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<p align="center"><font size="2" face="serif"><b>As filed with the Securities
      and Exchange Commission on January&nbsp;12,
      2006</b></font></p>
<p align="center"><font size="2" face="serif"><b>Registration&nbsp;No.  333-</b></font></p>
<p align="center"><font size="2" face="serif"><b><font face="serif" size="4">UNITED STATES<br>
  SECURITIES AND EXCHANGE COMMISSION<br>
  </font>
  <font face="serif" size="1">Washington, D.C.  20549</font></b></font></p>
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<p align="center"><font size="2" face="serif"><b><font face="serif" size="4">FORM&nbsp;S-1<br></font>REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933</b></font></p>
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<p align="center"><font size="2" face="serif"><b><font face="serif" size="4">Atlas Pipeline Holdings, L.P.<br>
</font></b><i><font face="serif" size="1"> (Exact Name of Registrant as Specified in Its Charter)</font></i></font></p>
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<td align="center" width="33%"><font size="2" face="serif"><b>Delaware<br></b><i>(State or Other Jurisdiction of<br>Incorporation or Organization)</i></font></td>
<td align="center" width="33%"><font size="2" face="serif"><b>1311<br></b><i>(Primary Standard Industrial<br>Classification Code Number)</i></font></td>
<td align="center"><font size="2" face="serif"><b>Applied For<br></b><i>(I.R.S.  Employer<br>Identification Number)</i></font></td>
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<td colspan="3" align="center"><font size="2" face="serif"><b>Edward E. Cohen<br>311 Rouser Road<br>Moon Township, PA  15108<br>(412) 262-2830<br></b><i>(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant&#8217;s Principal Executive Offices)</i></font></td>
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<td colspan="3" align="center"><font size="2" face="serif"><b>Edward E. Cohen<br>311 Rouser Road<br>Moon Township, PA  15108<br>(412) 262-2830<br></b><i>(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)</i></font></td>
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<p align="center"><b><font face="serif" size="2">Copies to:</font></b></p>
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<td align="center" width="50%"><font size="2" face="serif"><b>Alan P. Baden<br>Vinson &amp; Elkins L.L.P.<br>666 Fifth Avenue<br>New York, New York 10103<br>(212) 237-0000</b></font></td>
<td align="center"><font size="2" face="serif"><b>Joshua Davidson<br>Baker Botts L.L.P.<br>910 Louisiana Street<br>Houston, Texas 77002<br>
  (713) 229-1234</b></font></td>
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<p align="left"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b><font face="serif">Approximate date of commencement of proposed sale to the public:</font></b><font face="serif"> As soon as practicable after this Registration Statement becomes effective.</font></font></p>
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<p align="left"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font face="serif">If
      any of the securities being registered on this form are to be offered on
      a delayed or continuous basis pursuant to Rule&nbsp;415 under the Securities
Act of 1933, check the following box. <img src="emptybox.gif" width="12" height="12"></font></font></p>
<p align="left"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font face="serif">If
      this form is filed to register additional securities for an offering pursuant
      to Rule&nbsp;462(b) under the Securities Act, check the following box and
      list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. </font><font size="2"><font face="serif"><img src="emptybox.gif" width="12" height="12"></font></font></font></p>
<p align="left"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font face="serif">If
      this form is a post-effective amendment filed pursuant to Rule&nbsp;462(c)
      under the Securities Act, check the following box and list the Securities
      Act registration statement number of the earlier effective registration
statement for the same offering. </font><font size="2"><font face="serif"><img src="emptybox.gif" width="12" height="12"></font></font></font></p>
<p align="left"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font face="serif">If
      this form is a post-effective amendment filed pursuant to Rule&nbsp;462(d)
      under the Securities Act, check the following box and list the Securities
      Act registration statement number of the earlier effective registration
statement for the same offering. </font><font size="2"><font face="serif"><img src="emptybox.gif" width="12" height="12"></font></font></font></p>
<p align="left"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<font face="serif">If
      delivery of the prospectus is expected to be made pursuant to Rule&nbsp;434,
please check the following box. </font><font size="2"><font face="serif"><img src="emptybox.gif" width="12" height="12"></font></font></font></p>
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<p align="center"><font size="2" face="serif"><b>CALCULATION OF REGISTRATION FEE</b></font></p>
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<td align="center"><font size="2" face="serif"><b><font face="serif" size="1">Title Of Each Class Of<br>Securities To Be Registered</font></b></font></td>
<td colspan="2" align="center"><font size="2" face="serif"><b><font face="serif" size="1">Proposed Maximum Aggregate <br>
  Offering Price (1)(2)</font></b></font></td>
<td colspan="2" align="center"><font size="2" face="serif"><b><font face="serif" size="1">Amount of<br>Registration Fee</font></b></font></td>
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<td align="left"><font size="2" face="serif">Common units representing limited partner interests</font></td>
<td width="2%" align="left"><font size="2" face="serif">$</font></td>
<td width="20%" align="right"><font size="2" face="serif">103,500,000</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
<td width="2%" align="left"><font size="2" face="serif">$</font></td>
<td width="20%" align="right"><font size="2" face="serif">11,074.50</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</td>
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<p align="left"><font size="2" face="serif" align="left">
<font face="serif" size="1">  (1)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <font face="serif" size="1">Includes
common units issuable upon exercise of the underwriters&#8217; </font><font size="2" face="serif" align="left"><font face="serif" size="1">option </font></font><font face="serif" size="1">to
acquire additional common
units.</font>
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<font size="2" face="serif" align="left"><font face="serif" size="1">(2)</font>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <font face="serif" size="1">Estimated
solely for the purpose of calculating the registration fee pursuant to Rule&nbsp;457(o).</font>
</font></p>
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<p align="left"><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b><font face="serif">The
        registrant hereby amends this registration statement on such date or
        dates as may be necessary to delay its effective date until the registrant
        shall file&nbsp;a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section&nbsp;8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section&nbsp;8(a),
may determine.</font></b></font></p>
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<p align="left"><font face="serif" size="1">The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer
or sale is not permitted.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">Subject to Completion, dated January 12, 2006</font></p>
<p align="left"><font face="serif" size="2">PROSPECTUS</font></p>
<p align="center"><font face="serif" size="4"><b>ATLAS PIPELINE HOLDINGS, L.P.</b></font></p>
<p align="center"><font face="serif" size="4"><b>3,600,000 Common Units</b></font></p>
<p align="center"><font face="serif" size="4"><b>Representing Limited Partner Interests</b></font></p>
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<p align="left"><font face="serif" size="2">This is the initial public offering of our common units. We own a 2.0% general partner interest, all the incentive distribution rights and an approximate 12.8% limited partner interest in Atlas Pipeline Partners, L.P., a midstream energy services provider engaged in the
transmission, gathering and processing of natural gas.</font></p>
<p align="left"><font face="serif" size="2">Before this offering, there has been no public market for our common units. We intend to apply to list the common units on the New York Stock Exchange under the symbol &#147;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.&#148; We expect the initial public offering price to be between $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; and $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per unit.</font></p>
<p align="left"><font face="serif" size="2">We will use substantially all of the net proceeds from this offering to make a cash distribution to our existing unitholders. Please read &#147;Use of Proceeds.&#148;</font></p>
<p align="left"><font face="serif" size="2"><b><i>Investing in our common units involves risks. Please read &#147;Risk factors&#148; beginning on page 22.</i></b></font></p>
<p align="left"><font face="serif" size="2">These risks include the following:</font></p>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Our only cash generating assets are our interests in Atlas Pipeline Partners, L.P., and our cash flow is therefore completely dependent upon the ability of Atlas Pipeline Partners, L.P. to make distributions to its partners.</font></div></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">You will experience immediate and substantial dilution of $24.63 per common unit in the pro forma net tangible book value of your common units.</font></div></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">If we or Atlas Pipeline Partners, L.P. were treated as a corporation for federal income tax purposes, or if we or Atlas were to become subject to entity-level taxation for federal or state income tax purposes, then our cash available for distribution to you would be substantially
reduced.</font></div></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Our unitholders do not elect our general partner or vote on our general partner&#146;s officers or directors, and the rights of unitholders owning 20% or more of our units are further restricted under our partnership agreement. Following the completion of this offering, Atlas
America, Inc. will own approximately 82.9% of our common units, a sufficient number to prevent removal of our general partner without its consent.</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">The fiduciary duties of our general partner&#146;s officers and directors may conflict with those of Atlas Pipeline Partners GP, LLC, which is the general partner of Atlas Pipeline Partners, L.P.</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">You may be required to pay taxes on income from us even if you do not receive any cash distributions from us.</font></div></td>
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    <td>&nbsp;</td>
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    <td>&nbsp;</td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Per Common Unit</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Total</b></font></td>
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    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Initial public offering price</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
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    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Underwriting discount<sup>(1)</sup></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Proceeds to us, before expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
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    <td width="3%"><font face="serif" size="2">(1)</font></td>
    <td><div align="left"><font face="serif" size="2">Excludes structuring fee payable to Lehman Brothers Inc. of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.</font></div></td>
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<p align="left"><font face="serif" size="2">We have granted the underwriters a 30-day option to purchase up to an additional 540,000 common units from us on the same terms and conditions as set forth above if the underwriters sell more than 3,600,000 common units in this offering.</font></p>
<p align="left"><font face="serif" size="2">Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.</font></p>
<p align="left"><font face="serif" size="2">Lehman Brothers, on behalf of the underwriters, expects to deliver the common units on or about &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2006.</font></p>
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<p align="center"><font face="serif" size="5"><b>L<small>EHMAN</small></b> <b>B<small>ROTHERS</small></b></font></p>
<p align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; , 2006</font></p>
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<p align="left"><font face="serif" size="2">We own and control Atlas Pipeline Partners GP, LLC, the general partner of Atlas Pipeline Partners, L.P. (NYSE: APL), through which we own certain general partner interests, all the incentive distribution rights and 1,641,026 common units of Atlas Pipeline Partners, L.P.,
representing an approximate 12.8% limited partner interest. We do not have any other assets. The map below identifies Atlas Pipeline Partners, L.P.&#146;s operations and their location.</font></p>
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    <td><div align="left"><font face="serif" size="3"><b>Atlas Pipeline Partners, L.P. Operations</b></font></div></td>
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<p align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></p>
<p align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></p>
<p align="left"><img src="atlasmapflatten.jpg"></p>
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<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>TABLE OF CONTENTS</b></font></p>
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    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">SUMMARY</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">1</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
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    <td><div style="margin-left:3%"><font face="serif" size="2">Atlas Pipeline Holdings, L.P.</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><div style="margin-left:3%"><font face="serif" size="2">The Offering</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><div style="margin-left:3%"><font face="serif" size="2">Atlas Pipeline Partners, L.P.</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Atlas&#146; Principal Executive Offices and Internet Address</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Comparison of Rights of Holders of Our Common Units and Atlas&#146; Common Units</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">11</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Summary of Risk Factors</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">13</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Summary of Conflicts of Interest and Fiduciary Responsibilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Summary Historical Consolidated and Pro Forma Financial Data</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">16</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">RISK FACTORS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">22</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Risks Inherent in an Investment in Us</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">22</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Risks Related to Conflicts of Interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">31</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Risks Relating to Atlas&#146; Business</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">34</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Tax Risks to Common Unitholders</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">42</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">USE OF PROCEEDS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">45</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CAPITALIZATION</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">46</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">DILUTION</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">47</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH DISTRIBUTION POLICY AND RESTRICTIONS ON DISTRIBUTIONS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">48</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">General</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">48</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Our Initial Distribution Rate</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">50</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Estimated Cash Available for Distributions</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">56</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Assumptions and Considerations</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">59</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Our Sources of Distributable Cash</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">61</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">SELECTED HISTORICAL AND OPERATING DATA</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">64</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">68</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Overview</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">68</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Atlas Pipeline Partners, L.P.</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">69</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Overview of Atlas&#146; Operations</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">69</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Significant Acquisitions</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">70</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Contractual Revenue Agreements</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">70</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Results of Our Operations</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">71</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Liquidity and Capital Resources</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">74</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Atlas Partnership Distributions</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">76</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Contractual Obligations and  Commercial Commitments</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">77</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Atlas&#146; Equity Offerings</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">77</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Atlas&#146; Shelf Registration Statement</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">78</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Atlas&#146; Credit Facility</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">78</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="bottom" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">NOARK Notes</font></div></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font face="serif" size="2">79</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="bottom" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Significant Announced
          Internal Growth Project</font></div>
    </td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right"><font face="serif" size="2">79</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Environmental Regulation</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">79</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Inflation and Changes in Prices</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">80</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Critical Accounting Policies and Estimates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">80</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Quantitative and Qualitative Disclosures About Market Risk</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">84</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">BUSINESS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">87</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Atlas Pipeline Holdings, L.P.</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">87</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Atlas Pipeline Partners, L.P.</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">90</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Overview</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">90</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Recent Acquisitions</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">91</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Business Strategy</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">92</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Competitive Strengths</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">93</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">The Midstream Natural Gas Gathering, Processing and Transmission Industry</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">94</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Mid-Continent Operations</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">95</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Appalachian Basin Operations</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">99</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Relationship with Atlas America</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">100</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Competition</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">103</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Contracts and Customer Relationships</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">104</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Regulation</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">104</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Environmental Matters</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">106</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Employees</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">109</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Properties</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">109</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Legal Proceedings</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">110</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">MANAGEMENT</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">111</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Atlas Pipeline Holdings, L.P.</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">111</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Board Committees</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">112</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Election of Our Directors</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">113</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Governance Matters</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">113</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Compensation of Directors</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">114</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Atlas Pipeline Holdings Long-Term Incentive Plan</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">114</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Compensation Committee Interlocks and Insider Participation</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">115</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Atlas Pipeline Partners, L.P.</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">116</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Executive Officer Compensation</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">117</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Long-Term Incentive Plan</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">118</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Compensation of Managing Board Members</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">118</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">119</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">120</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Our Relationship with Atlas Pipeline Partners, L.P.</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">120</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">The Contribution Agreement</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">120</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Registration Rights</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">120</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">i</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pii"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Indemnification
          of Directors and Officers</font></div>
    </td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">120</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Related Party
          Transactions Involving Atlas</font></div>
    </td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">121</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CONFLICTS OF INTEREST AND FIDUCIARY DUTIES</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">122</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Conflicts of Interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">122</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Fiduciary Duties</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">124</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">DESCRIPTION OF THE COMMON UNITS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">127</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">The Units</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">127</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Transfer Agent and Registrar</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">127</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Transfer of Common Units</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">127</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">THE PARTNERSHIP AGREEMENT OF ATLAS PIPELINE HOLDINGS, L.P.</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">129</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Organization and Duration</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">129</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Purpose</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">129</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Power of Attorney</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">129</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Capital Contributions</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">129</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Limited Liability</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">129</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Voting Rights</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">130</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Issuance of Additional Securities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">131</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Amendments to Our Partnership Agreement</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">131</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Prohibited Amendments</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">132</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">No Unitholder Approval</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">132</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Opinion of Counsel and Unitholder Approval</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">133</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Merger, Sale or Other Disposition of Assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">133</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Termination or Dissolution</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">133</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Liquidation and Distribution of Proceeds</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">134</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Withdrawal or Removal of Our General Partner</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">134</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Transfer of General Partner Interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">135</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Transfer of Ownership Interests in Our General Partner</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">135</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Change of Management Provisions</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">135</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Limited Call Right</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">135</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Meetings; Voting</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">136</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Status as Limited Partner</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">136</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Non-Citizen Assignees; Redemption</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">136</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Indemnification</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">137</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Reimbursement of Expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">137</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Books and Reports</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">137</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Right to Inspect Our Books and Records</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">138</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Registration Rights</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">138</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">THE PARTNERSHIP AGREEMENT OF ATLAS PIPELINE PARTNERS, L.P.</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">139</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Organization and Duration</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">139</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Purpose</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">139</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">The Units</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">139</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Limited Voting Rights</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">139</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash Distribution Policy</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">139</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Power of Attorney</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">143</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Capital Contributions</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">144</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Limited Liability</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">144</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Transfer Agent and Registrar</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">144</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Transfer of Common Units</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">145</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Issuance of Additional Securities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">146</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Amendment of Atlas&#146; Partnership Agreement</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">146</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Merger, Sale or Other Disposition of Assets of Atlas</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">148</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Termination and Dissolution</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">148</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Liquidation and Distribution of Proceeds</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">148</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Withdrawal or Removal of Atlas&#146; General Partner</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">148</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Transfer of General Partner Interest And Incentive Distribution Rights</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">150</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Change of Management Provisions</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">150</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Limited Call Right</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">150</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Meetings; Voting</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">150</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Status as Limited Partner or Assignee</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">151</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Non-Citizen Assignees; Redemption</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">151</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Indemnification</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">151</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Books and Reports</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">152</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Right to Inspect Our Books and Records</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">152</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Registration Rights</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">153</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">UNITS ELIGIBLE FOR FUTURE SALE</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">154</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">MATERIAL TAX CONSEQUENCES</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">155</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Partnership Status</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">155</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Limited Partner Status</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">156</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Tax Consequences of Unit Ownership</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">157</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Tax Treatment of Operations</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">162</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Disposition of Common Units</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">163</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Uniformity of Units</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">165</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Tax-Exempt Organizations and Other Investors</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">166</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Administrative Matters</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">166</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">State, Local, Foreign and Other Tax Considerations</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">168</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">INVESTMENT IN ATLAS PIPELINE HOLDINGS, L.P. BY EMPLOYEE BENEFIT PLANS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">170</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">UNDERWRITING</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">171</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Commissions and Expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">171</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Option to Purchase Additional Common Units</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">171</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Lock-Up Agreements</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">172</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Offering Price Determination</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">172</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Indemnification</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">172</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Directed Unit Program</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">172</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="piii"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top" bgcolor="#ffffff">
    <td valign="bottom"><div style="margin-left:3%"><font face="serif" size="2">Stabilization,
	Short Positions and Penalty
    Bids</font></div></td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td align="right" valign="bottom"><font face="serif" size="2">173</font></td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Electronic Distribution</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">173</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">NYSE</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">174</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Discretionary Sales</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">174</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Stamp Taxes</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">174</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Relationships</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">174</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">VALIDITY OF THE COMMON UNITS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">175</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">EXPERTS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">175</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">WHERE YOU CAN FIND MORE INFORMATION</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">175</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">FORWARD-LOOKING STATEMENTS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">175</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">INDEX TO FINANCIAL STATEMENTS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">F-1</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">APPENDIX A &#151; AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF ATLAS PIPELINE HOLDINGS, L.P.</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">A-1</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<hr size="1" width="133" noshade>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Until &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2006 (the 25th day after the date of this prospectus), all dealers that effect transactions in the securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers&#146; obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><b>You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized anyone to provide you with different information from that contained in this prospectus. If anyone provides you with different
or inconsistent information, you should not rely on it. We are not, and the underwriters are not, offering to sell our common units or seeking offers to buy our common units in any jurisdiction where offers or sales are not permitted. The information contained
in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of the common units offered hereby.</b></font></p>
</div>
<p align="center"><font face="serif" size="2">iii</font></p>
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<p align="center"><font face="serif" size="2"><b>SUMMARY</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>This summary may not contain all of the information that is important to you. You should read this entire prospectus carefully, including the historical consolidated financial statements and pro forma financial statements and the notes to those financial
statements. Furthermore, you should carefully read &#147;Summary of Risk Factors&#148; and &#147;Risk Factors&#148; for more information about important risks that you should consider before making a decision to purchase our common units.</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Except as otherwise indicated, the information presented in this prospectus assumes (1) an initial public offering price of $24.00 per common unit and (2) that the underwriters do not exercise their option to purchase additional common units. All references in this
prospectus to &#147;we,&#148; &#147;our,&#148; &#147;us&#148; or like terms refer to Atlas Pipeline Holdings, L.P., and unless the context requires otherwise, to Atlas Pipeline Partners GP, LLC, the general partner of Atlas Pipeline Partners, L.P. All references in this prospectus to &#147;Atlas Pipeline GP&#148;
refer to Atlas Pipeline Partners GP, LLC. All references in this prospectus to &#147;Atlas&#148; refer to Atlas Pipeline Partners, L.P. and its wholly-owned subsidiaries. All references in this prospectus to &#147;Atlas America&#148; refer to Atlas America, Inc. and its wholly-owned subsidiaries,
excluding Atlas Pipeline Holdings, L.P. and any of its wholly-owned subsidiaries. All references to our &#147;partnership agreement&#148; refer to the Amended and Restated Agreement of Limited Partnership of Atlas Pipeline Holdings, L.P. to be adopted contemporaneously with the
closing of this offering.</i></font></p>
</div>
<p align="center"><font face="serif" size="2"><b>Atlas Pipeline Holdings, L.P.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our cash generating assets consist of our interests in Atlas Pipeline Partners, L.P. (NYSE: APL), a publicly traded Delaware limited partnership. Atlas is a midstream energy service provider engaged in the transmission, gathering and processing of natural gas in the
Mid-Continent and Appalachian regions. Our interests in Atlas will initially consist of a 100% ownership interest in the general partner of Atlas, Atlas Pipeline Partners GP, LLC, which owns:</font></p>
</div>
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  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">a 2.0% general partner interest in Atlas, which entitles it to receive 2.0% of the cash distributed by Atlas;</font></div></td>
  </tr>
</table>
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  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">all of the incentive distribution rights in Atlas, which entitle it to receive increasing percentages, up to a maximum of 48.0%, of any cash distributed by Atlas as it reaches certain target distribution levels in excess of $0.42 per Atlas unit in any quarter; and</font></div></td>
  </tr>
</table>
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  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">1,641,026 common units of Atlas, representing an approximate 12.8% limited partner interest in Atlas.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">At Atlas&#146; current quarterly distribution rate of $0.83 per common unit, aggregate quarterly cash distributions to us on all our interests in Atlas would be approximately $5.0 million. Based on this distribution, we expect that our initial quarterly distribution will be $0.225
per unit, or $0.90 per unit on an annualized basis.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our primary objective is to increase our cash distributions to our unitholders through growth at Atlas. Atlas has grown both through strategic acquisitions and internal growth projects. Since Atlas&#146; initial public offering in January 2000, it has completed five acquisitions
at an aggregate cost of approximately $516.7 million. Atlas&#146; business strategy is to create capital-efficient growth in distributable cash flow to maximize its distribution to its unitholders by, among other things, (1) maximizing cash flows from its existing businesses through
marketing of its services and facilities and controlling its operating costs; (2) continuing to increase the amount of its operating cash flow generated by long-term, fee-based contracts; (3) expanding its existing businesses through internal growth opportunities; (4) expanding its
operations through strategic acquisitions; and (5) maintaining a flexible capital structure based on a strong balance sheet by financing its growth through a balanced combination of debt and equity.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">1</font></p>
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<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We intend to support Atlas in implementing its business strategy by assisting it in identifying, evaluating, and pursuing growth opportunities. In the future, we may also support the growth of Atlas through the use of our capital resources, which could involve loans or
capital contributions to Atlas to provide funding for the acquisition of a business or asset or for an internal growth project. We may also provide Atlas with other forms of credit support, such as guarantees related to financing a project or other types of support related to a
merger or acquisition transaction.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas is required by its partnership agreement to distribute all of its cash on hand at the end of each quarter, less reserves established by its general partner in its sole discretion to provide for the proper conduct of Atlas&#146; business or to provide for future distributions.
Since January 1, 2003, Atlas has increased the per unit quarterly cash distribution on its common units by approximately 48%, from the quarterly distribution of $0.56 per unit to $0.83 per unit declared for the fourth quarter of 2005. The following graph shows, for the period
from the first quarter of 2003 through the fourth quarter of 2005: (i) Atlas&#146; quarterly distributions per unit and (ii) total distributions by Atlas to us.</font></p>
</div>
<p align="left"><img src="historical_chart.jpg"></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">While we, like Atlas, are structured as a limited partnership, our capital structure and cash distribution policy differ materially from those of Atlas. Most notably, our general partner does not have an economic interest in us and is not entitled to receive any distributions
from us, and our capital structure does not include incentive distribution rights. Therefore, all of our distributions are made on our common units, which is our only class of security outstanding.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our ownership of Atlas&#146; incentive distribution rights entitles us to receive an increasing percentage of cash distributed by Atlas as it reaches certain target distribution levels. The rights entitle us to receive the following:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">13.0% of all cash distributed in a quarter after each Atlas unit has received $0.42 for that quarter;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">23.0% of all cash distributed after each Atlas unit has received $0.52 for that quarter; and</font></div></td>
  </tr>
</table>
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  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">48.0% of all cash distributed after each Atlas unit has received $0.60 for that quarter.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">For the quarter ended December 31, 2005, Atlas declared a distribution of $0.83 per unit, which means we will receive 48.0% of the $0.23 incremental cash distribution per unit in excess of the</font></p>
</div>
<p align="center"><font face="serif" size="2">2</font></p>
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<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="left"><font face="serif" size="2">maximum target distribution level of $0.60 per unit. Because the incentive distribution rights currently participate at the maximum 48.0% target cash distribution level, future growth in
distributions we receive from Atlas will not result from an increase in the target cash distribution level associated with the incentive distribution rights.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The graph set forth below demonstrates hypothetical cash distributions payable in respect of our interests in Atlas by showing the total cash allocated to us across an illustrative range of annualized cash distributions per unit made by Atlas. The graph illustrates the
impact to us of Atlas&#146; raising or lowering its distribution from the most recently declared distribution of $0.83 per common unit ($3.32 on an annualized basis), which will be paid on February&nbsp;14, 2006. This information assumes:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas has 12,549,266 total units outstanding, representing the number of units outstanding at December&nbsp;31, 2005; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">through Atlas Pipeline GP, we own (i) 1,641,026 Atlas common units, representing an approximate 12.8% limited partner interest in Atlas, (ii) a 2.0% general partner interest in Atlas and (iii) all the incentive distribution rights in Atlas.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2"><img src="hypo_chart.jpg"></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">This information is presented for illustrative purposes only and is not intended to be a prediction of future performance and does not attempt to illustrate the impact of changes in our or Atlas&#146; business, including changes that may result from changes in natural gas, NGL
and condensate prices, changes in economic conditions, the impact of any future acquisitions or expansion projects or the issuance of additional units by Atlas. In addition, the level of cash distributions we receive may be affected by the various risks associated with an
investment in us and the underlying business of Atlas. Please read &#147;Risk Factors.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We intend to pay to our unitholders, on a quarterly basis, distributions equal to the cash we receive from Atlas, less certain reserves for expenses and other uses of cash, including:</font></p>
</div>
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  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">our general and administrative expenses, including expenses we will incur as the result of being a public company;</font></div></td>
  </tr>
</table>
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  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">capital contributions to maintain or increase our ownership interest in Atlas; and</font></div></td>
  </tr>
</table>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">reserves our general partner believes prudent to maintain for the proper conduct of our business or to provide for future distributions.</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">3</font></p>
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<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Based on Atlas&#146; current quarterly distribution, the number of our units outstanding and our expected level of expenses and reserves that our general partner believes prudent to maintain, we expect that our initial quarterly distribution will be $0.225 per common unit, or
$0.90 per unit on an annualized basis. Due to our ownership of Atlas&#146; incentive distribution rights, our cash flows are impacted by changes in Atlas&#146; distributions to a greater extent than those of Atlas&#146; common unitholders.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If Atlas is successful in implementing its business strategy and increasing distributions to its unitholders, we would generally expect to increase distributions to our unitholders, although the timing and amount of any such increased distributions will not necessarily be
comparable to the increased Atlas distributions. However, we cannot assure you that any distributions will be declared or paid. Please read &#147;Cash Distribution Policy and Restrictions on Distributions.&#148;</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><div style="text-indent:3%"><font face="serif" size="2"><i>Executive Offices</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our principal executive offices are located at 311 Rouser Road, Moon Township, Pennsylvania 15108, and our phone number is (412) 262-2830. Our website is located at www.atlaspipelineholdings.com. Information on our website is not incorporated by reference into
this prospectus and does not constitute a part of this prospectus.</font></p>
</div>
<p align="center"><font face="serif" size="2"><b>Our Limited Partnership Structure and Management</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We were formed in December 2005, as a Delaware limited partnership. The chart on the following page depicts our organization and ownership upon completion of this offering, at which time:</font></p>
</div>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">our general partner will own a non-economic general partner interest in us;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">our public unitholders will own 3,600,000 of our common units, representing an approximate 17.1% limited partner interest in us;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">our current owner, Atlas America, will own 17,500,000 of our common units, representing an approximate 82.9% limited partner interest in us; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">we will continue to own indirectly, through our ownership of Atlas Pipeline Partners GP, LLC, 1,641,026 Atlas common units representing an approximate 12.8% limited partner interest in Atlas, the 2.0% general partner interest in Atlas and all the incentive distribution
rights in Atlas.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner, Atlas Pipeline Holdings GP, LLC, will manage our operations and activities, including, among other things, establishing the quarterly cash distribution levels for our common units and reserves it believes prudent to maintain for the proper conduct of
our business or to provide for future distributions. Our general partner is entitled to reimbursement for out-of-pocket expenses it incurs on our behalf, but it is not entitled to any other compensation, fees, profits or other benefits for acting in its capacity as our general partner.
All of our executive officers and a majority of the directors of our general partner also serve as executive officers and directors of the general partner of Atlas. Atlas America will own all the membership interests in our general partner.</font></p>
</div>
<p align="center"><font face="serif" size="2">4</font></p>
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<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2"><b>Atlas Pipeline Holdings, L.P.&#146;s Ownership and</b><br>
<b>Organizational Chart</b><br>
<b>After This Offering</b></font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Aggregate ownership of Atlas Pipeline Holdings, L.P. after this offering:</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Common Units:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Public Unitholders</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">17.1</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Atlas America, Inc.</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">82.9</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Total</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">100.0</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">
<img src="chart.jpg"></font></p>
<p align="center"><font face="serif" size="2">5</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p6"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2"><b>The Offering</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="39%"><font face="serif" size="2"><b>Common units offered to the public</b></font></td>
    <td valign="bottom"><div align="left"><font face="serif" size="2">
3,600,000 common units.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">4,140,000 common units, if the underwriters exercise their option to purchase additional common units in full.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2"><b>Common units outstanding after</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>this offering</b></font></td>
    <td valign="bottom"><div align="left"><font face="serif" size="2"><br>
21,100,000 common units.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2"><b>Use of proceeds</b></font></td>
    <td valign="bottom"><div align="left"><font face="serif" size="2">
We expect to receive net proceeds of approximately $79.2 million from the sale of the common units, after deducting underwriting discounts and commissions and estimated offering expenses payable by
us. Substantially all of the net proceeds from this offering will be distributed to Atlas America.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The net proceeds from any exercise of the underwriters&#146; option to purchase additional common units will be used to fund the redemption of an equal number of common units from Atlas America. Please read &#147;Use of
Proceeds.&#148;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2"><b>Cash distributions</b></font></td>
    <td valign="bottom"><div align="left"><font face="serif" size="2"> We expect
          to make an initial quarterly distribution of $0.225 per common unit
          to the extent we have sufficient cash from operations after establishment
          of cash reserves and payment of fees and expenses.
Please read &#147;Cash Distribution Policy and Restrictions on Distributions.&#148; We do not have any subordinated units and our general partner is not entitled to any distributions. Please read &#147;Description of
the Common Units&#148; and &#147;The Partnership Agreement of Atlas Pipeline
Holdings, L.P.&#148;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">We expect to pay you a prorated distribution for the first quarter during which we are a publicly traded partnership. Assuming that we become a publicly traded partnership before March&nbsp;31, 2006, we will pay you a
prorated distribution for the period from the first day our common units are publicly traded to and including March&nbsp;31, 2006. We expect to pay this cash distribution in May 2006. </font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The amount of pro forma available cash generated during the twelve months ended December&nbsp;31, 2004 and the twelve months ended September&nbsp;30, 2005 would have been insufficient by approximately $21.4
million and $10.0 million, respectively, to pay the full initial distribution amount on all our common units during those periods. Please read &#147;Cash Distribution Policy and Restrictions on Distributions.&#148; We believe
that we will have sufficient cash available for distribution to pay the distributions at the initial distribution rate of $0.225 per unit on all the outstanding common units for each quarter for the year ending
December&nbsp;31, 2006. See &#147;Cash Distribution Policy and Restrictions on Distributions&#151;Assumptions and Considerations&#148; for the specific assumptions underlying this belief.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">6</font></p>
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<div style="page-break-before:always"></div>
<page>
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<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="39%"><font face="serif" size="2"><b>Limited voting rights</b></font></td>
    <td valign="bottom"><div align="left"><font face="serif" size="2"> Our general
          partner will manage and operate us. Unlike the holders of common stock
          in a corporation, you will have only limited voting rights on matters
          affecting our business. You will have no right to elect our general
          partner or its directors. Our general partner may not be removed except
          by a vote of the holders of at least 66 2/3% of the outstanding units,
          including any units owned by our affiliates,
voting together as a single class. Atlas America will own an aggregate of approximately
          82.9% of our common units. This will give Atlas America the ability
          to prevent our general partner&#146;s involuntary
removal. Please read &#147;The Partnership Agreement of Atlas Pipeline Holdings, L.P.&#151;Withdrawal
or Removal of Our General Partner.&#148;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2"><b>Limited call right</b></font></td>
    <td valign="bottom"><div align="left"><font face="serif" size="2">
If at any time our affiliates own more than 87.5% of our outstanding common units, our general partner has the right, but not the obligation, to purchase all of the remaining common units at a price not
less than the then current market price of the common units. At the completion of this offering, Atlas America will own approximately 82.9% of our common units.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2"><b>Estimated ratio of taxable
          income</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>to distributions</b></font></td>
    <td><div align="left"><font face="serif" size="2">We estimate that if you
          own the common units you purchase in this offering through the record
          date for distributions for the period ending &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;,
            you will be allocated, on a cumulative basis, an amount of federal
            taxable income for that period that will be less than &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%
            of the cash distributed to you with respect to that cumulative period.
            For example, if you receive an annual distribution of $0.90 per unit,
            we estimate that your average allocable federal taxable income per
            year will be no more than $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per unit. This estimate is based on assumptions with respect to our operations, gross income, capital
expenditures, cash flow and anticipated distributions. Our ratio of taxable income to cash distributions will be much greater than the ratio applicable to the holders of common units in Atlas because
remedial allocations of deductions to us from Atlas will be very limited and our ownership of incentive distribution rights will cause more taxable income to be allocated to us from Atlas. Further, if Atlas
is successful in increasing its distributions over time, our ratio of taxable income to cash distributions will increase. For the basis of this estimate, please read &#147;Material Tax Consequences&#151;Tax
Consequences of Unit Ownership&#151;Ratio of Taxable Income to Distributions.&#148;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2"><b>Exchange listing</b></font></td>
    <td valign="bottom"><div align="left"><font face="serif" size="2"> We
            will apply to list the common units on the New York Stock Exchange
            under the symbol &#147;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.&#148;</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">7</font></p>
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<page>
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<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2"><b>Atlas Pipeline Partners, L.P.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas is a publicly-traded midstream energy services provider engaged in the transmission, gathering and processing of natural gas. Atlas conducts its business through two operating segments: its Mid-Continent operations and its Appalachian operations.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Through its Mid-Continent operations, Atlas owns and operates:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">a 75% interest in a FERC-regulated, 565-mile interstate pipeline system, which we refer to as Ozark Gas Transmission, that extends from southeastern Oklahoma through Arkansas and into southeastern Missouri and which has throughput capacity of approximately 322
MMcf/d;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">two natural gas processing plants with aggregate capacity of approximately 230 MMcf/d and one treating facility with a capacity of approximately 200 MMcf/d, all located in Oklahoma; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">1,765 miles of active natural gas gathering systems located in Oklahoma, Arkansas, northern Texas and the Texas panhandle, which transport gas from wells and central delivery points in the Mid-Continent region to Atlas&#146; natural gas processing plants or Ozark Gas
Transmission.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Through its Appalachian operations, Atlas owns and operates 1,500 miles of active natural gas gathering systems located in eastern Ohio, western New York and western Pennsylvania. Through an omnibus agreement and other agreements between Atlas and Atlas
America, the parent of Atlas&#146; general partner and our general partner and a leading sponsor of natural gas drilling investment partnerships in the Appalachian Basin, Atlas gathers substantially all of the natural gas for its Appalachian Basin operations from wells operated by
Atlas America. Among other things, the omnibus agreement requires Atlas America to connect wells it operates to Atlas&#146; gathering systems that are located within 2,500 feet of Atlas&#146; gathering systems. Atlas is also party to natural gas gathering agreements with Atlas America
under which Atlas receives gathering fees generally equal to a percentage, typically 16%, of the selling price of the natural gas it transports. These agreements are continuing obligations and have no specified term except that they will terminate if Atlas&#146; general partner is
removed without cause.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Since Atlas&#146; initial public offering in January 2000, Atlas has completed five acquisitions at an aggregate cost of approximately $516.7 million, including, most recently, the October 2005 acquisition of Atlas Arkansas Pipeline LLC, which we refer to as Atlas Arkansas
and which owns a 75% interest in NOARK Pipeline System, Limited Partnership, which we refer to as NOARK, and the April 2005 acquisition of ETC Oklahoma Pipeline, Ltd, which we refer to as Elk City.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Both Atlas&#146; Mid-Continent and Appalachian operations are located in areas of abundant and long-lived natural gas production and significant new drilling activity. The Ozark Gas Transmission system and Atlas&#146; gathering systems are connected to approximately 6,250
central delivery points or wells, giving Atlas significant scale in its service areas. Atlas provides gathering and processing services to the wells connected to its systems, primarily under long-term contracts. Atlas provides fee-based, FERC-regulated transmission services through
Ozark Gas Transmission under both long-term and short-term contractual arrangements. Atlas intends to increase the portion of the transmission services provided under long-term contracts. As a result of the location and capacity of the Ozark Gas Transmission system and
Atlas&#146; gathering and processing assets, Atlas believes it is strategically positioned to capitalize on the significant increase in drilling activity in its service areas and the positive price differential across Ozark Gas Transmission, also known as basis spread. Atlas intends to
continue to expand its business through strategic acquisitions and internal growth projects, including its plan to construct the Sweetwater gas plant, that increase distributable cash flow per unit.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On October&nbsp;31, 2005, Atlas acquired from Enogex, Inc., a wholly-owned subsidiary of OGE Energy Corp. (NYSE: OGE), which we refer to as Enogex, all of the outstanding equity of Atlas Arkansas for $165.3 million, including estimated related transaction costs, plus
$10.2 million for working capital adjustments. Atlas Arkansas owns a 75% interest in NOARK, with the remaining 25%</font></p>
</div>
<p align="center"><font face="serif" size="2">8</font></p>
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<page>
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<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="left"><font face="serif" size="2">interest being owned by Southwestern Energy Pipeline Company, which we refer to as Southwestern, a wholly-owned subsidiary of Southwestern Energy Company (NYSE: SWN). The NOARK
acquisition further expands Atlas&#146; activities in the Mid-Continent region and provides an additional source of fee-based cash flows from a FERC-regulated interstate pipeline system and an
intrastate gas gathering system. NOARK&#146;s geographic position relative to Atlas&#146; other businesses and interconnections with major interstate pipelines also provides it with internal growth
opportunities. NOARK&#146;s principal assets include:</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">The Ozark Gas Transmission system, a 565-mile FERC-regulated interstate pipeline system which extends from southeast Oklahoma through Arkansas and into southeast Missouri and has a throughput capacity of approximately 322 MMcf/d. The system includes
approximately 30 supply and delivery interconnections and two compressor stations.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">A 365-mile intrastate natural gas gathering system, which we refer to as Ozark Gas Gathering, located in eastern Oklahoma and western Arkansas, and 11 associated compressor stations.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Ozark Gas Transmission transports natural gas from receipt points in eastern Oklahoma and western Arkansas to interstate pipelines in northeastern and central Arkansas and to local distribution companies in Arkansas and Missouri. Ozark Gas Gathering gathers natural
gas supplies in eastern Oklahoma and western Arkansas which are then transported through Ozark Gas Transmission. Ozark Gas Transmission&#146;s revenue is comprised of FERC-regulated transmission fees that are based on firm transportation rates and, to the extent capacity is
available following the reservation of firm system capacity, interruptible transportation rates. The Ozark transmission and gathering systems gathered and transported an average of 163.9 MMcf/d during the nine months ended September&nbsp;30, 2005, and 207.2 MMcf/d during
October 2005.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The NOARK acquisition increases Atlas&#146; size and presence in the Mid-Continent region, including extending its operations east into the Arkoma Basin where the Fayetteville Shale Play is located. The Mid-Continent region, one of the most prolific natural gas-producing
regions in North America, has recently experienced a significant increase in oil and gas drilling activity driven by long-term projections of continued growth in U.S. natural gas demand and the application of new drilling and production technologies. Atlas believes that the
increased drilling activity in the Mid-Continent area, combined with the positive basis spread across Ozark Gas Transmission, will result in increasing volumes gathered and transported on the Ozark Gas Gathering and Ozark Gas Transmission systems.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas recently completed three new gathering and compression projects in Elk City which have increased, and we believe will continue to increase, gathered volumes and total gross margin. Atlas also plans to complete construction of a new natural gas processing
facility in Oklahoma near its Prentiss treating facility in the third quarter of 2006, which we refer to as the Sweetwater gas plant. The new plant will be scaled to 120 MMcf/d of processing capacity. Along with the Sweetwater gas plant, Atlas will construct a gathering system
to be located primarily in western Oklahoma and in the Texas panhandle, more specifically, Beckham and Roger Mills counties in Oklahoma and Hemphill County, Texas. Atlas is currently gathering approximately 30 MMcf/d of natural gas in the Elk City area for which it
earns gathering fees but does not earn processing fees due to the fact that the Elk City plant is currently processing at maximum capacity and is unable to process those volumes. As Atlas completes construction of the Sweetwater gas plant and gathering system, it expects to
increase the volumes it gathers in the Elk City area and to process those volumes at the Sweetwater gas plant, thereby enabling it to earn incremental gathering and processing fees. Atlas anticipates that construction of the Sweetwater gas plant and associated gathering system
will cost approximately $40.0 million and will generate cash flow of $8.0 million to $10.0 million annually.</font></p>
</div>
<p align="center"><font face="serif" size="2">9</font></p>
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<div style="page-break-before:always"></div>
<page>
<a name="p10"></a>
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<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Atlas&#146; Principal Executive Offices and Internet Address</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; principal executive offices are located at 311 Rouser Road, Moon Township, Pennsylvania 15108, and its phone number is (412) 262-2830. Atlas maintains a website at
www.atlaspipelinepartners.com that provides information about its business and operations. Information contained on this website, however, is not incorporated into or otherwise a part of this prospectus. Atlas
also files annual, quarterly and current reports and other information with the Securities and Exchange Commission, or Commission. Atlas&#146; Commission filings are available to the public at the Commission&#146;s
website at www.sec.gov. You may also read and copy any document Atlas files at the Commission&#146;s public reference room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the
operation of the Commission&#146;s public reference room by calling the Commission at 1-800-SEC-0330.</font></p>
</div>
<p align="center"><font face="serif" size="2">10</font></p>
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<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2"><b>Comparison of Rights of Holders of Our Common Units and Atlas&#146; Common Units</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our common units and Atlas&#146; common units are unlikely to trade in simple relation or proportion to one another. Instead, while the trading prices of our common units and Atlas&#146; common units are likely to follow generally similar broad trends, the trading prices may
diverge because, among other things:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">with respect to its distributions, Atlas&#146; common unitholders have a priority over our incentive distribution rights in Atlas;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">we participate in Atlas&#146; general partner&#146;s distributions and the incentive distribution rights, and Atlas&#146; common unitholders do not; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">we may in the future enter into other businesses separate from Atlas. </font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following table compares certain features of Atlas&#146; common units and our common units.</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td align="center"><font face="serif" size="1"><b>Atlas&#146; Common Units</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td align="center"><font face="serif" size="1"><b>Our Common Units</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Distributions and Incentive Distribution Rights</b></font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="20%"><font face="serif" size="2">Atlas has historically made quarterly distributions to its
partners of its cash, less certain reserves for expenses
and other uses of cash, including reimbursement of
expenses owed to its general partner. For a more
detailed discussion, please read &#147;The Partnership
Agreement of Atlas Pipeline Partners, L.P.&#151;Cash
Distribution Policy.&#148; Atlas&#146; general partner owns the
incentive distribution rights in Atlas.</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="20%"><font face="serif" size="2">We intend to pay our unitholders quarterly distributions
equal to the cash we receive from our Atlas
distributions, less certain reserves for expenses and
other uses of cash. Our general partner is not entitled to
any distributions. Therefore, our distributions are
allocated exclusively to our common unitholders.</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Taxation of Entity and Entity Owners</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">Atlas is a flow-through entity that is not subject to an
entity-level federal income tax.</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">Similarly, we are a flow-through entity that is not
subject to an entity-level federal income tax.</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">Atlas expects that holders of its common units will
benefit for a period of time from tax basis adjustments
and remedial allocations of deductions.</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">We also expect that holders of our common units will
benefit for a period of time from tax basis adjustments
and remedial allocations of deductions as a result of our
ownership of common units of Atlas. However,
incentive distribution rights do not benefit from such
adjustments and allocations. Therefore, we expect the
ratio of our taxable income to the distributions you will
receive to be higher than the ratio of taxable income to
the distributions received by the common unitholders of
Atlas. Moreover, if Atlas is successful in increasing its
distributable cash flow over time, we expect the ratio of
our taxable income to distributions will increase.</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">11</font></p>
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<div style="page-break-before:always"></div>
<page>
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<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td align="center"><font face="serif" size="1"><b>Atlas&#146; Common Units</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td align="center"><font face="serif" size="1"><b>Our Common Units</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="20%"><font face="serif" size="2">Atlas&#146; common unitholders will receive Schedule K-1s
from Atlas reflecting the unitholders&#146; share of Atlas&#146;
items of income, gain, loss and deduction at the end of
each fiscal year.</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="20%"><font face="serif" size="2">Our common unitholders also will receive Schedule
K-1s from us reflecting the unitholders&#146; share of our
items of income, gain, loss and deduction at the end of
each fiscal year.</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Sources of Cash Flow</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">Atlas currently generates its cash flow from its natural
gas transmission, gathering and processing operations.</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">Our only cash-generating assets consist of our interests
in Atlas, and we currently have no independent
operations. Accordingly, our financial performance
and our ability to pay cash distributions to our
unitholders is currently completely dependent upon the
performance of Atlas.</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Limitation on Issuance of Additional Units</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">Atlas may issue an unlimited number of additional
partnership interests and other equity securities without
obtaining unitholder approval.</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">We also may issue an unlimited number of additional
partnership interests and other equity securities without
obtaining unitholder approval.</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">12</font></p>
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<div style="page-break-before:always"></div>
<page>
<a name="p13"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Summary of Risk Factors</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">An investment in our common units involves risks associated with us and Atlas as well as tax characteristics associated with interests in publicly traded partnerships. You should consider carefully all the risk factors together with all of the other information included in
this prospectus before you invest in our units. The risks related to an investment in us, conflicts of interest, Atlas&#146; business and tax consequences to our unitholders are described under the caption &#147;Risk Factors.&#148; These risks include, but are not limited to, those described
below:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Risks Inherent in An Investment in Us</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Our only cash generating assets are our interests in Atlas and our cash flow is therefore completely dependent upon the ability of Atlas to make distributions to its partners.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Restrictions in Atlas&#146; credit facility and our proposed credit facility could limit our ability to make distributions to our unitholders.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">In the future, we may not have sufficient cash to pay distributions at our estimated initial quarterly distribution level or to increase distributions.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">We are largely dependent on Atlas for our growth. As a result of the fiduciary obligations of Atlas&#146; general partner, which is our wholly owned subsidiary, to the unitholders of Atlas, our ability to pursue business opportunities independently will be limited.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Our ability to sell our partnership interests in Atlas may be limited by securities laws restrictions and liquidity constraints.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public markets, including sales by our existing unitholders.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Our unitholders do not elect our general partner or vote on our general partner&#146;s officers or directors, and the rights of our unitholders owning 20% or more of our units are further restricted under our partnership agreement. Following the completion of this offering, Atlas
America will own approximately 82.9% of our units, a sufficient number to block any attempt to remove our general partner.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas may issue additional common units, which may increase the risk of it not having sufficient available cash to maintain or increase its per unit distribution level.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">You will experience immediate and substantial dilution of $24.63 per common unit in the pro forma net tangible book value of your common units.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Risks Related to Conflicts of Interest</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Although we control Atlas through our ownership of its general partner, Atlas&#146; general partner owes fiduciary duties to Atlas and Atlas&#146; unitholders, which may conflict with our interests.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">The fiduciary duties of our general partner&#146;s officers and directors may conflict with those of Atlas&#146; general partner&#146;s officers and directors.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Potential conflicts of interest may arise among our general partner, its affiliates and us. Our general partner and its affiliates have limited fiduciary duties to us and our unitholders, which may permit them to favor their own interests to the detriment of us and our unitholders.</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">13</font></p>
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<div style="page-break-before:always"></div>
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<a name="p14"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Risks Related to Atlas&#146; Business</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas may be unsuccessful in integrating the operations from its recent acquisitions or any future acquisitions with its operations or in realizing all of the anticipated benefits of these acquisitions.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">The amount of natural gas Atlas transports, treats or processes will decline over time unless Atlas is able to attract new wells to connect to its gathering systems.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">The success of Atlas&#146; Appalachian operations depends upon Atlas America&#146;s ability to drill and complete commercial producing wells.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">The failure of Atlas America to perform its obligations under Atlas&#146; natural gas gathering agreements may adversely affect Atlas&#146; business.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">The success of Atlas&#146; Mid-Continent operations depends upon its ability to continually find and contract for new sources of natural gas supply from unrelated third parties.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; Mid-Continent operations currently depend on certain key producers for their supply of natural gas, and the loss of any of these key producers could reduce Atlas&#146; revenue.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">The curtailment of operations at, or closure of, either of Atlas&#146; primary plants could harm its business.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Tax Risks to Our Common Unitholders</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">If we or Atlas were treated as a corporation for federal income tax purposes, or if we or Atlas were to become subject to entity-level taxation for state tax purposes, then our cash available for distribution to you would be substantially reduced.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">A successful IRS contest of the federal income tax positions we or Atlas take may adversely affect the market for our common units or Atlas&#146; units, and the costs of any contest will reduce cash available for distribution to our unitholders.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">14</font></p>
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<div style="page-break-before:always"></div>
<page>
<a name="p15"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2"><b>Summary of Conflicts of Interest and Fiduciary Responsibilities</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Conflicts of interest exist and may arise in the future as a result of the relationships among us, Atlas and our and their respective general partners and affiliates. Our general partner is controlled by Atlas America. Accordingly, Atlas America has the ability to elect,
remove and replace the directors and officers of our general partner. Similarly, through its indirect control of the general partner of Atlas, Atlas America has the ability to elect, remove and replace the directors and officers of the general partner of Atlas.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner and its directors and officers have fiduciary duties to manage our business in a manner beneficial to us and our partners. At the same time, Atlas&#146; general partner and its directors and officers have fiduciary duties to manage Atlas&#146; business in a
manner beneficial to Atlas and its partners, including us. Certain of the executive officers and non-independent directors of our general partner also serve as executive officers and directors of the general partner of Atlas. Consequently, these directors and officers may encounter
situations in which their fiduciary obligations to Atlas, on the one hand, and us, on the other hand, are in conflict.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The board of directors of Atlas&#146; general partner or its conflicts committee will resolve any conflict between us and Atlas. The board of directors of our general partner or its conflicts committee will resolve any conflict between us and the owners of our general partner
and their affiliates. The resolution of these conflicts may not always be in our best interest or that of our unitholders. For a more detailed description of the conflicts of interest involving us and the resolution of these conflicts, please read &#147;Conflicts of Interest and Fiduciary
Duties.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our partnership agreement limits the liability and reduces the fiduciary duties owed by our general partner to our unitholders. Our partnership agreement also restricts the remedies available to unitholders for actions that might otherwise constitute breaches of our general
partner&#146;s fiduciary duties owed to unitholders. By purchasing our units, you are treated as having consented to various actions contemplated in the partnership agreement and conflicts of interest that might otherwise be considered a breach of fiduciary or other duties under
applicable state law. Please read &#147;Conflicts of Interest and Fiduciary Duties&#151;Fiduciary Duties&#148; for a description of the fiduciary duties imposed on our general partner by Delaware law, the material modifications of these duties contained in our partnership agreement and
certain legal rights and remedies available to unitholders.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If a business opportunity in respect
    of any business activity in which Atlas is currently engaged is presented
    to us, our general partner or Atlas or its general partner, then Atlas will
    have the first right to pursue such opportunity. Pursuant to an omnibus agreement
    to be entered into in connection with the closing of this offering, we will
    agree to certain business opportunity arrangements to address potential conflicts
    that may arise between us and Atlas. For more information, please read &#147;Conflicts
    of Interest and Fiduciary Duties.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">For a description of our other relationships with our affiliates, please read &#147;Certain Relationships and Related Party Transactions.&#148;</font></p>
</div>
<p align="center"><font face="serif" size="2">15</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p16"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2"><b>Summary Historical Consolidated and Pro Forma Financial Data</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We were formed in December 2005 and therefore do not have any historical financial statements. Since we will own and control Atlas Pipeline GP, the general partner of Atlas, the historical financial statements presented below are of Atlas Pipeline GP, on a
consolidated basis, including Atlas.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The historical financial data of Atlas Pipeline GP were derived from audited consolidated financial statements for each of the years ended December&nbsp;31, 2002, 2003 and 2004 and at December&nbsp;31, 2003 and 2004, which have been audited by Grant Thornton LLP, an
independent registered public accounting firm. The financial data for the nine months ended and at September&nbsp;30, 2004 and 2005 were derived from unaudited consolidated financial statements of Atlas Pipeline GP.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We have also included unaudited pro forma financial data that reflects historical results of Atlas Pipeline GP as adjusted on a pro forma basis to give effect to Atlas&#146; April 2004, July 2004, June 2005 and November 2005 offerings of common units, the issuance of Atlas&#146;
$250 million of 8.125% senior unsecured notes, the completion of the NOARK acquisition and the acquisitions of Spectrum Field Services, Inc., which we refer to as Spectrum, and Elk City, and this offering.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The summary unaudited pro forma balance sheet information reflects the following transactions as if they occurred as of September&nbsp;30, 2005:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the NOARK acquisition, which occurred on October&nbsp;31, 2005, for consideration of $165.3 million, including estimated transaction costs plus $10.2 million for working capital adjustments, and the redemption of the portion of the NOARK 7.15% notes severally guaranteed
by Atlas Arkansas;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the amendment of Atlas&#146; credit facility, which occurred on October&nbsp;31, 2005, and borrowings under it to finance the NOARK acquisition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; public offering of 2,700,000 common units, which was completed in November 2005, and 330,000 additional underwriter option units, which was completed in December 2005, each at a public offering price of $42.00 per common unit, the net proceeds of which were
principally used to repay indebtedness under its credit facility incurred in connection with the NOARK acquisition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; issuance of $250.0 million of 8.125% senior unsecured notes in a private placement on December 20, 2005, the net proceeds of which were principally used to repay indebtedness under its credit facility; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">this offering and the application of the net proceeds as described under &#147;Use of Proceeds.&#148;</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The unaudited pro forma statement of income information for the year ended December&nbsp;31, 2004 reflects the following transactions as if they occurred as of January&nbsp;1, 2004:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; public offering of 750,000 common units, which was completed in April 2004 at a public offering price of $36.00 per common unit, the net proceeds of which were used principally to repay indebtedness under Atlas&#146; then existing credit facility;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the Spectrum acquisition, which occurred in July 2004, for total consideration of $141.6 million, including the payment of income taxes due as a result of the transaction and other related transaction costs;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; public offering of 2,100,000 common units, which was completed in July 2004 at a public offering price of $34.76 per common unit, the net proceeds of which were used principally to repay indebtedness incurred in connection with the Spectrum acquisition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the Elk City acquisition, which occurred in April 2005, for total consideration of $196.0 million, including related transaction costs;</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">16</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p17"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the closing of Atlas&#146; $270.0 million credit facility, which occurred in April 2005, and borrowings under it to finance the Elk City acquisition and repay amounts outstanding under Atlas&#146; previous credit facility;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; public offering of 2,300,000 common units, which was completed in June 2005 at a public offering price of $41.95 per common unit, the net proceeds of which were used principally to repay indebtedness incurred in connection with the Elk City acquisition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the NOARK acquisition, which occurred on October&nbsp;31, 2005, for consideration of $165.3 million, including estimated transaction costs, plus $10.2 million for working capital adjustments, and the redemption of the portion of the NOARK 7.15% notes severally guaranteed
by Atlas Arkansas;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the amendment of Atlas&#146; credit facility, which occurred on October&nbsp;31, 2005, and borrowings under it to finance the NOARK acquisition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; public offering of 2,700,000 common units, which was completed in November 2005, and 330,000 additional underwriter option units, which was completed in December 2005, each at a public offering price of $42.00 per common unit, the net proceeds of which were
principally used to repay indebtedness under its credit facility incurred in connection with the NOARK acquisition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; issuance of $250.0 million of 8.125% senior unsecured notes in a private placement on December 20, 2005, the net proceeds of which were principally used to repay indebtedness under its credit facility; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">this offering and the application of the net proceeds as described under &#147;Use of Proceeds.&#148;</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The unaudited pro forma statement of income information for the nine months ended September&nbsp;30, 2005 reflects the following transactions as if they occurred as of January&nbsp;1, 2005:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the Elk City acquisition, which occurred in April 2005, for total consideration of $196.0 million, including related transaction costs;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the closing of Atlas&#146; $270.0 million credit facility, which occurred in April 2005, and borrowings under it to finance the Elk City acquisition and repay amounts outstanding under Atlas&#146; previous credit facility;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; public offering of 2,300,000 common units, which was completed in June 2005, at a public offering price of $41.95 per common unit, the net proceeds of which were principally used to repay indebtedness incurred in connection with the Elk City acquisition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the NOARK acquisition, which occurred on October&nbsp;31, 2005, for consideration of $165.3 million, including estimated transaction costs plus $10.2 million for working capital adjustments, and the redemption of the portion of the NOARK 7.15% notes severally guaranteed
by Atlas Arkansas;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the amendment of Atlas&#146; credit facility, which occurred on October&nbsp;31, 2005, and borrowings under it to finance the NOARK acquisition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; public offering of 2,700,000 common units, which was completed in November 2005, and 330,000 additional underwriter option units, which was completed in December 2005, each at a public offering price of $42.00 per common unit, the net proceeds of which were
principally used to repay indebtedness under its credit facility incurred in connection with the NOARK acquisition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; issuance of $250.0 million of 8.125% senior unsecured notes in a private placement on December 20, 2005, the net proceeds of which were principally used to repay indebtedness under its credit facility; and</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">17</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p18"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">this offering and the application of the net proceeds as described under &#147;Use of Proceeds.&#148;</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Elk City&#146;s historical fiscal year ended August&nbsp;31, 2004 is not within 93 days of our fiscal year end. Accordingly, for pro forma purposes, statement of income information for the year ended December&nbsp;31, 2004 is based on Elk City&#146;s historical financial results for the
twelve months ended November&nbsp;30, 2004 and was created by subtracting the quarter ended November&nbsp;30, 2003 from Elk City&#146;s income statement for the year ended August&nbsp;31, 2004 and adding the quarter ended November&nbsp;30, 2004. For our pro forma statement of income
information for the nine months ended September&nbsp;30, 2005, we included Elk City&#146;s income statement for the three months ended February&nbsp;28, 2005. Elk City was included within our historical results for the nine months ended September&nbsp;30, 2005 from its date of acquisition
on April&nbsp;14, 2005.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The unaudited pro forma balance sheet and the pro forma statements of income were derived by adjusting the historical financial statements of Atlas Pipeline GP. However, we believe that the adjustments provide a reasonable basis for presenting the significant effects of
the transactions described above. The unaudited pro forma financial data presented are for informational purposes only and are based upon available information and assumptions that we believe are reasonable under the circumstances. You should not construe the unaudited pro
forma financial data as indicative of the combined financial position or results of operations that we, Atlas Pipeline GP, Atlas, Spectrum, Elk City and NOARK would have achieved had the transactions been consummated on the dates assumed. Moreover, they do not purport
to represent our, Atlas Pipeline GP&#146;s, Atlas&#146;, Spectrum&#146;s, Elk City&#146;s or NOARK&#146;s combined financial position or results of operations for any future date or period.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The financial data below should be read together with, and are qualified in their entirety by reference to, Atlas Pipeline GP&#146;s historical consolidated and pro forma combined financial statements and the accompanying notes, &#147;Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations,&#148; and the historical consolidated financial statements and the accompanying notes of Spectrum, Elk City and its predecessor and Enogex Arkansas Pipeline, each of which is set forth elsewhere in this prospectus. The pro forma
data are not necessarily reflective of what our results would actually have been had the transactions actually occurred on the indicated date, nor do they reflect what may actually occur in the future.</font></p>
</div>
<p align="center"><font face="serif" size="2">18</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p19"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Pro Forma, as adjusted</b></font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" align="center" valign="bottom"><font face="serif" size="1"><b>Years Ended December</b>&nbsp;<b>31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Nine Months</b><br>
<b>Ended</b><br>
<b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Year</b><br>
<b>Ended</b><br>
<b>December</b>&nbsp;<b>31,</b></font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Nine</b><br>
<b>Months</b><br>
<b>Ended</b><br>
<b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004(1)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004(1)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005(2)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><hr noshade size="1"></td>
    <td width="4%"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><hr noshade size="1"></td>
    <td width="4%"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><hr noshade size="1"></td>
    <td width="4%"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><hr noshade size="1"></td>
    <td width="4%"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><hr noshade size="1"></td>
    <td width="4%"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" align="right"></td>
    <td colspan="5" align="center"><font face="serif" size="1">(unaudited)</font><br>
        <font face="serif" size="1">(dollars
    in thousands)</font></td>
    <td align="right">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center"><font face="serif" size="1">(unaudited)</font></td>
    <td align="right">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Statement of income data:</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Revenue:</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Natural gas and liquids</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">72,109</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">30,048</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">218,268</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">331,119</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">301,362</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Transportation and compression</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,660</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">15,651</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">18,800</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">13,344</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">16,501</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">40,283</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">31,630</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Interest income and other</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">98</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">382</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">282</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">352</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">711</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">496</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Total revenue and other income</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,667</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">15,749</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">91,291</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">43,674</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">235,121</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">372,113</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">333,488</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Costs and Expenses:</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Natural gas and liquids</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">58,707</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">24,588</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">184,578</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">286,828</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">261,794</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Plant operating</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,032</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">931</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,242</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9,105</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,605</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Transportation and compression</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,062</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,421</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,260</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,709</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,169</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">6,694</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,716</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">General and administrative</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,482</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,662</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,642</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,901</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9,127</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,378</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,544</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,475</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,770</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,471</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,132</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,495</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">16,803</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">12,809</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Loss (gain) on arbitration settlement, net</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(1,457</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,987</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">138</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(1,457</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">138</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Interest</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">250</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">258</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,301</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,202</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,478</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">26,385</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">20,059</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Minority interest in Atlas (3)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,496</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,066</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,941</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,300</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,240</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,370</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,921</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Minority interest in NOARK (4)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">492</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">440</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Other</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">555</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Total costs and expenses</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,765</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,177</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">83,897</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">39,750</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">227,467</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">367,153</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">327,026</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Net income</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,902</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,572</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,394</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,924</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,654</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,960</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">6,462</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Premium on preferred unit redemption</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(400</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(400</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(400</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Net income attributable to owners</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,902</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,572</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">6,994</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,524</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,654</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,560</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">6,462</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Balance sheet data (at period end):</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Property, plant and equipment, net</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">23,764</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">29,628</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">175,259</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">172,312</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">304,704</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">462,626</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Total assets</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">38,151</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">63,170</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">234,898</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">236,178</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">484,458</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">722,313</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Total debt, including current portion</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">6,500</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">54,452</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">60,220</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">183,645</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">289,745</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Total owners&#146; equity (deficit)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,157</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">15,729</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">21,405</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">15,325</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(40,880</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(40,885</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Other financial data:</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Gross margin (5)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,660</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">15,651</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">32,202</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">18,804</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">50,191</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">84,574</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">71,198</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">EBITDA (6)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,123</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,666</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">25,107</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,558</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">31,867</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">59,518</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">45,251</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Adjusted EBITDA (6)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,123</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,666</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">24,350</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">13,887</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">34,814</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">58,761</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">48,198</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Maintenance capital expenditures</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">170</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,109</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,516</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">844</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,110</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Expansion capital expenditures</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,060</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,526</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,527</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,575</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">33,409</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Total capital expenditures</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,230</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,635</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,043</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,419</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">34,519</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Operating data:</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Appalachia:</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Average throughput volumes (Mcf/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">50,363</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">52,472</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">53,343</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">52,745</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">54,804</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">53,343</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">54,804</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Average transportation rate per Mcf</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">0.58</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">0.82</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">0.96</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">0.92</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1.10</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">0.96</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1.10</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Mid-Continent:</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Velma system:</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Gathered gas volume (Mcf/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">56,441</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">55,580</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">69,091</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">54,315</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">69,091</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">Processed gas volume (Mcf/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">55,202</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">54,755</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">64,581</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">52,391</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">64,581</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Residue gas volume (Mcf/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">42,659</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">41,555</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">52,471</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">40,702</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">52,471</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">NGL production (Bbl/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,799</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,916</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">6,812</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,711</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">6,812</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Condensate volume (Bbl/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">185</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">204</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">269</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">191</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">269</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Elk City system:</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Gathered gas volume (Mcf/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">242,294</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">239,804</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">246,539</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">Processed gas volume (Mcf/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">116,688</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">120,505</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">116,304</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Residue gas volume (Mcf/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">107,182</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">110,164</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">106,391</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">NGL production (Bbl/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,317</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,331</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,347</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Condensate volume (Bbl/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">121</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">108</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">136</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">NOARK system:</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Average throughput volume (Mcf/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">155,937</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">163,906</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><hr noshade size="1" align="left" width="100%"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(1)</font></td>
    <td><div align="left"><font face="serif" size="2">Includes Atlas&#146; acquisition of Spectrum on July&nbsp;16, 2004, representing five and one-half months&#146; operations for the year ended December&nbsp;31, 2004 and two and one-half months&#146; operations for the nine months ended September&nbsp;30, 2004. </font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">19</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p20"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
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    <td width="3%"><font face="serif" size="2">(2)</font></td>
    <td><div align="left"><font face="serif" size="2">Includes Atlas&#146; acquisition of Elk City on April&nbsp;14, 2005, representing five and one-half months&#146; operations for the nine months ended September&nbsp;30, 2005.</font></div></td>
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    <td width="3%"><font face="serif" size="2">(3)</font></td>
    <td><div align="left"><font face="serif" size="2">Represents the minority interest in the net income of Atlas.</font></div></td>
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    <td width="3%"><font face="serif" size="2">(4)</font></td>
    <td><div align="left"><font face="serif" size="2">Represents Southwestern&#146;s 25% minority interest in NOARK, which was acquired on October&nbsp;31, 2005.</font></div></td>
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    <td width="3%"><font face="serif" size="2">(5)</font></td>
    <td><div align="left"><font face="serif" size="2">We define gross margin as revenue less purchased product costs. Purchased product costs include the cost of natural gas and NGLs that Atlas purchases from third parties. We view gross margin as an important performance measure of core profitability of our operations and as a
key component of our internal financial reporting. We believe that investors benefit from having access to the same financial measures that our management uses. The GAAP measure most directly comparable to gross margin is net income. The following table reconciles our net
income to gross margin (in thousands):</font></div></td>
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    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Pro Forma, as adjusted</b></font></td>
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    <td colspan="8" align="center" valign="bottom"><font face="serif" size="1"><b>Years Ended December</b>&nbsp;<b>31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Nine Months</b><br>
<b>Ended</b><br>
<b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" rowspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Year</b><br>
<b>Ended</b><br>
<b>December</b>&nbsp;<b>31,</b></font><font face="serif" size="1">&nbsp;</font><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" rowspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Nine</b><br>
<b>Months</b><br>
<b>Ended</b><br>
<b>September</b>&nbsp;<b>30,</b></font><font face="serif" size="1">&nbsp;</font><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><hr noshade size="1"></td>
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    <td><hr noshade size="1"></td>
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    <td><hr noshade size="1"></td>
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    <td colspan="8" align="center" valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
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    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>(unaudited)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>(unaudited)</b></font></td>
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    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Net income</font></div></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">2,902</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">4,572</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">7,394</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">3,924</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">7,654</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="1">4,960</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="1">6,462</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
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    <td><div style="margin-left:3%"><font face="serif" size="1">Plus (minus):</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><div style="margin-left:6%"><font face="serif" size="1">Interest income and other</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(7</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(98</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(382</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(282</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(352</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(711</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(496</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">Plant operating</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,032</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">931</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,242</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9,105</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,605</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Transportation and compression</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,062</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,421</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,260</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,709</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,169</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">6,694</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,716</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">General and administrative</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,482</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,662</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,642</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,901</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9,127</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,378</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,544</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,475</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,770</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,471</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,132</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,495</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">16,803</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">12,809</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">Loss (gain) on arbitration settlement, net</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(1,457</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,987</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">138</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(1,457</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">138</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Interest</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">250</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">258</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,301</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,202</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,478</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">26,385</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">20,059</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">Minority interest in Atlas</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,496</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,066</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,941</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,300</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,240</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,370</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,921</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Minority interest in NOARK</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">492</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">440</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">Other</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">555</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Gross margin</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,660</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">15,651</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">32,202</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">18,804</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">50,191</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">84,574</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">71,198</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><hr noshade size="1" align="left" width="100%"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(6)</font></td>
    <td><div align="left"><font face="serif" size="2">EBITDA represents net income before net interest expense, income taxes, depreciation and amortization and minority interest in Atlas. Adjusted EBITDA is calculated by adding to EBITDA other non-cash items such as compensation expenses associated with unit issuances to
directors and employees. EBITDA and Adjusted EBITDA are not intended to represent cash flow and do not represent the measure of cash available for distribution. Our method of computing EBITDA may not be the same method used to compute similar measures reported by
other companies. Adjusted EBITDA includes net gain or loss on arbitration settlement as a non-recurring item. Adjusted EBITDA does not reflect approximately $1.0 million of additional general and administrative expenses we expect to incur in connection with our being a
public company after this offering.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Certain items excluded from EBITDA are significant components in understanding and assessing an entity&#146;s financial performance, such as their cost of capital and its tax structure, as well as historic costs of depreciable assets. We have included information concerning EBITDA
and Adjusted EBITDA because they provide investors and management with additional information as to Atlas&#146; ability to pay its fixed charges and are presented solely as a supplemental financial measure. EBITDA and Adjusted EBITDA should not be considered as alternatives
to, or more meaningful than, net income or cash flow as determined in accordance with generally accepted accounting principles or as indicators of Atlas&#146; operating performance or liquidity. The table below reconciles Adjusted EBITDA to EBITDA and EBITDA to our net
income (in thousands):</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">20</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p21"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Pro Forma, as adjusted</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" align="center" valign="bottom"><font face="serif" size="1"><b>Years Ended December</b>&nbsp;<b>31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Nine Months</b><br>
<b>Ended</b><br>
<b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" rowspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Year</b><br>
<b>Ended</b><br>
<b>December</b>&nbsp;<b>31,</b></font><font face="serif" size="1">&nbsp;</font><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" rowspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Nine</b><br>
<b>Months</b><br>
<b>Ended</b><br>
<b>September</b>&nbsp;<b>30,</b></font><font face="serif" size="1">&nbsp;</font><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" align="center" valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>(unaudited)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>(unaudited)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Net income</font></div></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="2%"><font face="serif" size="1">2,902</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">4,572</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">7,394</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">3,924</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">7,654</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="1">4,960</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="1">6,462</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Plus:</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Minority interest in Atlas</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,496</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,066</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,941</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,300</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,240</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,370</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,921</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">Interest expense</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">250</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">258</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,301</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,202</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,478</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">26,385</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">20,059</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,475</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,770</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,471</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,132</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,495</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">16,803</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">12,809</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">EBITDA</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,123</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,666</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">25,107</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,558</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">31,867</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">59,518</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">45,251</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Adjustments:</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Non-cash compensation expense</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">700</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">342</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,809</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">700</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,809</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">Loss (gain) on arbitration settlement, net</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(1,457</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,987</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">138</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(1,457</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">138</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Adjusted EBITDA</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,123</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,666</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">24,350</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">13,887</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">34,814</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">58,761</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">48,198</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">21</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p22"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>RISK FACTORS</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Partnership interests are inherently different from capital stock of a corporation, although many of the business risks to which we are subject are similar to those that would be faced by a corporation engaged in a similar business. You should consider carefully the
following risk factors together with all of the other information included in this prospectus in evaluating an investment in our common units.</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>If any of the following risks were actually to occur, our business, financial condition or results of operations could be materially adversely affected. In that case, we might not be able to pay the quarterly distribution on our common units, the trading price of our
common units could decline and you could lose all or part of your investment.</i></font></p>
</div>
<p align="center"><font face="serif" size="2"><b>Risks Inherent in an Investment in Us</b></font></p>
<p align="left"><font face="serif" size="2"><b>Our only cash generating assets are our interests in Atlas, and our cash flow is therefore completely dependent upon the ability of Atlas to make distributions to its partners.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The amounts of cash that Atlas generates may not be sufficient for it to pay distributions at the current or any other level of distribution. Atlas&#146; ability to make cash distributions depends primarily on its cash flow. Cash distributions do not depend directly on Atlas&#146;
profitability, which is affected by non-cash items. Therefore, cash distributions may be made during periods when Atlas records losses and may not be made during periods when Atlas records profits. The actual amounts of cash Atlas generates will depend upon numerous
factors relating to its business which may be beyond its control, including:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the demand for and price of its natural gas and NGLs;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the volume of natural gas Atlas transports;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">continued development of wells for connection to Atlas&#146; gathering systems;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the availability of local, intrastate and interstate transportation systems;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the expenses Atlas incurs in providing its gathering services;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the cost of acquisitions and capital improvements;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; issuance of equity securities;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">required principal and interest payments on Atlas&#146; debt;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">prevailing economic conditions;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">fuel conservation measures;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">alternate fuel requirements;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">government regulation and taxation; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">technical advances in fuel economy and energy generation devices.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In addition, the actual amount of cash that Atlas will have available for distribution will depend on other factors, including:</font></p>
</div>
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  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the level of capital expenditures it makes;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the sources of cash used to fund its acquisitions;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">its debt service requirements and restrictions on distributions contained in its current or future debt agreements; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the amount of cash reserves established by Atlas&#146; general partner for the conduct of Atlas&#146; business.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas is unable to borrow under its credit facility to pay distributions of available cash to unitholders because such borrowings would not constitute &#147;working capital borrowings&#148; under its partnership agreement. Because Atlas will be unable to borrow money to pay
distributions unless it establishes a facility that meets</font></p>
</div>
<p align="center"><font face="serif" size="2">22</font></p>
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<p align="left"><font face="serif" size="2">the definition contained in its partnership agreement, Atlas&#146; ability to pay a distribution in any quarter is solely dependent on its ability to generate sufficient operating surplus with respect to that
quarter.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Because of these factors, Atlas may not have sufficient available cash each quarter to pay the current declared distribution of $0.83 per quarter or any other amount. Please read &#147;&#151;Risks Relating to Atlas&#146; Business&#148; for a discussion of risks affecting Atlas&#146; ability to
generate distributable cash flow.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Restrictions in Atlas&#146; credit facility and our proposed credit facility could limit our ability to make distributions to our unitholders.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We intend to enter into a credit facility after the closing of this offering. Atlas&#146; credit facility, and any future credit facility we enter into, will contain covenants limiting the ability to incur indebtedness, grant liens, engage in transactions with affiliates and make
distributions to unitholders. Atlas&#146; credit facility also contains covenants requiring Atlas to maintain certain financial ratios. In addition, Atlas is prohibited from making any distribution to unitholders if such distribution would cause an event of default or otherwise violate a
covenant under this credit facility.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Our partnership interests in Atlas are pledged under Atlas America&#146;s credit facility.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas Pipeline GP has granted a security interest and pledged its limited partner and general partner interests in Atlas to Wachovia Bank pursuant to Atlas America&#146;s credit facility. If Atlas America or another party to the credit facility causes an event of default,
Wachovia Bank and the other lenders under Atlas America&#146;s credit facility could foreclose on the pledged Atlas partnership interests, which could cause us to lose our ability to manage Atlas and could have a material adverse effect on our business, financial condition and
results of operations.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>If distributions on our common units are not paid with respect to any fiscal quarter, including those at the anticipated initial distribution rate, our unitholders will not be entitled to receive such payments in the future.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our distributions to our unitholders will not be cumulative. Consequently, if distributions on our common units are not paid with respect to any fiscal quarter, including those at the anticipated initial distribution rate, our unitholders will not be entitled to receive such
payments in the future. Any distributions received by us from Atlas related to periods prior to the closing of this offering will be distributed entirely to Atlas America. In May 2006, we expect to pay a distribution to our unitholders equal to the initial quarterly distribution
prorated for the portion of the quarter ending March&nbsp;31, 2006 that we are a publicly traded partnership.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>We cannot assure you that we will have sufficient available cash to pay our initial quarterly distribution of $0.225 per unit for each quarter following the consummation of this offering.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The amount of available cash we need to pay our full initial quarterly distribution on the common units outstanding for the four quarters immediately following the completion of this offering is approximately $19.0 million. Our pro forma, as adjusted, available cash
deficit generated during fiscal 2004 would have been approximately $2.4 million. This amount would have been insufficient by approximately $21.4 million to pay our full initial quarterly distribution amount on all of our outstanding common units. Our pro forma, as adjusted,
available cash for the twelve months ended September&nbsp;30, 2005 would have been approximately $9.0 million. This amount would have been insufficient by approximately $10.0 million to pay our full initial annual distribution amount on all of our outstanding units. Please see &#147;Unaudited Pro Forma Available Cash&#148; for a presentation of the amounts of available cash that we would have generated
for fiscal 2004 and the twelve months ended September&nbsp;30, 2005.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>In the future, we may not have sufficient cash to pay distributions at our estimated initial quarterly distribution level or to increase distributions.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The source of our earnings and cash flow will initially consist exclusively of cash distributions from Atlas. Therefore, the amount of distributions we are able to make to our unitholders may fluctuate based on the level of distributions Atlas makes to its partners. We
cannot assure you that Atlas will continue to make quarterly distributions at its current level or increase its quarterly distributions in the future. In addition, while</font></p>
</div>
<p align="center"><font face="serif" size="2">23</font></p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">we would expect to increase or decrease distributions to our unitholders if Atlas increases or decreases
distributions to us, the timing and amount of such increased or decreased distributions, if any, will not necessarily be comparable to the timing and amount of the increase or decrease in distributions made by Atlas to us.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our ability to distribute cash received from Atlas to our unitholders is limited by a number of factors, including:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">interest expense and principal payments on any current or future indebtedness;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">restrictions on distributions contained in any current or future debt agreements;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">our general and administrative expenses, including expenses we will incur as a result of being a public company;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">expenses of our subsidiaries other than Atlas, including tax liabilities of our corporate subsidiaries, if any;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">reserves necessary for us to make the necessary capital contributions to maintain our 2.0% general partner interest in Atlas as required by its partnership agreement upon the issuance of additional partnership securities by Atlas; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">reserves our general partner believes prudent for us to maintain for the proper conduct of our business or to provide for future distributions.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We cannot guarantee that in the future we will be able to pay distributions or that any distributions we do make will be at or above our estimated initial quarterly distribution. The actual amount of cash that is available for distribution to our unitholders will depend on
numerous factors, many of which are beyond our control or the control of our general partner. Our estimated cash available to pay distributions for the twelve months ending December&nbsp;31, 2006 approximately equals the amount of cash we need to pay the expected annual
distribution of $0.90 per unit. Therefore, a reduction in the amount of cash distributed by Atlas per unit or on the incentive distribution rights, or an increase in our expenses may result in our not being able to pay the expected annual distribution of $0.90 per unit. We do not
have any subordinated units, which would have their distributions reduced before distributions to the common units are reduced.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Atlas&#146; general partner, with our consent, may limit or modify the incentive distributions we are entitled to receive in order to facilitate the growth strategy of Atlas. Our general partner&#146;s board of directors can give this consent without a vote of our unitholders.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We own Atlas&#146; general partner, which owns the incentive distribution rights in Atlas that entitle us to receive increasing percentages, up to a maximum of 48.0%, of any cash distributed by Atlas as it reaches certain target distribution levels in excess of $0.42 per unit in
any quarter. A substantial portion of the cash flows we receive from Atlas is provided by these incentive distributions. Atlas&#146; board of directors may reduce the incentive distribution rights payable to us with our consent, which we may provide without the approval of our
unitholders.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In order to facilitate acquisitions by Atlas, the general partner of Atlas may elect to limit the incentive distributions we are entitled to receive with respect to a particular acquisition or unit issuance contemplated by Atlas. This is because a potential acquisition might not
be accretive to Atlas&#146; unitholders as a result of the significant portion of that acquisition&#146;s cash flows which would be paid as incentive distributions to us. By limiting the level of incentive distributions in connection with a particular acquisition
or issuance of units of Atlas, the cash flows associated with that acquisition could be accretive to Atlas&#146; unitholders as well as substantially beneficial to us. In doing so, the managing board of
Atlas&#146; general partner would be required to consider both its fiduciary obligations to investors in Atlas as well as to us. Our partnership agreement specifically permits our general partner to
authorize the general partner of Atlas to limit or modify the incentive distribution rights held by us if our general partner determines that such limitation or modification does not adversely affect
our limited partners in any material respect.</font></p>
</div>
<p align="center"><font face="serif" size="2">24</font></p>
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<p align="left"><font face="serif" size="2"><b>A reduction in Atlas&#146; distributions will disproportionately affect the amount of cash distributions to which we are currently entitled.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our ownership of the incentive distribution rights in Atlas, through our ownership of equity interests in Atlas Pipeline GP, the holder of the incentive distribution rights, entitles us to receive our pro rata share of specified percentages of total cash distributions made by
Atlas with respect to any particular quarter only in the event that Atlas distributes more than $0.42 per unit for such quarter. As a result, the holders of Atlas&#146; common units have a priority over the holders of Atlas&#146; incentive distribution rights to the extent of cash distributions
by Atlas up to and including $0.42 per unit for any quarter.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our incentive distribution rights entitle us to receive increasing percentages, up to 48%, of all cash distributed by Atlas. Because the incentive distribution rights currently participate at the maximum 48% target cash distribution level in all distributions made by Atlas
above the current distribution level, future growth in distributions we receive from Atlas will not result from an increase in the target cash distribution level associated with the incentive distribution rights.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Furthermore, a decrease in the amount of distributions by Atlas to less than $0.60 per common unit per quarter would reduce Atlas Pipeline GP&#146;s percentage of the incremental cash distributions above $0.52 per common unit per quarter from 48% to 23%. As a result,
any such reduction in quarterly cash distributions from Atlas would have the effect of disproportionately reducing the amount of all distributions that we receive based on our ownership interest in the incentive distribution rights in Atlas as compared to cash distributions we
receive on our 2.0% general partner interest in Atlas and our Atlas common units.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Our ability to meet our financial needs may be adversely affected by our cash distribution policy and our lack of operational assets.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our cash distribution policy, which is consistent with our partnership agreement, requires us to distribute all of our available cash quarterly. Our only cash generating assets are partnership interests, including incentive distribution rights, in Atlas, and we currently have
no independent operations separate from those of Atlas. Moreover, a reduction in Atlas&#146; distributions will disproportionately affect the amount of cash distributions we receive. Given that our cash distribution policy is to distribute available cash and not retain it and that our
only cash generating assets are partnership interests in Atlas, we may not have enough cash to meet our needs if any of the following events occur:</font></p>
</div>
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  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">an increase in our operating expenses;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">an increase in general and administrative expenses;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">an increase in principal and interest payments on our outstanding debt;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">an increase in working capital requirements; or</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">an increase in cash needs of Atlas or its subsidiaries that reduces Atlas&#146; distributions.</font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2"><b>There is no guarantee that our unitholders will receive quarterly distributions from us.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">While our cash distribution policy, which is consistent with the terms of our partnership agreement, requires that we distribute all of our available cash quarterly, our cash distribution policy is subject to the following restrictions and limitations and may be changed at
any time, including in the following ways:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">We may lack sufficient cash to pay distributions to our unitholders due to a number of factors, including increases in our general and administrative expenses, principal and interest payments on debt we may incur, tax expenses, working capital requirements and anticipated cash needs of us or Atlas and its subsidiaries.</font></div></td>
  </tr>
  <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Our cash distribution policy will be, and Atlas&#146; cash distribution policy is, subject to restrictions on distributions under our anticipated new credit facility and Atlas&#146; credit agreements, respectively, such as material financial tests and covenants and limitations on paying
distributions during an event of default.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">25</font></p>
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    <td><div align="left"><font face="serif" size="2">Our general partner&#146;s board of directors will have the authority under our partnership agreement to establish reserves for the prudent conduct of our business and for future cash distributions to our unitholders, and the managing board of Atlas&#146; general partner has the
authority under Atlas&#146; partnership agreement to establish reserves for the prudent conduct of Atlas&#146; business and for future cash distributions to Atlas&#146; unitholders. The establishment of those reserves could result in a reduction in cash distributions to you from levels we
currently anticipate pursuant to our stated cash distribution policy.</font></div></td>
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    <td><div align="left"><font face="serif" size="2">Our partnership agreement, including our cash distribution policy contained therein, may be amended by a vote of the holders of a majority of our common units.</font></div></td>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Even if our cash distribution policy is not amended, modified or revoked, the amount of distributions we pay under our cash distribution policy and the decision to make any distribution is determined by our general partner, taking into consideration the terms of our
partnership agreement, and the amount of distributions paid under Atlas&#146; cash distribution policy and the decision to make any distribution to its unitholders is at the discretion of Atlas&#146; general partner, taking into consideration the terms of its partnership agreement.</font></div></td>
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    <td><div align="left"><font face="serif" size="2">Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act, Atlas may not make a distribution to its partners if the distribution would cause its liabilities to exceed the fair value of its assets, and we may not make a distribution to you if the distribution
would cause our liabilities to exceed the fair value of our assets.</font></div></td>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Because of these restrictions and limitations on our cash distribution policy and our ability to change our cash distribution policy, we may not have available cash to distribute to our unitholders, and there is no guarantee that our unitholders will receive quarterly
distributions from us.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Our cash distribution policy limits our ability to grow.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Because we distribute all of our available cash, our growth may not be as fast as businesses that reinvest their available cash to expand ongoing operations. In fact, our growth initially will be completely dependent upon Atlas&#146; ability to increase its quarterly distribution
per unit because currently our only cash-generating assets are partnership interests in Atlas, including incentive distribution rights. If we issue additional units or incur debt to fund acquisitions and capital expenditures, the payment of distributions on those additional
units or interest on that debt could increase the risk that we will be unable to maintain or increase our per unit distribution level.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Consistent with the terms of its partnership agreement, Atlas distributes to its partners its available cash each quarter. In determining the amount of cash available for distribution, Atlas sets aside cash reserves, including reserves it believes prudent to maintain for the
proper conduct of its business or to provide for future distributions. Additionally, it has relied upon external financing sources, including commercial borrowings and other debt and equity issuances, to fund its acquisition capital expenditures. Accordingly, to the extent Atlas
does not have sufficient cash reserves or is unable to finance growth externally, its cash distribution policy will significantly impair its ability to grow. In addition, to the extent Atlas issues additional units in connection with any acquisitions or capital expenditures,
the payment of distributions on those additional units may increase the risk that Atlas will be unable to maintain or increase its per unit distribution level, which in turn may impact the available cash that we have to distribute to our unitholders. The incurrence of additional
debt to finance its growth strategy would result in increased interest expense to Atlas, which in turn may impact the available cash that we have to distribute to our unitholders.</font></p>
</div>
<p>&nbsp;</p>
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<p align="left"><font face="serif" size="2"><b>The amount of cash distributions from Atlas that we will be able to distribute to you will be reduced by the costs associated with being a public company, other general and administrative expenses, and reserves that our general partner believes prudent to
maintain for the proper conduct of our business and for future distributions.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Before we can pay distributions to our unitholders, we must first pay or reserve cash for our expenses, including the costs of being a public company and other operating expenses, and we may reserve cash for future distributions during periods of limited cash flows.
Prior to this offering, we have been a private company and have not filed reports with the Commission. Following this offering, we will become subject to the public reporting requirements of the Securities Exchange Act of 1934, as amended. Although we produce our
financial statements in accordance with GAAP, our internal accounting controls may not currently meet all standards applicable to companies with publicly traded securities. For example, as we become subject to the requirements of Section 404 of Sarbanes-Oxley for the fiscal
year ending December&nbsp;31, 2007, our auditors may identify weaknesses or deficiencies in the operational effectiveness of our internal controls and procedures and may advise us that these weaknesses or deficiencies could collectively constitute a significant deficiency that may
rise to the level of a material weakness under Section 404. Similarly, Atlas is subject to Section 404 with the filing of its annual reports on Form 10-K, and its auditors may identify significant deficiencies and/or material weaknesses in its internal controls and procedures. In
addition, the amount of cash distributions from Atlas that will be available for distribution to our unitholders will be reduced by the costs associated with us becoming a public company.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In addition, we may reserve funds to maintain our 2.0% general partner interest in Atlas by making a capital contribution to Atlas when it issues additional common units.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>We are largely dependent on Atlas for our growth. As a result of the fiduciary obligations of Atlas&#146; general partner, which is our wholly owned subsidiary, to the unitholders of Atlas, our ability to pursue business opportunities independently will be limited.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We currently intend to grow primarily through the growth of Atlas. While we are not precluded from pursuing business opportunities independently of Atlas, our subsidiary, as the general partner of Atlas, has fiduciary duties to Atlas unitholders which would make it
difficult for us to engage in any business activity that is competitive with Atlas. Those fiduciary duties are applicable to us because we control the general partner through our ability to elect all of its directors. While there may be circumstances in which these fiduciary duties
may be satisfied while allowing us to pursue business opportunities independent of Atlas, we expect such opportunities to be limited. Accordingly, we may be unable to diversify our sources of revenue in order to increase cash distributions to you. See also &#147;&#151;Risks Related to
Conflicts of Interest.&#148;</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Our ability to sell our partnership interests in Atlas may be limited by securities laws restrictions and liquidity constraints.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">All of the 1,641,026 common units of Atlas that we own are unregistered, restricted securities, within the meaning of Rule 144 under the Securities Act of 1933. Unless we exercise our registration rights with respect to these common units, we are limited to selling into
the market in any three-month period an amount of Atlas common units that does not exceed the greater of 1% of the total number of common units outstanding or the average weekly reported trading volume of the common units for the four calendar weeks prior to the sale.
We face contractual limitations on our ability to sell our general partner interest and incentive distribution rights and the market for such interests is illiquid.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public markets, including sales by our existing unitholders.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">After this offering, we will have 21,100,000 common units outstanding, which includes the 3,600,000 common units we are selling in this offering that may be resold in the public market immediately. All of our common units that were outstanding prior to our initial
public offering will be subject to resale restrictions under 180-day lock-up agreements with our underwriters. Each of the lock-up arrangements with the underwriters may be waived in the discretion of Lehman Brothers, Inc. Sales by any of our existing unitholders of a
substantial number of our common units in the public markets following this offering, or the perception that such sales might occur, could have a material adverse effect on the price of our common units</font></p>
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<p align="left"><font face="serif" size="2">or could impair our ability to obtain capital through an offering of equity securities. In addition, our general partner has agreed to provide registration rights to these holders, subject to certain
limitations. Please read &#147;Units Eligible for Future Sale.&#148;</font></p>
<p align="left"><font face="serif" size="2"><b>The control of our general partner may be transferred to a third party, and that party could replace our current management team, in each case without unitholder consent.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of its assets without the consent of our unitholders. Furthermore, there is no restriction in our limited partnership agreement on the ability of the
owners of our general partner to transfer their ownership interest in our general partner to a third party. The owner of our general partner would then be in a position to replace the board of directors and officers of our general partner with its own choices and to control the
decisions taken by the board of directors and officers.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Atlas&#146; unitholders have the right to remove Atlas&#146; general partner with the approval of the holders of 66 2/3% of all units, which would cause us to lose our general partner interest and incentive distribution rights in Atlas and the ability to manage Atlas.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We currently manage Atlas through Atlas Pipeline GP, Atlas&#146; general partner and our wholly-owned subsidiary. Atlas&#146; partnership agreement, however, gives unitholders of Atlas the right to remove the general partner of Atlas upon the affirmative vote of holders of 66
2/3% of Atlas&#146; outstanding units. If Atlas Pipeline GP were removed as general partner of Atlas, it would receive cash or common units in exchange for its 2.0% general partner interest and the incentive distribution rights and would lose its ability to manage Atlas. While the
common units or cash we would receive are intended under the terms of Atlas&#146; partnership agreement to fully compensate us in the event such an exchange is required, the value of these common units or investments we make with the cash over time may not be equivalent to
the value of the general partner interest and the incentive distribution rights had we retained them.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>If Atlas&#146; general partner is not fully reimbursed or indemnified for obligations and liabilities it incurs in managing the business and affairs of Atlas, its value, and therefore the value of our common units, could decline.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The general partner of Atlas may make expenditures on behalf of Atlas for which it will seek reimbursement from Atlas. In addition, under Delaware partnership law, the general partner, in its capacity as the general partner of Atlas, has unlimited liability for the
obligations of Atlas, such as its debts and environmental liabilities, except for those contractual obligations of Atlas that are expressly made without recourse to the general partner. To the extent Atlas Pipeline GP incurs obligations on behalf of Atlas, it is entitled to be
reimbursed or indemnified by Atlas. If Atlas is unable or unwilling to reimburse or indemnify its general partner, Atlas Pipeline GP may be unable to satisfy these liabilities or obligations, which would reduce its value and therefore the value of our common units.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>The initial public offering price of our common units may not be indicative of the market price of our common units after this offering. In addition, our unit price may be volatile.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Prior to this offering there has been no public market for our common units. An active market for our common units may not develop or may not be sustained after this offering. The initial public offering price of our common units will be determined by negotiations
between us and the underwriters based on numerous factors which we discuss in the &#147;Underwriting&#148; section of this prospectus. This price may not be indicative of the market price for our common units after this initial public offering. The market price of our common units
could be subject to significant fluctuations after this offering, and may decline below the initial public offering price. You may not be able to resell your common units at or above the initial public offering price. The following factors could affect our common unit price:</font></p>
</div>
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    <td><div align="left"><font face="serif" size="2">Atlas&#146; operating and financial performance and prospects;</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><div align="left"><font face="serif" size="2">quarterly variations in the rate of growth of our financial indicators, such as distributable cash flow per common unit, net income and revenue;</font></div></td>
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    <td><div align="left"><font face="serif" size="2">changes in revenue or earnings estimates or publication of research reports by analysts;</font></div></td>
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<p>&nbsp;</p>
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    <td><div align="left"><font face="serif" size="2">speculation in the press or investment community;</font></div></td>
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    <td><div align="left"><font face="serif" size="2">sales of our common units by our unitholders;</font></div></td>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">announcements by Atlas or its competitors of significant contracts, acquisitions, strategic partnerships, joint ventures, securities offerings or capital commitments;</font></div></td>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">general market conditions; and</font></div></td>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">domestic and international economic, legal and regulatory factors unrelated to Atlas&#146; performance.</font></div></td>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies and partnerships. These broad market fluctuations may adversely affect the trading price of our common units.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our common units and Atlas&#146; common units may not trade in simple relation or proportion to one another. Instead, while the trading prices of our common units and Atlas&#146; common units are likely to follow generally similar broad trends, the trading prices may diverge
because, among other things:</font></p>
</div>
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    <td><div align="left"><font face="serif" size="2">Atlas&#146; cash distributions to its common unitholders have a priority over distributions on its incentive distribution rights;</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">we participate in the distributions on our general partner interest in Atlas and the incentive distribution rights in Atlas while Atlas&#146; common unitholders do not; and</font></div></td>
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    <td><div align="left"><font face="serif" size="2">we may enter into other businesses separate and apart from Atlas or any of its affiliates.</font></div></td>
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<p align="left"><font face="serif" size="2"><b>You may have limited liquidity for your common units. A trading market may not develop for our common units, and you may not be able to resell your common units at the initial public offering price.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Prior to the offering, there has been no public market for our common units. We do not know the extent to which investor interest will lead to the development of a trading market or how liquid that market might be. Potential investors may be deterred from investing in
our common units for various reasons, including the very limited number of publicly traded entities whose assets consist exclusively of partnership interests in a publicly traded limited partnership. Also, you may not be able to resell your common units at or above the initial
public offering price. Additionally, the lack of liquidity may result in wide bid-ask spreads, contribute to significant fluctuations in the market price of our common units and limit the number of investors who are able to buy our common units.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Our unitholders do not elect our general partner or vote on our general partner&#146;s officers and directors, and the rights of unitholders owning 20% or more of our units are further restricted under our partnership agreement. Following the completion of this
offering, Atlas America will own approximately 82.9% of our units, a sufficient number to block any attempt to remove our general partner.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Unlike the holders of common stock in a corporation, our unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management&#146;s decisions regarding our business. Our unitholders did not elect our general
partner or the officers or directors of our general partner and will have no right to elect our general partner or the officers and directors of our general partner on an annual or other continuing basis in the future. The board of directors of our general partner, including
independent directors, is chosen by the members of our general partner.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Furthermore, if our unitholders are dissatisfied with the performance of our general partner, they will have little ability to remove our general partner. Our general partner may not be removed except upon the vote of the holders of at least 66 2/3% of the outstanding
units voting together as a single class. Because Atlas America owns approximately 82.9% of our outstanding units, our general partner may not be removed without the consent of Atlas America.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our unitholders&#146; voting rights are further restricted by the provision in our limited partnership agreement stating that any units held by a person that owns 20% or more of any class of units then outstanding, other than our general partner, its affiliates, their transferees
and persons who acquired such units with the prior</font></p>
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<p align="left"><font face="serif" size="2">approval of the board of directors of our general partner, cannot be voted on any matter. In addition, our limited partnership agreement contains provisions limiting the ability of our unitholders
to call meetings or to acquire information about our operations, as well as other provisions limiting our unitholders&#146; ability to influence the manner or direction of our management. As a result
of these provisions, the price at which our common units will trade may be lower because of the absence or reduction of a takeover premium in the trading price.</font></p>
<p align="left"><font face="serif" size="2"><b>Atlas may issue additional units, which may increase the risk of it not having sufficient available cash to maintain or increase its per unit distribution level.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas has wide discretion to issue additional units, including units that rank senior to its common units and the incentive distributions rights as to quarterly cash distributions, on the terms and conditions established by its general partner. The payment of distributions on
these additional Atlas units may increase the risk of Atlas being unable to maintain or increase its per unit distribution level. To the extent these new Atlas units are senior to the Atlas common units and the incentive distribution rights, their issuance will increase the
uncertainty of the payment of distributions on the common units and the incentive distribution rights. Neither the common units nor the incentive distribution rights are entitled to any arrearages from prior quarters.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>We may issue an unlimited number of limited partner interests without the consent of our unitholders, which will dilute your ownership interest in us and may increase the risk that we will not have sufficient available cash to maintain or increase our per unit
distribution level.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We may issue an unlimited number of limited partner interests of any type without the approval of our unitholders on terms and conditions established by our general partner at any time. The issuance by us of additional common units or other equity securities of equal
or senior rank will have the following effects:</font></p>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">our unitholders&#146; proportionate ownership interest in us will decrease;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the amount of cash available for distribution on each unit may decrease;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the relative voting strength of each previously outstanding unit may be diminished;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the ratio of taxable income to distributions may increase; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the market price of the common units may decline.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Please read &#147;The Partnership Agreement of Atlas Pipeline Holdings, L.P.&#151;Issuance of Additional Securities.&#148;</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>If in the future we cease to manage and control Atlas through our ownership of its general partner interests, we may be deemed to be an investment company under the Investment Company Act of 1940.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If we cease to manage and control Atlas and are deemed to be an investment company under the Investment Company Act of 1940, we would either have to register as an investment company under the Investment Company Act of 1940, obtain exemptive relief from
the SEC or modify our organizational structure or our contract rights to fall outside the definition of an investment company. Registering as an investment company could, among other things, materially limit our ability to engage in transactions with affiliates, including the
purchase and sale of certain securities or other property to or from our affiliates, restrict our ability to borrow funds or engage in other transactions involving leverage and require us to add additional directors who are independent of us or our affiliates.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>You will experience immediate and substantial dilution of $24.63 per common unit in the pro forma net tangible book value of your common units.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The offering price of our common units will be substantially higher than the pro forma net tangible book value per common unit of the outstanding common units immediately after the offering. If you purchase common units in this offering you will incur immediate
and substantial dilution in the pro forma net tangible book value per common unit from the price you pay for the common units.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Your liability as a limited partner may not be limited, and our unitholders may have to repay distributions or make additional contributions under certain circumstances.</b></font></p>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">30</font></p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under Delaware law, you could be held liable for our obligations to the same extent as our general partner if a court determined that the right or the exercise of the right by our unitholders as a group to remove or replace our general partner, to approve some
amendments to the limited partnership agreement or to take other action under our limited partnership agreement constituted participation in the &#147;control&#148; of our business.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner generally has unlimited liability for our obligations, such as our debts and environmental liabilities, except for those contractual obligations that are expressly made without recourse to our general partner. Additionally, the limitations on the liability
of holders of limited partner interests for the obligations of a limited partnership have not been clearly established in many jurisdictions.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In addition, Section 17-607 of the Delaware Revised Uniform Limited Partnership Act provides that, under some circumstances, a unitholder may be liable to us for the amount of a distribution for a period of three years from the date of the distribution. Please read
&#147;The Partnership Agreement of Atlas Pipeline Holdings, L.P.&#151;Limited Liability&#148; for a discussion of the implications of the limitations on liability to a unitholder.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>An increase in interest rates may cause the market price of our common units to decline.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Like all equity investments, an investment in our common units is subject to certain risks. In exchange for accepting these risks, investors may expect to receive a higher rate of return than would otherwise be obtainable from lower-risk investments. Accordingly, as
interest rates rise, the ability of investors to obtain higher risk-adjusted rates of return by purchasing government-backed debt securities may cause a corresponding decline in demand for riskier investments generally, including yield-based equity investments such as publicly-
traded limited partnership interests. Reduced demand for our common units resulting from investors seeking other more favorable investment opportunities may cause the trading price of our common units to decline.</font></p>
</div>
<p align="center"><font face="serif" size="2"><b>Risks Related to Conflicts of Interest</b></font></p>
<p align="left"><font face="serif" size="2"><b>Although we control Atlas through our ownership of its general partner, Atlas&#146; general partner owes fiduciary duties to Atlas and Atlas&#146; unitholders, which may conflict with our interests.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Conflicts of interest exist and may arise in the future as a result of the relationships between us and our affiliates, including Atlas&#146; general partner, on the one hand, and Atlas and its limited partners, on the other hand. The directors and officers of Atlas Pipeline GP have
fiduciary duties to manage Atlas in a manner beneficial to us, its owner. At the same time, these directors and officers have a fiduciary duty to manage Atlas in a manner beneficial to Atlas and its limited partners. The managing board of Atlas or its conflicts committee will
resolve any such conflict and has broad latitude to consider the interests of all parties to the conflict. The resolution of these conflicts may not always be in our best interest or that of our unitholders.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">For example, conflicts of interest may arise in the following situations:</font></p>
</div>
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  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the allocation of shared overhead expenses to Atlas and us;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the interpretation and enforcement of contractual obligations between us and our affiliates, on the one hand, and Atlas, on the other hand;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the determination and timing of the amount of cash to be distributed to Atlas&#146; partners and the amount of cash reserved for the future conduct of Atlas&#146; business;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the decision as to whether Atlas should make acquisitions, and on what terms; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">any decision we make in the future to engage in business activities independent of, or in competition with, Atlas.</font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2"><b>The fiduciary duties of our general partner&#146;s officers and directors may conflict with those of Atlas&#146; general partner&#146;s officers and directors.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner&#146;s officers and directors have fiduciary duties to manage our business in a manner beneficial to us and our partners. However, all of our general partner&#146;s executive officers and non-independent</font></p>
</div>
<p align="center"><font face="serif" size="2">31</font></p>
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<p align="left"><font face="serif" size="2">directors also serve as executive officers and directors of Atlas&#146; general partner, and, as a result, have fiduciary duties to manage the business of Atlas in a manner beneficial to Atlas and its
partners. Consequently, these directors and officers may encounter situations in which their fiduciary obligations to Atlas, on one hand, and us, on the other hand, are in conflict. The resolution
of these conflicts of interest may not always be in our best interest or that of our unitholders. For a more detailed description of the conflicts of interest involving our general partner, please read
&#147;Conflicts of Interest and Fiduciary Duties.&#148;</font></p>
<p align="left"><font face="serif" size="2"><b>If we are presented with certain
      business opportunities, Atlas will have the first right to pursue such
      opportunities.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Pursuant to the omnibus agreement to be entered into in connection with the closing of this offering, we will agree to certain business opportunity arrangements to address potential conflicts that may arise between us and Atlas. If a business opportunity in respect of any business activity in which Atlas is currently engaged is presented to us, our general partner or Atlas or its general partner, then Atlas will have the first right to pursue such business opportunity. The omnibus agreement will provide, among other things, that Atlas will be presumed to desire to acquire the assets until such time as it advises us that it has abandoned such pursuit, and we may not pursue the opportunity prior to that time. Please read &#147;Conflicts of Interest and Fiduciary Duties.&#148;</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Atlas and affiliates of our general
      partner are not limited in their ability to compete with us, which could
      cause conflicts of interest and limit our ability to acquire additional
      assets or businesses which in turn could adversely affect our results of
      operations and cash available for distribution to our unitholders.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Neither our partnership agreement
    nor the omnibus agreement between us, Atlas, Atlas Pipeline GP and Atlas
    Pipeline Holdings GP, LLC will prohibit Atlas or affiliates of our general
    partner from owning assets or engaging in businesses that compete directly
    or indirectly with us or one another. In addition, Atlas and its affiliates
    or affiliates of our general partner, may acquire, construct or dispose of
    additional assets related to the transmission, gathering and processing of
    natural gas, NGLs or other assets in the future, without any obligation to
    offer us the opportunity to purchase or construct any of those assets. As
    a result, competition among these entities could adversely impact Atlas&#146;
    or our results of operations and cash available for distribution. Please
    read &#147;Conflicts of Interest and Fiduciary Duties.&#148;</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Potential conflicts of interest may arise among our general partner, its affiliates and us. Our general partner and its affiliates have limited fiduciary duties to us and our unitholders, which may permit them to favor their own interests to the detriment of us and
our unitholders.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Following this offering, conflicts of interest may arise among our general partner and its affiliates, on the one hand, and us and our unitholders, on the other hand. As a result of these conflicts, our general partner may favor its own interests and the interests of its
affiliates over the interests of our unitholders. These conflicts include, among others, the following:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Our general partner is allowed to take into account the interests of parties other than us, including Atlas and its affiliates and any other businesses acquired in the future, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our unitholders.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Our general partner has limited its liability and reduced its fiduciary duties under the terms of our partnership agreement, while also restricting the remedies available to our unitholders for actions that, without these limitations, might constitute breaches of fiduciary duties.
As a result of purchasing our units, unitholders consent to various actions and conflicts of interest that might otherwise constitute a breach of fiduciary or other duties under applicable state law.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Our general partner determines the amount and timing of our investment transactions, borrowings, issuances of additional partnership securities and reserves, each of which can affect the amount of cash that is available for distribution to our unitholders.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Our general partner determines which costs incurred by it and its affiliates are reimbursable by us.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Our partnership agreement
          does not restrict our general partner from causing us to pay it or
          its affiliates for any services rendered, or from entering into additional
          contractual arrangements with any </font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">32</font></p>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td><font face="serif" size="2">of these entities on our behalf,
          so long as the terms of any such payments or
additional contractual arrangements are fair and reasonable to us.</font></td>
  </tr>
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Our general partner controls the enforcement of obligations owed to us by it and its affiliates.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Our general partner decides whether to retain separate counsel, accountants or others to perform services for us.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Please read &#147;Certain Relationships and Related Party Transactions&#148; and &#147;Conflicts of Interest and Fiduciary Duties.&#148;</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Our general partner may not be fully reimbursed for the use of its officers and employees by Atlas&#146; general partner.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner shares officers and administrative personnel with Atlas&#146; general partner to operate both our business and Atlas&#146; business. In that case, our general partner&#146;s officers, who are also the officers of Atlas&#146; general partner, will allocate, in their reasonable
and sole discretion, the time its employees spend on our behalf and on behalf of Atlas. These allocations may not necessarily be the result of arms-length negotiations between Atlas&#146; general partner and our general partner. Although our general partner intends to be reimbursed
by Atlas&#146; general partner for its employees&#146; activities, due to the nature of the allocations, this reimbursement may not exactly match the actual time and overhead spent.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Our partnership agreement limits our general partner&#146;s fiduciary duties to us and our unitholders and restricts the remedies available to our unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our partnership agreement contains provisions that reduce the standards to which our general partner would otherwise be held by state fiduciary duty law. For example, our partnership agreement:</font></p>
</div>
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  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner. This entitles our general partner to consider only the interests and factors that it desires, and it has no duty or obligation to give any
consideration to any interest of, or factors affecting, us, our affiliates or any limited partner. Examples include the exercise of its limited call right, its voting rights with respect to the units it owns, its registration rights and its determination whether or not to consent to any
merger or consolidation of our partnership or amendment to our partnership agreement;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">provides that our general partner will not have any liability to us or our unitholders for decisions made in its capacity as a general partner so long as it acted in good faith, meaning it believed the decisions were in the best interests of our partnership;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the audit and conflicts committee of the board of directors of our general partner and not involving a vote of unitholders must be on terms no less favorable to us than those
generally being provided to or available from unrelated third parties or be &#147;fair and reasonable&#148; to us and that, in determining whether a transaction or resolution is &#147;fair and reasonable,&#148; our general partner may consider the totality of the relationships among the parties
involved, including other transactions that may be particularly advantageous or beneficial to us;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">provides that in resolving conflicts of interest, it will be presumed that in making its decision the general partner acted in good faith, and in any proceeding brought by or on behalf of any limited partner or us, the person bringing or prosecuting such proceeding will have the
burden of overcoming such presumption; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">provides that our general partner and its officers and directors will not be liable for monetary damages to us, our limited partners or assignees for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction
determining that the general partner or those other persons acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that such person&#146;s conduct was criminal.</font></div></td>
  </tr>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In order to become a limited partner of our partnership, our unitholders are required to agree to be bound by the provisions in the partnership agreement, including the provisions discussed above. Please read &#147;Conflicts of Interest and Fiduciary Duties&#151;Fiduciary
Duties.&#148;</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Our general  partner has a limited call right that may require you to sell your units at an undesirable time or price.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If at any time our general partner and its affiliates own more than 87.5% of our outstanding units, our general partner will have the right, but not the obligation, which it may assign to any of its affiliates or to us, to acquire all, but not less than all, of the units held by
unaffiliated persons at a price not less than their then-current market price. As a result, you may be required to sell your units at an undesirable time or price and may not receive any return on your investment. You may also incur a tax
liability upon a sale of your units. At the completion of this offering, Atlas America will own approximately 82.9% of our units. Please read &#147;The Partnership Agreement of Atlas Pipeline
Holdings, L.P.&#151;Limited Call Right.&#148;</font></p>
</div>
<p align="center"><font face="serif" size="2"><b>Risks Relating to Atlas&#146; Business</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Because our cash flow will initially consist exclusively of distributions from Atlas, risks to Atlas&#146; business are also risks to us. We have set forth below the material risks to Atlas&#146; business or results of operations, the occurrence of which could negatively impact Atlas&#146;
financial performance and decrease the amount of cash it is able to distribute to us, thereby decreasing the amount of cash we have available for distribution to our unitholders.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Atlas may be unsuccessful in integrating the operations from its recent acquisitions or any future acquisitions with its operations and in realizing all of the anticipated benefits of these acquisitions.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas acquired Elk City in April 2005 and completed the NOARK acquisition in October 2005 and is currently in the process of integrating their operations with its operations. Atlas also has an active, on-going program to identify other potential acquisitions. The
integration of previously independent operations with Atlas can be a complex, costly and time-consuming process. The difficulties of combining Elk City and NOARK, as well as any operations Atlas may acquire in the future, with its existing operations include, among other
things:</font></p>
</div>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">operating a significantly larger combined entity;</font></div></td>
  </tr>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the necessity of coordinating geographically disparate organizations, systems and facilities;</font></div></td>
  </tr>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">integrating personnel with diverse business backgrounds and organizational cultures;</font></div></td>
  </tr>
</table>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">consolidating operational and administrative functions;</font></div></td>
  </tr>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">integrating internal controls, compliance under Sarbanes-Oxley Act of 2002 and other corporate governance matters;</font></div></td>
  </tr>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the diversion of management&#146;s attention from other business concerns;</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">customer or key employee loss from the acquired businesses;</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">a significant increase in Atlas&#146; indebtedness; and</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">potential environmental or regulatory liabilities and title problems.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The process of combining companies or the failure to integrate them successfully could harm Atlas&#146; business or future prospects, and result in significant decreases in Atlas&#146; gross margin and cash flows.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>The acquisitions of the Elk City and NOARK operations have substantially changed Atlas&#146; business, making it difficult to evaluate Atlas&#146; business based upon its historical financial information.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The acquisitions of the Elk City and NOARK operations have significantly increased Atlas&#146; size and substantially redefined its business plan, expanded Atlas&#146; geographic market and resulted in large changes to its revenue and expenses. As a result of these acquisitions,
and Atlas&#146; continued plan to acquire and integrate additional companies that it believes present attractive opportunities, Atlas&#146; financial results for any period or changes in its results across periods may continue to dramatically change. Atlas&#146; historical
financial results,
</font></p>
</div>
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<p align="left"><font face="serif" size="2"><font face="serif" size="2">therefore,
      should not be relied upon to accurately predict its future operating results,
      thereby making the evaluation of its business more difficult.</font></font></p>
<p align="left"><font face="serif" size="2"><b>Due to its lack of asset diversification, negative developments in Atlas&#146; operations would reduce its ability to make distributions to its unitholders.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas relies exclusively on the revenue generated from its transportation, gathering and processing operations, and as a result, its financial condition depends upon prices of, and continued demand for, natural gas and NGLs. Due to Atlas&#146; lack of asset-type diversification,
a negative development in one of these businesses would have a significantly greater impact on Atlas&#146; financial condition and results of operations than if it maintained more diverse assets.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Atlas&#146; construction of new assets may not result in revenue increases and is subject to regulatory, environmental, political, legal and economic risks, which could impair its results of operations and financial condition.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">One of the ways Atlas may grow its business is through the construction of new assets, such as the Sweetwater gas plant. The construction of additions or modifications to Atlas&#146; existing systems and facilities, and the construction of new assets, involve numerous
regulatory, environmental, political and legal uncertainties beyond Atlas&#146; control and require the expenditure of significant amounts of capital. Any projects Atlas undertakes may not be completed on schedule at the budgeted cost, or at all. Moreover, its revenue may not
increase immediately upon the expenditure of funds on a particular project. For instance, if Atlas expands a gathering system, the construction may occur over an extended period of time, and it will not receive any material increases in revenue until the project is completed.
Moreover, Atlas may construct facilities to capture anticipated future growth in production in a region in which growth does not materialize. Since Atlas is not engaged in the exploration for and development of natural gas reserves, it often does not have access to estimates of
potential reserves in an area before constructing facilities in the area. To the extent Atlas relies on estimates of future production in Atlas&#146; decision to construct additions to its systems, the estimates may prove to be inaccurate because there are numerous uncertainties inherent
in estimating quantities of future production. As a result, new facilities may not be able to attract enough throughput to achieve Atlas&#146; expected investment return, which could impair Atlas&#146; results of operations and financial condition. In addition, Atlas&#146; actual revenue from a
project could materially differ from expectations as a result of the price of natural gas, the NGL content of the natural gas processed and other economic factors described in this section.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In particular, if the Sweetwater gas plant does not generate the incremental cash flow we expect, or if the generation of such cash flow is materially delayed, we may not have sufficient available cash to pay distributions at the initial distribution rate. In addition to the
risks discussed above, expected revenue from the Sweetwater gas plant could be reduced or delayed due to the following reasons:</font></p>
</div>
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    <td><div align="left"><font face="serif" size="2">difficulties in obtaining equity or debt financing for construction and operating costs;</font></div></td>
  </tr>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">difficulties in obtaining permits or other regulatory or third party consents;</font></div></td>
  </tr>
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  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">construction and operating costs exceeding budget estimates;</font></div></td>
  </tr>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">revenue being less than expected due to lower commodity prices or lower demand;</font></div></td>
  </tr>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">difficulties in obtaining consistent supplies of natural gas; and</font></div></td>
  </tr>
</table>
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  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">terms in operating agreements that are not favorable to us.</font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2"><b>If Atlas is unable to obtain new rights-of-way or the cost of renewing existing rights-of-way increases, then it may be unable to fully execute its growth strategy and its cash flows could be reduced.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The construction of additions to Atlas&#146; existing gathering assets may require it to obtain new rights-of-way before constructing new pipelines. Atlas may be unable to obtain rights-of-way to connect new natural gas supplies to its existing gathering lines or capitalize on
other attractive expansion opportunities. Additionally, it may become more expensive for Atlas to obtain new rights-of-way or to renew existing rights-of-way. If the cost of obtaining new rights-of-way or renewing existing rights-of-way increases, then Atlas&#146; cash flows could
be reduced.</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">35</font></p>
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<p align="left"><font face="serif" size="2"><b>Atlas&#146; profitability is affected by the volatility of prices for natural gas and NGL products.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas derives a majority of its gross margin from percentage of proceeds contracts. As a result, Atlas&#146; income depends to a significant extent upon the prices at which the natural gas it transports and the NGLs it produces are sold. Additionally, changes in natural gas
prices may indirectly impact Atlas&#146; profitability since prices can influence drilling activity and well operations and thus the volume of natural gas Atlas gathers and processes. Historically, the price of both natural gas and NGLs has been subject to significant volatility in
response to relatively minor changes in the supply and demand for natural gas and NGL products, market uncertainty and a variety of additional factors beyond Atlas&#146; control, including those described in &#147;Our only cash generating assets are our partnership interests in Atlas,
and our cash flow is therefore completely dependent upon the ability of Atlas to make distributions to its partners,&#148; above. Atlas expects this volatility to continue. This volatility may cause Atlas&#146; gross margin and cash flows to vary widely from period to period. Atlas&#146;
hedging strategies may not be sufficient to offset price volatility risk and, in any event, do not cover all of the throughput volumes subject to percentage of proceeds contracts. Moreover, hedges are subject to inherent risks, described in &#147;&#151;Atlas&#146; hedging strategies may fail to
protect it and could reduce its gross margin and cash flow.&#148;</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>The amount of natural gas Atlas transports, treats or processes will decline over time unless it is able to attract new wells to connect to its gathering systems.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Production of natural gas from a well generally declines over time until the well can no longer economically produce natural gas and is plugged and abandoned. Failure to connect new wells to Atlas&#146; gathering systems could, therefore, result in a substantial reduction of
the amount of natural gas transported over time and could, upon exhaustion of the current wells, cause Atlas to abandon one or more of its gathering systems and, possibly, cease operations. The primary factors affecting Atlas&#146; ability to connect new supplies of natural gas to
its gathering systems include its success in contracting for existing wells that are not committed to other systems, the level of drilling activity near its gathering systems and, in the Mid-Continent region, its ability to attract natural gas producers away from its competitors&#146;
gathering systems. Fluctuations in energy prices can greatly affect production rates and investments by third parties in the development of new oil and natural gas reserves. Drilling activity generally decreases as oil and natural gas prices decrease. Atlas has no control over the
level of drilling activity in its service areas, the amount of reserves underlying wells that connect to its systems and the rate at which production from a well will decline. In addition, Atlas has no control over producers or their production decisions, which are affected by,
among other things, prevailing and projected energy prices, demand for hydrocarbons, the level of reserves, geological considerations, governmental regulation and the availability and cost of capital. Because Atlas&#146; operating costs are fixed to a significant degree, a reduction in
the natural gas volumes it transports, treats or processes would result in a reduction in Atlas&#146; gross margin and cash flows.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>The success of Atlas&#146; Appalachian operations depends upon Atlas America&#146;s ability to drill and complete commercial producing wells.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Substantially all of the wells Atlas connects to its gathering systems in its Appalachian service area are drilled and operated by Atlas America for drilling investment partnerships sponsored by Atlas America. As a result, Atlas&#146; Appalachian operations depend principally
upon the success of Atlas America in sponsoring drilling investment partnerships and completing wells for these partnerships. Atlas America operates in a highly competitive environment for acquiring undeveloped leasehold acreage and attracting capital. Atlas America may
not be able to compete successfully in the future in acquiring undeveloped leasehold acreage or in raising additional capital through its drilling investment partnerships. Furthermore, Atlas America is not required to connect wells for which it is not the operator to Atlas&#146;
gathering systems. If Atlas America cannot or does not continue to sponsor drilling investment partnerships, if the amount of money raised by those partnerships decreases, or if the number of wells actually drilled and completed as commercially producing wells decreases, the
amount of natural gas transported by Atlas&#146; Appalachian gathering systems would substantially decrease and could, upon exhaustion of the wells currently connected to its gathering systems, cause it to abandon one or more of its Appalachian gathering systems, thereby
materially reducing its gross margin and cash flows.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">36</font></p>
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<p align="left"><font face="serif" size="2"><b>The failure of Atlas America to perform its obligations under Atlas&#146; natural gas gathering agreements may adversely affect Atlas&#146; business.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Substantially all of Atlas&#146; Appalachian operating system revenue currently consists of the fees Atlas receives under the master natural gas gathering agreement and other transportation agreements it has with Atlas America. Atlas expects to derive a material portion of its
gross margin from the services it provides under its contracts with Atlas America for the foreseeable future. Any factor or event adversely affecting Atlas America&#146;s business or its ability to perform under its contracts with Atlas or any default or nonperformance by Atlas
America of its contractual obligations to Atlas, could reduce Atlas&#146; gross margin and cash flows.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>The success of Atlas&#146; Mid-Continent operations depends upon its ability to continually find and contract for new sources of natural gas supply from unrelated third parties.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Unlike its Appalachian operations, none of the drillers or operators in Atlas&#146; Mid-Continent service area is an affiliate of Atlas. Moreover, Atlas&#146; agreements with most of the drillers and operators with which its Mid-Continent operations do business do not require them
to dedicate significant amounts of undeveloped acreage to Atlas&#146; systems. As a result, Atlas does not have assured sources to provide it with new wells to connect to its Mid-Continent gathering systems. Failure to connect new wells to its Mid-Continent operations will, as
described in &#147;&#151;The amount of natural gas Atlas transports, treats or processes will decline over time unless it is able to attract new wells to connect to its gathering systems,&#148; above, reduce its gross margin and cash flows.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Atlas&#146; Mid-Continent operations currently depend on certain key producers for their supply of natural gas, and the loss of any of these key producers could reduce Atlas&#146; revenue.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">During 2004, Chesapeake, Kaiser-Francis Oil Company, Burlington Resources Inc., St. Mary Land and Exploration Company and Samson Resources Co. supplied Atlas&#146; Mid-Continent system with a majority of its natural gas supply. If these producers reduce the
volumes of natural gas that they supply to Atlas, Atlas&#146; gross margin and cash flows would be reduced unless it obtains comparable supplies of natural gas from other producers.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>The curtailment of operations at, or closure of, either of Atlas&#146; processing plants could harm its business.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas has one processing plant for its Elk City operation and one active processing plant for its Velma operation. If operations at either plant were to be curtailed, or closed, whether due to accident, natural catastrophe, environmental regulation or for any other reason,
Atlas&#146; ability to process natural gas from the relevant gathering system and, as a result, its ability to extract and sell NGLs, would be harmed. If this curtailment or stoppage were to extend for more than a short period, Atlas&#146; gross margin and cash flows would be materially
reduced.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Atlas may face increased competition in the future in its Mid-Continent service areas.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; Mid-Continent operations
    may face competition for well connections. Duke Energy Field Services, LLC,
    ONEOK, Inc., Carrera Gas Company, Cimmarron Transportation, LLC and Enogex,
    Inc. operate competing gathering systems and processing plants in Atlas&#146;
Velma service area. In Atlas&#146; Elk City service area, ONEOK, Enbridge Energy
Partners, L.P., CenterPoint Energy, Inc. and Enogex operate competing gathering
systems and processing plants. Centerpoint Energy, Inc.&#146;s interstate system
is the nearest direct competitor to Atlas&#146;
Ozark Gas Transmission system. Centerpoint and Enogex Inc. operate competing
gathering systems in Ozark Gas Gathering&#146;s service area. Some of Atlas&#146; competitors
have greater financial and other resources than Atlas does. If these companies
become more active in its Mid-Continent service areas, Atlas may not be able
to compete successfully with them in securing new well  connections or retaining
current well connections. If Atlas does not compete successfully, the amount
of natural gas it transports, processes and treats will decrease, reducing its
gross margin and cash flows.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">37</font></p>
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    <td><div align="left"><font face="serif" size="2"><b>The amount of natural gas Atlas transports, treats or processes may be reduced if the public utility and interstate pipelines to which it delivers gas cannot or will not accept the gas.</b></font></div></td>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; gathering systems principally serve as intermediate transportation facilities between sales lines from wells connected to its systems and the public utility or interstate pipelines to which it delivers natural gas. If one or more of these pipelines has service
interruptions, capacity limitations or otherwise does not accept the natural gas Atlas transports, and Atlas cannot arrange for delivery to other pipelines, local distribution companies or end users, the amount of natural gas it transports may be reduced. Since Atlas&#146; revenue
depends upon the volumes of natural gas it transports, this could result in a material reduction in its gross margin and cash flows.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Before acquiring its Velma and Elk City operations, Atlas had no previous experience either in its Mid-Continent service area or in operating natural gas processing plants.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; Mid-Continent gathering systems are located in Oklahoma and northern Texas, areas in which it has been involved only since July 2004 as a result of the Velma acquisition and, in April 2005, the Elk City acquisition. In addition, as a result of these acquisitions,
Atlas began to operate natural gas processing plants, a business in which it had no prior operating experience. Atlas depends upon the experience, knowledge and business relationships that have been developed by the senior management of its Mid-Continent operations to
operate successfully in the region. The loss of the services of one or more members of Atlas&#146; Mid-Continent senior management, in particular, Robert R. Firth, President, and David D. Hall, Chief Financial Officer, could limit its growth or ability to maintain its current level of
operations in the Mid-Continent region.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Atlas may not be able to execute its growth strategy successfully.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; strategy contemplates substantial growth through both the acquisition of other gathering systems and processing assets and the expansion of its existing gathering systems and processing assets. Atlas&#146; growth strategy involves numerous risks, including:</font></p>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">it may not be able to identify suitable acquisition candidates;</font></div></td>
  </tr>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">it may not be able to make acquisitions on economically acceptable terms;</font></div></td>
  </tr>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">its costs in seeking to make acquisitions may be material, even if it cannot complete any acquisition it has pursued;</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">irrespective of estimates at the time it makes an acquisition, the acquisition may prove to be dilutive to earnings and operating surplus;</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">it may encounter difficulties in integrating operations and systems; and</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">any additional debt it incurs to finance an acquisition may impair Atlas&#146; ability to service its existing debt.</font></div></td>
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<p align="left"><font face="serif" size="2"><b>Limitations on Atlas&#146; access to capital or the market for its common units will impair its ability to execute its growth strategy.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; ability to raise capital for acquisitions and other capital expenditures depends upon ready access to the capital markets. Historically, Atlas has financed its acquisitions, and to a much lesser extent, expansions of its gathering systems, by bank credit facilities and
the proceeds of public equity offerings of its common units. If Atlas is unable to access the capital markets, it may be unable to execute its strategy of growth through acquisitions.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Atlas&#146; hedging strategies may fail to protect it and could reduce its gross margin and cash flow.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas pursues various hedging strategies to seek to reduce its exposure to losses from adverse changes in the prices for natural gas and NGLs. Atlas&#146; hedging activities will vary in scope based upon the level and volatility of natural gas and NGL prices and other
changing market conditions. Atlas&#146; hedging activity may fail to protect or could harm it because, among other things:</font></p>
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    <td><div align="left"><font face="serif" size="2">hedging can be expensive, particularly during periods of volatile prices;</font></div></td>
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<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">38</font></p>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">available hedges may not correspond directly with the risks against which it seeks protection;</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the duration of the hedge may not match the duration of the risk against which it seeks protection; and</font></div></td>
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    <td><div align="left"><font face="serif" size="2">the party owing money in the hedging transaction may default on its obligation to pay.</font></div></td>
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<p align="left"><font face="serif" size="2"><b>Atlas&#146; midstream natural gas operations may incur significant costs and liabilities resulting from a failure to comply with new or existing environmental regulations or a release of hazardous substances into the environment.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The operations of Atlas&#146; gathering systems, plant and other facilities are subject to stringent and complex federal, state and local environmental laws and regulations. These laws and regulations can restrict or impact Atlas&#146; business activities in many ways, including
restricting the manner in which it disposes of substances, requiring remedial action to remove or mitigate contamination, and requiring capital expenditures to comply with control requirements. Failure to comply with these laws and regulations may trigger a variety of
administrative, civil and criminal enforcement measures, including the assessment of monetary penalties, the imposition of remedial requirements, and the issuance of orders enjoining future operations. Certain environmental statutes impose strict, joint and several liability for
costs required to clean up and restore sites where substances and wastes have been disposed or otherwise released. Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the
release of substances or wastes into the environment.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">There is inherent risk of the incurrence of environmental costs and liabilities in Atlas&#146; business due to its handling of natural gas and other petroleum products, air emissions related to its operations, historical industry operations including releases of substances into the
environment, and waste disposal practices. For example, an accidental release from one of Atlas&#146; pipelines or processing facilities could subject it to substantial liabilities arising from environmental cleanup, restoration costs and natural resource damages, claims made by
neighboring landowners and other third parties for personal injury and property damage, and fines or penalties for related violations of environmental laws or regulations. Moreover, the possibility exists that stricter laws, regulations or enforcement policies could significantly
increase Atlas&#146; compliance costs and the cost of any remediation that may become necessary. Atlas may not be able to recover some or any of these costs from insurance.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Atlas is subject to operating and litigation risks that may not be covered by insurance.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; operations are subject to all operating hazards and risks incidental to transporting and processing natural gas and NGLs. These hazards include:</font></p>
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    <td><div align="left"><font face="serif" size="2">damage to pipelines, plants, related equipment and surrounding properties caused by floods and other natural disasters;</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">inadvertent damage from construction and farm equipment;</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">leakage of natural gas, NGLs and other hydrocarbons;</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">fires and explosions;</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">other hazards, including those associated with high-sulfur content, or sour gas, that could also result in personal injury and loss of life, pollution and suspension of operations; and</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">acts of terrorism directed at Atlas&#146; pipeline infrastructure, production facilities, transmission and distribution facilities and surrounding properties.</font></div></td>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As a result, Atlas may be a defendant in various legal proceedings and litigation arising from its operations. Atlas may not be able to maintain or obtain insurance of the type and amount it desires at reasonable rates. As a result of market conditions, premiums and
deductibles for some of Atlas&#146; insurance policies have increased substantially, and could escalate further. In some instances, insurance could become unavailable or available only for reduced amounts of coverage. For example, insurance carriers are now requiring broad
exclusions for losses due to war risk and terrorist acts. If Atlas were to incur a significant liability for which it was not fully insured, its gross margin and cash flows would be materially reduced.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">39</font></p>
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<p align="left"><font face="serif" size="2"><b>Regulation of Atlas&#146; gathering operations could increase its operating costs, decrease its revenue, or both.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Currently Atlas&#146; gathering of natural gas from wells is exempt from regulation under the Natural Gas Act of 1938. However, the implementation of new laws or policies, or interpretations of existing laws, could subject Atlas to regulation by FERC under the Natural Gas
Act. Atlas expects that any such regulation would increase its costs, decrease its gross margin and cash flows, or both.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">FERC regulation will still affect Atlas&#146; business and the market for its products. FERC&#146;s policies and practices affect a range of Atlas&#146; natural gas pipeline activities, including, for example, its policies on open access transportation, ratemaking, capacity release, and
market center promotion, which indirectly affect intrastate markets. In recent years, FERC has pursued pro-competitive policies in its regulation of interstate natural gas pipelines. However, Atlas cannot assure you that FERC will continue this approach as it considers matters
such as pipeline rates and rules and policies that may affect rights of access to natural gas transportation capacity.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Other state and local regulations will also affect Atlas&#146; business. Matters subject to regulation include rates, service and safety. Atlas&#146; gathering lines are subject to ratable take and common purchaser statutes in Texas and Oklahoma. Ratable take statutes generally
require gatherers to take, without undue discrimination, natural gas production that may be tendered to the gatherer for handling. Similarly, common purchaser statutes generally require gatherers to purchase without undue discrimination as to source of supply or producer.
These statutes restrict Atlas&#146; right as an owner of gathering facilities to decide with whom it contracts to purchase or transport natural gas.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Federal law leaves any economic regulation of natural gas gathering to the states. Texas and Oklahoma have adopted complaint-based regulation of natural gas gathering activities, which allows natural gas producers and shippers to file complaints with state regulators in
an effort to resolve grievances relating to natural gas gathering access and, in Texas and Oklahoma, with respect to rate discrimination. Should a complaint be filed or regulation by the Texas Railroad Commission or Oklahoma Corporation Commission become more active,
Atlas&#146; revenue could decrease.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Increased regulatory requirements relating to the integrity of the Ozark Gas Transmission pipeline will require it to spend additional money to comply with these requirements. Ozark Gas Transmission is subject to extensive laws and regulations related to pipeline
integrity. For example, federal legislation signed into law in December 2002 includes guidelines for the U.S. Department of Transportation and pipeline companies in the areas of testing, education, training and communication. Compliance with existing and recently enacted
regulations requires significant expenditures. Additional laws and regulations that may be enacted in the future, such as U.S. Department of Transportation implementation of additional hydrostatic testing requirements, could significantly increase the amount of these
expenditures.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Ozark Gas Transmission is subject to FERC rate-making policies that could have an adverse impact on Atlas&#146; ability to establish rates that would allow it to recover the full cost of operating the pipeline.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Rate-making policies by FERC could affect Ozark Gas Transmission&#146;s ability to establish rates, or to charge rates that would cover future increases in its costs, or even to continue to collect rates that cover current costs. Natural gas companies may not charge rates that
have been determined not to be just and reasonable by FERC. The rates, terms and conditions of service provided by natural gas companies are required to be on file with FERC in FERC-approved tariffs. Pursuant to FERC&#146;s jurisdiction over rates, existing rates may be
challenged by complaint and proposed rate increases may be challenged by protest. Atlas cannot assure you that FERC will continue to pursue its approach of pro-competitive policies as it considers matters such as pipeline rates and rules and policies that may affect rights of
access to natural gas capacity and transportation facilities. Any successful complaint or protest against Ozark Gas Transmission&#146;s rates could reduce Atlas&#146; revenue associated with providing transmission services. Atlas cannot assure you that it will be able to recover all of
Ozark Gas Transmission&#146;s costs through existing or future rates.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Ozark Gas Transmission is subject to regulation by FERC in addition to FERC rules and regulations related to the rates it can charge for its services.</b></font></p>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">40</font></p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">FERC&#146;s regulatory authority also extends to:</font></p>
</div>
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    <td><div align="left"><font face="serif" size="2">operating terms and conditions of service;</font></div></td>
  </tr>
</table>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the types of services Ozark Gas Transmission may offer to its customers;</font></div></td>
  </tr>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">construction of new facilities;</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">acquisition, extension or abandonment of services or facilities;</font></div></td>
  </tr>
</table>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">accounts and records; and</font></div></td>
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</table>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">relationships with affiliated companies involved in all aspects of the natural gas and energy businesses.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">FERC action in any of these areas or modifications of its current regulations can impair Ozark Gas Transmission&#146;s ability to compete for business, the costs it incurs in its operations, the construction of new facilities or its ability to recover the full cost of operating its
pipeline. For example, the development of uniform interstate gas quality standards by FERC could create two distinct markets for natural gas&#151;an interstate market subject to uniform minimum quality standards and an intrastate market with no uniform minimum quality
standards. Such a bifurcation of markets could make it difficult for Atlas&#146; pipelines to compete in both markets or to attract certain gas supplies away from the intrastate market. The time FERC takes to approve the construction of new facilities could raise the costs of Atlas&#146;
projects to the point where they are no longer economic.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">FERC has authority to review pipeline contracts. If FERC determines that a term of any such contract deviates in a material manner from a pipeline&#146;s tariff, FERC typically will order the pipeline to remove the term from the contract and execute and refile a new
contract with FERC or, alternatively, to amend its tariff to include the deviating term, thereby offering it to all shippers. If FERC audits a pipeline&#146;s contracts and finds deviations that appear to be unduly discriminatory, FERC could conduct a formal enforcement investigation,
resulting in serious penalties and/or onerous ongoing compliance obligations.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Should Ozark Gas Transmission fail to comply with all applicable FERC administered statutes, rules, regulations and orders, it could be subject to substantial penalties and fines. Under the recently enacted Energy Policy Act of 2005, FERC has civil penalty authority
under the Natural Gas Act to impose penalties for current violations of up to $1,000,000 per day for each violation.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Finally, Atlas cannot give any assurance regarding the likely future regulations under which it will operate Ozark Gas Transmission or the effect such regulation could have on its business, financial condition, results of operations and ability to make distributions to its
unitholders.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Compliance with pipeline integrity regulations issued by the United States Department of Transportation and state agencies could result in substantial expenditures for testing, repairs and replacement.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">United States Department of Transportation and state agency regulations require pipeline operators to develop integrity management programs for transportation pipelines located in &#147;high consequence areas.&#148; The regulations require operators to:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">perform ongoing assessments of pipeline integrity;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">identify and characterize applicable threats to pipeline segments that could impact a high consequence area;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">improve data collection, integration and analysis;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">repair and remediate the pipeline as necessary; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">implement preventative and mitigating actions.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas does not believe that the cost of implementing integrity management program testing along certain segments of its pipeline will have a material effect on its results of operations. This does not include the</font></p>
</div>
<p align="center"><font face="serif" size="2">41</font></p>
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<p align="left"><font face="serif" size="2">costs, if any, of any repair, remediation, preventative or mitigating actions that may be determined to be necessary as a result of the testing program, which costs could be substantial.</font></p>
<p align="center"><font face="serif" size="2"><b>Tax Risks to Common Unitholders</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">For a discussion of the expected material federal income tax consequences of owning and disposing of common units, see &#147;Material Tax Consequences.&#148;</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>If we or Atlas were treated as a corporation for federal income tax purposes, or if we or Atlas were to become subject to entity-level taxation for state tax purposes, then our cash available for distribution to you would be substantially reduced.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The value of our investment in Atlas depends largely on it being treated as a partnership for federal income tax purposes, which requires that 90% or more of Atlas&#146; gross income for every taxable year consist of qualifying income, as defined in Section 7704 of the
Internal Revenue Code. Atlas may not meet this requirement or current law may change so as to cause, in either event, Atlas to be treated as a corporation for federal income tax purposes or otherwise subject to federal income tax. Moreover, the anticipated after-tax benefit of
an investment in our common units depends largely on our being treated as a partnership for federal income tax purposes. We have not requested, and do not plan to request, a ruling from the IRS on this or any other matter affecting us.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If Atlas were treated as a corporation for federal income tax purposes, it would pay federal income tax on its taxable income at the corporate tax rate, which is currently a maximum of 35%. Distributions to us would generally be taxed again as corporate distributions,
and no income, gains, losses, deductions or credits would flow through to us. As a result, there would be a material reduction in our anticipated cash flow, likely causing a substantial reduction in the value of our units.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If we were treated as a corporation for federal income tax purposes, we would pay federal income tax on our taxable income at the corporate tax rate. Distributions to you would generally be taxed again as corporate distributions, and no income, gains, losses, deductions
or credits would flow through to you. Because a tax would be imposed upon us as a corporation, our cash available for distribution to you would be substantially reduced. Thus, treatment of us as a corporation would result in a material reduction in our anticipated cash flow,
likely causing a substantial reduction in the value of our units.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Current law may change, causing us or Atlas to be treated as a corporation for federal income tax purposes or otherwise subjecting us or Atlas to entity level taxation. For example, because of widespread state budget deficits, several states are evaluating ways to subject
partnerships to entity level taxation through the imposition of state income, franchise or other forms of taxation. If any state were to impose a tax upon us or Atlas as an entity, the cash available for distribution to you would be reduced.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>A successful IRS contest of the federal income tax positions we, or Atlas, take may adversely affect the market for our common units or Atlas units, and the costs of any contest will reduce cash available for distribution to our unitholders.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We have not requested a ruling from the IRS with respect to our treatment as a partnership for federal income tax purposes or any other matter that affects us. Moreover, Atlas has not requested any ruling from the IRS with respect to its treatment as a partnership for
federal income tax purposes or any other matter that affects it. The IRS may adopt positions that differ from the positions we or Atlas take. It may be necessary to resort to administrative or court proceedings to sustain some or all of the positions we or Atlas take. A court may
disagree with some or all of the positions we or Atlas take. Any contest with the IRS may materially and adversely impact the market for our common units or Atlas&#146; units and the price at which they trade. In addition, the cost of any contest between Atlas and the IRS will
result in a reduction in cash available for distribution to Atlas unitholders and thus indirectly by us, as a unitholder and as the owner of the general partner of Atlas. Moreover, the costs of any contest between us and the IRS will result in a reduction in cash available for
distribution to our unitholders and thus will be borne indirectly by our unitholders.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>You may be required to pay taxes on income from us even if you do not receive any cash distributions from us.</b></font></p>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">42</font></p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">You will be required to pay any federal income taxes and, in some cases, state and local income taxes on your share of our taxable income, whether or not you receive cash distributions from us. You may not receive cash distributions from us equal to your share of our
taxable income or even equal to the tax liability that results from the taxation of your share of our taxable income.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Our ratio of taxable income to cash distributions will be much greater than the ratio applicable to holders of common units in Atlas.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our ratio of taxable income to cash distributions will be much greater than the ratio applicable to holders of common units in Atlas. Other holders of common units in Atlas will receive remedial allocations of deductions from Atlas. Although we will receive remedial
allocations of deductions from Atlas, remedial allocations of deductions to us will be very limited. In addition, our ownership of Atlas incentive distribution rights will cause more taxable income to be allocated to us from Atlas than will be allocated to holders who hold only
common units in Atlas. If Atlas is successful in increasing its distributions over time, our income allocations from our Atlas incentive distribution rights will increase, and, therefore, our ratio of taxable income to cash distributions will increase. Because our ratio of taxable
income to cash distributions will be greater than the ratio applicable to holders of common units in Atlas, your allocable taxable income will be significantly greater than that of a holder of common units in Atlas who receives cash distributions from Atlas equal to the cash
distributions you receive from us.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Tax gain or loss on disposition of our common units could be more or less than expected.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If you sell your common units, you will recognize a gain or loss equal to the difference between the amount realized and the adjusted tax basis in those common units. Prior distributions to you in excess of the total net taxable income allocated to you, which decreased
the tax basis in your common units, will, in effect, become taxable income to you if the common units are sold at a price greater than your tax basis in those common units, even if the price is less than the original cost. A substantial portion of the amount realized, whether or
not representing gain, may be ordinary income to you.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Tax-exempt entities and foreign persons face unique tax issues from owning common units that may result in adverse tax consequences to them.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Investment in common units by tax-exempt entities, including employee benefit plans and individual retirement accounts (known as IRAs) and non-U.S. persons raises issues unique to them. For example, virtually all of our income allocated to organizations exempt from
federal income tax, including individual retirement accounts and other retirement plans, will be unrelated business taxable income and will be taxable to such a unitholder. Distributions to non-U.S. persons will be reduced by withholding taxes imposed at the highest effective
applicable tax rate, and non-U.S. persons will be required to file United States federal income tax returns and pay tax on their share of our taxable income.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>We treat each purchaser of our common units as having the same tax benefits without regard to the common units purchased. The IRS may challenge this treatment, which could adversely affect the value of the common units.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Because we cannot match transferors and transferees of common units, we will adopt depreciation and amortization positions that may not conform with all aspects of existing Treasury regulations. A successful IRS challenge to those positions could adversely affect the
amount of tax benefits available to our unitholders. It also could affect the timing of these tax benefits or the amount of gain on the sale of common units and could have a negative impact on the value of our common units or result in audits of and adjustments to our
unitholders&#146; tax returns.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>The sale or exchange of 50% or more of our or Atlas&#146; capital and profits interests within a 12-month period will result in the termination of our or Atlas&#146; partnership for federal income tax purposes.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We will be considered to have terminated our partnership for federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and profits within a 12-month period. Likewise, Atlas will be considered to have terminated its
partnership for federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in Atlas&#146; capital and profits within a 12-month period. The termination would, among other things, result in the closing of our or Atlas&#146; taxable year for all</font></p>
</div>
<p align="center"><font face="serif" size="2">43</font></p>
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<p align="left"><font face="serif" size="2">unitholders and could result in a deferral of depreciation deductions allowable in computing our taxable income for the year in which the termination occurs. Thus, if this occurs, you will be
allocated an increased amount of federal taxable income for the year in which we are considered to be terminated as a percentage of the cash distributed to you with respect to that period.
Please read &#147;Material Tax Consequences&#151;Disposition of Common Units&#151;Constructive Termination&#148; for a discussion of the consequences of our termination for federal income tax purposes.</font></p>
<p align="left"><font face="serif" size="2"><b>Unitholders may be subject to state and local taxes and return filing requirements as a result of investing in our common units.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In addition to federal income taxes, our unitholders will likely be subject to other taxes, including foreign, state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we or Atlas do
business or own property now or in the future, even if our unitholders do not reside in any of those jurisdictions. Our unitholders will likely be required to file state and local income tax returns and pay state and local income taxes in some or all of these jurisdictions. Further,
unitholders may be subject to penalties for failure to comply with those requirements. We and Atlas presently anticipate that substantially all of our income will be generated in the following states: Arkansas, Missouri, New York, Ohio, Oklahoma, Pennsylvania and Texas.
Each of those states, except Texas, currently impose a personal income tax. We or Atlas may do business or own property in other states in the future. It is the responsibility of each unitholder to file all United States federal, state and local tax returns that may be required of
such unitholder. Our counsel has not rendered an opinion on the state or local tax consequences of an investment in the common units.</font></p>
</div>
<p align="center"><font face="serif" size="2">44</font></p>
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<p align="center"><font face="serif" size="2"><b>USE OF PROCEEDS</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We expect to receive net proceeds
    of approximately $79.2 million from the sale of 3,600,000 common units offered
    by this prospectus, after deducting underwriting discounts and commissions
    and estimated offering expenses payable by us. Our estimates assume an initial
    public offering price of $24.00 per common unit, the mid-point of the range
  set forth on the cover page of this prospectus, and no exercise of the underwriters&#146; option to purchase additional units.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Substantially all of the net proceeds from this offering will be distributed to Atlas America. If the underwriters exercise all or any portion of their option to purchase additional common units, we will use all of the net proceeds from the sale of our common units sold
pursuant to the exercise of that option to fund the redemption of an equal number of common units from Atlas America. The redemption price per common unit will be equal to the price per common unit (net of underwriting discounts) sold to the underwriters upon exercise of
their option to purchase additional common units. Please read &#147;Security Ownership of Certain Beneficial Owners and Management.&#148;</font></p>
</div>
<p align="center"><font face="serif" size="2">45</font></p>
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<p align="center"><font face="serif" size="2"><b>CAPITALIZATION</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following table sets forth our cash and cash equivalents and our capitalization as of September&nbsp;30, 2005 on a consolidated historical basis for Atlas Pipeline GP, and on a pro forma basis to reflect the following:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">this offering and the application of the net proceeds as described in &#147;Use of Proceeds;&#148;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the amendment of Atlas&#146; credit facility, which occurred on October 31, 2005, and borrowings under it to finance the NOARK acquisition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the redemption of the portion of the NOARK 7.15% notes severally guaranteed by Atlas Arkansas in connection with the NOARK acquisition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; public offering of 2,700,000 common units, which was completed in November 2005 and 330,000 additional underwriter option units which was completed in December 2005, each at a public offering price of $42.00 per common unit, the net proceeds of which were
principally used to repay indebtedness under its credit facility incurred in connection with the NOARK acquisition; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; issuance of $250.0 million of 8.125% senior unsecured notes in a private placement on December 20, 2005, the net proceeds of which were principally used to repay indebtedness under its credit facility.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The historical financial data of Atlas Pipeline GP presented in the table below is derived from and should be read in conjunction with Atlas Pipeline GP&#146;s historical financial statements, including the accompanying notes, included elsewhere in this prospectus.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>As of September 30, 2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Historical</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Pro forma, as adjusted</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>(in thousands)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Cash and cash equivalents</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">12,035</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">29,338</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Debt:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Atlas Pipeline Partners, L.P.:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Credit facility</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">183,500</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">8.125% senior unsecured notes</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">250,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">NOARK 7.15% notes (1)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">39,600</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">145</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">145</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total debt</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">183,645</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">289,745</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Minority interests (2)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">227,908</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">348,612</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Equity:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Owners&#146; equity</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,564</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,559</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accumulated other comprehensive loss</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(46,444</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(46,444</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Total owners&#146; deficit</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(40,880</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(40,885</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Total capitalization</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">370,673</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">597,472</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><hr noshade size="1" align="left" width="100%"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(1)</font></td>
    <td><div align="left"><font face="serif" size="2">These notes are severally guaranteed by Southwestern and amounts paid on these notes are to be paid from amounts otherwise distributable by NOARK to Southwestern. If such amount is insufficient, Southwestern is required to make a capital contribution to NOARK for such
insufficient amount.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(2)</font></td>
    <td><div align="left"><font face="serif" size="2">Represents Atlas limited partner interests owned by non-affiliated partners.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">46</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p47"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>DILUTION</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Dilution is the amount by which the offering price paid by the purchasers of common units sold in this offering will exceed the pro forma net tangible book value per unit after the offering. As of September&nbsp;30, 2005, after giving effect to the offering of common units
and the application of the related net proceeds, and assuming the underwriters&#146; option to purchase additional units is not exercised, our net tangible book value was $(13.3) million, or $(0.63) per common unit. Our tangible net book value is the sum of our owners&#146; equity less
our pro rata share of goodwill and other intangible assets and accumulated other comprehensive loss, based upon estimated ownership interest in those items. Purchasers of common units in this offering will experience substantial and immediate dilution in net tangible book
value per common unit for financial accounting purposes, as illustrated in the following table:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Assumed initial public offering price per common unit</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">24.00</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Pro forma net tangible book value per common unit before the offering (1)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(0.76</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Increase in net tangible book value per common unit attributable to purchasers in the offering</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.13</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Less: Pro forma net tangible book value per common unit after the offering (2)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(0.63</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Immediate dilution in tangible net book value per common unit to new investors</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">24.63</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><hr noshade size="1" align="left" width="100%"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(1)</font></td>
    <td><div align="left"><font face="serif" size="2">Determined by dividing the total number of units (17,500,000) to be issued to Atlas America for its contribution of assets to us into our net tangible book value before this offering.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(2)</font></td>
    <td><div align="left"><font face="serif" size="2">Determined by dividing the total number of units to be outstanding after the offering (21,100,000) and the application of the related net proceeds into our pro forma net tangible book value, after giving effect to the application of the expected net proceeds of the offering.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following table sets forth the number of units that we will issue and the total consideration contributed to us by Atlas America in respect of its common units and by the purchasers of common units in this offering upon consummation of the transactions contemplated by this prospectus:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Units Acquired</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Total</b><br>
<b>Consideration</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Number</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Percent</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Amount</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">General partner and affiliates (1)</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">17,500,000</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">82.9</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">%</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">(92,443,000</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">New investors</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,600,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">17.1</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">86,400,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Total</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">21,100,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">100.0</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(6,043,000</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><hr noshade size="1" align="left" width="100%"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(1)</font></td>
    <td><div align="left"><font face="serif" size="2">Upon the consummation of this offering, an aggregate 17,500,000 units will be issued to Atlas America. The assets contributed by Atlas America were recorded at historical cost in accordance with GAAP. Book value of the consideration provided by Atlas America is as follows:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Atlas America</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">$(13,291,000</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Less: Payments to Atlas America from net proceeds of this offering</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">79,152,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Total consideration</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">$(92,443,000</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">47</font></p>
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<div style="page-break-before:always"></div>
<page>
<a name="p48"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>CASH DISTRIBUTION POLICY AND RESTRICTIONS ON DISTRIBUTIONS</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>You should read the following discussion of our cash distribution policy in conjunction with the specific assumptions included in this section. For more detailed information regarding the factors and assumptions upon which our cash distribution policy is based, please
see &#147;&#150;Assumptions and Considerations&#148; below. In addition, you should read &#147;Forward-Looking Statements&#148; and &#147;Risk Factors&#148; for information regarding statements that do not relate strictly to historical or current facts and certain risks inherent in our and Atlas&#146; business.
Unless otherwise stated, the information presented in this section assumes that the underwriters will exercise their option to purchase additional units in full. Because the proceeds of any exercise of the underwriters&#146; option will be used to redeem a number of common units
from our affiliates equal to the number of common units issued pursuant to the exercise of that option, the number of our common units will not change upon the exercise of the option but the relative percentages of common units owned by the public and our affiliates will
change.</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>When discussing our operating results, we are referring to the operating results of Atlas Pipeline GP, our wholly-owned subsidiary, which are presented on a consolidated basis including Atlas. For additional information regarding our historical and pro forma
operating results, you should refer to the historical financial statements for the years ended December</i>&nbsp;<i>31, 2002, 2003 and 2004, our unaudited historical financial statements for the nine months ended September</i>&nbsp;<i>30, 2004 and 2005 and our unaudited pro forma financial
statements for the year ended December</i>&nbsp;<i>31, 2004 and the nine months ended September</i>&nbsp;<i>30, 2005, included elsewhere in this prospectus.</i></font></p>
</div>
<p align="left"><font face="serif" size="2"><b>General</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Rationale for Our Cash Distribution Policy</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our cash distribution policy reflects a basic judgment that our unitholders will be better served by our distributing our available cash rather than retaining it. It is important that you understand that our only cash-generating assets consist of our interests in Atlas from
which we receive quarterly distributions. We currently have no independent operations separate from those of Atlas and do not currently intend to conduct operations separate from those of Atlas. Because we believe we will have low cash requirements for operating expenses
and capital investments, we believe that our investors are best served by our distribution of all of our available cash as described below. Because we are not subject to an entity-level federal income tax, we have more cash to distribute to you than would be the case were we
subject to tax. Our cash distribution policy is consistent with the terms of our partnership agreement, which requires that we distribute all of our available cash quarterly.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Restrictions and Limitations on Cash Distributions and Our Ability to Change Our Cash Distribution Policy</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">There is no guarantee that unitholders will receive quarterly distributions from us. Our distribution policy is subject to certain restrictions and may be changed at any time, including:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Our cash distribution policy will be subject to restrictions on distributions under our anticipated new credit facility. Specifically, we anticipate that our new credit facility will contain certain material financial tests and covenants that we must satisfy. Should we be unable to
satisfy these restrictions under our new credit facility, or if we otherwise default under our new credit facility, we would be prohibited from making a distribution to you notwithstanding our stated cash distribution policy.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; cash distribution policy is subject to restrictions on distributions under its credit facility. Specifically, Atlas&#146; credit facility contains material financial tests and covenants that it must satisfy. These financial tests and covenants are described in the prospectus under the
caption &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#151;Debt Obligations&#151;Atlas.&#148; Should Atlas be unable to satisfy these restrictions under its credit facility, it would be prohibited from making cash distributions to us, which in
turn would prevent us from making cash distributions to you notwithstanding our stated cash distribution policy.</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Our general partner&#146;s board of directors will have the authority under our partnership agreement to establish reserves for the prudent conduct of our business and for future cash distributions to our </font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">48</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p49"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">unitholders, and the establishment of those reserves could result in a reduction in cash distributions to you from levels we currently anticipate pursuant to our stated cash distribution
policy.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">The managing board of Atlas&#146; general partner has the authority under Atlas&#146; partnership agreement to establish reserves for the prudent conduct of its business and for future cash distributions to its unitholders, and the establishment of those reserves could result in a
reduction in cash distributions we would otherwise anticipate receiving from Atlas, which in turn could result in a reduction in cash distributions to you from levels we currently anticipate pursuant to our stated cash distribution policy.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">While our partnership agreement requires us to distribute all of our available cash, our partnership agreement, including our cash distribution policy contained therein, may be amended by a vote of the holders of a majority of our common units. Following completion of this
offering and assuming the full exercise of the underwriters&#146; option to purchase additional common units, Atlas America will own approximately 80.4% of our outstanding common units and will have the ability to amend our partnership agreement without the approval of any
other unitholders.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Even if our cash distribution policy is not amended, modified or revoked, the amount of distributions we pay under our cash distribution policy and the decision to make any distribution is determined by our general partner, taking into consideration the terms of our
partnership agreement.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">The amount of distributions paid under Atlas&#146; cash distribution policy and the decision to make any distribution to its unitholders is at the discretion of Atlas&#146; general partner, taking into consideration the terms of its partnership agreement.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act, Atlas may not make a distribution to its partners if the distribution would cause its liabilities to exceed the fair value of its assets and we may not make a distribution to you if the distribution
would cause our liabilities to exceed the fair value of our assets.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">We may lack sufficient cash to pay distributions to our unitholders due to a number of factors, including increases in general and administrative expenses, principal and interest payments on any current or future debt, tax expenses, working capital requirements and
anticipated cash needs of us or Atlas and its subsidiaries. Please read &#147;Risk Factors&#148; for a discussion of these factors.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Our Cash Distribution Policy Limits Our Ability to Grow</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Because we distribute all of our available cash, our growth may not be as fast as businesses that reinvest their available cash to expand ongoing operations. In fact, since currently our only cash-generating assets are our interests in Atlas, our growth initially will be
completely dependent upon Atlas&#146; ability to increase its quarterly distribution. If we issue additional interests or incur debt to fund acquisitions and growth capital expenditures, the payment of distributions on those additional units or interest on that debt could increase the risk
that we will be unable to maintain or increase our per unit distribution level.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Atlas&#146; Ability to Grow is Dependent on its Ability to Access External Growth Capital</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Consistent with the terms of its partnership agreement, Atlas distributes to its partners its available cash each quarter. In determining the amount of cash available for distribution, Atlas sets aside cash reserves, including reserves it believes prudent to maintain for the
proper conduct of its business or to provide for future distributions. Additionally, it has relied upon external financing sources, including commercial borrowings and other debt and equity issuances, to fund its acquisition capital expenditures. Accordingly, to the extent Atlas
does not have sufficient cash reserves or is unable to finance growth externally, its cash distribution policy will significantly impair its ability to grow. In addition, to the extent Atlas issues additional units in connection with any acquisitions or growth capital expenditures, the
payment of distributions on those additional units may increase the risk that Atlas will be unable to maintain or increase its per unit distribution level, which in turn may impact the available cash that we have to distribute to our unitholders. The incurrence of additional
commercial or other debt to finance its growth strategy would result in increased interest expense to Atlas, which in turn may impact the available cash that we have to distribute to our unitholders.</font></p>
</div>
<p align="center"><font face="serif" size="2">49</font></p>
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<p align="left"><font face="serif" size="2"><b>Our Initial Distribution Rate</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Our Cash Distribution Policy</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Upon completion of this offering, the board of directors of our general partner will adopt a cash distribution policy pursuant to which we will declare an initial distribution of $0.225 per unit per quarter, or $0.90 per unit per year, to be paid no later than 50 days after
the end of each fiscal quarter. This equates to an aggregate cash distribution of approximately $4.7 million per quarter, or approximately $19.0 million per year, based on the common units outstanding immediately after completion of this offering.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following table sets forth the assumed number of outstanding common units upon the closing of this offering, and the estimated per unit and aggregate distribution amounts payable on such common units during the year following the closing of this offering at our
initial distribution rate of $0.225 per common unit per quarter ($0.90 per common unit on an annualized basis):</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" align="center" valign="bottom"><font face="serif" size="1"><b>Distributions on Our Common Units</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Number of Common Units</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>One Quarter</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Four Quarters</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Estimated distributions on publicly held common units</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">4,140,000</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">931,500</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">3,726,000</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Estimated distributions on common units held by Atlas America</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">16,960,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,816,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,264,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Total</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">21,100,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,747,500</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">18,990,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">These distributions will not be cumulative. Consequently, if distributions on our common units are not paid with respect to any fiscal quarter at the anticipated initial distribution rate, our unitholders will not be entitled to receive such payments in the future. We will pay
our distributions on or about the 20th of each of February, May, August and November to holders of record on or about the 13th of each such month. If the distribution date does not fall on a business day, we will make the distribution on the business day immediately
preceding the indicated distribution date. Any distributions received by us from Atlas related to periods prior to the closing of this offering will be distributed entirely to Atlas America. In May 2006, we expect to pay a distribution to our unitholders equal to the initial quarterly
distribution prorated for the portion of the quarter ending March&nbsp;31, 2006 that we are public.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our cash distribution policy is consistent with the terms of our partnership agreement, which requires that we distribute all of our available cash quarterly. Under our partnership agreement, available cash is defined to generally mean, for each fiscal quarter, cash
generated from our business in excess of the amount of cash reserves established by our general partner to, among other things:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">provide for the proper conduct of our business;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">comply with applicable law, any of our debt instruments or other agreements; or</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">provide funds for distributions to our unitholders for any one or more of the next four quarters.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Atlas&#146; Cash Distribution Policy</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Like us, Atlas has adopted a cash distribution policy that requires it to distribute its available cash to its unitholders on a quarterly basis. Under Atlas&#146; partnership agreement, available cash is defined to generally mean, for each fiscal quarter, cash generated from Atlas&#146;
business in excess of the amount its general partner reasonably determines is necessary or appropriate to provide for the conduct of its business, comply with applicable law, any of its debt instruments or other agreements or provide for future distributions to its unitholders for
any one or more of the next four quarters. Atlas&#146; determination of available cash takes into account the possibility of establishing cash reserves in some quarterly periods that it may use to pay cash distributions in other quarterly periods, thereby enabling it to maintain
relatively consistent cash distribution levels even if its business experiences fluctuations in its cash from operations due to seasonal and cyclical factors. Atlas&#146; determination of available cash also allows it to maintain reserves to provide funding for its growth opportunities.
Atlas makes its quarterly distributions from cash generated from its transmission, gathering and processing operations and those distributions have grown over time as its business has grown,</font></p>
</div>
<p align="center"><font face="serif" size="2">50</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p51"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">as a result of a substantial acquisition program and internal growth projects that are funded through external financing sources.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following table sets forth the amount of quarterly cash distributions Atlas declared on its ownership interests for the periods indicated. The actual cash distributions (i.e., payments to the partners of Atlas) occur within 45 days after the end of such quarter. Atlas has
an established historical record of paying quarterly cash distributions to its partners.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="14" align="center" valign="bottom"><font face="serif" size="1"><b>Atlas Cash Distribution History</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Distributions on L.P. Units</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Distributions on 2.0% General Partner</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Distributions on Incentive Distribution</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Total Atlas Cash</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Per Unit</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Total</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Interest</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Rights</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Distributions</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="14" align="center" valign="bottom"><font face="serif" size="1"><b>(in thousands, except per unit)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>2003</b></font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="10%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">1st Quarter</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.560</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,827</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">40</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">95</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,962</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">2nd Quarter</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.580</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,526</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">55</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">155</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,736</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">3rd Quarter</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.620</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,700</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">60</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">269</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,029</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">4th Quarter</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.625</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,721</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">62</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">290</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,073</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>2004</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">1st Quarter</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.630</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,743</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">63</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">311</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,117</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">2nd Quarter</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.630</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,216</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">73</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">365</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,654</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">3rd Quarter</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.690</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,971</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">120</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">939</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,030</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">4th Quarter</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.720</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,187</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">130</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,150</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,467</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>2005</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">1st Quarter</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.750</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,404</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">138</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,362</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,904</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">2nd Quarter</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.770</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,319</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">190</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,983</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">9,492</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">3rd Quarter</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.810</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,711</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">205</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,360</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,276</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">4th Quarter</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.830</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,416</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">282</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,356</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">14,054</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In the sections that follow, we present in detail the basis for our belief that we will be able to fully fund our initial distribution rate of $0.225 per common unit per quarter through the quarter ending December 31, 2006. In those sections we present two tables, including:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Our &#147;Unaudited Pro Forma Available Cash,&#148; in which we present the amount of pro forma available cash that we would have had available for distribution to our unitholders with respect to the year ended December&nbsp;31, 2004 and the twelve months ended September&nbsp;30,
2005. Our calculation of pro forma available cash in this table should only be viewed as a general indication of the amount of cash available that we might have generated had we been formed in an earlier period.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Our &#147;Estimated Cash Available for Distribution&#148; in which we present our estimate of the minimum Adjusted EBITDA necessary for us to have sufficient cash available for distribution to pay distributions at the initial distribution rate on all the outstanding common units for
each quarter for the year ending December&nbsp;31, 2006. In &#147;Assumptions and Considerations&#148; below, we also present our assumptions underlying our belief that Atlas will generate this minimum Adjusted EBITDA.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We do not as a matter of course make public projections as to future sales, earnings, or other results. However, we have prepared the prospective financial information set forth below to present the tables entitled &#147;Unaudited Pro Forma Available Cash&#148; and &#147;Estimated
Cash Available for Distribution.&#148; The accompanying prospective financial information was not prepared with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information,
but, in our view, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of management&#146;s knowledge and belief, the assumptions on which we base our belief that Atlas can generate the minimum Adjusted
EBITDA necessary for us to have sufficient cash available for distribution to pay a distribution on the common units at the initial distribution rate. However, this information is not fact and should not be relied upon as being necessarily indicative of</font></p>
</div>
<p align="center"><font face="serif" size="2">51</font></p>
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<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">future results, and readers of this prospectus are cautioned not to place undue reliance on the prospective financial information.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Neither our independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance
on such information or its achievability. Accordingly, they assume no responsibility for, and disclaim any association with, the prospective financial information.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Our pro forma available cash for the twelve months ended December 31, 2004 would not have been sufficient to pay the initial quarterly distribution of $0.225 per unit on the common units to be outstanding following the completion of this offering.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If we had completed the transactions contemplated in this prospectus on January&nbsp;1, 2004, our pro forma available cash deficit generated during fiscal 2004 would have been approximately $2.4 million. This amount would have been insufficient by approximately $21.4
million to pay the full initial distribution amount on all our units.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Our pro forma available cash for the twelve months ended September</b>&nbsp;<b>30, 2005 would not have been sufficient to pay the initial quarterly distribution of $0.225 per unit on the common units to be outstanding following the completion of this offering.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If we had completed the transactions contemplated in the prospectus on October&nbsp;1, 2004, our pro forma available cash for the twelve months ended September&nbsp;30, 2005 would have been approximately $9.0 million. This amount would have been insufficient by
approximately $10.0 million to pay the full initial distribution amount on all units.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We believe that we will have sufficient cash available for distribution to pay the full quarterly distributions at the initial distribution rate of $0.225 per unit on all the outstanding common units for each quarter for the year ending December 31, 2006. See &#147;Assumptions
and Considerations&#148; below for the specific assumptions underlying this belief.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Pro forma cash available for distribution includes estimated incremental general and administrative expenses we will incur as a result of being a publicly traded limited partnership, such as costs associated with annual and quarterly reports to unitholders, tax return and
Schedule K-1 preparation and distribution, investor relations, registrar and transfer agent fees, director compensation, accounting and audit fees and incremental insurance costs, including director and officer liability and business interruption insurance. We expect these
incremental general and administrative expenses initially to total approximately $1.0 million per year.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The pro forma financial statements, upon which pro forma cash available for distribution is based, do not purport to present our results of operations had the transactions contemplated in this prospectus actually been completed as of the dates indicated. Furthermore, cash
available for distribution is a cash accounting concept, while our pro forma financial statements have been prepared on an accrual basis. We derived the amounts of pro forma cash available for distribution shown above in the manner described in the table below. As a result,
the amount of pro forma cash available for distribution should only be viewed as a general indication of the amount of cash available for distribution that we might have generated had we been formed in earlier periods.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following table illustrates, on a pro forma basis, for the year ended December&nbsp;31, 2004 and for the twelve months ended September&nbsp;30, 2005, the amount of available cash that would have been available for distributions to our unitholders, assuming in each case
that this offering had been consummated at the beginning of such period. Each of the pro forma adjustments presented below is explained in the footnotes to such adjustments.</font></p>
</div>
<p align="center"><font face="serif" size="2">52</font></p>
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<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Unaudited Pro Forma Available Cash of Atlas Pipeline Holdings, L.P.</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Year Ended December</b>&nbsp;<b>31, 2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Twelve Months Ended September</b>&nbsp;<b>30, 2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>(in thousands, except per unit data and ratios)</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Net Cash Provided by Operating Activities (1)</b></font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">11,311</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">32,825</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Plus (minus):</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash interest expense</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,901</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,599</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Non-recurring gain on arbitration settlement, net (2)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,457</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(4,306</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Net changes in working capital accounts, including net changes in price risk management assets and liabilities (3)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">12,595</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">9,159</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Adjusted EBITDA (4)</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">24,350</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">45,277</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Plus: Pro forma acquisition adjustment to Adjusted EBITDA (5)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">34,411</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">24,397</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Pro forma Adjusted EBITDA</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">58,761</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">69,674</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Less:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Pro forma cash interest expense (6)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(20,313</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(20,313</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Maintenance capital expenditures (7)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,516</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,782</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Expansion capital expenditures (8)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(8,527</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(38,361</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Estimated maintenance capital expenditures of acquisitions (9)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,615</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(829</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Pro forma distributions to non-affiliated owners of Atlas (10)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(36,747</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(36,747</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Estimated incremental general and administrative expense (11)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,000</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,000</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Plus:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Borrowings under Atlas credit facility for expansion capital expenditures (12)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,527</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">38,361</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Pro forma available cash at Atlas Pipeline Holdings, L.P.</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,430</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">9,003</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Expected Cash Distributions: (13)</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Expected distribution per unit</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.90</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.90</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Distributions to public common unitholders</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,726</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,726</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Distributions to common units held by our affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,264</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,264</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Total distributions</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">18,990</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">18,990</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Shortfall (14)</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(21,420</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(9,987</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Debt Covenant Ratios:</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2"><b>Atlas</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Funded Debt/EBITDA (15)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4.3</font></td>
    <td valign="bottom"><font face="serif" size="2">x</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3.5</font></td>
    <td valign="bottom"><font face="serif" size="2">x</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">EBITDA/Interest Expense (15)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3.0</font></td>
    <td valign="bottom"><font face="serif" size="2">x</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3.6</font></td>
    <td valign="bottom"><font face="serif" size="2">x</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Senior Secured Debt/EBITDA (15)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.1</font></td>
    <td valign="bottom"><font face="serif" size="2">x</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.1</font></td>
    <td valign="bottom"><font face="serif" size="2">x</font></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><hr noshade size="1" align="left" width="100%"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(1)</font></td>
    <td><div align="left"><font face="serif" size="2">Reflects net cash provided by operating activities of Atlas Pipeline Holdings, L.P., derived from Atlas Pipeline GP&#146;s historical consolidated financial statements for the periods indicated without giving pro forma effect to the transactions described in footnote (5).</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(2)</font></td>
    <td><div align="left"><font face="serif" size="2">Represents the non-recurring net gain recognized in connection with the fourth quarter 2004 settlement associated with Atlas&#146; terminated attempt to acquire Alaska Pipeline Company. Atlas settled the matter in the fourth quarter 2004 and received $5.5 million.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(3)</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas utilizes its $225.0 million credit facility to satisfy its working capital needs, thereby allowing it to avoid using cash flow available for distribution to satisfy working capital requirements. Therefore, we do not reflect any adjustments to cash available for distributions as a
result of these requirements. Atlas is unable to borrow under its credit facility to pay distributions of available cash to unitholders because such borrowings would not constitute &#147;working capital borrowings&#148; under its partnership agreement.</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(4)</font></td>
    <td><div align="left"><font face="serif" size="2">EBITDA represents net income before net interest expense, income taxes, depreciation and amortization and minority interest in Atlas. Adjusted EBITDA is calculated by adding to EBITDA other non-cash items such as compensation expenses associated with unit issuances to
directors and employees. EBITDA and Adjusted EBITDA are not intended to represent cash flow and do not represent the measure of cash available for distribution. Adjusted EBITDA does not reflect approximately $1.0 million </font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">53</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p54"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">of additional general and administrative expense we expect to incur in connection with us being a public company after this offering.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(5)</font></td>
    <td><div align="left"><font face="serif" size="2">Reflects pro forma adjustments for Atlas&#146; acquisitions of NOARK in October 2005, Elk City in April 2005, and Spectrum in July 2004. These acquisitions were accounted for under the purchase method of accounting. Accordingly, the results of operations for these acquisitions
are reflected in Atlas&#146; historical operating results beginning on the day it closed the transactions. We have included the results of these acquisitions in our results on a pro forma basis as if the operations were acquired on January&nbsp;1, 2004. The financial information for these
acquisitions was derived from audited financial statements and pro forma financial statements included in this prospectus. Our independent auditors have not examined, compiled, or otherwise applied procedures to our pro forma financial statements, and accordingly, do not
express an opinion or any other assurance on the pro forma financial information set forth below. The pro forma financial data should not be considered indicative of the historical results we would have had or the future results that we will have after this offering. We have set
forth below a summary of our pro forma adjustments to Adjusted EBITDA to reflect Atlas&#146; acquisitions (in thousands):</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="14" align="center" valign="bottom"><font face="serif" size="1"><b>Year Ended December</b>&nbsp;<b>31, 2004</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" align="center" valign="bottom"><font face="serif" size="1"><b>Historical</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><br>
<b>Spectrum</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><br>
<b>Elk City</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><br>
<b>NOARK</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Pro Forma Adjustments</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><br>
<b>Total</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Net income</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">55,977</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">7,583</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">3,429</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">(69,423</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">(2,434</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Minority interest in Atlas</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">429</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">429</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,638</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,153</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,249</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,292</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">12,332</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Interest expense</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,712</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,287</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">17,085</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">24,084</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Income tax expense</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">32,319</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,162</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(34,481</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Non-cash compensation expense</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,369</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(6,369</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Gain recognized upon sale of Spectrum by previous owner</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(89,109</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">89,109</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Total adjustments</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,906</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">9,736</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">14,127</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,642</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">34,411</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="11" align="center" valign="bottom"><font face="serif" size="1"><b>Twelve Months Ended September</b>&nbsp;<b>30, 2005</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Historical</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Pro Forma</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Elk City</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>NOARK</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Adjustments</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Total</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Net income</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">4,893</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">5,373</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">(11,971</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">(1,705</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Minority interest in Atlas</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,623</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,623</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,287</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,320</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,046</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,653</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Interest expense</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,892</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">11,934</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">16,826</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Income tax expense</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,464</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,464</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Total adjustments</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,180</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">17,049</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,168</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">24,397</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(6)</font></td>
    <td><div align="left"><font face="serif" size="2">Reflects an increase to interest expense of approximately $18.4 million and $12.7 million for the year ended December&nbsp;31, 2004 and the twelve months ended September&nbsp;30, 2005, respectively, as a result of interest expense related to Atlas&#146; issuance of $250.0 million of its
8.125% senior notes. This amount does not reflect interest expense on NOARK&#146;s $39.6 million of 7.15% notes, for which our minority interest partner in NOARK is liable. Under the NOARK partnership agreement, payments on the NOARK notes will be made from amounts
otherwise distributable to the minority interest partner and, if that amount is insufficient, the minority interest partner is required to make a capital contribution to NOARK.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(7)</font></td>
    <td><div align="left"><font face="serif" size="2">Reflects actual maintenance capital expenditures during the period.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(8)</font></td>
    <td><div align="left"><font face="serif" size="2">Expansion capital expenditures for the year ended December&nbsp;31, 2004 and the twelve months ended September&nbsp;30, 2005 were $8.5 million and $38.4 million, respectively. The expansion capital expenditures for the year ended December&nbsp;31, 2004 include gathering system
expansions and compressor upgrades of the Velma and Appalachian gathering systems. The $38.4 million of expansion capital expenditures for the twelve months ended September&nbsp;30, 2005 include expansions of the Velma and Elk City gathering systems and processing
facilities to accommodate new wells drilled in their service areas and compressor upgrades and expansions of the Appalachian gathering system.</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">54</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p55"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(9)</font></td>
    <td><div align="left"><font face="serif" size="2">Includes estimated adjustments to maintenance capital expenditures of $1.6 million and $0.8 million for the year ended December&nbsp;31, 2004 and the twelve months ended September&nbsp;30, 2005, respectively, to reflect pro forma maintenance capital expenditure activity for
recently completed acquisitions. These estimated adjustments are derived based on Atlas&#146; experience in operating these assets as well as the specific characteristics of the businesses Atlas has acquired.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(10)</font></td>
    <td><div align="left"><font face="serif" size="2">Reflects the cash distributions from Atlas to its unitholders other than us based upon the most recent announced quarterly distribution of $0.83 per limited partner unit or $3.32 per limited partner unit on an annualized basis.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(11)</font></td>
    <td><div align="left"><font face="serif" size="2">Reflects approximately $1.0 million in incremental ongoing expenses associated with being a publicly-traded partnership, including, among other things, estimated incremental costs associated with annual and quarterly reports to unitholders, tax return and Schedule K-1
preparation and distribution, investor relations, registrar and transfer agent fees, director compensation, accounting and audit fees and incremental insurance costs, including director and officer liability and business interruption insurance.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(12)</font></td>
    <td><div align="left"><font face="serif" size="2">Reflects borrowings incurred under Atlas&#146; credit facility to finance its expansion capital expenditures. Because Atlas distributes substantially all of its available cash on a quarterly basis, Atlas has historically financed its growth capital expenditures through the use of external
financing alternatives, including borrowings under its credit facility and the public capital markets. In the future, Atlas anticipates that it will continue to utilize these external sources of financing to fund its acquisition growth strategy and expects to refinance all of its debt as it
matures.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(13)</font></td>
    <td><div align="left"><font face="serif" size="2">The table below sets forth the assumed number of outstanding common units upon the closing of this offering, assuming the full exercise of the underwriters&#146; option to purchase additional common units, and the estimated per unit and aggregate distribution amounts payable on
such common units during the year following the closing of this offering at our initial distribution rate:</font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td width="3%">&nbsp;</td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" align="center" valign="bottom"><font face="serif" size="1"><b>Distributions on Our Common Units</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Number of Common Units</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Per Unit</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Aggregate</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%">&nbsp;</td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td width="3%" bgcolor="#ffffff">&nbsp;</td>
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Estimated distributions on publicly held common units</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">4,140,000</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">0.90</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">3,726,000</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td width="3%">&nbsp;</td>
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Estimated distributions on common units held by our affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">16,960,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.90</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,264,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td width="3%">&nbsp;</td>
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td width="3%" bgcolor="#ffffff">&nbsp;</td>
    <td><div style="margin-left:3%"><font face="serif" size="2">Total</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">21,100,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">18,990,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td width="3%">&nbsp;</td>
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(14)</font></td>
    <td><div align="left"><font face="serif" size="2">We believe that we will have sufficient cash available for distribution to pay the full quarterly distributions at the initial distribution rate of $0.225 per unit on all the outstanding common units for each quarter for the year ending December 31, 2006. See &#147;Assumptions and
Considerations&#148; below for the specific assumptions we are making in projecting that we will have sufficient available cash for the four quarters in the year ending December 31, 2006.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(15)</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; credit facility
          requires it to maintain a ratio of senior secured debt (as defined
          in the credit facility) to EBITDA (as defined in the credit facility)
          of not more than 6.0 to 1.0, reducing to 5.75 to 1.0 on March 31, 2006,
          4.5
          to 1.0 on June 30, 2006, and 4.0 to 1.0 on September 30, 2006; a funded
          debt (as defined in the credit facility) to EBITDA ratio of not more
          than 6.0 to 1.0, reducing to 5.75 to 1.0 on March 31, 2006 and to 4.5
          to 1.0 on June 30, 2006, and an interest coverage ratio (as defined
          in the credit facility) of not less than
2.5 to 1.0, increasing to 3.0 to 1.0 on March 31, 2006. The credit facility defines
          EBITDA to include pro forma adjustments, acceptable to the administrator
          of the facility, following material acquisitions. The definition of
          EBITDA contained in the credit facility is substantially similar to
          the definition of Adjusted EBITDA used in this prospectus, except that:
          (1) the credit facility definition of EBITDA includes net gain or loss
          on arbitration settlement, while the definition of Adjusted EBITDA
          excludes net gain or loss on arbitration settlement as a
non-recurring item, and (2) the credit facility definition of EBITDA includes
          EBITDA of NOARK only to the extent of cash distributions from NOARK,
          while the definition of Adjusted EBITDA includes Atlas&#146; percentage
          interest in NOARK&#146;s EBITDA. The ratios described
above include only the operations of Atlas and its subsidiaries, and exclude
          our operations and those of our subsidiaries that are not subsidiaries
          of Atlas.</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">55</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p56"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2"><b>Estimated Cash Available for Distributions</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In order to pay the quarterly distribution to our common unitholders at our initial distribution rate of $0.225 per unit per quarter for each quarter in the period ending December&nbsp;31, 2006, we estimate that Atlas must generate at least $79.4 million in Adjusted EBITDA
during the twelve months ending December&nbsp;31, 2006. We refer to this amount as &#147;Estimated Minimum Adjusted EBITDA.&#148; Estimated Minimum Adjusted EBITDA is intended to be an indicator or benchmark of the amount management considers to be the lowest amount of
Adjusted EBITDA necessary to generate sufficient available cash for us to make cash distributions to our common unitholders at our initial distribution rate of $0.225 per common unit per quarter (or $0.90 per common unit per year). The Estimated Minimum Adjusted
EBITDA should not be viewed as management&#146;s projection of the actual Adjusted EBITDA that will be generated during 2006.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Estimated Minimum Adjusted EBITDA of $79.4 million exceeds pro forma Adjusted EBITDA for the year ended December&nbsp;31, 2004 by approximately $20.7 million and pro forma Adjusted EBITDA for the twelve months ended September&nbsp;30, 2005 by approximately
$9.7 million. We believe that Atlas will generate the Estimated Minimum Adjusted EBITDA for the year ending December 31, 2006. In&nbsp;&#147;&#151;Assumptions and Considerations&#148; below, we discuss the major assumptions underlying our belief that Atlas will be able to generate the
Estimated Minimum Adjusted EBITDA and we will have sufficient available cash to pay distributions at the initial distribution rate. We can give you no assurance that our assumptions will be realized or that Atlas will generate the Estimated Minimum Adjusted EBITDA or
the expected level of available cash, in which event we will not be able to pay the initial quarterly distribution on our common units. When considering how we calculate estimated cash available for distribution, please keep in mind all the risk factors and other cautionary
statements under the heading &#147;Risk Factors&#148; and elsewhere in the prospectus, which discuss factors that could cause cash available for distribution to vary significantly from our estimates.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As shown in the table below, we have also determined that if Atlas achieves the Estimated Minimum Adjusted EBITDA, Atlas would be permitted under the terms of its credit facility to make its distributions to its unitholders. In addition, we expect that we will be
permitted to make distributions at the initial distribution rate under our anticipated credit agreement.</font></p>
</div>
<p align="center"><font face="serif" size="2">56</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p57"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>Atlas Pipeline Holdings, L.P. Estimated Cash Available for Distribution</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Four Fiscal Quarters Ending December</b>&nbsp;<b>31, 2006</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(in thousands, except per unit data and ratios)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="20%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Estimated Minimum Adjusted EBITDA (1)</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">79,420</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Less:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash interest expense (2)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(20,283</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Maintenance capital expenditures (3)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,400</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Expansion capital expenditures (4)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(45,537</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Acquisition capital expenditures (5)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Incremental general and administration expense (6)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,000</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Distributions to non-affiliated owners of Atlas (7)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(36,747</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Plus:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Sources for expansion capital expenditures (8)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">45,537</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Estimated Available Cash at Atlas Pipeline Holdings, L.P.</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">18,990</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Expected Cash Distributions by Atlas Pipeline Holdings, L.P.</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Expected distribution per common unit</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.90</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Distributions to our public common unitholders</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,726</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Distributions to common units held by affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,264</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Total distributions paid to our common unitholders (9)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">18,990</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Debt Covenant Ratios</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2"><b>Atlas</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Funded Debt / EBITDA (10)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3.4</font></td>
    <td valign="bottom"><font face="serif" size="2">x</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">EBITDA / Interest Expense (10)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3.9</font></td>
    <td valign="bottom"><font face="serif" size="2">x</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Senior Secured Debt / EBITDA (10)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.3</font></td>
    <td valign="bottom"><font face="serif" size="2">x</font></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><hr noshade size="1" align="left" width="100%"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(1)</font></td>
    <td><div align="left"><font face="serif" size="2">We believe that Estimated Minimum Adjusted EBITDA for the year ending December&nbsp;31, 2006 will be approximately $79.4 million. Estimated Minimum Adjusted EBITDA is approximately $20.7 million more than the pro forma Adjusted EBITDA Atlas generated for the
year ended December&nbsp;31, 2004 and approximately $9.7 million more than the pro forma Adjusted EBITDA Atlas generated for the twelve months ended September&nbsp;30, 2005. Please see &#147;&#151;Assumptions and Considerations&#148; for a discussion of the assumptions underlying our
belief that we will be able to generate sufficient available cash for us to make cash distributions to our common unitholders at our initial distribution rate.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(2)</font></td>
    <td><div align="left"><font face="serif" size="2">Our estimated cash interest expense is comprised of the following components:</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">(i)</font></td>
    <td><div align="left"><font face="serif" size="2">Approximately $20.3 million associated with Atlas&#146; $250.0 million of 8.125% senior unsecured notes;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">(ii)</font></td>
    <td><div align="left"><font face="serif" size="2">Approximately $0.7 million attributable to capital expenditures, a portion of which will be financed with cash on hand, and a portion of which will be financed with borrowings under Atlas&#146; credit facility; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">(iii)</font></td>
    <td><div align="left"><font face="serif" size="2">Offset by $0.7 million of capitalized interest related to the construction of the Sweetwater gas plant and associated gathering system.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(3)</font></td>
    <td><div align="left"><font face="serif" size="2">We currently expect that our estimated maintenance capital expenditures will be approximately $2.4 million for the year ending December&nbsp;31, 2006 in comparison to pro forma maintenance capital expenditures of $3.1 million and $2.6 million for the year ended December&nbsp;31,
2004 and the twelve months ended September&nbsp;30, 2005, respectively. The decrease in the estimated maintenance capital expenditures for the year ending December&nbsp;31, 2006 primarily reflects the completion of maintenance projects during the prior historical periods.</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">57</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p58"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(4)</font></td>
    <td><div align="left"><font face="serif" size="2">This reflects our estimated expenditure of $45.5 million for expansion capital for the year ending December&nbsp;31, 2006. Our estimated expansion capital expenditures of approximately $45.5 million for the year ending December&nbsp;31, 2006 includes approximately $30.0 million
associated with the construction of Atlas&#146; Sweetwater gas plant and associated gathering system and $15.5 million for well connections and other internal expansion projects relating to Atlas&#146; transmission, processing, and treatment operations. Our estimated $45.5 million of
expansion capital expenditures for the year ending December&nbsp;31, 2006 as compared to the expansion capital expenditures for the year ended December&nbsp;31, 2004 and the twelve months ended September&nbsp;30, 2005 represents an increase of approximately $37.0 million and
approximately $7.1 million, respectively. The increased need for future expansion capital expenditures is primarily a result of the construction of the Sweetwater gas plant and an increase in well connections due to increased drilling activity in Atlas&#146; area of operations.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(5)</font></td>
    <td><div align="left"><font face="serif" size="2">Consistent with its acquisition strategy, Atlas is continuously pursuing strategic acquisitions that it expects to be accretive to its earnings. Since Atlas&#146; inception in January 2000 through November 2005, Atlas has consummated five acquisitions for an aggregate purchase price of
approximately $516.7 million. While Atlas expects to continue to pursue acquisitions in the next twelve months, because of the uncertain nature of the acquisition environment, we have not included an estimate of future acquisition capital expenditure requirements. If Atlas is
successful in completing additional acquisitions, Atlas anticipates its primary source of consideration will be through commercial borrowings, other debt and common unit issuances. While the initial funding of its acquisitions may consist of debt financing, Atlas&#146; financial
strategy is to finance acquisitions equally with equity and debt, and Atlas would expect to repay such debt with proceeds of equity issuances to achieve this relatively balanced financing ratio. If Atlas is unable to finance its growth through external sources or is unable to achieve
its targeted debt/equity ratios, our cash available to pay distributions may be negatively impacted.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(6)</font></td>
    <td><div align="left"><font face="serif" size="2">Reflects approximately $1.0 million in incremental ongoing expenses associated with being a publicly-traded partnership, including, among other things, estimated incremental costs associated with annual and quarterly reports to unitholders, tax return and Schedule K-1
preparation and distribution, investor relations, registrar and transfer agent fees, director compensation, accounting and audit fees and incremental insurance costs, including director and officer liability and business interruption insurance.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(7)</font></td>
    <td><div align="left"><font face="serif" size="2">Reflects the cash distributions from Atlas to its unitholders other than us based upon the most recent declared quarterly distribution of $0.83 per limited partner unit or $3.32 per limited partner unit on an annualized basis.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(8)</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas has historically financed internal growth and acquisitions through the use of cash on hand together with external financing sources, including borrowings under its credit facility and the issuance of debt and equity securities. Atlas
anticipates that it will use cash on hand together with available capacity under its credit facility to fund its projected $45.5 million of expansion capital expenditures.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(9)</font></td>
    <td><div align="left"><font face="serif" size="2">Represents the amount required to fund distributions to our unitholders based upon the declared annualized distribution of $0.90 per unit and assuming the underwriters&#146; option to purchase additional common units has been exercised in full.</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(10)</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; credit facility requires it to maintain a ratio of senior secured debt (as defined in the credit facility) to EBITDA (as defined in the credit facility) of not more than 6.0 to 1.0, reducing to 5.75 to 1.0 on March 31, 2006, 4.5 to 1.0 on June 30, 2006 and 4.0 to 1.0 on September
30, 2006; a funded debt (as defined in the credit facility) to EBITDA ratio of not more than 6.0 to 1.0, reducing to 5.75 to 1.0 on March 31, 2006 and to 4.5 to 1.0 on June 30, 2006, and an interest coverage ratio (as defined in the credit facility) of not less than 2.5 to 1.0,
increasing to 3.0 to 1.0 on March 31, 2006. The credit facility defines EBITDA to include pro forma adjustments, acceptable to the administrator of the facility, following material acquisitions. The definition of EBITDA contained in the credit facility is substantially similar to
the definition of Adjusted EBITDA used in this prospectus, except that: (1) the credit facility definition of EBITDA includes net gain or loss on arbitration settlement, while the definition of Adjusted EBITDA excludes net gain or loss on arbitration settlement as a non-recurring
item, and (2) the credit facility definition of EBITDA includes EBITDA of NOARK only to the extent of cash distributions from </font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">58</font></p>
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<div style="page-break-before:always"></div>
<page>
<a name="p59"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">NOARK, while the definition of Adjusted EBITDA includes Atlas&#146; percentage interest in NOARK&#146;s EBITDA. The ratios described above include only the operations of Atlas and its
subsidiaries, and exclude our operations and those of our subsidiaries that are not subsidiaries of Atlas.</font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2"><b>Assumptions and Considerations</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">While we believe that the following assumptions are generally consistent with the actual performance of Atlas since its acquisitions of Elk City and NOARK in 2005 and Spectrum in 2004, and are reasonable in light of our current beliefs concerning future events, the
assumptions are inherently uncertain and are subject to significant business, economic, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those we anticipate. If our assumptions are not realized, the actual available cash
that Atlas generates, and thus the available cash of Atlas Pipeline GP could be substantially less than that currently expected and could, therefore, be insufficient to permit us to make our initial quarterly and annual distributions on our units, in which event the market price of
our units may decline materially. Consequently, the statement that we believe that we will have sufficient available cash to pay the initial distribution on our units for each quarter through December&nbsp;31, 2006 should not be regarded as a representation by us or the underwriters
or any other person that we will make such a distribution. When reading this section, you should keep in mind the risk factors and other cautionary statements under the heading &#147;Risk Factors&#148; in this prospectus.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We believe that our interests in Atlas will generate sufficient cash flow to enable us to pay our initial quarterly distribution of $0.225 per unit on all of our units for the four quarters ending December&nbsp;31, 2006. Our belief is based on a number of current assumptions
that we believe to be reasonable over the next four quarters.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Distribution Rate of Atlas.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our estimate of cash distributions to be received from Atlas during the twelve months ending December&nbsp;31, 2006 assumes that Atlas will continue to pay its recently declared quarterly distribution of $0.83 per common unit over the next
four quarters and that the amount of cash distributions we receive from Atlas will be sufficient to allow us to pay total distributions to our unitholders of approximately $19.0 million. We have assumed that Atlas Pipeline GP will maintain its 2.0% general partner interest in
Atlas by making proportionate cash contributions to Atlas in connection with Atlas&#146; equity issuances.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Operating Performance of Atlas.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The primary determinant of Adjusted EBITDA is cash flow generated by the operations of Atlas. In order for us to pay distributions at the initial distribution rate, we believe that Atlas must achieve Estimated Minimum Adjusted
EBITDA of $79.4 million for the twelve months ending December&nbsp;31, 2006.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our estimates of Estimated Minimum Adjusted EBITDA are based on several general assumptions related to Atlas&#146;s operating performance, including:</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><u>Commodity Prices</u>.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our estimate of Adjusted EBITDA for the twelve months ending December&nbsp;31, 2006 assumes that there will not be any significant changes in the commodity prices Atlas received for natural gas, NGLs and condensate over the twelve months
ended September&nbsp;30, 2005, taking into account Atlas&#146; hedge positions.
We have assumed that for any hedges that expire in 2006, Atlas will realize the
average prices it received during the twelve month period ended September 30,
2005, such average prices including the
impact of hedge prices during that time. </font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In its Mid-Continent operations,
    for the twelve months ended September 30, 2005, taking into account Atlas&#146; hedge
    positions during that period, Atlas realized average commodity prices of
    approximately $6.34 per Mcf of natural gas, approximately $0.77 per gallon
    of NGLs and approximately $51.92 per barrel of condensate in its Mid-Continent
    operations. Atlas has hedged portions of its Mid-Continent natural gas, NGL
    and condensate volumes for fixed prices for various periods through 2008.
    The following table summarizes Atlas&#146; hedge positions for its Mid-Continent
    volumes through December 31, 2006:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr align="center" valign="top">
    <td valign="bottom"><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Commodity</b></font></div></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><font face="serif" size="1"><b>Average percentage of anticipated volumes hedged</b></font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><font face="serif" size="1"><b>Average fixed price</b></font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><hr noshade size="1"></td>
    <td>&nbsp;</td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Natural gas</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="12%"><font face="serif" size="2">47%</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="10%"><font face="serif" size="2">$6.63/MMbtu</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">NGLs</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">54%</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$0.68/gallon</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Condensate</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">69%</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$49.25/Bbl</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">59</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p60"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In its Appalachian operations, Atlas
    is a party to natural gas gathering agreements with Atlas America under which
    Atlas receives gathering fees generally equal to a percentage, typically
    16%, of the selling price of the natural gas it transports. Atlas was paid
    gathering fees based on an average price of approximately $6.85 per Mcf of
    natural gas during the twelve months ended September 30, 2005. Atlas is the
    beneficiary of, and consults with Atlas America with respect to, the hedging
    program Atlas America has established for its Appalachian natural gas production.
    Atlas America&#146;s hedging program impacts the gathering fees Atlas earns under
    its natural gas gathering agreements with Atlas America. We have assumed
    that Atlas will receive gathering fees based on an average price of $6.85
    per Mcf on Atlas America&#146;s unhedged natural gas production and $9.00 per
    Mcf on Atlas America's hedged natural gas production through December 31,
    2006.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><u>Volumes.</u> Our estimate of Adjusted EBITDA for the twelve months ending December&nbsp;31, 2006 assumes that Atlas&#146; transportation, gathering and processing volumes will approximate those shown in the following table. For comparison purposes, we have shown the
corresponding pro forma volumetric data for the twelve months ended September&nbsp;30, 2005:</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Twelve Months Ended</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Twelve Months Ending</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>September</b>&nbsp;<b>30, 2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>December</b>&nbsp;<b>31, 2006</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Appalachia:</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="10%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="10%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Average Throughput Volume (Mcf/d)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">54,885</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">54,885</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Mid-Continent:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Velma Residue Gas Volume (Mcf/d)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">50,231</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">50,231</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Velma NGL and Condensate Volume (Bbl/d)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,776</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,776</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Elk City Gathered Gas Volume (Mcf/d)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">251,050</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">251,050</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Elk City NGL and Condensate Volume (Bbl/d)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,491</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,491</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">NOARK Average Throughput (Mcf/d)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">168,540</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">225,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Sweetwater Gathered Volume (Mcf/d) (1)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">30,000</font></td>
    <td valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Sweetwater NGL and Condensate Volume (Bbl/d) (2)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,866</font></td>
    <td valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><hr noshade size="1" align="left" width="100%"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(1)</font></td>
    <td><div align="left"><font face="serif" size="2">Represents volumes currently being gathered in the Elk City area that are incremental to the 251,050 Mcf/d of Elk City gathered gas volumes. Atlas currently earns a gathering fee on this 30,000 Mcf/d but does not currently earn any processing fees due to the fact that the Elk
City plant is currently processing at maximum capacity and is unable to process those volumes.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(2)</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas anticipates that the Sweetwater gas plant will be operational beginning in the third quarter of 2006. These volumes represent the NGL and condensate production once the plant becomes operational from the 30,000 Mcf/d of volumes currently being gathered in the Elk City
area, which are assumed to remain flat for 2006.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our Estimated Minimum Adjusted EBITDA
    assumes that Atlas&#146; overall operating volumes in Velma and Elk City
    will remain at the same level as for the twelve months ended September&nbsp;30,
    2005. Our estimate includes 30,000 Mcf/d of volumes currently being  gathered
    in the Elk City area that are incremental to the 251,050 Mcf/d of Elk City
    gathered gas volumes. In addition, our estimate includes NGL and condensate
    volumes relating to these incremental volumes produced after the Sweetwater
    gas plant becomes operational.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our estimate also assumes that Atlas&#146; gathering and transportation volumes related to NOARK will increase in 2006 as a result of increased drilling activity in the Mid-Continent area, including in the Fayetteville Shale play in the Arkoma basin. NOARK volumes are also expected to increase as a result of a positive basis spread across the Ozark Gas Transmission system.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Other Assumptions Used in Determining Estimated Minimum Adjusted EBITDA</i></font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas will generate $108.1 million of gross margin through the operation of its Mid-Continent and Appalachia business segments, as compared to $100.6 million of pro forma gross margin for the twelve months ended September&nbsp;30, 2005;</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">60</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p61"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; plant operating expenses are expected to be approximately $11.3 million for the twelve months ending December&nbsp;31, 2006, as compared to $11.1 million of pro forma plant operating expenses for the twelve months ended September 30, 2005;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; transportation and compression expenses are expected to be approximately $7.4 million for the twelve months ending December&nbsp;31, 2006, as compared to $7.5 million of pro forma transportation and compression expenses for the twelve months ended September 30,
2005;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; general and administrative expenses are expected to be approximately $14.4 million for the twelve months ending December&nbsp;31, 2006, as compared to $14.6 million of pro forma general and administrative expenses for the twelve months ended September 30, 2005;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; maintenance capital expenditures are expected to be approximately $2.4 million for the twelve months ending December&nbsp;31, 2006;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; growth capital expenditures are expected to be approximately $45.5 million for the twelve months ending December&nbsp;31, 2006;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Based on Atlas&#146; current businesses, Atlas will borrow approximately $23.4 million under its $225 million revolving credit facility;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; average interest rate on its $225 million revolving credit facility will be approximately 7.0%; </font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; average interest rate related to its $250 million senior unsecured notes will be 8.125%;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">there will not be any new federal, state or local regulation of portions of the energy industry in which we and Atlas operate, or a new interpretation of existing regulation, that will be materially adverse to our or Atlas&#146; business; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">market, regulatory, insurance and overall economic conditions will not change substantially.</font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2"><b>Our Sources of Distributable Cash</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our only cash-generating assets currently consist of our partnership interests in Atlas. Therefore, our cash flow and resulting ability to make distributions initially will be completely dependent upon the ability of Atlas to make distributions in respect of those interests
and rights. The actual amount of cash that Atlas will have available for distribution will primarily depend on the amount of cash it generates from operations. The actual amount of this cash will fluctuate from quarter to quarter based on certain factors, including:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the level of capital expenditures Atlas makes;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the cost of capital used to fund acquisitions;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">debt service requirements;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">fluctuations in cash flow generated by Atlas&#146; operating activities;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">prevailing economic conditions;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">fluctuations in working capital needs;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">restrictions on distributions contained in Atlas&#146; credit facility and senior notes; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the amount, if any, of cash reserves established by Atlas&#146; general partner in its discretion for the proper conduct of its business.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As Atlas makes quarterly distributions to its partners, we receive our share of such distributions in proportion to our ownership interest in Atlas. Upon completion of this offering, we will own, directly or indirectly:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">a 100% ownership interest in the general partner of Atlas, which owns:</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o&nbsp;&nbsp;a 2.0% general partner interest in Atlas, which entitles it to receive 2.0% of the cash distributed by Atlas;</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">61</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p62"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o&nbsp;&nbsp;all of the incentive distribution rights in Atlas, which entitle it to receive increasing percentages, up to a maximum of 48.0%, of any cash distributed by Atlas as it reaches certain target distribution levels in excess of $0.42 per Atlas unit in any quarter; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o&nbsp;&nbsp;1,641,026 common units of Atlas, representing an approximate 12.8% limited partner interest in Atlas.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Our Incentive Distribution Rights Related to Atlas&#146; Cash Distributions.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The incentive distribution rights we own in Atlas represent our right to receive an increasing percentage of Atlas&#146; quarterly distributions of available cash from operating surplus after Atlas has
made cash distributions in excess of its minimum quarterly distribution level. Atlas will distribute any available cash from operating surplus for that quarter among its unitholders and Atlas&#146; general partner in the following manner:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>First, </i>98.0% to all unitholders of Atlas pro rata and 2.0% to the general partner, until Atlas has distributed $0.42 for each outstanding common unit;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>Second, </i>85.0% to all unitholders of Atlas, pro rata, 2.0% to the general partner and 13.0% to us, until a hypothetical unitholder has received a total of $0.52 per unit for that quarter, in addition to any distributions to Atlas&#146; common unitholders to eliminate any cumulative
arrearages in payment of the minimum quarterly distribution on the common units (&#147;second target distribution&#148;);</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>Third, </i>75.0% to all unitholders of Atlas, pro rata, 2.0% to the general partner and 23.0% to us, until each unitholder has received a total of $0.60 per unit for that quarter, in addition to any distributions to Atlas&#146; common unitholders to eliminate any cumulative arrearages in
payment of the minimum quarterly distribution on the common units (&#147;third target distribution&#148;); and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>Thereafter, </i>50.0% to all unitholders of Atlas, pro rata, 2.0% to the general partner and 48.0% to us.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Hypothetical Allocations of Distributions to Our Unitholders and Atlas&#146; Unitholders.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The table set forth below demonstrates the percentage allocations among (i) the owners of Atlas, other than us, and (ii) Atlas Pipeline Holdings, L.P. as a result of certain assumed
quarterly distribution payments per common units made by Atlas, including the target distribution levels contained in Atlas&#146; partnership agreement. This information assumes:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas has 12,549,266 common units outstanding; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">we own (i) 1,641,026 Atlas common units, comprising approximately 12.8% of the outstanding common units in Atlas, (ii) a 2.0% general partner interest in Atlas and (iii) the incentive distribution rights in Atlas.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The percentage interests shown for us and the other Atlas unitholders for the minimum quarterly distribution amount are also applicable to distribution amounts that are less than the minimum quarterly distribution. The amounts presented below are intended to be
illustrative of the way in which we are entitled to an increasing share of distributions from Atlas as total distributions from Atlas increase and are not intended to represent a prediction of future performance based upon 12,549,266 Atlas limited partnership units outstanding at
December 31, 2005.</font></p>
</div>
<p align="center"><font face="serif" size="2">62</font></p>
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<div style="page-break-before:always"></div>
<page>
<a name="p63"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr align="center" valign="top">
    <td valign="bottom"><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Distribution Level</b></font></div></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><font face="serif" size="1"><b>Atlas Quarterly Distribution Per Unit</b></font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><font face="serif" size="1"><b>Distributions to Owners of Atlas Other than Us as a Percentage of Total Distributions</b></font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><font face="serif" size="1"><b>Distributions to Us as a Percentage of Total Distributions (1)</b></font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="top">
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Minimum Quarterly Distribution</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">0.42</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">85.2</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">%</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">14.8</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">%</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Second Target Distribution</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.52</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">82.6</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">17.4</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Third Target Distribution</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.60</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">79.6</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">20.4</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Current Distribution</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.83</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">64.4</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">35.6</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><hr noshade size="1" align="left" width="100%"></td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(1)</font></td>
    <td><div align="left"><font face="serif" size="2">Includes distributions made with respect to our 2.0% general partner interest (aggregate), our approximate 12.8% limited partner interest in Atlas and our right to receive incentive payments.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">63</font></p>
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<page>
<a name="p64"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>SELECTED HISTORICAL FINANCIAL AND OPERATING DATA</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We were formed in December 2005 and therefore do not have any historical financial statements. Since we will own and control Atlas Pipeline Partners GP, LLC, the general partner of Atlas, the selected financial and operating data statements presented below are of
Atlas Pipeline Partners GP, LLC on a consolidated basis, including Atlas.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following table sets forth selected financial data as of and for the period from inception to December 31, 2000 and the years ended December 31, 2001, 2002, 2003 and 2004 and the nine months ended September 30, 2004 and 2005. The historical financial data of
Atlas Pipeline GP were derived from the audited consolidated financial statements for each of the years ended December&nbsp;31, 2002, 2003 and 2004 and at December&nbsp;31, 2003 and 2004, which have been audited by Grant Thornton LLP, an independent registered public
accounting firm. The historical financial data of Atlas Pipeline GP were derived from the consolidated financial statements which are not included in this prospectus, for each of the years ended December 31, 2000 and 2001 and at December 31, 2000 and 2001. We derived the
financial data as of and for the nine months ended September&nbsp;30, 2004 and 2005 from our unaudited consolidated financial statements included elsewhere in this prospectus.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The financial data below should be read together with, and are qualified in their entirety by reference to, our historical consolidated combined financial statements and the accompanying notes, &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results
of Operations,&#148; and the historical consolidated financial statements and the accompanying notes of Spectrum and Elk City and its predecessor set forth elsewhere in this prospectus.</font></p>
</div>
<p align="center"><font face="serif" size="2">64</font></p>
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<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Inception through December 31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="11" align="center" valign="bottom"><font face="serif" size="1"><b>Years Ended December 31,</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Nine Months Ended September 30,</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2000</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2001</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004(1)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004(1)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005(2)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="14" align="center" valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(<b>dollars
          in thousands)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>(unaudited)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Statement of income data:</b></font></div></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Revenue:</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Natural gas and liquids</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">72,109</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">30,048</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">218,268</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Transportation and compression</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9,441</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">13,095</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,660</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">15,651</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">18,800</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">13,344</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">16,501</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Interest income and other</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">25</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">35</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">98</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">382</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">282</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">352</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Total revenue and other income</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9,466</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">13,130</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,667</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">15,749</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">91,291</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">43,674</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">235,121</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Costs and Expenses:</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Natural gas and liquids</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">58,707</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">24,588</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">184,578</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Plant operating</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,032</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">931</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,242</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Transportation and compression</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,224</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,929</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,062</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,421</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,260</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,709</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,169</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">General and administrative</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">603</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,114</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,482</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,662</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,642</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,901</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9,127</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,019</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,356</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,475</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,770</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,471</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,132</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,495</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Loss (gain) on arbritation settlement, net</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(1,457</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,987</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">138</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Interest</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">176</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">250</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">258</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,301</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,202</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,478</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Minority interest in Atlas(3)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,101</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,810</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,496</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,066</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,941</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,300</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,240</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Total costs and expenses</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,956</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,385</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,765</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,177</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">83,897</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">39,750</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">227,467</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Net income</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,510</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,745</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,902</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,572</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,394</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,924</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,654</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Premium on preferred unit redemption</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(400</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(400</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Net income attributable to owners</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,510</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,745</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,902</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,572</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">6,994</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,524</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,654</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Balance sheet data (at period end):</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Property, plant and equipment, net</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">15,773</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">20,009</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">23,764</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">29,628</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">175,259</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">172,312</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">304,704</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Total assets</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">21,877</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">31,603</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">38,151</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">63,170</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">234,898</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">236,178</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">484,458</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Total debt, including current portion</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,089</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">6,500</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">54,452</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">60,220</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">183,645</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Total owners&#146; equity (deficit)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,510</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,255</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,157</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">15,729</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">21,405</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">15,325</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(40,880</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Other financial data:</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Gross margin (4)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9,441</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">13,095</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,660</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">15,651</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">32,202</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">18,804</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">50,191</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">EBITDA (5)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,639</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,087</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,123</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,666</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">25,107</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,558</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">31,867</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Adjusted EBITDA (5)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,639</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,087</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,123</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,666</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">24,350</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">13,887</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">34,814</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Maintenance capital expenditures</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">138</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">159</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">170</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,109</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,516</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">844</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,110</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Expansion capital expenditures</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,192</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,569</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,060</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,526</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,527</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,575</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">33,409</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Total capital expenditures</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,330</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,728</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,230</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,635</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,043</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,419</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">34,519</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Operating data:</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Appalachia:</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Average throughput volumes (Mcf/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">42,669</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">46,918</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">50,363</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">52,472</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">53,343</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">52,745</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">54,804</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Average transportation rate per Mcf</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">0.65</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">0.76</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">0.58</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">0.82</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">0.96</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">0.92</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1.10</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Mid-Continent:</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Velma system:</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Gathered gas volume (Mcf/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">56,441</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">55,580</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">69,091</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">Processed gas volume (Mcf/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">55,202</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">54,755</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">64,581</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Residue gas volume (Mcf/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">42,659</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">41,555</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">52,471</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">NGL production (Bbl/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,799</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,916</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">6,812</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Condensate volume (Bbl/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">185</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">204</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">269</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Elk City system:</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Gathered gas volume (Mcf/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">242,294</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">Processed gas volume (Mcf/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">116,688</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Residue gas volume (Mcf/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">107,182</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">NGL production (Bbl/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,317</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Condensate volume (Bbl/d)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">121</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><hr noshade size="1" align="left" width="100%"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(1)</font></td>
    <td><div align="left"><font face="serif" size="2">Includes Atlas&#146; acquisition of Spectrum on July 16, 2004, representing five and one-half months&#146; operations for the year ended December 31, 2004 and two and one-half months&#146; operations for the nine months ended September 30, 2004.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">65</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p66"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(2)</font></td>
    <td><div align="left"><font face="serif" size="2">Includes Atlas&#146; acquisition of Elk City on April 14, 2005, representing five and one-half months&#146; operations for the nine months ended September 30, 2005.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">(3)</font></td>
    <td><div align="left"><font face="serif" size="2">Represents the minority interest in the net income of Atlas.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">(4)</font></td>
    <td><div align="left"><font face="serif" size="2">We define gross margin as revenue less purchased product costs. Purchased product costs include the cost of natural gas and NGLs that Atlas purchases from third parties. Our management views gross margin as an important performance measure of core profitability of our
operations and as a key component of our internal financial reporting. We believe that investors benefit from having access to the same financial measures that our management uses. The following table reconciles our net income to gross margin (in thousands):</font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Inception through December 31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="11" align="center" valign="bottom"><font face="serif" size="1"><b>Years Ended December 31,</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Nine Months Ended September 30,</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2000</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2001</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="14" align="center" valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>(unaudited)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Net income</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,510</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,745</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,902</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,572</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,394</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,924</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,654</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Plus (minus):</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Interest income and other</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(25</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(35</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(7</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(98</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(382</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(282</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(352</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">Plant operating</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,032</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">931</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,242</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Transportation and compression</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,224</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,929</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,062</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,421</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,260</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,709</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,169</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">General and administrative</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">603</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,114</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,482</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,662</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,642</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,901</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9,127</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,019</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,356</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,475</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,770</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,471</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,132</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,495</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">Loss (gain) on arbitration settlement, net</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(1,457</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,987</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">138</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Interest</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">176</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">250</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">258</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,301</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,202</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,478</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">Minority interest in Atlas</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,101</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,810</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,496</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,066</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,941</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,300</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,240</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Gross margin</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9,441</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">13,095</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,660</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">15,651</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">32,202</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">18,804</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">50,191</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(5)</font></td>
    <td><div align="left"><font face="serif" size="2">EBITDA represents net income before net interest expense, income taxes, depreciation and amortization and minority interest in Atlas. Adjusted EBITDA is calculated by adding to EBITDA other non-cash items such as compensation expenses associated with unit issuances to
directors and employees. EBITDA and Adjusted EBITDA are not intended to represent cash flow and do not represent the measure of cash available for distribution. Our method of computing EBITDA may not be the same method used to compute similar measures reported by
other companies. Adjusted EBITDA excludes net gain or loss on arbitration settlement as a non-recurring item. Adjusted EBITDA does not reflect approximately $1.0 million of additional general and administrative expense, we expect to incur in connection with our being a
public company after this offering.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Certain items excluded from EBITDA are significant components in understanding and assessing an entity&#146;s financial performance, such as their cost of capital and its tax structure, as well as historic costs of depreciable assets. We have included information concerning EBITDA
and Adjusted EBITDA because they provide investors and management with additional information as to Atlas&#146; ability to pay its fixed charges and are presented solely as a supplemental financial measure. EBITDA and Adjusted EBITDA should not be considered as alternatives
to, or more meaningful than, net income or cash flow as determined in accordance with generally accepted accounting principles or as indicators of Atlas&#146; operating performance or liquidity. The following table reconciles Adjusted EBITDA to EBITDA and EBITDA to our net
income (in thousands):</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">66</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p67"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Inception through December 31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="11" align="center" valign="bottom"><font face="serif" size="1"><b>Years Ended December 31,</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Nine Months Ended September 30,</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2000</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2001</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="11" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>(unaudited)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Net income</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,510</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,745</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,902</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,572</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,394</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,924</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,654</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Plus:</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Minority interest in Atlas</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,101</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,810</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,496</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,066</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,941</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,300</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,240</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">Interest expense</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">176</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">250</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">258</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,301</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,202</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,478</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,019</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,356</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,475</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,770</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,471</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,132</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,495</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">EBITDA</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,639</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,087</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,123</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,666</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">25,107</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,558</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">31,867</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Adjustments:</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="1">Non-cash compensation expense</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">700</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">342</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,809</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="1">Loss (gain) on arbitration settlement, net</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(1,457</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,987</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">138</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Adjusted EBITDA</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,639</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,087</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,123</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,666</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">24,350</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">13,887</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">34,814</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">67</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p68"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>MANAGEMENT&#146;S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>You should read the following discussion of our financial condition and results of operations in conjunction with the historical and pro forma financial statements and notes thereto included elsewhere in this prospectus. For more detailed information regarding the basis
of presentation for the following information, you should read the notes to the historical and pro forma financial statements included elsewhere in this prospectus. In addition, you should read &#147;Forward-Looking Statements&#148; and &#147;Risk Factors&#148; for information regarding some
of the risks inherent in our business.</i></font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Overview</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><i>Financial Presentation</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We reflect our ownership interest in Atlas on a consolidated basis, which means that our financial results are combined with Atlas&#146; financial results. The non-controlling limited partner interests in Atlas will be reflected as an expense in our consolidated results of
operations and as a liability on our consolidated balance sheet. We initially will have no separate operating activities apart from those conducted by Atlas, and our cash flows currently consist of distributions from Atlas on our partnership interests in it, including the incentive
distribution rights that we own. Our historical consolidated results of operations reflect the results of operations of our wholly-owned subsidiary, Atlas Pipeline Partners GP, LLC, the general partner of Atlas. Throughout this discussion, when we refer to &#147;our&#148; consolidated
results of operations, we are referring to the results of consolidated operations of Atlas Pipeline GP. Atlas Pipeline GP&#146;s consolidated results of operations principally reflect the results of operations of Atlas adjusted for non-controlling partners&#146; interest in Atlas&#146; net income.
Accordingly, the discussion of our financial position and results of operations in this &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#148; reflects the operating activities and results of operations of Atlas. The historical results of our
operations do not reflect the incremental expenses we expect to incur as a result of being a publicly traded partnership.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><i>General</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our cash generating assets consist of our interests in Atlas, a publicly-traded Delaware limited partnership. Atlas is a midstream energy service provider engaged in the transmission, gathering and processing of natural gas in the Mid-Continent and Appalachian regions
of the United States. Our interests in Atlas will initially consist of a 100% ownership interest in Atlas Pipeline GP, the general partner of Atlas, which owns:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">a 2.0% general partner interest in Atlas, which entitles it to receive 2.0% of the cash distributed by Atlas;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">all of the incentive distribution rights in Atlas, which entitle it to receive increasing percentages, up to a maximum of 48.0%, of any cash distributed by Atlas as it reaches certain target distribution levels in excess of $0.42 per unit in any quarter; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">1,641,026 common limited partner units of Atlas, representing an approximate 12.8% limited partner interest.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">At Atlas&#146; current annual distribution rate of $3.32 per common unit, aggregate annual cash distributions to us on all our interests in Atlas would be approximately $20.0 million. The following table sets forth the historical Atlas distributions paid to its general partner,
Atlas Pipeline GP, our wholly-owned subsidiary, during the periods indicated:</font></p>
</div>
<p align="center"><font face="serif" size="2">68</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p69"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Atlas Cash Distributions to Atlas Pipeline GP</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="14" align="center" valign="bottom"><font face="serif" size="1"><b>Year Ended December</b>&nbsp;<b>31,</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Twelve Months</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2000</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2001</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Ended</b><br>
<b>September</b>&nbsp;<b>30,</b><br>
<b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="17" align="center" valign="bottom"><font face="serif" size="1">(in thousands)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Distributions on Atlas common units held by Atlas Pipeline GP</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">3,283</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">4,103</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">3,504</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">3,914</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">4,382</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">5,005</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Distributions from ownership interest in the Atlas general partner</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">140</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">186</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">148</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">217</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">386</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">663</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Distributions from Atlas incentive distribution rights held by Atlas Pipeline GP</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">585</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">911</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">273</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">809</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,765</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,855</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Total</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,008</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,200</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,925</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,940</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,533</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">12,523</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Atlas Pipeline Partners, L.P.</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas Pipeline Partners, L.P. is a publicly-traded Delaware limited partnership whose common units are listed on the New York Stock Exchange under the symbol &#147;APL.&#148; Atlas Pipeline Partners, L.P.&#146;s business activities are primarily conducted through, and its assets
are owned by, its subsidiary Atlas Pipeline Operating Partnership, L.P. and its subsidiaries, which are collectively referred to in this prospectus as Atlas.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Overview of Atlas&#146; Operations</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Through its Mid-Continent operations, which began in July 2004, Atlas owns and operates:</font></p>
</div>
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  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">a 75% interest in a FERC-regulated, 565-mile interstate pipeline system, that extends from southeastern Oklahoma through Arkansas and into southeastern Missouri and which has throughput capacity of approximately 322 MMcf/d;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">two natural gas processing plants with aggregate capacity of approximately 230 MMcf/d and one treating facility with a capacity of approximately 200 MMcf/d, all located in Oklahoma; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">1,765 miles of active natural gas gathering systems located in Oklahoma, Arkansas, northern Texas and the Texas panhandle, which transport gas from wells and central delivery points in the Mid-Continent region to its natural gas processing plants or transmission lines.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Through its Appalachian operations, Atlas owns and operates 1,500 miles of active natural gas gathering systems located in eastern Ohio, western New York and western Pennsylvania. These systems gather natural gas from more than 5,120 wells for delivery to a variety
of customers on major intra- and/or interstate pipeline systems and a limited number of direct end-users. Through an omnibus agreement and other agreements between Atlas and Atlas America, the parent of Atlas and our general partner and a leading sponsor of natural gas
drilling investment partnerships in the Appalachian Basin, Atlas gathers substantially all of the natural gas for its Appalachian operations from wells operated by Atlas America. Among other things, the omnibus agreement requires Atlas America to connect to Atlas&#146; gathering
systems wells Atlas America operates that are located within 2,500 feet of Atlas&#146; gathering systems. Atlas is also a party to natural gas gathering agreements with Atlas America under which it receives gathering fees generally equal to a percentage, typically 16%, of the selling
price of the natural gas it transports. These agreements are continuing obligations and have no specified term except that they will terminate if Atlas&#146; general partner is removed without cause.</font></p>
</div>
<p align="center"><font face="serif" size="2">69</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p70"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Significant Acquisitions</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Since Atlas&#146; initial public offering in January 2000 through December 2005, Atlas has completed five acquisitions at an aggregate cost of approximately $516.7 million, including, most recently:</font></p>
</div>
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  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">In October 2005, Atlas acquired from Enogex, a wholly-owned subsidiary of OGE Energy Corp., all of the outstanding equity of Atlas Arkansas, which owns a 75% interest in NOARK, for $165.3 million, including estimated related transaction costs, plus $10.2 million for
working capital adjustments. NOARK&#146;s principal assets include the Ozark Gas Transmission system, a 565-mile interstate natural gas pipeline, and Ozark Gas Gathering, a 365-mile natural gas gathering system. The remaining 25% interest in NOARK is owned by
Southwestern.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">In April 2005, Atlas acquired all of the outstanding equity interests of Elk City for $196.0 million, including related transaction costs. Elk City&#146;s principal assets include approximately 300 miles of natural gas pipelines located in the Anadarko Basin in western Oklahoma and
the Texas panhandle, a natural gas processing facility in Elk City, Oklahoma, with a total capacity of approximately 200 MMcf/d and a gas treatment facility in Prentiss, Oklahoma, with a total capacity of approximately 200 MMcf/d.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">In July 2004, Atlas acquired Spectrum for $141.6 million, including transaction costs and the payment of taxes due as a result of the transaction. Spectrum&#146;s principal assets consist of 1,100 miles of active and 800 miles of inactive natural gas gathering pipelines in the
Golden Trend area of Southern Oklahoma and the Barnett Shale area of North Texas and a natural gas processing facility in Stephens County, Oklahoma, with a total capacity of approximately 100 MMcf/d.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Contractual Revenue Arrangements</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; principal revenue is generated from the transportation and sale of residue gas and NGLs. Variables which affect Atlas&#146; revenue are:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the volumes of natural gas gathered, transported and processed by Atlas which, in turn, depend upon the number of wells connected to its gathering systems, the amount of natural gas they produce, and the demand for natural gas and NGLs; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the transportation and processing fees paid to Atlas which, in turn, depend upon the price of the natural gas and NGLs it transports and processes, which itself is a function of the relevant supply and demand in the mid-continent, mid-Atlantic and northeastern areas of the
United States.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In Appalachia, substantially all of the gas Atlas transports is for Atlas America under percentage of proceeds, or POP, contracts, as described below, where Atlas earns a fee equal to a percentage, generally 16%, of the selling price of the gas subject, in most cases, to a
minimum of $0.35 or $0.40 per Mcf. Since Atlas&#146; inception in January 2000, its Appalachian transportation fee has always exceeded this minimum. The balance of the Appalachian gas Atlas transports is for third-party operators generally under fixed fee contracts.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; revenue in the Mid-Continent region is determined primarily by the fees earned from the following types of arrangements:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>Fee-Based Contracts. </i>These contracts provide for a set fee for gathering and processing raw natural gas. Atlas&#146; revenue is a function of the volume of gas that it gathers and processes and is not directly dependent on the value of the natural gas.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>POP Contracts. </i>These contracts provide for Atlas to retain a negotiated percentage of the sale proceeds from residue natural gas and NGLs it gathers and processes, with the remainder being remitted to the producer. In this situation, Atlas and the producer are directly dependent
on the volume of the commodity and its value; Atlas owns a percentage of that commodity and is directly subject to its market value.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">70</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p71"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>Keep-Whole Contracts. </i>These contracts require Atlas, as the processor, to bear the economic risk (the &#147;processing margin risk&#148;) that the aggregate proceeds from the sale of the processed natural gas and NGLs could be less than the amount that the processor paid for the
unprocessed natural gas. However, since the gas received by the Elk City system, which is currently Atlas&#146; only gathering system with keep-whole contracts, is generally low in liquids content and meets downstream pipeline specifications without being processed, the gas can be
bypassed around the Elk City processing plant and delivered directly into downstream pipelines during periods of margin risk. Therefore, the processing margin risk associated with such type of contracts is minimized.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As a result of Atlas&#146; POP and keep whole contracts, Atlas&#146; results of operations and financial condition substantially depend upon the price of natural gas and NGLs. Atlas believes that future natural gas prices will be influenced by supply deliverability, the severity of
winter and summer weather and the level of United States economic growth. Based on historical trends, Atlas generally expects NGL prices to follow changes in crude oil prices over the long term, which it believes will in large part be determined by the level of production
from major crude oil exporting countries and the demand generated by growth in the world economy. The number of active oil and gas rigs has increased in recent years, mainly due to recent significant increases in natural gas prices, which could result in sustained increases in
drilling activity during the current and future periods. However, energy market uncertainty could negatively impact North American drilling activity in the short term. Lower drilling levels over a sustained period would have a negative effect on natural gas volumes gathered
and processed.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas closely monitors the risks associated with these commodity price changes on its future operations and, where appropriate, uses various commodity instruments such as natural gas, crude oil and NGL contracts to hedge a portion of the value of its assets and
operations from such price risks. Atlas does not realize the full impact of commodity price changes because some of its sales volumes were previously hedged at prices different than actual market prices.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Results of Our Operations</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The results of operations discussed below principally reflect the activities of Atlas on and after January&nbsp;1, 2002. Because our financial statements represent consolidated results of Atlas, our financial statements are substantially similar to Atlas&#146;. The primary differences
in our financial statements include the following adjustments:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>Interest of non-controlling limited partners in Atlas&#146; net income and partners&#146; capital. </i>We adjust our net income by excluding the income allocated to Atlas limited partner units that are not directly or indirectly owned by us. This allocation of Atlas&#146; income to
non-controlling limited partners is reflected as minority interest expense in our consolidated statements of income. At the time of completion of the offering, we will own a 12.8% limited partner interest in Atlas and the non-affiliated unitholders will own a 85.2% limited
partner interest. Our consolidated balance sheet includes a minority interest liability which reflects the proportion of Atlas owned by its partners other than us.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>Our general and administrative expenses. </i>We incur general and administrative expenses that are independent from Atlas&#146; operations and are not reflected on Atlas&#146; consolidated financial statements.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b><i>Nine Months Ended September</i></b>&nbsp;<b><i>30, 2004 Compared to Nine Months Ended September</i></b>&nbsp;<b><i>30, 2005</i></b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Revenue. </i>Natural gas and liquids revenue was $218.3 million for the nine months ended September&nbsp;30, 2005, an increase of $188.3 million from $30.0 million for the first nine months of 2004. The increase was primarily attributable to contributions from the Elk City
system, acquired in April 2005, and the Velma system, acquired in July 2004, and an increase in commodity prices between periods. Gross natural gas gathered averaged 69.1 MMcf/d on the Velma system for the first nine months of 2005, an increase of 24% from the first
nine months of 2004. Gross natural gas gathered on the Elk City system averaged 242.3 MMcf/d from its date of acquisition through September&nbsp;30, 2005.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">71</font></p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Appalachia transportation and compression revenue increased to $16.5 million for the nine months ended September&nbsp;30, 2005 from $13.3 million for the first nine months of 2004. This $3.2 million increase was primarily due to an increase in the average transportation
rate earned and an increase in the volumes of natural gas Atlas transported. Atlas&#146; average transportation rate was $1.10 per Mcf for the nine months ended September&nbsp;30, 2005 as compared to $0.92 per Mcf for the prior year comparable period, an increase of $0.18 per Mcf.
Appalachia&#146;s average throughput volumes were 54.8 MMcf/d for the first nine months of 2005 as compared with 52.7 MMcf/d for the prior year comparable period, an increase of 2.1 MMcf/d. The increase in the average daily throughput volume was principally due to new
wells connected to Atlas&#146; gathering system and the completion of a capacity expansion project on certain sections of its pipeline system during the current period.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Costs and Expenses. </i>Natural gas and liquids cost of goods sold of $184.6 million and plant operating expenses of $7.2 million for the nine months ended September&nbsp;30, 2005 represented increases of $160.0 million and $6.3 million, respectively, from the prior year&#146;s
comparable period amounts due primarily to contributions from the acquisitions and an increase in commodity prices. Appalachia transportation and compression expenses increased $0.5 million to $2.2 million for the first nine months of 2005 due mainly to higher operating
costs as a result of compressors added in connection with Atlas&#146; capacity expansion project and higher maintenance expense as a result of additional wells connected to the pipeline.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">General and administrative expenses, including amounts reimbursed to affiliates, increased $6.2 million to $9.1 million for the nine months ended September&nbsp;30, 2005 compared with $2.9 million for the prior year comparable period. This increase was mainly due to a
$2.6 million increase in non-cash compensation expense related to phantom units issued under Atlas&#146; long-term incentive plan and $3.7 million of expenses associated with the acquisitions. Depreciation and amortization increased to $8.5 million for the nine months ended
September&nbsp;30, 2005 compared with $2.1 million for the first nine months of 2004 due principally to the increased asset base associated with the acquisitions.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Interest expense increased to $8.5 million for the nine months ended September&nbsp;30, 2005 as compared with $1.2 million for the prior year comparable period. This $7.3 million increase was primarily due to interest associated with borrowings under Atlas&#146; credit facility
to finance the acquired assets and $1.0 million of accelerated amortization of deferred financing costs. This accelerated amortization was associated with the retirement of the term portion of Atlas&#146; $270 million credit facility in April 2005. For the third quarter of 2004, Atlas
incurred $3.0 million of costs in connection with the terminated attempt to acquire Alaska Pipeline Company and subsequent legal action. Atlas settled the matter in the fourth quarter 2004 and received $5.5 million.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Minority interest in Atlas net income, which represents the allocation of Atlas earnings to its non-affiliated limited partners, increased to $7.2 million for the nine months ended September&nbsp;30, 2005 as compared with $3.3 million for the prior year comparable period.
This $3.9 million increase was primarily due to an increase in Atlas&#146; overall net income and an increase in the number of its outstanding limited partner units due to additional equity offerings in April 2004, July 2004 and June 2005.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b><i>Year Ended December</i></b>&nbsp;<b><i>31, 2003 Compared to Year Ended December</i></b>&nbsp;<b><i>31, 2004</i></b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Revenue. </i>Natural gas and liquids revenue of $72.1 million for the year ended December&nbsp;31, 2004 was associated with the acquisition of Atlas&#146; Velma operations in July 2004 and reflect approximately five and one half months of operations at Velma in 2004.
Appalachia transportation and compression revenue increased to $18.8 million for the year ended December&nbsp;31, 2004 from $15.7 million for the prior year. This $3.1 million increase was primarily due to an increase in the average transportation rate earned and an increase in
the volumes of natural gas transported. The average transportation rate was $0.96 per Mcf for the year ended December&nbsp;31, 2004 as compared with $0.82 per Mcf for the prior year, an increase of $0.14 per Mcf. The average daily throughput volumes were 53.3 MMcf/d for
the year ended December&nbsp;31, 2004 as compared with 52.5 MMcf/d for the prior year, an increase of 0.8 MMcf/d. The increase in the average daily throughput volume was principally due to new wells connected to the Appalachia gathering system, partially offset by the
natural decline in production volumes from existing wells connected to it.</font></p>
</div>
<p>&nbsp;</p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Costs and Expenses. </i>Natural gas and liquids cost of goods sold of $58.7 million and plant operating expenses of $2.0 million for the year ended December&nbsp;31, 2004 were associated with the acquisition of Atlas&#146; Velma operations and reflect five and one half months of
activity at Velma. Appalachian transportation and compression expenses decreased slightly to $2.3 million for the year ended December&nbsp;31, 2004 as compared with $2.4 million for the prior year. This decrease was primarily due to a decrease in compressor expenses due to
the purchase of several compressors that were previously leased at the end of 2003.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">General and administrative expenses, including amounts reimbursed to affiliates, increased $3.0 million to $4.6 million for the year ended December&nbsp;31, 2004 compared with $1.6 million for the prior year. This increase was mainly due to $1.1 million of general and
administrative expenses associated with Atlas&#146; Velma operations, $0.8 million of expenses related to non-cash compensation expense for phantom units issued under our long-term incentive plan, a $0.5 million increase in allocations of compensation and benefits from Atlas
America and its affiliates due to management time associated with acquisitions and public offerings, and $0.3 million of costs associated with the implementation of Sarbanes-Oxley and the preparation and filing of two tax returns for 2003. The filing of two tax returns was a
result of our percentage interest in Atlas being reduced below 50% as a result of Atlas&#146; offering of common units in May 2003, requiring a change in its tax year-end from September 30 to December 31. This necessitated the filing of an additional short year tax return. This
expense is non-recurring.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Depreciation and amortization increased to $4.5 million for the year ended December&nbsp;31, 2004 compared with $1.8 million for the prior year due principally to the increased asset base associated with the acquisition of the Velma operations and pipeline extensions and
compressor upgrades in Appalachia.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Net gain on arbitration settlement of $1.5 million for the year ended December&nbsp;31, 2004 is the result of a December&nbsp;30, 2004 settlement agreement with SEMCO settling all issues and matters related to the terminated acquisition of Alaska Pipeline Company by Atlas
from SEMCO. The gain reflects $5.5 million received from SEMCO, net of $4.0 million of associated costs.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Interest expense increased to $2.3 million for the year ended December&nbsp;31, 2004 as compared with $0.3 million for the prior year. This $2.0 million increase was primarily due to interest associated with borrowings under the credit facility to finance the acquisition of
the Velma operations.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Minority interest in Atlas net income increased to $10.9 million for the year ended December&nbsp;31, 2004 as compared with $5.1 million for the prior year. This $5.8 million increase was primarily due to an increase in Atlas&#146; overall net income and an increase in the
number of outstanding limited partner units due to additional equity offerings in May 2003, April 2004 and July 2004.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b><i>Year Ended December</i></b>&nbsp;<b><i>31, 2002 Compared with Year Ended December</i></b>&nbsp;<b><i>31, 2003</i></b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Revenue. </i>Appalachian transportation and compression revenue increased to $15.7 million for the year ended December&nbsp;31, 2003 from $10.7 million for the prior year. This $5.0 million increase was primarily due to an increase in the average transportation rate earned
and an increase in the volumes of natural gas transported. The average transportation rate was $0.82 per Mcf for the year ended December&nbsp;31, 2003 as compared with $0.58 per Mcf for the prior year, an increase of $0.24 per Mcf. Average daily throughput volumes were 52.5
MMcf/d for the year ended December&nbsp;31, 2003 as compared with 50.4 MMcf/d for the prior year, an increase of 2.1 MMcf/d. The increase in the average daily throughput volume was principally due to new wells connected to the Appalachian gathering system, partially
offset by the natural decline in production volumes from existing wells connected to the system.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Costs and Expenses. </i>Transportation and compression expenses increased to $2.4 million for the year ended December&nbsp;31, 2003 as compared with $2.1 million for the prior year. This increase was primarily due to an increase in compressor expenses due to additional
compressors and higher lease rates for these compressors.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">General and administrative expenses, including amounts reimbursed to affiliates, increased $0.2 million to $1.7 million for the year ended December&nbsp;31, 2003 compared with $1.5 million for the prior year. This increase was mainly due to a $0.6 million increase in
allocations of compensation and benefits from Atlas</font></p>
</div>
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<p align="left"><font face="serif" size="2">America and its affiliates due to management time associated with potential acquisitions and public offerings, partially offset by a decline in professional fees associated with potential
acquisitions and public offerings.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Depreciation and amortization increased to $1.8 million for the year ended December&nbsp;31, 2003 compared with $1.5 million for the prior year due principally to the increased asset base associated with pipeline extensions and compressor upgrades and purchases.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Minority interest in Atlas net income increased to $5.1 million for the year ended December&nbsp;31, 2003 as compared with $2.5 million for the prior year. This $2.6 million increase was primarily due to an increase in Atlas&#146; overall net income and an increase in the
number of outstanding limited partner units due to an additional equity offering in May 2003.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Liquidity and Capital Resources</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><i>General</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; primary sources of liquidity are cash generated from operations and borrowings under its credit facility. Atlas&#146; primary cash requirements, in addition to normal operating expenses, are for debt service, capital expenditures and quarterly distributions to its
unitholders and us, as general partner. In general, Atlas expects to fund:</font></p>
</div>
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  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">cash distributions and maintenance capital expenditures through existing cash and cash flows from operating activities;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">expansion capital expenditures and working capital deficits through the retention of cash and additional borrowings; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">debt principal payments through additional borrowings as they become due or by the issuance of additional common units.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">At September&nbsp;30, 2005, Atlas had $183.5 million of outstanding borrowings under its credit facility and $7.7 million of outstanding letters of credit which are not reflected as borrowings on our consolidated balance sheet, with $33.8 million of available borrowing
capacity. In addition to the availability under the credit facility, Atlas has a universal shelf registration statement on file with the Securities and Exchange Commission, which allows it to issue equity or debt securities, See &#147;&#151;Atlas&#146; Shelf Registration Statement.&#148; At
September&nbsp;30, 2005, we had a working capital deficit of $9.6&nbsp;million compared with working capital of $27.9 million at December&nbsp;31, 2004. This decrease was primarily due to the settlement of accounts receivable from affiliates and an increase in the current portion of
Atlas&#146; net hedge liability between periods and is reflected in the change in fair-market value of its derivative instruments based on the subsequent increases in the price of natural gas after Atlas entered into the hedges. These price increases will be reflected in our consolidated
statements of income when the contracts settle.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><i>Cash Flows</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Nine Months Ended September</i>&nbsp;<i>30, 2004 Compared with Nine Months Ended September</i>&nbsp;<i>30, 2005.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities of $31.0&nbsp;million for the nine months ended September&nbsp;30, 2005 increased $21.5&nbsp;million from $9.5 million for the first nine
months of 2004. The increase is derived principally from increases in cash provided by working capital of $13.4&nbsp;million, net income of $4.1&nbsp;million, minority interest in Atlas&#146; net income of $3.9&nbsp;million, depreciation and amortization of $6.4&nbsp;million, and non-cash
compensation expense of $2.5&nbsp;million, partially offset by a $8.6&nbsp;million increase in cash distributions to Atlas&#146; minority interest partners. The increase in cash provided by working capital between periods is mainly due to timing of settlement of accounts receivable due from
affiliates. The increases in net income, minority interest and depreciation and amortization were principally due to the contribution from the acquisitions of Spectrum in July 2004 and Elk City in April 2005. The increase in cash distributions to Atlas minority interest partners
was due to an increase in their limited partner units outstanding and the distribution amount per limited partner unit.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Net cash used in investing activities was $229.9 million for the nine months ended September&nbsp;30, 2005, an increase of $84.2 million from $145.7 million for the first nine months of 2004. This increase was</font></p>
</div>
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<p align="left"><font face="serif" size="2">principally due to the acquisitions mentioned previously and a $30.1 million increase in capital expenditures. See further discussion of capital expenditures under &#147;&#151; Capital Requirements.&#148;</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Net cash provided by financing activities was $192.7 million for the nine months ended September&nbsp;30, 2005, an increase of $42.5 million from $150.2 million for the first nine months of 2004. This increase was principally due to a $69.3 million increase in net
borrowings under Atlas&#146; credit facility, mainly to fund the acquisition of the Elk City assets, partially offset by the distribution to owners.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Year Ended December</i>&nbsp;<i>31, 2003 Compared with Year Ended December</i>&nbsp;<i>31, 2004.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities of $11.3 million for the year ended December&nbsp;31, 2004 increased $6.7 million from $4.6 million for the prior year. The increase is derived
principally from increases in net income of $2.4 million, minority interest in Atlas net income of $5.9 million, depreciation and amortization of $2.7 million, and non-cash compensation expense of $0.7 million, partially offset by an increase in cash distributions to Atlas
minority interest partners of $4.4 million. The increases in net income, minority interest and depreciation and amortization were principally due to the acquisition of the Velma operations in July 2004. The increase in cash distributions to Atlas minority interest partners was due
to an increase in its limited partner units outstanding and its distribution amount per limited partner unit.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Net cash used in investing activities was $151.8 million for the year ended December&nbsp;31, 2004, an increase of $142.6 million from $9.2 million for the prior year. This increase was principally due to the acquisition of the Velma operations in July 2004 and a $2.4
million increase in capital expenditures. See further discussion of capital expenditures under &#147;&#151;Capital Requirements.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Net cash provided by financing activities was $143.6 million for the year ended December&nbsp;31, 2004, an increase of $125.9 million from $17.7 million for the prior year. This increase was principally due to $67.9 million of additional net proceeds received from Atlas&#146;
sales of its common units and $60.7 million of net borrowings under its credit facility, mainly to fund the acquisition of the Velma operations.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Year Ended December</i>&nbsp;<i>31, 2002 Compared with Year Ended December</i>&nbsp;<i>31, 2003.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Net cash provided by operating activities of $4.6 million for the year ended December&nbsp;31, 2003 increased $4.0 million from $0.6 million for the prior year. The increase is derived
principally from increases in net income of $1.7 million, minority interest in Atlas net income of $2.6 million, and an increase in cash provided by working capital of $1.0 million, partially offset by an increase in cash distributions to Atlas minority interest partners of $1.5
million. The increases in net income and minority interest were principally due to an increase in the Appalachian average transportation rate. The increase in cash distributions to Atlas minority interest partners was due to an increase in its limited partner units outstanding and
its distribution amount per limited partner unit.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Net cash used in investing activities was $9.2 million for the year ended December&nbsp;31, 2003, an increase of $4.0 million from $5.2 million for the prior year. This increase was principally due to a $2.4 million increase in capital expenditures and $1.5 million of
deferred costs associated with pending acquisitions. See further discussion of capital expenditures under &#147;&#151;Capital Requirements.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Net cash provided by financing activities was $17.7 million for the year ended December&nbsp;31, 2003, an increase of $13.4 million from $4.3 million for the prior year. This increase was principally due to $25.2 million of net proceeds received from Atlas&#146; sale of
common units, partially offset by $10.9 million of net reductions of outstanding borrowings under Atlas&#146; credit facility.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><i>Capital Requirements</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; operations require continual investment to upgrade or enhance existing operations and to ensure compliance with safety, operational, and environmental regulations. The capital requirements for Atlas&#146; operations consist primarily of:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">maintenance capital expenditures to maintain equipment reliability and safety and to address environmental regulations; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">expansion capital expenditures to acquire complementary assets and to expand the capacity of Atlas&#146; existing operations.</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">75</font></p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following table summarizes maintenance and expansion capital expenditures, excluding amounts paid for acquisitions, for the periods presented (in thousands):</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" align="center" valign="bottom"><font face="serif" size="1"><br>
<b>Years Ended December</b>&nbsp;<b>31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Nine Months Ended</b><br>
<b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Maintenance capital expenditures</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">170</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">3,109</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">1,516</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">844</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">1,110</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Expansion capital expenditures</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,060</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,526</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,527</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,575</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">33,409</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Total capital expenditures</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,230</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,635</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,043</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,419</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">34,519</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Expansion capital expenditures increased to $33.4 million for the nine months ended September&nbsp;30, 2005, due principally to expansions of the Velma and Elk City gathering systems and processing facilities to accommodate new wells drilled in Atlas&#146; service areas. In
addition, expansion capital expenditures increased due to compressor upgrades and gathering system expansions in the Appalachian region. Maintenance capital expenditures for the nine months ended September&nbsp;30, 2005 remained relatively consistent compared with the prior
year period. As of September&nbsp;30, 2005, Atlas is committed to expend approximately $36.6 million on pipeline extensions, compressor station upgrades and processing facility upgrades, including $13.1 million related to the Sweetwater gas plant. We anticipate that Atlas&#146;
expansion capital expenditures will continue to increase in the fourth quarter of 2005 compared with the prior year period as a result of an increase in the estimated number of well connections to Atlas&#146; gathering systems.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Expansion capital expenditures were $8.5 million for the year ended December&nbsp;31, 2004, an increase of $4.0 million compared with $4.5 million for the prior year due principally to expansions of the Velma gathering system and processing facilities to accommodate
new wells drilled in Atlas&#146; service areas and compressor upgrades and gathering system expansions in the Appalachian region. Maintenance capital expenditures were $1.5 million for the year ended December&nbsp;31, 2004, a decrease of $1.6 million compared with $3.1 million
for the prior year due principally to the purchase of Appalachian pipeline compressors in 2003 to replace units which were formerly leased.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Expansion capital expenditures declined slightly to $4.5 million for the year ended December&nbsp;31, 2003 due to the timing of expenditures for well connections, compressor upgrades, and gathering system expansions in the Appalachian region. Maintenance capital
expenditures were $3.1 million for the year ended December&nbsp;31, 2003, an increase of $2.9 million compared with the prior year due principally to the purchase of Appalachian pipeline compressors in 2003 to replace units which were formerly leased.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Atlas Partnership Distributions</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; partnership agreement requires that Atlas distribute 100% of available cash to its partners within 45 days following the end of each calendar quarter in accordance with their respective percentage interests. Available cash consists generally of all of Atlas&#146; cash
receipts, less cash disbursements and net additions to reserves, including any reserves required under debt instruments for future principal and interest payments.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas Pipeline GP, as general partner, is granted discretion by Atlas&#146; partnership agreement to establish, maintain and adjust reserves for future operating expenses, debt service, maintenance capital expenditures, rate refunds and distributions for the next four quarters.
These reserves are not restricted by magnitude, but only by type of future cash requirements with which they can be associated. When Atlas Pipeline GP determines Atlas&#146; quarterly distributions, it considers current and expected reserve needs along with current and expected
cash flows to identify the appropriate sustainable distribution level.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Available cash is initially distributed 98% to Atlas&#146; limited partners and 2.0% to its general partner. These distribution percentages are modified to provide for incentive distributions to be paid to Atlas Pipeline GP if quarterly distributions to limited partners exceed
specified targets. Incentive distributions are generally defined as all cash distributions paid to its general partner that are in excess of 2.0% of the aggregate amount of cash being distributed. Incentive distributions declared were $2.8 million and $5.7 million for the year ended
December&nbsp;31, 2004 and for the nine months ended September&nbsp;30, 2005, respectively.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">76</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p77"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Contractual Obligations and Commercial Commitments</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following tables summarizes Atlas&#146; contractual obligations and commercial commitments at September&nbsp;30, 2005 (in thousands):</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="14" align="center" valign="bottom"><font face="serif" size="1"><b>Payments due by period</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="14" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Contractual cash obligations:</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Total</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Less than 1 year</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>1 - 3 Years</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>4 - 5 Years</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>After 5 years</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Long-term debt (1)</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">183,645</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">63</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">82</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">183,500</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">&#151;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Operating leases</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,663</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,948</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,427</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">288</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Total contractual cash obligations</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">187,308</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,011</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,509</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">183,788</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><hr noshade size="1" align="left" width="100%"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(1)</font></td>
    <td><div align="left"><font face="serif" size="2">Not included in the table above are estimated interest payments calculated at the rates in effect at September&nbsp;30, 2005: 2006 &#150; $12.3 million; 2007 &#150; $12.3 million; 2008 &#150; $12.3 million; 2009 &#150; $12.3 million; and 2010 &#150; $6.6 million.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The operating leases represent lease commitments for compressors, office space, and office equipment with varying expiration dates. These commitments are routine and were made in the normal course of Atlas&#146; business.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="14" align="center" valign="bottom"><font face="serif" size="1"><b>Amount of commitment expiration per period</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="14" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Other commercial commitments:</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Total</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Less than 1 year</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>1 &#150; 3 Years</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>4 &#150; 5 Years</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>After 5 years</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Standby letters of credit</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">7,692</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">7,667</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">25</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">&#151;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">&#151;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Other commercial commitments</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">36,642</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">36,642</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Total commercial commitments</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">44,334</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">44,309</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">25</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Other commercial commitments relate to commitments to install new compressors and sales lines for new well hookups, and expenditures for pipeline extensions.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Atlas&#146; Equity Offerings</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On November&nbsp;28, 2005, Atlas sold 2,700,000 of its common units in a public offering for gross proceeds of $113.4 million. In addition, pursuant to an option granted to the underwriters of the offering, Atlas sold 330,000 common units on December 27, 2005 for gross
proceeds of $13.9 million, or aggregate total gross proceeds of $127.3 million including the November 2005 offering. The sale of the units resulted in net proceeds of approximately $120.9 million, after estimated underwriting commissions and other transaction costs. Atlas
primarily utilized the net proceeds from the sale to repay a portion of the amounts due under its credit facility. Subsequent to this equity offering, Atlas Pipeline GP&#146;s ownership interest in Atlas was 14.8%, including its 2.0% general partner interest.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In June 2005, Atlas sold 2,300,000 common units in a public offering for total gross proceeds of $96.5 million. The units were issued under Atlas&#146; previously filed shelf registration statement. The sale of the common units resulted in net proceeds of approximately $91.7
million, after underwriting commissions and other transaction costs. Atlas primarily utilized the net proceeds from the sale to repay a portion of the amounts due under its credit facility.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In July 2004, Atlas sold 2,100,000 common units in a public offering for total gross proceeds of $73.0 million. The units were issued under Atlas&#146; Form S-3 shelf registration statement. The sale of the common units resulted in net proceeds of approximately $67.5
million, after underwriting commissions and other transaction costs. Atlas utilized the net proceeds from the sale primarily to repay a portion of the amounts due under its credit facility and to redeem preferred units issued in connection with the acquisition of Spectrum Field
Services, Inc. in July 2004 for $20.4 million.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In April 2004, Atlas sold 750,000 common units in a public offering for total gross proceeds of $27.0 million. The units were issued under Atlas&#146; shelf registration statement. The sale of the common units resulted in net proceeds of approximately $25.2 million, after
underwriting commissions and other transaction</font></p>
</div>
<p align="center"><font face="serif" size="2">77</font></p>
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<p align="left"><font face="serif" size="2">costs. Atlas utilized the net proceeds from the sale primarily to repay a portion of the amounts due under its credit facility.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In May 2003, Atlas sold 1,092,500 common units in a public offering for total gross proceeds of $27.3 million. The units were issued under Atlas&#146; shelf registration statement. The sale of the units resulted in net proceeds of approximately $25.2 million, after
underwriting commissions and other transaction costs. Atlas utilized the net proceeds from the sale primarily to repay a portion of the amounts due under its credit facility.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Atlas&#146; Shelf Registration Statement</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas has an effective shelf registration statement with the Securities and Exchange Commission that permits it to periodically issue equity and debt securities for a total value of up to $500 million.  On November&nbsp;28, 2005, Atlas sold 2,700,000 of its common units in a
public offering for gross proceeds of $113.4 million. In addition, pursuant to an option granted to the underwriters of the offering, Atlas sold 330,000 common units on December 27, 2005 for gross proceeds of $13.9 million, or aggregate total gross proceeds of $127.3 million
including the November 2005 offering. The sale of the units resulted in net proceeds of approximately $120.9 million, after estimated underwriting commissions and other transaction costs. Atlas primarily utilized the net proceeds from the sale to repay a portion of the amounts
due under its credit facility. Subsequent to this equity offering, Atlas Pipeline GP&#146;s ownership interest in Atlas was 14.8%, including its 2.0% general partner interest. As of December 31, 2005, $372.7 million remains available for issuance under the shelf registration statement.
However, the amount, type and timing of any offerings will depend upon, among other things, the funding requirements of Atlas, prevailing market conditions, and compliance with Atlas&#146; credit facility covenants.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Atlas&#146; Credit Facility</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In April 2005, Atlas entered into a new $270.0 million credit facility with a syndicate of banks, which replaced its existing $135.0 million facility. The facility was comprised of a five-year $225.0 million revolving line of credit and a five-year $45.0 million term loan.
The term loan portion of the credit facility was repaid and retired from the net proceeds of the June 2005 equity offering. The revolving portion of the credit facility bears interest, at Atlas&#146; option, at either (i) Adjusted LIBOR plus the applicable margin, as defined, or (ii) the
higher of the federal funds rate plus 0.5% or the Wachovia Bank prime rate (each plus the applicable margin). The weighted average interest rate on the outstanding credit facility borrowings at December&nbsp;31, 2004 and September&nbsp;30, 2005 was 7.0% and 6.6%, respectively.
Up to $10.0 million of the credit facility may be utilized for letters of credit, of which $2.2 million and $7.7 million was outstanding at December&nbsp;31, 2004 and September&nbsp;30, 2005, respectively. These outstanding letter of credit amounts were not reflected as borrowings on
our consolidated balance sheet. Borrowings under the credit facility are secured by a lien on and security interest in all of Atlas&#146; property and that of its subsidiaries, and by the guaranty of each of Atlas&#146; subsidiaries. The credit facility contains customary covenants, including
restrictions on Atlas&#146; ability to incur additional indebtedness; make certain acquisitions, loans or investments; make distribution payments to its unitholders if an event of default exists; or enter into a merger or sale of assets, including the sale or transfer of interests in its
subsidiaries.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The events which constitute an event of default are also customary for loans of this size, including payment defaults, breaches of representations or covenants contained in the credit agreements, adverse judgments against Atlas in excess of a specified amount, and a
change of control of Atlas&#146; general partner.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The credit facility requires Atlas
    to maintain a ratio of senior secured debt (as defined in the credit facility)
    to EBITDA (as defined in the credit facility) of not more than 6.0 to 1.0,
    reducing to 5.75 to 1.0 on March 31, 2006, 4.5 to 1.0 on June 30, 2006, and
    4.0 to 1.0  on September 30, 2006; a funded debt (as defined in the credit
    facility) to EBITDA ratio of not more than 6.0 to 1.0, reducing to 5.75 to
    1.0 on March 31, 2006 and to 4.5 to 1.0 on June 30, 2006; and an interest
    coverage ratio (as defined in the credit facility) of not less than
2.5 to 1.0, increasing to 3.0 to 1.0 on March 31, 2006. The credit facility defines
    EBITDA to include pro forma adjustments, acceptable to the administrator
    of the facility, following material acquisitions. The definition of EBITDA
    contained in the credit facility is substantially  similar to the definition
    of Adjusted</font></p>
</div>
<p align="center"><font face="serif" size="2">78</font></p>
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<p align="left"><font face="serif" size="2">EBITDA used in this prospectus, except that: (1) the credit facility definition of EBITDA includes net gain or loss on arbitration settlement, while the definition of Adjusted EBITDA excludes
net gain or loss on arbitration settlement as a non-recurring item, and (2) the credit facility definition of EBITDA includes EBITDA of NOARK only to the extent of cash distributions from
NOARK, while the definition of Adjusted EBITDA includes Atlas&#146; percentage interest in NOARK&#146;s EBITDA. The ratios described above include only the operations of Atlas and its
subsidiaries, and exclude our operations and those of our subsidiaries that are not subsidiaries of Atlas. As of September 30, 2005, pro forma for the acquisition of NOARK, Atlas&#146; ratio of senior
secured debt to EBITDA was 5.4 to 1.0, its funded debt ratio was 5.4 to 1.0 and its interest coverage ratio was 2.8 to 1.0</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas is unable to borrow under its credit facility to pay distributions of available cash to unitholders because such borrowings would not constitute &#147;working capital borrowings&#148; pursuant to its partnership agreement. Because Atlas will be unable to borrow money to
pay distributions unless it establishes a facility that meets the definition contained in its partnership agreement, Atlas&#146; ability to pay a distribution in any quarter is solely dependent on its ability to generate sufficient operating surplus with respect to that quarter.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>NOARK Notes</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As of November 30, 2005, NOARK&#146;s subsidiary, NOARK Pipeline Finance, L.L.C., had outstanding $66.0 million in principal amount of 7.15% notes due in 2018. The notes are governed by an indenture dated June&nbsp;1, 1998 for which UMB Bank, N.A. serves as
trustee. Interest on the notes is payable semi-annually, in cash, in arrears on June 1 and December 1 of each year. Liability under the notes was allocated severally 40% to Atlas Arkansas, as successor to Enogex, and 60% to Southwestern, and the parties are several guarantors
for their respective allocations.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The notes are subject to a semi-annual redemption in installments of $1.0 million each at a redemption price of 100% of the principal, plus accrued and unpaid interest. Additionally, at the option of either Enogex or Southwestern, notes in an aggregate principal amount
guaranteed by either company as of a particular payment date may be redeemed at such notes&#146; redemption price plus a make-whole premium and unpaid interest accrued to that date by giving the trustee at least 60 days notice. As part of the NOARK acquisition, Enogex
agreed to redeem its portion of the notes as promptly as practicable after the closing, and at the closing it deposited cash sufficient to redeem the notes into an escrow account. The redemption of $26.4 million of the notes was completed on December&nbsp;5, 2005. After the
redemption, $39.6 million of notes remain outstanding, for which Southwestern remains liable. Under the partnership agreement, payments on the notes will be made from amounts otherwise distributable to Southwestern and, if that amount is insufficient, Southwestern is
required to make a capital contribution to NOARK. NOARK distributes cash available for distribution to the partners, after amounts payable on their respective allocations of the notes, in accordance with their percentage interests.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Significant Announced Internal Growth Project</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On October&nbsp;19, 2005, Atlas announced plans to complete construction of a new natural gas processing plant in Beckham County, Oklahoma near its Prentiss treating facility, in the third quarter of 2006. The new plant, to be known as the Sweetwater gas plant, will be
scaled to 120 MMcf/d of processing capacity. The Sweetwater gas plant will be located west of Atlas&#146; Elk City gas plant, and is being built to further access natural gas production actively being developed in western Oklahoma and the Texas panhandle. Along with the
Sweetwater gas plant, Atlas will construct a gathering system to be located primarily in western Oklahoma and in the Texas panhandle, more specifically, Beckham and Roger Mills counties in Oklahoma and Hemphill County, Texas. Atlas anticipates that construction of the
Sweetwater gas plant and associated gathering system will cost approximately $40.0 million and will generate cash flow of $8.0 million to $10.0 million annually.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Environmental Regulation</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; operations are subject to stringent and complex federal, state and local environmental laws and regulations governing the release of regulated materials into the environment or otherwise relating to</font></p>
</div>
<p align="center"><font face="serif" size="2">79</font></p>
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<p align="left"><font face="serif" size="2">environmental protection or human health or safety. We believe that Atlas&#146; operations and facilities are in substantial compliance with applicable environmental laws and regulations. Failure to
comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial requirements, and the issuance of injunctions
limiting or preventing some or all of our operations. Atlas has an ongoing environmental compliance program. However, risks of accidental leaks or spills are associated with the transportation
of natural gas. There can be no assurance that Atlas will not incur significant costs and liabilities relating to claims for damages to property, the environment, natural resources, or persons
resulting from the operation of its business. Moreover, it is possible that other developments, such as increasingly strict environmental laws and regulations and enforcement policies hereunder,
could result in increased costs and liabilities to Atlas.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Environmental laws and regulations have changed substantially and rapidly over the last 25 years, and we anticipate that there will be continuing changes. One trend in environmental regulation is to increase reporting obligations and place more restrictions and
limitations on activities, such as emissions of pollutants, generation and disposal of wastes and use, storage and handling of chemical substances, that may impact human health, the environment and/or endangered species. Increasingly strict environmental restrictions and
limitations have resulted in increased operating costs for Atlas and other similar businesses throughout the United States. It is possible that the costs of compliance with environmental laws and regulations may continue to increase. Atlas will attempt to anticipate future
regulatory requirements that might be imposed and to plan accordingly, but there can be no assurance that Atlas will identify and properly anticipate each such charge, or that its efforts will prevent material costs, if any, from arising.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Inflation and Changes in Prices</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Inflation affects the operating expenses of Atlas&#146; gathering systems. Increases in those expenses are not necessarily offset by increases in transportation fees that the gathering operations are able to charge. While we anticipate that inflation will affect Atlas&#146; future
operating costs, we can not predict the timing or amounts of any such effects. In addition, the value of Atlas&#146; gathering systems has been and will continue to be affected by changes in natural gas prices. Natural gas prices are subject to fluctuations which we are unable to
control or accurately predict.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Critical Accounting Policies and Estimates</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires making estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of actual revenue and expenses during the reporting period. Although we and Atlas believe our estimates are reasonable, actual results could differ from those estimates. Changes in these estimates
could materially affect our and Atlas&#146; financial position, results of operations or cash flows. Key estimates used by Atlas&#146; management include estimates used to record revenue and expense accruals, depreciation and amortization, asset impairment and fair values of assets
acquired. We summarize our and Atlas&#146; significant accounting policies in our consolidated financial statements included in this prospectus. The critical accounting policies that we have identified are discussed below.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><i>Use of Estimates</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities that exist at the date of our consolidated financial statements, as well as the reported amounts of revenue and expense during the reporting periods. Actual results could differ from those estimates.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The natural gas industry principally conducts its business by processing actual transactions at the end of the month following the month of delivery. Consequently, our most current month&#146;s financial results include estimated volumes and market prices. Differences
between estimated and actual amounts are recognized in the following month&#146;s financial results. We believe that the operating results presented for the year ended</font></p>
</div>
<p align="center"><font face="serif" size="2">80</font></p>
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<p align="left"><font face="serif" size="2">December&nbsp;31, 2004 and the nine months ended September&nbsp;30, 2005 represent actual results in all material respects (see Revenue Recognition accounting policy for further description).</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><i>Receivables</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In evaluating the realizability of accounts receivable, Atlas performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer&#146;s current creditworthiness, as determined by its review of the customers&#146; credit
information. Atlas extends credit on an unsecured basis to many of its energy customers. At December&nbsp;31, 2004 and September&nbsp;30, 2005, no allowance was recorded for uncollectible accounts receivable impairment.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><i>Revenue Recognition</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Revenue in the Appalachian segment is recognized at the time the natural gas is transported through the gathering systems. Under the terms of its natural gas gathering agreements with Atlas America and its affiliates, Atlas receives fees for gathering natural gas from
wells owned by Atlas America, by drilling investment partnerships sponsored by Atlas America or by independent third parties. The fees received for the gathering services are generally the greater of 16% of the gross sales price for gas produced from the wells, or $0.35 or
$0.40 per Mcf, depending on the ownership of the well. Substantially all gas gathering revenue is derived under this agreement. Fees for transportation services provided to independent third parties whose wells are connected to Atlas&#146;s Appalachian gathering systems are at
separately negotiated prices.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Revenue in the Mid-Continent segment is recognized at the time the natural gas is processed and the resulting residue gas and NGLs are sold. The majority of this revenue is based on POP and fixed-fee contracts. Under its POP purchasing arrangements, Atlas purchases
natural gas at the wellhead, processes the natural gas by extracting NGLs and removing impurities and sells the residue gas and NGLs at market-based prices, remitting to producers a contractually-determined percentage of the sale proceeds.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas accrues unbilled revenue due to timing differences between the delivery of natural gas, NGLs and oil and the receipt of a delivery statement. This revenue is recorded based upon volumetric data from its records and management estimates of the related
transportation and compression fees which are, in turn, based upon applicable product prices (see Use of Estimates accounting policy for further description). Atlas had unbilled revenue at December&nbsp;31, 2004 and September&nbsp;30, 2005 of $15.3 million and $42.1 million,
respectively, included in accounts receivable and accounts receivable-affiliates within our consolidated balance sheets.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><i>Intangible Assets</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">At September&nbsp;30, 2005, Atlas had $12.4 million of intangible assets, net of accumulated amortization of $0.5 million, which was recorded in connection with natural gas gathering contracts assumed in consummated acquisitions. Statement of Financial Accounting
Standards No. 142, &#147;Goodwill and Other Intangible Assets,&#148; (&#147;SFAS No. 142&#148;) requires that intangible assets with finite useful lives be amortized over their respective estimated useful lives. If an intangible asset has a finite useful life, but the precise length of that life is not
known, that intangible asset must be amortized over the best estimate of its useful life. At a minimum, Atlas will assess the useful lives and residual values of all intangible assets on an annual basis to determine if adjustments are required. Amortization expense on the
customer contract intangible assets, which have an estimated life of 12 years and are amortized on a straight-line basis, was $0.5 million for the nine months ended September&nbsp;30, 2005. There was no amortization expense on intangible assets recorded during the nine months
ended September&nbsp;30, 2004. Amortization expense related to intangible assets is estimated to be $1.1 million for each of the next five calendar years.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><i>Goodwill</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">At December&nbsp;31, 2004 and September&nbsp;30, 2005, Atlas had $2.3 million and $80.2 million, respectively, of goodwill which was recognized in connection with consummated acquisitions. Atlas tests its goodwill for impairment at each year end by comparing fair values
to its carrying values. The evaluation of impairment under SFAS No. 142 requires the use of projections, estimates and assumptions as to the future performance</font></p>
</div>
<p align="center"><font face="serif" size="2">81</font></p>
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<p align="left"><font face="serif" size="2">of Atlas&#146; operations, including anticipated future revenue, expected future operating costs and the discount factor used. Actual results could differ from projections, resulting in revisions to Atlas&#146;
assumptions and, if required, recognition of an impairment loss. Atlas&#146; test of goodwill at December&nbsp;31, 2004 resulted in no impairment, and no impairment indicators have been noted as of
September&nbsp;30, 2005. Atlas will continue to evaluate its goodwill at least annually and when impairment indicators arise, and will reflect the impairment of goodwill, if any, within its
consolidated statements of income in the period in which the impairment is indicated.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><i>Depreciation and Amortization</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas calculates its depreciation based on the estimated useful lives and salvage values of its assets. However, factors such as usage, equipment failure, competition, regulation or environmental matters could cause it to change its estimates, thus impacting the future
calculation of depreciation and amortization.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><i>Impairment of Assets</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In accordance with Statement of Financial Accounting Standards No. 144, &#147;Accounting for the Impairment or Disposal of Long-Lived Assets,&#148; Atlas reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount
of long-lived assets may not be recoverable. Atlas determines if its long-lived assets are impaired by comparing the carrying amount of an asset or group of assets with the estimated undiscounted future cash flows associated with such asset or group of assets. If the carrying
amount is greater than the estimated undiscounted future cash flows, an impairment loss is recognized to reduce the carrying value to fair value. Atlas&#146; operations are subject to numerous factors which could affect future cash flows which we discuss in &#147;Risk Factors.&#148; Atlas
continuously monitors these factors and pursue alternative strategies to maintain or enhance cash flows associated with these assets; however, we cannot assure you that Atlas can mitigate the effects, if any, on future cash flows related to any changes in these factors.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><i>Fair Value of Derivative Commodity Contracts</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas enters into certain financial swap and option instruments that are classified as cash flow hedges in accordance with SFAS No. 133. Atlas enters into these instruments to hedge its forecasted natural gas, NGLs and condensate sales against the variability in expected
future cash flows attributable to changes in market prices. The swap instruments are contractual agreements between counterparties to exchange obligations of money as the underlying natural gas, NGLs and condensate is sold. Under these swap agreements, Atlas receives a
fixed price and pays a floating price based on certain indices for the relevant contract period.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas formally documents all relationships between hedging instruments and the items being hedged, including its risk management objective and strategy for undertaking the hedging transactions. This includes matching the natural gas futures and options contracts to the
forecasted transactions. Atlas assesses, both at the inception of the hedge and on an ongoing basis, whether the derivatives are effective in offsetting changes in the forecasted cash flow of hedged items. If it is determined that a derivative is not effective as a hedge or that it
has ceased to be an effective hedge due to the loss of correlation between the hedging instrument and the underlying commodity, Atlas will discontinue hedge accounting for the derivative and subsequent changes in fair value for the derivative will be recognized immediately
within its consolidated statements of income.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas records derivatives on the consolidated balance sheet as assets or liabilities at fair value. For derivatives qualifying as hedges, Atlas recognizes the effective portion of changes in fair value in owners&#146; equity as accumulated other comprehensive income (loss) and
reclassifies them to earnings as such transactions are settled. For non-qualifying derivatives and for the ineffective portion of qualifying derivatives, Atlas recognizes changes in fair value within the consolidated statements of income as they occur. At December&nbsp;31, 2004 and
September&nbsp;30, 2005, Atlas reflected net hedging liabilities on the consolidated balance sheets of $2.6 million and $46.7 million, respectively. Of the $46.4 million net loss in accumulated other comprehensive loss at September&nbsp;30, 2005, Atlas will reclassify $22.7 million of
losses to the consolidated statements of income over the next twelve month period as these contracts expire, and $23.7 million will be reclassified in later periods if the fair values of the instruments remain at current market</font></p>
</div>
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<p align="left"><font face="serif" size="2">values. Actual amounts that will be reclassified will vary as a result of future price changes. Ineffective hedge gains or losses are recorded within the consolidated statements of income while the
hedge contract is open and may increase or decrease until settlement of the contract. Atlas recognized losses of $27,000 and $4.4 million for the nine months ended September&nbsp;30, 2004 and
2005, respectively, within the consolidated statements of income related to the settlement of qualifying hedge instruments. Atlas also recognized losses of $0.7 million for the nine months ended
September&nbsp;30, 2005 and 2004, within the consolidated statements of income related to the change in market value of non-qualifying or ineffective hedges.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">A portion of Atlas&#146; future natural gas sales is periodically hedged through the use of swaps and collar contracts. Realized gains and losses on the derivative instruments that are classified as effective hedges are reflected in the contract month being hedged as an
adjustment to revenue.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><i>Volume Measurement</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas records amounts for natural gas gathering and transportation revenue, NGL transportation and processing revenue, natural gas sales and natural gas purchases, and the sale of production based on volumetric calculations. Variances resulting from such calculations
are inherent in Atlas&#146; business.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><i>New Accounting Standards</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In May 2005, the Financial Accounting Standards Board (&#147;FASB&#148;) issued Statement of Financial Accounting Standards No. 154, &#147;Accounting Changes and Error Corrections&#148; (&#147;SFAS No. 154&#148;). SFAS No. 154 requires retrospective application to prior periods&#146;
financial statements for changes in accounting principle. It also requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding
adjustment be made to the opening balance of retained earnings for that period rather than being reported in an income statement. The statement will be effective for accounting changes and corrections of errors made in fiscal years beginning after December&nbsp;15, 2005. The
impact of SFAS No. 154 will depend on the nature and extent of any voluntary accounting changes and corrections of errors after the effective date, but we do not currently expect SFAS No. 154 to have a material impact on our financial position or results of operations.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In March 2005, the FASB issued FASB Interpretation No. 47, &#147;Accounting for Conditional Asset Retirement Obligations&#148; (&#147;FIN 47&#148;), which will result in (a) more consistent recognition of liabilities relating to asset retirement obligations, (b) more information about
expected future cash outflows associated with those obligations, and (c) more information about investments in long-lived assets because additional asset retirement costs will be recognized as part of the carrying amounts of the assets. FIN 47 clarifies that the term conditional
asset retirement obligation as used in SFAS No. 143, &#147;Accounting for Asset Retirement Obligations,&#148; refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be
within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement. Uncertainty about the timing and (or) method of settlement of a conditional asset retirement
obligation should be factored into the measurement of the liability when sufficient information exists. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than
the end of fiscal years ending after December&nbsp;15, 2005. Retrospective application of interim financial information is permitted but is not required. Early adoption of this interpretation is encouraged. Atlas does not expect FIN 47 to have a material impact on the consolidated
financial statements.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (R) (revised 2004), &#147;Share-Based Payment&#148; (&#147;SFAS No. 123 (R)&#148;)  which is a revision of SFAS No. 123, &#147;Accounting for Stock-Based Compensation.&#148; SFAS No. 123 (R)
supersedes Accounting Principles Board Opinion (&#147;APB&#148;) No. 25, &#147;Accounting for Stock Issued to Employees,&#148; and amends SFAS No. 95, &#147;Statement of Cash Flows.&#148; Generally, the approach to accounting in Statement&nbsp;123&nbsp;(R) requires all share-based payments to
employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. Currently, Atlas follows APB No. 25 and its interpretations, which allow for valuation of</font></p>
</div>
<p align="center"><font face="serif" size="2">83</font></p>
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<p align="left"><font face="serif" size="2">share-based payments to employees at their intrinsic values. Under this methodology, Atlas recognizes compensation expense for phantom units granted only if the current market price of the
underlying units exceeds the exercise price. SFAS No. 123 (R) is effective for us beginning January&nbsp;1, 2006. Atlas does not expect SFAS No. 123 (R) to have a material impact on the
consolidated financial statements.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Quantitative and Qualitative Disclosures About Market Risk</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. The term &#147;market risk&#148; refers to the risk of loss arising from adverse changes in interest rates and
natural gas, NGL and condensate prices. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. This forward-looking information provides indicators of how we view and manage our ongoing market
risk exposures. All of our market risk sensitive instruments were entered into for purposes other than trading.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">All of Atlas&#146; assets and liabilities are denominated in U.S. dollars and, as a result, it does not have exposure to currency exchange risks.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas is exposed to various market risks, principally fluctuating interest rates and changes in commodity prices. These risks can impact Atlas&#146; results of operations, cash flows and financial position. Atlas manages these risks through regular operating and financing
activities and periodic use of derivative financial instruments. The following analysis presents the effect on Atlas&#146; results of operations, cash flows and financial position as if the hypothetical changes in market risk factors occurred on September&nbsp;30, 2005. Only the potential
impacts of hypothetical assumptions are analyzed. The analysis does not consider other possible effects that could impact Atlas&#146; business.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Interest Rate Risk. </i>At September&nbsp;30, 2005, Atlas had a $225.0 million revolving credit facility ($183.5 million outstanding) to fund the expansion of its existing gathering systems, acquire other natural gas gathering systems and fund working capital movements as
needed. The weighted average interest rate for these borrowings was 6.6% at September&nbsp;30, 2005. Holding all other variables constant, a 1% change in interest rates would change interest expense by $1.8 million.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Commodity Price Risk. </i>Atlas is exposed to commodity prices as a result of being paid for certain services in the form of commodities rather than cash. For gathering services, Atlas receives fees for commodities from the producers to bring the raw natural gas from the
wellhead to the processing plant. For processing services, Atlas either receives fees or commodities as payment for these services, based on the type of contractual agreement. Based on the current portfolio of gas supply contracts, Atlas is long condensate, NGL and natural gas
positions. A 10% change in the average price of NGLs, natural gas and condensate Atlas processes and sells would result in a change to our 2005 consolidated annual income, excluding the effect of minority interests in Atlas net income, of approximately $2.1 million.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas enters into certain financial swap and option instruments that are classified as cash flow hedges in accordance with SFAS No. 133. Atlas enters into these instruments to hedge its forecasted natural gas, NGLs and condensate sales against the variability in expected
future cash flows attributable to changes in market prices. The swap instruments are contractual agreements between counterparties to exchange obligations of money as the underlying natural gas, NGLs and condensate is sold. Under these swap agreements, Atlas receives a
fixed price and pays a floating price based on certain indices for the relevant contract period.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas formally documents all relationships between hedging instruments and the items being hedged, including its risk management objective and strategy for undertaking the hedging transactions. This includes matching the natural gas futures and options contracts to the
forecasted transactions. Atlas assesses, both at the inception of the hedge and on an ongoing basis, whether the derivatives are effective in offsetting changes in the forecasted cash flow of hedged items. If it is determined that a derivative is not effective as a hedge or that it
has ceased to be an effective hedge due to the loss of correlation between the hedging instrument and the underlying commodity, Atlas will discontinue hedge accounting for the derivative and subsequent changes in fair value for the derivative will be recognized immediately
within our consolidated statements of income.</font></p>
</div>
<p>&nbsp;</p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Derivatives are recorded on the consolidated balance sheet as assets or liabilities at fair value. For derivatives qualifying as hedges, Atlas recognizes the effective portion of changes in fair value in owners&#146; equity as accumulated other comprehensive income (loss) and
reclassifies them to earnings as such transactions are settled. For non-qualifying derivatives and for the ineffective portion of qualifying derivatives, Atlas recognizes changes in fair value within the consolidated statements of income as they occur. At December&nbsp;31, 2004 and
September&nbsp;30, 2005, Atlas reflected net hedging liabilities on its consolidated balance sheets of $2.6 million and $46.7 million, respectively. Of the $46.4 million net loss in accumulated other comprehensive income (loss) at September&nbsp;30, 2005, Atlas will reclassify $22.7
million of losses to its consolidated statements of income over the next twelve month period as these contracts expire, and $23.7 million will be reclassified in later periods if the fair values of the instruments remain at current market values. Actual amounts that will be
reclassified will vary as a result of future price changes. Ineffective hedge gains or losses are recorded within Atlas&#146; consolidated statements of income while the hedge contract is open and may increase or decrease until settlement of the contract. Atlas recognized losses of
$27,000 and $4.4 million for the nine months ended September&nbsp;30, 2004 and 2005, respectively, within our consolidated statements of income related to the settlement of qualifying hedge instruments. Atlas also recognized losses of $0.7 million for the nine months ended
September&nbsp;30, 2005 and 2004, within its consolidated statements of income related to the change in market value of non-qualifying or ineffective hedges.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">A portion of Atlas&#146; future natural gas sales is periodically hedged through the use of swaps and collar contracts. Realized gains and losses on the derivative instruments that are classified as effective hedges are reflected in the contract month being hedged as an
adjustment to revenue.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As of September&nbsp;30, 2005, Atlas had the following NGLs, natural gas, and crude oil volumes hedged:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Natural Gas Liquids Fixed &#150; Price Swaps</b></font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Twelve Months Ended September</b>&nbsp;<b>30,</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Volumes</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Average fixed price</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fair value liability(1)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(gallons)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(per gallon)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(in thousands)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">38,586,000</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">0.673</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">(16,742</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2007</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">38,115,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.711</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(12,188</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2008</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">34,587,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.702</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(9,037</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2009</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,434,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.697</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,781</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(39,748</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Natural Gas Fixed &#150; Price Swaps</b></font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Twelve Months Ended September</b>&nbsp;<b>30,</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Volumes</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Average fixed price</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fair value liability(3)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(MMbtu)(2)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(per MMbtu)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(in thousands)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">3,923,000</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">7.169</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">(5,767</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2007</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,560,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7.210</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,658</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2008</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">510,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7.262</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,037</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(8,462</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">85</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p86"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Natural Gas Basis Swaps</b></font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Twelve Months Ended September</b>&nbsp;<b>30,</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Volumes</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Average fixed price</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fair value asset(3)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(MMbtu)(2)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(per MMbtu)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(in thousands)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">4,262,000</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">(0.517</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">1,376</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2007</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,560,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(0.522</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,584</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2008</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">510,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(0.544</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,383</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,343</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Crude Oil Fixed &#150; Price Swaps</b></font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Twelve Months Ended September</b>&nbsp;<b>30,</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Volumes</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Average fixed price</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fair value liability(3)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(Bbls)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(per Bbl)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(in thousands)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">67,800</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">51.329</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">(1,056</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2007</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">80,400</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">55.187</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(844</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2008</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">82,500</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">58.475</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(414</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,314</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Crude Oil Options</b></font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Twelve Months Ended September</b>&nbsp;<b>30,</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Option type</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Volumes</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Average strike price</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fair value liability(3)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(Bbls)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(per Bbl)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(in thousands)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">Puts purchased</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">15,000</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">30.00</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">&#151;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">Calls sold</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">34.25</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(481</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(481</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="5" align="right" valign="bottom"><font face="serif" size="2">Total net liability&nbsp;&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(46,662</font></td>
    <td align="left" valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><hr noshade size="1" align="left" width="100%"></td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(1)</font></td>
    <td><div align="left"><font face="serif" size="2">Fair value based upon management estimates, including forecasted forward NGL prices as a function of forward NYMEX natural gas and light crude prices.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(2)</font></td>
    <td><div align="left"><font face="serif" size="2">MMbtu represents million British Thermal Units.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(3)</font></td>
    <td><div align="left"><font face="serif" size="2">Fair value based on forward NYMEX natural gas and light crude prices, as applicable.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In Atlas&#146; Appalachian operations, it is the beneficiary of natural gas gathering agreements with Atlas America under which Atlas receives gathering fees generally equal to a percentage, typically 16% of the selling price, of the natural gas it transports. Atlas is the
beneficiary of, and consults with Atlas America with respect to, the hedging program it has established for its Appalachian natural gas production that mitigates the risks of Atlas&#146; percentage of proceeds agreement with it. Atlas does not currently engage in any interest rate or
foreign currency exchange rate transactions, and as a result, it does not have exposure to those types of derivative risks.</font></p>
</div>
<p align="center"><font face="serif" size="2">86</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p87"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>BUSINESS</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Atlas Pipeline Holdings, L.P.</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our cash generating assets consist of our interests in Atlas Pipeline Partners, L.P., a publicly traded Delaware limited partnership. Atlas is a midstream energy service provider engaged in the transmission, gathering and processing of natural gas in the Mid-Continent and
Appalachian regions. Our interests in Atlas will initially consist of a 100% ownership interest in the general partner of Atlas, Atlas Pipeline GP, which owns:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">a 2.0% general partner interest in Atlas, which entitles it to receive 2.0% of the cash distributed by Atlas;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">all of the incentive distribution rights in Atlas, which entitle it to receive increasing percentages, up to a maximum of 48.0%, of any cash distributed by Atlas as it reaches certain target distribution levels in excess of $0.42 per Atlas unit in any quarter; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">1,641,026 common units of Atlas, representing an approximate 12.8% limited partner interest in Atlas.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">At Atlas&#146; current quarterly distribution rate of $0.83 per common unit, aggregate quarterly cash distributions to us on all our interests in Atlas would be approximately $5.0 million. Based on this distribution, we expect that our initial quarterly distribution will be $0.225
per unit, or $0.90 per unit on an annualized basis.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our primary objective is to increase our cash distributions to our unitholders through growth at Atlas. Atlas has grown through strategic acquisitions and internal growth projects. Since Atlas&#146; initial public offering in January 2000, it has completed five acquisitions at an
aggregate cost of approximately $516.7 million. Atlas&#146; business strategy is to create capital-efficient growth in distributable cash flow to maximize its distribution to its unitholders by, among other things, (1) maximizing cash flows from its existing businesses through
marketing of its services and facilities and controlling its operating costs; (2) continuing to increase the amount of its operating cash flow generated by long-term, fee-based contracts; (3) expanding its existing businesses through internal growth opportunities; (4) expanding its
operations through strategic acquisitions; and (5) maintaining a flexible capital structure based on a strong balance sheet by financing its growth through a balanced combination of debt and equity.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We intend to support Atlas in implementing its business strategy by assisting it in identifying, evaluating, and pursuing growth opportunities. In the future, we may also support the growth of Atlas through the use of our capital resources, which could involve loans or
capital contributions to Atlas to provide funding for the acquisition of a business or asset or for an internal growth project. We may also provide Atlas with other forms of credit support, such as guarantees related to financing a project or other types of support related to a
merger or acquisition transaction.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas is required by its partnership
    agreement to distribute all of its cash on hand at the end of each quarter,
    less reserves established by its general partner in its sole discretion to
    provide for the proper conduct of Atlas&#146; business or to provide for
    future distributions.  Atlas has increased the per unit quarterly cash distribution
    on its common units by approximately 48%, from the quarterly distribution
    of $0.56 per unit declared for the first quarter of 2003 to $0.83 per unit
    declared for the fourth quarter of 2005. The following graph shows,
for the period from the first quarter of 2003 through the fourth quarter of 2005:
    (i) Atlas&#146; quarterly distributions per unit and (ii) total distributions
    by Atlas to us.</font></p>
</div>
<p align="center"><font face="serif" size="2">87</font></p>
<hr noshade align="center" width="100%" size="2">
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<p align="left"><img src="historical_chart.jpg"></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">While we, like Atlas, are structured as a limited partnership, our capital structure and cash distribution policy differ materially from those of Atlas. Most notably, our general partner does not have an economic interest in us and is not entitled to receive any distributions
from us, and our capital structure does not include incentive distribution rights. Therefore, all of our distributions are made on our common units, which is our only class of security outstanding.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our ownership of Atlas&#146; incentive distribution rights entitles us to receive an increasing percentage of cash distributed by Atlas as it reaches certain target distribution levels. The rights entitle us to receive the following:</font></p>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">13.0% of all cash distributed in a quarter after each Atlas unit has received $0.42 for that quarter;</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">23.0% of all cash distributed after each Atlas unit has received $0.52 for that quarter; and</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">48.0% of all cash distributed after each Atlas unit has received $0.60 for that quarter.</font></div></td>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">For the quarter ended December&nbsp;31, 2005, Atlas declared a distribution of $0.83 per unit, which means we will receive 48.0% of the $0.23 incremental cash distribution per unit in excess of the maximum target distribution level of $0.60 per unit. Because the incentive
distribution rights currently participate at the maximum 48.0% target cash distribution level, future growth in distributions we receive from Atlas will not result from an increase in the target cash distribution level associated with the incentive distribution rights.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The graph set forth below demonstrates hypothetical cash distributions payable in respect of our interests in Atlas by showing the total cash allocated to us across an illustrative range of annualized cash distributions per unit made by Atlas. The graph illustrates the
impact to us of Atlas raising or lowering its distribution from the most recently declared distribution of $0.83 per common unit ($3.32 on an annualized basis), which will be paid on February&nbsp;14, 2006. This information assumes:</font></p>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas has 12,549,266 total units outstanding, representing the number of units outstanding at December&nbsp;31, 2005; and</font></div></td>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">through Atlas Pipeline GP, we own (i) 1,641,026 Atlas common units, representing an approximate 12.8% limited partner interest in Atlas, (ii) a 2.0% general partner interest in Atlas and (iii) all the incentive distribution rights.</font></div></td>
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<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">88</font></p>
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<p align="center"><font face="serif" size="2"><b><img src="hypo_chart.jpg"></b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">This information is presented for illustrative purposes only and is not intended to be a prediction of future performance and does not attempt to illustrate the impact of changes in our or Atlas&#146; business, including changes that may result from changes in natural gas, NGL
and condensate prices, changes in economic conditions, the impact of any future acquisitions or expansion projects or the issuance of additional units by Atlas. In addition, the level of cash distributions we receive may be affected by the various risks associated with an
investment in us and the underlying business of Atlas. Please read &#147;Risk Factors.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We intend to pay to our unitholders, on a quarterly basis, distributions equal to the cash we receive from Atlas, less certain reserves for expenses and other uses of cash, including:</font></p>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">our general and administrative expenses, including expenses we will incur as the result of being a public company;</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">capital contributions to maintain or increase our ownership interest in Atlas; and</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">reserves our general partner believes prudent to maintain for the proper conduct of our business or to provide for future distributions.</font></div></td>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Based on Atlas&#146; current quarterly distribution, the number of our units outstanding and our expected level of expenses and reserves that our general partner believes prudent to maintain, we expect that our initial quarterly distribution will be $0.225 per common unit, or
$0.90 per unit on an annualized basis. Due to our ownership of Atlas&#146; incentive distribution rights, our cash flows are impacted by changes in Atlas&#146; distributions to a greater extent than those of Atlas&#146; common unitholders.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If Atlas is successful in implementing its business strategy and increasing distributions to its unitholders, we would generally expect to increase distributions to our unitholders, although the timing and amount of any such increased distributions will not necessarily be
comparable to the increased Atlas distributions. However, we cannot assure you that any distributions will be declared or paid. Please read &#147;Cash Distribution Policy and Restrictions on Distributions.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our common units and Atlas&#146; common units are unlikely to trade in simple relation or proportion to one another. Instead, while the trading prices of our common units and Atlas&#146; common units are likely to follow generally similar broad trends, the trading prices may
diverge because, among other things:</font></p>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">with respect to Atlas distributions, Atlas&#146; common unitholders have a priority over the incentive distribution rights; and</font></div></td>
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<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">89</font></p>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">we participate in Atlas&#146; managing general partner&#146;s distributions and the incentive distribution rights, and Atlas&#146; common unitholders do not; and</font></div></td>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">we may in the future enter into other businesses separate from Atlas or any of its affiliates.</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><div align="left"><font face="serif" size="2"><b>Atlas Pipeline Partners, L.P.</b></font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><div align="left"><font face="serif" size="2"><b>Overview</b></font></div></td>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas is a publicly-traded midstream energy services provider engaged in the transmission, gathering and processing of natural gas. Atlas conducts its business through two operating segments: its Mid-Continent operations and its Appalachian operations.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Through its Mid-Continent operations, Atlas owns and operates:</font></p>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">a 75% interest in a FERC-regulated, 565-mile interstate pipeline system, which we refer to as Ozark Gas Transmission, that extends from southeastern Oklahoma through Arkansas and into southeastern Missouri and which has throughput capacity of approximately 322
MMcf/d;</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">two natural gas processing plants with aggregate capacity of approximately 230 MMcf/d and one treating facility with a capacity of approximately 200 MMcf/d, all located in Oklahoma; and</font></div></td>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">1,765 miles of active natural gas gathering systems located in Oklahoma, Arkansas, northern Texas and the Texas panhandle, which transport gas from wells and central delivery points in the Mid-Continent region to Atlas&#146; natural gas processing plants or Ozark Gas
Transmission.</font></div></td>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Through its Appalachian operations, Atlas owns and operates 1,500 miles of active natural gas gathering systems located in eastern Ohio, western New York and western Pennsylvania. Through an omnibus agreement and other agreements between Atlas and Atlas
America, the parent of Atlas&#146; general partner and our general partner and a leading sponsor of natural gas drilling investment partnerships in the Appalachian Basin, Atlas gathers substantially all of the natural gas for its Appalachian Basin operations from wells operated by
Atlas America. Among other things, the omnibus agreement requires Atlas America to connect wells it operates to Atlas&#146; gathering systems that are located within 2,500 feet of Atlas&#146; gathering systems. Atlas is also party to natural gas gathering agreements with Atlas America
under which Atlas receives gathering fees generally equal to a percentage, typically 16%, of the selling price of the natural gas it transports. These agreements are continuing obligations and have no specified term except that they will terminate if Atlas&#146; general partner is
removed without cause.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Since Atlas&#146; initial public offering in January 2000, Atlas has completed five acquisitions at an aggregate cost of approximately $516.7 million, including, most recently, the October 2005 acquisition of Atlas Arkansas Pipeline LLC, which owns a 75% interest in
NOARK, and the April 2005 acquisition of Elk City.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Both Atlas&#146; Mid-Continent and Appalachian operations are located in areas of abundant and long-lived natural gas production and significant new drilling activity. The Ozark Gas Transmission system and Atlas&#146; gathering systems are connected to approximately 6,250
central delivery points or wells, giving Atlas significant scale in its service areas. Atlas provides gathering and processing services to the wells connected to its systems, primarily under long-term contracts. Atlas provides fee-based, FERC-regulated transmission services through
Ozark Gas Transmission under both long-term and short-term contractual arrangements. Atlas intends to increase the portion of the transmission services provided under long-term contracts. As a result of the location and capacity of the Ozark Gas Transmission system and
Atlas&#146; gathering and processing assets, Atlas believes that it is strategically positioned to capitalize on the significant increase in drilling activity in its service areas and the positive price differential across Ozark Gas Transmission, also known as basis spread. Atlas intends to
continue to expand its business through strategic acquisitions and internal growth projects, including its plan to construct the Sweetwater gas plant, that increase distributable cash flow per unit.</font></p>
</div>
<p align="center"><font face="serif" size="2">90</font></p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following table shows the pro forma gross margin for our operating units for the periods indicated:</font></p>
</div>
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    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td colspan="12" align="center" valign="bottom"><font face="serif" size="1"><b>Pro forma</b></font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="11" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Year ended December</b>&nbsp;<b>31, 2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Nine months ended September</b>&nbsp;<b>30, 2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="11" align="center" valign="bottom"><font face="serif" size="1"><b>(dollars in thousands)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Mid-Continent:</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Velma and Elk City</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">43,294</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">51.2</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">37,757</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">53.0</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">NOARK</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">22,480</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">26.6</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">16,940</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">23.8</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">65,774</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">77.8</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">54,697</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">76.8</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Appalachia</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">18,800</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">22.2</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">16,501</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">23.2</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">84,574</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">100.0</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">71,198</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">100.0</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td align="right" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
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    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Please see &#147;&#151;Summary Historical Consolidated and Pro Forma Financial Data&#148; for a definition of gross margin and a reconciliation of pro forma gross margin to our pro forma net income.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Recent Acquisitions</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
  </tr>
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    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Acquisition of Atlas Arkansas and Controlling Interest in NOARK</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On October&nbsp;31, 2005, Atlas acquired from Enogex all of the outstanding equity of Atlas Arkansas for $165.3 million, including estimated related transaction costs, plus $10.2 million for working capital adjustments. Atlas Arkansas owns a 75% interest in NOARK, with
the remaining 25% interest being owned by Southwestern. Before the closing of this acquisition, Atlas Arkansas converted from an Oklahoma corporation into an Oklahoma limited liability company and changed its name from Enogex Arkansas Pipeline Company. The
NOARK acquisition further expands Atlas&#146; activities in the Mid-Continent region and provides an additional source of fee-based cash flows from a FERC-regulated interstate pipeline system and an intrastate gas gathering system. NOARK&#146;s geographic position relative to
Atlas&#146; other businesses and interconnections with major interstate pipelines also provides Atlas with internal growth opportunities. NOARK&#146;s principal assets include:</font></p>
</div>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">The Ozark Gas Transmission system, a 565-mile FERC-regulated interstate pipeline system which extends from southeast Oklahoma through Arkansas and into southeast Missouri and has a throughout capacity of approximately 322 MMcf/d. The system includes
approximately 30 supply and delivery interconnections and two compressor stations.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">The Ozark Gas Gathering system, a 365-mile intrastate natural gas gathering system, located in eastern Oklahoma and western Arkansas, and 11 associated compressor stations.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas financed the acquisition by borrowing under its senior secured credit facility. Atlas expects the NOARK acquisition to be immediately accretive to its distributable cash flow per unit.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Ozark Gas Transmission transports natural gas from receipt points in eastern Oklahoma and western Arkansas, where the Arkoma Basin is located, to interstate pipelines in northeastern and central Arkansas and to local distribution companies in Arkansas and Missouri.
Ozark Gas Gathering provides access to natural gas supplies that are then transported through Ozark Gas Transmission. Ozark Gas Transmission&#146;s revenue is comprised of FERC-regulated transmission fees that are based on firm transportation rates and, to the extent capacity is
available following the reservation of firm system capacity, interruptible transportation rates. The Ozark transmission and gathering systems transported an average of 163.9 MMcf/d during the nine months ended September&nbsp;30, 2005, and 207.2 MMcf/d during October 2005.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; gas supply strategy in the Mid-Continent region is to establish long-term, value-oriented relationships with its producing customers. Atlas has long-standing relationships with many of its Mid-Continent customers which account for a substantial majority of Atlas&#146;
gathering and processing throughput. The Mid-Continent region, one of the most prolific natural gas-producing regions in North America, has recently experienced a significant increase in oil and gas drilling activity driven by long-term projections of continued growth in U.S.
natural gas demand and the application of new drilling and</font></p>
</div>
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<p align="left"><font face="serif" size="2">production technologies. Atlas believes that the increased drilling activity in the Mid-Continent area, combined with the positive basis spread across Ozark Gas Transmission, will result in
increasing volumes gathered and transported on the Ozark Gas Gathering and Ozark Gas Transmission systems.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As part of the acquisition, Enogex agreed to redeem the 40% portion of NOARK&#146;s 7.15% notes due 2018 for which it is severally liable as guarantor as promptly as practicable after the closing. At the closing, Enogex deposited $32.2 million with UMB Bank, N.A., as
escrow agent, in order to fulfill this redemption obligation. The redemption of $26.4 million was completed on December&nbsp;5, 2005. After the redemption, $39.6 million of notes remain outstanding for which Southwestern, the other partner in NOARK, will remain liable for the
remaining 60% portion of the 7.15% notes. Under the NOARK partnership agreement, payments on the notes will be made from amounts otherwise distributable to Southwestern and, if that amount is insufficient, Southwestern is required to make a capital contribution to
NOARK.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Acquisition of Elk City</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In April 2005, Atlas acquired all of the outstanding equity interests in Elk City for $196.0 million, including transaction costs. Elk City&#146;s principal assets include approximately 300 miles of natural gas pipelines located in the Anadarko Basin in western Oklahoma and
the Texas panhandle, a natural gas processing facility in Elk City, Oklahoma, with a total capacity of approximately 130 MMcf/d, and a gas treating facility in Prentiss, Oklahoma, with a total capacity of approximately 200 MMcf/d. Gathered volumes averaged 242.3 MMcf/d
for the nine months ended September&nbsp;30, 2005. The system connects to over 300 receipt points. The acquisition expanded the scale of Atlas&#146; Mid-Continent operations and built upon its experience in processing and gathering. Atlas recently completed three new gathering and
compression projects in Elk City which have increased, and Atlas believes will continue to increase, gathered volumes and total gross margin. Atlas also plans to complete construction of a new natural gas processing facility in Oklahoma near its Prentiss treating facility in the
third quarter of 2006, which we refer to as the Sweetwater gas plant. The new plant will be scaled to 120 MMcf/d of processing capacity. Along with the Sweetwater gas plant, Atlas will construct a gathering system to be located primarily in western Oklahoma and in the
Texas panhandle, more specifically, Beckham and Roger Mills counties in Oklahoma and Hemphill County, Texas. Atlas anticipates that construction of the Sweetwater gas plant and associated gathering system will cost approximately $40.0 million and will generate cash flow
of $8.0 million to $10.0 million annually.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><div align="left"><font face="serif" size="2"><b>Business Strategy</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; primary objective is to increase cash flow and achieve sustainable, profitable growth while maintaining a strong credit profile and financial flexibility by executing the following strategies:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>Maximize cash flows from its existing businesses through efficient marketing of its services and facilities and control of its operating costs.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Atlas intends to continue to control its operating costs by efficiently managing its existing and acquired businesses and achieving
economies of scale. Atlas has additional capacity in its gathering systems and has, or can upgrade at minimal cost, the capacity at its processing and treating facilities. As a result Atlas can readily increase the amount of natural gas it transports and processes.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>Continuing to increase the amount of its operating cash flow generated by long-term, fee-based contracts.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Atlas intends to continue to secure long-term, fee-based contracts both in its existing operations and through strategic acquisitions in order to further diversify its
contract mix.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>Expanding existing businesses through organic growth opportunities.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Atlas continually evaluates opportunities to expand its operations through the construction of pipeline extensions to connect additional wells and access additional reserves. In addition, Atlas plans to
complete the Sweetwater gas plant, a 120 MMcf/d natural gas processing plant near its Prentiss treatment plant, by the third quarter of 2006. Atlas believes that its agreements with Atlas America present a favorable source of organic growth and that its competitive position
and customer relationships in the Mid-Continent region will continue to yield additional expansion opportunities.</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>Expand operations through strategic acquisitions.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Atlas&#146; recent acquisitions have provided geographic diversification and expanded the midstream services it provides. Atlas intends to continue </font></div></td>
  </tr>
</table>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">to make accretive acquisitions of midstream energy assets such as natural gas gathering systems and natural gas and NGL transmission, processing and storage facilities. Atlas will seek
strategic opportunities in its current areas of operation, as well as other regions of the United States with significant natural gas and oil reserves or with growing demand for natural gas
and oil. Atlas believes that there will continue to be attractive acquisition opportunities in the midstream sector of the energy industry.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>Maintain a flexible capital structure based on a strong balance sheet by financing its growth through a balanced combination of debt and equity.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To provide financial flexibility to fund future acquisition and expansion opportunities, Atlas intends to continue to
opportunistically access the capital markets. Atlas intends to maintain a strong balance sheet by financing growth with a combination of long-term debt and equity. Including Atlas&#146; initial public offering in 2000, Atlas has accessed the equity markets six times, raising
approximately $370.6 million in gross proceeds. Atlas expects to have unused capacity under its revolving credit facility to finance system expansions, acquisitions and working capital needs. Historically, because of its financial flexibility, Atlas has been able to take
advantage of opportunities for expansion and optimization as they arise.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Competitive Strengths</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Strategically positioned for internal growth.</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas is a leading provider of natural gas gathering services in the Appalachian and Anadarko Basins and the Arkoma Basin, and the Golden Trend area of Oklahoma and the Appalachian Basin and of natural gas processing services in Oklahoma. These regions are
characterized by long-lived wells and substantial developed and undeveloped natural gas reserves which Atlas believes will continue to promote significant drilling activity. Atlas provides gathering and processing services to over 6,250 wells and central delivery points. Atlas
expects the breadth of its operations in its service areas, its customer focus and its relationship with Atlas America will allow Atlas to continue to connect new wells and capture new natural gas volumes quickly and cost effectively. Additionally, the NOARK acquisition
increases its size and presence in the Mid-Continent region, including expanding Atlas&#146; operations east into the Arkoma Basin.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Diversified asset base.</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; operations are divided between the active Mid-Continent Basin, including Arkansas, Oklahoma, southern Missouri, northern Texas and the Texas panhandle, where Atlas transports, gathers, processes and treats third-party gas volumes, and the Appalachian Basin,
where Atlas accesses new volumes through long-term gathering agreements with Atlas America. In addition, Atlas&#146; revenue is generated under a variety of contract structures, including FERC-regulated transmission fees from Ozark Gas Transmission, fixed fees from Atlas&#146;
gathering and treating businesses, percentage-of-proceeds contracts from Atlas&#146; gathering and processing businesses and, to a lesser extent, keep-whole contracts from Atlas&#146; Elk City processing plant, which Atlas may bypass during periods of unfavorable processing margins.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Stability from long-term contracts and strong customer relationships.</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; gas supply strategy in the Mid-Continent region is to establish long-term, value-oriented relationships with its producing customers. Atlas has long-standing relationships with many of its Mid-Continent customers which account for a substantial majority of our
gathering and processing throughput. Ozark Gas Transmission also has strong relationships with numerous shippers that contract for transmission services either on a short or long-term firm basis or interruptible basis. In addition, Atlas&#146; Appalachian operations generate
substantially all of their volumes under a long-term omnibus agreement with Atlas America whereby Atlas America is required to commit to Atlas&#146; gathering system all wells it drills and operates that are within 2,500 feet of the system. Wells under this agreement are
committed for the life of their respective leases, typically over 30 years.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">93</font></p>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Relationship with Atlas America.</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As a result of Atlas&#146; agreements with Atlas America, Atlas believes that the growth in the number of wells drilled by Atlas America and its affiliates in the Appalachian Basin will serve as an engine for its growth in the region. Atlas connected 411 Atlas America wells
to its Appalachian gathering system for the twelve months ended September&nbsp;30, 2005, and 1,508 Atlas America wells from its inception in January 2000 through September&nbsp;30, 2005.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Efficient assets that offer low maintenance capital expenditure requirements, system flexibility and superior customer service.</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; transmission, gathering and processing systems carry low maintenance capital expenditure needs. In addition, a significant portion of Atlas&#146; existing gathering systems and processing plants are new or have been recently expanded or replaced. Atlas&#146; gathering
systems provide its customers increased flexibility through low pressure service and multiple pipeline interconnections, and its willingness to expand its systems quickly provides its customers with superior customer service.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Favorable commercial agreements that reduce commodity price risk.</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas derives substantially all of the operating income from its gathering and processing operations from fee-based and percentage-of-proceeds arrangements. Atlas has hedged a significant amount of its near-term equity natural gas production and equity NGL production
from its processing operations, which it believes should reduce volatility in its operating income. Furthermore, Atlas can bypass its Elk City processing plant during periods of unfavorable processing margins. Substantially all of the operating income generated by NOARK&#146;s
transmission and gathering assets is generated under fixed-fee agreements. In its Appalachian operations, Atlas is the beneficiary of, and consults with Atlas America with respect to, the hedging program Atlas America has established for its Appalachian natural gas production
that mitigates the risks of Atlas&#146; percentage-of-proceeds agreement with it.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Experienced management and engineering team.</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Through Atlas&#146; general partner, Atlas has significant management and technical expertise. Atlas&#146; senior management team averages approximately 20 years of experience in the oil and natural gas industry and currently manages 91 public and private drilling investment
partnerships. Atlas&#146; operational and technical expertise has enabled it to identify assets that have not been fully utilized and to improve their performance upon integration into Atlas&#146; operations.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>The Midstream Natural Gas Gathering, Processing and Transmission Industry</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The midstream natural gas gathering and processing industry is characterized by regional competition based on the proximity of gathering systems and processing plants to producing natural gas wells.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The natural gas gathering process begins with the drilling of wells into natural gas or oil bearing rock formations. Once a well has been completed, the well is connected to a gathering system. Gathering systems generally consist of a network of small diameter pipelines
that collect natural gas from points near producing wells and transport it to larger pipelines for further transmission. Gathering systems are operated at design pressures that will maximize the total throughput from all connected wells.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">While natural gas produced in some areas, such as the Appalachian Basin, does not require treatment or processing, natural gas produced in many other areas, such as Atlas&#146; Velma service area, is not suitable for long-haul pipeline transmission or commercial use and
must be compressed, transported via pipeline to a central processing facility, and then processed to remove the heavier hydrocarbon components such as NGLs and other contaminants that would interfere with pipeline transmission or the end use of the gas. Natural gas
processing plants generally treat (remove carbon dioxide and hydrogen sulfide) and remove the NGLs, enabling the treated, &#147;dry&#148; gas (stripped of liquids) to meet pipeline specification for long-haul transport to end users. After being separated from natural gas at the
processing plant, the mixed NGL stream, commonly referred to as &#147;y-grade&#148; or &#147;raw mix,&#148; is typically transported on pipelines to a centralized facility for</font></p>
</div>
<p align="center"><font face="serif" size="2">94</font></p>
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<p align="left"><font face="serif" size="2">fractionation into discrete NGL purity products: ethane, propane, normal butane, isobutane, and natural gasoline.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Natural gas transmission pipelines receive natural gas from producers, other mainline transmission pipelines, shippers and gathering systems through system interconnects and redeliver the natural gas to processing facilities, local gas distribution companies, industrial
end-users, utilities and other pipelines. Generally natural gas transmission agreements generate revenue for these systems based on a fee per unit of volume transported.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Mid-Continent Operations</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas owns and operates a 565-mile interstate natural gas pipeline, approximately 2,565 miles of intrastate natural gas gathering systems, including approximately 800 miles of inactive pipeline, located in Oklahoma, Arkansas, southeast Missouri, northern Texas and the
Texas panhandle, and two processing plants and one stand-alone treating facility in Oklahoma. The Mid-Continent operations were formed through Atlas&#146; acquisition of Spectrum in July 2004 and expanded through the Elk City acquisition in April 2005 and the NOARK
acquisition in October 2005. Ozark Gas Transmission transports natural gas from receipt points in eastern Oklahoma, including major intrastate pipelines, and western Arkansas, where the Arkoma Basin is located, to local distribution companies in Arkansas and Missouri and to
interstate pipelines in northeastern and central Arkansas. Ozark Gas Gathering provides access to natural gas supplies that are then transported through Ozark Gas Transmission. Atlas&#146; gathering and processing assets service long-lived natural gas basins that continue to
experience an increase in drilling activity, including the Anadarko Basin and the Arkoma Basin and the Golden Trend area of Oklahoma. Atlas&#146; systems gather natural gas from oil and natural gas wells and process the raw natural gas into merchantable, or residue gas, by
extracting NGLs and removing impurities. In the aggregate, the Mid-Continent systems have approximately 1,160 receipt points, consisting primarily of individual connections and, secondarily, of central delivery points which are linked to multiple wells. Atlas&#146; gathering
systems currently connect with interstate and intrastate pipelines operated by Ozark Gas Transmission, ONEOK Gas Transportation, LLC, Southern Star Central Gas Pipeline, Inc., Panhandle Eastern Pipe Line Company, LP, Northern Natural Gas Company, CenterPoint Energy,
Inc., ANR Pipeline Company, Texas Eastern, Mississippi River Transmission and Natural Gas Pipeline Company of America.</font></p>
</div>
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    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Mid-Continent Overview</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The heart of the Mid-Continent region is generally defined as running from Kansas through Oklahoma, branching into North and West Texas, southeast New Mexico as well as western Arkansas. The primary producing areas in the region include the Hugoton field in
southwest Kansas, the Anadarko basin in western Oklahoma, the Permian basin in West Texas and the Arkoma basin in western Arkansas and eastern Oklahoma.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">According to the Energy Information Administration, Oklahoma accounted for approximately 9.0% of total 2003 domestic natural gas production, or 1.6 Tcf. From 2000 to 2003, Oklahoma reserves, which were 15.4 Tcf at December&nbsp;31, 2003, grew at an annual
compound growth rate of 4.0%, significantly higher than total domestic reserves which grew at a rate of 2.1%. From 2000 to 2004, natural gas production in Oklahoma has grown at a compound annual rate of 1.2% while domestic natural gas production as a whole decreased
at a compound annual rate of 0.5%.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The number of active drilling rigs serving Oklahoma has increased significantly over the last three years. In 2004, the number of active rigs drilling in Oklahoma averaged 159 or a 75% increase over 2002. The areas served by our Velma, Elk City and NOARK assets
have also experienced an increase in oil and natural gas development as evidenced by a growth in well completions in the counties that the Elk City system, Velma system and NOARK system serve. In 2004, well permits in Carter, Garvin, Grady, Stephens, Beckham and
Washita counties totaled 809, a 20% increase compared to 2002.</font></p>
</div>
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    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>FERC-Regulated Transmission System</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas owns a 75% interest in NOARK, which owns a 565-mile FERC-regulated natural gas interstate pipeline extending from southeast Oklahoma through Arkansas and into southeast Missouri. Ozark Gas</font></p>
</div>
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<p align="left"><font face="serif" size="2">Transmission delivers natural gas via 30 supply and delivery interconnects with major intrastate and interstate pipelines, including Mississippi River Transmission Corp., Natural Gas Pipeline
Company of America and Texas Eastern Transmission Corp., and receives natural gas from eight interconnects with intrastate pipelines, including Enogex, BP&#146;s Vastar gathering system,
Arkansas Oklahoma Gas Corporation, Arkansas Western Gas Company and ONEOK Gas Transmission. Ozark Gas Transmission recently entered into a firm transportation agreement with
Southwestern Energy Services Company under which Southwestern Energy Services has reserved capacity for 15,000 MMbtu/d through October&nbsp;31, 2006.</font></p>
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    <td>&nbsp;</td>
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    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Mid-Continent Gathering Systems</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Velma.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Velma gathering system is located in the Golden Trend area of Southern Oklahoma and the Barnett Shale area of North Texas. As of September&nbsp;30, 2005, the gathering system had approximately 1,100 miles of active pipeline with approximately 580
receipt points consisting primarily of individual connections and, secondarily, of central delivery points which are linked to multiple wells. The system includes approximately 800 miles of inactive pipeline, much of which can be returned to active status as local drilling
activity warrants.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Elk City.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Elk City gathering system includes approximately 300 miles of natural gas pipelines located in the Anadarko Basin in western Oklahoma. The Elk City gathering system connects to over 300 receipt points, with a majority of the western end of the system
located in close proximity to areas of high drilling activity. Atlas recently completed three new gathering and compression projects which will increase gathered volumes and, Atlas believes, have a significant positive effect on our earnings.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>NOARK Gas Gathering.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;NOARK owns Ozark Gas Gathering, 365 miles of intrastate natural gas gathering pipeline located in eastern Oklahoma and western Arkansas, providing access to both the well-established Arkoma basin and the newly-exploited Fayetteville
Shale. This system connects to approximately 250 receipt points and compresses and transports gas to interconnections with Ozark Gas Transmission.</font></p>
</div>
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  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Processing Plants</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Velma.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Velma processing plant, located in Stephens County, Oklahoma, is a single-train twin-expander cryogenic facility with a natural gas capacity of approximately 100 MMcf/d. The Velma plant is one of only two facilities in the area that is capable of treating
both high-content hydrogen sulfide and carbon dioxide gas. Atlas sells natural gas to purchasers at the tailgate of the Velma plant and sells NGL production to ONEOK Hydrocarbons Company. The Velma operations gather and process natural gas for approximately 150
producers. Atlas has made capital expenditures at the facility to improve its efficiency and competitiveness, including by implementing electric-powered compressors rather than higher-cost natural gas-powered compressors used by many of Atlas&#146; competitors, which results in
higher revenue from higher efficiency and lower fuel costs. In addition, Atlas recently completed a compression expansion project that increased processing capacity by 30 MMcf/d.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Elk City.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Elk City processing plant, located in Beckham County, Oklahoma, is a twin-train cryogenic natural gas processing plant with a total capacity of approximately 130 MMcf/d. Atlas sells natural gas to purchasers at the tailgate of its Elk City processing
plant and sells NGL production to ONEOK Hydrocarbons Company. The Prentiss treating facility, also located in Beckham County, is an amine treating facility with a total capacity of approximately 200 MMcf/d. Atlas&#146; Elk City operations gather and process gas for more than
135 producers.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas plans to complete construction of the Sweetwater gas processing facility near its Prentiss treatment plant by mid-2006. The new plant will initially be scaled to 120 MMcf/d of processing capacity. Along with the plant, Atlas will construct a gathering system to be
located primarily in Beckham and Roger Mills counties in Oklahoma and Hemphill County, Texas. Atlas anticipates that construction of the plant and associated gathering system will cost approximately $40.0 million and generate cash flow of $8.0 million to $10.0 million
annually.</font></p>
</div>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Enville.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Atlas&#146; Enville, Oklahoma gas plant is currently inactive and is used as a field compression booster station.</font></p>
</div>
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    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>NOARK Partnership</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">NOARK is an Arkansas limited partnership in which Atlas Arkansas owns a 74% general partner interest and a 1% limited partner interest and Southwestern owns a 25% general partner interest. The current configuration of NOARK&#146;s assets was completed in 1998 when
Enogex acquired its interest in the partnership, which at that point owned Ozark Gas Gathering, and acquired Ozark Gas Transmission and certain Warren Petroleum gathering assets and contributed them to the partnership.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The partnership is managed by a five-member management committee comprised of the partnership&#146;s project leader appointed by Atlas Arkansas, subject to Southwestern&#146;s consent which cannot be unreasonably withheld, two members appointed by Atlas Arkansas and
two members appointed by Southwestern. The management committee determines whether to distribute cash, may issue mandatory capital calls to the partners and may conduct expansion projects. An expansion to the system not included in an approved budget requires an 80%
vote of the partners; if a partner does not consent to an expansion within 30 days, the other partner may fund the project and receive a cash distribution equal to all of the net operating income attributable to the project until it has received 200% of its capital contribution,
before the non-consenting partner receives distributions attributable to the project.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under the partnership agreement, day-to-day management of the partnership&#146;s operations is the responsibility of the project leader, who will be an employee of Atlas America. Atlas Arkansas has the sole power to remove the project leader and, upon a vacancy in that
position, to propose a new project leader, subject to the consent of Southwestern, not to be unreasonably withheld.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As described under &#147;&#151;Acquisition of Atlas Arkansas and Controlling Interest in NOARK,&#148; NOARK&#146;s subsidiary, NOARK Pipeline Finance, L.L.C., has outstanding $66.0 million in principal amount of 7.15% notes due in 2018 outstanding at November 30, 2005.
Liability under the notes is allocated 40% to us, as successor to Enogex upon acquisition, and 60% to Southwestern, and the parties are several guarantors for their respective allocations. As part of the NOARK acquisition, Enogex agreed to redeem its portion of the notes as
promptly as practicable after the closing. The redemption of $26.4 million of the notes was completed on December&nbsp;5, 2005. After the redemption, $39.6 million of notes remain outstanding, for which Southwestern will remain liable. Under the partnership agreement, interest
and principal payments on the notes will be made from amounts otherwise distributable to Southwestern and, if that amount is insufficient, Southwestern is required to make a capital contribution to NOARK. NOARK distributes cash available for distribution after amounts
payable on the notes to the partners in accordance with their percentage interests.</font></p>
</div>
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  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Natural Gas Supply</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In the Mid-Continent, Atlas has gas purchase, gathering and processing agreements with approximately 250 producers with terms ranging from one month to 15 years. These agreements provide for the purchase or gathering of gas under fixed-fee, percentage-of-proceeds
or keep-whole arrangements. Most of the agreements provide for compression, treating, and/or low volume fees. Producers generally provide, in-kind, their proportionate share of compressor fuel required to gather the gas and to operate the Velma and Elk City processing
plants. In addition, the producers generally bear their proportionate share of gathering system line loss and, except for keep-whole arrangements, bear gas plant &#147;shrinkage,&#148; or the gas consumed in the production of NGLs.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas has enjoyed long-term relationships with the majority of its Mid-Continent producers. For instance, on the Velma system, where Atlas has producer relationships going back over 20 years, Atlas&#146; top four producers, which accounted for approximately 60% of its
Velma volumes for the year ended December&nbsp;31, 2004, have recently executed renegotiated contracts with primary terms running into 2009 and 2010. At the end of the primary terms, most of the contracts with producers on Atlas&#146; gathering systems have evergreen term
extensions.</font></p>
</div>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Natural Gas and NGL Marketing</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas sells natural gas to purchasers at the tailgate of both the Velma and Elk City plants and at various delivery points on Ozark Gas Gathering. During the year ended December&nbsp;31, 2004, in its Velma operations, ONEOK Energy Marketing and Trading accounted for
31% of the residue natural gas sales and Tenaska Marketing Ventures accounted for 12% of such sales. Atlas currently sells the majority of its residue natural gas at the average of ONEOK Gas Transportation, LLC and Southern Star Central Gas Pipeline first-of-month indices
as published in Inside FERC. The Velma plant has access to ONEOK Gas Transportation, an intrastate pipeline, and Southern Star Central Gas Pipeline, an interstate pipeline. In Atlas&#146; Elk City operations, Atlas sells substantially all of the residue gas to ONEOK Energy
Marketing, at first-of-month index pricing. The Elk City plant has access to five major interstate and intrastate downstream pipelines: Natural Gas Pipe Line of America, Panhandle Eastern Pipeline Co., CenterPoint Energy Gas Transmission Company, Northern Natural Gas
Company and Enogex. Ozark Gas Gathering gas prices are generally based on Texas Eastern &#147;East LA&#148; index as published in Inside FERC and have historically been sold to affiliates of Enogex and Southwestern.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas sells its NGL production to ONEOK Hydrocarbons Company under two separate agreements. Under the Velma agreement, Atlas has the right to elect on a monthly basis until January&nbsp;31, 2006 whether the NGLs are sold into the Mont Belvieu or Conway
markets. After that, NGLs will be sold on a 50% Mont Belvieu/50% Conway combined price. NGLs are priced at the average monthly Oil Price Information Service, or OPIS, price for the selected market. The Velma agreement has an initial term expiring February&nbsp;1, 2011.
NGL production from Atlas&#146; Elk City plant is also sold to ONEOK Hydrocarbons Company based on Conway OPIS postings. The Elk City agreement has an initial term expiring October&nbsp;1, 2008.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Condensate is collected at the Velma gas plant and around the Velma gathering system and sold for Atlas&#146; account to SemGroup, L.P. and EnerWest Trading while that collected at Elk City is sold to TEPPCO Crude Oil, L.P.</font></p>
</div>
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  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Natural Gas and NGL Hedging</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; Mid-Continent operations are exposed to certain commodity price risks. These risks result from either taking title to natural gas and NGLs, including condensate, or being obligated to purchase natural gas to satisfy contractual obligations with certain producers.
Atlas mitigates a portion of these risks through a comprehensive risk management program which employs a variety of hedging tools. The resulting combination of the underlying physical business and the financial risk management program is a conversion from a physical
environment that consists of floating prices to a risk-managed environment that is characterized by fixed prices.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas (a) purchases natural gas and subsequently sells processed natural gas and the resulting NGLs, (b) purchases natural gas and subsequently sells the unprocessed gas, or (c) transports and/or processes the natural gas for a fee without taking title to the commodities.
Scenario (b) exposes Atlas to a generally neutral price risk (long sales approximate short purchases) while scenario (c) does not expose Atlas to any price risk; in both scenarios, risk management is not required.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas is exposed to commodity price risks when natural gas is purchased for processing. The amount and character of this price risk is a function of Atlas&#146; contractual relationships with natural gas producers, or, alternatively, a function of cost of sales. Atlas is therefore
exposed to price risk at a gross profit level rather than revenue level. These cost-of-sales or contractual relationships are generally of two types:</font></p>
</div>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Percentage-of-proceeds: requires Atlas to pay a percentage of revenue to the producer. This results in Atlas being net long physical natural gas and NGLs.</font></div></td>
  </tr>
</table>
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    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Keep-whole: requires Atlas to deliver the same quantity of natural gas at the delivery point as Atlas received at the receipt point; any resulting NGLs produced belong to Atlas. This results in Atlas being long physical NGLs and short physical natural gas.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas hedges a portion of these risks by using fixed-for-floating swaps, which result in a fixed price, or by utilizing the purchase or sale of options, which result in a range of fixed prices.</font></p>
</div>
<p>&nbsp;</p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas recognizes gains and losses from the settlement of its hedges in revenue when Atlas sells the associated physical residue natural gas or NGLs. Any gain or loss realized as a result of hedging is substantially offset in the market when Atlas sells the physical residue
natural gas or NGLs. All of Atlas&#146; hedges are characterized as cash flow hedges as defined in Statement of Financial Accounting Standards No. 133, &#147;Accounting for Derivative Instruments and Hedging Accounting.&#148; Atlas determines gains or losses on open and closed
hedging transactions as the difference between the hedge price and the physical price. This mark-to-market methodology uses daily closing NYMEX prices when applicable and an internally-generated algorithm for hedged commodities that are not traded on a market. To
ensure that these financial instruments will be used solely for hedging price risks and not for speculative purposes, Atlas has established a hedging committee to review its hedges for compliance with Atlas&#146; hedging policies and procedures. In addition, Atlas does not enter into
a hedge where it cannot offset the hedge with physical residue natural gas or NGL sales.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Appalachian Basin Operations</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas owns and operates approximately 1,500 miles of intrastate gas gathering systems located in eastern Ohio, western New York and western Pennsylvania. Atlas&#146; Appalachian operations serve approximately 5,100 wells with an average throughput of 54.8 MMcf/d of
natural gas for the nine months ended September&nbsp;30, 2005. Atlas&#146; gathering systems provide a means through which well owners and operators can transport the natural gas produced by their wells to interstate and public utility pipelines for delivery to customers. To a lesser
extent, Atlas&#146; gathering systems transport natural gas directly to customers. These gathering systems connect with public utility pipelines operated by Peoples Natural Gas Company, National Fuel Gas Supply, Tennessee Gas Pipeline Company, National Fuel Gas Distribution
Company, East Ohio Gas Company, Columbia Gas of Ohio, Consolidated Natural Gas Co., Texas Eastern Pipeline, Columbia Gas Transmission Corp., Equitrans Pipeline Company, Gatherco Incorporated and Equitable Utilities. These systems are strategically located in the
Appalachian Basin, a region characterized by long-lived, predictable natural gas reserves that are close to major eastern U.S. markets.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Appalachian Basin Overview</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Appalachian Basin includes the states of Kentucky, Maryland, New York, Ohio, Pennsylvania, Virginia, West Virginia and Tennessee. It is the most mature oil and gas producing region in the United States, having established the first oil production in 1859. In
addition, the Appalachian Basin is strategically located near the energy-consuming regions of the mid-Atlantic and northeastern United States which has historically resulted in Appalachian producers selling their natural gas at a premium to the benchmark price for natural gas
on the NYMEX.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">According to the Energy Information Administration, a branch of the U.S. Department of Energy, in 2003 there were 22.4 Tcf of natural gas consumed in the United States which represented approximately 22.9% of the total energy used. The Appalachian Basin
accounted for approximately 3.3% of total 2003 domestic natural gas production, or 647.9 Bcf. Additionally, in 2003 there were approximately 145,189 gas wells in the Appalachian Basin which represented roughly 36.9% of the total number of gas wells in the United States.
Of those wells, Atlas America and its drilling investment partnerships own interests in approximately 5,755 proved developed producing wells, 84% of which Atlas America operated in 2004.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Furthermore, according to the Natural Gas Annual 2003, an annual report published by the Energy Information Administration, Office of Oil and Gas, the Appalachian Basin holds 10.9 Tcf of economically recoverable gas reserves, representing approximately 5.8% of
total domestic reserves as of December&nbsp;31, 2003. World Oil magazine, in its February 2005 issue, predicted that approximately 5,316 oil and gas wells will be drilled in the Appalachian Basin during 2005, approximately 13.3% of the total number of wells they predict will be
drilled in the United States during 2005, and an increase of 8% over the number of Appalachian Basin wells estimated to have been drilled during 2004, compared to an increase of 7.2% in the wells drilled in the United States from 2004 to 2005.</font></p>
</div>
<p>&nbsp;</p>
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    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Natural Gas Supply</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Substantially all of the natural gas Atlas transports in the Appalachian Basin is derived from wells operated by Atlas America, a leading sponsor of natural gas drilling investment partnerships in the Appalachian Basin. Atlas America is the corporate parent of Atlas&#146;
general partner and our general partner. Atlas is party to an omnibus agreement with Atlas America which is intended to maximize the use and expansion of its gathering systems and the amount of natural gas which Atlas transports in the region. Among other things, the
omnibus agreement requires Atlas America to connect to Atlas&#146; gathering systems wells it operates that are located within 2,500 feet of Atlas&#146; gathering systems. Atlas America can require Atlas to extend its lines to connect an Atlas America-operated well located more than
2,500 feet from Atlas&#146; gathering system if it extends a flow line to within 1,000 feet; for other Atlas America-operated wells located more than 2,500 feet from Atlas&#146; gathering systems, Atlas has a right to extend its lines. Atlas is also party to natural gas gathering agreements
with Atlas America under which Atlas receives gathering fees generally equal to a percentage, typically 16%, of the selling price of the natural gas Atlas transports. From the inception of Atlas&#146; operations in January 2000 through September&nbsp;30, 2005, Atlas connected 2,040
new wells to its Appalachian gathering system, 433 of which were added through acquisitions of other gathering systems. For the three months ended September&nbsp;30, 2005, Atlas connected 151 wells to its gathering system and for the 12 months ended September&nbsp;30, 2005,
Atlas connected 442 wells. Atlas&#146; ability to increase the flow of natural gas through its gathering systems and to offset the natural decline of the production already connected to its gathering systems will be determined primarily by the number of wells drilled by Atlas America
and connected to Atlas&#146; gathering systems and by Atlas&#146; ability to acquire additional gathering assets.</font></p>
</div>
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  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Natural Gas Revenue</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; Appalachian Basin revenue is determined primarily by the amount of natural gas flowing through its gathering systems and the price received for this natural gas. Atlas has an agreement with Atlas America under which Atlas America pays Atlas gathering fees
generally equal to a percentage, typically 16%, of the gross or weighted average sales price of the natural gas Atlas transports subject, in most cases, to minimum prices of $0.35 or $0.40 per Mcf. During the year ended December&nbsp;31, 2004, Atlas received gathering fees
averaging $0.96 per Mcf and for the nine months ended September&nbsp;30, 2005, Atlas received gathering fees averaging $1.10 per Mcf. Atlas charges other operators fees negotiated at the time Atlas connects their wells to its gathering systems or, in a pipeline acquisition, that
were established by the entity from which Atlas acquired the pipeline.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Because Atlas does not buy or sell gas in connection with its Appalachian operations, Atlas does not engage in hedging. Atlas America maintains a hedging program. Since Atlas receives transportation fees from Atlas America generally based on the selling price
received by Atlas America, these physical hedges mitigate the risk of Atlas&#146; percentage-of-proceeds arrangements.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Relationship with Atlas America</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas began its operations in January 2000 by acquiring the gathering systems of Atlas America. Atlas America, through its interest in us, will own a limited partner interest and general partner interest in Atlas after this offering through its ownership of our general
partner, Atlas Pipeline Holdings GP, LLC. Atlas America and its affiliates sponsor limited and general partnerships to raise funds from investors to explore for, develop and produce natural gas and, to a lesser extent, oil from locations in eastern Ohio, western New York and
western Pennsylvania. Atlas&#146; gathering systems are connected to approximately 4,550 wells developed and operated by Atlas America in the Appalachian Basin. Through agreements between Atlas and Atlas America, Atlas gathers substantially all of the natural gas for its
Appalachian Basin operations from wells operated by Atlas America.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Omnibus Agreement</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under the omnibus agreement, Atlas America and its affiliates agreed to add wells to the gathering systems and provide consulting services when Atlas constructs new gathering systems or extends existing</font></p>
</div>
<p align="center"><font face="serif" size="2">100</font></p>
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<p align="left"><font face="serif" size="2">systems. The omnibus agreement also imposes conditions upon Atlas&#146; general partner&#146;s disposition of its general partner interest in Atlas. The omnibus agreement is a continuing obligation,
having no specified term or provisions regarding termination except for a provision terminating the agreement if Atlas&#146; general partner is removed as general partner without cause. The omnibus
agreement may not be amended without the approval of the conflicts committee of the managing board of Atlas&#146; general partner if, in the reasonable discretion of Atlas&#146; general partner, such
amendment will adversely affect the common unitholders. Unitholders do not have explicit rights to approve any termination or material modification of the omnibus agreement, as stated in the
accompanying prospectus under &#147;Atlas&#146; Partnership Agreement&#151;Limited Voting Rights.&#148; We anticipate that the conflicts committee of Atlas would submit to the common unitholders for their
approval any proposal to terminate or amend the omnibus agreement if Atlas&#146; general partner determines, in its reasonable discretion, that the termination or amendment would materially
adversely affect Atlas&#146; common unitholders.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Well Connections</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under the omnibus agreement, with respect to any well Atlas America drills and operates for itself or an affiliate that is within 2,500 feet of one of our gathering systems, Atlas America must, at its sole cost and expense, construct small diameter (two inches or less)
sales or flow lines from the wellhead of any such well to a point of connection to the gathering system. Where an Atlas America Well is located more than 2,500 feet from one of Atlas&#146; gathering systems, but Atlas America has extended the flow line from the well to within
1,000 feet of the gathering system, Atlas America has the right to require Atlas, at its cost and expense, to extend its gathering system to connect to that well. With respect to other Atlas America Wells that are more than 2,500 feet from Atlas&#146; gathering systems, Atlas has the
right, at its cost and expense, to extend its gathering system to within 2,500 feet of the well and to require Atlas America, at its cost and expense, to construct up to 2,500 feet of flow line to connect to the gathering system extension. If Atlas elects not to exercise its right to
extend its gathering systems, Atlas America may connect an Atlas America Well to a natural gas gathering system owned by someone other than Atlas or one of Atlas&#146; subsidiaries or to any other delivery point; however, Atlas will have the right to assume the cost of
construction of the necessary flow lines, which then become Atlas&#146; property and part of Atlas&#146; gathering systems.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Consulting Services.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The omnibus agreement requires Atlas America to assist Atlas in identifying existing gathering systems for possible acquisition and to provide consulting services to Atlas in evaluating and making a bid for these systems. Atlas America must give
Atlas notice of identification by Atlas America or any of its affiliates of any gathering system as a potential acquisition candidate, and must provide Atlas with information about the gathering system, its seller and the proposed sales price, as well as any other information or
analyses compiled by Atlas America with respect to the gathering system. Atlas will have 30 days to determine whether it wants to acquire the identified system and advise Atlas America of this intent. If Atlas intends to acquire the system, Atlas has an additional 60 days to
complete the acquisition. If Atlas does not complete the acquisition, or advise Atlas America that it does not intend to acquire the system, then Atlas America may do so.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Gathering System Construction.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The omnibus agreement requires Atlas America to provide Atlas with construction management services if Atlas determines to expand one or more of its gathering systems. Atlas must reimburse Atlas America for its costs, including an
allocable portion of employee salaries, in connection with Atlas America&#146;s construction management services.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Disposition of Interest in Our General Partner.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Direct and indirect wholly-owned subsidiaries of Atlas America act as the general partners, operators or managers of the drilling investment partnerships sponsored by Atlas America. Atlas&#146; general partner is a subsidiary
of Atlas America. Under the omnibus agreement, those subsidiaries, including Atlas&#146; general partner, that currently act as the general partners, operators or managers of partnerships sponsored by Atlas America must also act as the general partners, operators or managers for all
new drilling investment partnerships sponsored by Atlas America. Atlas America and its affiliates may not divest their ownership of Atlas&#146; general partner entity without divesting their ownership of the other entities to the same acquirer, except that Atlas America is permitted
to transfer its interest in Atlas&#146; general partner to a wholly- or majority-owned direct or indirect subsidiary as long as Atlas America continues to control the new entity. For these purposes, divestiture means a sale of all or substantially all of</font></p>
</div>
<p align="center"><font face="serif" size="2">101</font></p>
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<p align="left"><font face="serif" size="2">the assets of an entity, the disposition of more than 50% of the capital stock or equity interest of an entity, or a merger or consolidation that results in Atlas America and its affiliates, on a
combined basis, owning, directly or indirectly, less than 50% of the entity&#146;s capital stock or equity interest, but excludes pledges to a lender in connection with a secured funding arrangement.
Atlas&#146; general partner has pledged its interests in Atlas as security for the revolving credit facility of Atlas America.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Natural Gas Gathering Agreements</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under the master natural gas gathering agreement, Atlas receives a fee from Atlas America for gathering natural gas, determined as follows:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">for natural gas from well interests allocable to Atlas America or its affiliates (excluding general or limited partnerships sponsored by them) that were connected to Atlas&#146; gathering systems at February&nbsp;2, 2000, the greater of $0.40 per Mcf or 16% of the gross sales price of
the natural gas transported;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">for (i) natural gas from well interests allocable to general and limited partnerships sponsored by Atlas America that drill wells on or after December&nbsp;1, 1999 that are connected to Atlas&#146; gathering systems, (ii) natural gas from well interests allocable to Atlas America or its
affiliates (excluding general or limited partnerships sponsored by them) that are connected to Atlas&#146; gathering systems after February&nbsp;2, 2000, and (iii) well interests allocable to third parties in wells connected to Atlas&#146; gathering systems at February&nbsp;2, 2000, the greater of
$0.35 per Mcf or 16% of the gross sales price of the natural gas transported; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">for natural gas from well interests operated by Atlas America and drilled after December&nbsp;1, 1999 that are connected to a gathering system that is not owned by Atlas and for which Atlas assumes the cost of constructing the connection to that gathering system, an amount
equal to the greater of $0.35 per Mcf or 16% of the gross sales price of the natural gas transported, less the gathering fee charged by the other gathering system.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas America receives gathering fees from contracts or other arrangements with third party owners of well interests connected to Atlas&#146; gathering systems. However, Atlas America must pay gathering fees owed to Atlas from its own resources regardless of whether
Atlas America receives payment under those contracts or arrangements.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The master natural gas gathering agreement is a continuing obligation and, accordingly, has no specified term or provisions regarding termination. However, if Atlas&#146; general partner is removed as the general partner without cause, then no gathering fees will be due
under the agreement with respect to new wells drilled by Atlas America.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The master natural gas gathering agreement may not be amended without the approval of the conflicts committee of the managing board of Atlas&#146; general partner if, in the reasonable discretion of Atlas&#146; general partner, such amendment will adversely affect the common
unitholders. Unitholders do not have explicit rights to approve any termination or material modification of the master natural gas gathering agreement, as stated in the accompanying prospectus under &#147;Atlas&#146; Partnership Agreement&#151;Limited Voting Rights.&#148; Atlas anticipates
that the conflicts committee would submit to the common unitholders for their approval any proposal to terminate or amend the master natural gas gathering agreement if Atlas&#146; general partner determines, in its reasonable discretion, that the termination or amendment would
materially adversely affect Atlas&#146; common unitholders.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In addition to the master natural gas gathering agreement, Atlas has three other gas gathering agreements with subsidiaries of Atlas America. Under two of these agreements, relating to wells located in southeastern Ohio which Atlas America acquired from Kingston Oil
Corporation and wells located in Fayette County, Pennsylvania which Atlas America acquired from American Refining and Exploration Company, Atlas receives a fee of $0.80 per Mcf. Under the third agreement, which covers wells owned by third parties unrelated to Atlas
America or the investment partnerships it sponsors, Atlas receives fees that range between $0.20 to $0.29 per Mcf or between 10% to 16% of the weighted average sales price for the natural gas Atlas transports.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">102</font></p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas recently amended the gas gathering agreements with Atlas America to provide that the &#147;gross sales price,&#148; for purposes of the agreements, will mean the price that is actually received, adjusted to take into account proceeds received or payments made pursuant to
financial hedging arrangements.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Competition</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas has encountered competition in acquiring midstream assets owned by third parties. In several instances Atlas submitted bids in auction situations and in direct negotiations for the acquisition of such assets and were either outbid by others or were unwilling to meet
the sellers&#146; expectations. In the future, Atlas expects to encounter equal if not greater competition for midstream assets because, as natural gas prices increase, the economic attractiveness of owning such assets increases.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Mid-Continent</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In Atlas&#146; Mid-Continent service area, Atlas competes for the acquisition of well connections with several other gathering/servicing operations. These operations include plants operated by Duke Energy Field Services, ONEOK Field Services and Enbridge. Atlas believes
that the principal factors upon which competition for new well connections is based are:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the price received by an operator for its production after deduction of allocable charges, principally the use of the natural gas to operate compressors; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">responsiveness to a well operator&#146;s needs, particularly the speed at which a new well is connected by the gatherer to its system.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas believes that its electric compressors operate more efficiently than the gas-operated compressors used by its competitors. As a result, Atlas believes that it can operate as or more cost-effectively than its competitors. Atlas also believes that its relationships with
operators connected to its system are good and that Atlas presents an attractive alternative for producers. However, if Atlas cannot compete successfully, Atlas may be unable to obtain new well connections and, possibly, could lose wells already connected to its systems.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Being a regulated entity, Ozark Gas Transmission faces somewhat more indirect competition that is more regional or even national in character. CenterPoint Energy, Inc.&#146;s interstate system is the nearest direct competitor.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Appalachian Basin</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; Appalachian Basin operations do not encounter direct competition in their service areas since Atlas America controls the majority of the drillable acreage in each area. However, because Atlas&#146; Appalachian Basin operations principally serve wells drilled by Atlas
America, Atlas is affected by competitive factors affecting Atlas America&#146;s ability to obtain properties and drill wells, which affects its ability to expand its gathering systems and to maintain or increase the volume of natural gas it transports and, thus, its transportation
revenue. Atlas America also may encounter competition in obtaining drilling services from third-party providers. Any competition it encounters could delay Atlas America in drilling wells for its sponsored partnerships, and thus delay the connection of wells to Atlas&#146; gathering
systems. These delays would reduce the volume of gas Atlas otherwise would have transported, thus reducing Atlas&#146; potential transportation revenue.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As Atlas&#146; omnibus agreement with Atlas America generally requires it to connect wells it operates to Atlas&#146; system, Atlas does not expect any direct competition in connecting wells drilled and operated by Atlas America in the future. In addition, Atlas occasionally
connects wells operated by third parties. During 2004, Atlas connected 17 third party wells and for the first nine months of 2005, Atlas connected 16 third party wells.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">103</font></p>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Contracts and Customer Relationships</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In Atlas&#146; Mid-Continent operations, Atlas either purchases gas from producers, or intermediaries, into receipt points on its systems and then sells the gas, and produced NGLs, if any, off of delivery points on its systems, or Atlas transports gas across its systems, from
receipt to delivery point, without taking title to the gas. Beyond the distinction of purchasing or transporting gas, Atlas has a variety of contractual relationships with its producers and shippers, including fixed-fee, percentage-of-proceeds and keep-whole. Ozark Gas
Transmission&#146;s revenue is comprised of FERC-regulated transmission fees that are based on firm transportation rates and, to the extent capacity is available following the reservation of firm system capacity, interruptible transportation rates. Under the fixed fee contracts, Atlas
provides gathering, compression, treating and dehydration services to its customers for a flat fee. Gross margin from fee-based services depends solely on throughput volume and is not affected by changes in commodity prices. Under the percentage-of-proceeds contracts, Atlas
purchases natural gas at the wellhead, processes the natural gas and sells the plant residue gas and NGLs at market-based prices, remitting to producers a percentage of the proceeds. Under keep-whole contracts, Atlas gathers natural gas from the producer, processes the natural
gas and sells the resulting NGLs at market price. The extraction of the NGLs lowers the Btu content of the natural gas. Therefore, under keep-whole contracts, Atlas must replace these Btus by either purchasing natural gas at market prices or making a cash payment to the
producer and Atlas&#146; profitability is dependent upon the spread between the price of natural gas, Atlas&#146; feedstock, and NGLs, Atlas&#146; &#147;manufactured&#148; product. The gross margin associated with each of these contractual arrangements can vary from period to period due to a
variety of factors, including changing prices of natural gas and NGLs, producers&#146; optionality between contract types (e.g., percentage-of-proceeds and keep-whole), and producers&#146; optionality between transporting and selling gas.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Substantially all of the gas Atlas transports in its Appalachian operations is under a percentage-of-proceeds contract with Atlas America where Atlas calculates its transportation fee as a percentage of the price of the natural gas it transports. The natural gas Atlas
transports in its Appalachian operations does not require processing.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Regulation</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Regulation by FERC of Interstate Natural Gas Pipelines</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">FERC regulates Atlas&#146; interstate natural gas pipeline interests. Through Atlas Arkansas, Atlas owns a 75% interest in NOARK, which owns Ozark Gas Transmission. Ozark Gas Transmission transports natural gas in interstate commerce. As a result, Ozark Gas
Transmission qualifies as a &#147;natural gas company&#148; under the Natural Gas Act and is subject to the regulatory jurisdiction of FERC. In general, FERC has authority over natural gas companies that provide natural gas pipeline transportation services in interstate commerce, and
its authority to regulate those services includes:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">rate structures;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">rates of return on equity;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">recovery of costs;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the services that our regulated assets are permitted to perform;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the acquisition, construction and disposition of assets; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">to an extent, the level of competition in that regulated industry.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under the Natural Gas Act, FERC has authority to regulate natural gas companies that provide natural gas pipeline transportation services in interstate commerce. Its authority to regulate those services includes the rates charged for the services, terms and conditions of
service, certification and construction of new facilities, the extension or abandonment of services and facilities, the maintenance of accounts and records, the acquisition and disposition of facilities, the initiation and discontinuation of services, and various other matters. Natural
gas companies may not charge rates that have been determined not to be just and reasonable</font></p>
</div>
<p align="center"><font face="serif" size="2">104</font></p>
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<p align="left"><font face="serif" size="2">by FERC. In addition, FERC prohibits natural gas companies from unduly preferring or unreasonably discriminating against any person with respect to pipeline rates or terms and conditions of
service.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The rates, terms and conditions of service provided by natural gas companies are required to be on file with FERC in FERC-approved tariffs. Pursuant to FERC&#146;s jurisdiction over rates, existing rates may be challenged by complaint and proposed rate increases may be
challenged by protest. We cannot assure you that FERC will continue to pursue its approach of pro-competitive policies as it considers matters such as pipeline rates and rules and policies that may affect rights of access to natural gas transportation capacity, transportation and
storage facilities. Any successful complaint or protest against Ozark Gas Transmission&#146;s FERC-approved rates could have an adverse impact on our revenue associated with providing transmission services.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Gathering Pipeline Regulation</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Section 1(b) of the Natural Gas Act exempts natural gas gathering facilities from the jurisdiction of the FERC. Atlas owns a number of intrastate natural gas pipelines in New York, Pennsylvania, Ohio, Arkansas, Texas and Oklahoma that Atlas believes would meet the
traditional tests FERC has used to establish a pipeline&#146;s status as a gatherer not subject to FERC jurisdiction. However, the distinction between the FERC-regulated transmission services and federally unregulated gathering services is the subject of regular litigation, so the
classification and regulation of some of Atlas&#146; gathering facilities may be subject to change based on future determinations by FERC and the courts.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In Ohio, a producer or gatherer of natural gas may file an application seeking exemption from regulation as a public utility, except for the continuing jurisdiction of the Public Utilities Commission of Ohio to inspect its gathering systems for public safety purposes.
Atlas&#146; operating subsidiary has been granted an exemption by the Public Utilities Commission of Ohio for its Ohio facilities. The New York Public Service Commission imposes traditional public utility regulation on the transportation of natural gas by companies subject to its
regulation. This regulation includes rates, services and siting authority for the construction of certain facilities. Atlas&#146; gas gathering operations currently are not subject to regulation by the New York Public Service Commission. Atlas&#146; operations in Pennsylvania currently are
not subject to the Pennsylvania Public Utility Commission&#146;s regulatory authority since they do not provide service to the public generally and, accordingly, do not constitute the operation of a public utility. Similarly, Atlas&#146; operations in Arkansas are not subject to regulatory
oversight by the Arkansas Public Service Commission. In the event the Arkansas, Ohio, New York or Pennsylvania authorities seek to regulate our operations, Atlas believes that its operating costs could increase and Atlas&#146; transportation fees could be adversely affected,
thereby reducing Atlas&#146; net revenue and ability to make distributions to unitholders.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas is currently subject to state ratable take and common purchaser statutes in Texas and Oklahoma. The ratable take statutes generally require gatherers to take, without discrimination, natural gas production that may be tendered to the gatherer for handling. Similarly,
common purchaser statutes generally require gatherers to purchase without discrimination as to source of supply or producer. These statutes are designed to prohibit discrimination in favor of one producer over another producer or one source of supply over another source of
supply. These statutes have the effect of restricting Atlas&#146; right as an owner of gathering facilities to decide with whom it contracts to purchase or transport natural gas.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The state of Oklahoma has adopted a complaint-based statute that allows the Oklahoma Corporation Commission to resolve grievances relating to natural gas gathering access and to remedy discriminatory rates for providing gathering service where the parties are unable
to agree. In a similar way, the Texas Railroad Commission sponsors a complaint procedure for resolving grievances about natural gas gathering access and rate discrimination. No such complaints have been made against Atlas&#146; Mid-Continent operations to date in Oklahoma or
Texas.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Natural gas gathering may receive greater regulatory scrutiny at both the state and federal levels now that FERC has taken a less stringent approach to regulation of the gathering activities of interstate pipeline transmission companies and a number of such companies
have transferred gathering facilities to unregulated affiliates. For example, the Texas Railroad Commission has approved changes to its regulations governing transportation and gathering services performed by intrastate pipelines and gatherers, which prohibit such</font></p>
</div>
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<p align="left"><font face="serif" size="2">entities from unduly discriminating in favor of one customer over another. Atlas&#146; gathering operations could be adversely affected should they be subject in the future to the application of state
or federal regulation of rates and services.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; gathering operations also may be or become subject to safety and operational regulations relating to the design, installation, testing, construction, operation, replacement and management of gathering facilities. Additional rules and legislation pertaining to these
matters are considered or adopted from time to time. Atlas cannot predict what effect, if any, such changes might have on its operations, but the industry could be required to incur additional capital expenditures and increased costs depending on future legislative and regulatory
changes.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Sales of Natural Gas</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">A portion of Atlas&#146; revenue is tied to the price of natural gas. The price of natural gas is not currently subject to federal regulation and, for the most part, is not subject to state regulation. Sales of natural gas are affected by the availability, terms and cost of pipeline
transportation. As noted above, the price and terms of access to pipeline transportation are subject to extensive federal and state regulation. FERC is continually proposing and implementing new rules and regulations affecting those segments of the natural gas industry, most
notably interstate natural gas transmission companies that remain subject to FERC&#146;s jurisdiction. These initiatives also may affect the intrastate transportation of natural gas under certain circumstances. The stated purpose of many of these regulatory changes is to promote
competition among the various sectors of the natural gas industry, and these initiatives generally reflect more light-handed regulation. Atlas cannot predict the ultimate impact of these regulatory changes to its operations, and we note that some of FERC&#146;s more recent proposals
may adversely affect the availability and reliability of interruptible transportation service on interstate pipelines. Atlas does not believe that it will be affected by any such FERC action materially differently than other companies with whom it competes.</font></p>
</div>
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    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Energy Policy Act of 2005</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On August&nbsp;8, 2005, the Energy Policy Act of 2005 was signed into law. The Energy Policy Act contains numerous provisions relevant to the natural gas industry and to interstate pipelines in particular. Overall, the legislation attempts to increase supply sources by
engaging in various studies of the overall resource base and attempting to advantage deep water production on the Outer Continental Shelf in the Gulf of Mexico. However, the primary provisions of interest to Atlas&#146; interstate pipelines focus in two areas: (1) infrastructure
development; and (2) market transparency and enhanced enforcement. Regarding infrastructure development, the Energy Policy Act includes provisions to clarify that FERC has exclusive jurisdiction over the siting of liquefied natural gas terminals; provides for market based
rates for new storage facilities placed into service after the date of enactment; shortens depreciable life for gathering facilities; statutorily designates FERC as the lead agency for federal authorizations and permits; creates a consolidated record for all federal decisions relating to
necessary authorizations and permits; and provides for expedited judicial review of any agency action and review by only the D.C. Circuit Court of Appeals of any alleged failure of a federal agency to act by a deadline set by FERC as lead agency. Such provisions, however,
do not apply to review and authorization under the Coastal Zone Management Act of 1972. Regarding market transparency and manipulation rules, the Natural Gas Act is amended to prohibit market manipulation and add provisions for FERC to prescribe rules designed to
encourage the public provision of data and reports regarding the price of natural gas in wholesale markets. The Natural Gas Act and the Natural Gas Policy Act are also amended to increase monetary criminal penalties to $1,000,000 from current law at $5,000 and to add and
increase civil penalty authority to be administered by FERC to $1,000,000 per day per violation without any limitation as to total amount.</font></p>
</div>
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  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Environmental Matters</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The operation of pipelines, plant and other facilities for gathering, compressing, treating, processing, or transporting natural gas, natural gas liquids and other products is subject to stringent and complex laws and regulations pertaining to health, safety and the
environment. As an owner or operator of these facilities, Atlas must comply with these laws and regulations at the federal, state and local levels. These laws and regulations can restrict or impact Atlas&#146; business activities in many ways, such as:</font></p>
</div>
<p>&nbsp;</p>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">restricting the way Atlas can handle or dispose of its wastes;</font></div></td>
  </tr>
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    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">limiting or prohibiting construction and operating activities in sensitive areas such as wetlands, coastal regions, or areas inhabited by endangered species;</font></div></td>
  </tr>
</table>
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    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">requiring remedial action to mitigate pollution conditions caused by its operations or attributable to former operators; and</font></div></td>
  </tr>
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    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">enjoining some or all of the operations of facilities deemed in non-compliance with permits issued pursuant to such environmental laws and regulations.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial requirements, and the issuance of orders enjoining future operations. Certain environmental statutes impose strict,
joint and several liability for costs required to clean up and restore sites where substances or wastes have been disposed or otherwise released. Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property
damage allegedly caused by the release of substances or wastes into the environment.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas believes that its operations are in substantial compliance with applicable environmental laws and regulations and that compliance with existing federal, state and local environmental laws and regulations will not have a material adverse effect on Atlas&#146; business,
financial position or results of operations. Nevertheless, the trend in environmental regulation is to place more restrictions and limitations on activities that may affect the environment. As a result, there can be no assurance as to the amount or timing of future expenditures for
environmental compliance or remediation, and actual future expenditures may be different from the amounts Atlas currently anticipates. Moreover, Atlas cannot assure you that future events, such as changes in existing laws, the promulgation of new laws, or the development or
discovery of new facts or conditions will not cause Atlas to incur significant costs.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Hazardous Waste</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; operations generate wastes, including some hazardous wastes, that are subject to the federal Resource Conservation and Recovery Act, as amended, or RCRA, and comparable state laws, which impose detailed requirements for the handling, storage, treatment and
disposal of hazardous and solid waste. RCRA currently exempts many natural gas gathering and field processing wastes from classification as hazardous waste. Specifically, RCRA excludes from the definition of hazardous waste produced waters and other wastes associated
with the exploration, development, or production of crude oil and natural gas. However, these oil and gas exploration and production wastes may still be regulated under state law or the less stringent solid waste requirements of RCRA. Moreover, ordinary industrial wastes such
as paint wastes, waste solvents, laboratory wastes, and waste compressor oils may be regulated as hazardous waste. The transportation of natural gas in pipelines may also generate some hazardous wastes that are subject to RCRA or comparable state law requirements.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Site Remediation</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or CERCLA, also known as &#147;Superfund,&#148; and comparable state laws impose liability, without regard to fault or the legality of the original conduct, on certain classes of
persons responsible for the release of hazardous substances into the environment. Such classes of persons include the current and past owners or operators of sites where a hazardous substance was released, and companies that disposed or arranged for disposal of hazardous
substances at offsite locations such as landfills. Although petroleum as well as natural gas is excluded from CERCLA&#146;s definition of &#147;hazardous substance,&#148; in the course of Atlas&#146; ordinary operations it will generate wastes that may fall within the definition of a &#147;hazardous
substance.&#148; CERCLA authorizes the EPA and, in some cases, third parties to take actions in response to threats to the public health or the environment and to seek to recover from the responsible classes of persons the costs they incur. Under CERCLA, Atlas could be subject
to joint and several, strict liability for the costs of cleaning up and restoring sites where hazardous substances have been released, for damages to natural resources, and for the costs of certain health studies.</font></p>
</div>
<p>&nbsp;</p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas currently owns or leases, and has in the past owned or leased, numerous properties that for many years have been used for the measurement, gathering, field compression and processing of natural gas. Although Atlas used operating and disposal practices that were
standard in the industry at the time, petroleum hydrocarbons or wastes may have been disposed of or released on or under the properties owned or leased by Atlas or on or under other locations where such substances have been taken for disposal. In fact, there is evidence that
petroleum spills or releases have occurred at some of the properties owned or leased by Atlas. In addition, some of these properties have been operated by third parties or by previous owners whose treatment and disposal or release of petroleum hydrocarbons or wastes was not
under Atlas&#146; control. These properties and the substances disposed or released on them may be subject to CERCLA, RCRA and analogous state laws. Under such laws, Atlas could be required to remove previously disposed wastes (including waste disposed of by prior owners
or operators), remediate contaminated property (including groundwater contamination, whether from prior owners or operators or other historic activities or spills), or perform remedial closure operations to prevent future contamination.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Air Emissions</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; operations are subject to the federal Clean Air Act, as amended, and comparable state laws and regulations. These laws and regulations regulate emissions of air pollutants from various industrial sources, including processing plants and compressor stations, and
also impose various monitoring and reporting requirements. Such laws and regulations may require that Atlas obtain pre-approval for the construction or modification of certain projects or facilities expected to produce air emissions or result in the increase of existing air
emissions, obtain and strictly comply with air permits containing various emissions and operational limitations, or utilize specific emission control technologies to limit emissions. Atlas&#146; failure to comply with these requirements could subject Atlas to monetary penalties,
injunctions, conditions or restrictions on operations, and potentially criminal enforcement actions. Atlas likely will be required to incur certain capital expenditures in the future for air pollution control equipment in connection with obtaining and maintaining operating permits
and approvals for air emissions. Atlas believes, however, that its operations will not be materially adversely affected by such requirements, and the requirements are not expected to be any more burdensome to Atlas than to any other similarly situated companies.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Water Discharges</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; operations are subject to the Federal Water Pollution Control Act of 1972, as amended, also known as the Clean Water Act, and analogous state laws and regulations. These laws and regulations impose detailed requirements and strict controls regarding the
discharge of pollutants into state and federal waters. The discharge of pollutants is prohibited unless authorized by a permit or other agency approval. The Clean Water Act and regulations implemented thereunder also prohibit discharges of dredged and fill material in wetlands
and other waters of the United States unless authorized by an appropriately issued permit. Any unpermitted release of pollutants from Atlas&#146; pipelines or facilities could result in administrative, civil and criminal penalties as well as significant remedial obligations.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Pipeline Safety</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; pipelines are subject to regulation by the U.S. Department of Transportation, or the DOT, under the Natural Gas Pipeline Safety Act of 1968, as amended, or the NGPSA, pursuant to which the DOT has established requirements relating to the design, installation,
testing, construction, operation, replacement and management of pipeline facilities. The NGPSA covers the pipeline transportation of natural gas and other gases, and the transportation and storage of liquefied natural gas and requires any entity that owns or operates pipeline
facilities to comply with the regulations under the NGPSA, to permit access to and allow copying of records and to make certain reports and provide information as required by the Secretary of Transportation. Atlas believes that its pipeline operations are in substantial
compliance with existing NGPSA requirements; however, due to the possibility of new or amended laws and regulations or reinterpretation of existing laws and regulations, future compliance with the NGPSA could result in increased costs.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The DOT, through the Office of Pipeline Safety, recently finalized a series of rules intended to require pipeline operators to develop integrity management programs for gas transmission pipelines that, in the event</font></p>
</div>
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<p align="left"><font face="serif" size="2">of a failure, could affect &#147;high consequence areas.&#148; &#147;High consequence areas&#148; are currently defined as areas with specified population densities, buildings containing populations of limited
mobility, and areas where people gather that are located along the route of a pipeline. The Texas Railroad Commission, the Oklahoma Corporation Commission and other state agencies have
adopted similar regulations applicable to intrastate gathering and transmission lines. Compliance with these existing rules has not had a material adverse effect on Atlas&#146; operations but there is
no assurance that this trend will continue in the future.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td>&nbsp;</td>
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    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Employee Health and Safety</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas is subject to the requirements of the Occupational Safety and Health Act, as amended, referred to as OSHA, and comparable state laws that regulate the protection of the health and safety of workers. In addition, the OSHA hazard communication standard requires
that information be maintained about hazardous materials used or produced in Atlas&#146; operations and that this information be provided to employees, state and local government authorities and citizens.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Hydrogen Sulfide</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Exposure to gas containing high levels of hydrogen sulfide, referred to as sour gas, is harmful to humans, and prolonged exposure can result in death. The gas produced at Atlas&#146; Velma gas plant contains high levels of hydrogen sulfide, and Atlas employs numerous
safety precautions at the system to ensure the safety of Atlas&#146; employees. There are various federal and state environmental and safety requirements for handling sour gas, and Atlas is in substantial compliance with all such requirements.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Employees</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As is commonly the case with publicly traded limited partnerships, Atlas does not directly employ any of the persons responsible for Atlas&#146; management or operations. In general, employees of Atlas America manage Atlas&#146; gathering systems and operate Atlas&#146; business.
Our affiliates will conduct business and activities of their own in which Atlas will have no economic interest. If these separate activities are significantly greater than Atlas&#146; activities, there could be material competition between them, us and our affiliates for the time and effort
of the officers and employees who provide services to us. Our officers who provide services to Atlas are not required to work full time on Atlas&#146; affairs. These officers may devote significant time to the affairs of our affiliates and be compensated by these affiliates for the
services rendered to them. There may be significant conflicts between them and our affiliates regarding the availability of these officers to manage them.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Properties</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As of December&nbsp;31, 2004, Atlas&#146; principal facilities in Appalachia include approximately 1,500 miles of 2 to 12 inch diameter pipeline. Atlas&#146; principal facilities in the Mid-Continent area consist of three natural gas processing plants, one treating facility, and
approximately 3,130 miles of active and inactive 2-to-42 inch diameter pipeline. Substantially all of Atlas&#146; gathering systems are constructed within rights-of-way granted by property owners named in the appropriate land records. In a few cases, property for gathering system
purposes was purchased in fee. All of Atlas&#146; compressor stations are located on property owned in fee or on property obtained via long-term leases or surface easements.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; property or rights-of-way are subject to encumbrances, restrictions and other imperfections, although these imperfections have not interfered, and Atlas&#146; general partner does not expect that they will materially interfere with the conduct of Atlas&#146; business. In many
instances, lands over which rights-of-way have been obtained are subject to prior liens which have not been subordinated to the right-of-way grants. In a few instances, Atlas&#146; rights-of-way are revocable at the election of the land owners. In some cases, not all of the owners
named in the appropriate land records have joined in the right-of-way grants, but in substantially all such cases signatures of the owners of majority interests have been obtained. Substantially all permits have been obtained from public authorities to cross over or under, or to
lay facilities in or along, water courses, county roads, municipal streets, and state highways, where necessary, although in some instances these permits are revocable at the election of the grantor. Substantially all permits have also been</font></p>
</div>
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<p align="left"><font face="serif" size="2">obtained from railroad companies to cross over or under lands or rights-of-way, many of which are also revocable at the grantor&#146;s election.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Certain of Atlas&#146; rights to lay and maintain pipelines are derived from recorded gas well leases, for wells that are currently in production; however, the leases are subject to termination if the wells cease to produce. In some of these cases, the right to maintain existing
pipelines continues in perpetuity, even if the well associated with the lease ceases to be productive. In addition, because many of these leases affect wells at the end of lines, these rights-of-way will not be used for any other purpose once the related wells cease to produce.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas rents 24,959 square feet of office space through November 2009 in Tulsa, Oklahoma for its Mid-Continent operations. For a description of Atlas&#146; natural gas processing plants, see &#147;&#151;Our Mid-Continent Operations&#151;Processing Plants.&#148;</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><div align="left"><font face="serif" size="2"><b>Legal Proceedings</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On March&nbsp;9, 2004, the Oklahoma Tax Commission filed a petition against Spectrum alleging that Spectrum underpaid gross production taxes beginning in June 2000. The OTC is seeking a settlement of $5.0 million plus interest and penalties. Atlas plans on defending
itself vigorously. Atlas has asserted a claim for indemnification by Chevron under the provisions of Atlas&#146; contract with it. Chevron has acknowledged Atlas&#146; claim notice pursuant to which Chevron will be responsible for the payment of any underpayment of taxes, which
would be the basis for any monetary judgment against them, but Chevron will reserve the issues of payment of penalties and reimbursement of Atlas&#146; attorneys fees and costs for determination by arbitration following the end of the litigation. In addition, under the terms of the
Spectrum purchase agreement, $14.0 million has been placed in escrow to cover the costs of any adverse settlement resulting from the petition and other indemnification obligations of the purchase agreement.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas is not subject to any other pending legal proceedings.</font></p>
</div>
<p align="center"><font face="serif" size="2">110</font></p>
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<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>MANAGEMENT</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Atlas Pipeline Holdings, L.P.</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b><i>Directors and Officers of Atlas Pipeline Holdings GP, LLC</i></b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following table sets forth certain information with respect to the executive officers and members of the board of directors of our general partner, Atlas Pipeline Holdings GP, LLC. Executive officers and directors will serve until their successors are duly appointed or
elected.</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Name</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Age</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="center" valign="bottom"><font face="serif" size="1"><b>Position with general partner</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><hr noshade size="1"></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Edward E. Cohen</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" width="4%"><font face="serif" size="2">66</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">Chairman of the Board and Chief Executive Officer</font><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Jonathan Z. Cohen</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right"><font face="serif" size="2">35</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">Vice Chairman of the Board</font><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Robert R. Firth</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right"><font face="serif" size="2">51</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">President</font><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Matthew A. Jones</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right"><font face="serif" size="2">44</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">Chief Financial Officer</font><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Lisa Washington</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right"><font face="serif" size="2">38</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">Chief Legal Officer and Secretary</font><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Steven J. Doherty</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right"><font face="serif" size="2">45</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">Director</font><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">William G. Karis</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right"><font face="serif" size="2">57</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">Director</font><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Harvey G. Magarick</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right"><font face="serif" size="2">66</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">Director</font><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><b>Edward E. Cohen </b>has been the Chairman of the Board of Directors and Chief Executive Officer of our general partner since its formation in January 2006. Mr. Cohen also has been Chairman of the Board of Directors and Chief Executive Officer of Atlas America
since its formation in 2000 and of Atlas since its formation in 1999. Mr. Cohen has been Chairman of the Board of Directors of Resource America, Inc. (NASDAQ: REXI), since 1990, and a director since 1988. Mr. Cohen served as Chief Executive Officer of Resource
America from 1988 to 2004 and President of Resource America from 2000 to 2003. He is Chairman of the Board of Directors of Brandywine Construction &amp; Management, Inc., a property management company, and a director of TRM Corporation, a publicly traded consumer
services company, Mr. Cohen is the father of Jonathan Z. Cohen.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><b>Jonathan Z. Cohen</b> has been the Vice Chairman of the Board of Directors of our general partner since January 2006. Mr. Cohen also has been the President of Resource America since 2003, Chief Executive Officer of Resource America since 2004 and a director since
2002. He was the Chief Operating Officer of Resource America from 2002 to 2004 and Executive Vice President of Resource America from 2001 until 2003. Before that, Mr. Cohen had been a Senior Vice President since 1999. Mr. Cohen has been Vice Chairman of Atlas
America since its formation in 2000 and Vice Chairman of Atlas since its formation in 1999. Mr. Cohen has also served as Trustee and Secretary of RAIT Investment Trust, a publicly-traded real estate investment trust, since 1997, Vice Chairman of RAIT since 2003 and
Chairman of the Board of Directors of The Richardson Company, a sales consulting company, since 1999. Mr. Cohen is a son of Edward E. Cohen.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><b>Robert R. Firth</b> has been the President of our general partner since January 2006. Mr. Firth also has been the President and Chief Executive Officer of Spectrum (acquired by Atlas in July 2004 and now known as Atlas Pipeline Mid-Continent LLC) since 2002. Mr.
Firth has held positions with Northern Natural Gas, Panda Resources, Transok, CMS Energy and ScissorTail Energy over his 30 years in the midstream energy sector.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><b>Matthew A. Jones</b> has been the Chief Financial Officer of our general partner since January 2006. Mr. Jones also has been Chief Financial Officer of Atlas and Atlas America since March 2005. Prior to that time, Mr. Jones was a Managing Director with the Energy
Investment Banking Group at Friedman Billings Ramsey. Before that, Mr. Jones had been associated with Friedman Billings Ramsey&#146;s Specialty Finance and Real Estate Group. Mr. Jones is a Chartered Financial Analyst.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><b>Lisa Washington</b> has been the Chief Legal Officer and Secretary of our general partner since January 2006. Ms. Washington is also the Vice President, Chief Legal Officer and Secretary of Atlas and Atlas America. From 1999 to 2005, Ms. Washington was an attorney
in the business department of the law firm of Blank Rome LLP.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">111</font></p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><b>Steven J. Doherty </b>has been a member of the Board of Directors of our general partner since January 2006. Mr. Doherty, a Chartered Financial Analyst, has been a Vice President and Client Portfolio Manager of Loomis Sayles &amp; Co., since 1996 and was a Vice
President and Portfolio Manager of Loomis Sayles between 1996 and 1999. From 1986 to 1996, Mr. Doherty was a Senior Portfolio Manager of Howard Hughes Medical Institute. Mr. Doherty is on the Board of Advisors of the George Washington University School of
Business and Public Management.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><b>William G. Karis </b>has been a member of the Board of Directors of our general partner since January 2006 and has been the principal of Karis and Associates, LLC, a consulting company that provides financial and consulting services to the coal industry, since 1997.
Prior to that, Mr. Karis was President and CEO of CONSOL Inc. (now CONSOL Energy Company). Mr. Karis is a member of the Boards of Directors and is Chairman of the Audit and Finance Committees of Blue Danube Inc., PinnOak Resources, LLC (formerly US Steel
Mining), and Greenbriar Minerals, LLC.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><b>Harvey G. Magarick </b>has been a member of the Board of Directors of our general partner since January 2006 and has maintained his own consulting practice since June 2004. From 1997 to 2004, Mr. Magarick was a partner at BDO Seidman. Mr. Magarick is a
member of the Board of Trustees of the Hirtle Callaghan Trust, an investment fund, and has been the Chairman of its audit committee since 2004.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Other Significant Employees</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><b>Sean P. McGrath</b>, 34, has been the Chief Accounting Officer of our general partner since January 2006. Mr. McGrath also has been the Chief Accounting Officer of Atlas since May 2005. Before that, Mr. McGrath had been the Chief Accounting Officer of Sunoco
Logistics Partners L.P., a publicly-traded partnership that transports, terminals and stores refined products and crude oil, since 2002. From 1998 to 2002, Mr. McGrath was Assistant Controller of Asplundh Tree Expert Co., a utility services and vegetation management
company.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><b>Daniel C. Herz</b>, 29, has been the Vice President of Corporate Development of our general partner since January 2006. Mr. Herz also has been an employee of Atlas and Atlas America since January 2004 and has served as Vice President of Corporate Development
since December 2004. Mr. Herz was an Associate Investment Banker with Banc of America Securities from 2002 to 2003 and an Analyst from 1999 to 2002.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Board Committees</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Audit Committee</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner&#146;s board of directors will establish an audit committee to be effective upon the closing of this offering. The three independent members of our general partner&#146;s board of directors will serve on the audit committee that will review our external financial
reporting, maintain responsibility for engaging our independent auditors and review procedures for internal auditing and the adequacy of our internal accounting controls. In addition to satisfying certain other requirements, the members of the audit committee must meet the
independence standards for an audit committee of a board of directors established by the NYSE. Upon completion of this offering, Messrs. Doherty, Karis and Magarick will be the members of the Audit Committee.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Conflicts Committee</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner&#146;s board of directors will establish a conflicts committee to be effective upon the closing of this offering. Ultimately, at least two members of our general partner&#146;s board of directors will serve on the conflicts committee, which will be charged with
reviewing specific matters that our general partner&#146;s board of directors believes may involve conflicts of interest. The conflicts committee will determine if the resolution of any conflict of interest submitted to it is fair and reasonable to us. In addition to satisfying certain other
requirements, the members of the conflicts committee must meet the independence standards for a conflicts committee of a board of directors established by the NYSE. Any matters approved by the conflicts committee will be conclusively deemed to be fair and reasonable to
us, approved by all of our unitholders, and not a breach by us of any duties we may owe to our unitholders.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">112</font></p>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Compensation Committee</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner&#146;s board of directors will establish a compensation committee of at least two directors to be effective upon the closing of this offering. The compensation committee will oversee compensation decisions and benefits for the officers of our general
partner and will administer our Long-Term Incentive Plan described below.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Compensation for the officers of our general partner shall be determined by the independent directors constituting the compensation committee of Atlas America, the sole shareholder of our general partner and the employer of all of the officers. Charges to us (and hence
indirectly compensation of officers attributable to, and payable by, us) will be cleared with the conflicts committee of the board of directors of our general partner.</font></p>
</div>
<div style="margin-left:2%">
<p align="left"><font face="serif" size="2"></font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Executive Committee</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner&#146;s board of directors will establish an executive committee of four directors to be effective upon the closing of this offering. The role of the executive committee, which will be chaired by the Vice Chairman of the Board of our general partner, is to
exercise all powers of our general partner&#146;s board of directors between board meetings when it is not practical or feasible for the full board to meet. Upon completion of this offering, Messrs. Edward E. Cohen, Jonathan Z. Cohen, Robert R. Firth and Matthew A. Jones will be
the members of the Executive Committee.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Other Committees</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner&#146;s board of directors may establish other committees from time to time to facilitate our management.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Election of Our Directors</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner&#146;s limited liability company agreement establishes a board of directors that will be responsible for the oversight of our business and operations. Our general partner&#146;s board of directors will be elected by a voting majority, as defined in the limited
liability company agreement.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Governance Matters</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Independence of Board Members.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our general partner is committed to having at least three independent directors on its board of directors. Pursuant to the NYSE listing standards, a director will be considered independent if the board determines that he or she does not
have a material relationship with our general partner or us (either directly or as a partner, unitholder or officer of an organization that has a material relationship with our general partner or us). The initial independent directors are Steven J. Doherty, William G. Karis and
Harvey G. Magarick. The independent members of the board of directors of our general partner will serve as the initial members of the audit and conflicts and compensation committees.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Heightened Independence for Audit and Conflicts Committee Members.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As required by the Sarbanes-Oxley Act of 2002, the Commission has adopted rules that direct national securities exchanges and associations to prohibit the listing of securities of a public company
if members of its audit committee do not satisfy a heightened independence standard. In order to meet this standard, a member of an audit committee may not receive any consulting fee, advisory fee or other compensation from the public company other than fees for service as
a director or committee member and may not be considered an affiliate of the public company. The board of directors of our general partner expects that all members of its audit and conflicts committee will satisfy this heightened independence requirement.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Audit Committee Financial Expert.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An audit committee plays an important role in promoting effective corporate governance, and it is imperative that members of an audit committee have requisite financial literacy and expertise. As required by the Sarbanes-Oxley Act
of 2002, Commission rules require that a public company disclose whether or not its audit committee has an &#147;audit committee financial expert&#148; as a member. An &#147;audit committee financial expert&#148; is defined as a person who, based on his or her experience, possesses all of the
following attributes:</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">113</font></p>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">An understanding of generally accepted accounting principles and financial statements;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">An ability to assess the general application of such principles in connection with the accounting for estimates, accruals, and reserves;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and level of complexity of issues that can reasonably be expected to be raised by our
financial statements, or experience actively supervising one or more persons engaged in such activities;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">An understanding of internal controls and procedures for financial reporting; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">An understanding of audit committee functions.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The board of directors of our general partner expects that one of the independent directors will satisfy the definition of &#147;audit committee financial expert.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Code of Ethics.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The board of directors of our general partner will adopt a code of ethics, the &#147;Code of Ethical Conduct for Senior Financial Officers and Managers,&#148; that applies to the chief executive officer, chief financial officer, principal accounting officer and
senior financial and other managers. In addition to other matters, this code of ethics will establish policies to prevent wrongdoing and to promote honest and ethical conduct, including ethical handling of actual and apparent conflicts of interest, compliance with applicable laws,
rules and regulations, full, fair, accurate, timely and understandable disclosure in public communications and prompt internal reporting violations of the code.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Web Access.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We
    will provide access through our website to current information relating to
    governance, including a copy of the Code of Ethical Conduct for Senior Financial
    Officers
    and Managers and other matters impacting our governance principles. You will
    be able  to contact our investor relations department for paper copies of
    these documents free of charge.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Compensation of Directors</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner does not contemplate paying additional remuneration to officers or employees of Atlas America who also serve on the board of directors of our general partner. Each non-employee director will receive an annual retainer of $35,000 in cash and an
annual grant of phantom units with distribution equivalent rights in an amount equal to the lesser of 500 units or $15,000 worth of units (based upon the market price of our common units) pursuant to our Long-Term Incentive Plan. Please see &#147;&#151;Atlas Pipeline Holdings
Long-Term Incentive Plan&#148; below. In addition, our general partner will reimburse each non-employee director for out-of-pocket expenses and indemnify our general partner&#146;s board of directors for actions associated with serving as directors to the extent permitted under
Delaware law.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Atlas Pipeline Holdings Long-Term Incentive Plan</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Prior to the closing of this offering, we will adopt the Atlas Pipeline Holdings, L.P. Long-Term Incentive Plan for the employees, directors and consultants of our general partner and its affiliates, including Atlas, who perform services for us. The long-term incentive plan
will consist of phantom units, unit options and tandem distribution equivalent rights with respect to phantom units. Units with respect to awards forfeited, terminated or paid without the delivery of units are available for delivery pursuant to other awards. The long-term
incentive plan will be administered by the compensation committee of the board of directors of our general partner.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The board of directors of our general partner and the compensation committee of the board may terminate or amend the long-term incentive plan at any time with respect to any units for which a grant has not yet been made. Our board of directors and the compensation
committee of the board also have the right to alter or amend the long-term incentive plan or any part of the long-term incentive plan from time to time, including increasing the number of units that may be granted, subject to unitholder approval as may be required by the
exchange upon which the common units are listed at that time, if any. Subject to adjustment as provided in the long-term incentive plan documents, the aggregate number of our units that may be awarded to participants is 2,100,000. However, no change in any outstanding
grant may be made that would</font></p>
</div>
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<p align="left"><font face="serif" size="2">materially reduce the benefits of the participant without the consent of the participant. The long-term incentive plan will expire upon its termination by the board of directors or the compensation
committee or, if earlier, when no units remain available under the long-term incentive plan for awards. Upon termination of the long-term incentive plan, awards then outstanding will continue
pursuant to the terms of their grants.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Phantom Units.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A phantom unit entitles the grantee to receive a common unit upon the vesting of the phantom unit or, in the discretion of the compensation committee, cash equivalent to the value of a common unit. In the future, the compensation committee may
determine to make grants of phantom units under the plan to employees, consultants and directors containing such terms as the compensation committee determines. The compensation committee will determine the period over which phantom units granted to employees and
members of our board will vest. The committee, in its discretion, may base its determination upon the achievement of specified financial objectives or other events. In addition, the phantom units will vest upon a change in control. If a grantee&#146;s employment, consulting or
membership on the board of directors terminates for any reason, the grantee&#146;s phantom units will be automatically forfeited unless, and to the extent, the compensation committee or the terms of the award agreement provide otherwise.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Options.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;An option entitles the grantee to receive a common unit upon payment of the exercise price for the option, which exercise price may be equal to or more than the fair market value of a common unit on the date of grant of the option. The compensation
committee will determine the directors, employees and consultants to whom options are granted, the number of options, their vesting provisions, exercise price and other terms and conditions.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Common units to be delivered upon the vesting of phantom units or the exercise of options may be common units acquired by us in the open market, common units acquired by us from any other person or any combination of the foregoing. If we issue new common
units upon vesting of the phantom units or the exercise of options, the total number of common units outstanding will increase.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We intend that the issuance of any common units upon vesting of the phantom units under the plan serve as a means of incentive compensation for performance and not primarily as an opportunity to participate in the equity appreciation of our common units. Therefore,
plan participants will not pay any consideration for the common units they receive, and we will receive no remuneration for the units.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>U.S. Federal Income Tax Consequences of Awards Under the Long-Term Incentive Plan.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Generally, when phantom units or options are granted, there are no income tax consequences for the participant or us. Upon the payment to the participant of common units and/or
cash in respect of the vesting of phantom units or DERs or the exercise of units, the participant recognizes compensation equal to the fair market value of the cash and/or units as of the date of payment.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On October 22, 2004, the American Jobs Creation Act of 2004 (H.R. 4520) (the &#147;AJCA&#148;) was signed into law by the President. The AJCA added a new Section 409A to the Internal Revenue Code (&#147;Section 409A&#148;) which significantly alters the rules relating to the
taxation of deferred compensation. Section 409A broadly applies to deferred compensation and potentially results in additional tax to participants. The Department of Treasury and IRS have issued guidance and proposed regulations under Section 409A, however further
guidance is anticipated. Based on current guidance, the award of options to employees, consultants and directors of certain of our affiliates may be very limited in order to meet the requirements of Section 409A. However, we expect that we will be able to structure awards
under the plan in a manner that complies with Section 409A. Because we expect additional guidance to be issued under Section 409A, we may be required to alter provisions of the plan and future awards.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>DERs.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A distribution equivalent right or DER is a right granted in the committee&#146;s discretion with respect to a phantom unit that entitles the grantee to receive cash equal to the cash distributed on a common unit on such terms and conditions as the committee may
proscribe.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Compensation Committee Interlocks and Insider Participation</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">While certain of our executive officers and directors serve in such roles with Atlas America and the general partner of Atlas, none of our executive officers serves as a member of the board of directors or</font></p>
</div>
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<p align="left"><font face="serif" size="2">compensation committee of any entity that has one or more of its executive officers serving as a member of the board of directors or compensation committee of our general partner.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Atlas Pipeline Partners, L.P.</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b><i>Managing Board Members, Executive Officers and Other Significant Employers of Atlas Pipeline Partners</i></b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following table sets forth certain
    information with respect to the executive officers and members of the managing
    board of Atlas Pipeline Partners GP, LLC. Executive officers and directors
  will serve until their successors are duly appointed or elected.</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>  Name</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center"><font face="serif" size="1"><b>  Age</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2"><font face="serif" size="1"><b>  Position with general partner</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center"><font face="serif" size="1"><b>Year in which service began</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><hr noshade size="1"></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Edward E. Cohen</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="center" width="4%"><font face="serif" size="2">66</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="22%"><font face="serif" size="2">Chairman of the Managing Board and Chief Executive Officer</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="center" width="8%"><font face="serif" size="2">1999</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Jonathan Z. Cohen</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="center"><font face="serif" size="2">35</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">Vice Chairman of the Managing Board</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="center"><font face="serif" size="2">1999</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Michael L. Staines</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="center"><font face="serif" size="2">56</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">President, Chief Operating Officer and Managing Board Member</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="center"><font face="serif" size="2">1999</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Matthew A. Jones</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="center"><font face="serif" size="2">44</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">Chief Financial Officer</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="center"><font face="serif" size="2">2005</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Tony C. Banks</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="center"><font face="serif" size="2">51</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">Managing Board Member</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="center"><font face="serif" size="2">1999</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Curtis D. Clifford</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="center"><font face="serif" size="2">63</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">Managing Board Member</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="center"><font face="serif" size="2">2004</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Gayle P.W. Jackson</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="center"><font face="serif" size="2">59</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">Managing Board Member</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="center"><font face="serif" size="2">2005</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Martin Rudolph</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="center"><font face="serif" size="2">59</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">Managing Board Member</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="center"><font face="serif" size="2">2005</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As described above, some of the managing board members, executive officers and other significant employees of our general partner, Atlas Pipeline Holdings GP, LLC, also serve as directors, executive officers and other significant employees of Atlas&#146; general partner.
To the extent that we have described the business experience of these individuals above, we have not repeated that information below.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><b>Michael L. Staines </b>has been an Executive Vice President of Atlas America since its formation. Mr. Staines is also the President and Chief Operating Officer of Atlas. Mr. Staines was Senior Vice President of Resource America from 1989 to 2004 and served as a
director from 1989 through 2000 and Secretary from 1989 through 1998. Mr. Staines is a member of the Ohio Oil and Gas Association, the Independent Oil and Gas Association of New York and the Independent Petroleum Association of America.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><b>Tony C. Banks </b>is a Vice President of First Energy Solutions, Inc., a subsidiary of First Energy Corp., a public utility, since 2005. Mr. Banks is responsible for unregulated sales of electricity and energy-related products and services. Mr. Banks was previously the
Director of Marketing for First Energy Solutions. Before that, Mr. Banks was a consultant to utilities, energy service companies and energy technology firms. From 2000 through 2002, Mr. Banks was President of RAI Ventures, Inc. and Chairman of the Board of Optiron
Corporation, which was an energy technology subsidiary of Atlas America until 2002. In addition, Mr. Banks served as President of our general partner during 2000. He was Chief Executive Officer and President of Atlas America from 1998 through 2000.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><b>Curtis D. Clifford </b>has been the principal of CL4D CO, an energy consulting, marketing and reporting firm since 1998. Mr. Clifford has 39 years&#146; experience in the natural gas industry, from exploration, production and gathering to procurement, marketing and
consulting. He has been president of Amity Manor, Inc. since 1988 when he founded the company to develop housing for low-income elderly using tax credit financing. Mr. Clifford is a registered professional engineer in Pennsylvania.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><b>Gayle P.W. Jackson </b>has been President of Energy Global, Inc., a consulting firm which specializes in corporate development, diversification and government relations strategies for energy companies, since 2004. From 2001 to 2004, Dr. Jackson served as Managing
Director of FE Clean Energy Group, a global private equity management firm that invests in energy companies and projects in Central and Eastern Europe, Latin America and Asia. From 1985 to 2001, Dr. Jackson was President of Gayle P.W. Jackson, Inc., a consulting firm
that advised energy companies on corporate development and diversification strategies and also advised national and international governmental institutions on energy policy. Dr. Jackson has been Deputy Chairman</font></p>
</div>
<p align="center"><font face="serif" size="2">116</font></p>
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<p align="left"><font face="serif" size="2">of the Federal Reserve Bank of St.
    Louis since 2003 and a Board member since 2000, and is a member of the Board
    of Directors of Ameren Corporation, a publicly-traded public utility holding
company.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><b>Martin Rudolph </b>has been the Trustee of the AHP Settlement Trust, a $5 billion trust established to process litigation claims, since 2005. Before that, Mr. Rudolph was the director of tax planning, research and compliance for RSM McGladrey, Inc., a business services
firm from 2001 to 2005. From 1990 to 2001, he was a Managing Partner of Rudolph, Palitz LLC, which was merged with RSM McGladrey. Mr. Rudolph is a certified public accountant.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b><i>Other Significant Employees</i></b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><b>David D. Hall, 48</b>, has been the Executive Vice President and Chief Financial Officer of Spectrum (acquired by Atlas in July 2004 and now known as Atlas Pipeline Mid-Continent LLC) since 2002. From 2000 to 2002, Mr. Hall served as a senior business analyst at
ScissorTail Energy. Mr. Hall has more than 25 years experience as a financial executive in the energy industry.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Messrs. Firth, McGrath and Herz and Ms. Washington also are significant employees of Atlas Pipeline Partners GP, LLC.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b><i>Reimbursement of Expenses of Atlas&#146; General Partner and its Affiliates</i></b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas does not directly employ any persons to manage or operate its business. These functions are provided by Atlas&#146; general partner and employees of Atlas America. Atlas&#146; general partner does not receive a management fee in connection with its management of Atlas
apart from its interest as general partner and its right to receive incentive distributions.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas reimburses its general partner and its affiliates for compensation and benefits related to their executive officers, based upon an estimate of the time spent by such persons on activities for Atlas. Other indirect costs, such as rent for offices, are allocated to Atlas by
Atlas America based on the number of Atlas America employees who devote substantially all of their time to activities on Atlas&#146; behalf. Atlas reimburses Atlas America at cost for direct costs incurred by them on Atlas&#146; behalf.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; partnership agreement provides that its general partner will determine the costs and expenses that are allocable to Atlas in any reasonable manner determined by its general partner at its sole discretion. Atlas reimbursed its general partner and its affiliates $0.7
million and $1.4 million for the nine months ended September&nbsp;30, 2004 and 2005, respectively, for compensation and benefits related to its executive officers. Direct reimbursements were $7.2 million and $17.1 million for the nine months ended September&nbsp;30, 2004 and
2005, respectively, including certain costs that have been capitalized by Atlas. Atlas&#146; general partner believes that the method utilized in allocating costs to Atlas is reasonable.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Executive Officer Compensation</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following table sets forth certain compensation information for the chief executive officer and each of the four other most highly compensated executive officers of Atlas&#146; general partner in excess of $100,000 for 2004, 2003 and 2002. Atlas reimburses Atlas&#146;
general partner and its affiliates for expenses incurred on Atlas&#146; behalf, including the cost of officer compensation allocable to Atlas. It is not currently anticipated that Atlas will pay additional annual cash or cash bonus compensation to the officers of our general partner for
service to us, but that such officers will be compensated through the Long-Term Incentive Plan we are adopting concurrently with this offering.</font></p>
</div>
<p align="center"><font face="serif" size="2"><b>Summary Compensation Table</b></font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" align="center" valign="bottom"><font face="serif" size="1"><b>Annual
          Compensation</b></font>  <hr noshade size="1"></td><td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>All
          Other</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td valign="bottom"><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Name and Principal Position</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Year</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Salary</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Bonus</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Compensation<sup>(1)</sup></b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Edward E. Cohen<br>
Chairman of the Managing Board<br>
and Chief Executive Officer</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" width="4%"><font face="serif" size="2">2004<br>
2003<br>
2002</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">$<br>
        $<br>
        $</font></td>
    <td align="right" width="6%"><font face="serif" size="2">133,950<br>

179,600<br>

0</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">$<br>
$<br>
$</font></td>
    <td align="right" width="6%"><font face="serif" size="2">193,800<br>

119,700<br>


0</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" width="8%"><font face="serif" size="2">931,500   </font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Michael L. Staines</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right"><font face="serif" size="2">2004</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">$</font></td>
    <td align="right"><font face="serif" size="2">219,400</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">$</font></td>
    <td align="right"><font face="serif" size="2">45,600</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">$</font></td>
    <td align="right"><font face="serif" size="2">298,080</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">President, Chief Operating Officer</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right"><font face="serif" size="2">2003</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">$</font></td>
    <td align="right"><font face="serif" size="2">133,300</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">$</font></td>
    <td align="right"><font face="serif" size="2">10,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">and Managing Board Member</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right"><font face="serif" size="2">2002</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">$</font></td>
    <td align="right"><font face="serif" size="2">169,979</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">$</font></td>
    <td align="right"><font face="serif" size="2">28,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
 <tr valign="top">
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">117</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p118"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><hr noshade size="1" align="left" width="100%"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(1)</font></td>
    <td><div align="left"><font face="serif" size="2">Reflects grants of phantom units under the Atlas Long Term Incentive Plan, valued at the closing price of common units on the respective dates of grants. The phantom unit grants entitle the recipient, upon vesting, to receive one common unit or its then fair market value in cash
and include distribution equivalent rights. The number of phantom units held and the value of those phantom units, valued at the closing market price of Atlas common units on December 31, 2004, are: Mr. E. Cohen &#151; 25,000 phantom units ($1,047,500) and Mr. Staines &#151; 8,000
phantom units ($335,200).</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Long-Term Incentive Plan</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; general partner has adopted
    the Atlas Pipeline Partners, L.P. Long-Term Incentive Plan, referred to as
    the
    Plan, for employees of Atlas&#146; general partner and its affiliates who perform
    services for Atlas. Awards contemplated by the Plan include phantom units and
    unit  options. The Plan currently permits the grant of phantom units and
    unit options covering an aggregate of 435,000 common units delivered upon
    vesting of such phantom units or unit options. The Plan is administered by
    a committee appointed by Atlas&#146; general partner&#146;s
managing board, which sets the terms of awards under the Plan. This committee
    may make awards of either phantom units or options for an aggregate of 435,000
    common units, provided that the maximum number of phantom units that may
    be awarded in total to
non-employee managing board members is 10,000.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Phantom Units.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A phantom unit entitles the grantee to receive, upon the vesting of the phantom unit, a common unit (or cash equivalent, depending on the terms of the grant). As of December&nbsp;31, 2004, grants of 58,752 unvested phantom units under the Plan remain
outstanding to employees, officers and directors of Atlas&#146; general partner. This committee may, in the future, make additional grants under the plan to employees and directors containing such terms as such committee shall determine, including tandem distribution equivalent
rights with respect to phantom units. As a result of the vesting of these awards, Atlas recognized an expense of $0.7&nbsp;million during 2004.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The issuance of the common units upon vesting of phantom units is primarily intended to serve as a means of incentive compensation for performance. Therefore, no consideration is paid to Atlas by the plan participants upon receipt of the common units.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Grants of 1,752 phantom units were made in 2004 to current non-employee directors of Atlas&#146; general partner. These units vest and are payable in 25% increments.</font></p>
<p><font size="2" face="serif">The following table shows the vesting of phantom units granted under the Plan during 2004 to the named executive officers.</font></p>
</div>
<p align="center"><b><font size="2" face="serif">Remaining Unvested<br>
Grants<sup>(1)</sup></font></b></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><b><font size="1" face="serif">Name</font></b></td>
<td width="20%" align="center"><b><font size="1" face="serif">Total Units</font></b></td>
<td width="20%" align="center"><b><font size="1" face="serif">Units</font></b></td>
<td width="2%" align="left"><font size="1">&nbsp;</font></td>
<td width="1%" align="right"><font size="1">&nbsp;</font></td>
<td width="20%" align="center"><b><font size="1" face="serif">Value</font></b></td>
</tr>
<tr valign="top">
<td align="left"><hr align="left" width="25" size="1" noshade></td>
<td align="center"><hr align="center" width="50" size="1" noshade></td>
<td align="center"><hr align="center" width="25" size="1" noshade></td>
<td align="left">&nbsp;</td>
<td align="right">&nbsp;</td>
<td align="left"><hr align="center" width="25" size="1" noshade></td>
</tr>
<tr valign="top" bgcolor="#ffffff">
<td align="left"><font size="2" face="serif">Edward E. Cohen</font></td>
<td align="center"><font size="2" face="serif">25,000</font></td>
<td align="center"><font size="2" face="serif">25,000</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">  1,047,500</font></td>
</tr>
<tr valign="top" bgcolor="#FFFFFF">
<td align="left"><font size="2" face="serif">Michael L. Staines</font></td>
<td align="center"><font size="2" face="serif">  &nbsp;&nbsp;8,000</font></td>
<td align="center"><font size="2" face="serif">  &nbsp;&nbsp;8,000</font></td>
<td align="left">&nbsp;</td>
<td align="right"><font size="2" face="serif">$</font></td>
<td align="right"><font size="2" face="serif">     335,200</font></td>
</tr>
</table>

<table width="100%" border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td colspan="2"><hr align="left" width="100" size="1" noshade></font></td>
  </tr>
  <tr align="left" valign="top">
    <td width="3%"><font size="2" face="serif">(1) </font></td>
    <td><font size="2" face="serif">
As if vested on December 31, 2004, at a market closing price of $41.90 per unit.</font> </td>
  </tr>
</table>
<p></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Compensation of Managing Board Members</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; general partner does not pay additional remuneration to officers or employees of Atlas America who also serve as managing board members. In fiscal year 2004, each non-employee managing board member of Atlas&#146; general partner received an annual retainer of
$20,000 in cash and an annual grant of phantom units with DERs in an amount equal to the lesser of 500 units or $15,000 worth of units (based upon the market price of our common units) pursuant to Atlas&#146; Long-Term Incentive Plan, which was approved by Atlas&#146;
unitholders on February&nbsp;11, 2004. In addition, Atlas&#146; general partner reimburses each non-employee board member for out-of-pocket expenses in connection with attending meetings of the board or committees. Atlas reimburses its general partner for these expenses and
indemnifies its general partner&#146;s managing board members for actions associated with serving as managing board members to the extent permitted under Delaware law.</font></p>
</div>
<p align="center"><font face="serif" size="2">118</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p119"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT</b></font></p>
<p align="left"><font face="serif" size="2"><b>Atlas Pipeline Holdings, L.P.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following table sets forth certain information regarding the beneficial ownership of our common units prior to and as of the closing of this offering by:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">each person who will beneficially own more than 5% of our common units;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">each of the named executive officers of our general partner;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">all of the directors of our general partner; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">all directors and executive officers of our general partner as a group.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">All information with respect to beneficial ownership has been furnished by the respective directors or officers, as the case may be.</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Common Units Beneficially Owned After
Offering</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Name of Beneficial Owner</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Common Units</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Percent</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Atlas America, Inc.</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">AIC, Inc.</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Viking Resources Corporation</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Resource Energy, Inc.</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">REI-NY, Inc.</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Edward E. Cohen</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Jonathan Z. Cohen</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Robert R. Firth</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Matthew A. Jones</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Lisa Washington</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Steven J. Doherty</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">William G. Karis</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Harvey G. Magarick</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">All directors and officers of our general partner as a group (8 persons)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><hr noshade size="1" align="left" width="100%"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">*</font></td>
    <td><div align="left"><font face="serif" size="2">Less than 1%.</font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2"><b>Atlas Pipeline Partners, L.P.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following table sets forth certain information as of December&nbsp;31, 2005 regarding beneficial ownership of Atlas&#146; common units by:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">each person known by Atlas Pipeline GP to beneficially own more than 5% of Atlas&#146; common units;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">each of the named executive officers of Atlas Pipeline GP;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">all of the directors of Atlas Pipeline GP;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">all of the directors and executive officers of Atlas Pipeline GP as a group.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">All information with respect to beneficial ownership has been furnished by the respective directors or officers, as the case may be. Each person has sole voting and dispositive power over the common units shown unless otherwise indicated below. Atlas has 12,549,266
common units outstanding at December 31, 2005.</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Common Units Beneficially Owned After Offering</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Name of Beneficial Owner</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Common Units</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Percent</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Atlas Pipeline GP</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">1,641,026</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">12.8%</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Edward E. Cohen</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,350</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">*</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Jonathan Z. Cohen</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,727</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">*</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Michael L. Staines</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">*</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Matthew A. Jones</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">*</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Tony C. Banks (a)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">195</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">*</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Curtis D. Clifford</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">113</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">*</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Gayle P.W. Jackson</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">*</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Martin Rudolph</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">500</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">*</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">All directors and officers as a group (8 persons)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">20,885</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">*</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><hr noshade size="1" align="left" width="100%"></td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">*</font></td>
    <td><div align="left"><font face="serif" size="2">Less than 1%.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(a)</font></td>
    <td><div align="left"><font face="serif" size="2">Represents the number of common units Mr. Banks has the right to receive upon vesting of previous grants of phantom units within the next 60 days.</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">119</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p120"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Our Relationship with Atlas Pipeline Partners, L.P.</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our cash generating assets consist of our interests in Atlas Pipeline Partners, L.P., a publicly traded Delaware limited partnership. Atlas is a midstream energy service provider engaged in the transmission, gathering and processing of natural gas in the Mid-Continent and
Appalachian regions. Our interests in Atlas will initially consist of a 100% ownership interest in the general partner of Atlas, Atlas Pipeline GP, which owns:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">a 2.0% general partner interest in Atlas, which entitles it to receive 2.0% of the cash distributed by Atlas;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">all of the incentive distribution rights in Atlas, which entitle us to receive increasing percentages, up to a maximum of 48.0%, of any cash distributed by Atlas as it reaches certain target distribution levels in excess of $0.42 per Atlas unit in any quarter; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">1,641,026 common units of Atlas, representing an approximate 12.8% limited partner interest in Atlas.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas is required by its partnership agreement to distribute all of its cash on hand at the end of each quarter, less reserves established by its general partner, in its sole discretion to provide for the proper conduct of Atlas&#146; business or to provide for future distributions.
Our general partner will be reimbursed for direct and indirect expenses incurred on our behalf. Some of the non-independent directors of our general partner also serve as directors of Atlas&#146; general partner.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>The Contribution Agreement</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Prior to the closing of this offering, the partnership interests we will own in Atlas, including the 2.0% general partner interest, the incentive distribution rights and 1,641,026 common units, are held, directly or indirectly, by Atlas America. In connection with this
offering, Atlas America and its affiliates have entered into a Contribution Agreement pursuant to which, at closing, the 2% general partner interest, incentive distribution rights and 1,641,026 common units, each representing partnership interests in Atlas, will be contributed to
us. As consideration for this contribution and in accordance with the terms of the Contribution Agreement, we will distribute substantially all of the proceeds we receive from this offering as well as 17,500,000 of our common units, assuming no exercise of the underwriters&#146;
option to purchase additional units.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Registration Rights</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under our limited partnership agreement, we have agreed to register for sale under the Securities Act and applicable state securities laws (subject to certain limitations) any common units proposed to be sold by owners of Atlas&#146; general partner or any of its respective
affiliates. These registration rights require us to file one registration statement. We have also agreed to include any securities held by the owners of Atlas&#146; general partner or any of its respective affiliates in any registration statement that we file to offer securities for cash,
except that an offering relating solely to an employee benefit plan and other similar exceptions. We are obligated to pay all expenses incidental to the registration, excluding underwriting discounts and commissions. These registration rights are in addition to the registration
rights that we have agreed to provide our general partner and its affiliates pursuant to our limited partnership agreement. Please read &#147;Units Eligible for Future Sale.&#148;</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Indemnification of Directors and Officers</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under our limited partnership agreement and subject to specified limitations, we will indemnify to the fullest extent permitted by Delaware law, from and against all losses, claims, damages or similar events any director or officer, or while serving as a director or officer,
any person who is or was serving as a tax matters member or as a director, officer, tax matters member, employee, partner, manager, fiduciary or trustee of our company or any of our affiliates. Additionally, we will indemnify to the fullest extent permitted by law, from
</font></p>
</div>
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<p align="left"><font face="serif" size="2">and against all losses, claims, damages or similar events any person who is or was an employee (other than an officer) or agent of our partnership at the time of the occurrence giving rise to the
indemnity being sought.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Related Party Transactions Involving Atlas</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On June&nbsp;30, 2005, Resource America, Inc. (RAI) distributed its 10.7 million shares of Atlas America to its shareholders. In connection with this distribution of Atlas America common stock to its shareholders, RAI and Atlas America entered into various agreements,
including a shared services agreement and a tax matters agreement, which govern the ongoing relationship between the two companies. Atlas is dependent upon the resources and services provided by Atlas America, and through these agreements, RAI and its affiliates.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under an agreement between Atlas and Atlas America, Atlas America must construct up to 2,500 feet of sales lines from its existing wells in the Appalachian region to a point of connection to Atlas&#146; gathering systems. Atlas must, at its own cost, extend its system to
connect to any such lines within 1,000 feet of its gathering systems. With respect to wells to be drilled by Atlas America that will be more than 3,500 feet from Atlas&#146; gathering systems, Atlas has various options to connect those wells to its gathering systems at its own cost.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">At December&nbsp;31, 2005, Atlas&#146; general partner owned 1,641,026 common units constituting 12.8% of the limited partner interest in Atlas.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; omnibus agreement and the natural gas gathering agreements with Atlas America and its affiliates were not the result of arms-length negotiations and, accordingly, Atlas cannot assure us that it could have obtained more favorable terms from independent third
parties similarly situated. However, since these agreements principally involve the imposition of obligations on Atlas America and its affiliates, Atlas does not believe that it could obtain similar agreements from independent third parties.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In connection with the acquisition of Spectrum, Atlas entered into commitment agreements with Resource America and Atlas America for the purchase by them of up to $25.0 million of preferred units in Atlas Pipeline Operating Partnership, L.P., Atlas&#146; subsidiary. In
consideration for their commitments, upon the closing of the Spectrum acquisition and the purchase by each of $10.0 million preferred units, Atlas paid Resource America and Atlas America commitment fees of $750,000 and $500,000, respectively.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In connection with the proposed acquisition of Alaska Pipeline Company, L.L.C., Atlas paid Resource America a fee of $70,750 in the year ended December&nbsp;31, 2004 for its commitment to repay certain financing that would have been required to complete the
acquisition.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas does not currently directly employ any persons to manage or operate its business. These functions are provided by employees of Atlas America and/or its affiliates. Atlas&#146; general partner does not receive a management fee in connection with its management of
Atlas apart from its interest as general partner and its right to receive incentive distributions.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas reimburses its general partner, Atlas America and its affiliates for expenses they incur in managing its operations and for an allocation of the compensation paid to the executive officers of its general partner, based upon an estimate of the time spent by such
persons on activities for Atlas. Other indirect costs, such as rent for offices, are allocated to Atlas by Atlas America based on the number of its employees who devote substantially all of their time to activities on Atlas&#146; behalf. Atlas reimburses Atlas America at cost for direct
costs incurred by them on Atlas&#146; behalf. Atlas&#146; partnership agreement provides that its general partners will determine the costs and expenses that are allocable to Atlas in any reasonable manner determined by its general partner at its sole discretion.</font></p>
</div>
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<p align="center"><font face="serif" size="2"><b>CONFLICTS OF INTEREST AND FIDUCIARY DUTIES</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Conflicts of Interest</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>General.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Conflicts of interest exist and may arise in the future as a result of the relationships among us, Atlas and our and its respective general partners and affiliates. The directors and officers of Atlas&#146; general partner have fiduciary duties to manage Atlas in a
manner beneficial to us, its owner. At the same time, Atlas&#146; general partner has a fiduciary duty to manage Atlas in a manner beneficial to Atlas and its limited partners. The managing board or the conflicts committee of the managing board of Atlas will resolve any such
conflict and has broad latitude to consider the interests of all parties to the conflict. The resolution of these conflicts may not always be in our best interest or that of our unitholders.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Conflicts Between Our General Partner and Its Affiliates and Our Partners.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Whenever a conflict arises between our general partner or its affiliates, on the one hand, and us or any of our other partners, on the other hand, our general partner will resolve that conflict.
Our partnership agreement contains provisions that modify and limit our general partner&#146;s fiduciary duties to our unitholders. Our partnership agreement also restricts the remedies available to unitholders for actions taken that, without those limitations, might constitute breaches
of our general partner&#146;s fiduciary duty to us.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner will not be in breach of its obligations under the partnership agreement or its duties to us or our unitholders if the resolution of the conflict is:</font></p>
</div>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">approved by the audit and conflicts committee, although our general partner is not obligated to seek such approval;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner or any of its affiliates;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">fair and reasonable to us, taking into account the totality of the relationships among the parties involved, including other transactions that may be particularly favorable or advantageous to us.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner may, but is not required to, seek the approval of such resolution from the audit and conflicts committee of its board. If our general partner does not seek approval from the audit and conflicts committee and its board of directors determines that the
resolution or course of action taken with respect to the conflict of interest satisfies either of the standards set forth in the third and fourth bullet points above, then it will be presumed that, in making its decision, the board of directors acted in good faith, and in any proceeding
brought by or on behalf of any limited partner or us, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. Unless the resolution of a conflict is specifically provided for in our partnership agreement, our general partner or
the audit and conflicts committee may consider any factors it determines in good faith to consider when resolving a conflict. When our partnership agreement requires someone to act in good faith, it requires that person to believe that he is acting in the best interests of the
partnership.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Conflicts of interest could arise in the situations described below, among others.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Actions taken by our general partner may affect the amount of cash available for distribution to our common unitholders.</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The amount of cash that is available for distribution to our common unitholders is affected by decisions of our general partner regarding such matters as:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">amount and time of cash expenditures;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">asset sales or acquisitions;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">borrowings;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the issuance of additional units;</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">122</font></p>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the creation, reduction or increase of reserves in any quarter; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">corporate opportunities.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>We will reimburse our general partner and its affiliates for expenses.</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We will reimburse our general partner and its affiliates for costs incurred in managing and operating us, including costs incurred in rendering corporate staff and support services to us. Our partnership agreement provides that our general partner will determine the
expenses that are allocable to us in any reasonable manner determined by our general partner in its sole discretion. Please read &#147;Certain Relationships and Related Party Transactions.&#148;</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Our general partner intends to limit its liability regarding our obligations.</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner intends to limit its liability under contractual arrangements so that the other party has recourse only to our assets, and not against our general partner or its assets. Our partnership agreement provides that any action taken by our general partner to
limit its liability or our liability is not a breach of our general partner&#146;s fiduciary duties, even if we could have obtained more favorable terms without the limitation on liability.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Common unitholders will have no right to enforce obligations of our general partner and its affiliates under agreements with us.</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Any agreements between us on the one hand, and our general partner and its affiliates, on the other, will not grant to the unitholders, separate and apart from us, the right to enforce the obligations of our general partner and its affiliates in our favor.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>If we are presented with certain
      business opportunities, Atlas will have the first right to pursue such
      opportunities.</b></font></p>
<p align="left"><font face="serif" size="2">Pursuant to the omnibus agreement
    to be entered into in connection with the closing of this offering, we will
    agree to certain business opportunity arrangements to address potential conflicts
    that may arise between us and Atlas. If a business opportunity in respect
    of any business activity in which Atlas is currently engaged is presented
    to us, our general partner or Atlas or its general partner, then Atlas will
    have the first right to pursue such business opportunity. The omnibus agreement
    will provide, among other things, that Atlas will be presumed to desire to
    acquire the assets until such time as it advises us that it has abandoned
    such pursuit, and we may not pursue the opportunity prior to that time.</font></p>

<p align="left"><font face="serif" size="2"><b>Atlas and affiliates of our general partner are not limited in their ability to compete with us, which could cause conflicts of interest and limit our ability to acquire additional assets or businesses which in turn could adversely affect our results of operations and cash available for distribution to our unitholders.</b></font></p>
<div style="text-indent:3%">

<p align="left"><font face="serif" size="2">Neither our partnership agreement
    nor the omnibus agreement between us, Atlas, Atlas Pipeline GP and Atlas
    Pipeline Holdings GP, LLC will prohibit Atlas or affiliates of our general
    partner from owning assets or engaging in businesses that compete directly
    or indirectly with us or one another. In addition, Atlas and its affiliates
    or affiliates of our general partner, may acquire, construct or dispose of
    additional assets related to the transmission, gathering and processing of
    natural gas, NGLs or other assets in the future, without any obligation to
    offer us the opportunity to purchase or construct any of those assets. As
    a result, competition among these entities could adversely impact Atlas&#146;    or our results of operations and cash available for distribution.</font></p>
</div>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Contracts between us, on the one hand, and our general partner and its affiliates, on the other, will not be the result of arm&#146;s-length negotiations.</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our partnership agreement allows our general partner to determine, in good faith, any amounts to pay itself or its affiliates for any services rendered to us. Our general partner may also enter into additional contractual arrangements with any of its affiliates on our behalf.
Neither the partnership agreement nor any of the other agreements, contracts and arrangements between us, on the one hand, and our general partner and its affiliates, on the other, are or will be the result of arm&#146;s-length negotiations.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner will determine, in good faith, the terms of any of these transactions entered into after the sale of the common units offered in this offering.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Common units are subject to our general partner&#146;s limited call right.</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner may exercise its right to call and purchase common units as provided in our partnership agreement or assign this right to one of its affiliates or to us. Our general partner may use its own discretion, free of fiduciary duty restrictions, in determining
whether to exercise this right. As a result, a common unitholder may have his common units purchased from him at an undesirable time or price.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>We may not choose to retain separate counsel for ourselves or for the holders of common units.</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The attorneys, independent accountants and others who have performed services for us regarding this offering have been retained by our general partner. Attorneys, independent accountants and others who will perform services for us are selected by our general partner
or the conflicts committee, if established, and may perform services for our general partner and its affiliates. We may retain separate counsel for ourselves or the holders of our common units in the event of a conflict of interest between our general partner and its affiliates, on
the one hand, and us or the holders of our common units, on the other, depending on the nature of the conflict. We do not intend to do so in most cases.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Acquisitions of Competing Businesses; Potential Future Conflicts.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;From time to time, we or our affiliates may acquire entities whose businesses compete with us or Atlas. In addition, future conflicts of interest may arise among us and any entities whose general partner
interests we or our affiliates acquire or between Atlas and such entities. It is not possible to predict the nature or extent of these potential future conflicts of interest at this time, nor is it possible to determine how we will address and resolve any such future conflicts of interest.
However, the resolution of these conflicts may not always be in our best interest or those of our unitholders. We do not currently intend to take any action which would limit the ability of Atlas to pursue its business strategy.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Fiduciary Duties</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner is accountable to us and our unitholders as a fiduciary. Fiduciary duties owed to unitholders by our general partner are prescribed by law and our partnership agreement. The Delaware Revised Uniform Limited Partnership Act, which we refer to in
this prospectus as the Delaware Act, provides that Delaware limited partnerships may, in their partnership agreements, modify, restrict or expand the fiduciary duties otherwise owed by a general partner to limited partners and the partnership.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our partnership agreement contains various provisions modifying and restricting the fiduciary duties that might otherwise be owed by our general partner. We have adopted these restrictions to allow our general partner to take into account the interests of other parties in
addition to our interests when resolving conflicts of interest. These modifications are detrimental to the common unitholders because they restrict the remedies available to unitholders for actions that, without those limitations, might constitute breaches of fiduciary duty, as
described below. The following is a summary of the material restrictions of the fiduciary duties owed by our general partner to the unitholders:</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="39%"><font face="serif" size="2"><b>State-law fiduciary duty standards</b></font></td>
    <td valign="bottom"><div align="left"><font face="serif" size="2">
Fiduciary duties are generally considered to include an obligation to act in
      good faith and with due care and loyalty. The duty of care, in the absence
      of a provision in a </font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">124</font></p>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td><font face="serif" size="2">partnership agreement providing otherwise,
        would generally require a general partner to act for the partnership
        in the same manner as a prudent person would act on his own behalf. The
        duty of loyalty, in the absence of a provision in a partnership agreement
        providing otherwise, would generally prohibit a general partner of a
        Delaware limited partnership from taking any action or engaging in any
        transaction where a conflict of
interest is present.</font></td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr>
    <td>&nbsp;</td>
    <td><font face="serif" size="2">The Delaware Act generally provides that
        a limited partner may institute legal action on behalf of the partnership
        to recover damages from a third party where a general partner has refused
        to institute the action or where an effort to cause a general partner
        to do so is not likely to succeed. In addition, the statutory or case
        law of some jurisdictions may permit a limited partner to institute legal
        action on behalf of himself and all other similarly situated limited
        partners to recover damages from a general partner for violations of
    its fiduciary duties to the limited partners.</font></td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="39%"><font face="serif" size="2"><b>Partnership agreement modified standards</b></font></td>
    <td valign="bottom"><div align="left"><font face="serif" size="2"> Our partnership
          agreement contains provisions that waive or consent to conduct by our
          general partner and its affiliates that might otherwise raise issues
          about compliance with fiduciary duties or applicable law. For example,
          our partnership agreement provides that when our general partner is
          acting in its capacity as our general partner, as opposed to in its
          individual capacity, it must act in &#147;good faith&#148; and will
          not be subject to any other standard under applicable law. In addition,
          when our general partner is acting in its individual capacity, as opposed
          to in its capacity as our general partner, it may act without any fiduciary
          obligation to us or the unitholders whatsoever. These standards reduce
          the obligations to which our general partner would otherwise be held.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">In addition to the other more specific provisions limiting the obligations of our general partner, our partnership agreement further provides that our general partner and its officers and directors will not be liable for
monetary damages to us, our unitholders or assignees for errors of judgment or for any acts or omissions unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining
that the general partner or its officers and directors acted in bad faith or engaged in fraud or willful misconduct, or in the case of a criminal matter, acted with the knowledge that such conduct was unlawful.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>Special provisions regarding affiliated transactions.</i>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our partnership agreement generally provides that affiliated transactions and resolutions of conflicts of interest not involving a vote of unitholders and that are
not approved by the conflicts committee of the board of directors of our general partner must be:</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">125</font></p>
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<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="39%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">&#147;fair and reasonable&#148; to us, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to us).</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">If our general partner does not seek approval from the conflicts committee and its board of directors determines that the resolution or course of action taken with respect to the conflict of interest satisfies either of the
standards set forth in the bullet points above, then it will be presumed that, in making its decision, the board of directors, which may include board members affected by the conflict of interest, acted in good faith and
in any proceeding brought by or on behalf of any unitholders or the partnership, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. These standards reduce the
obligations to which our general partner would otherwise be held.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In order to become one of our limited partners, a unitholder is required to agree to be bound by the provisions in our partnership agreement, including the provisions discussed above. This is in accordance with the policy of the Delaware Act favoring the principle of freedom
of contract and the enforceability of partnership agreements. The failure of a limited partner or assignee to sign a partnership agreement does not render the partnership agreement unenforceable against that person.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We must indemnify our general partner and its officers, directors, managers and certain other specified persons, to the fullest extent permitted by law, against liabilities, costs and expenses incurred by our general partner or these other persons. We must provide this
indemnification unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that these persons acted in bad faith or engaged in fraud or willful misconduct. We must also provide this indemnification for criminal proceedings
unless our general partner or these other persons acted with knowledge that their conduct was unlawful. Thus, our general partner could be indemnified for its negligent acts if it met the requirements set forth above. To the extent these provisions purport to include
indemnification for liabilities arising under the Securities Act, in the opinion of the SEC, such indemnification is contrary to public policy and, therefore, unenforceable. Please read &#147;Description of Our Partnership Agreement&#151;Indemnification.&#148;</font></p>
</div>
<p align="center"><font face="serif" size="2">126</font></p>
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<p align="center"><font face="serif" size="2"><b>DESCRIPTION OF THE COMMON UNITS</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>The Units</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The common units represent limited partner interests in us. The holders of units are entitled to participate in partnership distributions and exercise the rights or privileges available to unitholders under our partnership agreement. For a description of the rights and
preferences of holders of common units in and to partnership distributions, please read this section and &#147;Cash Distribution Policy.&#148; For a description of the rights and privileges of unitholders under our partnership agreement, including voting rights, please read &#147;The
Partnership Agreement of Atlas Pipeline Holdings, L.P.&#148;</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Transfer Agent and Registrar</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Duties</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">American Stock Transfer and Trust Company will serve as registrar and transfer agent for the common units. We will pay all fees charged by the transfer agent for transfers of common units except the following that must be paid by unitholders:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">surety bond premiums to replace lost or stolen certificates, taxes and other governmental charges;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">special charges for services requested by a common unitholder; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">other similar fees or charges.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">There will be no charge to unitholders for disbursements of our cash distributions. We will indemnify the transfer agent, its agents and each of their stockholders, directors, officers and employees against all claims and losses that may arise out of acts performed or
omitted for its activities in that capacity, except for any liability due to any gross negligence or intentional misconduct of the indemnified person or entity.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<i>Resignation or Removal</i></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The transfer agent may resign, by notice to us, or be removed by us. The resignation or removal of the transfer agent will become effective upon our appointment of a successor transfer agent and registrar and its acceptance of the appointment. If no successor has been
appointed and has accepted the appointment within 30 days after notice of the resignation or removal, our general partner may act as the transfer agent and registrar until a successor is appointed.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Transfer of Common Units</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">By transfer of common units in accordance with our partnership agreement, each transferee of common units shall be admitted as a limited partner with respect to the common units transferred when such transfer and admission is reflected in our books and records. Each
transferee:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">represents that the transferee has the capacity, power and authority to become bound by our partnership agreement;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">automatically agrees to be bound by the terms and conditions of, and is deemed to have executed, our partnership agreement; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">gives the consents and approvals contained in our partnership agreement, such as the approval of all transactions and agreements that we are entering into in connection with our formation and this offering.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">A transferee will become a substituted limited partner of our partnership for the transferred common units automatically upon the recording of the transfer on our books and records. Our general partner will cause any transfers to be recorded on our books and records no
less frequently than quarterly.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We may, at our discretion, treat the nominee holder of a common unit as the absolute owner. In that case, the beneficial holders&#146; rights are limited solely to those that it has against the nominee holder as a result of any agreement between the beneficial owner and the
nominee holder.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">127</font></p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Common units are securities and are transferable according to the laws governing transfers of securities. In addition to other rights acquired upon transfer, the transferor gives the transferee the right to become a substituted limited partner in our partnership for the
transferred common units.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Until a common unit has been transferred on our books, we and the transfer agent may treat the record holder of the unit as the absolute owner for all purposes, except as otherwise required by law or stock exchange regulations.</font></p>
</div>
<p align="center"><font face="serif" size="2">128</font></p>
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<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>THE PARTNERSHIP AGREEMENT OF ATLAS PIPELINE HOLDINGS, L.P.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following is a summary of the material provisions of our partnership agreement. The form of our partnership agreement is included as Appendix A in this prospectus.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We summarize the following provisions of our partnership agreement elsewhere in this prospectus:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">with regard to distributions of available cash, please read &#147;Cash Distribution Policy and Restrictions on Distributions;&#148;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">with regard to the fiduciary duties of our general partner, please read &#147;Conflicts of Interest and Fiduciary Duties;&#148;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">with regard to rights of holders of units, please read &#147;Description of the Common Units;&#148; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">with regard to allocations of taxable income, taxable loss and other matters, please read &#147;Material Tax Consequences.&#148;</font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2"><b>Organization and Duration</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We were formed on December&nbsp;15, 2005 and have a perpetual existence.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Purpose</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under our partnership agreement, we are permitted to engage, directly or indirectly, in any business activity that is approved by our general partner and that lawfully may be conducted by a limited partnership organized under Delaware law and, in connection therewith,
to exercise all of the rights and powers conferred upon us pursuant to the agreements relating to such business activity; provided, however, that our general partner may not cause us to engage, directly or indirectly, in any business activity that our general partner determines
would cause us to be treated as an association taxable as a corporation or otherwise taxable as an entity for federal income tax purposes.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Although our general partner has the ability to cause us, our affiliates or our subsidiaries to engage in activities other than the ownership of partnership interests in Atlas, our general partner has no current plans to do so and may decline to do so free of any fiduciary
duty or obligation whatsoever to us or the limited partners, including any duty to act in good faith or in the best interest of us or our limited partners. Our general partner is authorized in general to perform all acts it determines to be necessary or appropriate to carry out our
purposes and to conduct our business. For a further description of limits on our business, please read &#147;Certain Relationships and Related Transactions.&#148;</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Power of Attorney</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Each limited partner, and each person who acquires a unit from a unitholder, by accepting the unit, automatically grants to our general partner and, if appointed, a liquidator, a power of attorney to, among other things, execute and file documents required for our
qualification, continuance or dissolution. The power of attorney also grants the authority to amend, and to make consents and waivers under, our partnership agreement. Please read &#147;&#151;Amendments to Our Partnership Agreement.&#148;</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Capital Contributions</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Unitholders are not obligated to make additional capital contributions, except as described below under &#147;&#151;Limited Liability.&#148;</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Limited Liability</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Assuming that a limited partner does not participate in the control of our business within the meaning of the Delaware Act and that he otherwise acts in conformity with the provisions of our partnership agreement, his liability under the Delaware Act will be limited,
subject to possible exceptions, to the amount of capital he is obligated to contribute to us for his common units plus his share of any undistributed profits and assets. If it were determined, however, that the right, or exercise of the right, by the limited partners as a group:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">to remove or replace the general partner;</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">129</font></p>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">to approve some amendments to the partnership agreement; or</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">to take other action under the partnership agreement;</font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2">constituted &#147;participation in the control&#148; of our business for the purposes of the Delaware Act, then our limited partners could be held personally liable for our obligations under the laws of Delaware, to the same extent as our general partner. This liability would extend to
persons who transact business with us and reasonably believe that the limited partner is a general partner. Neither our partnership agreement nor the Delaware Act specifically provides for legal recourse against our general partner if a limited partner were to lose limited
liability through any fault of our general partner. While this does not mean that a limited partner could not seek legal recourse, we know of no precedent for this type of a claim in Delaware case law.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under the Delaware Act, a limited partnership may not make a distribution to a partner if, after the distribution, all liabilities of the limited partnership, other than liabilities to partners on account of their partnership interests and liabilities for which the recourse of
creditors is limited to specific property of the partnership, would exceed the fair value of the assets of the limited partnership. For the purpose of determining the fair value of the assets of a limited partnership, the Delaware Act provides that the fair value of property subject to
liability for which recourse of creditors is limited shall be included in the assets of the limited partnership only to the extent that the fair value of that property exceeds the nonrecourse liability. The Delaware Act provides that a limited partner who receives a distribution and
knew at the time of the distribution that the distribution was in violation of the Delaware Act shall be liable to the limited partnership for the amount of the distribution for three years. Under the Delaware Act, a substituted limited partner of a limited partnership is liable for
the obligations of his assignor to make contributions to the partnership, except that such person is not obligated for liabilities unknown to him at the time he became a limited partner and that could not be ascertained from the partnership agreement.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Limitations on the liability of limited partners for the obligations of a limited partner have not been clearly established in many jurisdictions. While we currently have no operations distinct from Atlas, if in the future, by our ownership in an operating company or
otherwise, it were determined that we were conducting business in any state without compliance with the applicable limited partnership or limited liability company statute, or that the right or exercise of the right by the limited partners as a group to remove or replace the
general partner, to approve some amendments to our partnership agreement, or to take other action under our partnership agreement constituted &#147;participation in the control&#148; of our business for purposes of the statutes of any relevant jurisdiction, then the limited partners could
be held personally liable for our obligations under the law of that jurisdiction to the same extent as the general partner under the circumstances. We will operate in a manner that the general partner considers reasonable and necessary or appropriate to preserve the limited
liability of the limited partners.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Voting Rights</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following is a summary of the unitholder vote required for the matters specified below. In voting their units, affiliates of our general partner will have no fiduciary duty or obligation whatsoever to us or the limited partners, including any duty to act in good faith or
in the best interests of us or the limited partners.</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="39%"><font face="serif" size="2"><b>Issuance of additional units</b></font></td>
    <td valign="bottom"><div align="left"><font face="serif" size="2">
No approval right.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2"><b>Amendment of our partnership agreement</b></font></td>
    <td valign="bottom"><div align="left"><font face="serif" size="2"> Certain
          amendments may be made by our general partner without the approval
          of our unitholders. Other amendments generally require the approval
          of a majority of our outstanding units.
Please read &#147;&#151;Amendments to Our Partnership Agreement.&#148;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2"><b>Merger of our partnership or the sale of all</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>or substantially all of our assets</b></font></td>
    <td valign="bottom"><div align="left"><font face="serif" size="2"> A majority
          of our outstanding units in certain circumstances. Please read &#147;&#151;Merger,
          Sale or Other Disposition of Assets.&#148;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2"><b>Dissolution of our partnership</b></font></td>
    <td valign="bottom"><div align="left"><font face="serif" size="2"> A majority
          of our outstanding units. Please read &#147;&#151;Termination or Dissolution.&#148;</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">130</font></p>
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<div style="page-break-before:always"></div>
<page>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="39%"><font face="serif" size="2"><b>Continuation of our business upon dissolution</b></font></td>
    <td valign="bottom"><div align="left"><font face="serif" size="2"> A majority
          of our outstanding units. Please read &#147;&#151;Termination or Dissolution.&#148;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2"><b>Withdrawal of our general partner</b></font></td>
    <td valign="bottom"><div align="left"><font face="serif" size="2"> Under
            most circumstances, the approval of a majority of the units, excluding
            units held by our general partner and its affiliates, is required
            for the withdrawal of the general partner prior to
December&nbsp;30, 2015 in a manner that would cause a dissolution of our partnership. Please read &#147;&#151;Withdrawal
or Removal of Our General Partner.&#148;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2"><b>Removal of our general partner</b></font></td>
    <td valign="bottom"><div align="left"><font face="serif" size="2"> Not less
          than 66 2/3 of the outstanding units, including units held by our general
          partner and its affiliates. Please read &#147;&#151;Withdrawal or Removal
          of Our General Partner.&#148;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><div align="left"><font face="serif" size="2">Transfer
            of the general partner interest Our general partner may transfer
            all, but not less than all, of its general partner interest in us
            without a vote of our unitholders to (i) an affiliate (other than
            an individual) or (ii) another entity
in connection with its merger or consolidation with or into, or sale of all or
            substantially all of its assets to, such person. The approval of
            a majority of the units, excluding units held by the general partner
            and its affiliates, is required in other circumstances for a transfer
            of the general partner interest to a third party prior to December&nbsp;31, 2015. Please read &#147;&#151;Transfer
            of
General Partner Interest.&#148;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="39%"><font face="serif" size="2"><b>Transfer of ownership interests in</b><br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>our general partner</b></font></td>
    <td valign="bottom"><div align="left"><font face="serif" size="2">&nbsp;<br>
        No approval
          required at any time. Please read &#147;&#151;Transfer of Ownership
          Interests in Our General Partner.&#148;</font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Issuance of Additional Securities</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our partnership agreement authorizes us to issue an unlimited number of additional limited partner interests and other equity securities on terms and conditions established by our general partner in its sole discretion without the approval of our unitholders.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">It is possible that we will fund acquisitions through the issuance of additional units or other equity securities. Holders of any additional units we issue will be entitled to share equally with the then-existing holders of units in our cash distributions. In addition, the
issuance of additional partnership interests may dilute the value of the interests of the then-existing holders of units in our net assets.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In accordance with Delaware law and the provisions of our partnership agreement, we may also issue additional partnership interests that, in the sole discretion of our general partner, may have special voting rights to which units are not entitled.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Amendments to Our Partnership Agreement</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>General</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Amendments to our partnership agreement may be proposed only by or with the consent of our general partner. However, our general partner will have no duty or obligation to propose any amendment and may decline to do so free of any fiduciary duty or obligation
whatsoever to us or the limited partners, including any duty to act in good faith or in the best interests of us or the limited partners. To adopt a proposed amendment, other than the amendments discussed below, our general partner is required to seek written approval of the
holders of the number of units required to approve the amendment or call a meeting of the</font></p>
</div>
<p align="center"><font face="serif" size="2">131</font></p>
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<p align="left"><font face="serif" size="2">limited partners to consider and vote upon the proposed amendment. Except as described below, an amendment must be approved by a majority of our outstanding units.</font></p>
<p align="left"><font face="serif" size="2"><b>Prohibited Amendments</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">No amendment may be made that would:</font></p>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(1)&nbsp;&nbsp;enlarge the obligations of any limited partner without its consent, unless approved by at least a majority of the type or class of limited partner interests so affected; or</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(2)&nbsp;&nbsp;enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable by us to our general partner or any of its affiliates without the consent of our general partner, which may be
given or withheld at its option.</font></p>
</div>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The provision of our partnership agreement preventing the amendments having the effects described in clauses (1) or (2) above can be amended upon the approval of the holders of at least 90% of the outstanding units.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>No Unitholder Approval</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner may generally make amendments to our partnership agreement without the approval of any limited partner to reflect:</font></p>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(1) a change in the name of the partnership, the location of the partnership&#146;s principal place of business, the partnership&#146;s registered agent or its registered office;</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(2) the admission, substitution, withdrawal or removal of partners in accordance with our partnership agreement;</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(3) a change that, in the sole discretion of our general partner, is necessary or advisable for the partnership to qualify or to continue our qualification as a limited partnership or a partnership in which the limited partners have limited liability under the laws of any state
or to ensure that the partnership will not be treated as an association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes;</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(4) an amendment that is necessary, in the opinion of our counsel, to prevent the partnership or our general partner or its directors, officers, agents or trustees, from in any manner being subjected to the provisions of the Investment Company Act of 1940, the Investment
Advisors Act of 1940, or &#147;plan asset&#148; regulations adopted under the Employee Retirement Income Security Act of 1974, whether or not substantially similar to plan asset regulations currently applied or proposed;</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(5) an amendment that our general partner determines to be necessary or appropriate for the authorization of additional partnership securities or rights to acquire partnership securities;</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(6) any amendment expressly permitted in our partnership agreement to be made by our general partner acting alone;</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(7) an amendment effected, necessitated or contemplated by a merger agreement that has been approved under the terms of our partnership agreement;</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(8) any amendment that, in the discretion of our general partner, is necessary or advisable for the formation by the partnership of, or its investment in, any corporation, partnership or other entity, as otherwise permitted by our partnership agreement;</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(9) a change in our fiscal year or taxable year and related changes;</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(10) certain mergers or conveyances set forth in our partnership agreement; and</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(11) any other amendments substantially similar to any of the matters described in (1) through (9) above.</font></p>
</div>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">132</font></p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In addition, our general partner may make amendments to our partnership agreement without the approval of any limited partner or assignee if our general partner determines, at its option, that those amendments:</font></p>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(1) do not adversely affect our limited partners in any material respect;</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(2) are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute;</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(3) are necessary or appropriate to facilitate the trading of limited partner interests or to comply with any rule, regulation, guideline or requirement of any securities exchange on which the limited partner interests are or will be listed for trading;</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(4) are necessary or advisable for any action taken by our general partner relating to splits or combinations of units under the provisions of our partnership agreement; or</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(5) are required to effect the intent of the provisions of our partnership agreement or are otherwise contemplated by our partnership agreement.</font></p>
</div>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Finally, our partnership agreement specifically permits our general partner to authorize the general partner of Atlas to limit or modify the incentive distribution rights held by us if our general partner determines that such limitation or modification does not adversely
affect our limited partners in any material respect.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Opinion of Counsel and Unitholder Approval</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner will not be required to obtain an opinion of counsel that an amendment will not result in a loss of limited liability to the limited partners or result in none of us, Atlas or Atlas&#146;s intermediate or operating partnerships being treated as an entity for
federal income tax purposes in connection with any of the amendments described under &#147;&#151;No Unitholder Approval.&#148; No other amendments to our partnership agreement will become effective without the approval of holders of at least 90% of the outstanding units unless we
first obtain an opinion of counsel to the effect that the amendment will not affect the limited liability under applicable law of any of our limited partners. Any amendment that reduces the voting percentage required to take any action must be approved by the affirmative vote of
limited partners constituting not less than the voting requirement sought to be reduced.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Merger, Sale or Other Disposition of Assets</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our partnership agreement generally prohibits our general partner, without the prior approval of a majority of our outstanding units, from causing us to, among other things, sell, exchange or otherwise dispose of all or substantially all of our assets in a single transaction
or a series of related transactions, including by way of merger, consolidation or other combination, or approving on our behalf the sale, exchange or other disposition of all or substantially all of the assets of our subsidiaries. Our general partner may, however, mortgage, pledge,
hypothecate or grant a security interest in all or substantially all of our assets without that approval. Our general partner may also sell all or substantially all of our assets under a foreclosure or other realization upon those encumbrances without that approval.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If conditions specified in our partnership agreement are satisfied, our general partner may merge us or any of our subsidiaries into, or convey some or all of our assets to, a newly formed entity if the sole purpose of that merger or conveyance is to effect a mere change
in our legal form into another limited liability entity. The unitholders are not entitled to dissenters&#146; rights of appraisal under our partnership agreement or applicable Delaware law in the event of a merger or consolidation, a sale of substantially all of our assets or any other
transaction or event.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Termination or Dissolution</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We will continue as a limited partnership until terminated under our partnership agreement. We will dissolve upon:</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">133</font></p>
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<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(1) the election of our general partner to dissolve us, if approved by the holders of a majority of our outstanding units, excluding those units held by our general partner and its affiliates;</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(2) there being no limited partners, unless we are continued without dissolution in accordance with applicable Delaware law;</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(3) the entry of a decree of judicial dissolution of our partnership; or</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(4) the withdrawal or removal of our general partner or any other event that results in its ceasing to be our general partner other than by reason of a transfer of its general partner interest in accordance with our partnership agreement or withdrawal or removal following
approval and admission of a successor.</font></p>
</div>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Upon a dissolution under clause (4) above, the holders of a majority of our outstanding units excluding any units held by our general partner and its affiliates, may also elect, within specific time limitations, to continue our business on the same terms and conditions
described in our partnership agreement by appointing a successor general partner an entity approved by the holders of a majority of our outstanding units, excluding those units held by our general partner and its affiliates, subject to receipt by us of an opinion of counsel to the
effect that:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the action would not result in the loss of limited liability of any limited partner; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">none of our partnership nor the reconstituted limited partnership would be treated as an association taxable as a corporation or otherwise be taxable as an entity for federal income tax purposes upon the exercise of that right to continue.</font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2"><b>Liquidation and Distribution of Proceeds</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Upon our dissolution, unless we are reconstituted and continued as a new limited partnership, the liquidator authorized to wind up our affairs will, acting with all the powers of our general partner that the liquidator deems necessary or desirable in its good faith
judgment, liquidate our assets. The proceeds of the liquidation will be applied as follows:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>first, </i>towards the payment of all of our creditors and the creation of a reserve for contingent liabilities; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>then, </i>to all partners in accordance with the positive balance in the respective capital accounts.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under some circumstances and subject to some limitations, the liquidator may defer liquidation or distribution of our assets for a reasonable period of time. If the liquidator determines that a sale would be impractical or would cause a loss to our partners, our general
partner may distribute assets in kind to our partners.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Withdrawal or Removal of Our General Partner</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Except as described below, our general partner has agreed not to withdraw voluntarily as our general partner prior to December&nbsp;31, 2015 without obtaining the approval of a majority of our outstanding units, excluding those held by our general partner and its affiliates,
and furnishing an opinion of counsel regarding limited liability and tax matters. On or after December&nbsp;31, 2015, our general partner may withdraw as general partner without first obtaining approval of any unitholder by giving 90 days&#146; written notice, and that withdrawal will
not constitute a violation of our partnership agreement. In addition, our general partner may withdraw without unitholder approval upon 90 days&#146; notice to our limited partners if at least 50% of our outstanding common units are held or controlled by one person and its affiliates
other than our general partner and its affiliates.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Upon the voluntary withdrawal of our general partner, the holders of a majority of our outstanding units, excluding the units held by the withdrawing general partner and its affiliates, may elect a successor to the withdrawing general partner. If a successor is not elected,
or is elected but an opinion of counsel regarding limited liability and tax matters cannot be obtained, we will be dissolved, wound up and liquidated, unless within 90 days after that withdrawal, the holders of a majority of our outstanding units, excluding the units held by the
withdrawing general partner and its affiliates, agree to continue our business and to appoint a successor general partner.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">134</font></p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner may not be removed unless that removal is approved by (i) the audit and conflicts committee of the general partner and (ii) not less than 66 2/3% of our outstanding units, including units held by our general partner and its affiliates, and we receive
an opinion of counsel regarding limited liability and tax matters. Any removal of our general partner is also subject to the approval of a successor general partner by a majority of our outstanding units, including those held by our general partner and its affiliates. The ownership
of more than 33 1/3% of the outstanding units by our general partner and its affiliates would give it the practical ability to prevent its removal. Upon completion of this offering, Atlas America will own approximately 82.9% of the outstanding units, assuming no exercise of its
underwriters&#146; option to purchase additional units.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In addition, we will be required to reimburse the departing general partner for all amounts due the departing general partner, including, without limitation, all employee-related liabilities, including severance liabilities, incurred for the termination of any employees
employed by the departing general partner or its affiliates for our benefit.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Transfer of General Partner Interest</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Except for transfer by our general partner of all, but not less than all, of its general partner interest in us to:</font></p>
</div>
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  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">an affiliate of the general partner (other than an individual); or</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">another entity as part of the merger or consolidation of the general partner with or into another entity or the transfer by the general partner of all or substantially all of its assets to another entity,</font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2">our general partner may not transfer all or any part of its general partner interest in us to another entity prior to December&nbsp;31, 2015 without the approval of a majority of the common units outstanding, excluding common units held by our general partner and its affiliates. As a
condition of this transfer, the transferee must assume the rights and duties of our general partner, agree to be bound by the provisions of the partnership agreement, and furnish an opinion of counsel regarding limited liability and tax matters.</font></p>
<p align="left"><font face="serif" size="2"><b>Transfer of Ownership Interests in Our General Partner</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">At any time, Atlas America, Inc., as the sole member of our general partner, may sell or transfer all or part of its ownership interest in the general partner without the approval of our unitholders.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Change of Management Provisions</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our partnership agreement contains specific provisions that are intended to discourage a person or group from attempting to remove our general partner as general partner or otherwise change management. If any person or group other than our general partner and its
affiliates acquires beneficial ownership of 20% or more of any class of units, that person or group loses voting rights on all of its units. This loss of voting rights does not apply to any person or group that acquires the units from our general partner or its affiliates and any
transferees of that person or group approved by our general partner.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Limited Call Right</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If at any time our general partner and its affiliates hold more than 87.5% of the outstanding limited partner interests of any class, our general partner will have the right, but not the obligation, which it may assign in whole or in part to any of its affiliates or us, to
acquire all, but not less than all, of the remaining limited partner interests of the class held by unaffiliated persons as of a record date to be selected by our general partner, on at least ten but not more than 60 days&#146; notice. The purchase price in the event of this purchase is the
greater of:</font></p>
</div>
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  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the highest cash price paid by either our general partner or any of its affiliates for any limited partners interests of the class purchased within the 90 days preceding the date our general partner first mails notice of its election to purchase the limited partner interests; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the current market price of the limited partner interests of the class as of the date three days prior to the date that notice is mailed.</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">135</font></p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As a result of our general partner&#146;s right to purchase outstanding limited partner interests, a holder of limited partner interests may have his limited partner interests purchased at an undesirable time or price. The tax consequences to a unitholder of the exercise of this
call right are the same as a sale by that unitholder of his units in the market. Please read &#147;Material Tax Consequences&#151;Disposition of Units.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Upon completion of this offering, Atlas America will own 17,500,000 of our common units, representing approximately 82.9% of our outstanding common units, assuming no exercise of the underwriters&#146; option to purchase additional units.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Meetings; Voting</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Except as described below regarding a person or group owning 20% or more of units then outstanding, unitholders on the record date will be entitled to notice of, and to vote at, meetings of our limited partners and to act upon matters for which approvals may be
solicited. Units that are owned by non-citizen assignees will be voted by our general partner and our general partner will distribute the votes on those units in the same ratios as the votes of limited partners on other units are cast.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner does not anticipate that any meeting of unitholders will be called in the foreseeable future. Any action that is required or permitted to be taken by our unitholders may be taken either at a meeting of the unitholders or without a meeting if consents in
writing describing the action so taken are signed by holders of the number of units as would be necessary to authorize or take that action at a meeting. Meetings of the unitholders may be called by our general partner or by unitholders owning at least 20% of the outstanding
units. Unitholders may vote either in person or by proxy at meetings. The holders of a majority of the outstanding units, represented in person or by proxy, will constitute a quorum unless any action by the unitholders requires approval by holders of a greater percentage of the
units, in which case the quorum will be the greater percentage.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Each record holder of a unit has a vote according to his percentage interest in us, although additional limited partner interests having special voting rights could be issued. Please read &#147;&#151;Issuance of Additional Securities&#148; above. However, if at any time any person or
group, other than our general partner and its affiliates, or a direct or subsequently approved transferee of our general partner or its affiliates, acquires, in the aggregate, beneficial ownership of 20% or more of any class of units then outstanding, that person or group will lose
voting rights on all of its units and the units may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes, determining the presence of a quorum or for other similar purposes.
Common units held in nominee or street name account will be voted by the broker or other nominee in accordance with the instruction of the beneficial owner unless the arrangement between the beneficial owner and his nominee provides otherwise.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Any notice, demand, request, report or proxy material required or permitted to be given or made to record holders of units under our partnership agreement will be delivered to the record holder by us or by the transfer agent.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Status as Limited Partner</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">By transfer of common units in accordance with our partnership agreement, each transferee of common units shall be admitted as a limited partner with respect to the transferred units when such transfer and admission is reflected in our books and records. Except as
described under &#147;&#151;Limited Liability,&#148; the common units will be fully paid, and unitholders will not be required to make additional contributions.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Non-Citizen Assignees; Redemption</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If we are or become subject to federal, state or local laws or regulations that, in the reasonable determination of our general partner, create a substantial risk of cancellation or forfeiture of any property that we have an interest in because of the nationality, citizenship or
other related status of any limited partner, we may redeem the units held by the limited partner at their current market price. In order to avoid any cancellation or forfeiture, our general partner may require each limited partner to furnish information about his nationality,
citizenship or related status. If a limited partner fails to furnish information about his nationality, citizenship or other related status within 30 days after a request for the information or our general partner determines after receipt of the information that the limited partner is not
an eligible citizen, the</font></p>
</div>
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<p align="left"><font face="serif" size="2">limited partner may be treated as a non-citizen assignee. A non-citizen assignee is entitled to an interest equivalent to that of a limited partner for the right to share in allocations and
distributions from us, including liquidating distributions. A non-citizen assignee does not have the right to direct the voting of his units and may not receive distributions in kind upon our
liquidation.</font></p>
<p align="left"><font face="serif" size="2"><b>Indemnification</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under our partnership agreement, in most circumstances, we will indemnify the following persons, to the fullest extent permitted by law, from and against all losses, claims, damages or similar events:</font></p>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(1) our general partner;</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(2) any departing general partner;</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(3) any person who is or was an affiliate of our general partner or any departing general partner;</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(4) any person who is or was an officer, director, member, partner, fiduciary or trustee of any entity described in (1), (2) or (3) above;</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(5) any person who is or was serving as an officer, director, member, partner, fiduciary or trustee of another person at the request of the general partner or any departing general partner; and</font></p>
</div>
</div>
<div style="margin-left:4%">
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(6) any person designated by our general partner.</font></p>
</div>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Any indemnification under these provisions will only be out of our assets. Unless it otherwise agrees, our general partner will not be personally liable for, or have any obligation to contribute or loan funds or assets to us to enable us to effectuate, indemnification. We
may purchase insurance against liabilities asserted against and expenses incurred by persons for our activities, regardless of whether we would have the power to indemnify the person against liabilities under the partnership agreement.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Reimbursement of Expenses</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our partnership agreement requires us to reimburse our general partner for all direct and indirect expenses it incurs or payments it makes on our behalf and all other expenses allocable to us or otherwise incurred by our general partner in connection with operating our
business. These expenses include salary, bonus, incentive compensation and other amounts paid to persons who perform services for us or on our behalf and expenses allocated to our general partner by its affiliates. The general partner is entitled to determine in good faith the
expenses that are allocable to us.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Books and Reports</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner is required to keep appropriate books of our business at our principal offices. The books will be maintained for both tax and financial reporting purposes on an accrual basis. For tax reporting purposes, our fiscal year end is September&nbsp;30. For fiscal
reporting purposes, our fiscal year is the calendar year.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We will furnish or make available to record holders of units, within 120 days after the close of each fiscal year, an annual report containing audited financial statements and a report on those financial statements by our independent public accountants. Except for our
fourth quarter, we will also furnish or make available summary financial information within 90 days after the close of each quarter.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We will furnish each record holder of a unit with information reasonably required for tax reporting purposes within 90 days after the close of each calendar year. This information is expected to be furnished in summary form so that some complex calculations normally
required of partners can be avoided. Our ability to furnish this summary information to unitholders will depend on the cooperation of unitholders in supplying us with specific information. Every unitholder will receive information to assist him in determining his federal and
state tax liability and filing his federal and state income tax returns, regardless of whether he supplies us with information.</font></p>
</div>
<p align="center"><font face="serif" size="2">137</font></p>
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<p align="left"><font face="serif" size="2"><b>Right to Inspect Our Books and Records</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">A limited partner can, for a purpose reasonably related to the limited partner&#146;s interest as a limited partner, upon reasonable demand stating the purpose of such demand and at his own expense, obtain:</font></p>
</div>
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  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">a current list of the name and last known address of each partner;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">a copy of our tax returns;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">information as to the amount of cash and a description and statement of the agreed value of any other property or services, contributed or to be contributed by each partner and the date on which each became a partner;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">copies of our partnership agreement, our certificate of limited partnership, amendments to either of them and powers of attorney which have been executed under our partnership agreement;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">information regarding the status of our business and financial condition; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">any other information regarding our affairs as is just and reasonable.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our general partner may, and intends to, keep confidential from the limited partners trade secrets and other information the disclosure of which our general partner believes in good faith is not in our best interest or which we are required by law or by agreements with
third parties to keep confidential.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Registration Rights</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under our partnership agreement, we have agreed to register for resale under the Securities Act and applicable state securities laws any units or other partnership securities proposed to be sold by our general partner or any of its affiliates or their assignees if an
exemption from the registration requirements is not otherwise available. We are obligated to pay all expenses incidental to the registration, excluding underwriting discounts and commissions. Please read &#147;Units Eligible for Future Sale.&#148;</font></p>
</div>
<p align="center"><font face="serif" size="2">138</font></p>
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<p align="center"><font face="serif" size="2"><b>THE PARTNERSHIP AGREEMENT OF ATLAS PIPELINE PARTNERS, L.P.</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following is a summary of the material provisions of Atlas&#146; partnership agreement.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Organization and Duration</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas was formed in May 1999. Atlas will dissolve on December&nbsp;31, 2098, unless sooner dissolved under the terms of Atlas&#146; partnership agreement.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Purpose</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; purpose under its partnership agreement is limited to serving as the limited partner of its operating partnership and engaging in any business activity that may be engaged in by its operating partnership or that is approved by Atlas&#146; general partner. The operating
partnership agreement provides that Atlas&#146; operating partnership may, directly or indirectly, engage in:</font></p>
</div>
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  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">operations as conducted on February&nbsp;2, 2000, including the ownership and operation of Atlas&#146; gathering systems;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">any other activity approved by Atlas&#146; general partner, but only to the extent that the general partner reasonably determines that, as of the date of the acquisition or commencement of the activity, the activity generates &#147;qualifying income&#148; as that term is defined in Section
7704 of the Internal Revenue Code; or</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">any activity that enhances the operations described above.</font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2"><b>The Units</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; common units represent limited partner interests in Atlas. The holders of units are entitled to participate in partnership distributions and exercise the rights or privileges available to limited partners under Atlas&#146; partnership agreement.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Limited Voting Rights</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Holders of Atlas&#146; units have limited voting rights and generally are entitled to vote only with respect to the following matters:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">a sale or exchange of all or substantially all of our assets;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">our dissolution or reconstitution;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">our merger; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">termination or material modification of the omnibus agreement or master natural gas gathering agreement.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Removal of Atlas&#146; general partner requires a two-thirds vote of all outstanding common units, excluding those held by Atlas&#146; general partner and its affiliates. Atlas&#146; partnership agreement permits us generally to make amendments to it that do not materially adversely
affect unitholders without the approval of any unitholders.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Cash Distribution Policy</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Quarterly Distributions of Available Cash</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; operating partnership is required by the operating partnership agreement to distribute to Atlas, within 45 days of the end of each fiscal quarter, all of its available cash for that quarter. Atlas, in turn, distributes to its partners all of the available cash received from
its operating partnership for that quarter.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Available cash generally means, for any of Atlas&#146; fiscal quarters, all cash on hand at the end of the quarter less cash reserves that the general partner of Atlas determines are appropriate to provide for Atlas&#146; operating costs, including potential acquisitions, and to provide
funds for distributions to the partners for any</font></p>
</div>
<p align="center"><font face="serif" size="2">139</font></p>
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<p align="left"><font face="serif" size="2">one or more of the next four quarters. Atlas generally makes distributions of all available cash within 45 days after the end of each quarter to holders of record on the applicable record date.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Distributions of Available Cash from Operating Surplus</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Cash distributions are characterized as distributions from either operating surplus or capital surplus. This distinction affects the amounts distributed to unitholders relative to Atlas&#146; general partner.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Operating surplus means:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; cash balance, excluding cash constituting capital surplus, less</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">all of Atlas&#146; operating expenses, debt service payments, maintenance costs, capital expenditures and reserves established for future operations.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Capital surplus means capital generated only by borrowings other than working capital borrowings, sales of debt and equity securities and sales or other dispositions of assets for cash, other than inventory, accounts receivable and other assets disposed of in the ordinary
course of business.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas treats all available cash distributed from any source as distributed from operating surplus until the sum of all available cash distributed since Atlas began operations equals Atlas&#146; total operating surplus from the date Atlas began operations until the end of the
quarter that immediately preceded the distribution. This method of cash distribution avoids the difficulty of trying to determine whether available cash is distributed from operating surplus or capital surplus. Atlas treats any excess available cash, irrespective of its source, as
capital surplus, which would represent a return of capital, and Atlas&#146; general partner will distribute it accordingly. For a discussion of distributions from capital surplus, see &#147;&#151;Distributions from Capital Surplus&#148; below.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas distributes available cash from operating surplus for any quarter in the following manner:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">first, 98% to all unitholders of Atlas, pro rata, and 2.0% to our subsidiary, Atlas Pipeline GP, as the general partner of Atlas, until Atlas has distributed $0.42 for each outstanding common unit; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">after that, in the manner described in &#147;&#151;Incentive Distribution Rights&#148; below.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The 2.0% allocation of available cash from operating surplus to our subsidiary, as the general partner of Atlas, includes Atlas&#146; general partner&#146;s percentage interest in distributions from Atlas and Atlas&#146; operating partnership on a combined basis.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Adjusted operating surplus for any period generally means operating surplus generated during that period, less:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">any net increase in working capital borrowings during that period and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">any net reduction in cash reserves for operating expenditures during that period not relating to an operating expenditure made during that period,</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">and plus:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">any net decrease in working capital borrowings during that period and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">any net increase in cash reserves for operating expenditures during that period required by any debt instrument for the repayment of principal, interest or premium.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Operating surplus generated during a period is equal to the difference between:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the operating surplus determined at the end of that period and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the operating surplus determined at the beginning of that period.</font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">140</font></p>
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<a name="p141"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Incentive Distribution Rights</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">By &#147;incentive distribution rights&#148; we mean our right to receive an increasing percentage of quarterly distributions of available cash from operating surplus after Atlas has made the minimum quarterly distributions and Atlas has met specified target distribution levels, as
described below. We may transfer our incentive distribution rights separately from our general partner interest without the consent of the unitholders.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas makes incentive distributions to us for any quarter in which it has distributed available cash from operating surplus to the common unitholders in an amount equal to the minimum quarterly distribution. If this condition is satisfied, the remaining available cash will
be distributed as follows:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>first, </i>85.0% to all units, pro rata, 2.0% to the general partner and 13.0% to us, until a hypothetical unitholder has received a total of $0.52 per unit for that quarter, in addition to any distributions to common unitholders to eliminate any cumulative arrearages in payment of the
minimum quarterly distribution on the common units;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>second, </i>75.0% to all units, pro rata, 2.0% to the general partner and 23.0% to us until a hypothetical unitholder has received a total of $0.60 per unit for that quarter, in addition to any distributions to common unitholders to eliminate any cumulative arrearages in payment of
the minimum quarterly distribution on the common units; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>after that, </i>50.0% to all units, pro rata, 2.0% to the general partner and 48% to us.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The distributions to us that exceed its aggregate 2.0% general partner interest represent the incentive distribution rights.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Distributions from Capital Surplus</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas distributes available cash from capital surplus in the following manner:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>first, </i>98.0% to all units, pro rata, and 2.0% to the general partner, until each common unit issued in the initial public offering has received distributions equal to $13.00 per unit; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>after that, </i>Atlas will distribute all available cash from capital surplus, as if it were from operating surplus.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">When Atlas makes a distribution from capital surplus, Atlas will treat it as if it were a repayment of a limited partner&#146;s investment in its common units. For these purposes, the partnership agreement deems the investment to be $13.00 per common unit, which is the unit
price from Atlas&#146; initial public offering. To reflect this repayment, Atlas will reduce the amount of the minimum quarterly distribution and the distribution levels at which our incentive distribution rights begin, which we refer to in this prospectus as &#147;target distribution levels,&#148;
by multiplying each amount by a fraction, determined as follows:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the numerator is $13.00 less all distributions from capital surplus including the distribution just made, and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the denominator is $13.00 less all distributions from capital surplus excluding the distribution just made.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The initial public offering price of $13.00 per common unit, less any distributions from capital surplus, is referred to as the &#147;unrecovered unit price.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">After the minimum quarterly distribution and the target distribution levels have been reduced to zero, Atlas will treat all distributions of available cash from all sources as if they were from operating surplus. Because the minimum quarterly distribution and the target
distribution levels will have been reduced to zero, we will then be entitled to receive 48.0% of all distributions of available cash, in addition to any distributions to which we may be entitled as a holder of units.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Distributions from capital surplus will not reduce the minimum quarterly distribution or target distribution levels for the quarter in which they are distributed.</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">141</font></p>
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<a name="p142"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Adjustment of Minimum Quarterly Distribution and Target Distribution Levels</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In addition to adjustments made upon a distribution of available cash from capital surplus, Atlas will proportionately adjust each of the following upward or downward, as appropriate, if any combination or subdivision of units occurs:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the minimum quarterly distribution, the target distribution levels, or the unrecovered unit price,</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the number of common units issuable upon conversion of the subordinated units, and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">other amounts calculated on a per unit basis.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">For example, if a two-for-one split of the common units occurs, Atlas will reduce the minimum quarterly distribution, the target distribution levels and the unrecovered initial unit price of the common units to 50% of their initial levels.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas will not make any adjustment for the issuance of additional common units for cash or property.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas may also adjust the minimum quarterly distribution and the target distribution levels if legislation is enacted or if existing law is modified or interpreted in a manner that causes Atlas or its operating partnership to become taxable as a corporation or otherwise
subject to taxation as an entity for federal, state or local income tax purposes. In this event, Atlas will reduce the minimum quarterly distribution and the target distribution levels for each quarter after that time to amounts equal to the product of:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the minimum quarterly distribution and each of the target distribution levels multiplied by,</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">one minus the sum of:</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the highest marginal federal income tax rate which could apply to the partnership that is taxed as a corporation plus:</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">any increase in the effective overall state and local income tax rate that would have been applicable in the preceding calendar year as a result of the new imposition of the entity level tax, after taking into account the benefit of any deduction allowable for federal income tax
purposes for the payment of state and local income taxes, but only to the extent of the increase in rates resulting from that legislation or interpretation.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">For example, assuming Atlas is not previously subject to state and local income tax, if Atlas became taxable as a corporation for federal income tax purposes and subject to a maximum marginal federal, and effective state and local, income tax rate of 40%, then Atlas
would reduce the minimum quarterly distribution and the target distribution levels to 60% of the amount immediately before the adjustment.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Distributions of Cash Upon Liquidation</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">When Atlas commences dissolution and liquidation, Atlas will sell or otherwise dispose of its assets and adjust the partners&#146; capital account balances to reflect any resulting gain or loss. Atlas will first apply the proceeds of liquidation to the payment of our creditors in
the order of priority provided in Atlas&#146; partnership agreement and by law. After that, Atlas will distribute the proceeds to the unitholders and our general partner in accordance with their capital account balances, as so adjusted.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas maintains capital accounts in order to ensure that the partnership&#146;s allocations of income, gain, loss and deduction are respected under the Internal Revenue Code. The balance of a partner&#146;s capital account also determines how much cash or other property the
partner will receive on liquidation of the partnership. A partner&#146;s capital account is credited with (increased by) the following items:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the amount of cash and fair market value of any property (net of liabilities) contributed by the partner to the partnership; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the partner&#146;s share of &#147;book&#148; income and gain (including income and gain exempt from tax).</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">A partner&#146;s capital account is debited with (reduced by) the following items:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the amount of cash and fair market value (net of liabilities) of property distributed to the partner; and</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">142</font></p>
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<div style="page-break-before:always"></div>
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<a name="p143"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the partner&#146;s share of loss and deduction (including some items not deductible for tax purposes).</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Partners are entitled to liquidating distributions in accordance with their capital account balances.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Upon our liquidation, any gain, or unrealized gain attributable to assets distributed in kind, will be allocated to the partners in the following manner:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>first, </i>to the general partner and the holders of units who have negative balances in their capital accounts to the extent of and in proportion to those negative balances;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>second, </i>98% to the common units, pro rata, and 2.0% to the general partner, until the capital account for each common unit is equal to the sum of:</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">the unrecovered unit price, and the amount of the minimum quarterly distribution for the quarter during which our liquidation occurs;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>third,</i> 85% to all units, pro rata, 2.0% to the general partner and 13.0% to us, until there has been allocated under this paragraph an amount per unit equal to:</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">the excess of the $0.52 target distribution per unit over the minimum quarterly distribution per unit for each quarter of Atlas&#146; existence less:</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">the cumulative amount per unit of any distribution of available cash from operating surplus in excess of the minimum quarterly distribution per unit that was distributed 85.0% to the units, pro rata, and 15% to us for each quarter of our existence;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>fourth,</i> 75.0% to all units, pro rata, 2.0% to the general partner and 23.0% to us, until there has been allocated under this paragraph an amount per unit equal to:</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">the excess of the $0.60 target distribution per unit over the $0.52 target distribution per unit for each quarter of our existence less:</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the first target distribution per unit that was distributed 75.0% to the units, pro rata, and 23.0% to us for each quarter of our existence; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>after that,</i> 50.0% to all units, pro rata, 48.0% to us and 2.0% to our general partner.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Upon Atlas&#146; liquidation, any loss will generally be allocated to us and the unitholders in the following manner:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>first,</i> 98.0% to the holders of common units in proportion to the positive balances in their capital accounts and 2.0% to us, until the capital accounts of the common unitholders have been reduced to zero; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2"><i>after that,</i> 100.0% to us.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In addition, Atlas will make interim adjustments to the capital accounts at the time Atlas issues additional equity interests or makes distributions of property. Atlas will base these adjustments on the fair market value of the interests or the property distributed and Atlas
will allocate any gain or loss resulting from the adjustments to the unitholders and us in the same manner as Atlas allocates gain or loss upon liquidation. In the event that Atlas makes positive interim adjustments to the capital accounts, Atlas will allocate any later negative
adjustments to the capital accounts resulting from the issuance of additional equity interests, Atlas&#146; distributions of property, or upon Atlas&#146; liquidation, in a manner which results, to the extent possible, in the capital account balances of us equaling the amount which would
have been our general partner&#146;s capital account balances if we had not made any earlier positive adjustments to the capital accounts.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Power of Attorney</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Each limited partner, and each person who acquires a unit from a unitholder and executes and delivers a transfer application, grants to the general partner and, if appointed, a liquidator, a power of attorney to, among other things, execute and file documents required for
our qualification, continuance or dissolution and</font></p>
</div>
<p align="center"><font face="serif" size="2">143</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p144"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">the amendment of Atlas&#146; partnership agreement, and to make consents and waivers under Atlas&#146; partnership agreement.</font></p>
<p align="left"><font face="serif" size="2"><b>Capital Contributions</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Unitholders are not obligated to make additional capital contributions, except as described below under &#147;&#151;Limited Liability.&#148;</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Limited Liability</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">So long as a limited partner does not participate in the control of Atlas&#146; business within the meaning of the Delaware Revised Uniform Limited Partnership Act and otherwise acts in conformity with the provisions of Atlas&#146; partnership agreement, the limited partner&#146;s
liability under the Delaware Act will be limited to the amount of capital he is obligated to contribute to us for his common units plus his share of any undistributed profits and assets. If it were determined that a limited partner participated in the control of Atlas&#146; business, then
the limited partner could be held personally liable for Atlas&#146; obligations under Delaware law to the same extent as the general partner. This liability would extend only to persons who transact business with Atlas who reasonably believe that the limited partner is a general
partner. However, what constitutes participating in the control of a limited partnership&#146;s business has not been clearly established in all states. If it were determined, for example, that the right, or exercise of a right, by the limited partners to:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">remove Atlas&#146; general partner;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">approve some amendments to our partnership agreement; or</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">take other action under our partnership agreement;</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">constituted participation in the control of our business, then limited partners could be held liable for our obligations to the same extent as the general partner.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under the Delaware Act, Atlas cannot make a distribution to a partner if, after the distribution, all its liabilities, other than liabilities to partners on account of their partnership interests and liabilities for which the recourse of creditors is limited to specific property,
exceed the fair value of Atlas&#146; assets. For the purpose of determining the fair value of the assets of a limited partnership, the Delaware Act provides that the fair value of property subject to liability for which recourse of creditors is limited shall be included in the assets of the
limited partnership only to the extent that the fair value of that property exceeds the nonrecourse liability. The Delaware Act provides that a limited partner who receives a distribution and knew at the time of the distribution that the distribution was in violation of the Delaware
Act is liable to the limited partnership for the amount of the distribution for three years. Under the Delaware Act, an assignee who becomes a substituted limited partner is liable for the obligations of his assignor to make contributions to the partnership, except the assignee is
not obligated for liabilities unknown to him at the time he became a limited partner and which he could not ascertain from Atlas&#146; partnership agreement.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; operating partnership currently conducts business in Arkansas, Missouri, New York, Ohio, Oklahoma, Pennsylvania and Texas. The limitations on the liability of limited partners for the obligations of a limited partnership have not been clearly established in many
jurisdictions. If it were determined that Atlas was, by virtue of its limited partner interest in its operating partnership or otherwise, conducting business in any state under the applicable limited partnership statute, or that the right or exercise of the right by the limited partners as
a group to remove or replace the general partner, to approve some amendments to our partnership agreement, or to take other action under Atlas&#146; partnership agreement constituted &#147;participation in the control&#148; of Atlas&#146; business for purposes of the statutes of any relevant
jurisdiction, then the limited partners could be held personally liable for Atlas&#146; obligations under the law of that jurisdiction to the same extent as the general partner. Atlas operates in a manner we consider reasonable and appropriate to preserve the limited liability of the
limited partners.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Transfer Agent and Registrar</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">American Stock Transfer and Trust Company is our registrar and transfer agent for the common units. Atlas pays all fees charged by the transfer agent for transfers of common units, except that the following fees must be paid by unitholders:</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">144</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p145"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">surety bond premiums to replace lost or stolen certificates, taxes and other governmental charges;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">special charges for services requested by a holder of a common unit; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">other similar fees or charges.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">There is no charge to unitholders for disbursements of cash distributions.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas will indemnify the transfer agent, its agents and each of their particular shareholders, directors, officers and employees against all claims and losses that may arise out of acts performed or omitted in its capacity as Atlas&#146; transfer agent, except for any liability due
to any negligence, gross negligence, bad faith or intentional misconduct of the indemnified person or entity.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Transfer of Common Units</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The transfer agent will not record a transfer of common units, and Atlas will not recognize the transfer, unless the transferee executes and delivers a transfer application. The form of transfer application appears on the reverse side of the certificates representing the
common units. By executing and delivering a transfer application, the transferee of common units:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">becomes the record holder of the common units and is an assignee until admitted as a substituted limited partner;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">automatically requests admission as a substituted limited partner;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">agrees to be bound by the terms and conditions of our partnership agreement;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">represents that the transferee has the capacity, power and authority to enter into Atlas&#146; partnership agreement;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">grants powers of attorney to officers of our general partner and our liquidator, as specified in Atlas&#146; partnership agreement; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">makes the consents and waivers contained in Atlas&#146; partnership agreement.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">An assignee will become a substituted limited partner as to the transferred common units upon the consent of the general partner and the recordation of the name of the assignee on the general partner&#146;s books and records. The general partner may withhold its consent in
its sole discretion.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">A transferee&#146;s broker, agent or nominee may complete, execute and deliver the transfer applications. Atlas is entitled to treat the nominee holder of a common unit as the absolute owner. In that case, the beneficial holder&#146;s rights are limited solely to those that it has
against the nominee holder as a result of any agreement between the beneficial owner and the nominee holder.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Common units are securities and are transferable according to the laws governing transfer of securities. In addition to the rights acquired upon transfer, the transferor gives the transferee the right to request admission as a substituted limited partner. A purchaser or
transferee of common units who does not execute and deliver a transfer application will have only:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the right to assign the common units to a purchaser or other transferee; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the right to transfer the right to seek admission as a substituted limited partner.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Thus, a purchaser or transferee of common units who does not execute and deliver a transfer application will not receive:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">cash distributions or federal income tax allocations unless the common units are held in a nominee or &#147;street name&#148; account and the nominee or broker has executed and delivered a transfer application; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">may not receive federal income tax information or reports furnished to record holders of common units.</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">145</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p146"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The transferor of common units must provide the transferee with all information necessary to transfer the common units. The transferor will not be required to insure the execution of the transfer application by the transferee and will have no liability or responsibility if
the transferee neglects or chooses not to execute and forward the transfer application to the transfer agent. See &#147;&#151;Status as Limited Partner or Assignee.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Until a common unit has been transferred on Atlas&#146; books, Atlas and the transfer agent may treat the record holder of the unit as the absolute owner for all purposes, except as otherwise required by law or stock exchange regulations, even if Atlas or the transfer agent
has notice of an attempted transfer.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Issuance of Additional Securities</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; partnership agreement authorizes it to issue an unlimited number of additional limited partner interests, debt and other securities for the consideration and on the terms and conditions established by the general partner in its sole discretion without the approval of
any limited partners. Atlas has funded, and will likely continue to fund, acquisitions through the issuance of additional common units or other equity securities. Holders of any additional common units Atlas issues will be entitled to share equally with the then-existing holders
of common units in Atlas&#146; distributions of available cash. In addition, the issuance of additional partnership interests may dilute the value of the interests of the then-existing holders of common units in our net assets.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In accordance with Delaware law and the provisions of Atlas&#146; partnership agreement, Atlas may also issue additional partnership securities that, in the sole discretion of the general partner, may have special voting rights to which the common units are not entitled.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Upon issuance of additional partnership securities, the general partner must make additional capital contributions to the extent necessary to maintain its combined 2.0% general partner interest in Atlas and in Atlas&#146; operating partnership. We will be required to make
corresponding capital contributions to the general partner. Moreover, the general partner will have the right, which it may from time to time assign in whole or in part to us or to any of our affiliates, to purchase common units, subordinated units or other equity securities,
whenever, and on the same terms that, Atlas issues those securities to persons other than the general partner and its affiliates, to the extent necessary to maintain its percentage interest that existed immediately before each issuance. The holders of common units will not have
preemptive rights to acquire additional common units or other partnership interests.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Amendment of Atlas&#146; Partnership Agreement</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Amendments to Atlas&#146; partnership agreement may be proposed only by or with the consent of the general partner, which the general partner may withhold in its sole discretion. In order to adopt a proposed amendment, other than the amendments discussed in &#147;&#151;No
Unitholder Approval&#148; below, the general partner must seek written approval of the holders of the number of units required to approve the amendment or call a meeting of the limited partners to consider and vote upon the proposed amendment.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Prohibited Amendments</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">No amendment may be made that would:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">change the percentage of outstanding units required to take partnership action, unless approved by the affirmative vote of unitholders constituting at least the voting requirement sought to be reduced;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">enlarge the obligations of any limited partner without its consent, unless approved by at least a majority of the type or class of limited partner interests so affected;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable to the general partner or any of its affiliates without its consent, which may be given or withheld in its sole discretion;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">change Atlas&#146; term;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">provide that Atlas is not dissolved upon the expiration of its term or upon an election to dissolve it by us as the general partner that is approved by holders of a majority of the units of each class; or</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">146</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p147"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">give any person the right to dissolve Atlas other than the general partner&#146;s right to dissolve Atlas with the approval of holders of a majority of the units of each class.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The provision of Atlas&#146; partnership agreement preventing the amendments having the effects described above can be amended upon the approval of the holders of at least 90% of the outstanding units voting together as a single class.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>No Unitholder Approval</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The general partner may amend Atlas&#146; partnership agreement, without the approval of the unitholders, to:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">change Atlas&#146; name, the location of its principal place of business, its registered agent or registered office;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">reflect the admission, substitution, withdrawal or removal of partners in accordance with Atlas&#146; partnership agreement;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">qualify Atlas or continue its qualification as a limited partnership under the laws of any state or to ensure that neither Atlas nor its operating partnership will be taxed as a corporation or otherwise taxed as an entity for federal income tax purposes;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">prevent Atlas or the general partner, or its directors, officers, agents or trustees, from being subject to the provisions of the Investment Advisers Act of 1940 or &#147;plan asset&#148; regulations adopted under the Employee Retirement Income Security Act of 1974;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">authorize additional limited or general partner interests;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">reflect changes required by a merger agreement that has been approved under the terms of Atlas&#146; partnership agreement;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">permit Atlas to form or invest in any entity, other than the operating partnership, permitted by its partnership agreement;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">change Atlas&#146; fiscal year or taxable year; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">make other changes substantially similar to any of the matters described above.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In addition, the general partner may amend Atlas&#146; partnership agreement, without the approval of the unitholders, if those amendments:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">do not adversely affect the limited partners in any material respect;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">are necessary to satisfy any requirements or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">are necessary to facilitate the trading of limited partner interests or to comply with any rule or guideline of any securities exchange or interdealer quotation system on which the limited partner interests are or will be listed for trading;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">are necessary for any action taken by the general partner relating to splits or combinations of units; or</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">are required to effect the intent expressed in this prospectus or the intent of the provisions of Atlas&#146; partnership agreement or are otherwise contemplated by Atlas&#146; partnership agreement.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Opinion of Counsel and Unitholder Approval</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Except in the case of the amendments described above under &#147;&#151;No Unitholder Approval,&#148; amendments to Atlas&#146; partnership agreement will not become effective without the approval of holders of at least 90% of the units unless Atlas obtains an opinion of counsel to
the effect that the amendment will not affect the limited liability under applicable law of any limited partner or cause Atlas or Atlas&#146; operating partnership to be taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (to the extent not
previously taxed as such). Subject to obtaining the opinion of counsel, any amendment that would have a material adverse effect on the rights or preferences of any type or class of outstanding units in relation</font></p>
</div>
<p align="center"><font face="serif" size="2">147</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="p148"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">to other classes of units will require the approval of at least a majority of the type or class of units so affected.</font></p>
<p align="left"><font face="serif" size="2"><b>Merger, Sale or Other Disposition of Assets of Atlas</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The general partner may not, without the prior approval of holders of a majority of the outstanding units of each class, sell, exchange or otherwise dispose of all or substantially all of Atlas&#146; assets, including by way of merger, consolidation or other combination, or
approve on behalf of Atlas the sale, exchange or other disposition of all or substantially all of the assets of Atlas&#146; operating partnership. However, the general partner may mortgage or otherwise grant a security interest in all or substantially all of its assets or sell all or
substantially all of Atlas&#146; assets under a foreclosure without that approval. Furthermore, provided that conditions specified in Atlas&#146; partnership agreement are satisfied, the general partner may merge Atlas or any of its subsidiaries into, or convey some or all of Atlas&#146; and its
subsidiaries assets to, a newly formed entity if the sole purpose of that merger or conveyance changes our legal form into another limited liability entity.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The unitholders are not entitled to dissenters&#146; rights of appraisal in the event of a merger, consolidation, sale of substantially all of our assets or any other transaction or event.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Termination and Dissolution</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas will continue until December&nbsp;31, 2098, unless terminated sooner upon:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the election of the general partner to dissolve Atlas, if approved by the holders of a majority of the outstanding units of each class;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the sale, exchange or other disposition of all or substantially all of Atlas&#146; assets and those of its operating partnership;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the entry of a decree of judicial dissolution of Atlas; or</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the withdrawal or removal of the general partner or any other event that results in Atlas Pipeline GP ceasing to be Atlas&#146; general partner other than the transfer of its general partner interest in accordance with Atlas&#146; partnership agreement or withdrawal or removal following
approval and admission of a successor.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Upon a dissolution under the last item above, the holders of a majority of the units of each class may also elect, within specific time limitations, to reconstitute Atlas by forming a new limited partnership on terms identical to those in Atlas&#146; partnership agreement and
having as general partner an entity approved by the holders of a majority of the units of each class subject to Atlas&#146; receipt of an opinion of counsel to the effect that:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the action would not result in the loss of limited liability of any limited partner; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas, the reconstituted limited partnership, and the operating partnership would not be taxed as a corporation or otherwise be taxed as an entity for federal income tax purposes upon the exercise of that right to continue.</font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2"><b>Liquidation and Distribution of Proceeds</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Unless the general partner is reconstituted and continues as a new limited partnership, upon liquidation the liquidator will liquidate Atlas&#146; assets and apply the proceeds of the liquidation as described in &#147;&#151;Cash Distribution Policy&#151;Distributions of Cash Upon
Liquidation.&#148; The liquidator may defer liquidation or distribution of Atlas&#146; assets for a reasonable period of time or distribute assets to partners in kind if it determines that a sale would be impractical or would cause undue loss to the partners.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Withdrawal or Removal of Atlas&#146; General Partner</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; general partner may withdraw as Atlas&#146; general partner without first obtaining approval from the unitholders by giving 90 days&#146; written notice. Atlas&#146; general partner may also sell or otherwise transfer all of its general partner interests in Atlas without the approval
of the unitholders as described below under &#147;&#151;Transfer of General Partner Interest and Incentive Distribution Rights.&#148; Upon withdrawal, Atlas must</font></p>
</div>
<p align="center"><font face="serif" size="2">148</font></p>
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<a name="p149"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">reimburse the general partner for all expenses incurred by it on Atlas&#146; behalf or allocable to Atlas in connection with operating its business.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If the general partner withdraws, other than as a result of a transfer of all or a part of its general partner interests in Atlas, the holders of a majority of the units may elect a successor to the withdrawing general partner. If a successor is not elected, or is elected but an
opinion of counsel regarding limited liability and tax matters cannot be obtained, Atlas will be dissolved and liquidated, unless within 180 days after that withdrawal the holders of a majority of the units agree in writing to continue Atlas&#146; business and to appoint a successor
general partner.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The general partner may not be removed except by the vote of the holders of at least 66 2/3% of the outstanding common units, excluding common units held by the general partner and its affiliates, and Atlas receives an opinion of counsel regarding limited liability and
tax matters. Any removal is also subject to the approval of a successor general partner by the vote of the holders of a majority of the common units, excluding common units held by us as the general partner and our affiliates. If the general partner is removed under
circumstances where cause does not exist and does not consent to that removal:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the agreement of Atlas America to connect wells to Atlas&#146; gathering systems will terminate;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the master natural gas gathering agreement with Atlas America will not apply to any future wells drilled by Atlas America although it will continue as to wells connected to the gathering system at the time of removal;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the obligations of Atlas America to provide assistance for the extension of Atlas&#146; gathering systems and in the identification and acquisition of gathering systems from third parties will terminate; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the general partner will have the right to convert its general partner interests and incentive distribution rights into common units or to receive cash in exchange for those interests from the successor general partner.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; partnership agreement defines &#147;cause&#148; as existing where a court has rendered a final, non-appealable judgment that the general partner has committed fraud, gross negligence or willful or wanton misconduct in its capacity as general partner.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Withdrawal or removal of the general partner as Atlas&#146; general partner also constitutes withdrawal or removal as the general partner of Atlas&#146; operating partnership.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In the event of removal of the general partner under circumstances where cause exists or a withdrawal of the general partner that violates Atlas&#146; partnership agreement, a successor general partner will have the option to purchase the general partner interests and incentive
distribution rights of the departing general partner for a cash payment equal to the fair market value of those interests. Under all other circumstances where the general partner withdraws or is removed, the departing general partner will have the option to require the successor
general partner to purchase those interests for their fair market value. In each case, fair market value will be determined by agreement between the departing general partner and the successor general partner. If they cannot reach an agreement, an independent expert selected by
the departing general partner and the successor general partner will determine the fair market value. If the departing general partner and the successor general partner cannot agree on an expert, then an expert chosen by agreement of the experts selected by each of them will
determine the fair market value. If the purchase option is not exercised by either the departing general partner or the successor general partner, the general partner interests and incentive distribution rights will automatically convert into common units equal to the fair market
value of those interests. The successor general partner must indemnify the departing general partner (or its transferee) from all of Atlas&#146; debt and liability arising on or after the date on which the departing general partner becomes a common unitholder as a result of the
conversion. Except for this limited indemnity right and the right of the departing general partner to receive distributions on its common units, no other payments will be made to Atlas&#146; general partner after withdrawal.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">149</font></p>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Transfer of General Partner Interest And Incentive Distribution Rights</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; general partner may transfer all or any part of its general partner interest without obtaining the consent of the unitholders. As a condition to the transfer of a general partner interest, the transferee must assume the rights and duties of the general partner to whose
interest it has succeeded, furnish an opinion of counsel regarding limited liability and tax matters, agree to acquire all of the general partner&#146;s interest in Atlas&#146; operating partnership and agree to be bound by the provisions of the partnership agreement of our operating
partnership.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The general partner&#146;s members may sell or transfer all or part of their interest in the general partner to an affiliate without the approval of the unitholders. Atlas America and its affiliates have agreed that they will not divest their interest in the general partner without
also divesting to the same acquirer their ownership interest in subsidiaries which act as the general partner of oil and gas investment partnerships sponsored by them.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas Pipeline GP or a later holder may transfer its incentive distribution rights to an affiliate or another person as part of its merger or consolidation with or into, or sale of all or substantially all of our assets to, that person without the prior approval of the unitholders.
However, the transferee must agree to be bound by the provisions of Atlas&#146; partnership agreement.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Change of Management Provisions</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; partnership agreement contains specific provisions that are intended to discourage a person or group from attempting to remove Atlas&#146; general partner or otherwise change management. If any person or group other than Atlas Pipeline GP and its affiliates acquires
beneficial ownership of 20% or more of any class of units, that person or group will lose voting rights on all of its units and the units will not be considered outstanding for the purposes of noticing meetings, determining the presence of a quorum, calculating required votes and
other similar matters. In addition, the removal of the general partner under circumstances where cause does not exist and the general partner does not consent to that removal has the adverse consequences described under &#147;&#151;Withdrawal or Removal of Atlas&#146; General Partner.&#148;</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Limited Call Right</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If at any time not more than 20% of the outstanding limited partner interests of any class are held by persons other than the general partner and its affiliates, the general partner will have the right, which it may assign in whole or in part to any of its affiliates or to Atlas,
to acquire all, but not less than all, of the remaining limited partner interests of the class held by unaffiliated persons as of a record date selected by the general partner on at least 10 but not more than 60 days&#146; notice. The purchase price is the greater of:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the highest cash price paid by the general partner or any of its affiliates for any limited partner interests of the class purchased within the 90 days preceding the date on which the general partner first mails notice of its election to purchase those limited partner interests; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the current market price as of the date three days before the date the notice is mailed.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As a result of the general partner&#146;s right to purchase outstanding limited partner interests, a holder of limited partner interests may have his limited partner interests purchased at an undesirable time or price. The tax consequences to a unitholder of the exercise of this
call right are the same as a sale by that unitholder of his common units in the market.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Meetings; Voting</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Except as described above under &#147;&#151;Change of Management Provisions,&#148; unitholders or assignees who are record holders of units on a record date will be entitled to notice of, and to vote at, meetings of Atlas&#146; limited partners and to act upon matters for which
approvals may be solicited. Common units that are owned by an assignee who is a record holder, but who has not yet been admitted as a substituted limited partner, will be voted by the general partner at the written direction of the record holder. Absent direction of this kind,
the common units will not be voted, except that, in the case of common units held by the general partner on behalf of non-citizen assignees, the general partner will distribute the votes on those common units in the same ratios as the votes of limited partners on other units are
cast.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">150</font></p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Any action to be taken by the unitholders may be taken either at a meeting of the unitholders or without a meeting if consents in writing describing the action so taken are signed by holders of the same number of units as would be necessary to take the action. Meetings
of the unitholders may be called by the general partner or by unitholders owning at least 20% of the outstanding units of the class for which a meeting is proposed. Unitholders may vote either in person or by proxy at meetings. The holders of a majority of the outstanding
units of the class or classes for which a meeting has been called, represented in person or by proxy, will constitute a quorum unless any action by the unitholders requires approval by holders of a greater percentage of the units, in which case the quorum will be the greater
percentage.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Except as described above under &#147;&#151;Change of Management Provisions,&#148; each record holder will have a vote in accordance with his percentage interest, although additional limited partner interests having different voting rights could be issued. See &#147;&#151;Issuance of
Additional Securities.&#148; Common units held in nominee or street name account will be voted by the broker or other nominee in accordance with the instruction of the beneficial owner.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas or the transfer agent will deliver any notice, report or proxy material required or permitted to be given or made to record holders of common units under Atlas&#146; partnership agreement to the record holder.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Status as Limited Partner or Assignee</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The common units will be fully paid, and, except as described above under &#147;&#151;Limited Liability,&#148; unitholders will not be required to make additional contributions.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">An assignee of a common unit, after executing and delivering a transfer application, but pending its admission as a substituted limited partner, is entitled to an interest equivalent to that of a limited partner sharing in allocations and distributions, including liquidating
distributions. The general partner will vote and exercise other powers attributable to common units owned by an assignee who has not become a substituted limited partner at the written direction of the assignee. See &#147;&#151;Meetings; Voting.&#148; Atlas will not treat transferees who
do not execute and deliver a transfer application as assignees or as record holders of common units, and they will not receive cash distributions, federal income tax allocations or reports furnished to record holders. See &#147;&#151;Transfer of Common Units.&#148;</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Non-Citizen Assignees; Redemption</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If Atlas is or becomes subject to federal, state or local laws or regulations that, in the reasonable determination of us as the general partner, create a substantial risk of cancellation or forfeiture of any property in which Atlas has an interest because of the nationality,
citizenship or related status of any limited partner or assignee, Atlas may redeem the units held by the limited partner or assignee at their current market price. In order to avoid any cancellation or forfeiture, Atlas may require each limited partner or assignee to furnish
information about his nationality, citizenship or related status. If a limited partner or assignee fails to furnish this information within 30 days after a request for it, or Atlas determines after receipt of the information that the limited partner or assignee is not an eligible citizen,
then the limited partner or assignee may be treated as a non-citizen assignee. In addition to other limitations on the rights of an assignee who is not a substituted limited partner, a non-citizen assignee does not have the right to direct the voting of his units and may not receive
distributions in kind upon Atlas&#146; liquidation.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Indemnification</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under the partnership agreement, Atlas will indemnify the following persons, by reason of their status as such, to the fullest extent permitted by law, from and against all losses, claims or damages arising out of or incurred in connection with Atlas&#146; business:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the general partner;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">any departing general partner;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">any person who is or was an affiliate of the general partner or any departing general partner;</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">151</font></p>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">any person who is or was a member, partner, officer, director, employee, agent or trustee of the general partner, any departing general partner or the operating partnership or any affiliate of a general partner, any departing general partner or the operating partnership; or</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">any person who is or was serving at the request of a general partner or any departing general partner or any affiliate of a general partner or any departing general partner as an officer, director, employee, member, partner, agent, fiduciary or trustee of another person.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; indemnification obligation arises only if the indemnified person acted in good faith and in a manner the person reasonably believed to be in, and not opposed to, Atlas&#146; best interests. With respect to criminal proceedings, the indemnified person must not have had
reasonable cause to believe that the conduct was unlawful.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Any indemnification under these provisions will be only out of Atlas&#146; assets. Atlas&#146; general partner will not be personally liable for the indemnification obligations and will not have any obligation to contribute or loan funds to Atlas in connection with it. The partnership
agreement permits Atlas to purchase insurance against liabilities asserted against and expenses incurred by persons for Atlas&#146; activities, regardless of whether Atlas would have the power to indemnify the person against liabilities under the partnership agreement.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Books and Reports</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The general partner keeps appropriate books on Atlas&#146; business at Atlas&#146; principal offices. The books are maintained for both tax and financial reporting purposes on an accrual basis. For tax purposes, our fiscal year end is September&nbsp;30. For financial reporting purposes,
our fiscal year is the calendar year.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas furnishes or makes available to record holders of common units, within 120 days after the close of each fiscal year, an annual report containing audited financial statements and a report on those financial statements by Atlas&#146; independent public accountants. Except
for its fourth quarter, Atlas also furnishes or makes available summary financial information within 90 days after the close of each quarter.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas furnishes each record holder information reasonably required for tax reporting purposes within 90 days after the close of each calendar year. Atlas expects to furnish information in summary form so that some complex calculations normally required of partners can
be avoided. Atlas&#146; ability to furnish this summary information to unitholders depends on the cooperation of unitholders in supplying it with specific information. Atlas will furnish every unitholder with information to assist him in determining his federal and state tax liability
and filing his federal and state income tax returns, regardless of whether he supplies Atlas with information.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Right to Inspect Our Books and Records</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas&#146; partnership agreement provides that a limited partner can, for a purpose reasonably related to his interest as a limited partner, upon reasonable demand and at his own expense, have furnished to him:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">a current list of the name and last known address of each partner;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">a copy of Atlas&#146; tax returns;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">information as to the amount of cash, and a description and statement of the agreed value of any other property or services, contributed or to be contributed by each partner and the date on which each became a partner;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">copies of Atlas&#146; partnership agreement, the certificate of limited partnership and related amendments and powers of attorney under which they have been executed;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">information regarding the status of our business and financial condition; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">other information regarding our affairs that is just and reasonable.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The general partner may keep confidential from the limited partners trade secrets or other information the disclosure of which general partner believes in good faith is not in Atlas&#146; best interests or which Atlas is required by law or by agreements with third parties to
keep confidential.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">152</font></p>
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<p align="left"><font face="serif" size="2"><b>Registration Rights</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under the partnership agreement, Atlas has agreed to register for resale under the Securities Act and applicable state securities laws any common units, subordinated units or other partnership securities proposed to be sold by the general partner or any of our affiliates if
an exemption from the registration requirements is not otherwise available. Atlas is obligated to pay all expenses incidental to the registration, excluding underwriting discounts and commissions.</font></p>
</div>
<p align="center"><font face="serif" size="2">153</font></p>
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<p align="center"><font face="serif" size="2"><b>UNITS ELIGIBLE FOR FUTURE SALE</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">After the sale of the common units offered hereby, management of our general partner will hold an aggregate of 17,500,000 common units, assuming no exercise of the underwriters&#146; option to purchase additional units. The sale of these units could have an adverse
impact on the price of the common units or on any trading market that may develop.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The common units sold in the offering will generally be freely transferable without restriction or further registration under the Securities Act, except that any common units owned by an &#147;affiliate&#148; of ours may not be resold publicly except in compliance with the
registration requirements of the Securities Act or under an exemption under Rule 144 or otherwise. Rule 144 permits securities acquired by an affiliate of the issuer to be sold into the market in an amount that does not exceed, during any three-month period, the greater of:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">1% of the total number of the securities outstanding; or</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the average weekly reported trading volume of the common units for the four calendar weeks prior to the sale.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Sales under Rule 144 are also subject to specific manner of sale provisions, holding period requirements, notice requirements and the availability of current public information about us. A person who is not deemed to have been an affiliate of ours at any time during the
three months preceding a sale, and who has beneficially owned his common units for at least two years, would be entitled to sell common units under Rule 144 without regard to the public information requirements, volume limitations, manner of sale provisions and notice
requirements of Rule 144.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The partnership agreement does not restrict our ability to issue any partnership securities at any time. Any issuance of additional common units or other equity securities would result in a corresponding decrease in the proportionate ownership interest in us represented
by, and could adversely affect the cash distributions to and market price of, common units then outstanding. Please read &#147;The Partnership Agreement of Atlas Pipeline Holdings, L.P.&#151;Issuance of Additional Securities.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under our partnership agreement, our general partner and its affiliates have the right to cause us to register under the Securities Act and state securities laws the offer and sale of any common units, subordinated units or other partnership securities that they hold. Subject
to the terms and conditions of our partnership agreement, these registration rights allow our general partner and its affiliates or their assignees holding any units or other partnership securities to require registration of any of these units or other partnership securities and to
include them in a registration by us of other units, including units offered by us or by any unitholder. Our general partner will continue to have these registration rights for two years following its withdrawal or removal as our general partner. In connection with any registration
of this kind, we will indemnify each unitholder participating in the registration and its officers, directors and controlling persons from and against any liabilities under the Securities Act or any state securities laws arising from the registration statement or prospectus. We will
bear all costs and expenses incidental to any registration, excluding any underwriting discounts and commissions. Except as described below, our general partner and its affiliates may sell their units or other partnership interests in private transactions at any time, subject to
compliance with applicable laws.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our partnership, our general partner and the directors and executive officers of our general partner, have agreed not to sell any common units they beneficially own for a period of 180 days from the date of this prospectus. For a description of these lock-up provisions,
please read &#147;Underwriting.&#148;</font></p>
</div>
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<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>MATERIAL TAX CONSEQUENCES</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">This section is a discussion of the material tax considerations that may be relevant to prospective unitholders who are individual citizens or residents of the United States and, unless otherwise noted in the following discussion, is the opinion of Vinson &amp; Elkins L.L.P.,
tax counsel to the general partner and us, insofar as it relates to matters of United States federal income tax law and legal conclusions with respect to those matters. This section is based upon current provisions of the Internal Revenue Code, existing and proposed regulations
and current administrative rulings and court decisions, all of which are subject to change. Later changes in these authorities may cause the tax consequences to vary substantially from the consequences described below. Unless the context otherwise requires, references in this
section to &#147;us&#148; or &#147;we&#148; are references to Atlas Pipeline Holdings, L.P.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following discussion does not comment on all federal income tax matters affecting us or the unitholders. Moreover, the discussion focuses on unitholders who are individual citizens or residents of the United States and has only limited application to corporations,
estates, trusts, nonresident aliens or other unitholders subject to specialized tax treatment, such as tax-exempt institutions, foreign persons, individual retirement accounts (IRAs), real estate investment trusts (REITs) or mutual funds. Accordingly, we urge each prospective
unitholder to consult, and depend on, his own tax advisor in analyzing the federal, state, local and foreign tax consequences particular to him of the ownership or disposition of common units.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">All statements as to matters of law and legal conclusions, but not as to factual matters, contained in this section, unless otherwise noted, are the opinion of Vinson &amp; Elkins L.L.P. and are based on the accuracy of the representations made by us.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">No ruling has been or will be requested from the IRS regarding any matter affecting us or prospective unitholders. Instead, we will rely on opinions of Vinson &amp; Elkins L.L.P. Unlike a ruling, an opinion of counsel represents only that counsel&#146;s best legal judgment and
does not bind the IRS or the courts. Accordingly, the opinions and statements made here may not be sustained by a court if contested by the IRS. Any contest of this sort with the IRS may materially and adversely impact the market for the common units and the prices at
which common units trade. In addition, the costs of any contest with the IRS, principally legal, accounting and related fees, will result in a reduction in cash available for distribution to our unitholders and our general partner and thus will be borne indirectly by our unitholders
and our general partner. Furthermore, the tax treatment of us, or of an investment in us, may be significantly modified by future legislative or administrative changes or court decisions. Any modifications may or may not be retroactively applied.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">For the reasons described below, Vinson &amp; Elkins L.L.P. has not rendered an opinion with respect to the following specific federal income tax issues: (1) the treatment of a unitholder whose common units are loaned to a short seller to cover a short sale of common
units (please read &#147;Material Tax Consequences&#151;Tax Consequences of Unit Ownership&#151;Treatment of Short Sales&#148;); (2) whether our monthly convention for allocating taxable income and losses is permitted by existing Treasury Regulations (please read &#147;Material Tax
Consequences &#151;Disposition of Common Units&#151;Allocations Between Transferors and Transferees&#148;); and (3) whether our method for depreciating Section 743 adjustments is sustainable in certain cases (please read &#147;Material Tax Consequences&#151;Tax Consequences of Unit
Ownership&#151;Section 754 Election&#148;).</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Partnership Status</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">A partnership is not a taxable entity and incurs no federal income tax liability. Instead, each partner of a partnership is required to take into account his share of items of income, gain, loss and deduction of the partnership in computing his federal income tax liability,
regardless of whether cash distributions are made to him by the partnership. Distributions by a partnership to a partner are generally not taxable unless the amount of cash distributed is in excess of the partner&#146;s adjusted basis in his partnership interest.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Section 7704 of the Internal Revenue Code provides that publicly traded partnerships will, as a general rule, be taxed as corporations. However, an exception, referred to as the &#147;Qualifying Income Exception,&#148; exists with respect to publicly traded partnerships of which
90% or more of the gross income for every taxable year consists of &#147;qualifying income.&#148; Qualifying income includes income and gains derived from the</font></p>
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<p align="left"><font face="serif" size="2">transportation, storage, processing and marketing of crude oil, natural gas and products thereof, including our allocable share of such income from Atlas. Other types of qualifying income
include interest (other than from a financial business), dividends, gains from the sale of real property and gains from the sale or other disposition of capital assets held for the production of
income that otherwise constitutes qualifying income. We estimate that less than &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% of our current income is not qualifying income; however, this estimate could change from time to time.
Based upon and subject to this estimate, the factual representations made by us and the general partner and a review of the applicable legal authorities, Vinson &amp; Elkins L.L.P. is of the opinion
that at least 90% of our current gross income constitutes qualifying income.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">No ruling has been or will be sought from the IRS and the IRS has made no determination as to our status for federal income tax purposes or whether our operations generate &#147;qualifying income&#148; under Section 7704 of the Internal Revenue Code. Moreover, no ruling
has been or will be sought from the IRS and the IRS has made no determination as to Atlas&#146; status for federal income tax purposes or whether its operations generate &#147;qualifying income&#148; under Section 7704 of the Internal Revenue Code. Instead, we will rely on the opinion
of Vinson &amp; Elkins L.L.P. that, based upon the Internal Revenue Code, its regulations, published revenue rulings and court decisions and the representations described below, we will be classified as a partnership for federal income tax purposes.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In rendering its opinion, Vinson &amp; Elkins L.L.P. has relied on factual representations made by us and our general partner. The representations made by us and our general partner upon which Vinson &amp; Elkins L.L.P. has relied are:</font></p>
</div>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">(a)</font></td>
    <td><div align="left"><font face="serif" size="2">Neither we, nor Atlas will elect to be treated as a corporation; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">(b)</font></td>
    <td><div align="left"><font face="serif" size="2">For each taxable year, more than 90% of our gross income will be income that Vinson &amp; Elkins L.L.P. has opined or will opine is &#147;qualifying income&#148; within the meaning of Section 7704(d) of the Internal Revenue Code.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If we fail to meet the Qualifying Income Exception, other than a failure that is determined by the IRS to be inadvertent and that is cured within a reasonable time after discovery, we will be treated as if we had transferred all of our assets, subject to liabilities, to a
newly formed corporation, on the first day of the year in which we fail to meet the Qualifying Income Exception, in return for stock in that corporation, and then distributed that stock to the unitholders in liquidation of their interests in us. This contribution and liquidation
should be tax-free to unitholders and us so long as we, at that time, do not have liabilities in excess of the tax basis of our assets. Thereafter, we would be treated as a corporation for federal income tax purposes.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If we were taxable as a corporation in any taxable year, either as a result of a failure to meet the Qualifying Income Exception or otherwise, our items of income, gain, loss and deduction would be reflected only on our tax return rather than being passed through to the
unitholders, and our net income would be taxed to us at corporate rates. Moreover, if Atlas were taxable as a corporation in any given year, our share of Atlas&#146; items of income, gain, loss and deduction would not be passed through to us, and Atlas would pay tax on its income
at corporate rates. In addition, any distribution made to a unitholder would be treated as either taxable dividend income, to the extent of our current or accumulated earnings and profits, or, in the absence of earnings and profits, a nontaxable return of capital, to the extent of the
unitholder&#146;s tax basis in his common units, or taxable capital gain, after the unitholder&#146;s tax basis in his common units is reduced to zero. Accordingly, taxation of either us or Atlas as a corporation would result in a material reduction in a unitholder&#146;s cash flow and after-tax
return and thus would likely result in a substantial reduction of the value of the units.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The discussion below is based on Vinson &amp; Elkins L.L.P.&#146;s opinion that we and Atlas will be classified as a partnership for federal income tax purposes.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Limited Partner Status</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Unitholders who have become limited partners of Atlas Pipeline Holdings, L.P. will be treated as partners of Atlas Pipeline Holdings, L.P. for federal income tax purposes. Also:</font></p>
</div>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">assignees who have executed and delivered transfer applications, and are awaiting admission as limited partners; and</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">unitholders whose common units are held in street name or by a nominee and who have the right to direct the nominee in the exercise of all substantive rights attendant to the ownership of their common units will be treated as partners of Atlas Pipeline Holdings, L.P. for
federal income tax purposes.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As there is no direct authority addressing assignees of units who are entitled to execute and deliver transfer applications and thereby become entitled to direct the exercise of attendant rights, but who fail to execute and deliver transfer applications, Vinson &amp; Elkins
L.L.P.&#146;s opinion does not extend to those persons. Furthermore, a purchaser or other transferee of units who does not execute and deliver a transfer application may not receive some federal income tax information or reports furnished to record holders of units unless the units
are held in a nominee or street name account and the nominee or broker has executed and delivered a transfer application for those units.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">A beneficial owner of common units whose units have been transferred to a short seller to complete a short sale would appear to lose his status as a partner with respect to those units for federal income tax purposes. Please read &#147;Material Tax Consequences&#151;Tax
Consequences of Unit Ownership&#151;Treatment of Short Sales.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Income, gain, deductions or losses would not appear to be reportable by a unitholder who is not a partner for federal income tax purposes, and any cash distributions received by a unitholder who is not a partner for federal income tax purposes would therefore appear to
be fully taxable as ordinary income. These holders are urged to consult their own tax advisors with respect to their status as partners in Atlas Pipeline Holdings, L.P.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The references to &#147;unitholders&#148; in the discussion that follows are to persons who are treated as partners in Atlas Pipeline Holdings, L.P. for federal income tax purposes.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Tax Consequences of Unit Ownership</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Flow-Through of Taxable Income</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We will not pay any federal income tax. Instead, each unitholder will be required to report on his income tax return his share of our income, gains, losses and deductions without regard to whether corresponding cash distributions are received by him. Consequently, we
may allocate income to a unitholder even if he has not received a cash distribution. Each unitholder will be required to include in income his allocable share of our income, gains, losses and deductions for our taxable year ending with or within his taxable year. Our taxable
year ends on September 30.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Treatment of Distributions</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Distributions by us to a unitholder generally will not be taxable to the unitholder for federal income tax purposes, except to the extent the amount of any such cash distribution exceeds his tax basis in his common units immediately before the distribution. Our cash
distributions in excess of a unitholder&#146;s tax basis generally will be considered to be gain from the sale or exchange of the common units, taxable in accordance with the rules described under &#147;&#151;Disposition of Common Units.&#148; Any reduction in a unitholder&#146;s share of our
liabilities for which no partner, including the general partner, bears the economic risk of loss, known as &#147;nonrecourse liabilities,&#148; will be treated as a distribution of cash to that unitholder. To the extent our distributions cause a unitholder&#146;s &#147;at risk&#148; amount to be less than zero
at the end of any taxable year, he must recapture any losses deducted in previous years. Please read &#147;Material Tax Consequences&#151;Tax Consequences of Unit Ownership&#151;Limitations on Deductibility of Losses.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">A decrease in a unitholder&#146;s percentage interest in us because of our issuance of additional common units will decrease his share of our nonrecourse liabilities, and thus will result in a corresponding deemed distribution of cash. A non-pro rata distribution of money or
property may result in ordinary income to a unitholder, regardless of his tax basis in his common units, if the distribution reduces the unitholder&#146;s share of our &#147;unrealized receivables,&#148; including depreciation recapture, and/or substantially appreciated &#147;inventory items,&#148; both as
defined in the Internal Revenue Code, and collectively, &#147;Section 751 Assets.&#148; To that extent, he will be treated as having been distributed his proportionate share of the Section 751 Assets and having exchanged those assets with us in return for the non-pro rata portion of the
actual distribution made to him. This latter deemed exchange will generally result in the unitholder&#146;s realization of ordinary income, which</font></p>
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<p align="left"><font face="serif" size="2">will equal the excess of (1) the non-pro rata portion of that distribution over (2) the unitholder&#146;s tax basis for the share of Section 751 Assets deemed relinquished in the exchange.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Ratio of Taxable Income to Distributions</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We estimate that a purchaser of common units in this offering who owns those common units from the date of closing of this offering through the record date for distributions for the period ending &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, will be allocated an amount of federal taxable income for that period
that will be &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% or less of the cash distributed with respect to that period. We anticipate that after the taxable year ending &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, the ratio of allocable taxable income to cash distributions to the unitholders will increase. Our ratio of taxable income to cash distributions will be
much greater than the ratio applicable to holders of common units of Atlas because remedial allocations of deductions to us from Atlas will be very limited and our ownership of incentive distribution rights will cause more taxable income to be allocated to us from Atlas.
Moreover, if Atlas is successful in increasing distributable cash flow over time, our income allocations from incentive distribution rights will increase, and, therefore, our ratio of taxable income to cash distributions will further increase. These estimates are based upon the
assumption that current rate of distributions from Atlas will approximate the amount required to make the initial quarterly distribution of $0.225 per common unit on all units and other assumptions with respect to capital expenditures, cash flow and anticipated cash
distributions. These estimates and assumptions are subject to, among other things, numerous business, economic, regulatory, competitive and political uncertainties beyond our control. Further, the estimates are based on current tax law and tax reporting positions that we will
adopt and with which the IRS could disagree. Accordingly, we cannot assure you that these estimates will prove to be correct. The actual ratio of taxable income could be higher or lower than our estimate of &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;%, and any differences could be material and could materially
affect the value of the common units. For example, the ratio of allocable taxable income to cash distributions to a purchaser of common units in this offering will be greater than &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;% with respect to the period described above if:</font></p>
</div>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; gross income from operations exceeds the amount required to make the minimum quarterly distribution on all Atlas&#146; units, yet Atlas only distributes the minimum quarterly distribution on all its units; or</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas makes a future offering of common units and uses the proceeds of the offering in a manner that does not produce substantial additional deductions during the period described above, such as to repay indebtedness outstanding at the time of this offering or to acquire
property that is not eligible for depreciation or amortization for federal income tax purposes or that is depreciable or amortizable at a rate significantly slower than the rate applicable to Atlas&#146; assets at the time of this offering.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Basis of Common Units</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">A unitholder&#146;s initial tax basis for his common units will be the amount he paid for the common units plus his share of our nonrecourse liabilities. That basis will be increased by his share of our income and by any increases in his share of our nonrecourse liabilities.
That basis will be decreased, but not below zero, by distributions from us, by the unitholder&#146;s share of our losses, by any decreases in his share of our nonrecourse liabilities and by his share of our expenditures that are not deductible in computing taxable income and are not
required to be capitalized. A unitholder will have no share of our debt that is recourse to the general partner, but will have a share, generally based on his share of profits, of our nonrecourse liabilities. Please read &#147;Material Tax Consequences&#151;Disposition of Common
Units&#151;Recognition of Gain or Loss.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Limitations on Deductibility of Losses</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The deduction by a unitholder of his share of our losses will be limited to the tax basis in his units and, in the case of an individual unitholder or a corporate unitholder, if more than 50% of the value of the corporate unitholder&#146;s stock is owned directly or indirectly by
five or fewer individuals or some tax-exempt organizations, to the amount for which the unitholder is considered to be &#147;at risk&#148; with respect to our activities, if that is less than his tax basis. A unitholder must recapture losses deducted in previous years to the extent that
distributions cause his at risk amount to be less than zero at the end of any taxable year. Losses disallowed to a unitholder or recaptured as a result of these limitations will carry forward and will be allowable to the extent that his tax basis or at risk amount, whichever is the
limiting factor, is subsequently increased. Upon the taxable disposition of a unit, any gain recognized by a unitholder can be offset by losses</font></p>
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<p align="left"><font face="serif" size="2">that were previously suspended by the at risk limitation but may not be offset by losses suspended by the basis limitation. Any excess loss above that gain previously suspended by the at risk or
basis limitations is no longer utilizable.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In general, a unitholder will be at risk to the extent of the tax basis of his units, excluding any portion of that basis attributable to his share of our nonrecourse liabilities, reduced by any amount of money he borrows to acquire or hold his units, if the lender of those
borrowed funds owns an interest in us, is related to the unitholder or can look only to the units for repayment. A unitholder&#146;s at risk amount will increase or decrease as the tax basis of the unitholder&#146;s units increases or decreases, other than tax basis increases or decreases
attributable to increases or decreases in his share of our nonrecourse liabilities.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The passive loss limitations generally provide that individuals, estates, trusts and some closely-held corporations and personal service corporations can deduct losses from passive activities, which are generally corporate or partnership activities in which the taxpayer does
not materially participate, only to the extent of the taxpayer&#146;s income from those passive activities. As a general rule, the passive loss limitations are applied separately with respect to each publicly traded partnership. However, the application of the passive loss limitations to
tiered publicly traded partnerships is uncertain. We will take the position that any passive losses we generate that are reasonably allocable to our investment in Atlas will only be available to offset our passive income generated in the future that is reasonably allocable to our
investment in Atlas and will not be available to offset income from other passive activities or investments, including other investments in private businesses or investments we may make in other publicly traded partnerships. Moreover, because the passive loss limitations are
applied separately with respect to each publicly traded partnership, any passive losses we generate will not be available to offset your income from other passive activities or investments, including your investments in other publicly traded partnerships, such as Atlas, or salary
or active business income. Further, your share of our net income may be offset by any suspended passive losses from your investment in us, but may not be offset by our current or carryover losses from other passive activities, including those attributable to other publicly
traded partnerships. Passive losses that are not deductible because they exceed a unitholder&#146;s share of income we generate may be deducted in full when he disposes of his entire investment in us and Atlas in a fully taxable transaction with an unrelated party.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The IRS could take the position that for purposes of applying the passive loss limitation rules to tiered publicly traded partnerships, such as Atlas and us, the related entities are treated as one publicly traded partnership. In that case, any passive losses we generate would
be available to offset income from your investments in Atlas. However, passive losses that are not deductible because they exceed a unitholder&#146;s share of income we generate would not be deductible in full until a unitholder disposes of his entire investment in both us and
Atlas in a fully taxable transaction with an unrelated party.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The passive activity loss rules are applied after other applicable limitations on deductions, including the at risk rules and the basis limitation.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Limitations on Interest Deductions</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The deductibility of a non-corporate taxpayer&#146;s &#147;investment interest expense&#148; is generally limited to the amount of that taxpayer&#146;s &#147;net investment income.&#148; Investment interest expense includes:</font></p>
</div>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">interest on indebtedness properly allocable to property held for investment;</font></div></td>
  </tr>
</table>
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  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">our interest expense attributed to portfolio income; and</font></div></td>
  </tr>
</table>
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  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the portion of interest expense incurred to purchase or carry an interest in a passive activity to the extent attributable to portfolio income.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The computation of a unitholder&#146;s investment interest expense will take into account interest on any margin account borrowing or other loan incurred to purchase or carry a unit. Net investment income includes gross income from property held for investment and
amounts treated as portfolio income under the passive loss rules, less deductible expenses, other than interest, directly connected with the production of investment income, but generally does not include gains attributable to the disposition of property held for investment. The
IRS has indicated that net passive income earned by a publicly traded partnership will be treated as</font></p>
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<p align="left"><font face="serif" size="2">investment income to its unitholders. In addition, the unitholder&#146;s share of our portfolio income will be treated as investment income.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Entity-Level Collections</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If we are required or elect under applicable law to pay any federal, state, local or foreign income tax on behalf of any unitholder or the general partner or any former unitholder, we are authorized to pay those taxes from our funds. That payment, if made, will be treated
as a distribution of cash to the partner on whose behalf the payment was made. If the payment is made on behalf of a person whose identity cannot be determined, we are authorized to treat the payment as a distribution to all current unitholders. We are authorized to amend
the partnership agreement in the manner necessary to maintain uniformity of intrinsic tax characteristics of units and to adjust later distributions, so that after giving effect to these distributions, the priority and characterization of distributions otherwise applicable under the
partnership agreement is maintained as nearly as is practicable. Payments by us as described above could give rise to an overpayment of tax on behalf of an individual partner in which event the partner would be required to file a claim in order to obtain a credit or refund.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Allocation of Income, Gain, Loss and Deduction</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In general, if we have a net profit, our items of income, gain, loss and deduction will be allocated to the unitholders in accordance with their percentage interests in us. If we have a net loss for the entire year, that loss will be allocated to the unitholders in accordance
with their percentage interests in us to the extent of their positive capital accounts and, second, to the general partner.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Specified items of our income, gain, loss and deduction will be allocated to account for the difference between the tax basis and fair market value of our assets at time of this offering, referred to in this discussion as &#147;Contributed Property.&#148; The effect of these
allocations to a unitholder purchasing common units in this offering will be essentially the same as if the tax basis of our assets were equal to their fair market value at the time of this offering. In addition, items of recapture income will be allocated to the extent possible to
the partner who was allocated the deduction giving rise to the treatment of that gain as recapture income in order to minimize the recognition of ordinary income by some unitholders. Finally, although we do not expect that our operations will result in the creation of negative
capital accounts, if negative capital accounts nevertheless result, items of our income and gain will be allocated in such amount and manner as is needed to eliminate the negative balance as quickly as possible.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">An allocation of items of our income, gain, loss or deduction, other than an allocation required by the Internal Revenue Code to eliminate the difference between a partner&#146;s &#147;book&#148; capital account, credited with the fair market value of Contributed Property, and &#147;tax&#148;
capital account, credited with the tax basis of Contributed Property, referred to in this discussion as the &#147;Book-Tax Disparity,&#148; will generally be given effect for federal income tax purposes in determining a partner&#146;s share of an item of income, gain, loss or deduction only if
the allocation has substantial economic effect. In any other case, a partner&#146;s share of an item will be determined on the basis of his interest in us, which will be determined by taking into account all the facts and circumstances, including:</font></p>
</div>
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    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">his relative contributions to us;</font></div></td>
  </tr>
</table>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the interests of all the partners in profits and losses;</font></div></td>
  </tr>
</table>
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  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the interest of all the partners in cash flow; and</font></div></td>
  </tr>
</table>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the rights of all the partners to distributions of capital upon liquidation.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Vinson &amp; Elkins L.L.P. is of the opinion that, with the exception of the issues described in &#147;&#151;Tax Consequences of Unit Ownership&#151;Section 754 Election&#148; and &#147;&#151;Disposition of Common Units&#151;Allocations Between Transferors and Transferees,&#148; allocations under our partnership agreement will be given effect for federal income tax purposes in determining a partner&#146;s share of an item of income, gain, loss or deduction.</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">160</font></p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Treatment of Short Sales</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">A unitholder whose units are loaned to a &#147;short seller&#148; to cover a short sale of units may be considered as having disposed of those units. If so, he would no longer be treated for tax purposes as a partner with respect to those units during the period of the loan and may
recognize gain or loss from the disposition. As a result, during this period:</font></p>
</div>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">any of our income, gain, loss or deduction with respect to those units would not be reportable by the unitholder;</font></div></td>
  </tr>
</table>
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  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">any cash distributions received by the unitholder as to those units would be fully taxable; and</font></div></td>
  </tr>
</table>
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  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">all of these distributions would appear to be ordinary income.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Vinson &amp; Elkins L.L.P. has not rendered an opinion regarding the treatment of a unitholder where common units are loaned to a short seller to cover a short sale of common units; therefore, unitholders desiring to assure their status as partners and avoid the risk of gain
recognition from a loan to a short seller are urged to modify any applicable brokerage account agreements to prohibit their brokers from borrowing their units. The IRS has announced that it is actively studying issues relating to the tax treatment of short sales of partnership
interests. Please also read &#147;Material Tax Consequences&#151;Disposition of Common Units&#151;Recognition of Gain or Loss.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Alternative Minimum Tax</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Each unitholder will be required to take into account his distributive share of any items of our income, gain, loss or deduction for purposes of the alternative minimum tax. The current minimum tax rate for noncorporate taxpayers is 26% on the first $175,000 of
alternative minimum taxable income in excess of the exemption amount and 28% on any additional alternative minimum taxable income. Prospective unitholders are urged to consult with their tax advisors as to the impact of an investment in units on their liability for the
alternative minimum tax.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Tax Rates</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In general, the highest effective United States federal income tax rate for individuals is currently 35.0% and the maximum United States federal income tax rate for net capital gains of an individual is currently 15.0% if the asset disposed of was held for more than 12
months at the time of disposition.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Section 754 Election</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We will make the election permitted by Section 754 of the Internal Revenue Code. That election is irrevocable without the consent of the IRS. The election will generally permit us to adjust a common unit purchaser&#146;s tax basis in our assets (&#147;inside basis&#148;) under
Section 743(b) of the Internal Revenue Code to reflect his purchase price. This election does not apply to a person who purchases common units directly from us. The Section 743(b) adjustment belongs to the purchaser and not to other unitholders. For purposes of this
discussion, a unitholder&#146;s inside basis in our assets will be considered to have two components: (1) his share of our tax basis in our assets (&#147;common basis&#148;) and (2) his Section 743(b) adjustment to that basis.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Treasury regulations under Section 743 of the Internal Revenue Code require, if the remedial allocation method is adopted (which we will adopt), a portion of the Section 743(b) adjustment attributable to recovery property to be depreciated over the remaining cost
recovery period for the Section 704(c) built-in gain. Under Treasury Regulation Section 1.167(c)-1(a)(6), a Section 743(b) adjustment attributable to property subject to depreciation under Section 167 of the Internal Revenue Code, rather than cost recovery deductions under
Section 168, is generally required to be depreciated using either the straight-line method or the 150% declining balance method. Under our partnership agreement, the general partner is authorized to take a position to preserve the uniformity of units even if that position is not
consistent with these Treasury Regulations. Please read &#147;Material Tax Consequences&#151;Uniformity of Units.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Although Vinson &amp; Elkins L.L.P. is unable to opine as to the validity of this approach because there is no controlling authority on this issue, we intend to depreciate the portion of a Section 743(b) adjustment attributable to unrealized appreciation in the value of
Contributed Property, to the extent of any unamortized</font></p>
</div>
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<p align="left"><font face="serif" size="2">Book-Tax Disparity, using a rate of depreciation or amortization derived from the depreciation or amortization method and useful life applied to the common basis of the property, or treat that
portion as non-amortizable to the extent attributable to property the common basis of which is not amortizable. This method is consistent with the regulations under Section 743 of the Internal
Revenue Code but is arguably inconsistent with Treasury Regulation Section 1.167(c)-1(a)(6), which is not expected to directly apply to a material portion of our assets. To the extent this
Section 743(b) adjustment is attributable to appreciation in value in excess of the unamortized Book-Tax Disparity, we will apply the rules described in the Treasury Regulations and legislative
history. If we determine that this position cannot reasonably be taken, we may take a depreciation or amortization position under which all purchasers acquiring units in the same month would
receive depreciation or amortization, whether attributable to common basis or a Section 743(b) adjustment, based upon the same applicable rate as if they had purchased a direct interest in our
assets. This kind of aggregate approach may result in lower annual depreciation or amortization deductions than would otherwise be allowable to some unitholders. Please read &#147;Material Tax
Consequences&#151;Uniformity of Units.&#148;</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">A Section 754 election is advantageous if the transferee&#146;s tax basis in his units is higher than the units&#146; share of the aggregate tax basis of our assets immediately prior to the transfer. In that case, as a result of the election, the transferee would have, among other items,
a greater amount of depreciation and depletion deductions and his share of any gain or loss on a sale of our assets would be less. Conversely, a Section 754 election is disadvantageous if the transferee&#146;s tax basis in his units is lower than those units&#146; share of the aggregate tax
basis of our assets immediately prior to the transfer. Thus, the fair market value of the units may be affected either favorably or unfavorably by the election. A basis adjustment is required regardless of whether a Section 754 election is made in the case of a transfer of an
interest in us if we have a substantial built in loss immediately after the transfer or if we distribute property and have a substantial basis reduction. Generally, a built in loss or a basis reduction is substantial if it exceeds $250,000.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The calculations involved in the Section 754 election are complex and will be made on the basis of assumptions as to the value of our assets and other matters. For example, the allocation of the Section 743(b) adjustment among our assets must be made in accordance
with the Internal Revenue Code. The IRS could seek to reallocate some or all of any Section 743(b) adjustment allocated by us to our tangible assets or the tangible assets owned by Atlas to goodwill instead. Goodwill, as an intangible asset, is generally amortizable over a
longer period of time or under a less accelerated method than our tangible assets. We cannot assure you that the determinations we make will not be successfully challenged by the IRS and that the deductions resulting from them will not be reduced or disallowed altogether.
Should the IRS require a different basis adjustment to be made, and should, in our opinion, the expense of compliance exceed the benefit of the election, we may seek permission from the IRS to revoke our Section 754 election. If permission is granted, a subsequent purchaser
of units may be allocated more income than he would have been allocated had the election not been revoked.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Tax Treatment of Operations</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Accounting Method and Taxable Year</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We use the year ending September 30 as our taxable year and the accrual method of accounting for federal income tax purposes. Each unitholder will be required to include in income his share of our income, gain, loss and deduction for our taxable year ending within
or with his taxable year. In addition, a unitholder who has a taxable year ending on a date other than September 30 and who disposes of all of his units following the close of our taxable year but before the close of his taxable year must include his share of our income, gain,
loss and deduction in income for his taxable year, with the result that he will be required to include in income for his taxable year his share of more than one year of our income, gain, loss and deduction. Please read &#147;Material Tax Consequences &#151;Disposition of Common
Units&#151;Allocations Between Transferors and Transferees.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Initial Tax Basis, Depreciation and Amortization</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The tax basis of our assets and Atlas&#146; assets will be used for purposes of computing depreciation and cost recovery deductions and, ultimately, gain or loss on the disposition of these assets. The tax basis of our assets we own at the time of this offering will be greater to
the extent such assets have been recently</font></p>
</div>
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<p align="left"><font face="serif" size="2">acquired. The federal income tax burden associated with the difference between the fair market value of our assets and Atlas&#146; assets and their tax basis immediately prior to this offering will be
borne by our existing unitholders. Please read &#147;Material Tax Consequences&#151;Tax Consequences of Unit Ownership&#151;Allocation of Income, Gain, Loss and Deduction.&#148;</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">To the extent allowable, we may elect to use the depreciation and cost
recovery methods that will result in the largest deductions being taken in the early years after
assets are placed in service. Property we subsequently acquire or construct may be depreciated
using accelerated methods permitted by the Internal Revenue Code.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If we or Atlas dispose of depreciable property by sale, foreclosure or otherwise, all or a portion of any gain, determined by reference to the amount of depreciation previously deducted and the nature of the property, may be subject to the recapture rules and taxed as
ordinary income rather than capital gain. Similarly, a unitholder who has taken cost recovery or depreciation deductions with respect to property we own or Atlas owns will likely be required to recapture some or all of those deductions as ordinary income upon a sale of his
interest in us. Please read &#147;Material Tax Consequences&#151;Tax Consequences of Unit Ownership&#151;Allocation of Income, Gain, Loss and Deduction&#148; and &#147;Material Tax Consequences&#151;Disposition of Common Units&#151;Recognition of Gain or Loss.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The costs incurred in selling our units (called &#147;syndication expenses&#148;) must be capitalized and cannot be deducted currently, ratably or upon our termination. There are uncertainties regarding the classification of costs as organization expenses, which may be amortized
by us, and as syndication expenses, which may not be amortized by us. The underwriting discounts and commissions we incur will be treated as syndication expenses.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Valuation and Tax Basis of Our Properties</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The federal income tax consequences of the ownership and disposition of units will depend in part on our estimates of the relative fair market values, and the initial tax bases, of our assets and Atlas&#146; assets. Although we may from time to time consult with professional
appraisers regarding valuation matters, we will make many of the relative fair market value estimates ourselves. These estimates and determinations of basis are subject to challenge and will not be binding on the IRS or the courts. If the estimates of fair market value or basis
are later found to be incorrect, the character and amount of items of income, gain, loss or deductions previously reported by unitholders might change, and unitholders might be required to adjust their tax liability for prior years and incur interest and penalties with respect to
those adjustments.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Disposition of Common Units</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Recognition of Gain or Loss</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Gain or loss will be recognized on a sale of units equal to the difference between the amount realized and the unitholder&#146;s tax basis for the units sold. A unitholder&#146;s amount realized will be measured by the sum of the cash or the fair market value of other property
received by him plus his share of our nonrecourse liabilities. Because the amount realized includes a unitholder&#146;s share of our nonrecourse liabilities, the gain recognized on the sale of units could result in a tax liability in excess of any cash received from the sale.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Prior distributions from us in excess of cumulative net taxable income for a common unit that decreased a unitholder&#146;s tax basis in that common unit will, in effect, become taxable income if the common unit is sold at a price greater than the unitholder&#146;s tax basis in
that common unit, even if the price received is less than his original cost.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Except as noted below, gain or loss recognized by a unitholder, other than a &#147;dealer&#148; in units, on the sale or exchange of a unit held for more than one year will generally be taxable as capital gain or loss. Capital gain recognized by an individual on the sale of units
held more than 12 months will generally be taxed at a maximum rate of 15%. However, a portion of this gain or loss will be separately computed and taxed as ordinary income or loss under Section 751 of the Internal Revenue Code to the extent attributable to assets giving
rise to depreciation recapture or other &#147;unrealized receivables&#148; or to &#147;inventory items&#148; we own or Atlas owns. The term &#147;unrealized receivables&#148; includes potential recapture items, including depreciation</font></p>
</div>
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<p align="left"><font face="serif" size="2">recapture. Ordinary income attributable to unrealized receivables, inventory items and depreciation recapture may exceed net taxable gain realized upon the sale of a unit and may be recognized
even if there is a net taxable loss realized on the sale of a unit. Thus, a unitholder may recognize both ordinary income and a capital loss upon a sale of units. Net capital losses may offset
capital gains and no more than $3,000 of ordinary income, in the case of individuals, and may only be used to offset capital gains in the case of corporations.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The IRS has ruled that a partner who acquires interests in a partnership in separate transactions must combine those interests and maintain a single adjusted tax basis for all those interests. Upon a sale or other disposition of less than all of those interests, a portion of
that tax basis must be allocated to the interests sold using an &#147;equitable apportionment&#148; method, which generally means that the tax basis allocated to the interest sold equals an amount that bears the same relation to the partner&#146;s tax basis in his entire interest in the partnership
as the value of the interest sold bears to the value of the partner&#146;s entire interest in the partnership. Treasury Regulations under Section 1223 of the Internal Revenue Code allow a selling unitholder who can identify common units transferred with an ascertainable holding
period to elect to use the actual holding period of the common units transferred. Thus, according to the ruling, a common unitholder will be unable to select high or low basis common units to sell as would be the case with corporate stock, but, according to the regulations,
may designate specific common units sold for purposes of determining the holding period of units transferred. A unitholder electing to use the actual holding period of common units transferred must consistently use that identification method for all subsequent sales or
exchanges of common units. A unitholder considering the purchase of additional units or a sale of common units purchased in separate transactions is urged to consult his tax advisor as to the possible consequences of this ruling and application of the regulations.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Specific provisions of the Internal Revenue Code affect the taxation of some financial products and securities, including partnership interests, by treating a taxpayer as having sold an &#147;appreciated&#148; partnership interest, one in which gain would be recognized if it were
sold, assigned or terminated at its fair market value, if the taxpayer or related persons enter(s) into:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">a short sale;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">an offsetting notional principal contract; or</font></div></td>
  </tr>
</table>
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  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">a futures or forward contract with respect to the partnership interest or substantially identical property.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Moreover, if a taxpayer has previously entered into a short sale, an offsetting notional principal contract or a futures or forward contract with respect to the partnership interest, the taxpayer will be treated as having sold that position if the taxpayer or a related person
then acquires the partnership interest or substantially identical property. The Secretary of the Treasury is also authorized to issue regulations that treat a taxpayer that enters into transactions or positions that have substantially the same effect as the preceding transactions as
having constructively sold the financial position.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Allocations Between Transferors and Transferees</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In general, our taxable income and losses will be determined annually, will be prorated on a monthly basis and will be subsequently apportioned among the unitholders in proportion to the number of units owned by each of them as of the opening of the applicable
exchange on the first business day of the month, which we refer to in this prospectus as the &#147;Allocation Date.&#148; However, gain or loss realized on a sale or other disposition of our assets other than in the ordinary course of business will be allocated among the unitholders on
the Allocation Date in the month in which that gain or loss is recognized. As a result, a unitholder transferring units may be allocated income, gain, loss and deduction realized after the date of transfer.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The use of this method may not be permitted under existing Treasury Regulations as there is no controlling authority on the issue. Accordingly, Vinson &amp; Elkins L.L.P. is unable to opine on the validity of this method of allocating income and deductions between
unitholders. If this method is not allowed under the Treasury Regulations, or only applies to transfers of less than all of the unitholder&#146;s interest, our taxable income or losses might be reallocated among the unitholders. We are authorized to revise our method of</font></p>
</div>
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<p align="left"><font face="serif" size="2">allocation between unitholders, as well as unitholders whose interests vary during a taxable year, to conform to a method permitted under future Treasury Regulations.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">A unitholder who owns units at any time during a quarter and who disposes of them prior to the record date set for a cash distribution for that quarter will be allocated items of our income, gain, loss and deductions attributable to that quarter but will not be entitled to
receive that cash distribution.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Notification Requirements</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">A unitholder who sells any of his units other than through a broker generally is required to notify us in writing of that sale within 30 days after the sale (or, if earlier, January 15 of the year following the sale). A&nbsp;purchaser of units who purchases units from another
unitholder is generally required to notify us in writing of that purchase within 30 days after the purchase, unless a broker or nominee will satisfy such requirement. We are required to notify the IRS of that transaction and to furnish specified information to the transferor and
transferee. Failure to notify us of a purchase may, in some cases, lead to the imposition of penalties. However, these reporting requirements do not apply to a sale by an individual who is a citizen of the United States and who effects the sale or exchange through a broker.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Constructive Termination</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We will be considered to have been terminated for tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and profits within a 12-month period. A constructive termination results in the closing of our taxable year for all unitholders.
In the case of a unitholder reporting on a taxable year other than a fiscal year ending September 30, the closing of our taxable year may result in more than 12 months of our taxable income or loss being includable in his taxable income for the year of termination. We would
be required to make new tax elections after a termination, including a new election under Section 754 of the Internal Revenue Code, and a termination would result in a deferral of our deductions for depreciation. A termination could also result in penalties if we were unable to
determine that the termination had occurred. Moreover, a termination might either accelerate the application of, or subject us to, any tax legislation enacted before the termination.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Uniformity of Units</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Because we cannot match transferors and transferees of units, we must maintain uniformity of the economic and tax characteristics of the units to a purchaser of these units. In the absence of uniformity, we may be unable to completely comply with a number of federal
income tax requirements, both statutory and regulatory. A lack of uniformity can result from a literal application of Treasury Regulation Section 1.167(c)-1(a)(6). Any non-uniformity could have a negative impact on the value of the units. Please read &#147;Material Tax
Consequences&#151;Tax Consequences of Unit Ownership&#151;Section 754 Election.&#148;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We intend to depreciate the portion of a Section 743(b) adjustment attributable to unrealized appreciation in the value of Contributed Property, to the extent of any unamortized Book-Tax Disparity, using a rate of depreciation or amortization derived from the
depreciation or amortization method and useful life applied to the common basis of that property, or treat that portion as nonamortizable, to the extent attributable to property the common basis of which is not amortizable, consistent with the regulations under Section 743 of
the Internal Revenue Code, even though that position may be inconsistent with Treasury Regulation Section 1.167(c)-1(a)(6), which is not expected to directly apply to a material portion of our assets. Please read &#147;Material Tax Consequences&#151;Tax Consequences of Unit
Ownership&#151;Section 754 Election.&#148; To the extent that the Section 743(b) adjustment is attributable to appreciation in value in excess of the unamortized Book-Tax Disparity, we will apply the rules described in the Treasury Regulations and legislative history. If we determine
that this position cannot reasonably be taken, we may adopt a depreciation and amortization position under which all purchasers acquiring units in the same month would receive depreciation and amortization deductions, whether attributable to a common basis or Section
743(b) adjustment, based upon the same applicable rate as if they had purchased a direct interest in our property. If this position is adopted, it may result in lower annual depreciation and amortization deductions than would otherwise be allowable to some unitholders and risk
the loss of depreciation and amortization deductions not taken in the year that these deductions are otherwise allowable. This position will not be adopted if we determine that the loss of depreciation and amortization deductions will have a material adverse effect on the
unitholders. If we choose</font></p>
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<p align="left"><font face="serif" size="2">not to utilize this aggregate method, we may use any other reasonable depreciation and amortization method to preserve the uniformity of the intrinsic tax characteristics of any units that would
not have a material adverse effect on the unitholders. The IRS may challenge any method of depreciating the Section 743(b) adjustment described in this paragraph. If this challenge were
sustained, the uniformity of units might be affected, and the gain from the sale of units might be increased without the benefit of additional deductions. Please read &#147;Material Tax
Consequences&#151;Disposition of Common Units&#151;Recognition of Gain or Loss.&#148;</font></p>
<p align="left"><font face="serif" size="2"><b>Tax-Exempt Organizations and Other Investors</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Ownership of units by employee benefit plans, other tax-exempt organizations, non-resident aliens, foreign corporations and other foreign persons raises issues unique to those investors and, as described below, may have substantially adverse tax consequences to them.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Employee benefit plans and most other organizations exempt from federal income tax, including individual retirement accounts and other retirement plans, are subject to federal income tax on unrelated business taxable income. Virtually all of our income allocated to a
unitholder that is a tax-exempt organization will be unrelated business taxable income and will be taxable to them.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Non-resident aliens and foreign corporations, trusts or estates that own units will be considered to be engaged in business in the United States because of the ownership of units. As a consequence, they will be required to file federal tax returns to report their share of our
income, gain, loss or deduction and pay federal income tax at regular rates on their share of our net income or gain. Moreover, under rules applicable to publicly traded partnerships, we will withhold at the highest applicable effective tax rate from cash distributions made
quarterly to foreign unitholders. Each foreign unitholder must obtain a taxpayer identification number from the IRS and submit that number to our transfer agent on a Form W-8BEN or applicable substitute form in order to obtain credit for these withholding taxes. A change in
applicable law may require us to change these procedures.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In addition, because a foreign corporation that owns units will be treated as engaged in a United States trade or business, that corporation may be subject to the United States branch profits tax at a rate of 30%, in addition to regular federal income tax, on its share of our
income and gain, as adjusted for changes in the foreign corporation&#146;s &#147;U.S. net equity,&#148; which are effectively connected with the conduct of a United States trade or business. That tax may be reduced or eliminated by an income tax treaty between the United States and the
country in which the foreign corporate unitholder is a &#147;qualified resident.&#148; In addition, this type of unitholder is subject to special information reporting requirements under Section 6038C of the Internal Revenue Code.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under a published ruling of the IRS, the IRS has taken a position that a foreign unitholder who sells or otherwise disposes of a unit will be subject to federal income tax on gain realized on the sale or disposition of that unit to the extent that this gain is effectively
connected with a United States trade or business of the foreign unitholder. Because a foreign unitholder is considered to be engaged in business in the United States by virtue of the ownership of units, under this ruling a foreign unitholder who sells or otherwise disposes of a
unit generally will be subject to federal income tax on gain realized on the sale or disposition of units. Apart from the ruling, a foreign unitholder will not be taxed or subject to withholding upon the sale or disposition of a unit if he has owned less than 5% in value of the
units during the five-year period ending on the date of the disposition and if the units are regularly traded on an established securities market at the time of the sale or disposition.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Administrative Matters</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Information Returns and Audit Procedures</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We intend to furnish to each unitholder, within 90 days after the close of each calendar year, specific tax information, including a Schedule K-1, which describes his share of our income, gain, loss and deduction for our preceding taxable year. In preparing this
information, which will not be reviewed by counsel, we will take various accounting and reporting positions, some of which have been mentioned earlier, to determine each unitholder&#146;s share of income, gain, loss and deduction. We cannot assure you that those positions will
in all cases yield a result that conforms to the requirements of the Internal Revenue Code, Treasury Regulations</font></p>
</div>
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<p align="left"><font face="serif" size="2">or administrative interpretations of the IRS. Neither we nor Vinson &amp; Elkins L.L.P. can assure prospective unitholders that the IRS will not successfully contend in court that those positions are
impermissible. Any challenge by the IRS could negatively affect the value of the units.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The IRS may audit our federal income tax information returns. Adjustments resulting from an IRS audit may require each unitholder to adjust a prior year&#146;s tax liability, and possibly may result in an audit of his return. Any audit of a unitholder&#146;s return could result in
adjustments not related to our returns as well as those related to our returns.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Partnerships generally are treated as separate entities for purposes of federal tax audits, judicial review of administrative adjustments by the IRS and tax settlement proceedings. The tax treatment of partnership items of income, gain, loss and deduction are determined in
a partnership proceeding rather than in separate proceedings with the partners. The Internal Revenue Code requires that one partner be designated as the &#147;Tax Matters Partner&#148; for these purposes. The partnership agreement names Atlas Pipeline Holdings GP, LLC as our Tax
Matters Partner.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Tax Matters Partner will make some elections on our behalf and on behalf of unitholders. In addition, the Tax Matters Partner can extend the statute of limitations for assessment of tax deficiencies against unitholders for items in our returns. The Tax Matters Partner
may bind a unitholder with less than a 1% profits interest in us to a settlement with the IRS unless that unitholder elects, by filing a statement with the IRS, not to give that authority to the Tax Matters Partner. The Tax Matters Partner may seek judicial review, by which all
the unitholders are bound, of a final partnership administrative adjustment and, if the Tax Matters Partner fails to seek judicial review, judicial review may be sought by any unitholder having at least a 1% interest in profits or by any group of unitholders having in the
aggregate at least a 5% interest in profits. However, only one action for judicial review will go forward, and each unitholder with an interest in the outcome may participate.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">A unitholder must file a statement with the IRS identifying the treatment of any item on his federal income tax return that is not consistent with the treatment of the item on our return. Intentional or negligent disregard of this consistency requirement may subject a
unitholder to substantial penalties.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Nominee Reporting</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Persons who hold an interest in us as a nominee for another person are required to furnish to us:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">(a) the name, address and taxpayer identification number of the beneficial owner and the nominee;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">(b) whether the beneficial owner is:</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">1. a person that is not a United States person;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">2. a foreign government, an international organization or any wholly owned agency or instrumentality of either of the foregoing; or</font></div></td>
  </tr>
</table>
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  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">3. a tax-exempt entity;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">(c) the amount and description of units held, acquired or transferred for the beneficial owner; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">(d) specific information including the dates of acquisitions and transfers, means of acquisitions and transfers, and acquisition cost for purchases, as well as the amount of net proceeds from sales.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Brokers and financial institutions are required to furnish additional information, including whether they are United States persons and specific information on units they acquire, hold or transfer for their own account. A penalty of $50 per failure, up to a maximum of
$100,000 per calendar year, is imposed by the Internal Revenue Code for failure to report that information to us. The nominee is required to supply the beneficial owner of the units with the information furnished to us.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Accuracy-Related Penalties</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">An additional tax equal to 20% of the amount of any portion of an underpayment of tax that is attributable to one or more specified causes, including negligence or disregard of rules or regulations, substantial understatements of income tax and substantial valuation
misstatements, is imposed by the Internal</font></p>
</div>
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<p align="left"><font face="serif" size="2">Revenue Code. No penalty will be imposed, however, for any portion of an underpayment if it is shown that there was a reasonable cause for that portion and that the taxpayer acted in good
faith regarding that portion.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">For individuals, a substantial understatement of income tax in any taxable year exists if the amount of the understatement exceeds the greater of 10% of the tax required to be shown on the return for the taxable year or $5,000. The amount of any understatement subject
to penalty generally is reduced if any portion is attributable to a position adopted on the return:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">(a) for which there is, or was, &#147;substantial authority;&#148; or</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">(b) as to which there is a reasonable basis and the pertinent facts of that position are disclosed on the return.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If any item of income, gain, loss or deduction included in the distributive shares of unitholders for a given year might result in an &#147;understatement&#148; of income for which no &#147;substantial authority&#148; exists, we must disclose the pertinent facts on our return. In addition, we
will make a reasonable effort to furnish sufficient information for unitholders to make adequate disclosure on their returns and to take other actions as may be appropriate to permit unitholders to avoid liability for penalties. More stringent rules apply to &#147;tax shelters,&#148; which
we do not believe include us.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">A substantial valuation misstatement exists if the value of any property, or the adjusted basis of any property, claimed on a tax return is 200% or more of the amount determined to be the correct amount of the valuation or adjusted basis. No penalty is imposed unless
the portion of the underpayment attributable to a substantial valuation misstatement exceeds $5,000 ($10,000 for most corporations). If the valuation claimed on a return is 400% or more than the correct valuation, the penalty imposed increases to 40%.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><i>Reportable Transactions</i></font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If we were to engage in a &#147;reportable transaction,&#148; we (and possibly you and others) would be required to make a detailed disclosure of the transaction to the IRS. A transaction may be a reportable transaction based upon any of several factors, including the fact that it
is a type of tax avoidance transaction publicly identified by the IRS as a &#147;listed transaction&#148; or that it produces certain kinds of losses in excess of $2.0 million. Our participation in a reportable transaction could increase the likelihood that our federal income tax information
return (and possibly your tax return) would be audited by the IRS. Please read &#147;&#151;Information Returns and Audit Procedures&#148; above.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Moreover, if we were to participate in a reportable transaction with a significant purpose to avoid or evade tax, or in any listed transaction, you may be subject to the following provisions of the American Jobs Creation At of 2004:</font></p>
</div>
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  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">accuracy related penalties with a broader scope, significantly narrower exceptions, and potentially greater amounts than described above at &#147;&#151;Accuracy Related Penalties.&#148;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">for those persons otherwise entitled to deduct interest on federal tax deficiencies, nondeductability of interest on any resulting tax liability; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">in the case of a listed transaction, an extended statute of limitations.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We do not expect to engage in any reportable transactions.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>State, Local, Foreign and Other Tax Considerations</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In addition to federal income taxes, you likely will be subject to other taxes, such as state, local and foreign income taxes, unincorporated business taxes, and estate, inheritance or intangible taxes that may be imposed by the various jurisdictions in which we or Atlas do
business or own property or in which you are a resident. Although an analysis of those various taxes is not presented here, each prospective unitholder should consider their potential impact on his investment in us. We or Atlas will initially own property or do business in
Arkansas, New York, Ohio, Oklahoma, Pennsylvania and Texas, and each impose a personal income tax on individuals as well as an income tax on corporations and other entities, other than Texas. We may also own property or do business in other jurisdictions in the future.
Although you may not be required to file a return and pay taxes in some jurisdictions because your income from that jurisdiction falls below the filing</font></p>
</div>
<p align="center"><font face="serif" size="2">168</font></p>
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<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">and payment requirement, you will be required to file income tax returns and to pay income taxes in many of these jurisdictions in which we do business or own property and may be subject to
penalties for failure to comply with those requirements. In some jurisdictions, tax losses may not produce a tax benefit in the year incurred and may not be available to offset income in
subsequent taxable years. Some of the jurisdictions may require us, or we may elect, to withhold a percentage of income from amounts to be distributed to a unitholder who is not a resident of
the jurisdiction. Withholding, the amount of which may be greater or less than a particular unitholder&#146;s income tax liability to the jurisdiction, generally does not relieve a nonresident unitholder
from the obligation to file an income tax return. Amounts withheld will be treated as if distributed to unitholders for purposes of determining the amounts distributed by us. Please read &#147;Material
Tax Consequences&#151;Tax Consequences of Unit Ownership&#151;Entity-Level Collections.&#148; Based on current law and our estimate of our future operations, the general partner anticipates that any
amounts required to be withheld will not be material.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2"><b>It is the responsibility of each unitholder to investigate the legal and tax consequences, under the laws of pertinent jurisdictions, of his investment in us. Accordingly, each prospective unitholder is urged to consult, and depend upon, his tax counsel or other
advisor with regard to those matters. Further, it is the responsibility of each unitholder to file all state, local and foreign, as well as United States federal tax returns, that may be required of him. Vinson &amp; Elkins L.L.P. has not rendered an opinion on the state,
local or foreign tax consequences of an investment in us.</b></font></p>
</div>
<p align="center"><font face="serif" size="2">169</font></p>
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<p align="center"><font face="serif" size="2"><b>INVESTMENT IN ATLAS PIPELINE HOLDINGS L.P. BY EMPLOYEE BENEFIT PLANS</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">An investment in us by an employee benefit plan is subject to additional considerations because the investments of these plans are subject to the fiduciary responsibility and prohibited transaction provisions of ERISA and restrictions imposed by Section 4975 of the
Internal Revenue Code. For these purposes the term &#147;employee benefit plan&#148; includes, but is not limited to, qualified pension, profit-sharing and stock bonus plans, Keogh plans, simplified employee pension plans and tax deferred annuities or IRAs established or maintained by
an employer or employee organization. Among other things, consideration should be given to:</font></p>
</div>
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  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">whether the investment is prudent under Section 404(a)(1)(B) of ERISA;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">whether in making the investment, that plan will satisfy the diversification requirements of Section 404(a)(1)(C) of ERISA; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">whether the investment will result in recognition of unrelated business taxable income by the plan and, if so, the potential after-tax investment return.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The person with investment discretion with respect to the assets of an employee benefit plan, often called a fiduciary, should determine whether an investment in us is authorized by the appropriate governing instrument and is a proper investment for the plan.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Section 406 of ERISA and Section 4975 of the Internal Revenue Code prohibit employee benefit plans, and also IRAs that are not considered part of an employee benefit plan, from engaging in specified transactions involving &#147;plan assets&#148; with parties that are &#147;parties
in interest&#148; under ERISA or &#147;disqualified persons&#148; under the Internal Revenue Code with respect to the plan.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In addition to considering whether the purchase of common units is a prohibited transaction, a fiduciary of an employee benefit plan should consider whether the plan will, by investing in us, be deemed to own an undivided interest in our assets, with the result that our
operations would be subject to the regulatory restrictions of ERISA, including its prohibited transaction rules, as well as the prohibited transaction rules of the Internal Revenue Code.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Department of Labor regulations provide guidance with respect to whether the assets of an entity in which employee benefit plans acquire equity interests would be deemed &#147;plan assets&#148; under some circumstances. Under these regulations, an entity&#146;s assets would
not be considered to be &#147;plan assets&#148; if, among other things:</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(a) the equity interests acquired by employee benefit plans are publicly offered securities&#151;i.e., the equity interests are widely held by 100 or more investors independent of the issuer and each other, freely transferable and registered under some provisions of the federal
securities laws;</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(b) the entity is an &#147;operating company,&#148;&#151;i.e., it is primarily engaged in the production or sale of a product or service other than the investment of capital either directly or through a majority-owned subsidiary or subsidiaries; or</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">(c) there is no significant investment by benefit plan investors, which is defined to mean that less than 25% of the value of each class of equity interest is held by the employee benefit plans referred to above, IRAs and other employee benefit plans not subject to ERISA,
including governmental plans.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our assets should not be considered &#147;plan assets&#148; under these regulations because it is expected that the investment will satisfy the requirements in (a) above.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Plan fiduciaries contemplating a purchase of common units should consult with their own counsel regarding the consequences under ERISA and the Internal Revenue Code in light of the serious penalties imposed on persons who engage in prohibited transactions or
other violations.</font></p>
</div>
<p align="center"><font face="serif" size="2">170</font></p>
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<p align="center"><font face="serif" size="2"><b>UNDERWRITING</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Lehman Brothers Inc. is acting as sole book running manager. Under the terms of an underwriting agreement, which will be filed as an exhibit to the registration statement, each of the underwriters named below has severally agreed to purchase from us the respective
number of common units shown opposite its name below:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Underwriters</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Number of common units</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Lehman Brothers Inc.</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Total</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,600,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The underwriting agreement provides that the underwriters&#146; obligation to purchase common units depends on the satisfaction of the conditions contained in the underwriting agreement including:</font></p>
</div>
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  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the obligation to purchase all of the common units offered hereby, if any of the common units are purchased;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the representations and warranties made by us to the underwriters are true;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">there is no material change in the financial markets; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">we deliver customary closing documents to the underwriters.</font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2"><b>Commissions and Expenses</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following table summarizes the underwriting discounts and commissions we will pay to the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters&#146; option to purchase additional common units. The underwriting fee is
the difference between the initial price to the public and the amount the underwriters pay to us for the common units.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>No exercise</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Full exercise</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Per Unit</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Total</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Lehman Brothers Inc. has advised us that the underwriters propose to offer the common units directly to the public at the public offering price on the cover of this prospectus and to selected dealers, which may include the underwriters, at such offering price less a
selling concession not in excess of $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per unit. The underwriters may allow, and the selected dealers may re-allow, a discount from the concession not in excess of $ &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; per unit to other dealers. After the offering, Lehman Brothers Inc. may change the offering price and
other selling terms.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The expenses of the offering that are payable by us are estimated to be $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (exclusive of underwriting discounts and commissions).</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Option to Purchase Additional Common Units</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We have granted the underwriters an option exercisable for 30 days after the date of this prospectus, to purchase, from time to time, in whole or in part, up to an aggregate of 540,000 common units at the public offering price less underwriting discounts and
commissions. This option may be exercised if the underwriters sell more than 3,600,000 common units in connection with this offering. To the extent that this option is exercised, each underwriter will be obligated, subject to certain conditions, to purchase its pro rata portion
of these additional common units based on the underwriter&#146;s percentage underwriting commitment in the offering as indicated in the table at the beginning of this Underwriting section. To the extent the underwriters purchase our common units pursuant to the exercise of this
option, we will redeem an equal amount of common units from Atlas America.</font></p>
</div>
<p align="center"><font face="serif" size="2">171</font></p>
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<p align="left"><font face="serif" size="2"><b>Lock-Up Agreements</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We, our affiliates that own common units, and the directors and executive officers of our general partner have agreed that, without the prior written consent of Lehman Brothers Inc., we and they will not directly or indirectly, offer, pledge, announce the intention to sell,
sell, contract to sell, sell an option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of any common units or any securities that may be converted into or exchanged for any common
units, enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common units, make any demand for or exercise any right or file or cause to be filed a registration statement with respect to the registration
of any common units or securities convertible, exercisable or exchangeable into common units or any of our other securities or publicly disclose the intention to do any of the foregoing for a period of 180 days from the date of this prospectus other than permitted transfers.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The 180-day restricted period described in the preceding paragraph will be extended if:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">during the last 17 days of the 180-day restricted period we issue an earnings release or announce material news or a material event; or</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period,</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or material event.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Lehman Brothers Inc., in its sole discretion, may release the common units and other securities subject to the lock-up agreements described above in whole or in part at any time with or without notice. When determining whether or not to release common units and
other securities from lock-up agreements, Lehman Brothers Inc. will consider, among other factors, the holder&#146;s reasons for requesting the release, the number of common units and other securities for which the release is being requested and market conditions at the time.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Offering Price Determination</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Prior to this offering, there has been no public market for our common units. The initial public offering price will be negotiated between the representatives and us. In determining the initial public offering price of our common units, the representatives will consider:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the history and prospects for the industry in which we compete;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">our financial information;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the ability of our management and our business potential and earning prospects;</font></div></td>
  </tr>
</table>
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  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the prevailing securities markets at the time of this offering; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the recent market prices of, and the demand for, publicly traded common units of generally comparable companies.</font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2"><b>Indemnification</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act and liabilities incurred in connection with the directed unit program referred to below, and to contribute to payments that the underwriters may be
required to make for these liabilities.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Directed Unit Program</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">At our request, the underwriters have reserved for sale at the initial public offering price up to &nbsp;&nbsp;&nbsp;&nbsp;&nbsp; common units offered hereby for officers, directors, employees and certain other persons associated with us. The number of common units available for sale to the general
public will be reduced to the extent such</font></p>
</div>
<p align="center"><font face="serif" size="2">172</font></p>
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<p align="left"><font face="serif" size="2">persons purchase such reserved common units. Any reserved common units not so purchased will be offered by the underwriters to the general public on the same basis as the other common
units offered hereby.</font></p>
<p align="left"><font face="serif" size="2"><b>Stabilization, Short Positions and Penalty Bids</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The underwriters may engage in stabilizing transactions, short sales and purchases to cover positions created by short sales, and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of the common units, in accordance with Regulation M
under the Securities Exchange Act of 1934:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">A short position involves a sale by the underwriters of common units in excess of the number of common units the underwriters are obligated to purchase in the offering, which creates the syndicate short position. This short position may be either a covered short position or a
naked short position. In a covered short position, the number of common units involved in the sales made by the underwriters in excess of the number of common units they are obligated to purchase is not greater than the number of common units that they may purchase by
exercising their option to purchase additional common units. In a naked short position, the number of common units involved is greater than the number of common units in their option to purchase additional common units. The underwriters may close out any short position
by either exercising their option to purchase additional common units and/or purchasing common units in the open market. In determining the source of common units to close out the short position, the underwriters will consider, among other things, the price of common
units available for purchase in the open market as compared to the price at which they may purchase common units through their option to purchase additional common units. A naked short position is more likely to be created if the underwriters are concerned that there could
be downward pressure on the price of the common units in the open market after pricing that could adversely affect investors who purchase in the offering.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Syndicate covering transactions involve purchases of the common units in the open market after the distribution has been completed in order to cover syndicate short positions.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Penalty bids permit Lehman Brothers Inc. to reclaim a selling concession from a syndicate member when the common units originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common units or preventing or retarding a decline in the market price of the common units. As a result, the price of the
common units may be higher than the price that might otherwise exist in the open market. These transactions may be effected on The New York Stock Exchange or otherwise and, if commenced, may be discontinued at any time.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common units. In addition, neither we nor any of the underwriters make
representation that the underwriters will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Electronic Distribution</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">A prospectus in electronic format may be made available on the Internet sites or through other online services maintained by one or more of the underwriters and/or selling group members participating in this offering, or by their affiliates. In those cases, prospective
investors may view offering terms online and, depending upon the particular underwriter or selling group member, prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of common units for sale to online
brokerage account holders. Any such allocation for online distributions will be made by the underwriters on the same basis as other allocations.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">173</font></p>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Other than the prospectus in electronic format, the information on any underwriter&#146;s or selling group member&#146;s web site and any information contained in any other web site maintained by an underwriter or selling group member is not part of the prospectus or the
registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>NYSE</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We will apply to list our common units for quotation on The New York Stock Exchange under the symbol &#147;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.&#148;</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Discretionary Sales</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The underwriters have informed us that they do not intend to confirm sales to discretionary accounts that exceed 5% of the total number of common units offered by them.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Stamp Taxes</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If you purchase common units offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.</font></p>
</div>
<p align="left"><font face="serif" size="2"><b>Relationships</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The underwriters may in the future perform investment banking and advisory services for us from time to time for which they may in the future receive customary fees and expenses. The underwriters may, from time to time, engage in transactions with or perform
services for us in the ordinary course of their business.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Lehman Brothers Inc. and its related entities have engaged and may engage in commercial and investment banking transactions with Atlas, Atlas America, its general partner and us in the ordinary course of their business. Lehman Brothers Inc. has received customary
compensation and expenses for these commercial and investment banking transactions. Lehman Brothers Inc. acted as the exclusive financial advisor to Energy Spectrum Capital Partners, which held a controlling interest in Spectrum, in the solicitation of proposals for a
potential sale transaction of Spectrum. In addition, Lehman Brothers Inc. acted as the exclusive financial advisor to OGE Energy Corporation in the solicitation of proposals for a potential sale transaction of Enogex Arkansas Pipeline Corporation, which became Atlas Arkansas.
Lehman Brothers Inc., acted as an underwriter in our follow-on offering in July 2004 and in November 2005.</font></p>
</div>
<p align="center"><font face="serif" size="2">174</font></p>
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<p align="center"><font face="serif" size="2"><b>VALIDITY OF THE COMMON UNITS</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The validity of the common units will be passed upon for us by Vinson &amp; Elkins L.L.P., New York, New York, and for the underwriters by Baker Botts L.L.P., Houston, Texas.</font></p>
</div>
<p align="center"><font face="serif" size="2"><b>EXPERTS</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The consolidated financial statements of Atlas Pipeline Partners GP, LLC as of December&nbsp;31, 2003 and 2004 and for each of the three years in the period ended December&nbsp;31, 2004; the balance sheet of Atlas Pipeline Holdings, L.P. as of December 31, 2005; the
balance sheet of Atlas Pipeline Holdings GP, LLC as of December&nbsp;31, 2005; the financial statements of ETC Oklahoma Pipeline, Ltd. as of August&nbsp;31, 2003 and 2004 and for the year ended August&nbsp;31, 2004 and for the eleven month period ended August&nbsp;31, 2003; the
financial statements of the Elk City System (a division of Aquila Gas Pipeline Corporation) for the year ended September&nbsp;30, 2002, the financial statements of Spectrum Field Services, Inc. as of December 31, 2002 and 2003 and for each of the three years in the period ended
December 31, 2003, have been audited by Grant Thornton LLP, independent registered public accountants, as indicated in their reports with respect thereto, herein in reliance upon the authority of such firm as experts in accounting and auditing.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The consolidated financial statements of Enogex Arkansas Pipeline Corporation at December&nbsp;31, 2004 and 2003, and for each of the two years in the period ended December&nbsp;31, 2004, have been audited by Ernst &amp; Young LLP, independent auditors, as set forth in
their report thereon and included therein. Such consolidated financial statements are included herein in reliance upon such report given on the authority of such firm as experts in accounting and auditing.</font></p>
</div>
<p align="center"><font face="serif" size="2"><b>WHERE YOU CAN FIND MORE INFORMATION</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We have filed with the Securities and Exchange Commission, or the Commission, a registration statement on Form S-l regarding the common units. This prospectus does not contain all of the information found in the registration statement. For further information
regarding us and the common units offered by this prospectus, you may desire to review the full registration statement, including its exhibits and schedules, filed under the Securities Act. The registration statement of which this prospectus forms a part, including its exhibits and
schedules, may be inspected and copied at the public reference room maintained by the Commission at 100 F Street, N.E. Room 1580, Washington, D.C. 20549. Copies of the materials may also be obtained from the SEC at prescribed rates by writing to the public reference
room maintained by the Commission at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling the Commission at l-800-SEC-0330. The Commission maintains a web site on the Internet at
http://www.sec.gov. Our registration statement, of which this prospectus constitutes a part, can be downloaded from the Commission&#146;s web site.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We intend to furnish our unitholders annual reports containing our audited financial statements and furnish or make available quarterly reports containing our unaudited interim financial information for the first three fiscal quarters of each of our fiscal years.</font></p>
</div>
<p align="center"><font face="serif" size="2"><b>FORWARD-LOOKING STATEMENTS</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Some of the information in this prospectus may contain forward-looking statements. These statements can be identified by the use of forward-looking terminology including &#147;may,&#148; &#147;believe,&#148; &#147;will,&#148; &#147;expect,&#148; &#147;anticipate,&#148; &#147;estimate,&#148; &#147;continue,&#148; or other similar
words. These statements discuss plans, strategies, events, future expectations, contain projections of results of operations or of financial condition, or state other &#147;forward-looking&#148; information that we expect will or may occur in the future. These forward-looking statements
involve risks and uncertainties. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this prospectus. The risk factors and other factors noted throughout this prospectus could cause our actual results to
differ materially from those contained in any forward-looking statement.</font></p>
</div>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Specific factors could cause our actual results to differ materially from those contained in any forward-looking statement. These factors include, but are not limited to:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">increased competition in natural gas and NGL markets and Atlas&#146; ability to respond to the competition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">fluctuations in natural gas and NGL prices, which could adversely affect Atlas&#146; operating results and cash flows;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">decreased availability of local, intrastate and interstate transportation systems;</font></div></td>
  </tr>
</table>
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  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">increased expenses Atlas incurs in providing its gathering services;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">technical advances in fuel economy and energy generation devices;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">risks associated with the expansion of Atlas&#146;s operations and properties;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">customer bankruptcies and/or cancellations or breaches of existing contracts;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">customer delays or defaults in making payments;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">fluctuations in natural gas and NGL demand, prices and availability due to labor and transportation costs and disruptions, equipment availability, governmental regulations and other factors;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; productivity levels and margins that Atlas earns on its coal sales;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">greater than expected shortage of skilled labor;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">any unanticipated increases in labor costs, adverse changes in work rules, or unexpected cash payments associated with workers&#146; compensation claims;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">any unanticipated increases in transportation costs and risk of transportation delays or interruptions;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">greater than expected environmental regulation, costs and liabilities;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">results of litigation; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">difficulty obtaining commercial property insurance, and risks associated with Atlas&#146; participation (excluding any applicable deductible) in Atlas&#146; commercial insurance property program.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">If one or more of these or other risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results may differ materially from those described in any forward-looking statement. When considering forward-looking statements, you should
also keep in mind the risk factors described in &#147;Risk Factors.&#148; The risk factors could also cause our actual results to differ materially from those contained in any forward-looking statement. We disclaim any obligation to update the above list or to announce publicly the result
of any revisions to any of the forward-looking statements to reflect future events or developments.</font></p>
</div>
<p align="center"><font face="serif" size="2">176</font></p>
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<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>INDEX TO FINANCIAL STATEMENTS</b></font></p>
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    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Page</b></font></td>
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    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Atlas Pipeline Holdings, L.P.</b></font></div></td>
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    <td><div style="margin-left:3%"><font face="serif" size="2">Unaudited Pro Forma Consolidated Financial Statements:</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Introduction</font></div></td>
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    <td align="right" valign="bottom"><font face="serif" size="2">F-3</font></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Unaudited Pro Forma Consolidated Balance Sheet at September 30, 2005</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Unaudited Pro
          Forma Consolidated Statements of Income for the Year Ended December
          31, 2004 and the Nine Months Ended September 30, 2005</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Notes to Unaudited Pro Forma Consolidated Financial Statements</font></div></td>
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    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Atlas Pipeline Holdings, L.P.</b></font></div></td>
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    <td><div style="margin-left:3%"><font face="serif" size="2">Audited Balance Sheet:</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Report of Independent Registered Public Accounting Firm</font></div></td>
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    <td align="right" valign="bottom"><font face="serif" size="2">F-11</font></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Balance Sheet at December 31, 2005</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Note to Balance Sheet</font></div></td>
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    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Atlas Pipeline Holdings GP, LLC</b></font></div></td>
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    <td><div style="margin-left:3%"><font face="serif" size="2">Audited Balance Sheet:</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Report of Independent Registered Public Accounting Firm</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Balance Sheet at December 31, 2005</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Note to Balance Sheet</font></div></td>
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    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Atlas Pipeline Partners GP, LLC</b></font></div></td>
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    <td><div style="margin-left:3%"><font face="serif" size="2">Audited Consolidated Financial Statements:</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Report of Independent Registered Public Accounting Firm</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Consolidated Balance Sheets at December 31, 2003 and 2004 and September 30, 2005 (unaudited)</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Consolidated Statements of Income for the Years Ended December 31, 2002, 2003 and 2004 and the Nine Months Ended September 30, 2004 and 2005 (unaudited)</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2002, 2003 and 2004 and the Nine Months Ended September 30, 2004 and 2005 (unaudited)</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Consolidated Statements of Owner&#146;s Equity (Deficit)</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2003 and 2004 and the Nine Months Ended September 30, 2004 and 2005 (unaudited)</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Notes to Consolidated Financial Statements</font></div></td>
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    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Enogex Arkansas Pipeline Corporation</b></font></div></td>
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    <td><div style="margin-left:3%"><font face="serif" size="2">Audited Financial Statements:</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Report of Independent Auditors</font></div></td>
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    <td align="right" valign="bottom"><font face="serif" size="2">F-43</font></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Consolidated Balance Sheets as of December&nbsp;31, 2004 and 2003</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Consolidated Statements of Income for the Year Ended December&nbsp;31, 2004 and 2003</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Consolidated Statements of Retained Earnings (Deficit) for the Year Ended December&nbsp;31, 2004 and 2003</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Consolidated Statements of Cash Flows for the Year Ended December&nbsp;31, 2004 and 2003</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Notes to Consolidated Financial Statements</font></div></td>
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    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Enogex Arkansas Pipeline Corporation</b></font></div></td>
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    <td><div style="margin-left:3%"><font face="serif" size="2">Unaudited Financial Statements:</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Consolidated Balance Sheets as of September&nbsp;30, 2005 and December&nbsp;31, 2004</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Consolidated Statements of Income for the Nine Months Ended September&nbsp;30, 2005 and 2004</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Consolidated Statements of Cash Flows for the Nine Months Ended September&nbsp;30, 2005 and 2004</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Notes to Consolidated Financial Statements</font></div></td>
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    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>ETC Oklahoma Pipeline, Ltd.</b></font></div></td>
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    <td><div style="margin-left:3%"><font face="serif" size="2">Audited Financial Statements:</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Report of Independent Registered Public Accounting Firm</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Balance Sheets as of August&nbsp;31, 2004 and 2003</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Income Statements for the Twelve Months ended August&nbsp;31, 2004 and the Eleven Months Ended August 31, 2003</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Statements of Partners&#146; Capital for the Twelve Months Ended August&nbsp;31, 2004 and 2003</font></div></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Statement of Cash Flows for the Twelve Months Ended August&nbsp;31, 2004 and the Eleven Months Ended August&nbsp;31, 2003</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Notes to Financial Statements</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">F-68</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>ETC Oklahoma Pipeline, Ltd.</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Unaudited Financial Statements:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Balance Sheet as of February&nbsp;28, 2005</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">F-74</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Income Statements for the Six Months Ended February&nbsp;28, 2005 and February&nbsp;29, 2004</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">F-75</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Statements of Cash Flows for the Six Months Ended February&nbsp;28, 2005 and February&nbsp;29, 2004</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">F-76</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Notes to Financial Statements</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">F-77</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-1</font></p>
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<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>INDEX TO FINANCIAL STATEMENTS (Continued)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Page</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>The Elk City System (a division of Aquila Gas Processing Corporation)</b></font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
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    <td><div style="margin-left:3%"><font face="serif" size="2">Audited Financial Statements:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Report of Independent Registered Public Accounting Firm</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">F-80</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Carve-Out Statement of Income and Changes in Parent&#146;s Equity in Division for the Year Ended September&nbsp;30, 2002</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">F-81</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Carve-Out Statement of Cash Flow for the Year Ended September&nbsp;30, 2002</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">F-82</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Notes to Carve-Out Financial Statements</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">F-83</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Spectrum Field Services, Inc.</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Audited Financial Statements:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Report of Independent Certified Public Accountants</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">F-88</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Balance Sheets as of December 31, 2003 and 2002</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">F-89</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Statement of Operations for the Years Ended December 31, 2003, 2002, and 2001</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">F-90</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Statements of Comprehensive Income (Loss) as of December 31, 2003, 2002 and 2001</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">F-91</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Statements of Changes in Shareholders&#146; Equity for the Years Ended December 31, 2003, 2002 and 2001</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">F-92</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Statements of Cash Flows for the Years Ended December 31, 2003, 2002, and 2001</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">F-94</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><div style="margin-left:6%"><font face="serif" size="2">Notes to Financial Statements</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">F-95</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
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<p align="center"><font face="serif" size="2"><b>ATLAS PIPELINE HOLDINGS, L.P.</b><br>
<b>UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Unless indicated otherwise, the terms &#147;our,&#148; &#147;we,&#148; &#147;us,&#148; &#147;Atlas Holdings&#148; and other similar language refer to Atlas Pipeline Holdings, L.P. We own and control Atlas Pipeline Partners GP, LLC, which is the general partner of Atlas Pipeline Partners, L.P., a publicly
traded limited partnership (&#147;Atlas&#148;). Since we own and control Atlas&#146; general partner, we reflect our ownership interest in Atlas on a consolidated basis and our financial results are combined with those of Atlas and its general partner.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following unaudited pro forma financial statements reflect our historical results as adjusted on a pro forma basis to give effect to Atlas&#146; April 2004, July 2004, June 2005 and November 2005 offerings of common units, the December 2005 issuance of Atlas&#146; senior
unsecured notes, the completion of the Spectrum, Elk City and NOARK acquisitions and this offering. The acquisition and other adjustments are described in the notes to the unaudited pro forma financial statements. The unaudited pro forma financial statements and
accompanying notes should be read together with &#147;Selected Historical Financial and Operating Data,&#148; &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations,&#148; our historical financial statements and related notes and the historical financial
statements and related notes of Spectrum, Elk City and its predecessor and Enogex Arkansas Pipeline Corporation included in this registration statement.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We accounted for the NOARK acquisition and the acquisitions of Spectrum and Elk City in the unaudited pro forma financial statements using the purchase method of accounting in accordance with the guidance of Statement of Financial Accounting standards No. 141,
&#147;Business Combinations.&#148; For purposes of developing the unaudited pro forma financial information, we have allocated the purchase prices to Spectrum&#146;s, Elk City&#146;s, and NOARK&#146;s gas gathering, processing and/or transmission facilities based on their fair market value.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Our summary unaudited pro forma balance sheet information reflects the following transactions as if they occurred as of September&nbsp;30, 2005:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the NOARK acquisition, which occurred on October&nbsp;31, 2005, for consideration of $165.3 million, including estimated transaction costs plus $10.2 million for working capital adjustments and $2.3 million of estimated transaction costs, and the redemption of the portion of
the NOARK 7.15% notes severally guaranteed by Atlas Arkansas;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the amendment of Atlas&#146; credit facility, which occurred on October&nbsp;31, 2005, and borrowings under it to finance the NOARK acquisition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; public offering of 2,700,000 common units, which was completed in November 2005, and 330,000 additional underwriter option units, which was completed in December 2005, each at a public offering price of $42.00 per common unit, the net proceeds of which were
used principally to repay indebtedness incurred in connection with the NOARK acquisition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; issuance of $250.0 million of 8.125% senior unsecured notes in a private placement on December&nbsp;20, 2005, the net proceeds of which were used principally to repay indebtedness under its credit facility; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">this offering and the application of the net proceeds as described under &#147;Use of Proceeds.&#148;</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The unaudited pro forma statement of income information for the year ended December&nbsp;31, 2004 reflects the following transactions as if they occurred as of January&nbsp;1, 2004:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; public offering of 750,000 common units, which was completed in April 2004 at a public offering price of $36.00 per common unit, the net proceeds of which were used principally to repay indebtedness under Atlas&#146; then existing credit facility;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the Spectrum acquisition, which occurred in July 2004, for total consideration of $141.6 million, including the payment of income taxes due as a result of the transaction and other related transaction costs;</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-3</font></p>
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<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; public offering of 2,100,000 common units, which was completed in July 2004 at a public offering price of $34.76 per common unit, the net proceeds of which were used principally to repay indebtedness incurred in connection with the Spectrum acquisition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the Elk City acquisition, which occurred in April 2005, for total consideration of $196.0 million, including related transaction costs;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the closing of Atlas&#146; $270.0 million credit facility, which occurred in April 2005, and borrowings under it to finance the Elk City acquisition and repay amounts outstanding under Atlas&#146; previous credit facility;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; public offering of 2,300,000 common units, which was completed in June 2005 at a public offering price of $41.95 per common unit, the net proceeds of which were used principally to repay indebtedness incurred in connection with the Elk City acquisition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the NOARK acquisition, which occurred on October&nbsp;31, 2005, for consideration of $165.3 million, including estimated transaction costs plus $10.2 million for working capital adjustments and $2.3 million of estimated transaction costs, and the redemption of the portion of
the NOARK 7.15% notes severally guaranteed by Atlas Arkansas;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the amendment of Atlas&#146; credit facility, which occurred on October&nbsp;31, 2005, and borrowings under it to finance the NOARK acquisition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; public offering of 2,700,000 common units, which was completed in November 2005, and 330,000 additional underwriter option units, which was completed in December 2005, each at a public offering price of $42.00 per common unit, the net proceeds of which were
principally used to repay indebtedness incurred in connection with the NOARK acquisition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; issuance of $250.0 million of 8.125% senior unsecured notes in a private placement on December&nbsp;20, 2005, the net proceeds of which were used principally to repay indebtedness under its credit facility; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">this offering and the application of the net proceeds as described under &#147;Use of Proceeds.&#148;</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The unaudited pro forma statement of income information for the nine months ended September&nbsp;30, 2005 reflects the following transactions as if they occurred as of January&nbsp;1, 2005:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the Elk City acquisition, which occurred in April 2005, for total consideration of $196.0 million, including related transaction costs;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the closing of Atlas&#146; $270.0 million credit facility, which occurred in April 2005, and borrowings under it to finance the Elk City acquisition and repay amounts outstanding under Atlas&#146; previous credit facility;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; public offering of 2,300,000 common units, which was completed in June 2005, at a public offering price of $41.95 per common unit, the net proceeds of which were principally used to repay indebtedness incurred in connection with the Elk City acquisition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the NOARK acquisition, which occurred on October&nbsp;31, 2005, for consideration of $165.3 million, including estimated transaction costs plus $10.2 million for working capital adjustments and $2.3 million of estimated transaction costs, and the redemption of the portion of
the NOARK 7.15% notes severally guaranteed by Atlas Arkansas;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">the amendment of Atlas&#146; credit facility, which occurred on October&nbsp;31, 2005, and borrowings under it to finance the NOARK acquisition;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; public offering of 2,700,000 common units, which was completed in November 2005, and 330,000 additional underwriter option units, which was completed in December 2005, each at a public offering price of $42.00 per common unit, the net proceeds of which were
used principally to repay indebtedness incurred in connection with the NOARK acquisition;</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-4</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf5"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">Atlas&#146; issuance of $250.0 million of 8.125% senior unsecured notes in a private placement on December&nbsp;20, 2005, the net proceeds of which were used principally to repay indebtedness under its credit facility; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">this offering and the application of the net proceeds as described under &#147;Use of Proceeds.&#148;</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Elk City&#146;s historical fiscal year ended August&nbsp;31, 2004 is not within 93 days of our fiscal year end. Accordingly, for pro forma purposes, statement of income information for the year ended December&nbsp;31, 2004 is based on Elk City&#146;s historical financial results for the
twelve months ended November&nbsp;30, 2004 and was created by subtracting the quarter ended November&nbsp;30, 2003 from Elk City&#146;s income statement for the year ended August&nbsp;31, 2004 and adding the quarter ended November&nbsp;30, 2004. For our pro forma statement of income
information for the nine months ended September&nbsp;30, 2005, we included Elk City&#146;s income statement for the three months ended February&nbsp;28, 2005. Elk City was included within our historical results for the nine months ended September&nbsp;30, 2005 from its date of acquisition
on April&nbsp;14, 2005.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The unaudited pro forma balance sheet and the pro forma statements of income were derived by adjusting historical financial statements of Atlas Pipeline GP. However, our management believes that the adjustments provide a reasonable basis for presenting the
significant effects of the transactions described above. The unaudited pro forma financial data presented are for informational purposes only and are based upon available information and assumptions that we believe are reasonable under the circumstances. You should not
construe the unaudited pro forma financial data as indicative of the combined financial position or results of operations that we, Atlas Pipeline GP, Atlas, Spectrum, Elk City and NOARK would have achieved had the transactions been consummated on the dates assumed.
Moreover, they do not purport to represent our, Atlas&#146;, Atlas Pipeline GP&#146;s, Spectrum&#146;s, Elk City&#146;s or NOARK&#146;s combined financial position or results of operations for any future date or period.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The financial data below should be read together with, and are qualified in their entirety by reference to, Atlas Pipeline GP&#146;s historical consolidated and pro forma combined financial statements and the accompanying notes, &#147;Management&#146;s Discussion and Analysis of
Financial Condition and Results of Operations,&#148; and the historical consolidated financial statements and the accompanying notes of Spectrum, Elk City and its predecessor and Enogex Arkansas Pipeline, each of which is set forth elsewhere in this prospectus. The pro forma
data is not necessarily reflective of what our results would actually have been had the transactions actually occurred on the indicated date, nor do they reflect what may actually occur in the future.</font></p>
</div>
<p align="center"><font face="serif" size="2">F-5</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf6"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE HOLDINGS, L.P.</b><br>
<b>PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)</b><br>
<b>SEPTEMBER 30, 2005</b><br>
(in thousands)</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Historical</b><br>
<b>Atlas</b><br>
<b>Pipeline</b><br>
<b>GP</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Historical</b><br>
<b>NOARK</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Adjustments</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Atlas November</b><br>
<b>2005 Equity</b><br>
<b>Offering</b><br>
<b>Adjustments</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Atlas Senior Notes</b><br>
<b>Offering</b><br>
<b>Adjustments</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Pro</b><br>
<b>Forma</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Atlas Pipeline</b><br>
<b>Holdings Equity</b><br>
<b>Offering</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Pro Forma,</b><br>
<b>as adjusted</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">ASSETS</font></div></td>
    <td align="left" width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CURRENT ASSETS:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash and cash equivalents</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">12,035</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">14,502</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">178,000</font></td>
    <td valign="bottom"><font face="serif" size="2">&nbsp;(a)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">120,933</font></td>
    <td valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">243,125</font></td>
    <td valign="bottom"><font face="serif" size="2">&nbsp;(f)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">29,338</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">79,152</font></td>
    <td valign="bottom"><font face="serif" size="2">&nbsp;(g)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">29,338</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(177,757</font></td>
    <td valign="bottom"><font face="serif" size="2">)(a)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(120,933</font></td>
    <td valign="bottom"><font face="serif" size="2">)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(240,567</font></td>
    <td valign="bottom"><font face="serif" size="2">)(f)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(79,152</font></td>
    <td valign="bottom"><font face="serif" size="2">)(g)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%">
      <div style="margin-left: 3%; text-indent: -3%"><font face="serif" size="2">Accounts
          receivable &#151; affiliates</font></div>
    </div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,418</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,236</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,145</font></td>
    <td valign="bottom"><font face="serif" size="2">)(b)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,509</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,509</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts receivable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">41,289</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">785</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,145</font></td>
    <td valign="bottom"><font face="serif" size="2">&nbsp;(b)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">47,219</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">47,219 </font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Current portion of hedge asset</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">14,993</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">14,993</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">14,993 </font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%">
      <div style="margin-left: 3%; text-indent: -3%"><font face="serif" size="2">Prepaid
          expenses and other current assets</font></div>
    </div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,595</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">324</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,919</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,919 </font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Total current assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">74,330</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">22,847</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">243</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,558</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">99,978</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">99,978</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">PROPERTY, PLANT AND EQUIPMENT</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">324,517</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">146,509</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">32,006</font></td>
    <td valign="bottom"><font face="serif" size="2">&nbsp;(d)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">503,032</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">503,032</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%">
      <div style="margin-left: 3%; text-indent: -3%"><font face="serif" size="2">Less &#151; accumulated
          depreciation</font></div>
    </div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(19,813</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(20,593</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(40,406</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(40,406</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%">
      <div style="margin-left: 3%; text-indent: -3%"><font face="serif" size="2">Net
          property, plant and equipment</font></div>
    </div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">304,704</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">125,916</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">32,006</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">462,626</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">462,626</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%">
      <div style="margin-left: 3%; text-indent: -3%"><font face="serif" size="2">MINORITY
          INTEREST IN NOARK ASSETS</font></div>
    </div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,359</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">40,544</font></td>
    <td valign="bottom"><font face="serif" size="2">&nbsp;(d)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">43,903</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">43,903</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">LONG-TERM HEDGE ASSET</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,970</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,970</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,970</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">INTANGIBLES, NET</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">12,398</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">12,398</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">12,398 </font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">GOODWILL</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">80,201</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">80,201</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">80,201</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">OTHER ASSETS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,855</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,532</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(425</font></td>
    <td valign="bottom"><font face="serif" size="2">)(c)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,875</font></td>
    <td valign="bottom"><font face="serif" size="2">&nbsp;(f)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">17,237</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">17,237 </font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,400</font></td>
    <td valign="bottom"><font face="serif" size="2">&nbsp;(a)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">484,458</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">153,654</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">74,768</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">9,433</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">722,313</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">722,313</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">LIABILITIES AND OWNERS&#146; EQUITY</font></div></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CURRENT LIABILITIES:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%">
      <div style="margin-left: 3%; text-indent: -3%"><font face="serif" size="2">Current
          portion of NOARK long-term debt</font></div>
    </div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,200</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,200</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,200 </font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%">
      <div style="margin-left: 3%; text-indent: -3%"><font face="serif" size="2">Current
          portion of other long-term debt</font></div>
    </div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">63</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">800</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(800</font></td>
    <td valign="bottom"><font face="serif" size="2">)(d)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">63</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">63</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accrued liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,360</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,037</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">9,397</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">9,397</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%">
      <div style="margin-left: 3%; text-indent: -3%"><font face="serif" size="2">Current
          portion of hedge liability</font></div>
    </div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">37,663</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">37,663</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">37,663</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accrued producer liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">32,543</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">32,543</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">32,543</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts payable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,257</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,468</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,551</font></td>
    <td valign="bottom"><font face="serif" size="2">&nbsp;(b)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,276</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,276 </font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts payable &#151; affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,551</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,551</font></td>
    <td valign="bottom"><font face="serif" size="2">)(b)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Total current liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">83,886</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">13,056</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(800</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">96,142</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">96,142</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%">
      <div style="margin-left: 3%; text-indent: -3%"><font face="serif" size="2">LONG-TERM
          HEDGE LIABILITY</font></div>
    </div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">29,962</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">29,962</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">29,962</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">NOARK LONG-TERM DEBT</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">38,400</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">38,400</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">38,400</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">SENIOR UNSECURED DEBT</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">250,000</font></td>
    <td valign="bottom"><font face="serif" size="2">&nbsp;(f)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">250,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">250,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">SENIOR SECURED DEBT</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">183,582</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">25,600</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">178,000</font></td>
    <td valign="bottom"><font face="serif" size="2">&nbsp;(a)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(120,933</font></td>
    <td valign="bottom"><font face="serif" size="2">)(e)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(240,567</font></td>
    <td valign="bottom"><font face="serif" size="2">)(f)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">82</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">82</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(25,600</font></td>
    <td valign="bottom"><font face="serif" size="2">)(d)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">MINORITY INTEREST</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">227,908</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(229</font></td>
    <td valign="bottom"><font face="serif" size="2">)(a)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">120,933</font></td>
    <td valign="bottom"><font face="serif" size="2">(e)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">348,612</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">348,612 </font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">DEFERRED INCOME TAXES</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">21,893</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(21,893</font></td>
    <td valign="bottom"><font face="serif" size="2">)(d)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151; </font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">PARTNERS&#146; EQUITY:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Partners&#146; equity</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,564</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">54,705</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(54,705</font></td>
    <td valign="bottom"><font face="serif" size="2">)(d)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,559</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">79,152</font></td>
    <td valign="bottom"><font face="serif" size="2">&nbsp;(g)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,559</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5</font></td>
    <td valign="bottom"><font face="serif" size="2">)(a)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(79,152</font></td>
    <td valign="bottom"><font face="serif" size="2">)(g)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%">
      <div style="margin-left: 3%; text-indent: -3%"><font face="serif" size="2">Accumulated
          other comprehensive loss</font></div>
    </div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(46,444</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(46,444</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(46,444</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Total partners&#146; equity</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(40,880</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">54,705</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(54,710</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(40,885</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(40,885</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">484,458</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">153,654</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">74,768</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">9,433</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">722,313</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">722,313</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-6</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf7"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE HOLDINGS, L.P.</b><br>
<b>PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)</b><br>
<b>FOR THE YEAR ENDED DECEMBER 31, 2004</b><br>
(in thousands, except per unit data)</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Historical</b><br>
<b>Atlas</b><br>
<b>Pipeline</b><br>
<b>GP</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Historical</b><br>
<b>Spectrum</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Historical</b><br>
<b>Elk City</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Historical</b><br>
<b>NOARK</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Adjustments</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Atlas</b><br>
<b>November</b><br>
<b>2005 Equity</b><br>
<b>Offering</b><br>
<b>Adjustments</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Atlas Senior</b><br>
<b>Notes</b><br>
<b>Offering</b><br>
<b>Adjustments</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Pro</b><br>
<b>Forma</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Atlas Pipeline</b><br>
<b>Holdings</b><br>
<b>Equity</b><br>
<b>Offering</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Pro Forma,</b><br>
<b>as</b><br>
<b>adjusted</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">REVENUE:</font></div></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="5%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Natural gas and liquids &#151; third parties</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">72,109</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">67,643</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,376</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">253</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">166,544</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(h)</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">317,925</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">317,925</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Natural gas and liquids &#151; affiliates</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">123,975</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">55,763</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(166,544</font></td>
    <td valign="bottom"><font face="serif" size="1">)&nbsp;&nbsp;(h)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">13,194</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">13,194</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Transportation and compression &#151;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;third parties</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">76</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,364</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,143</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(h)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">14,583</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">14,583</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Transportation and compression &#151; <br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;affiliates</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">18,724</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,119</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(4,143</font></td>
    <td valign="bottom"><font face="serif" size="1">)&nbsp;&nbsp;(h)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">25,700</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">25,700</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Interest income and other</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">382</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">329</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">711</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">711</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="1">Total revenue and other income</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">91,291</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">67,643</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">135,351</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">77,828</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">372,113</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">372,113</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">COSTS AND EXPENSES:</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Natural gas and liquids</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">58,707</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">54,565</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">118,537</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">55,019</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">286,828</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">286,828</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Plant operating</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,032</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,474</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,599</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9,105</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9,105</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Transportation and compression</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,260</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,434</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">6,694</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">6,694</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">General and administrative</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,642</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,509</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,482</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,756</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(2,482</font></td>
    <td valign="bottom"><font face="serif" size="1">)&nbsp;&nbsp;(i)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,378</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(s)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,378</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">840</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(i)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(6,369</font></td>
    <td valign="bottom"><font face="serif" size="1">)&nbsp;&nbsp;(j)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Gain on arbitration settlement, net</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(1,457</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(1,457</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(1,457</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,471</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,638</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,153</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,249</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(7,040</font></td>
    <td valign="bottom"><font face="serif" size="1">)&nbsp;&nbsp;(k)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">16,803</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">16,803</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">12,332</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(k)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Minority interest in Atlas</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,941</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">429</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(l)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">11,370</font></td>
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  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Minority interest in NOARK</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">492</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">492</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">492</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Interest</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,301</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,712</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">5,287</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">13,058</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(m)(n)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(5,782</font></td>
    <td valign="bottom"><font face="serif" size="1">)&nbsp;&nbsp;&nbsp;&nbsp;(p)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9,121</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;(q)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">26,385</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">26,385</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">688</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;(r)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Other (income) expense</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">(88,551</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(3</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">89,109</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(j)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">555</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">555</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="1">Total costs and expenses</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">83,897</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(20,653</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">127,768</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">72,237</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">99,877</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(5,782</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9,809</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">367,153</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">367,153</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Income (loss) before income taxes</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,394</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">88,296</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,583</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,591</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">99,877</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,782</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(9,809</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,960</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,960</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Provision for income taxes</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(32,319</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(2,162</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">34,481</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(o)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Net income (loss)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,394</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">55,977</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,583</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,429</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(65,396</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,782</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(9,809</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,960</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,960</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Premium on preferred unit redemption</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(400</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(400</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(400</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Net income (loss) attributable to owners</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">6,994</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">55,977</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,583</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,429</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(65,396</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,782</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(9,809</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,560</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,560</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Net income per unit</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">0.22</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Weighted average units outstanding</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">21,100</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(t)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-7</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf8"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE HOLDINGS, L.P.</b><br>
<b>PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)</b><br>
<b>FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005</b><br>
(in thousands, except per unit data)</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Historical</b><br>
<b>Atlas</b><br>
<b>Pipeline GP</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Historical</b><br>
<b>Elk City</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Historical</b><br>
<b>NOARK</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Adjustments</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Atlas</b><br>
<b>November 2005</b><br>
<b>Equity</b><br>
<b>Offering</b><br>
<b>Adjustments</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Atlas Senior</b><br>
<b>Notes</b><br>
<b>Offering</b><br>
<b>Adjustments</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Pro</b><br>
<b>Forma</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Atlas</b><br>
<b>Pipeline</b><br>
<b>Holdings</b><br>
<b>Equity</b><br>
<b>Offering</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Pro Forma,</b><br>
<b>as</b><br>
<b>adjusted</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><hr noshade size="1"></td>
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    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
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    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
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    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
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    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
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    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
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    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
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    <td><hr noshade size="1"></td>
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  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">REVENUE:</font></div></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="5%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Natural gas and liquids &#151; third parties</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">218,268</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,497</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">237</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">69,658</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(h)</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">291,660</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">291,660</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Natural gas and liquids &#151; affiliates</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">37,235</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">42,125</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(69,658</font></td>
    <td valign="bottom"><font face="serif" size="1">)&nbsp;&nbsp;(h)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9,702</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9,702</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Transportation and compression &#151; third parties</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">54</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,174</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,999</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(h)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,227</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,227</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Transportation and compression &#151; affiliates</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">16,447</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">6,955</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(1,999</font></td>
    <td valign="bottom"><font face="serif" size="1">)&nbsp;&nbsp;(h)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">21,403</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">21,403</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Interest income and other</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">352</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">144</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">496</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">496</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="1">Total revenue and other income</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">235,121</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">40,732</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">57,635</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">333,488</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">333,488</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">COSTS AND EXPENSES:</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Natural gas and liquids</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">184,578</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">36,665</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">40,551</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">261,794</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">261,794</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Plant operating</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,242</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,363</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,605</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,605</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Transportation and compression</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,169</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,547</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,716</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,716</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">General and administrative</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9,127</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">850</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,207</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(850</font></td>
    <td valign="bottom"><font face="serif" size="1">)&nbsp;&nbsp;(i)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,544</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(s)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">11,544</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">210</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(i)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Loss on arbitration settlement, net</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">138</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">138</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">138</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,495</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">628</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,475</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(3,103</font></td>
    <td valign="bottom"><font face="serif" size="1">)&nbsp;&nbsp;(k)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">12,809</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">12,809</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,314</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(k)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Minority interest in Atlas</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,240</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(1,319</font></td>
    <td valign="bottom"><font face="serif" size="1">)&nbsp;&nbsp;(l)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,921</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,921</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="1">Minority interest in NOARK</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">440</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">440</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">440</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="1">Interest</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,478</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,654</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">9,062</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(m)(n)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(5,782</font></td>
    <td valign="bottom"><font face="serif" size="1">)&nbsp;&nbsp;(p)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,131</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(q)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">20,059</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">20,059</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">516</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(r)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="1">Total costs and expenses</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">227,467</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">39,506</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">52,874</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">8,314</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(5,782</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,647</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">327,026</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">327,026</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Income (loss) before income taxes</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,654</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,226</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,761</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(8,314</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,782</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(4,647</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">6,462</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">6,462</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Provision for income taxes</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(1,887</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,887</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(o)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Net income (loss)</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,654</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,226</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,874</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(6,427</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5,782</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(4,647</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">6,462</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">6,462</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Net income per unit</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">0.31</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Weighted average units outstanding</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">21,100</font></td>
    <td valign="bottom"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;(t)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-8</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf9"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE HOLDINGS, L.P.</b><br>
<b>NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">a.</font></td>
    <td><div align="left"><font face="serif" size="2">To reflect the application of $178,000,000 of borrowings under the Atlas credit facility for (a) payment to sellers and various acquisition costs of $175,123,000, which are allocated to the underlying assets and liabilities acquired as described in note d, (b) loan costs of
$2,400,000, which will be amortized over the remaining term of the credit facility, (c) interest of $234,000, all of which relates to post-September&nbsp;30, 2005 periods and charged herein to owners&#146; equity, and (d) the remaining $243,000 to Atlas. We describe Atlas&#146; credit facility
under &#147;Other Indebtedness.&#148;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">b.</font></td>
    <td><div align="left"><font face="serif" size="2">To reclassify affiliated receivables and payables to third-party receivables and payables.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">c.</font></td>
    <td><div align="left"><font face="serif" size="2">To remove $425,000 from Atlas&#146; other assets for acquisition costs previously paid or accrued and to include that amount within the purchase price allocation described in note d below.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">d.</font></td>
    <td><div align="left"><font face="serif" size="2">To reflect the allocation of the total purchase price for NOARK and various acquisition costs of $175,548,000 to the assets and liabilities acquired, consisting of $175,123,000 payment to seller and various acquisition costs as described in note a and the $425,000 of acquisition
costs previously paid or accrued as described in note c. The deferred tax liability and affiliated accounts payable were not assumed by Atlas and remain the responsibility of the seller. Also reflects the repayment of $26,400,000 of the 7.15% NOARK notes by the seller from the
net proceeds from its sale of NOARK. This amount was deposited into an escrow account for the purpose of repayment and retirement of this portion of the notes. The remaining outstanding portion of the NOARK notes is severally guaranteed by Southwestern, the 25% minority
interest owner in NOARK. An acquisition adjustment has been included to adjust minority interest to reflect Southwestern&#146;s interest in the NOARK notes.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">e.</font></td>
    <td><div align="left"><font face="serif" size="2">To reflect net proceeds of $120,933,000, after estimated offering costs of $6,327,000, from the Atlas November 2005 sale of 2,700,000 common units and the December 2005 sale of 330,000 additional underwriter option units, each at $42.00 per unit, principally used to repay
borrowings under Atlas&#146; credit facility.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">f.</font></td>
    <td><div align="left"><font face="serif" size="2">To reflect net proceeds of $243,125,000, after estimated offering costs of $6,875,000, from Atlas&#146; December 2005 issuance of $250,000,000 of 8.125% senior unsecured notes due 2015, of which $240,567,000 was used to repay borrowings under Atlas&#146; credit facility, with the
remaining $2,558,000 going to Atlas.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">g.</font></td>
    <td><div align="left"><font face="serif" size="2">To reflect net proceeds from this offering of $79,152,000, after estimated offering costs of $7,248,000, assuming 3,600,000 common units at a price of $24.00 per unit, which will be distributed to Atlas America.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">h.</font></td>
    <td><div align="left"><font face="serif" size="2">To reclassify affiliated revenue to third-party revenue.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">i.</font></td>
    <td><div align="left"><font face="serif" size="2">To reflect the elimination of the overhead allocated to Elk City by its parent and its replacement with an overhead allocation to be made by us in accordance with a new allocation agreement.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">j.</font></td>
    <td><div align="left"><font face="serif" size="2">To reflect the elimination of non-cash compensation costs of $6,369,000 related to the vesting of stock options upon change of control and the gain of $89,109,000, in each case, on the sale of Spectrum&#146;s assets to Atlas.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">k.</font></td>
    <td><div align="left"><font face="serif" size="2">To reflect the adjustment to depreciation expense for Spectrum, Elk City and NOARK for the periods these entities were not included within our historical results based upon the cost of the acquired gas gathering and transmission facilities using depreciable lives ranging from 3
to 40 years and using the straight-line method.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">l.</font></td>
    <td><div align="left"><font face="serif" size="2">To reflect adjustment of the minority interest in the net income of Atlas as a result of the net effect of the pro forma statement of income adjustments previously noted. The allocation of Atlas&#146; net income to minority interests is based upon the historical distributions received by
its partners. It is impracticable to determine what the cash available would have been on a pro forma basis. Accordingly, the allocation of Atlas&#146; net income to the minority interest owners reflects historical distributions.</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-9</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf10"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">m.</font></td>
    <td><div align="left"><font face="serif" size="2">To reflect the adjustments to interest expense resulting from borrowings under Atlas&#146; credit facility to (a) finance the acquisitions of Spectrum, Elk City and NOARK, (b) reflect the net proceeds of the April 2004, July 2004, and June 2005 offerings of common units, and (c)
reflect the repayment of the portion of the NOARK notes severally guaranteed by NOARK.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">n.</font></td>
    <td><div align="left"><font face="serif" size="2">To reflect the amortization of deferred financing costs related to Atlas&#146; credit facility to finance the Elk City acquisition and the amendment to the credit facility to finance the NOARK acquisition.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">o.</font></td>
    <td><div align="left"><font face="serif" size="2">To reflect the elimination of federal and state income taxes following the conversion of Spectrum and Atlas Arkansas, which were both C-corporations, to limited liability companies concurrent with their acquisition by Atlas.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">p.</font></td>
    <td><div align="left"><font face="serif" size="2">To reflect the adjustment to interest expense resulting from the repayment of amounts outstanding under Atlas&#146; credit facility with proceeds from its November 2005 equity offering.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">q.</font></td>
    <td><div align="left"><font face="serif" size="2">To reflect the adjustment to interest expense resulting from the repayment of amounts outstanding under Atlas&#146; credit facility with proceeds from their December 2005 issuance of senior unsecured notes.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">r.</font></td>
    <td><div align="left"><font face="serif" size="2">To reflect the amortization of deferred financing costs related to the issuance of Atlas&#146; senior unsecured notes.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">s.</font></td>
    <td><div align="left"><font face="serif" size="2">We estimate we will incur on-going general and administrative costs as a result of being a public entity, including, among other things, estimated incremental accounting and audit fees, director fees, director and officer liability insurances expenses and other miscellaneous costs.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">t.</font></td>
    <td><div align="left"><font face="serif" size="2">To reflect the adjustment of our outstanding limited partner units.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-10</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf11"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</b></font></p>
<p align="left"><font face="serif" size="2">Board of Directors<br>
Atlas America, Inc.</font></p>
<p align="left"><font face="serif" size="2">We have audited the accompanying balance sheet of Atlas Pipeline Holdings, L.P. (the &#147;Partnership&#148;) as of December&nbsp;31, 2005. This financial statement is the responsibility of the Partnership&#146;s management. Our responsibility is to express an opinion on this financial
statement based on our audit.</font></p>
<p align="left"><font face="serif" size="2">We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of
material misstatement. The Partnership is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership&#146;s internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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.</font></p>
<p align="left"><font face="serif" size="2">In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of Atlas Pipeline Holdings, L.P. as of December&nbsp;31, 2005, in conformity with accounting principles generally accepted in the United States of America.</font></p>
<div style="margin-left:44%">
<p align="left"><font face="serif" size="2"><b>
/s/ GRANT THORNTON LLP</b></font></p>
</div>
<p align="left"><font face="serif" size="2">Cleveland, Ohio<br>
January&nbsp;3, 2006</font></p>
<p align="center"><font face="serif" size="2">F-11</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf12"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>ATLAS PIPELINE HOLDINGS, L.P.</b><br>
<b>BALANCE SHEET</b><br>
<b>DECEMBER</b>&nbsp;<b>31, 2005</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr align="center" valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>ASSETS</b></font></div></td>
    <td align="left" width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Cash</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>OWNERS&#146; EQUITY</b></font></div></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Owners&#146; equity</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">See accompanying note to balance sheet</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-12</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf13"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>ATLAS PIPELINE HOLDINGS, L.P.</b><br>
<b>NOTE TO BALANCE SHEET</b><br>
<b>DECEMBER</b>&nbsp;<b>31, 2005</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>NATURE OF OPERATIONS</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas Pipeline Holdings, L.P. (the &#147;Partnership&#148;) is a Delaware limited partnership formed on December&nbsp;15, 2005 to become the sole member of Atlas Pipeline Partners GP, LLC, which is the managing general partner of Atlas Pipeline Partners, L.P. (&#147;Atlas&#148;), a
publicly traded limited partnership. Atlas is a midstream energy service provider engaged in the transmission, gathering and processing of natural gas in the Mid-Continent and Appalachian regions of the United States. Our assets will consist of the following
partnership interests in Atlas to be contributed to us by Atlas Pipeline Partners GP, LLC:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">The 100% ownership interest in Atlas Pipeline Partners GP, LLC, which owns a 2.0% general partner interest in Atlas;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">The incentive distribution rights in Atlas associated with the general partner interest, which we hold through our ownership interests in Atlas Pipeline Partners GP, LLC; and</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="3%"><font face="serif" size="2">&#149;</font></td>
    <td><div align="left"><font face="serif" size="2">1,641,026 common limited partner units of Atlas, representing approximately 13.1% of the outstanding common limited partner units of Atlas, or approximately 12.8% of Atlas&#146; partnership interests.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-13</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf14"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</b></font></p>
<p align="left"><font face="serif" size="2">Board of Directors<br>
Atlas America, Inc.</font></p>
<p align="left"><font face="serif" size="2">We have audited the accompanying balance sheet of Atlas Pipeline Holdings GP, LLC (the &#147;Company&#148;) as of December&nbsp;31, 2005. This financial statement is the responsibility of the Company&#146;s management. Our responsibility is to express an opinion on this financial
statement based on our audit.</font></p>
<p align="left"><font face="serif" size="2">We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of
material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company&#146;s internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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.</font></p>
<p align="left"><font face="serif" size="2">In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of Atlas Pipeline Holdings GP, LLC as of December&nbsp;31, 2005, in conformity with accounting principles generally accepted in the United States of America.</font></p>
<div style="margin-left:44%">
<p align="left"><font face="serif" size="2"><b>
/s/ GRANT THORNTON LLP</b></font></p>
</div>
<p align="left"><font face="serif" size="2">Cleveland, Ohio<br>
January&nbsp;3, 2006</font></p>
<p align="center"><font face="serif" size="2">F-14</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf15"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>ATLAS PIPELINE HOLDINGS GP, LLC</b><br>
<b>BALANCE SHEET</b><br>
<b>DECEMBER</b>&nbsp;<b>31, 2005</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr align="center" valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>ASSETS</b></font></div></td>
    <td align="left" width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Cash</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>OWNERS&#146; EQUITY</b></font></div></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Owners&#146; equity</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">See accompanying note to balance sheet</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-15</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf16"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>ATLAS PIPELINE HOLDINGS GP, LLC</b><br>
<b>NOTE TO BALANCE SHEET</b><br>
<b>DECEMBER</b>&nbsp;<b>31, 2005</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>NATURE OF OPERATIONS</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas Pipeline Holdings GP, LLC (the &#147;Company&#148;) is a Delaware limited liability company formed on December&nbsp;15, 2005 and is the general partner of Atlas Pipeline Holdings, L.P., a Delaware limited partnership that was formed on December&nbsp;15, 2005 to own
Atlas Pipeline Partners GP, LLC, the general partner of Atlas Pipeline Partners, L.P. (&#147;Atlas&#148;) and owner of 1,641,026 of Atlas&#146; common limited partner units. Atlas Pipeline Holdings GP, LLC&#146;s general partner interest is fixed without any requirement for capital
contributions in connection with additional unit issuances by Atlas Pipeline Holdings, L.P. because Atlas Pipeline Holdings GP, LLC has no economic interest in Atlas Pipeline Holdings, L.P.</font></p>
</div>
<p align="center"><font face="serif" size="2">F-16</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf17"></a>
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<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"></font><font face="serif" size="2"><b>REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><div align="left"><font face="serif" size="2">Board of Directors<br>
Atlas Pipeline Partners GP, LLC</font></div></td>
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<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We have audited the accompanying consolidated balance sheets of Atlas Pipeline Partners GP, LLC and subsidiaries (the &#147;Company&#148;) as of December&nbsp;31, 2003 and 2004, and the related consolidated statements of income, comprehensive income, owners&#146; equity,
and cash flows for each of the three years in the period ended December&nbsp;31, 2004. These financial statements are the responsibility of the Company&#146;s management. Our responsibility is to express an opinion on these financial statements based on our audits.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company&#146;s internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Atlas Pipeline Partners GP, LLC and subsidiaries as of December&nbsp;31, 2003 and 2004 and the consolidated results of
their operations and cash flows for each of the three years in the period ended December&nbsp;31, 2004, in conformity with accounting principles generally accepted in the United States of America.</font></p>
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<p align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<div style="margin-left:44%">
<p align="left"><font face="serif" size="2"><b>
/s/ GRANT THORNTON LLP</b></font></p>
</div>
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    <td><font face="serif" size="2">Cleveland, Ohio<br>
December&nbsp;21, 2005</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
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<p align="center"><font face="serif" size="2">F-17</font></p>
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<p align="center"><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>CONSOLIDATED BALANCE SHEETS</b><br>
(in thousands)</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>December</b>&nbsp;<b>31,</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(Unaudited)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>ASSETS</b></font></div></td>
    <td align="left" width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Current assets:</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash and cash equivalents</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,078</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">18,214</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">12,035</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts receivable &#150; affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">13,658</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">19,609</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,418</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts receivable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">12</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">13,729</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">41,289</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Current portion of hedge asset</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">40</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">14,993</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Prepaid expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">67</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,056</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,595</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total current assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">28,815</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">52,648</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">74,330</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Property, plant and equipment, net</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">29,628</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">175,259</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">304,704</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Long-term hedge asset</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">14</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,970</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Intangibles, net</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">12,398</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Goodwill</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,305</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,305</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">80,201</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Other assets</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,422</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,672</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,855</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">63,170</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">234,898</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">484,458</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>LIABILITIES AND OWNERS&#146; EQUITY (DEFICIT)</b></font></div></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Current liabilities:</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Current portion of long-term debt</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,303</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">63</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accrued liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">279</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,144</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,360</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Current portion of hedge liability</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,959</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">37,663</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accrued producer liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,996</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">32,543</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts payable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">242</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,341</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,257</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts payable &#150; affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,673</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Distribution payable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,696</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,006</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total current liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,890</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">24,749</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">83,886</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Long-term hedge liability</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">722</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">29,962</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Long-term debt, less current portion</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">52,149</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">183,582</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Minority interest</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">43,551</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">135,873</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">227,908</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Commitments and contingencies</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Owners&#146; equity (deficit):</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Owners&#146; equity</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,729</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">22,723</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,564</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accumulated other comprehensive loss</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,318</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(46,444</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total owners&#146; equity (deficit)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,729</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">21,405</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(40,880</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">63,170</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">234,898</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">484,458</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">See accompanying notes to consolidated financial statements</font></p>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-18</font></p>
<hr noshade align="center" width="100%" size="2">
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<p align="center"><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>CONSOLIDATED STATEMENTS OF INCOME</b><br>
(in thousands)</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
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    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
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    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Nine Months Ended</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" align="center" valign="bottom"><font face="serif" size="1"><b>Years Ended December</b>&nbsp;<b>31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>(unaudited)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Revenue:</b></font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Natural gas and liquids</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">72,109</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">30,048</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">218,268</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Transportation and compression &#151;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,581</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,563</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">18,724</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">13,292</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">16,447</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Transportation and compression &#151;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">third parties</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">79</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">88</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">76</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">52</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">54</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Interest income and other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">98</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">382</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">282</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">352</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total revenue and other income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,667</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,749</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">91,291</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">43,674</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">235,121</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Costs and expenses:</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Natural gas and liquids</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">58,707</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">24,588</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">184,578</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Plant operating</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,032</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">931</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,242</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Transportation and compression</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,062</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,421</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,260</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,709</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,169</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">General and administrative</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,274</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">854</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,561</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,180</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,762</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Compensation reimbursement &#151; affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">208</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">808</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,081</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">721</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,365</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,475</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,770</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,471</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,132</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,495</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">250</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">258</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,301</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,202</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,478</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Minority interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,496</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,066</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,941</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,300</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,240</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Loss (gain) on arbitration settlement, net</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,457</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,987</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">138</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total costs and expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,765</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">11,177</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">83,897</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">39,750</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">227,467</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Net income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,902</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,572</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,394</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,924</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,654</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Premium on preferred unit redemption</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(400</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(400</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Net income attributable to owners</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,902</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,572</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,994</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,524</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,654</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">See accompanying notes to consolidated financial statements</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-19</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf20"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)</b><br>
(in thousands)</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Nine Months Ended</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" align="center" valign="bottom"><font face="serif" size="1"><b>Years Ended December</b>&nbsp;<b>31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>(unaudited)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Net income</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">2,902</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">4,572</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">7,394</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">3,924</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">7,654</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Premium on preferred unit redemption</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(400</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(400</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Net income attributable to owners</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,902</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,572</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,994</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,524</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,654</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Other comprehensive loss:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Change in fair value of derivative</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">instruments accounted for as hedges</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,320</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,955</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(49,507</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Add: reclassification adjustment for</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">losses in net income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">27</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,381</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,318</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,928</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(45,126</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Comprehensive income (loss)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,902</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,572</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,676</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(404</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(37,472</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">See accompanying notes to consolidated financial statements</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-20</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf21"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>CONSOLIDATED STATEMENTS OF OWNERS&#146; EQUITY (DEFICIT)</b><br>
(in thousands)</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Accumulated</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Other</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Owners&#146;</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Comprehensive</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Total Owners&#146;</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Equity</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Loss</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Equity (Deficit)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Balance at January&nbsp;1, 2002</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">8,255</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">&#151;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">8,255</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Net income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,902</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">&nbsp; </font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,902</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Balance at December&nbsp;31, 2002</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">11,157</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">11,157</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Net income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,572</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,572</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Balance at December&nbsp;31, 2003</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,729</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,729</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Other comprehensive loss</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,318)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,318</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Net income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,994</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,994</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Balance at December&nbsp;31, 2004</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">22,723</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,318</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">21,405</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Other comprehensive loss (unaudited)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(45,126</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(45,126</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Net income (unaudited)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,654</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,654</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Distribution to owners (unaudited)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(24,813</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(24,813</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Balance at September&nbsp;30, 2005 (unaudited)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,564</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(46,444</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(40,880</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">See accompanying notes to consolidated financial statements</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-21</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf22"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>CONSOLIDATED STATEMENTS OF CASH FLOWS</b><br>
(in thousands)</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Nine Months Ended</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" align="center" valign="bottom"><font face="serif" size="1"><b>Years Ended December</b>&nbsp;<b>31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" align="center" valign="bottom"><font face="serif" size="1"><b>&nbsp;</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>(unaudited)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>CASH FLOWS FROM OPERATING ACTIVITIES:</b></font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Net income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,902</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,572</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,994</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,524</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,654</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Adjustments to reconcile net income to net cash provided by operating activities:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Minority interest in net income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,496</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,066</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,941</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,300</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,240</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Distributions paid to minority interest limited partners in Atlas Pipeline</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,526</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,040</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(9,427</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,589</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(14,234</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,475</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,770</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,471</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,132</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,495</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Non-cash (gain) loss on derivative value</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(210</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">585</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,091</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Non-cash compensation under long-term incentive plan</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">700</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">342</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,809</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Amortization of deferred finance costs</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">90</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">106</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">400</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">163</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,741</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Change in operating assets and liabilities, net of effects of acquisitions:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Increase decrease in accounts receivable and prepaid expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">799</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">827</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,444</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,320</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(24,779</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Increase (decrease) in accounts payable and accrued liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(82</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">413</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,264</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,797</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">25,511</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">(Increase) decrease in accounts receivable &#150; affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,577</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,075</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(4,738</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(90</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">17,652</font></td>
    <td valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Net cash provided by operating activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">577</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,639</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">11,311</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">9,484</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">30,998</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>CASH FLOWS FROM INVESTING ACTIVITIES:</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Acquisitions</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(141,626</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(141,564</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(195,201</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Capital expenditures</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,230</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(7,635</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(10,043</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(4,419</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(34,519</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,519</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(128</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">255</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(172</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Net cash used in investing activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,230</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(9,154</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(151,797</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(145,728</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(229,892</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>CASH FLOWS FROM FINANCING ACTIVITIES:</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Borrowings under Atlas Pipeline credit facility</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,816</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">110,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">100,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">271,500</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Repayments under Atlas Pipeline credit facility</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(6,405</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(8,500</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(55,750</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(40,000</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(142,250</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Net proceeds from issuance of Atlas Pipeline limited partner units</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">25,182</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">93,119</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">93,114</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">91,720</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Distribution to owners</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(24,813</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Net proceeds from sale of Atlas Pipeline preferred units</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">20,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">20,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Redemption of Atlas Pipeline preferred units</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(20,000</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(20,000</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(61</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(948</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,747</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,928</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,442</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Net cash provided by financing activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,350</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">17,734</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">143,622</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">150,186</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">192,715</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Net change in cash and cash equivalents</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(303</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">13,219</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,136</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">13,942</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(6,179</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Cash and cash equivalents, beginning of period</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,162</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,859</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,078</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,078</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">18,214</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Cash and cash equivalents, end of period</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,859</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,078</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">18,214</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">29,020</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">12,035</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></p>
<p align="center"><font face="serif" size="2">See accompanying notes to consolidated financial statements</font></p>
<p align="center"><font face="serif" size="2">F-22</font></p>
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<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>NOTE 1 &#151; NATURE OF OPERATIONS</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas Pipeline Partners GP, LLC (the &#147;Company&#148;) is a Delaware limited liability company formed in May 1999 to become the general partner of Atlas Pipeline Partners, L.P. (the &#147;Atlas Pipeline&#148;). The Company is wholly-owned by Atlas America, Inc. and its
affiliates (&#147;Atlas America&#148;), a publicly traded company (NASDAQ: ATLS).</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas Pipeline is a Delaware limited partnership formed in May 1999 to acquire, own and operate natural gas gathering systems previously owned by Atlas America. Atlas Pipeline&#146;s operations are conducted through subsidiary entities whose equity interests are
owned by Atlas Pipeline Operating Partnership, L.P. (the &#147;Operating Partnership&#148;), a wholly-owned subsidiary of Atlas Pipeline. The Company, through its general partner interests in Atlas Pipeline and the Operating Partnership, owns a 2.0% general partner interest in
the consolidated pipeline operations, through which it manages and effectively controls both Atlas Pipeline and the Operating Partnership. The remaining 98.0% ownership interest in the consolidated pipeline operations consists of limited partner interests in Atlas
Pipeline. At December&nbsp;31, 2004, Atlas Pipeline had 5,563,659 common and 1,641,026 subordinated limited partnership units outstanding. In January 2005, these subordinated units, which are owned by the Company, were converted to common units as Atlas Pipeline
met stipulated tests under the terms of its partnership agreement allowing for such conversion. While the converted units are no longer subordinated to the rights of the common unitholders, these units have not yet been registered with the Securities and Exchange
Commission and, therefore, their resale in the public market is subject to restrictions under the Securities Act. At September&nbsp;30, 2005, Atlas Pipeline had 9,505,016 common limited partnership units outstanding, including the 1,641,026 unregistered common units held
by the Company.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company, as general partner, manages the operations and activities of Atlas Pipeline and owes a fiduciary duty to Atlas Pipeline&#146;s unitholders. The Company is liable, as general partner, for all of Atlas Pipeline&#146;s debts (to the extent not paid from Atlas
Pipeline&#146;s assets), except for indebtedness or other obligations that are made specifically nonrecourse to the general partner.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company does not receive any management fee or other compensation for its management of Atlas Pipeline. The Company and its affiliates are reimbursed for expenses incurred on Atlas Pipeline&#146;s behalf. These expenses include the costs of employee,
officer, and managing board member compensation and benefits properly allocable to Atlas Pipeline and all other expenses necessary or appropriate to conduct the business of, and allocable to, Atlas Pipeline. The Atlas Pipeline partnership agreement provides that the
Company, as general partner, will determine the expenses that are allocable to Atlas Pipeline in any reasonable manner in its sole discretion.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The accompanying unaudited consolidated balance sheet as of September&nbsp;30, 2005 and the consolidated statements of income, comprehensive income, cash flows and owners&#146; equity for the nine months ended September&nbsp;30, 2004 and 2005 are presented in
accordance with accounting principles generally accepted in the United States for interim reporting. In management&#146;s opinion, all adjustments necessary for the fair presentation of the Company&#146;s financial position, results of operations and cash flows for the periods
presented have been made. The related disclosures as of September 30, 2005 and for the nine month periods ended September 30, 2004 and 2005 are also unaudited.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>NOTE 2 &#151; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Principles of Consolidation</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The consolidated financial statements include the accounts of the Company, Atlas Pipeline, the Operating Partnership and the Operating Partnership&#146;s wholly-owned subsidiaries. The Partnership&#146;s limited partner equity interests owned by third-parties at
September&nbsp;30, 2005 and December&nbsp;31, 2003 and</font></p>
</div>
<p align="center"><font face="serif" size="2">F-23</font></p>
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<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<p align="left"><font face="serif" size="2">2004 are reflected as minority interests on the consolidated balance sheets. All material intercompany transactions have been eliminated.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Use of Estimates</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The preparation of the Company&#146;s consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities that exist at the date of the Company&#146;s consolidated financial statements, as well as the reported amounts of revenue and costs and expenses during the reporting periods. Actual results could differ from those
estimates.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The natural gas industry principally conducts its business by processing actual transactions at the end of the month following the month of delivery. Consequently, the most current month&#146;s financial results for the Company include estimated volumes and market
prices. Differences between estimated and actual amounts are recognized in the following month&#146;s financial results. Management believes that the operating results presented for the three years ended December&nbsp;31, 2004 and for the nine months ended September&nbsp;30,
2004 and 2005 represent actual results in all material respects (see Revenue Recognition accounting policy for further description).</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Cash Equivalents</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company considers all highly liquid investments with a remaining maturity of three months or less at the time of purchase to be cash equivalents. These cash equivalents consist principally of temporary investments of cash in short-term money market
instruments.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Receivables</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In evaluating the realizability of its accounts receivable, the Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer&#146;s current creditworthiness, as determined by the Company&#146;s review
of its customers&#146; credit information. The Company extends credit on an unsecured basis to many of its customers. At December&nbsp;31, 2003 and 2004 and September&nbsp;30, 2005, the Company recorded no allowance for uncollectible accounts receivable impairment.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Property, Plant and Equipment</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Property and Equipment are stated at cost or, upon acquisition of a business, at the fair value of the assets acquired. Depreciation expense is recorded for each asset over its estimated useful life using the straight-line method.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Impairment of Long-Lived Assets</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company reviews its long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that an asset&#146;s estimated undiscounted future cash flows will not be sufficient
to recover its carrying amount, an impairment charge will be recorded to reduce the carrying amount for that asset to its estimated fair value if such carrying amount exceeds the fair value.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-24</font></p>
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<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Fair Value of Financial Instruments</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">For cash and cash equivalents, receivables and payables, the carrying amounts approximate fair values because of the short maturity of these instruments. The carrying value of long-term debt approximates fair market value since interest rates approximate
current market rates.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Derivative Instruments</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company applies the provisions of Statement of Financial Accounting Standards No. 133, &#147;Accounting for Derivative Instruments and Hedging Activities&#148; (&#147;SFAS No. 133&#148;). SFAS No. 133 requires each derivative instrument to be recorded in the balance
sheet as either an asset or liability measured at fair value. Changes in a derivative instrument&#146;s fair value are recognized currently in earnings unless specific hedge accounting criteria are met.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Intangible Assets</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">At September&nbsp;30, 2005, the Company had $12.4 million of intangible assets, net of accumulated amortization of $0.5 million, which was recorded in connection with natural gas gathering contracts assumed in consummated acquisitions (see Note 7). There were
no intangible assets recorded as of December&nbsp;31, 2003 or 2004. Statement of Financial Accounting Standards No. 142, &#147;Goodwill and Other Intangible Assets&#148; (&#147;SFAS No. 142&#148;) requires that intangible assets with finite useful lives be amortized over their respective
estimated useful lives. If an intangible asset has a finite useful life, but the precise length of that life is not known, that intangible asset must be amortized over the best estimate of its useful life. At a minimum, the Company will assess the useful lives and residual
values of all intangible assets on an annual basis to determine if adjustments are required. Amortization expense on the natural gas gathering contract intangible assets, which have an estimated life of 12 years and are being amortized on a straight-line basis, was $0.5
million for the nine months ended September&nbsp;30, 2005. There was no amortization expense on intangible assets recorded during the three years ended December&nbsp;31, 2004 and the nine months ended September&nbsp;30, 2004. Amortization expense related to intangible
assets is estimated to be $1.1 million for each of the next five calendar years commencing 2006.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Goodwill</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">At December&nbsp;31, 2003 and 2004 and September&nbsp;30, 2005, the Company had $2.3 million, $2.3 million and $80.2 million, respectively, of goodwill which was recognized in connection with consummated acquisitions (see Note 7). The Company tests its goodwill
for impairment at each year end by comparing fair values to its carrying values. The evaluation of impairment under SFAS No. 142 requires the use of projections, estimates and assumptions as to the future performance of the Company&#146;s operations, including
anticipated future revenue, expected future operating costs and the discount factor used. Actual results could differ from projections, resulting in revisions to the Company&#146;s assumptions and, if required, recognition of an impairment loss. The Company&#146;s test of
goodwill at December&nbsp;31, 2004 resulted in no impairment, and no impairment indicators have been noted as of September&nbsp;30, 2005. The Company will continue to evaluate its goodwill at least annually and if impairment indicators arise, will reflect the impairment of
goodwill, if any, within the consolidated statements of income in the period in which the impairment is indicated.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Federal Income Taxes</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company is a limited liability corporation and Atlas Pipeline is a limited partnership. As a result, the Company&#146;s and Atlas Pipeline&#146;s income for federal income tax purposes is reportable on the tax</font></p>
</div>
<p align="center"><font face="serif" size="2">F-25</font></p>
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<div style="page-break-before:always"></div>
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<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<p align="left"><font face="serif" size="2">returns of the individual owners and partners, respectively. Accordingly, no recognition has been given to income taxes in the Company&#146;s consolidated financial statements.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Stock Based Compensation</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company issues phantom units of the Partnership to its directors and employees of Atlas America and its affiliates under its Long-Term Incentive Plan (&#147;the Plan&#148;) (see Note 11). The Company accounts for the phantom units issued in connection with the
Plan under Accounting Principles Board Opinion No. 25, &#147;Accounting for Stock Issued to Employees&#148; and its related interpretations.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Minority Interests in Atlas Pipeline</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The minority interests in our consolidated financial statements reflect the outside ownership interests in Atlas Pipeline, which were 61%, 76% and 84% at December&nbsp;31, 2003 and 2004 and September&nbsp;30, 2005, respectively. The minority interest in the
Company&#146;s consolidated net income is calculated quarterly by multiplying (i) the weighted average Atlas Pipeline limited partner units outstanding held by non-affiliated third-parties by (ii) the consolidated net income per Atlas Pipeline limited partner unit for the
respective quarter. The net income per Atlas Pipeline limited partner unit is calculated by dividing the net income allocated to limited partners, after the allocation of net income to the Company as general partner in accordance with the terms of the Atlas Pipeline
partnership agreement, by the total weighted average Atlas Pipeline limited partner units outstanding. The minority interest liability on the Company&#146;s consolidated balance sheets principally reflects the sum of the allocation of Atlas Pipeline consolidated net income to
the minority interests and the contributed capital of minority interests through the sale of limited partner units in Atlas Pipeline, partially offset by Atlas Pipeline quarterly cash distributions to the minority interest owners.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Environmental Matters</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company is subject to various federal, state and local laws and regulations relating to the protection of the environment. The Company has established procedures for the ongoing evaluation of its operations, to identify potential environmental exposures and
to comply with regulatory policies and procedures.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company accounts for environmental contingencies in accordance with Statement of Financial Accounting Standards No. 5, &#147;Accounting for Contingencies.&#148; Environmental expenditures that relate to current operations are expensed or capitalized as
appropriate. Expenditures that relate to an existing condition caused by past operations, and do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or clean-ups are probable, and the costs
can be reasonably estimated. The Company maintains insurance which may cover in whole or in part certain environmental expenditures. At December&nbsp;31, 2003 and 2004 and September&nbsp;30, 2005, the Company had no environmental matters requiring specific
disclosure or requiring the recognition of a liability.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Segment Information</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company has two business segments: natural gas gathering and transmission located in the Appalachian Basin area (&#147;Appalachia&#148;) and gathering, transmission and processing located in the Mid-Continent area (&#147;Mid-Continent&#148;). Appalachian revenue is, for
the most part, based on contractual arrangements with Atlas America and its affiliates. Mid-Continent revenue is, for the most part, derived from the sale of residue gas and NGLs to purchasers at the tailgate of the processing plant.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-26</font></p>
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<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Revenue Recognition</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Revenue in the Appalachian segment is recognized at the time the natural gas is transported through the gathering systems. Under the terms of its natural gas gathering agreements with Atlas America and its affiliates, the Company receives fees for gathering
natural gas from wells owned by Atlas America, by drilling investment partnerships sponsored by Atlas America or by independent third parties. The fees received for the gathering services are generally the greater of 16% of the gross sales price for gas produced from
the wells, or $0.35 or $0.40 per thousand cubic feet (&#147;mcf&#148;), depending on the ownership of the well. Substantially all gas gathering revenue is derived under this agreement. Fees for transportation services provided to independent third parties whose wells are
connected to the Company&#146;s Appalachian gathering systems are at separately negotiated prices.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Revenue in the Mid-Continent segment is recognized at the time the natural gas is processed and the resulting residue gas and natural gas liquids (&#147;NGLs&#148;) are sold. The majority of this revenue is based on percentage of proceeds, or POP, and fixed-fee contracts.
Under its POP purchasing arrangements, the Company purchases natural gas at the wellhead, processes the natural gas by extracting NGLs and removing impurities and sells the residue gas and NGLs at market-based prices, remitting to producers a
contractually-determined percentage of the sale proceeds.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company accrues unbilled revenue due to timing differences between the delivery of natural gas, NGLs, and oil and the receipt of a delivery statement. This revenue is recorded based upon volumetric data from the Company&#146;s records and management
estimates of the related transportation and compression fees which are, in turn, based upon applicable product prices (see Use of Estimates accounting policy for further description). The Company had unbilled revenue at December&nbsp;31, 2003 and 2004 and
September&nbsp;30, 2005 of $2.6 million, $15.3 million and $42.1 million, respectively, included in accounts receivable and accounts receivable-affiliates within the consolidated balance sheets.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Comprehensive Income (Loss)</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Comprehensive income (loss) includes net income and all other changes in the equity of a business during a period from transactions and other events and circumstances from non-owner sources. These changes, other than net income, are referred to as &#147;other
comprehensive income (loss)&#148; and for the Company include only changes in the fair value of unsettled hedge contracts.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>New Accounting Standards</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In May 2005, the Financial Accounting Standards Board (&#147;FASB&#148;) issued SFAS No. 154, &#147;Accounting Changes and Error Corrections&#148; (&#147;SFAS No. 154&#148;). SFAS No. 154 requires retrospective application to prior periods&#146; financial statements for changes in accounting
principle. It also requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment is made to the opening balance
of retained earnings for that period rather than being reported in an income statement. The statement will be effective for accounting changes and corrections of errors made in fiscal years beginning after December&nbsp;15, 2005. The impact of SFAS No. 154 will depend
on the nature and extent of any voluntary accounting changes and corrections of errors after the effective date, but management does not currently expect SFAS No. 154 to have a material impact on the Company&#146;s financial position or results of operations.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In March 2005, the FASB issued FASB Interpretation No. 47, &#147;Accounting for Conditional Asset Retirement Obligations&#148; (&#147;FIN 47&#148;), which will result in (a) more consistent recognition of liabilities relating to asset retirement obligations, (b) more information
about expected future cash outflows</font></p>
</div>
<p align="center"><font face="serif" size="2">F-27</font></p>
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<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<p align="left"><font face="serif" size="2">associated with those obligations, and (c) more information about investments in long-lived assets because additional asset retirement costs will be recognized as part of the carrying
amounts of the assets. FIN 47 clarifies that the term conditional asset retirement obligation as used in SFAS No. 143, &#147;Accounting for Asset Retirement Obligations,&#148; refers to a legal
obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the
entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement. Uncertainty about the timing
and (or) method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. FIN 47 also clarifies
when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years ending
after December&nbsp;15, 2005. Retrospective application of interim financial information is permitted but is not required. Early adoption of this interpretation is encouraged. The Company does
not expect FIN 47 to have a material impact on its consolidated financial statements.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In December 2004, the FASB issued SFAS No. 123 (R) (revised 2004) &#147;Share-Based Payment,&#148; which is a revision of SFAS No. 123, &#147;Accounting for Stock-Based Compensation.&#148; SFAS No. 123 (R) supersedes Accounting Principals Board Opinion (&#147;APB&#148;) No. 25,
&#147;Accounting for Stock Issued to Employees,&#148; and amends SFAS No. 95, &#147;Statement of Cash Flows.&#148; Generally, the approach to accounting in Statement 123 (R) requires all share-based payments to employees, including grants of employee stock options, to be recognized
in the financial statements based on their fair values. Currently, the Company follows APB No. 25 and its interpretations, which allow for valuation of share-based payments to employees at their intrinsic values. Under this methodology, the Company recognizes
compensation expense for phantom units granted at their fair value at the date of grant and compensation expense for options granted only if the current market price of the underlying units exceed the exercise price. SFAS No. 123 (R) is effective for the Company
beginning January&nbsp;1, 2006. The Company does not expect SFAS No. 123 (R) to have a material impact on its consolidated financial statements.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>NOTE 3 &#151; ATLAS PIPELINE EQUITY OFFERINGS</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In June 2005, Atlas Pipeline sold 2.3 million common units in a public offering for total gross proceeds of $96.5 million. The units were issued under Atlas Pipeline&#146;s previously filed Form S-3 shelf registration statement. The sale of the units resulted in net
proceeds of approximately $91.7 million, after underwriting commissions and other transaction costs. Atlas Pipeline primarily utilized the net proceeds from the sale to repay a portion of the amounts due under its credit facility.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In July 2004, Atlas Pipeline sold 2.1 million common units in a public offering for total gross proceeds of $73.0 million. The units were issued under Atlas Pipeline&#146;s previously filed Form S-3 shelf registration statement. The sale of the units resulted in net
proceeds of approximately $67.5 million, after underwriting commissions and other transaction costs. Atlas Pipeline utilized the net proceeds from the sale primarily to repay a portion of the amounts due under its credit facility and to redeem preferred units issued in
connection with the acquisition of Spectrum Field Services, Inc. in July 2004 for $20.4 million (see Note 7).</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In April 2004, Atlas Pipeline sold 0.8 million common units in a public offering for total gross proceeds of $27.0 million. The units were issued under Atlas Pipeline&#146;s previously filed Form S-3 shelf registration statement. The sale of the units resulted in net
proceeds of approximately $25.2 million, after underwriting commissions and other transaction costs. Atlas Pipeline utilized the net proceeds from the sale primarily to repay a portion of the amounts due under its credit facility.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-28</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf29"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In May 2003, Atlas Pipeline sold 1.1 million common units in a public offering for total gross proceeds of $27.3 million. The units were issued under Atlas Pipeline&#146;s previously filed Form S-3 shelf registration statement. The sale of the units resulted in net
proceeds of approximately $25.2 million, after underwriting commissions and other transaction costs. Atlas Pipeline utilized the net proceeds from the sale primarily to repay a portion of the amounts due under its credit facility.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>NOTE 4 &#151; ATLAS PIPELINE DISTRIBUTIONS</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas Pipeline is required to distribute, within 45 days of the end of each quarter, all of its available cash (as defined in its partnership agreement) for that quarter. If distributions in any quarter exceed specified per unit target levels, the Company, as general
partner, receives between 15% and 50% of such distributions in excess of the specified target levels. Distributions declared by Atlas Pipeline for the period from January&nbsp;1, 2002 through September&nbsp;30, 2005 were as follows:</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr align="center" valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Date</b></font></div></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><font face="serif" size="1"><b>Atlas Pipeline</b></font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><font face="serif" size="1"><b>Total Atlas</b></font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Atlas Pipeline</b></font></div></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><font face="serif" size="1"><b>Cash Distribution</b></font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><font face="serif" size="1"><b>Pipeline Cash</b></font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Cash Distribution</b></font></div></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><font face="serif" size="1"><b>per Limited</b></font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><font face="serif" size="1"><b>Distribution To</b></font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<b>Paid</b>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2"><font face="serif" size="1"><b>For Quarter Ended</b></font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><font face="serif" size="1"><b>Partner Unit</b></font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><font face="serif" size="1"><b>Limited Partners</b></font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="top">
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(in thousands)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">May&nbsp;10, 2002</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="14%"><font face="serif" size="2">March&nbsp;31, 2002</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="12%"><font face="serif" size="2">0.520</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="12%"><font face="serif" size="2">843</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">August&nbsp;8, 2002</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">June&nbsp;30, 2002</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.535</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">867</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">November&nbsp;8, 2002</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">September&nbsp;30, 2002</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.540</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">875</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">February&nbsp;7, 2003</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">December&nbsp;31, 2002</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.540</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">875</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">May&nbsp;9, 2003</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">March&nbsp;31, 2003</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.560</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">908</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">August&nbsp;8, 2003</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">June&nbsp;30, 2003</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.580</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,574</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">November&nbsp;7, 2003</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">September&nbsp;30, 2003</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.620</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,682</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">February&nbsp;6, 2004</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">December&nbsp;31, 2003</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.625</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,696</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">May&nbsp;7, 2004</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">March&nbsp;31, 2004</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.630</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,710</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">August&nbsp;6, 2004</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">June&nbsp;30, 2004</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.630</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,182</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">November&nbsp;5, 2004</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">September&nbsp;30, 2004</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.690</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,839</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">February&nbsp;11, 2005</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">December&nbsp;31, 2004</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.720</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,006</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">May&nbsp;13, 2005</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">March&nbsp;31, 2005</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.750</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,173</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">August&nbsp;5, 2005</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">June&nbsp;30, 2005</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.770</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,055</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">November&nbsp;14, 2005</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">September&nbsp;30, 2005</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.810</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,382</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>NOTE 5 &#151; PROPERTY, PLANT AND EQUIPMENT</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following is a summary of property, plant and equipment (in thousands):</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Estimated</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>December</b>&nbsp;<b>31,</b></font><hr>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Useful Lives</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>in Years</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Pipelines, processing and compression facilities</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">36,390</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">168,932</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">304,795</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">15 &#150; 40</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Rights of way</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">623</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">14,128</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,109</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">20 &#150; 40</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Buildings</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,215</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,351</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">40</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Furniture and equipment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">517</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">700</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3 &#150; 7</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">307</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">562</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3 &#150; 10</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">37,018</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">187,099</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">324,517</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Less &#150; accumulated depreciation</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(7,390</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(11,840</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(19,813</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">29,628</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">175,259</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">304,704</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-29</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf30"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In April 2005, Atlas Pipeline completed the acquisition of ETC Oklahoma Pipeline, Ltd. for approximately $196.0 million (see Note 7). Due to its recent date of acquisition, the purchase price allocation is based upon estimated values determined by Atlas Pipeline,
which are subject to adjustment and could change significantly as this preliminary allocation is further evaluated. At September&nbsp;30, 2005, the portion of the purchase price allocated to property, plant and equipment for this acquisition by Atlas Pipeline (see Note 7) was
included in pipelines, processing and compression facilities.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>NOTE 6 &#151; OTHER ASSETS</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following is a summary of other assets (in thousands):</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>December</b>&nbsp;<b>31,</b></font><hr>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Deferred finance costs, net of accumulated amortization of $106, $506 and $1,237 at December&nbsp;31, 2003 and 2004 and September&nbsp;30, 2005, respectively</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">767</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">3,316</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">4,771</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Security deposits</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,356</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,659</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Alaska Pipeline Company acquisition costs (see Note 13)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,579</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">76</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">425</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,422</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,672</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,855</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Deferred finance costs are recorded at cost and amortized over the term of the respective debt agreements (see Note 9).</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>NOTE 7 &#151; ACQUISITIONS</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Spectrum</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In July 2004, Atlas Pipeline acquired Spectrum Field Services, Inc. (&#147;Spectrum&#148;), for approximately $141.6 million, including transaction costs and the payment of taxes due as a result of the transaction. Spectrum&#146;s principal assets included 1,900 miles of natural
gas pipelines and a natural gas processing facility in Velma, Oklahoma. The acquisition was accounted for using the purchase method of accounting under SFAS No. 141, &#147;Business Combinations&#148; (&#147;SFAS No. 141&#148;). The following table presents the purchase price
allocation, including professional fees and other related acquisition costs, to the assets acquired and liabilities assumed, based on their fair values at the date of acquisition (in thousands):</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Cash and cash equivalents</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">803</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Accounts receivable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">18,505</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Prepaid expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">649</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Property, plant and equipment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">139,464</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Other long-term assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,054</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Total assets acquired</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">160,475</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Accounts payable and accrued liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(17,153</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Hedging liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,519</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Long-term debt</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(164</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Total liabilities assumed</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(18,836</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Net assets acquired</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">141,639</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-30</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf31"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<p align="left"><font face="serif" size="2">The results of Spectrum&#146;s operations are included within the Company&#146;s consolidated financial statements from its date of acquisition. In connection with financing the acquisition of Spectrum, Atlas Pipeline issued preferred units to Resource America, Inc., an
affiliate of Atlas America at the date of the transaction, and to Atlas America for an aggregate amount of $20.0 million. These preferred units were subsequently redeemed for $20.4 million, including a $0.4 million premium, with the net proceeds from Atlas Pipeline&#146;s
July 2004 equity offering (see Note 3).</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Elk City</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In April 2005, Atlas Pipeline acquired all of the outstanding equity interests in ETC Oklahoma Pipeline, Ltd. (&#147;Elk City&#148;), a Texas limited partnership, for $196.0 million, including related transaction costs. Elk City&#146;s principal assets included 318 miles of natural
gas pipelines located in the Anadarko Basin in western Oklahoma, a natural gas processing facility in Elk City, Oklahoma and a gas treatment facility in Prentiss, Oklahoma. The acquisition was accounted for using the purchase method of accounting under SFAS No.
141. The following table presents the preliminary purchase price allocation, including professional fees and other related acquisition costs, to the assets acquired and liabilities assumed, based on their fair values at the date of acquisition (in thousands) (unaudited):</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Accounts receivable</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">5,587</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Other assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">497</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Property, plant and equipment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">104,091</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Intangible assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">12,890</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Goodwill</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">77,896</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Total assets acquired</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">200,961</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Accounts payable and accrued liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(4,970</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Net assets acquired</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">195,991</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas Pipeline recorded goodwill in connection with this acquisition as a result of Elk City&#146;s significant cash flow and its strategic industry position. The results of Elk City&#146;s operations are included within the Company&#146;s consolidated financial statements from its
date of acquisition.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following data presents unaudited pro forma revenue and net income for the Company as if the acquisitions discussed above and the equity offerings in April 2004, July 2004 and June 2005, the net proceeds of which were principally utilized to repay debt
borrowed to finance the acquisitions (see Note 3), had occurred on January&nbsp;1, 2003. The Company has prepared these pro forma financial results for comparative purposes only. These pro forma financial results may not be indicative of the results that would have
occurred if Atlas Pipeline had completed these acquisitions at the beginning of the periods shown below or the results that will be attained in the future (in thousands):</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Years Ended</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Nine Months Ended</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>December</b>&nbsp;<b>31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">2003</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">2004</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">2004</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">2005</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Total revenue and other income</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="12%"><font face="serif" size="2">230,082</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">294,285</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="12%"><font face="serif" size="2">194,186</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">275,853</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Net income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,409</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,714</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,404</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,306</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-31</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf32"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>NOTE 8 &#151; DERIVATIVE INSTRUMENTS</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas Pipeline enters into certain financial swap and option instruments that are classified as cash flow hedges in accordance with SFAS No. 133. Atlas Pipeline entered into these instruments to hedge the forecasted natural gas, NGL and condensate sales against
the variability in expected future cash flows attributable to changes in market prices. The swap instruments are contractual agreements between counterparties to exchange obligations of money as the underlying natural gas, NGL and condensate is sold. Under these
swap agreements, Atlas Pipeline receives a fixed price and pays a floating price based on certain indices for the relevant contract period.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas Pipeline formally documents all relationships between hedging instruments and the items being hedged, including its risk management objective and strategy for undertaking the hedging transactions. This includes matching the natural gas futures and
options contracts to the forecasted transactions. Atlas Pipeline assesses, both at the inception of the hedge and on an ongoing basis, whether the derivatives are effective in offsetting changes in the forecasted cash flow of hedged items. If it is determined that a
derivative is not effective as a hedge or that it has ceased to be an effective hedge due to the loss of correlation between the hedging instrument and the underlying commodity, Atlas Pipeline will discontinue hedge accounting for the derivative and subsequent changes
in the derivative fair value, which it determines through utilization of market data, will be recognized immediately within the Company&#146;s consolidated statements of income.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Derivatives are recorded on the consolidated balance sheet as assets or liabilities at fair value. For derivatives qualifying as hedges, the effective portion of changes in fair value are recognized in owners&#146; equity as accumulated other comprehensive income (loss)
and reclassified to natural gas and liquids revenue within the consolidated statements of income as the underlying transactions are settled. For non-qualifying derivatives and for the ineffective portion of qualifying derivatives, changes in fair value are recognized within
the consolidated statements of income as they occur. At December&nbsp;31, 2004 and September&nbsp;30, 2005, the Company reflected net hedging liabilities on its consolidated balance sheets of $2.6 million and $46.7 million, respectively. Prior to the acquisition of Spectrum in
July 2004, Atlas Pipeline had not entered into derivative instruments. Of the $46.4 million net loss in accumulated other comprehensive income (loss) at September&nbsp;30, 2005, if the fair values of the instruments remain at current market values, $22.7 million of losses
will be reclassified to the consolidated statements of income over the next twelve month period as these contracts expire and $23.7 million will be reclassified in later periods. Actual amounts that will be reclassified will vary as a result of future price changes.
Ineffective hedge gains or losses are recorded in natural gas and liquids revenue within the consolidated statements of income while the hedge contract is open and may increase or decrease until settlement of the contract. The Company recognized losses of $2,000 for
the year ended December&nbsp;31, 2004 and $27,000 and $4.4 million for the nine months ended September&nbsp;30, 2004 and 2005, respectively, within its consolidated statements of income related to the settlement of qualifying hedge instruments. The Company also
recognized losses of $0.3 million for the year ended December&nbsp;31, 2004 and $0.7 million for both the nine months ended September&nbsp;30, 2004 and 2005 within its consolidated statements of income related to the change in market value of non-qualifying or ineffective
hedges.</font></p>
</div>
<p align="center"><font face="serif" size="2">F-32</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf33"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As of December&nbsp;31, 2004, the Company had the following natural gas liquids, natural gas, and crude oil volumes hedged:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Natural Gas Liquids Fixed &#151; Price Swaps</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Twelve</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Average</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fair Value</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Months</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Volumes</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fixed Price</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Liability(1)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Ended December</b>&nbsp;<b>31,</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(gallons)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(per gallon)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(in thousands)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><hr noshade size="1"></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2005</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">12,564,000</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="12%"><font face="serif" size="2">0.550</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="12%"><font face="serif" size="2">(1,208</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,804,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.575</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(500</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,708</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Natural Gas Fixed &#150; Price Swaps</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Twelve</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Average</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fair Value</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Months</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Volumes</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fixed Price</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Liability(3)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Ended December</b>&nbsp;<b>31,</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(MMBTU)(2)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(per MMBTU)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(in thousands)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><hr noshade size="1"></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2005</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">970,000</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="12%"><font face="serif" size="2">6.187</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="12%"><font face="serif" size="2">(71</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">450,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5.920</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(172</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(243</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Crude Oil Fixed &#151; Price Swaps</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Twelve</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Average</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fair Value</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Months</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Volumes</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fixed Price</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Liability(3)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Ended December</b>&nbsp;<b>31,</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(barrels)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(per barrel)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(in thousands)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><hr noshade size="1"></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="12%"><font face="serif" size="2">18,000</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">38.767</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">(36)</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Crude Oil Options</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Twelve</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Average</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fair Value</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Months</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Option Type</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Volumes</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Strike Price</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Liability(3)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Ended December</b>&nbsp;<b>31,</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(barrels)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(per barrel)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(in thousands)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><hr noshade size="1"></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2005</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="12%"><font face="serif" size="2">Puts purchased</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">75,000</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="12%"><font face="serif" size="2">30.00</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2005</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">Calls sold</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">75,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">34.30</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(640</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(640</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">Total liability</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,627)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><hr noshade size="1" align="left" width="100%"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(1)</font></td>
    <td><div align="left"><font face="serif" size="2">Fair value based upon management estimates, including forecasted forward NGL prices as a function of forward NYMEX natural gas and light crude prices.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(2)</font></td>
    <td><div align="left"><font face="serif" size="2">MMBTU represents Million British Thermal Units.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(3)</font></td>
    <td><div align="left"><font face="serif" size="2">Fair value based on forward NYMEX natural gas and light crude prices, as applicable.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-33</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf34"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As of September&nbsp;30, 2005, the Company had the following NGLs, natural gas, and crude oil volumes hedged:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Natural Gas Liquids Fixed &#150; Price Swaps</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Twelve</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Average</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fair Value</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Months</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Volumes</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fixed Price</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Liability(1)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Ended September</b>&nbsp;<b>30,</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(gallons)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(per gallon)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(in thousands)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><hr noshade size="1"></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">38,586,000</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="12%"><font face="serif" size="2">0.673</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="12%"><font face="serif" size="2">(16,742</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2007</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">38,115,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.711</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(12,188</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2008</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">34,587,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.702</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(9,037</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2009</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,434,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">0.697</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,781</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(39,748</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Natural Gas Fixed &#150; Price Swaps</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Twelve</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Average</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fair Value</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Months</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Volumes</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fixed Price</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Liability(3)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Ended September</b>&nbsp;<b>30,</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(MMBTU)(2</b></font></td>
    <td valign="bottom"><font face="serif" size="1"><b>)</b></font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(per MMBTU)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(in thousands)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><hr noshade size="1"></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">3,923,000</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="12%"><font face="serif" size="2">7.169</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="12%"><font face="serif" size="2">(5,767</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2007</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,560,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7.210</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,658</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2008</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">510,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7.262</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,037</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(8,462</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Natural Gas Basis Swaps</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Twelve</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Average</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fair Value</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Months</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Volumes</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fixed Price</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Asset(3)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Ended September</b>&nbsp;<b>30,</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(MMBTU)(2)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(per MMBTU)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(in thousands)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><hr noshade size="1"></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">4,262,000</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="12%"><font face="serif" size="2">(0.517</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="12%"><font face="serif" size="2">1,376</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2007</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,560,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(0.522</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,584</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2008</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">510,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(0.544</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,383</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,343</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Crude Oil Fixed &#150; Price Swaps</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Twelve</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Average</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fair Value</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Months</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Volumes</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fixed Price</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Liability(3)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Ended September</b>&nbsp;<b>30,</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(barrels)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(per barrel)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(in thousands)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><hr noshade size="1"></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">67,800</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">51.329</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="12%"><font face="serif" size="2">(1,056</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2007</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">80,400</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">55.187</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(844</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2008</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">82,500</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">58.475</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(414</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,314</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-34</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf35"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Crude Oil Options</b></font></div></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Twelve</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Average</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Fair Value</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Months</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Volumes</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Strike Price</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Liability(3)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Ended September</b>&nbsp;<b>30,</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Option Type</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(barrels)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(per barrel)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>(in thousands)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><hr noshade size="1"></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="8%"><font face="serif" size="2">Puts purchased</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">15,000</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">30.00</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">Calls sold</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">34.25</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(481</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(481</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">Total net liability</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(46,662</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><hr noshade size="1" align="left" width="100%"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(1)</font></td>
    <td><div align="left"><font face="serif" size="2">Fair value based upon management estimates, including forecasted forward NGL prices as a function of forward NYMEX natural gas and light crude prices.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(2)</font></td>
    <td><div align="left"><font face="serif" size="2">MMBTU represents million British Thermal Units.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(3)</font></td>
    <td><div align="left"><font face="serif" size="2">Fair value based on forward NYMEX natural gas and light crude prices, as applicable.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>NOTE 9 &#151; LONG-TERM DEBT</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Total debt consists of the following (in thousands):</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>December</b>&nbsp;<b>31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Atlas Pipeline Credit Facility:</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Revolving credit facility</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">183,500</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Term loan</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">44,250</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Other debt</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">202</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">145</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">54,452</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">183,645</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Less current maturities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,303</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(63</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">52,149</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">183,582</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In April 2005, Atlas Pipeline entered into a new $270.0 million credit facility (the &#147;Credit Facility&#148;) with a syndicate of banks, which replaced its existing $135.0 million facility. The facility was comprised of a five-year $225.0 million revolving line of credit and a
five-year $45.0 million term loan. The term loan portion of the Credit Facility was repaid and retired from the net proceeds of the June 2005 equity offering (see Note 3). The revolving portion of the Credit Facility bears interest, at Atlas Pipeline&#146;s option, at either (i)
Adjusted LIBOR plus the applicable margin, as defined, or (ii) the higher of the federal funds rate plus 0.5% or the Wachovia Bank prime rate (each plus the applicable margin). The weighted average interest rate on the outstanding Credit Facility borrowings at
December&nbsp;31, 2004 and September&nbsp;30, 2005 was 7.0% and 6.6%, respectively. The interest rate on the outstanding balance of the term loan at December&nbsp;31, 2004 was 7.75%. Up to $10.0 million of the credit facility may be utilized for letters of credit, of which $2.2
million and $7.7 million was outstanding at December&nbsp;31, 2004 and September&nbsp;30, 2005, respectively. These outstanding letter of credit amounts were not reflected as borrowings on the Company&#146;s consolidated balance sheet. Borrowings under the Credit Facility are
secured by a lien on and security interest in all of Atlas Pipeline&#146;s property and that of its subsidiaries, and by the guaranty of each of Atlas Pipeline&#146;s subsidiaries.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Credit Facility contains customary covenants, including restrictions on Atlas Pipeline&#146;s ability to incur additional indebtedness; make certain acquisitions, loans or investments; make distribution payments to its unitholders if an event of default exists; or
enter into a merger or sale of assets, including</font></p>
</div>
<p align="center"><font face="serif" size="2">F-35</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf36"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<p align="left"><font face="serif" size="2">the sale or transfer of interests in its subsidiaries. The Credit Facility also contains covenants requiring Atlas to maintain, on a rolling four-quarter basis, a maximum total debt to EBITDA
ratio (each as defined in the credit agreement) of 5.5 to 1, reducing to 4.5 to 1 on September&nbsp;30, 2005 and thereafter; and an interest coverage ratio (as defined in the credit agreement) of
at least 3.0 to 1. Atlas Pipeline was in compliance with these covenants as of September&nbsp;30, 2005, and was in compliance with the covenants of its previously existing credit facility as of
December&nbsp;31, 2004. Based upon the definitions set forth within the credit agreement, Atlas Pipeline&#146;s ratio of total debt to EBITDA was 3.7 to 1 and the interest coverage ratio was 4.8 to 1
at September&nbsp;30, 2005.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The aggregate amount of long-term debt maturities is as follows (in thousands):</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Twelve Months Ended September 30:</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">63</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2007</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">62</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2008</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">20</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2010</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">183,500</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">183,645</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Cash payments for interest related to long-term debt were $0.2 million, $0.2 million, and $2.1 million for the years ended December&nbsp;31, 2002, 2003 and 2004, respectively.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>NOTE 10 &#151; COMMITMENTS AND CONTINGENCIES</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Atlas Pipeline has noncancelable operating leases for equipment and office space. Total rental expense for the years ended December&nbsp;31, 2002, 2003 and 2004 was $0.8 million, $1.0 million, and $0.8 million, respectively. The aggregate amount of remaining future
minimum annual lease payments as of September&nbsp;30, 2005 is as follows (in thousands):</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Twelve Months Ended September 30:</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">1,308</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2007</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,400</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2008</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">678</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2009</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">260</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2010</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">143</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,789</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas is a party to various routine legal proceedings arising out of the ordinary course of its business. Management of the Company believes that the ultimate resolution of these actions, individually or in the aggregate, will not have a material adverse effect on
its financial condition or results of operations.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On March&nbsp;9, 2004, the Oklahoma Tax Commission (&#147;OTC&#148;) filed a petition against Spectrum alleging that Spectrum underpaid gross production taxes beginning in June 2000. The OTC is seeking a settlement of $5.0 million plus interest and penalties. Atlas
Pipeline plans on defending this action vigorously. In addition, under the terms of the Spectrum purchase agreement, $14.0 million has been placed in escrow to cover the costs of any adverse settlement resulting from the petition and other indemnification obligations
of the purchase agreement.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As of September&nbsp;30, 2005, the Company is committed to expend approximately $36.6 million on pipeline extensions, compressor station upgrades and processing facility upgrades, including $13.1 million related to the Sweetwater Plant (see further description at
&#147;Subsequent Events&#148;).</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-36</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf37"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>NOTE 11 &#151; LONG-TERM INCENTIVE PLAN</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas Pipeline has a Long-Term Incentive Plan that was established in February 2004 (&#147;LTIP&#148;) in which officers, employees and non-employee managing board members of the Company and employees of the Company&#146;s affiliates and consultants are eligible to
participate. The LTIP is administered by a committee (the &#147;Committee&#148;) appointed by the Company&#146;s managing board. The Committee may make awards of either phantom units or unit options for an aggregate of 435,000 common units. Only phantom units have been
granted under the LTIP through September&nbsp;30, 2005.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">A phantom unit entitles a grantee to receive a common unit upon vesting of the phantom unit or, at the discretion of the Committee, cash equivalent to the fair market value of a common unit. In addition, the Committee may grant a participant a distribution
equivalent right (&#147;DER&#148;), which is the right to receive cash per phantom unit in an amount equal to, and at the same time as, the cash distributions Atlas Pipeline makes on a common unit during the period the phantom unit is outstanding. A unit option entitles the
grantee to purchase Atlas Pipeline&#146;s common limited partner units at an exercise price determined by the Committee at its discretion. The Committee also has discretion to determine how the exercise price may be paid by the participant. Except for phantom units
awarded to non-employee managing board members of the Company, the Committee will determine the vesting period for phantom units and the exercise period for options. Through September&nbsp;30, 2005, phantom units granted under the LTIP generally had vesting
periods of four years. The vesting period may also include the attainment of predetermined performance targets, which could increase or decrease the actual award settlement, as determined by the Committee. Phantom units awarded to non-employee managing board
members will vest over a four year period. Awards will automatically vest upon a change of control, as defined in the LTIP. Of the units outstanding under the LTIP at September&nbsp;30, 2005, 31,214 units will vest within the following twelve months.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company accounts for equity awards under the LTIP in accordance with the provisions of APB No. 25 and its interpretations, which allows for valuation of these awards at their intrinsic values. Under this methodology, the Company recognizes
compensation expense for phantom units granted at their fair value at the date of grant. For options granted, the Company recognizes compensation expense at the date of the grant only if the current market price of the underlying units exceeds the exercise price.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following table sets forth the LTIP phantom unit activity for the periods indicated:</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Nine Months Ended</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" align="center" valign="bottom"><font face="serif" size="1"><b>Years Ended December</b>&nbsp;<b>31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Outstanding, beginning of period</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">&#151;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">&#151;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">&#151;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">&#151;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">58,752</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Granted(1)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">59,598</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">59,598</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">67,338</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Performance factor adjusted(2)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">82,468</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Matured</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(14,686</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Forfeited</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(846</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(846</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,019</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Outstanding, end of period</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">58,752</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">58,752</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">192,853</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Non-cash compensation expense recognized</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">(in thousands)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">700</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">342</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,809</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-37</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf38"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><hr noshade size="1" align="left" width="100%"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(1)</font></td>
    <td><div align="left"><font face="serif" size="2">The weighted average price for phantom unit awards on the date of grant was $37.14 for awards granted for the year ended December&nbsp;31, 2004 and $37.14 and $48.58 for awards granted for the nine months ended September&nbsp;30, 2004 and 2005, respectively. There were
no units awarded for the years ended December&nbsp;31, 2002 and 2003.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">(2)</font></td>
    <td><div align="left"><font face="serif" size="2">Consists of adjustments to performance-based awards to reflect actual performance.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>NOTE 12 &#151; RELATED PARTY TRANSACTIONS</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company, which is wholly-owned by Atlas America, is affiliated with Resource America, Inc., a publicly-traded entity, and its subsidiaries (&#147;RAI&#148;). Atlas America was a 100% owned subsidiary of RAI through the effective date of its initial public offering
(May 2004) and an 80% owned subsidiary from that date through June&nbsp;29, 2005. On June&nbsp;30, 2005, Resource America distributed its 10.7 million shares of Atlas America to its shareholders. In connection with this distribution of Atlas America common stock to its
shareholders, RAI and Atlas America entered into various agreements, including shared services and a tax matters agreement, which govern the ongoing relationship between the two companies.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas Pipeline is dependent upon the resources and services provided by RAI, Atlas America and their affiliates and subsidiaries. Accounts receivable/payable-affiliates represents the net balance due from/to these related entities for natural gas transported through
the gathering systems, net of reimbursements for Atlas Pipeline costs and expenses paid by these Affiliates. Substantially all of Atlas Pipeline&#146;s revenue in Appalachia is from these Affiliates.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas Pipeline does not directly employ any persons to manage or operate its business. These functions are provided by the Company, as general partner, and employees of these affiliated entities, primarily Atlas America. The Company does not receive a
management fee or other compensation in connection with its management of Atlas Pipeline apart from its interest as general partner and its right to receive incentive distributions. Atlas Pipeline reimburses the Company and/or its Affiliates for all direct and indirect
costs of services provided, including the cost of employees, officer and managing board member compensation and benefits properly allocable to Atlas Pipeline and all other expenses necessary or appropriate to the conduct of the business of, and allocable to, Atlas
Pipeline. The partnership agreement provides that the Company, as general partner, will determine the costs and expenses that are allocable to Atlas Pipeline in any reasonable manner it determines by the Company in its sole discretion.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Under an agreement with Atlas America and certain of its subsidiaries, Atlas America must construct up to 2,500 feet of sales lines from its existing wells to a point of connection to Atlas Pipeline&#146;s gathering systems. Atlas Pipeline must, at its own cost, extend
its system to connect to any such lines extended to within 1,000 feet of its gathering systems. With respect to wells to be drilled by Atlas America that will be more than 3,500 feet from Atlas Pipeline&#146;s gathering systems, Atlas Pipeline has various options to connect
those wells to its gathering systems at its own cost.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In connection with the proposed acquisition of Alaska Pipeline Company, L.L.C. (&#147;Alaska Pipeline&#148;) (see Note 13), Atlas Pipeline paid RAI a fee of $70,750 in the year ended December&nbsp;31, 2004.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>NOTE 13 &#151; SETTLEMENT OF ALASKA PIPELINE ARBITRATION</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In September 2003, Atlas Pipeline entered into an agreement with SEMCO Energy, Inc. (&#147;SEMCO&#148;) to purchase all of the stock of Alaska Pipeline. In order to complete the acquisition, Atlas Pipeline needed the approval of the Regulatory Commission of Alaska.
The Regulatory Commission initially approved the transaction, but on June&nbsp;4, 2004, it vacated its order of approval based upon a motion for clarification or reconsideration filed by SEMCO. On July&nbsp;1, 2004, SEMCO sent Atlas Pipeline a notice purporting to</font></p>
</div>
<p align="center"><font face="serif" size="2">F-38</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf39"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<p align="left"><font face="serif" size="2">terminate the transaction. Atlas Pipeline pursued its remedies under the acquisition agreement. In connection with the acquisition, subsequent termination and legal action, Atlas Pipeline
incurred costs of approximately $4.0 million. On December&nbsp;30, 2004, Atlas Pipeline entered into a settlement agreement with SEMCO settling all issues and matters related to SEMCO&#146;s
termination of the sale of Alaska Pipeline to Atlas Pipeline and SEMCO paid Atlas Pipeline $5.5 million. Atlas Pipeline recognized expenses of $3.0 million and $0.1 million related to this
terminated transaction for the nine month periods ended September 30, 2004 and 2005, respectively, and a net gain of $1.5 million for the year ended December 31, 2004. These amounts
are shown under the caption &#147;(Gain) loss on arbitration settlement, net&#148; on the Company&#146;s consolidated statements of income.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>NOTE 14 &#150; OPERATING SEGMENT INFORMATION</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company has two business segments: natural gas gathering and transmission located in the Appalachian Basin area (&#147;Appalachia&#148;) of eastern Ohio, western New York and western Pennsylvania, and gathering and processing located in the Mid-Continent area
(&#147;Mid-Continent&#148;) of southern Oklahoma and northern Texas. Appalachia revenue is principally based on contractual arrangements with Atlas and its affiliates. Mid-Continent revenue is primarily derived from the sale of residue gas and NGLs to purchasers at the
tailgate of the processing plants. These operating segments reflect the way the Company manages its operations.</font></p>
</div>
<p align="center"><font face="serif" size="2">F-39</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf40"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following tables summarize the Company&#146;s operating segment data for the periods indicated (in thousands):</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Nine Months Ended</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" align="center" valign="bottom"><font face="serif" size="1"><b>Years Ended December</b>&nbsp;<b>31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><u><b>Mid-Continent:</b></u></font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2"><b>Revenue</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Natural gas and liquids</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">72,109</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">30,048</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">218,268</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Interest income and other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">60</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">24</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">77</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total revenue and other income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">72,169</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">30,072</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">218,345</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2"><b>Costs and expenses</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Natural gas and liquids</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">58,707</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">24,588</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">184,578</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Plant operating</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,032</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">931</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,242</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">General and administrative</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,088</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">634</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,307</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,408</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">613</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,597</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total costs and expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">64,235</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">26,766</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">202,724</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2"><b>Segment profit</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,934</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,306</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,621</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><u><b>Appalachia:</b></u></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2"><b>Revenue</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Transportation and compression &#150; affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,581</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,563</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">18,724</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">13,292</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">16,447</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Transportation and compression &#150; third parties</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">79</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">88</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">76</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">52</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">54</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Interest income and other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">98</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">322</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">258</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">275</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total revenue and other income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,667</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,749</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">19,122</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">13,602</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">16,776</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2"><b>Costs and expense</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Transportation and compression</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,062</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,421</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,260</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,709</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,169</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">General and administrative</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">741</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">831</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,777</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,133</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,410</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,475</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,770</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,063</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,519</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,898</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total costs and expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,278</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,022</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,100</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,361</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,477</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2"><b>Segment profit</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,389</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,727</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">13,022</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">9,241</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,299</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><u><b>Reconciliation of segment profit to net income:</b></u></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2"><b>Segment profit</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Mid-Continent </font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,934</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,306</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,621</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Appalachia</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,389</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,727</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">13,022</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">9,241</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,299</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total segment profit</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,389</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,727</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">20,956</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">12,547</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">25,920</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">General and administrative</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(741</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(831</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,777</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,134</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,410</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(250</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(258</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,301</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,202</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(8,478</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Gain (loss) on arbitration settlement, net</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,457</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,987</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(138</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Minority interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,496</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,066</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(10,941</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,300</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(7,240</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2"><b>Net income</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,902</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,572</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,394</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,924</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,654</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-40</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf41"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>December</b>&nbsp;<b>31,</b></font><hr>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><u><b>Balance sheet</b></u></font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Total assets:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Mid-Continent</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">157,675</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">426,628</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Appalachia</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">32,447</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">39,400</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">40,766</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Corporate other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">30,723</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">37,823</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">17,064</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">63,170</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">234,898</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">484,458</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Goodwill:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Mid-Continent</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">77,896</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Appalachia</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,305</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,305</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,305</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,305</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,305</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">80,201</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following tables summarize the Company&#146;s total revenue by product or service for the periods indicated (in thousands):</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Nine Months Ended</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" align="center" valign="bottom"><font face="serif" size="1"><b>Years Ended December</b>&nbsp;<b>31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="8" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Natural gas and liquids:</b></font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Natural gas</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">38,908</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,973</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">122,837</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">NGLs </font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">31,631</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">14,031</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">86,761</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Condensate </font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">589</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(294</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,768</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Other (1)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">981</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">338</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,902</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">72,109</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">30,048</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">218,268</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>Transportation and Compression:</b></font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,581</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,563</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">18,724</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">13,292</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">16,447</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Third parties</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">79</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">88</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">76</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">52</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">54</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,660</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,651</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">18,800</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">13,344</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">16,501</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="100"><hr noshade size="1" align="left" width="100%"></td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2"><sup>(1)</sup></font></td>
    <td><div align="left"><font face="serif" size="2">Includes treatment, processing, and other revenue associated with the products noted.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Atlas Pipeline sells natural gas and NGLs under contract to various purchasers in the normal course of business. For the year ended December&nbsp;31, 2004, the Mid-Continent segment had two customers that accounted for approximately 34% and 25% of the
Company&#146;s consolidated total revenue. Additionally, the Mid-Continent segment had two customers that accounted for 39% and 31% of the Company&#146;s consolidated accounts receivable at December&nbsp;31, 2004. Substantially all of the Appalachian segment&#146;s revenue is
derived from a master gas gathering agreement with Atlas America.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>NOTE 15 &#151; SUBSEQUENT EVENTS (UNAUDITED)</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On January 9, 2006, Atlas Pipeline declared a cash distribution of $0.83 per unit on its limited partner units, representing the cash distribution for the quarter ended December 31, 2005. The distribution will be paid on February 14, 2006 to unitholders of record
at the close of business on February 7, 2006.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On December&nbsp;20, 2005, Atlas Pipeline issued $250.0 million of 8.125% senior unsecured notes in a private placement for net proceeds of approximately $243.1 million, after estimated underwriting</font></p>
</div>
<p align="center"><font face="serif" size="2">F-41</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf42"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<p align="left"><font face="serif" size="2">commissions and other transaction costs. Atlas Pipeline utilized the net proceeds principally to repay indebtedness under its credit facility.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On November&nbsp;28, 2005, Atlas Pipeline sold 2.7 million of its common units in a public offering for gross proceeds of $113.4 million. In addition, pursuant to an option granted to the underwriters of the offering, Atlas Pipeline sold 0.3 million common units on
December 27, 2005 for gross proceeds of $13.9 million, or aggregate total gross proceeds of $127.3 million including the November 2005 offering. The units were issued under the Atlas Pipeline&#146;s previously filed Form S-3 shelf registration statement. The sale of the units
resulted in net proceeds of approximately $120.9 million, after estimated underwriting commissions and other transaction costs. Atlas primarily utilized the net proceeds from the sale to repay a portion of the amounts due under its credit facility. Subsequent to this
equity offering, the Company&#146;s ownership interest in Atlas Pipeline was 14.8%, including its 2.0% general partner interest.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On October&nbsp;31, 2005, Atlas Pipeline acquired all of the outstanding equity interests in a subsidiary of OGE Energy Corp. which owns a 75% operating interest in NOARK Pipeline System, Limited Partnership (&#147;NOARK&#148;). NOARK&#146;s assets include a FERC-regulated
interstate pipeline and an unregulated natural gas gathering system. Total consideration of $173.2 million, including $10.2 million for working capital adjustments, was funded through borrowings under Atlas Pipeline amended credit facility, which was temporarily
increased to a borrowing capacity of $400 million.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On October&nbsp;19, 2005, Atlas Pipeline announced plans to construct a new cryogenic gas processing plant in Beckham County, Oklahoma. The new facility, to be known as the Sweetwater gas plant, will be located west of Atlas Pipeline Elk City gas plant, and is
being built to further access natural gas production actively being developed in western Oklahoma and the Texas panhandle. Atlas Pipeline expects the Sweetwater plant to be completed in the third quarter of 2006.</font></p>
</div>
<p align="center"><font face="serif" size="2">F-42</font></p>
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<page>
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<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Report of Independent Auditors</b></font></p>
<p align="left"><font face="serif" size="2">The Board of Directors of<br>
Enogex Arkansas Pipeline Corporation</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We have audited the accompanying consolidated balance sheets of Enogex Arkansas Pipeline Corporation as of December&nbsp;31, 2004 and 2003, and the related consolidated statements of income, retained earnings (deficit), and cash flows for the years then ended.
These financial statements are the responsibility of the Company&#146;s management. Our responsibility is to express an opinion on these financial statements based on our audits.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. We were not engaged to perform an audit of the Company&#146;s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company&#146;s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Enogex Arkansas Pipeline Corporation at December&nbsp;31, 2004 and 2003, and the consolidated results of its operations and its
cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.</font></p>
</div>
<div style="margin-left:55%">
<p align="left"><font face="serif" size="2">/s/ Ernst &amp; Young LLP</font></p>
</div>
<p align="left"><font face="serif" size="2">Oklahoma City, Oklahoma<br>
October 31, 2005</font></p>
<p align="center"><font face="serif" size="2">F-43</font></p>
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<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>ENOGEX ARKANSAS PIPELINE CORPORATION</b><br>
<b>CONSOLIDATED BALANCE SHEETS</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>December</b>&nbsp;<b>31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>ASSETS</b></font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CURRENT ASSETS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash and cash equivalents</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2"> 3,156,938</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">14,596,140</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts receivable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,046,153</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">501,635</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts receivable &#151; affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,061,974</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,536,891</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts receivable &#151; affiliates for income taxes</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">993,575</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts receivable &#151; Southwestern and affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,112,338</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,610,235</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Prepayments and other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">124,201</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">65,082</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Pipeline imbalance</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">197,884</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,089,421</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Total current assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">11,699,488</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">22,392,979</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">PROPERTY, PLANT AND EQUIPMENT</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">In service</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">144,940,741</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">144,729,626</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Construction work in progress</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">150,893</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">52,780</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,034,072</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,034,072</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Total property, plant and equipment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">147,125,706</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">146,816,478</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:9%"><font face="serif" size="2">Less accumulated depreciation</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">18,798,507</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,725,853</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Net property, plant and equipment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">128,327,199</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">131,090,625</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Minority interest in NOARK</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,799,917</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,350,495</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Other assets and deferred charges</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,574,600</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,717,514</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">TOTAL ASSETS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2"> 145,401,204</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2"> 161,551,613</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="center"><font face="serif" size="2">See accompanying notes.</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-44</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf45"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>ENOGEX ARKANSAS PIPELINE CORPORATION</b><br>
<b>CONSOLIDATED BALANCE SHEETS (Continued)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>December</b>&nbsp;<b>31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>LIABILITIES AND STOCKHOLDER&#146;S EQUITY</b></font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CURRENT LIABILITIES</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts payable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2"> 5,393,537</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2"> 3,978,296</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts payable &#151; affiliates for income taxes</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">240,340</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts payable &#151; affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,145,301</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">608,254</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accrued taxes other than income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">858,717</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">842,325</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accrued interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">399,208</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">699,447</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accrued other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">20,136</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">62,030</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Long-term debt due within one year</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">800,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,065,147</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Non-recourse debt of joint venture</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,200,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,200,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Pipeline imbalance</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">483,009</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">243,193</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total current liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,540,248</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,698,692</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">LONG-TERM DEBT</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Notes payable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,950,108</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Long-term debt</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">26,000,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">26,800,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Non-recourse debt of joint venture</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">39,000,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">40,200,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total long-term debt</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">65,000,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">74,950,108</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">DEFERRED LIABILITIES</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Deferred income taxes</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">19,585,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">17,282,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total deferred credits and other liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">19,585,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">17,282,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">COMMITMENTS AND CONTINGENCIES (Note 6)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">STOCKHOLDER&#146;S EQUITY</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%; text-indent:-3%"><font face="serif" size="2">Common stock, $1 par value; 1,000 shares authorized, issued and outstanding</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Retained earnings (Deficit)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,118,152</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,310,565</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Advances from parent</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">48,156,804</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">61,930,378</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total stockholder&#146;s equity</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">50,275,956</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">60,620,813</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">TOTAL LIABILITIES AND STOCKHOLDER&#146;S EQUITY</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2"> 145,401,204</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2"> 161,551,613</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">See accompanying notes.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-45</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf46"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>ENOGEX ARKANSAS PIPELINE CORPORATION</b><br>
<b>CONSOLIDATED STATEMENTS OF INCOME</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Year
          Ended December</b>&nbsp;<b>31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">OPERATING REVENUE</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Gas transportation services</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">21,482,829</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">20,142,212</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Natural gas sales</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">56,015,639</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">51,889,474</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Other revenue</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,700</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,075</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Total operating revenue</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">77,504,168</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">72,037,761</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">COST OF GOODS SOLD</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">55,018,930</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">54,785,414</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">GROSS MARGIN</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">22,485,238</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">17,252,347</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">OPERATING EXPENSES</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">General and administrative expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,755,849</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,904,945</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Operation and maintenance</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,333,126</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,514,728</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Depreciation</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,248,719</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,294,553</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Taxes other than income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,101,303</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,100,050</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Total operating expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">11,438,997</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">11,814,276</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">OPERATING INCOME </font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">11,046,241</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,438,071</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">OTHER INCOME (EXPENSE)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Gain on sale of assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,424</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,894,700</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Other income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,530</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">14,247</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Minority interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(491,979</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(590,500</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Net other income (expense)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(480,025</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,318,447</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">INTEREST INCOME (EXPENSE)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Interest income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">199,629</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">98,663</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Gain on retirement of debt</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">111,361</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Interest on long-term debt and amortization</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(4,998,590</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,141,590</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Interest on short-term debt and other interest charges</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(288,322</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(556,945</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Net interest income (expense)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(4,975,922</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,599,872</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">INCOME BEFORE TAXES</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,590,294</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,156,646</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">INCOME TAX EXPENSE </font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,161,577</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,004,503</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">NET INCOME </font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,428,717</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,152,143</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">See accompanying notes.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-46</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf47"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>ENOGEX ARKANSAS PIPELINE CORPORATION</b><br>
<b>CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Year
          Ended December</b>&nbsp;<b>31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td align="center"><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">BALANCE AT BEGINNING OF PERIOD</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">(1,310,565</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">(4,462,708</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">ADD: Net income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,428,717</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,152,143</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">BALANCE AT END OF PERIOD</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,118,152</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,310,565</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">See accompanying notes.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-47</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf48"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>ENOGEX ARKANSAS PIPELINE CORPORATION</b><br>
<b>CONSOLIDATED STATEMENTS OF CASH FLOWS</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Year
          Ended December</b>&nbsp;<b>31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td align="center"><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH FLOWS FROM OPERATING ACTIVITIES</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Net income </font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,428,717</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,152,143</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%; text-indent:-3%"><font face="serif" size="2">Adjustments to reconcile net income to net cash provided by operating activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Minority interest in NOARK net income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">491,979</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">590,500</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Gain on sale of assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(8,424</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,894,700</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Net book value of retired assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,319</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">38,542</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Depreciation</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,248,719</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,294,553</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Amortization of debt and prepaid costs</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">142,914</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">212,400</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Deferred income taxes</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,303,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,452,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Change in certain current assets and liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Accounts receivable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(544,518</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(82,717</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Accounts receivable &#151; affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,033,613</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(893,762</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Materials and supplies inventories</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">50,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Pipeline imbalance assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">891,537</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(248,449</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Prepayments and other current assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(59,119</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(46,416</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Accounts payable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,415,241</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">156,849</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Accounts payable &#151; affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">777,387</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">608,254</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Other accrued liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(25,502</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(451,252</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Accrued interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(300,239</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">276,405</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Pipeline imbalance liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">239,816</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(423,349</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Other assets </font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">115,413</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Other liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(20,945</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">898,578</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Net Cash Provided by Operating Activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,951,269</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,804,992</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH FLOWS FROM INVESTING ACTIVITIES</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Capital expenditures</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(571,614</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(539,503</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Proceeds from sale of assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">111,372</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">9,808,562</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Repayment of advances from parent</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(24,000,000</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(7,500,000</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Increase in advances from parent</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,226,426</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,411,935</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Net Cash (Used in) Provided by Investing Activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(14,233,816</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,180,994</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH FLOWS FROM FINANCING ACTIVITIES</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Retirement of long-term debt</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(10,215,255</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,000,000</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Contribution from (Distribution to) minority interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,058,600</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,500,000</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Net Cash Used in Financing Activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(8,156,655</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(4,500,000</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(11,439,202</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,485,986</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">14,596,140</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,110,154</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH AND CASH EQUIVALENTS AT END OF PERIOD</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2"> 3,156,938</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2"> 14,596,140</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Supplemental Disclosure of Cash Flow Information:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Cash paid for interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,897,750</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,040,750</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">See accompanying notes.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-48</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf49"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ENOGEX ARKANSAS PIPELINE CORPORATION</b></font></p>
<p align="center"><font face="serif" size="2"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<p align="center"><font face="serif" size="2"></font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2"><b>1.</b></font></td>
    <td><div align="left"><font face="serif" size="2"><b>Summary of Significant Accounting Policies</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Organization</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Enogex Arkansas Pipeline Corporation (&#147;Company&#148;), a wholly owned subsidiary of Enogex Inc. (&#147;Enogex&#148;) which itself is a wholly owned subsidiary of OGE Energy Corp., owns an interest in the NOARK Pipeline System, Limited Partnership (&#147;NOARK&#148;), an
Arkansas limited partnership. The Company&#146;s ownership interest in NOARK with respect to assets, liabilities (exclusive of long-term debt), equity, income and expense is 75 percent. Under the partnership agreement and the NOARK Private Placement Memorandum, the
Company is only responsible for 40 percent of the long-term debt of NOARK. At December&nbsp;31, 2004, the general partners of NOARK consisted of the Company and Southwestern Energy Pipeline Company (Southwestern), a wholly owned subsidiary of Southwestern
Energy Company (SWN). The Company has a 75 percent interest (74 percent general partner interest and 1 percent limited partner interest) and Southwestern has a 25 percent interest in NOARK.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">NOARK has four wholly owned subsidiaries consisting of Ozark Gas Transmission, L.L.C. (Ozark), NOARK Energy Services, L.L.C. (&#147;NES&#148;), Ozark Gas Gathering, L.L.C. (&#147;OGG&#148;), and NOARK Pipeline Finance, L.L.C. (&#147;Finance&#148;). The operations of NOARK and its
subsidiaries are organized into three activities including natural gas gathering, natural gas transportation and natural gas marketing. The operations of the gas transportation segment are conducted by Ozark, a Federal Energy Regulatory Commission regulated interstate
pipeline that extends from Southeast Oklahoma through Arkansas to southeast Missouri. The natural gas gathering and marketing operations are conducted by OGG. NES had no significant operations during 2004 or 2003. Finance was created to hold and service the
debt of the Partnership.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As more fully discussed in Note 5, a substantial portion of the activities of NOARK during 2004 and 2003 were conducted with its general partners and their affiliates.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Principles of Consolidation</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The consolidated financial statements of the Company include the accounts and operations of the Company, NOARK and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Use of Estimates</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenue and expenses during the reporting period. Changes to these assumptions and estimates could have a material effect on the Company&#146;s consolidated financial statements.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Allowance for Uncollectible Accounts Receivable</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The allowance for uncollectible accounts receivable is calculated based on outstanding accounts receivable balances over 180 days old. In addition, other outstanding accounts receivable balances less than 180 days old are reserved on a case-by-case basis when the
Company believes the required payment of specific amounts owed is unlikely to occur. There was no allowance for uncollectible accounts receivable at December&nbsp;31, 2004 and 2003, respectively.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Credit risk is the risk of financial loss to the Company if customers fail to perform their contractual obligations. The Company maintains credit policies with regard to its customers that management believes</font></p>
</div>
<p align="center"><font face="serif" size="2">F-49</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf50"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ENOGEX ARKANSAS PIPELINE CORPORATION</b></font></p>
<p align="center"><font face="serif" size="2"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<p align="center"><font face="serif" size="2"></font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="left"><font face="serif" size="2">minimize overall credit risk. These policies include the evaluation of a potential customer&#146;s financial condition (including credit rating) and collateral requirements under certain
circumstances. The Company also monitors the financial condition of existing customers on an ongoing basis.</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Property, Plant and Equipment</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">All property, plant and equipment are recorded at cost. Newly constructed plant is added to plant balances at costs which include contracted services, direct labor, materials and overheads used during construction. Replacements of units of property are capitalized
as plant. For group assets, the replaced plant is removed from plant balances and charged to accumulated depreciation. For non-group assets, the replaced plant is removed from plant balances with the related accumulated depreciation and the remaining balance is
recorded as a loss in the Consolidated Statements of Operations as Other Expense. Repair and removal costs are included in the Consolidated Statements of Operations as Other Operation and Maintenance Expense.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company&#146;s property, plant and equipment are divided into the following major classes at December&nbsp;31, 2004 and 2003, respectively.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Year ended December 31</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Transportation assets</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">139,178,829</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">138,876,483</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Gathering assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,946,877</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,939,995</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total property, plant and equipment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">147,125,706</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">146,816,478</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Depreciation</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Depreciation and amortization of the Company&#146;s assets are computed using the straight-line method using estimated useful lives of three to 50 years for transportation, three to 30 years for gathering.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Revenue Recognition</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company recognizes revenue from natural gas gathering and transportation services as the services are provided. Revenue associated with physical gas sales are recognized upon physical delivery of the gas.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Pipeline Imbalances</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Pipeline imbalances occur when the actual amounts of natural gas delivered from or received by the NOARK pipeline systems differ from the amounts scheduled to be delivered or received. Imbalances are due to or due from shippers and operators and can be
settled in cash or made up in-kind. The Company values all imbalances at average market prices estimated to be in effect at the time the imbalance will be settled.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Minority Interest</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In consolidation, the equity interest of Southwestern in NOARK has been adjusted per the provisions of the NOARK partnership agreement, as amended (the &#147;Agreement&#148;) and is shown on the balance sheet of the Company as a minority interest asset. The
liquidation provisions of the partnership agreement provide for the Company to receive a disproportionate share of the value of NOARK equity upon liquidation of NOARK. The minority interest asset value as of December&nbsp;31, 2004 and 2003 is $3,799,917 and
$6,350,495 respectively.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-50</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf51"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ENOGEX ARKANSAS PIPELINE CORPORATION</b></font></p>
<p align="center"><font face="serif" size="2"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<p align="center"><font face="serif" size="2"></font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">According to the terms of the agreement, NOARK&#146;s net income (loss) is split between partners in three steps. First, a special revenue allocation, as defined in the Agreement may be made to Southwestern. This special revenue allocation is effective through
December&nbsp;31, 2009, and is calculated annually from an agreed upon maximum base amount ranging from $1,045,300 for 2003 and decreasing annually to $672,900 in 2009. The base amount may be reduced based upon an agreed upon formula specified in the
Agreement, not to be less than zero. There was not a special revenue allocation to Southwestern for 2004 or 2003 based on the agreed upon formula. Second, interest and debt amortization costs are split 60% to Southwestern and 40% to the Company. Third, the
remaining net income (loss) is split 25% to Southwestern and 75% to the Company. In accordance with the Agreement, Southwestern and the Company are each required to fund their share of any NOARK cash flow deficiencies to the extent that they are not funded
by NOARK&#146;s operations.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2"><b>2.</b></font></td>
    <td><div align="left"><font face="serif" size="2"><b>Asset Sale</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In 2002, Ozark entered into an Agreement of Sale and Purchase with Centerpoint Energy Gas Transmission Co. to sell approximately 29 miles of transmission lines of the Ozark pipeline located in Pittsburg and Latimer counties in Oklahoma for approximately
$10 million. Ozark received FERC approval for the sale on January&nbsp;6, 2003. Ozark recognized approximately a $5.3 million gain in 2003 which is included in gain on sale of assets in the accompanying consolidated statement of income.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2"><b>3.</b></font></td>
    <td><div align="left"><font face="serif" size="2"><b>Income Taxes</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The items comprising income tax expense are as follows:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Year ended December 31</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Benefit for Current Income Taxes</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Federal</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(119,266</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(397,800</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">State</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(22,157</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(49,697</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total Benefit for Current Income Taxes</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(141,423</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(447,497</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Provision for Deferred Income Taxes</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Federal</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,967,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,094,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">State</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">336,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">358,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total Provision for Deferred Income Taxes</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,303,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,452,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total Income Tax Expense</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,161,577</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,004,503</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The following schedule reconciles the statutory federal tax rate to the effective income tax rate:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Year ended December 31</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Statutory federal tax rate</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">35.0</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">%</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">35.0</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">%</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">State income taxes, net of federal income tax benefit</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2"> 3.7</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3.9</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Effective income tax rate as reported</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">38.7</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">38.9</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company is a member of an affiliated group that files consolidated income tax returns. Income taxes are allocated to each company in the affiliated group based on its separate taxable income or loss. The Company follows the provisions of SFAS No. 109,
&#147;Accounting for Income Taxes&#148;, which uses an asset and liability approach to accounting for income taxes. Under SFAS No. 109, deferred tax assets or liabilities are computed based on the difference between the financial statement and income tax bases of</font></p>
</div>
<p align="center"><font face="serif" size="2">F-51</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf52"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ENOGEX ARKANSAS PIPELINE CORPORATION</b></font></p>
<p align="center"><font face="serif" size="2"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<p align="center"><font face="serif" size="2"></font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="left"><font face="serif" size="2">assets and liabilities using the enacted marginal tax rate. Deferred income tax expenses or benefits are based on the changes in the asset or liability from period to period.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The components of Accumulated Deferred Taxes at December&nbsp;31, 2004 and 2003, respectively, are as follows:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Non-Current Accumulated Deferred Tax Liabilities</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Property</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">19,585,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">17,267,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total non-current tax liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">19,585,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">17,282,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2"><b>4.</b></font></td>
    <td><div align="left"><font face="serif" size="2"><b>Long-Term Debt</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On June&nbsp;15, 1998, NOARK issued $80 million of long-term notes in a private placement offering (the Notes) through Finance. The Notes mature on June&nbsp;1, 2018, and require semi-annual principal payments of $1.0 million plus interest at a fixed rate of 7.15%
with a final balloon payment of $40 million due at maturity. Enogex has guaranteed 40% of the Notes plus any accrued interest while SWN has guaranteed 60% of the Notes plus any accrued interest. In connection with the issuance of the Notes, NOARK incurred debt
issuance costs of approximately $2.2 million, which are being amortized on a basis that closely approximates the effective interest method. In connection with the issuance of the Notes, NOARK entered into a forward interest rate swap contract to hedge exposure to
changes in prevailing interest rates on the Notes described above. Due to changes in treasury note rates, NOARK paid $1,112,000 to settle the forward interest rate swap contract in 1998. The unamortized portion is included in other assets and deferred charges on the
consolidated balance sheets and is being amortized to interest expense over the life of the Notes.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On July&nbsp;15, 2004 the Company retired a note that had been issued to a former interest owner of NOARK in the amount of $7,839,000. This note would have matured on July&nbsp;1, 2020; as a result of retiring this note early the Company recognized a gain of
approximately $111,000.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Interest expense amounted to $4,885,833 and $5,028,833 in 2004 and 2003, respectively. Amortization of the deferred charges amounted to $112,757 in 2004 and 2003, and is included in interest on long-term debt in the accompanying consolidated statements of
income.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Future maturities of long-term debt are as follows:</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2005</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">2,000,000</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,000,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2007</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,000,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2008</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,000,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2009</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,000,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2010 and beyond</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">57,000,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Total long-term debt</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">67,000,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="left"><font face="serif" size="2">The estimated fair value of the Notes is approximately $77.5 million and $93.9 million at December&nbsp;31, 2004 and 2003, respectively. The fair value of these notes is based on management&#146;s estimate of current rates available for similar issues with similar
maturities.</font></p>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-52</font></p>
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<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ENOGEX ARKANSAS PIPELINE CORPORATION</b></font></p>
<p align="center"><font face="serif" size="2"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<p align="center"><font face="serif" size="2"></font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2"><b>5.</b></font></td>
    <td><div align="left"><font face="serif" size="2"><b>Related Party Transactions</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Approximately $13,194,000 and $13,058,000 of gas sales, net of gathering services and fuel during the years ended December&nbsp;31, 2004 and 2003, respectively, were generated with transactions from Southwestern and its affiliates. The Company also recorded
approximately $6,976,000 and $7,037,000 in transmission revenue for the years ended December&nbsp;31, 2004 and 2003, respectively from Southwestern and its&#146; affiliates. These revenue from Southwestern and its affiliates represent approximately 26 percent and 28 percent
of the Company&#146;s total operating revenue for the years ended December&nbsp;31, 2004 and 2003, respectively.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Approximately $42,569,000 and $38,739,000 of the gas sales, net of gathering services and fuel during the years ended December&nbsp;31, 2004 and 2003, respectively, were generated by transactions with Enogex and its affiliates. The Company also recorded
$4,143,000 and $4,258,000 in transmission revenue from Enogex and its affiliates. This revenue from Enogex and its affiliates represents approximately 60 percent of the Company&#146;s total operating revenue for both the years ended December&nbsp;31, 2004 and 2003. At
December&nbsp;31, 2004 and 2003, approximately $5,062,000 and $3,537,000 of accounts receivable, respectively, were outstanding with Enogex and its affiliates and are included in accounts receivable &#150; affiliates in the accompanying consolidated balance sheets. Also
recorded in November 2004 was a favorable price adjustment in the amount of $2,507,000 for gas sales to an Enogex affiliate by NOARK from May 2002 through September 2004.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Enogex and its affiliates also perform administrative, accounting, engineering field operations, legal and financial services for the Company, as well as NOARK. In 2003, Enogex allocated overhead costs to the Company in accordance with a formula based on the
pro-rata amounts of property, headcount and gross margin of each business segment. In 2004 Enogex began using a method which allocates overhead based on hours incurred in support of each business segment. Approximately $3,756,000 and $3,905,000 of these
charges are included in general and administrative expenses in 2004 and 2003, respectively in the consolidated statements of income. At December&nbsp;31, 2004 and 2003, the entire balance of accounts payable &#150; affiliates in the accompanying consolidated balance sheets is
due to Enogex and its affiliates. During 2004 and 2003, natural gas purchases of approximately $259,000 and $48,000, respectively, were made from an affiliate of Enogex.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The balance of advances from Parent was $48,156,804 and $61,930,378 at December&nbsp;31, 2004 and 2003, respectively. The advances originally consisted of assets contributed by Enogex to NOARK in 1998. During 2004 and 2003, the Company repaid $24,000,000
and $7,500,000 of these advances. The advances are non-interest bearing. Current transactions include administrative costs paid by the Parent on behalf of the Company and other costs allocated from the Parent to the Company, totaling $10,226,426 and $3,411,935 in
2004 and 2003, respectively.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2"><b>6.</b></font></td>
    <td><div align="left"><font face="serif" size="2"><b>Commitments and Contingencies</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In the normal course of business, lawsuits and claims arise against the Company and its subsidiaries. Management of the Company, after consultation with legal counsel, does not anticipate that liabilities arising from currently pending or threatened lawsuits and
claims would result in losses, which would materially affect the consolidated financial position of the Company or the results of its operations.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2"><b>7.</b></font></td>
    <td><div align="left"><font face="serif" size="2"><b>Business Segments</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company manages its operations on a consolidated basis. The Company has no operations that would quality as a separate operating segment under Statement of Financial Standards (SFAS) No. 131 &#147;Disclosure About Segments of an Enterprise and Related
Information.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-53</font></p>
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<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ENOGEX ARKANSAS PIPELINE CORPORATION</b></font></p>
<p align="center"><font face="serif" size="2"><b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<p align="center"><font face="serif" size="2"></font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2"><b>8.</b></font></td>
    <td><div align="left"><font face="serif" size="2"><b>Subsequent events</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On October&nbsp;31, 2005, Enogex sold all of it&#146;s ownership in EAPC to Atlas Pipeline Partner, L.P. pursuant to a stock purchase agreement dated September&nbsp;21, 2005. As a condition of the sale, Enogex will continue to perform certain administrative functions for a
period of time as required by the Transition Service Agreement.</font></p>
</div>
<p align="center"><font face="serif" size="2">F-54</font></p>
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<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ENOGEX ARKANSAS PIPELINE CORPORATION</b><br>
<b>CONSOLIDATED BALANCE SHEETS</b><br>
<b>(unaudited)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>December</b>&nbsp;<b>31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>ASSETS</b></font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CURRENT ASSETS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash and cash equivalents</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">14,501,542</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,156,938</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts receivable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">784,716</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,046,153</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts receivable &#151; affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,145,094</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,061,974</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts receivable &#151; Southwestern and affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,090,862</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,112,338</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Prepayments and other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">133,536</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">124,201</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Pipeline imbalance</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">191,258</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">197,884</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total current assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">22,847,008</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">11,699,488</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">PROPERTY, PLANT AND EQUIPMENT</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">In service</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">144,415,825</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">144,940,741</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Construction work in progress</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">58,742</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">150,893</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,034,072</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,034,072</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total property, plant and equipment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">146,508,639</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">147,125,706</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:12%"><font face="serif" size="2">Less accumulated depreciation</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">20,592,819</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">18,798,507</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Net property, plant and equipment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">125,915,820</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">128,327,199</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Minority interest in NOARK</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,359,515</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,799,917</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Other assets and deferred charges</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,531,702</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,574,600</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">TOTAL ASSETS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">153,654,045</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">145,401,204</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">See accompanying notes.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-55</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf56"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>ENOGEX ARKANSAS PIPELINE CORPORATION</b><br>
<b>CONSOLIDATED BALANCE SHEETS (Continued)</b><br>
<b>(unaudited)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>December</b>&nbsp;<b>31,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>LIABILITIES AND STOCKHOLDER&#146;S EQUITY</b></font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CURRENT LIABILITIES</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts payable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,467,924</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,393,537</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts payable &#151; affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,040,658</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,145,301</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts payable &#151; affiliates for income taxes</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">509,687</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">240,340</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accrued taxes other than income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">756,945</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">858,717</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accrued interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,573,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">399,208</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Customer deposits</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">65,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accrued other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">20,136</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Long-term debt due within one year</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">800,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">800,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Non-recourse debt of joint venture</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,200,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,200,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Pipeline imbalance</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">643,067</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">483,009</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total current liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">13,056,281</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,540,248</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">LONG-TERM DEBT</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Long-term debt</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">25,600,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">26,000,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Non-recourse debt of joint venture</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">38,400,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">39,000,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total long-term debt</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">64,000,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">65,000,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">DEFERRED LIABILITIES</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Deferred income taxes</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">21,893,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">19,585,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total deferred credits and other liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">21,893,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">19,585,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">COMMITMENTS AND CONTINGENCIES (Note 4)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">STOCKHOLDER&#146;S EQUITY</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%; text-indent:-3%"><font face="serif" size="2">Common stock, $1 par value; 1,000 shares authorized, issued and outstanding Common stock authorized, issued and outstanding</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Retained earnings</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,992,191</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,118,152</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Advances from parent</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">49,711,573</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">48,156,804</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total stockholder&#146;s equity</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">54,704,764</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">50,275,956</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">TOTAL LIABILITIES AND STOCKHOLDER&#146;S EQUITY</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">153,654,045</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">145,401,204</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">See accompanying notes.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-56</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf57"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>ENOGEX ARKANSAS PIPELINE CORPORATION</b><br>
<b>CONSOLIDATED STATEMENTS OF INCOME</b><br>
<b>(unaudited)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Nine
          Months Ended</b><br>
<b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">OPERATING REVENUE</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Gas transportation services</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,128,825</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,556,731</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Natural gas sales</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">42,362,507</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">37,677,107</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Other revenue</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,775</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,275</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total operating revenue</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">57,495,107</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">53,238,113</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">COST OF GOODS SOLD</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">40,551,222</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">40,327,285</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">GROSS MARGIN</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">16,943,885</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">12,910,828</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">OPERATING EXPENSES</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">General and administrative expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,206,424</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,613,129</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Operation and maintenance</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,699,306</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,371,186</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Depreciation</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,474,995</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,404,143</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Taxes other than income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">848,187</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">809,722</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total operating expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,228,912</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,198,180</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">OPERATING INCOME </font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,714,973</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,712,648</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">OTHER INCOME (EXPENSE)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Other income (expense)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(54,586</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,549</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Minority interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(440,402</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">609,670</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Net other income (expense)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(494,988</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">618,219</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">INTEREST INCOME (EXPENSE)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Interest income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">194,920</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">121,041</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Gain on retirement of debt</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">111,361</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Interest on long-term debt and amortization</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,653,610</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,760,860</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Interest on short-term debt and other interest charges</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(288,322</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Net interest expense</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,458,690</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,816,780</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">INCOME BEFORE TAXES</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,761,295</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,514,087</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">INCOME TAX EXPENSE </font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,887,257</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">584,577</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">NET INCOME </font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,874,038</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">929,510</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">See accompanying notes</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-57</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf58"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>ENOGEX ARKANSAS PIPELINE CORPORATION</b><br>
<b>CONSOLIDATED STATEMENTS OF CASH FLOWS</b><br>
<b>(unaudited)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Nine
          Months Ended</b><br>
<b>September</b>&nbsp;<b>30,</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH FLOWS FROM OPERATING ACTIVITIES</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="6%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Net income </font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,874,038</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">929,510</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Adjustments to reconcile net income to net cash provided by<br>
operating activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Minority interest in NOARK net income (loss)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">440,402</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(609,670</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Gain on sale of assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(8,424</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Net book value of retired assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">60,493</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Depreciation</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,474,995</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,404,143</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Amortization</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">133,286</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">96,293</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Deferred income taxes</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,308,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,132,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Change in certain current assets and liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Accounts receivable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">261,437</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(113,766</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Accounts receivable &#151; affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(61,644</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(916,436</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Pipeline imbalance assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,626</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">868,306</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Prepayments and other current assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(9,335</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(22,173</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Accounts payable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,074,387</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(13,889</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Accounts payable &#151; affiliates</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">164,704</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">325,101</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Other accrued liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(56,908</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(126,480</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Accrued interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,173,792</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">921,220</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Pipeline imbalance liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">160,058</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">417,576</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Other assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(88,338</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Other liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(20,944</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Net Cash Provided by Operating Activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,915,993</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,262,367</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH FLOWS FROM INVESTING ACTIVITIES</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Capital expenditures</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(126,158</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(360,746</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Proceeds from sale of assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">111,372</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Increase in advances from parent</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,554,769</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,373,164</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Net Cash Provided by Investing Activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,428,611</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,123,790</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH FLOWS FROM FINANCING ACTIVITIES</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Retirement of long&#151;term debt</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,000,000</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(9,215,255</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Net Cash Used in Financing Activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,000,000</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(9,215,255</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">NET INCREASE IN CASH AND CASH EQUIVALENTS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">11,344,604</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,170,902</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,156,938</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">14,596,140</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH AND CASH EQUIVALENTS AT END OF PERIOD</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">14,501,542</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">21,767,042</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Supplemental Disclosure of Cash Flow Information:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash paid for interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,395,250</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,466,750</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">See accompanying notes.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-58</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf59"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ENOGEX ARKANSAS PIPELINE CORPORATION</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<p align="center"><font face="serif" size="2"></font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2"><b>1.</b></font></td>
    <td><div align="left"><font face="serif" size="2"><b>Summary of Significant Accounting Policies</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Organization</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Enogex Arkansas Pipeline Corporation (&#147;Company&#148;), a wholly owned subsidiary of Enogex Inc. (&#147;Enogex&#148;) which is a wholly owned subsidiary of OGE Energy Corporation, owns an interest in the NOARK Pipeline System, Limited Partnership (&#147;NOARK&#148;), an
Arkansas limited partnership. The Company&#146;s ownership interest in NOARK with respect to assets, liabilities (exclusive of long-term debt), equity, income and expense is 75 percent. Under the partnership agreement and the NOARK Private Placement Memorandum, the
Company is only responsible for 40 percent of the long-term debt of NOARK. At September&nbsp;30, 2005, the general partners of NOARK consisted of the Company and Southwestern Energy Pipeline Company (Southwestern), a wholly owned subsidiary of Southwestern
Energy Company (SWN). The Company has a 75 percent interest (74 percent general partner interest and 1 percent limited partner interest) and Southwestern has a 25 percent interest in NOARK.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">NOARK has four wholly owned subsidiaries consisting of Ozark Gas Transmission, L.L.C. (Ozark), NOARK Energy Services, L.L.C. (&#147;NES&#148;), Ozark Gas Gathering, L.L.C. (&#147;OGG&#148;), and NOARK Pipeline Finance, L.L.C. (&#147;Finance&#148;). The operations of NOARK and its
subsidiaries are organized into two activities including natural gas gathering and natural gas transportation. The operations of the gas transportation segment are conducted by Ozark, a Federal Energy Regulatory Commission regulated interstate pipeline that extends
from Southeast Oklahoma through Arkansas to southeast Missouri. The natural gas gathering and marketing operations are conducted by OGG. NES had no operations during 2005 or 2004. Finance was created to hold and service the debt of the Partnership.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">As more fully discussed in Note 3, a substantial portion of the activities of NOARK during 2005 and 2004 were conducted with its general partners and their affiliates.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Principles of Consolidation</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The consolidated financial statements of the Company include the accounts and operations of the Company, NOARK and its subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Basis of Presentation</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The consolidated financial statements included herein have been prepared by the Company, without audit. In the opinion of management, all adjustments necessary to fairly present the consolidated financial position of the Company at September&nbsp;30, 2005 and
December&nbsp;31, 2004 and the results of its operations and cash flows for the nine months ended September&nbsp;30, 2005 and 2004, have been included and are of a normal recurring nature. The consolidated financial statements and Notes thereto should be read in
conjunction with the audited consolidated financial statements and Notes thereto for the year ended December&nbsp;31, 2004.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Use of Estimates</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenue and expenses during the reporting period. Changes to these assumptions and estimates could have a material effect on the Company&#146;s consolidated financial statements.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-59</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf60"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ENOGEX ARKANSAS PIPELINE CORPORATION</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<p align="center"><font face="serif" size="2"></font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Allowance for Uncollectible Accounts Receivable</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The allowance for uncollectible accounts receivable is calculated based on outstanding accounts receivable balances over 180 days old. In addition, other outstanding accounts receivable balances less than 180 days old are reserved on a case-by-case basis when the
Company believes the required payment of specific amounts owed is unlikely to occur. There was no allowance for uncollectible accounts receivable at September&nbsp;30, 2005 and December&nbsp;31, 2004.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Credit risk is the risk of financial loss to the Company if customers fail to perform their contractual obligations. The Company maintains credit policies with regard to its customers that management believes minimize overall credit risk. These policies include the
evaluation of a potential customer&#146;s financial condition (including credit rating) and collateral requirements under certain circumstances. The Company also monitors the financial condition of existing customers on an ongoing basis.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Property, Plant and Equipment</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">All property, plant and equipment are recorded at cost. Newly constructed plant is added to plant balances at costs which include contracted services, direct labor, materials and overheads used during construction. Replacements of units of property are capitalized
as plant. For group assets, the replaced plant is removed from plant balances and charged to accumulated depreciation. For non-group assets, the replaced plant is removed from plant balances with the related accumulated depreciation and the remaining balance is
recorded as a loss in the Consolidated Statements of Operations as Other Expense. Repair and removal costs are included in the Consolidated Statements of Operations as Other Operation and Maintenance Expense.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company&#146;s property, plant and equipment are divided into the following major classes at September&nbsp;30, 2005 and December&nbsp;31, 2004.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Transportation assets</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">130,580,066</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">139,178,829</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Gathering assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,928,573</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,946,877</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total property, plant and equipment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">146,508,639</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">147,125,706</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>Depreciation</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Depreciation and amortization of the Company&#146;s assets are computed using the straight-line method using estimated useful lives of three to 50 years for transportation, three to 30 years for gathering.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Revenue Recognition</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company recognizes revenue from natural gas gathering and transportation services as the services are provided. Revenue associated with physical gas sales are recognized upon physical delivery of the gas.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Pipeline Imbalances</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Pipeline imbalances occur when the actual amounts of natural gas delivered from or received by the NOARK pipeline systems differ from the amounts scheduled to be delivered or received. Imbalances are due to or due from shippers and operators and can be
settled in cash or made up in-kind.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-60</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf61"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ENOGEX ARKANSAS PIPELINE CORPORATION</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<p align="center"><font face="serif" size="2"></font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Minority Interest</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In consolidation, the equity interest of Southwestern in NOARK has been adjusted per the provisions of the NOARK partnership agreement, as amended (the &#147;agreement&#148;) and is shown on the balance sheet of the Company as a minority interest asset. The
liquidation provisions of the partnership agreement provide for the Company to receive a disproportionate share of the value of NOARK equity upon liquidation of NOARK. The minority interest asset value as of September&nbsp;30, 2005 is $3,359,515 and at December&nbsp;31,
2004 is $3,799,917.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">According to the terms of the agreement, NOARK&#146;s net income (loss) is split between partners in three steps. First, a special revenue allocation, as defined in the Agreement may be made to Southwestern. This special revenue allocation is effective through
December&nbsp;31, 2009, and is calculated annually from an agreed upon maximum base amount ranging from $979,100 for 2004 and decreasing annually to $672,900 in 2009. The base amount may be reduced based upon an agreed upon formula specified in the
Agreement, not to be less than zero. There was not a special revenue allocation to Southwestern for the nine months ended September&nbsp;30, 2005 or 2004 based on the agreed upon formula. Second, interest and debt amortization costs are split 60% to Southwestern and
40% to the Company. Third, the remaining net income (loss) is split 25% to Southwestern and 75% to the Company. In accordance with the Agreement, Southwestern and the Company are each required to fund their share of any NOARK cash flow deficiencies to the
extent that they are not funded by NOARK&#146;s operations.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>Income Taxes</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The Company is a member of an affiliated group that files consolidated income tax returns. Income taxes are allocated to each company in the affiliated group based on its separate taxable income or loss. The Company follows the provisions of SFAS No. 109,
&#147;Accounting for Income Taxes&#148;, which uses an asset and liability approach to accounting for income taxes. Under SFAS No. 109, deferred tax assets or liabilities are computed based on the difference between the financial statement and income tax bases of assets and
liabilities using the enacted marginal tax rate. Deferred income tax expenses or benefits are based on the changes in the asset or liability from period to period.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2"><b>2.</b></font></td>
    <td><div align="left"><font face="serif" size="2"><b>Long-Term Debt</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On June&nbsp;15, 1998, NOARK issued $80 million of long-term notes in a private placement offering (the Notes) through Finance. The Notes mature on June&nbsp;1, 2018, and require semi-annual principal payments of $1.0 million plus interest at a fixed rate of 7.15%
with a final balloon payment of $40 million due at maturity. Enogex has guaranteed 40% of the Notes plus any accrued interest while SWN has guaranteed 60% of the Notes plus any accrued interest. In connection with the issuance of the Notes, NOARK incurred debt
issuance costs of approximately $2.2 million, which are being amortized on a basis that closely approximates the effective interest method. In connection with the issuance of the Notes, NOARK entered into a forward interest rate swap contract to hedge exposure to
changes in prevailing interest rates on the Notes described above. Due to changes in treasury note rates, NOARK paid $1,112,000 to settle the forward interest rate swap contract in 1998. The unamortized portion is included in other assets and deferred charges on the
consolidated balance sheets and is being amortized to interest expense over the life of the Notes.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On July&nbsp;15, 2004 the Company retired a note that had been issued to a former interest owner of NOARK in the amount of $7,839,000. This note would have matured on July&nbsp;1, 2020; as a result of retiring this note early the Company recognized a gain of
$111,000.</font></p>
</div>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-61</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf62"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ENOGEX ARKANSAS PIPELINE CORPORATION</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b></font></p>
<p align="center"><font face="serif" size="2"></font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Interest expense amounted to $3,569,042 and $3,676,292 in 2005 and 2004, respectively. Amortization of the deferred charges amounted to $84,568 in 2005 and 2004, and is included in interest on long-term debt in the accompanying consolidated statements of
income.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2"><b>3.</b></font></td>
    <td><div align="left"><font face="serif" size="2"><b>Related Party Transactions</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Approximately $9,702,000 and $9,363,000 of gas sales, net of gathering services and fuel during the nine months ended September&nbsp;30, 2005 and 2004, respectively, were generated by transactions with Southwestern and its affiliates. The Company also recorded
approximately $4,956,000 and $5,306,000 in transmission revenue for the nine months ended September&nbsp;30, 2005 and 2004, respectively, from Southwestern and its affiliates. This revenue represents approximately 25 percent and 28 percent of the Company&#146;s total
operating revenue for the nine months ended September&nbsp;30, 2005 and 2004, respectively. Approximately $32,423,000 and $28,130,000 of gas sales, net of gathering services and fuel during the nine months ended September&nbsp;30, 2005 and 2004, respectively, were
generated by transactions with Enogex and its affiliates. The Company also recorded approximately $1,999,000 and $3,219,000 in transmission revenue from Enogex and its affiliates. This revenue from Enogex and its affiliates represents approximately 61 percent and 59
percent of the Company&#146;s total operating revenue for the nine months ended September&nbsp;30, 2005 and 2004, respectively. At September&nbsp;30, 2005 and December&nbsp;31, 2004, approximately $5,145,000 and $5,062,000 of accounts receivable, respectively, were outstanding
with Enogex and its affiliates.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">Enogex and its affiliates also perform administrative, accounting, engineering field operations, legal and financial services for the Company, as well as NOARK. Approximately $2,206,000 and $2,613,000 of these charges are included in general and administrative
expenses in 2005 and 2004, respectively consolidated statements of income. At September&nbsp;30, 2005 and December&nbsp;31, 2004, the entire balance of accounts payable&#151;affiliates in the accompanying consolidated balance sheets is due to Enogex and its affiliates.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">During 2005 and 2004, natural gas purchases of approximately $182,000 and $169,000, respectively, were made from an affiliate of Enogex.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">The balance of advances from Parent was $49,711,573 and $48,156,804 at September&nbsp;30, 2005 and December&nbsp;31, 2004, respectively. The advances originally consisted of assets contributed by Enogex to NOARK in 1998. Current transactions include
administrative costs paid by the Parent on behalf of the Company and other costs allocated from the Parent to the Company. During the nine months ended September&nbsp;30, 2005 and 2004, the Company did not repay any of the advances from parent. In November
2004, the Company repaid $24,000,000 of these advances. The advances are non-interest bearing.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2"><b>4.</b></font></td>
    <td><div align="left"><font face="serif" size="2"><b>Commitments and Contingencies</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In the normal course of business, lawsuits and claims arise against the Company and its subsidiaries. Management of the Company, after consultation with legal counsel, does not anticipate that liabilities arising from currently pending or threatened lawsuits and
claims would result in losses, which would materially affect the consolidated financial position of the Company or the results of its operations.</font></p>
</div>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2"><b>5.</b></font></td>
    <td><div align="left"><font face="serif" size="2"><b>Subsequent Events</b></font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">On October&nbsp;31, 2005, Enogex sold all of it&#146;s ownership in EAPC to Atlas Pipeline Partner, L.P. pursuant to a stock purchase agreement dated September&nbsp;21, 2005. As a condition of the sale, Enogex will continue to perform certain administrative functions for a
period of time as required by the Transition Service Agreement.</font></p>
</div>
<p align="center"><font face="serif" size="2">F-62</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf63"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Report of Independent Registered Public Accounting Firm</b></font></p>
<p align="left"><font face="serif" size="2">Board of Directors and<br>
Atlas Pipeline Partners, L.P.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We have audited the accompanying balance sheets of ETC Oklahoma Pipeline, Ltd. (a Texas limited partnership) as of August&nbsp;31, 2004 and 2003, and the related statements of income, partners&#146; capital, and cash flows for the year ended August&nbsp;31, 2004 and the
period from the beginning of operations (October&nbsp;1, 2002) through August&nbsp;31, 2003. These financial statements are the responsibility of the Partnership&#146;s management. Our responsibility is to express an opinion on these financial statements based on our audits.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership&#146;s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 provides a reasonable basis for our opinion.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ETC Oklahoma Pipeline, Ltd. as of August&nbsp;31, 2004 and 2003, and the results of its operations and its cash flows for the year ended
August&nbsp;31, 2004 and the period from inception (September&nbsp;24, 2002) through August&nbsp;31, 2003 in conformity with accounting principles generally accepted in the United States of America.</font></p>
</div>
<p align="left"><font face="serif" size="2">/s/Grant Thornton LLP<br>
Cleveland, Ohio<br>
April 25, 2005</font></p>
<p align="center"><font face="serif" size="2">F-63</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
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<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ETC OKLAHOMA PIPELINE, LTD.</b><br>
<b>BALANCE SHEETS</b><br>
<b>August</b>&nbsp;<b>31, 2004 and 2003</b><br>
<b>(in thousands)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr align="center" valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>ASSETS</b></font></div></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td align="left"><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="top">
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CURRENT ASSETS:</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Receivables &#151;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Trade</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,773</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,098</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Related parties</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">22,305</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,121</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Exchanges</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">213</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">730</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Materials and supplies</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">63</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">63</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Other current assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">49</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total current assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">24,354</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">9,061</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">PROPERTY, PLANT AND EQUIPMENT</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">47,492</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">40,305</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">ACCUMULATED DEPRECIATION</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,938</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,589</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">PROPERTY, PLANT AND EQUIPMENT, NET</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">43,554</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">38,716</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">67,908</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">47,777</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>LIABILITIES AND PARTNERS&#146; CAPITAL</b></font></div></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
   <tr align="center" valign="top">
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CURRENT LIABILITIES:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Payables &#151;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Trade exchanges</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">19,825</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,694</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Exchanges</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">188</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">576</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accrued expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">577</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">640</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total current liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">20,590</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,910</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">COMMITMENTS AND CONTINGENCIES (See Note H)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">PARTNERS&#146; CAPITAL</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Limited partner</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">47,271</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">38,828</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">General partner</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">47</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">39</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total partners&#146; capital</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">47,318</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">38,867</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total liabilities and partners&#146; capital</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">67,908</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">47,777</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">The accompanying notes are an integral part of these financial statements.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-64</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf65"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ETC OKLAHOMA PIPELINE, LTD.</b><br>
<b>INCOME STATEMENTS</b><br>
<b>(in thousands)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Year
          Ended</b><br>
<b>August</b>&nbsp;<b>31, 2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Eleven</b><br>
<b>Months Ended</b><br>
<b>August</b>&nbsp;<b>31, 2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">OPERATING REVENUE:</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Third party</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">11,977</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,607</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Related party</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">123,320</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">84,834</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total revenue</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">135,297</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">92,441</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">COSTS AND EXPENSES:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cost of products sold</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">119,495</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">79,055</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Operating</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,726</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,914</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">General and administrative</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,664</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,887</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,249</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,591</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total costs and expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">129,134</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">86,447</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">NET INCOME</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,163</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,994</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">The accompanying notes are an integral part of these financial statements.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-65</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf66"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>ETC OKLAHOMA PIPELINE, LTD.</b><br>
<b>STATEMENTS OF PARTNERS&#146; CAPITAL</b><br>
<b>August</b>&nbsp;<b>31, 2004 and 2003</b><br>
<b>(in thousands)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Limited</b><br>
<b>Partners&#146; Capital</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>General</b><br>
<b>Partners&#146;</b><br>
<b>Capital</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Total Partners&#146;</b><br>
<b>Capital</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Balance, October&nbsp;1, 2002</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">&#151;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">&#151;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">&#151;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Capital contribution</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">32,840</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">33</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">32,873</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Net income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,988</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,994</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Balance, August&nbsp;31, 2003</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">38,828</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">39</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">38,867</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Capital contribution</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,286</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,288</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Net income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,157</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,163</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Balance, August&nbsp;31, 2004</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">47,271</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">47</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">47,318</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">The accompanying notes are an integral part of these financial statements.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-66</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf67"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>ETC OKLAHOMA PIPELINE, LTD.</b><br>
<b>STATEMENTS OF CASH FLOWS</b><br>
<b>(in thousands)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Year
          Ended</b><br>
<b>August</b>&nbsp;<b>31, 2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Eleven
          Months</b><br>
<b>Ended</b><br>
<b>August</b>&nbsp;<b>31, 2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH FLOWS FROM OPERATING ACTIVITIES:</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Net income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,163</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,994</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Adjustments to reconcile net income to net cash provided by operating activities &#151;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,249</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,591</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Other, net</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Changes in operating assets and liabilities &#151;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Receivables</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(157</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,829</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:9%"><font face="serif" size="2">Related party receivables</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(7,181</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(18,289</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Other current assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">49</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(49</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:9%"><font face="serif" size="2">Payables</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">11,743</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,269</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Accrued expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(63</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">380</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:12%"><font face="serif" size="2">Net cash provided by (used in) operating activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">12,804</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,933</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH FLOWS FROM INVESTING ACTIVITIES:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Additions to property, plant and equipment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(4,873</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(7,321</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Proceeds from sale of assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">72</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">86</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:12%"><font face="serif" size="2">Net cash used in investing activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(4,801</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(7,235</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH FLOWS FROM FINANCING ACTIVITIES:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Working capital from (to) parent</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(8,003</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">11,168</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Net change in cash</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash beginning of year</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash end of year</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Non-cash asset contribution</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,288</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">32,873</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td><div style="margin-left:3%"><font face="serif" size="2">Cash paid for interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash paid for income taxes</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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</table>
<p align="center"><font face="serif" size="2">The accompanying notes are an integral part of these financial statements.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-67</font></p>
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<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ETC OKLAHOMA PIPELINE LTD.</b><br>
<b>NOTES TO FINANCIAL STATEMENTS</b></font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>A &#151; ORGANIZATION AND BUSINESS</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">ETC Oklahoma Pipeline, Ltd. (Elk City or the Company) is a Texas limited partnership, which began operations in October 2002. LG PL, LLC, a wholly-owned subsidiary of La Grange Acquisition, L.P. (La Grange) owns a 0.1% general partner interest and La Grange
Acquisition, L.P. owns a 99.9% limited partner interest. Elk City owns a natural gas gathering pipeline system and gas processing plant in Oklahoma. La Grange acquired the Oklahoma natural gas gathering and gas processing assets of Aquila Gas Pipeline Corporation
(Aquila), a subsidiary of Aquila, Inc., in October 2002. These assets are referred to herein as &#147;the Elk City system.&#148;</font></div></td>
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</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Elk City system is a 318-mile gathering system located in western Oklahoma that gathers, compresses, treats and processes natural gas from the Anadarko Basin. The Elk City system also includes the Elk City processing plant and one treating facility. The Elk City
system is connected, either directly or indirectly, to six major interstate and intrastate natural gas pipelines providing access to natural gas markets throughout the United States. The Elk City system has a processing capacity of approximately 130 million cubic feet per
day (MMcf/d).</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><div align="left"><font face="serif" size="2"><b>B &#151; SIGNIFICANT ACCOUNTING POLICIES</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>1. Basis of Presentation</b></font></div></td>
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</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Financial statements are presented for the year ended August&nbsp;31, 2004 and for the eleven months ended August&nbsp;31, 2003.</font></div></td>
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</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America.</font></div></td>
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</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>2. Use of Estimates</b></font></div></td>
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</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.</font></div></td>
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</table>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Some of the other more significant estimates made by management include, but are not limited to the useful lives for depreciation and amortization and general business reserves. Actual results could differ from those estimates.</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>3. Cash</b></font></div></td>
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</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">La Grange provides cash to the Company for working capital and capital expenditures. Cash transfers are recorded through related party receivables and payables. Cash receipts of the Company are immediately transferred to La Grange to reduce the intercompany
balance with La Grange.</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>4. Accounts Receivable</b></font></div></td>
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</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Elk City deals with counter parties that are typically either investment grade (Standard &amp; Poors BBB or higher) or are otherwise secured with a letter of credit or other form of security (corporate guaranty or prepayment). Management reviews accounts receivable
balances each week. Credit limits are assigned and monitored for all counter parties. The majority of payments are due on the 25th of the month following delivery.</font></div></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Management closely monitors credit exposure for potential doubtful accounts. Management believes that an occurrence of bad debt is unlikely; therefore, an allowance for doubtful accounts was not </font></div></td>
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<p align="center"><font face="serif" size="2">F-68</font></p>
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<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ETC OKLAHOMA PIPELINE LTD.</b><br>
<b>NOTES TO FINANCIAL STATEMENTS</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">deemed necessary at August&nbsp;31, 2004 and 2003, respectively. Bad debt expense is recognized at the time an account is deemed uncollectible. An account receivable will be written off
in the event a counter party files for bankruptcy protection or the account is turned over for collection and the collector deems the account uncollectible. No bad debt expense was
recorded during the year ended August&nbsp;31, 2004 or the eleven months ended August&nbsp;31, 2003.</font></div></td>
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</table>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>5. Materials and Supplies</b></font></div></td>
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</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Materials and supplies are stated at the lower of cost (determined on a first-in, first-out basis) or market value.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>6. Inventories and Exchanges</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Inventories and exchanges consist of natural gas liquids (NGLs) on hand or natural gas and NGL delivery imbalances with others and are presented net by customer/supplier. These amounts turn over monthly and management believes the cost approximates market
value. Accordingly, these volumes are valued at market prices.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>7. Property, Plant and Equipment</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Pipeline, property, plant, and equipment are stated at cost less accumulated depreciation. The cost of property additions includes labor and materials, applicable overhead and payroll-related costs. Additions and improvements that add to the productive capacity or
extend the useful life of the asset are capitalized. Expenditures for maintenance and repairs that do not add capacity or extend the useful life are charged to expense as incurred. Upon disposition or retirement of pipeline components or gas plant components, any gain
or loss is recorded to accumulated depreciation. When entire pipeline systems, gas plants or other property and equipment are retired or sold, any gain or loss is included in operations.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Depreciation of the gathering pipeline systems, gas plants, and processing equipment is provided using the straight-line method based on an estimated useful life of primarily 20 years.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>8. Federal and State Income Taxes</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company is organized under the provisions of the Texas Revised Limited Partnership Act. Accordingly, taxable income or loss, which may vary substantially from the net income or loss reported for financial reporting purposes is generally included in the federal
and state income tax returns of each partner.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>9. Revenue Recognition</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Revenue for sales of natural gas and NGLs is recognized upon delivery. Service revenue, including transportation, treating, compression and gas processing, is recognized at the time service is performed. Elk City contracts consist primarily of transportation contracts
and keep-whole arrangements. Under transportation contracts, the Company receives a fee for transporting gas through its system. The revenue earned from transportation contracts is directly related to volume of natural gas transported through the system and is not
directly dependent on commodity prices. Under keep-whole arrangements, the Company gathers natural gas from the producer, processes the natural gas and sells the resulting NGLs at market prices to an affiliated company.</font></div></td>
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</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>10. Shipping and Handling Costs</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">In accordance with the Emerging Issues Task Force Issue 00-10, <i>&#147;Accounting for Shipping and Handling Fees and Costs,&#148; </i>the Company classified fees deducted from payments to producers for compression and treating of gas as revenue.</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-69</font></p>
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<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ETC OKLAHOMA PIPELINE LTD.</b><br>
<b>NOTES TO FINANCIAL STATEMENTS</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>11. Asset Retirement Obligation</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company accounts for its asset retirement obligations in accordance with Statement of Financial Accounting Standards No. 143, <i>&#147;Accounting for Asset Retirement Obligations&#148; </i>(SFAS No. 143). SFAS No. 143 requires the Company to record the fair value of an asset
retirement obligation as a liability in the period in which it incurs a legal obligation for the retirement of tangible long-lived assets, typically at the time the assets are placed into service. A corresponding asset is also recorded and depreciated over the life of the asset.
After the initial measurement, any changes in the amount of the liability resulting from the passage of time and revisions to either the timing or amount of estimated cash flows would be recognized prospectively.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company has determined that it is obligated by contractual requirements to remove facilities or perform other remediation upon retirement of certain of its assets. Determination of the amounts to be recognized is based upon numerous estimates and assumptions,
including expected settlement dates, future retirement costs, future inflation rates and the credit-adjusted risk-free interest rates. However, the Company is not able to reasonably determine the fair value of the asset retirement obligations as of August&nbsp;31, 2004, because
the settlement dates are indeterminable. An asset retirement obligation will be recorded in the periods the settlement dates can reasonably determined.</font></div></td>
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</table>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>12. Impairment of Long-lived Assets</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Long-lived assets, including property, plant and equipments are reviewed for impairment whenever facts and circumstances indicate impairment may be present. When impairment indicators are present, the Company evaluates whether the assets in question are able
to generate sufficient cash flows to recover their carrying value on an undiscounted basis. If an asset is deemed to be impaired, the amount of impairment is determined as the amount by which the net carrying value exceeds discounted estimated net cash flows.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>C &#151; ACQUISITION</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">In October 2002, La Grange purchased certain operating assets from Aquila, primarily consisting of natural gas gathering, treating and processing assets in Texas and Oklahoma, for $264 million in cash. At the closing of the acquisition, approximately $33 million of the
purchase price was allocated to the Elk City assets based on the relative fair value of all assets acquired.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-70</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf71"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ETC OKLAHOMA PIPELINE LTD.</b><br>
<b>NOTES TO FINANCIAL STATEMENTS</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The assets acquired and purchase price allocation were as follows:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Elk City Assets</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Materials and supplies</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">63</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Property, plant and equipment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">33,070</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Accrued expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(260</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">32,873</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>D &#151; PROPERTY, PLANT AND EQUIPMENT</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Property, plant and equipment, at cost, consisted of the following:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Estimated</b><br>
<b>Useful Lives</b><br>
<b>(Years)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Balance at</b><br>
<b>August</b>&nbsp;<b>31,</b><br>
<b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Balance at</b><br>
<b>August</b>&nbsp;<b>31,</b><br>
<b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Midstream pipelines and equipment</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">20</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">45,445</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">36,574</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Midstream right of way</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">20</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">903</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">103</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Linepack</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">N/A</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">48</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">48</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Construction in progress</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">N/A</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">901</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,443</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">195</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">137</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Total</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">47,492</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">40,305</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Accumulated depreciation and amortization</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,938</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,589</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Property, plant and equipment, net</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">43,554</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">38,716</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>E &#151; RELATED PARTY TRANSACTIONS</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company entered into various types of transactions with La Grange, or its subsidiaries, for the year ended August&nbsp;31, 2004 and eleven months ended August&nbsp;31, 2003. The Company sold the majority of natural gas gathered and NGLs produced by the Company to
La Grange or its subsidiaries. La Grange purchased the gas and NGLs at an index based price. Additionally, the Company reimbursed La Grange for certain employees who provided services to the Company and for other costs (primarily general and administrative
expense) related to the Company&#146;s operations. La Grange also provided working capital necessary for the operations of the Company.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The following table summarizes transactions for the periods presented:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Year Ended</b><br>
<b>August</b>&nbsp;<b>31, 2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Eleven Months</b><br>
<b>Ended</b><br>
<b>August</b>&nbsp;<b>31, 2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Natural gas sales to affiliated companies</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">77,169</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">60,380</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">NGLs sales to affiliated companies</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">46,151</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">24,454</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Compression services from affiliated company</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">91</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Allocated costs from affiliated companies</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,663</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,887</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Working capital from affiliated companies</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,185</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(11,168</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Transfers of property, plant and equipment from affiliated companies</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,288</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">32,873</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The related party receivable due from La Grange was $22,305 and $7,121 at August&nbsp;31, 2004 and August&nbsp;31, 2003, respectively.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-71</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf72"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ETC OKLAHOMA PIPELINE LTD.</b><br>
<b>NOTES TO FINANCIAL STATEMENTS</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>F &#151; MAJOR CUSTOMERS AND SUPPLIERS</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company sold 91.1% and 91.8% of natural gas and NGLs produced to ETC Marketing, Ltd., a subsidiary of La Grange, for the year ended August&nbsp;31, 2004 and for the eleven months ended August&nbsp;31, 2003, respectively.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">For the year ended August&nbsp;31, 2004 and the eleven months ended August&nbsp;31, 2003, the Company had gross purchases as a percentage of cost of sales from nonaffiliated major suppliers as follows:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Year Ended</b><br>
<b>August</b>&nbsp;<b>31, 2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Eleven Months Ended</b><br>
<b>August</b>&nbsp;<b>31, 2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">St. Mary Operating Company</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">22.8</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">%</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">14.1</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">%</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Samson Resources Company</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">18.2</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">23.4</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Stephens Production Company</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">12.8</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8.8</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Management believes that the diversification of suppliers is sufficient to enable the Company to purchase all of its supply needs at market prices without a material disruption of operations if supplies are interrupted from any of the Company&#146;s existing sources.
Although no assurances can be given that supplies will be readily available in the future, we expect a sufficient supply to continue to be available.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>G &#151; RETIREMENT AND BENEFITS</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">La Grange has a defined contribution plan for virtually all employees with discretionary matching. Pursuant to the plan, employees of the Company can defer a portion of their compensation and contribute it to a deferred account. La Grange did not elect to match
contributions to this plan during the year ended August&nbsp;31, 2004 and the eleven months ended August&nbsp;31, 2003. Therefore, no expense related to the plan is recorded in the accompanying financial statements.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>H &#151; COMMITMENTS AND CONTINGENCIES</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>1. Lease Obligations</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company has operating leases for compressors under noncancelable agreements. Future annual minimum lease payments for each of the next five years and thereafter as of August&nbsp;31, 2004 are as follows:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Year ending August 31:</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">2005</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">522</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">2006</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">522</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">2007</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">522</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">2008</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">522</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">2009</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">500</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">After 2009</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">72</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,660</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Rental expense relating to operating leases was $675 and $555 for the year ended August&nbsp;31, 2004 and eleven months ended August&nbsp;31, 2003, respectively.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-72</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf73"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ETC OKLAHOMA PIPELINE LTD.</b><br>
<b>NOTES TO FINANCIAL STATEMENTS</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>2. Litigation</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company is involved in various lawsuits, claims and regulatory proceedings incidental to its business. In the opinion of management, the outcome of such matters will not have a material adverse effect on the Company&#146;s financial position or results of operations.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>3. Environmental</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company&#146;s operations are subject to extensive federal, state and local environmental laws and regulations that require expenditures for remediation at operating facilities and waste disposal sites. Although the Company believes its operations are in substantial
compliance with applicable environmental laws and regulations, risks of additional costs and liabilities are inherent in the natural gas pipeline and processing business, and there can be no assurance that significant costs and liabilities will not be incurred. Moreover, it
is possible that other developments, such as increasingly stringent environmental laws, regulations and enforcement policies thereunder, and claims for damages to property or persons resulting from the operations, could result in substantial costs and liabilities.
Accordingly, the Company has adopted policies, practices, and procedures in the areas of pollution control, product safety, occupational health, and the handling, storage, use, and disposal of hazardous materials to prevent material environmental or other damage, and
to limit the financial liability, which could result from such events. However, some risk of environmental or other damage is inherent in the natural gas pipeline and processing business, as it is with other entities engaged in similar businesses.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">In conjunction with the acquisition of the Texas and Oklahoma natural gas gathering and gas processing assets from Aquila, Aquila, Inc. agreed to indemnify La Grange Acquisition, L.P. for any environmental liabilities from those operations prior to October&nbsp;1, 2002.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Environmental exposures and liabilities are difficult to assess and estimate due to unknown factors such as the magnitude of possible contamination, the timing and extent of remediation, the determination of the Company&#146;s liability in proportion to other parties,
improvements in cleanup technologies and the extent to which environmental laws and regulations may change in the future. Although environmental costs may have a significant impact on the results of operations for any single period, the Company believes that
such costs will not have a material adverse effect on its financial position. Elk City did not accrue for environmental liabilities as of August&nbsp;31, 2004 or 2003.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>I &#151; SUBSEQUENT EVENT</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">On April&nbsp;14, 2005, Elk City&#146;s parent company completed the sale of the Company to Atlas Pipeline Partners, L.P. for $190 million in cash, subject to certain adjustments as defined in the purchase and sale agreement.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-73</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf74"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ETC OKLAHOMA PIPELINE, LTD.</b><br>
<b>BALANCE SHEET</b><br>
<b>February</b>&nbsp;<b>28, 2005</b><br>
<b>(unaudited)</b><br>
<b>(in thousands)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr align="center" valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>ASSETS</b></font></div></td>
    <td align="left" width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left" width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CURRENT ASSETS:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Receivables &#151;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Trade</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,294</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Related parties</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">27,671</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Exchanges</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">716</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Materials and supplies</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">63</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Other current assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">497</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total current assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">31,241</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">PROPERTY, PLANT AND EQUIPMENT</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">50,004</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">ACCUMULATED DEPRECIATION</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,243</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">PROPERTY, PLANT AND EQUIPMENT, net</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">44,761</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">76,002</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr align="center" valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2"><b>LIABILITIES AND PARTNERS&#146; CAPITAL</b></font></div></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
    <td align="left"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CURRENT LIABILITIES:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Payables &#151;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Trade</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">23,206</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Exchanges</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">209</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accrued expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">162</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total current liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">23,577</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">COMMITMENTS AND CONTINGENCIES (See Note D)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">PARTNERS&#146; CAPITAL:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Limited partner</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">52,373</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">General partner </font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">52</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total partners&#146; capital</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">52,425</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total liabilities and partners&#146; capital</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">76,002</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">The accompanying notes are an integral part of this financial statement.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-74</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf75"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>ETC OKLAHOMA PIPELINE, LTD.</b><br>
<b>INCOME STATEMENTS</b><br>
<b>(unaudited)</b><br>
<b>(in thousands)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Six
          Months Ended</b><br>
<b>February</b>&nbsp;<b>28, 2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Six
          Months Ended</b><br>
<b>February</b>&nbsp;<b>29, 2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">OPERATING REVENUE:</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Third party</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,841</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,138</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Related party</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">77,355</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">54,789</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total revenue</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">84,196</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">59,927</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">COSTS AND EXPENSES:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cost of products sold</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">74,330</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">52,757</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Operating</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,624</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,297</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">General and administrative</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,437</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,331</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,236</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,076</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total costs and expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">79,627</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">57,461</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">NET INCOME</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,569</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,466</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><hr noshade size="2"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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</table>
<p align="center"><font face="serif" size="2">The accompanying notes are an integral part of these financial statements.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-75</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf76"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>ETC OKLAHOMA PIPELINE, LTD.</b><br>
<b>STATEMENTS OF CASH FLOWS</b><br>
<b>(unaudited)</b><br>
<b>(in thousands)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Six
          Months Ended</b><br>
<b>February</b>&nbsp;<b>28, 2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Six
          Months Ended</b><br>
<b>February</b>&nbsp;<b>29, 2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH FLOWS FROM OPERATING ACTIVITIES:</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="8%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Net income</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,569</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,466</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Adjustments to reconcile net income to net cash provided by operating activities &#151;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,236</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,076</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Loss on disposal of assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Changes in operating assets and liabilities &#151;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Receivables</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,024</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(521</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:9%"><font face="serif" size="2">Related party receivables</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(12,560</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(21,586</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Other current assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(497</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">47</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:9%"><font face="serif" size="2">Payables</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,402</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">11,764</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Accrued expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(415</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(402</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:12%"><font face="serif" size="2">Net cash used in operating activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,289</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(7,153</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH FLOWS FROM INVESTING ACTIVITIES:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Additions to property, plant and equipment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,905</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,545</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Proceeds from sale of assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">72</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:12%"><font face="serif" size="2">Net cash used in investing activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,905</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,473</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH FLOWS FROM FINANCING ACTIVITIES:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Working capital from parent</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,194</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">9,626</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Net change in cash</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash beginning of year</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash end of year</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Non-cash asset contribution</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">538</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,288</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash paid for interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash paid for income taxes</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">The accompanying notes are an integral part of these financial statements.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-76</font></p>
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<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ETC OKLAHOMA PIPELINE, LTD.</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b><br>
<b>Six months ended February 28, 2005</b></font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>A &#151; ORGANIZATION AND BUSINESS</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">ETC Oklahoma Pipeline, Ltd. (Elk City or the Company) is a Texas limited partnership. LG PL, LLC, a wholly-owned subsidiary of La Grange Acquisition, L.P. (La Grange) owns a 0.1% general partner interest and La Grange Acquisition, L.P. owns a 99.9% limited partner
interest. Elk City owns a natural gas gathering pipeline system and gas processing plant in Oklahoma. These assets are referred to herein as &#147;the Elk City system.&#148;</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Elk City system is a 318-mile gathering system located in western Oklahoma that gathers, compresses, treats and processes natural gas from the Anadarko Basin. The Elk City system also includes the Elk City processing plant and one treating facility. The Elk City
system is connected, either directly or indirectly, to six major interstate and intrastate natural gas pipelines providing access to natural gas markets throughout the United States. The Elk City system has a processing capacity of approximately 130 million cubic feet per
day (MMcf/d).</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>B &#151; SIGNIFICANT ACCOUNTING POLICIES</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>1. Basis of Presentation</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (&#147;US GAAP&#148;) and on the same basis as the audited financial statements for the year ended August&nbsp;31, 2004. Certain
information and footnote disclosures normally included in annual financial statements prepared in accordance with US GAAP have been omitted pursuant to the rules and regulations of the SEC. Because the interim financial statements do not include all of the
information and footnotes required by US GAAP, they should be read in conjunction with the audited financial statements and related notes for the year ended August&nbsp;31, 2004. The results of operations for an interim period may not give a true indication of results for
a full year. There are no other components of comprehensive income other than net income.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>2. Use of Estimates</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The natural gas industry conducts its business by processing actual transactions at the end of the month following the
month of delivery. Consequently, the most current month&#146;s financial results are estimated using volume estimates and market prices. Any difference between estimated results and actual results are recognized in the following month&#146;s financial statements. Management
believes that the operating results estimated for the six months ending February&nbsp;28, 2005 and February&nbsp;29, 2004 represent the actual results in all material respects.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Some of the other more significant estimates made by management include, but are not limited to the useful lives for depreciation and amortization, and general business reserves. Actual results could differ from those estimates.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>3. Cash</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">La Grange provides cash to the Company for working capital and capital expenditures. Cash transfers are recorded through related party receivables and payables. Cash receipts of the Company are immediately transferred to La Grange to reduce the intercompany
balance with LaGrange.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-77</font></p>
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<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ETC OKLAHOMA PIPELINE, LTD.</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b><br>
<b>Six months ended February 28, 2005</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>4. Accounts Receivable</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Elk City deals with counter parties that are typically either investment grade (Standard &amp; Poors BBB or higher) or are otherwise secured with a letter of credit or other form of security (corporate guaranty or prepayment). Management reviews accounts receivable
balances each week. Credit limits are assigned and monitored for all counter parties. The majority of payments are due on the 25th of the month following delivery.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Management closely monitors credit exposure for potential doubtful accounts. Management believes that an occurrence of bad debt is unlikely; therefore, an allowance for doubtful accounts was not deemed necessary at February&nbsp;28, 2005. Bad debt expense is
recognized at the time an account is deemed uncollectible. An account receivable will be written off in the event a counter party files for bankruptcy protection or the account is turned over for collection and the collector deems the account uncollectible. No bad debt
expense was recorded during the six months ended February&nbsp;28, 2005 or six months ended February&nbsp;29, 2004.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>C &#151; RELATED PARTY TRANSACTIONS</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company entered into various types of transactions with La Grange, or its subsidiaries for the six months ended February&nbsp;28, 2005 and February&nbsp;29, 2004.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The following table summarized transactions for the six month periods ended February&nbsp;28, 2005 and February&nbsp;29, 2004:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2005</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2004</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Natural gas sales to affiliated companies</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">47,886</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">33,957</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">NGLs sales to affiliated companies</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">29,469</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">20,832</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Compression services from affiliated company</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">207</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Allocated costs from affiliated companies</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,437</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,329</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Working capital to (from) related companies</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,009</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,542</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Transfer of property, plant and equipment from related parties</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">539</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,288</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The related party receivable due from La Grange was $27,671 as of February&nbsp;28, 2005.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>D &#151; COMMITMENTS AND CONTINGENCIES</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>1. Litigation</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company is involved in various lawsuits, claims and regulatory proceedings incidental to its business. In the opinion of management, the outcome of such matters will not have a material adverse effect on the Company&#146;s financial position or results of operations.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>2. Environmental</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company&#146;s operations are subject to extensive federal, state and local environmental laws and regulations that require expenditures for remediation at operating facilities and waste disposal sites. Although the Company believes its operations are in substantial
compliance with applicable environmental laws and regulations, risks of additional costs and liabilities are inherent in the natural gas pipeline and processing business, and there can be no assurance that significant costs and liabilities will not be incurred. Moreover, it
is possible that other developments, such as increasingly stringent environmental laws, regulations and enforcement policies thereunder, and claims for damages to property or persons resulting from the operations, could result in substantial costs and liabilities.
Accordingly, the Company has adopted policies, practices, and procedures in the </font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-78</font></p>
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<div style="page-break-before:always"></div>
<page>
<a name="pf79"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>ETC OKLAHOMA PIPELINE, LTD.</b><br>
<b>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</b><br>
<b>Six months ended February 28, 2005</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">areas of pollution control, product safety, occupational health, and the handling, storage, use, and disposal of hazardous materials to prevent material environmental or other damage,
and to limit the financial liability, which could result from such events. However, some risk of environmental or other damage is inherent in the natural gas pipeline and processing
business, as it is with other entities engaged in similar businesses.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">In conjunction with the acquisition of the Texas and Oklahoma natural gas gathering and gas processing assets from Aquila, Aquila, Inc. agreed to indemnify La Grange Acquisition, L.P. for any environmental liabilities from those operations prior to October&nbsp;1, 2002.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Environmental exposures and liabilities are difficult to assess and estimate due to unknown factors such as the magnitude of possible contamination, the timing and extent of remediation, the determination of the Company&#146;s liability in proportion to other parties,
improvements in cleanup technologies and the extent to which environmental laws and regulations may change in the future. Although environmental costs may have a significant impact on the results of operations for any single period, the Company believes that
such costs will not have a material adverse effect on its financial position. Elk City did not accrue for environmental liabilities as of February&nbsp;28, 2005.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>E &#151; SUBSEQUENT EVENT</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">On April&nbsp;14, 2005, Elk City&#146;s parent company completed the sale of the Company to Atlas Pipeline Partners, L.P. for $190 million in cash, subject to certain adjustments as defined in the purchase and sale agreement.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-79</font></p>
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<a name="pf80"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Report of Independent Registered Public Accounting Firm</b></font></p>
<p align="left"><font face="serif" size="2">Board of Directors and<br>
Atlas Pipeline Partners, L.P.</font></p>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We have audited the accompanying carve-out statements of income and changes in parent&#146;s equity and cash flows of the Elk City System (a division of the Aquila Gas Pipeline Corporation), for the year ended September&nbsp;30, 2002. These financial statements are
the responsibility of the Company&#146;s management. Our responsibility is to express an opinion on these financial statements based on our audit.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company&#146;s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, 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.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In our opinion, the carve-out financial statements referred to above present fairly, in all material respects, the results of operations of the Elk City System of Aquila Gas Pipeline Corporation for the year ended September&nbsp;30, 2002, in conformity with accounting
principles generally accepted in the United States of America.</font></p>
</div>
<p align="left"><font face="serif" size="2">/s/Grant Thornton LLP<br>
Cleveland, Ohio<br>
April&nbsp;25, 2005</font></p>
<p align="center"><font face="serif" size="2">F-80</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf81"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>THE ELK CITY SYSTEM</b><br>
<b>CARVE-OUT STATEMENT OF INCOME AND CHANGES</b><br>
<b>IN PARENT&#146;S EQUITY IN DIVISION</b><br>
<b>For the year ended September</b>&nbsp;<b>30, 2002</b><br>
<b>(in thousands)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">OPERATING REVENUE:</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Third party</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,599</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Related party</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">46,643</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total revenue</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">52,242</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">COSTS AND EXPENSES:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cost of products sold</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">41,610</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Operating</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,881</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">General and administrative</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,389</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,811</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Asset impairment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">12,850</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total costs and expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">63,541</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">LOSS FROM OPERATIONS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(11,299</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">OTHER INCOME:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Gain on disposal of assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">14</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">LOSS BEFORE INCOME TAXES</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(11,285</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">INCOME TAX BENEFIT</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(4,439</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">NET LOSS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(6,846</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Parent&#146;s beginning equity in division</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">11,763</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Parent&#146;s ending equity in division</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,917</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">The accompanying notes are an integral part of this financial statement.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-81</font></p>
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<div style="page-break-before:always"></div>
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<a name="pf82"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>THE ELK CITY SYSTEM</b><br>
<b>CARVE-OUT STATEMENT OF CASH FLOWS</b><br>
<b>For the year ended September</b>&nbsp;<b>30, 2002</b><br>
<b>(in thousands)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH FLOWS FROM OPERATING ACTIVITIES:</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Net loss</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(6,846</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Adjustments to reconcile net loss to net cash provided by operating activities &#151;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Depreciation and amortization</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,811</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Asset impairment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">12,850</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Deferred income taxes</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(4,864</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Other, net</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(15</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Changes in operating assets and liabilities &#151;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Receivables</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,726</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:9%"><font face="serif" size="2">Materials and supplies</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">148</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Other current assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(34</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:9%"><font face="serif" size="2">Payables</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">942</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Related party payables</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,167</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:9%"><font face="serif" size="2">Accrued expenses</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">49</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Income taxes payable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">425</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:12%"><font face="serif" size="2">Net cash provided by operating activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">9,907</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH FLOWS FROM INVESTING ACTIVITIES:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Additions to property, plant and equipment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,045</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Proceeds from sale of assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">115</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:12%"><font face="serif" size="2">Net cash used in investing activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(4,930</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH FLOWS FROM FINANCING ACTIVITIES:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Working capital from parent</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(4,977</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:12%"><font face="serif" size="2">Net cash used in financing activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(4,977</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Net change in cash and cash equivalents</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash and cash equivalents, beginning of year</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash and cash equivalents, end of year</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">The accompanying notes are an integral part of this financial statement.</font></p>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-82</font></p>
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<div style="page-break-before:always"></div>
<page>
<a name="pf83"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>THE ELK CITY SYSTEM</b><br>
<b>NOTES TO CARVE-OUT FINANCIAL STATEMENTS</b><br>
<b>Year ended September 30, 2002</b><br>
<b>(in thousands)</b></font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>A &#151; ORGANIZATION AND BUSINESS</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Aquila Gas Processing Corporation (AGP), a Delaware Corporation and a wholly-owned subsidiary of Aquila Gas Pipeline Corporation (Aquila), owned the Elk City natural gas gathering pipeline system and gas processing plant in Oklahoma. Collectively, those assets are
referred to herein as the Elk City System. The Elk City System is considered a business as defined in the rules and regulations of the U.S. Securities and Exchange Commission and is sometimes referred to herein as the &#147;Company&#148;.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Elk City system, a 318-mile gathering system located in western Oklahoma, gathers, compresses, treats and processes natural gas from the Anadarko Basin. The Elk City System also includes the Elk City processing plant and one treating facility. The Elk City System
is connected, either directly or indirectly, to six major interstate and intrastate natural gas pipelines providing access to natural gas markets throughout the United States. The Elk City System has a processing capacity of approximately 130 million cubic feet per day
(MMcf/d).</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>B &#151; SIGNIFICANT ACCOUNTING POLICIES</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>1. Basis of Presentation</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America. The accompanying financial statements present the operations and cash flows of the Elk City System on a
carve-out basis. Accordingly, the carve-out financial statements reflect a reasonable allocation of the costs historically incurred by AGP.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>2. Use of Estimates</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Significant estimates made by management include, but are not limited to the useful lives for depreciation and amortization, and general business reserves. Actual results could differ from those estimates.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>3. Impairment of Long-lived Assets</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company evaluates the carrying value of long-lived assets to be held and used when events and circumstances warrant such a review. The carrying value of long-lived assets would be considered impaired when the projected undiscounted cash flows are less than
carrying value. In that event, a loss would be recognized based on the amount by which the carrying value exceeds the fair value. Fair value is determined primarily by available market valuations, or, if applicable, discounted cash flows.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">As a result of the sale to La Grange (See Note H), the Company recorded an impairment of $12,850 for the year ended on September&nbsp;30, 2002, to write down the Elk City assets to their net realizable value.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>4. Revenue Recognition</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Revenue for sales of natural gas and natural gas liquids (NGLs) is recognized upon delivery. Service revenue, including transportation, treating, compression and gas processing, is recognized at the time </font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-83</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf84"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>THE ELK CITY SYSTEM</b><br>
<b>NOTES TO CARVE-OUT FINANCIAL STATEMENTS</b><br>
<b>Year ended September 30, 2002</b><br>
<b>(in thousands)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">service is performed. Elk City System contracts consist primarily of transportation contracts and keep-whole arrangements. Under transportation contracts, the Company receives a fee
for transporting gas through its system. The revenue earned from transportation contracts is directly related to volume of natural gas transported through the system and is not
directly dependent on commodity prices. Under keep-whole arrangements, the Company gathers natural gas from the producer, processing the natural gas and selling the resulting
NGLs at market prices to an affiliated company.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>5. Shipping and Handling Costs</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">In accordance with the Emerging Issues Task Force Issue 00-10, &#147;Accounting for Shipping and Handling Fees and Costs,&#148; the Company classifies fees deducted from payments to producers for compression and treating of gas as revenue.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>6. Commodity Risk Management</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">In 1999, Aquila Gas Pipeline transferred all of its energy trading operations and management thereof to Aquila Energy Market (AEM), a wholly owned subsidiary of Aquila, Inc. AEM enters into forward physical contracts with third parties for the benefit of Aquila and
where deemed necessary entered into intercompany financial derivative positions (e.g., swaps, futures and options) with Aquila and other affiliates to assist them in managing their exposures. Thus, Aquila has forward physical contracts with third parties and financial
derivative positions with AEM and affiliates. This activity was not pushed down to the carve-out financial statements of Elk City.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>7. Stock Compensation</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Some of the Company&#146;s employees received stock options in Aquila. As permitted under accounting principles generally accepted in the United States of America, Aquila elected to account for the options under Accounting Principles Board Opinion No. 25, and because
the options strike price was equal to or greater than the fair value at the date of the grant, no compensation expense was recognized for the year ended September&nbsp;30, 2002. As these were Aquila options, the Company does not have full access to the information
necessary to disclose what compensation expense would have been, had Aquila accounted for the options under Statement of Financial Accounting Standards No. 123, <i>Accounting for Stock-Based Compensation</i>, which requires compensation expense be recognized for
the fair value of the options at the date of grant. La Grange Acquisition does not have a stock option plan in place for its employees.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>8. Federal and State Income Taxes</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Elk City System was included in the consolidated federal income tax returns filed by Aquila. Accordingly, all tax balances were ultimately settled through Aquila. The Company had generally accounted for its taxes on a stand-alone or separate return basis (see Note
D). Periodically, taxes payable were settled through the intercompany accounts with Aquila and were not funded in cash.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company provides for income taxes in accordance with Statement of Financial Accounting Standards No. 109, <i>Accounting for Income Taxes </i>(Statement No. 109). Statement No. 109 requires that deferred tax assets and liabilities be established for the basis
differences between the reported amounts of assets and liabilities for financial reporting purposes and income tax purposes.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>9. Asset Retirement Obligation</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company accounts for its asset retirement obligations in accordance with Statement of Financial Accounting Standards No. 143, <i>Accounting for Asset Retirement Obligations </i>(SFAS No. 143). SFAS No. 143 requires the Company to record the fair value of an asset
retirement obligation as a liability in </font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-84</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf85"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>THE ELK CITY SYSTEM</b><br>
<b>NOTES TO CARVE-OUT FINANCIAL STATEMENTS</b><br>
<b>Year ended September 30, 2002</b><br>
<b>(in thousands)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">the period in which it incurs a legal obligation for the retirement of tangible long-lived assets, typically at the time the assets are placed into service. A corresponding asset is also
recorded and depreciated over the life of the asset. After the initial measurement, any changes in the amount of the liability resulting from the passage of time and revisions to either
the timing or amount of estimated cash flows would be recognized prospectively.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company has determined that it is obligated by contractual requirements to remove facilities or perform other remediation upon retirement of certain of our assets. Determination of the amounts to be recognized is based upon numerous estimates and
assumptions, including expected settlement dates, future retirement costs, future inflation rates and the credit-adjusted risk-free interest rates. However, the Company is not able to reasonably determine the fair value of the asset retirement obligations as of
September&nbsp;30, 2002, because the settlement dates are indeterminable. An asset retirement obligation will be recorded in the periods in which the settlement dates can reasonably be determined.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>C &#151; RELATED PARTY TRANSACTIONS</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company entered into various types of transactions with Aquila for the year ended September&nbsp;30, 2002. The Company sold the majority of natural gas and NGLs produced to Aquila. Additionally, the Company reimbursed Aquila for certain employees who
provided services to the Company and for other costs (primarily general and administrative expense) related to the Company&#146;s operations. Aquila also provided the working capital necessary for the operations of the Company.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The following table summarized transactions for the year ended September&nbsp;30, 2002:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Natural gas sales to affiliated companies</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">16,391</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">NGLs sales to affiliated companies</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">30,252</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Allocated costs from affiliated companies</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,389</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Working capital to affiliated companies</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,732</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>D &#151; INCOME TAXES</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">A reconciliation between the expected tax computed using the US federal statutory income tax rate and the provision for income taxes is as follows:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Statutory federal income tax (35%)</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">(3,950</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">State and local income taxes &#151; net of federal income tax effect (4.3%)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(489</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%; text-indent:-3%"><font face="serif" size="2">Total</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(4,439</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>E &#151; RETIREMENT AND BENEFITS</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">For the year ended September&nbsp;30, 2002, certain Aquila employees received stock options to purchase Aquila&#146;s common stock. As permitted under generally accepted accounting principles, Aquila elected to account for the options under Accounting Principles Board
Opinion No. 25, and because the options strike price was equal to or greater than the fair value at the date of grant, no compensation expense was recognized. As these were Aquila, Inc. options, the Company does not have full access to the information necessary to
disclose what compensation would have been, had Aquila accounted for the options under Statement of Financial Accounting Standards No. 123, &#147;Accounting for </font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-85</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf86"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>THE ELK CITY SYSTEM</b><br>
<b>NOTES TO CARVE-OUT FINANCIAL STATEMENTS</b><br>
<b>Year ended September 30, 2002</b><br>
<b>(in thousands)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Stock-Based Compensation&#148;, which requires compensation expense be recognized for the fair value of the options at the date of grant. The Company does not have a stock option plan
in place for its employees.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Aquila had a defined contribution plan for virtually all employees. Pursuant to the plan, employees of the Company can defer a portion of their compensation and contribute it to a deferred account. Aquila&#146;s matching contribution to the plan for the Company employees
was $34 for the year ended September&nbsp;30, 2002.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Aquila had a stock contribution plan under which eligible employees received a Company contribution of 3% of their base income in Aquila&#146;s common stock. The Company&#146;s expense associated with this plan for the Company employees for the year ended
September&nbsp;30, 2002 was $19.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>F &#151; COMMITMENTS AND CONTINGENCIES</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>1. Litigation</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company is involved in various lawsuits, claims and regulatory proceedings incidental to its business. In the opinion of management, the outcome of such matters will not have a material adverse effect on the Company&#146;s financial position or results of operations.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>2. Environmental</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company&#146;s operations are subject to extensive federal, state and local environmental laws and regulations that require expenditures for remediation at operating facilities and waste disposal sites. Although the Company believes its operations are in substantial
compliance with applicable environmental laws and regulations, risks of additional costs and liabilities are inherent in the natural gas pipeline and processing business, and there can be no assurance that significant costs and liabilities will not be incurred. Moreover, it
is possible that other developments, such as increasingly stringent environmental laws, regulations and enforcement policies thereunder, and claims for damages to property or persons resulting from the operations, could result in substantial costs and liabilities.
Accordingly, the Company has adopted policies, practices, and procedures in the areas of pollution control, product safety, occupational health, and the handling, storage, use, and disposal of hazardous materials to prevent material environmental or other damage, and
to limit the financial liability, which could result from such events. However, some risk of environmental or other damage is inherent in the natural gas pipeline and processing business, as it is with other entities engaged in similar businesses.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Environmental exposures and liabilities are difficult to assess and estimate due to unknown factors such as the magnitude of possible contamination, the timing and extent of remediation, the determination of the Company&#146;s liability in proportion to other parties,
improvements in cleanup technologies and the extent to which environmental laws and regulations may change in the future. Although environmental costs may have a significant impact on the results of operations for any single period, the Company believes that
such costs will not have a material adverse effect on its financial position. Elk City did not accrue for environmental liabilities as of September&nbsp;30, 2002.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-86</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf87"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>THE ELK CITY SYSTEM</b><br>
<b>NOTES TO CARVE-OUT FINANCIAL STATEMENTS</b><br>
<b>Year ended September 30, 2002</b><br>
<b>(in thousands)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>G &#151; MAJOR CUSTOMERS AND SUPPLIERS</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company sold 89.3% of natural gas and NGLs produced to Aquila for the year ended September&nbsp;30, 2002.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">For the year ended September&nbsp;30, 2002, the Company had gross purchases as a percentage of cost of sales from nonaffiliated major suppliers as follows:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">St. Mary Operating Company</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="2%"><font face="serif" size="2">19.8</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">%</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Exxon Company, U.S.A</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10.7</font></td>
    <td valign="bottom"><font face="serif" size="2">%</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Management believes that the diversification of suppliers is sufficient to enable the Company to purchase all of its supply needs at market prices without a material disruption of operations if supplies are interrupted from any of the Company&#146;s existing sources.
Although no assurances can be given that supplies will be readily available in the future, we expect a sufficient supply to continue to be available.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>H &#151; SUBSEQUENT EVENT</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">In October 2002, La Grange Acquisition, L.P. purchased the Elk City System from Aquila.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-87</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf88"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Report of Independent Certified Public Accountants</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2">Board of Directors<br>
Spectrum Field Services, Inc.</font></div></td>
  </tr>
</table>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We have audited the accompanying balance sheets of Spectrum Field Services, Inc. (a Delaware corporation) as of December 31, 2003 and 2002, and the related statements of operations, comprehensive income (loss), changes in shareholders&#146; equity and cash flows
for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the Company&#146;s management. Our responsibility is to express an opinion on these financial statements based on our audits.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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.</font></p>
</div>
<div style="text-indent:3%">
<p align="left"><font face="serif" size="2">In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Spectrum Field Services, Inc. as of December 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.</font></p>
</div>
<p align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
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    <td valign="bottom" width="40%"><font face="serif" size="2"><b>/s/ GRANT THORNTON LLP</b></font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
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    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Tulsa, Oklahoma<br>
May 17, 2004<br>
(except with respect to the matters<br>
discussed in Note J, as to which the<br>
date is June 10, 2004)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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</table>
<p align="center"><font face="serif" size="2">F-88</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf89"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>Spectrum Field Services, Inc.</b><br>
<b>Balance sheets</b><br>
<b>December 31, 2003 and 2002</b><br>
(in thousands, except share data)</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">ASSETS</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CURRENT ASSETS:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">173</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">478</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts receivable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,473</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,554</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Inventories</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">179</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">553</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Prepaid expenses and other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">108</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">200</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Income tax receivable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">207</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Security deposits</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">257</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Deferred income taxes</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total current assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">9,200</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,992</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">PROPERTY, PLANT AND EQUIPMENT, net</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">47,050</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">47,774</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">DEFERRED INCOME TAXES</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,644</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">SECURITY DEPOSITS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,481</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">225</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">OTHER ASSETS, net</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">250</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,159</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">59,625</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">58,150</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">LIABILITIES AND SHAREHOLDERS&#146; EQUITY</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CURRENT LIABILITIES:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accounts payable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,800</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,428</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accrued producer payables</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,470</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,109</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accrued liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">129</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">234</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Hedge liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">338</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">719</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Current maturities of long-term debt</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,995</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,076</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total current liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">16,732</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">11,566</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">LONG-TERM DEBT, less current maturities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">39,117</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">35,200</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">PREFERRED DIVIDENDS PAYABLE</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,129</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,075</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">DEFERRED INCOME TAXES</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,063</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">COMMITMENTS AND CONTINGENCIES</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">SHAREHOLDERS&#146; EQUITY:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Preferred stock, $0.01 par value; 8.0% cumulative; 20,000,000 shares authorized;<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13,856,047 shares of Series A preferred stock issued; 11,052,304 shares<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;outstanding at December 31, 2003 and 2002</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">13,856</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">13,856</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Common stock, $0.01 par value; 5,000,000 shares authorized; 2,722,194 and<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,712,194 shares issued; 2,084,891 and 2,074,891 shares outstanding at<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;December 31, 2003 and 2002, respectively</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">27</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">27</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Additional paid-in capital</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,149</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,043</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Retained earnings (accumulated deficit)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,279</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,729</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Treasury stock &#150; preferred, at cost</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,758</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,758</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Treasury stock &#150; common, at cost</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(6,252</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(6,252</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Deferred compensation</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(43</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(70</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Accumulated other comprehensive loss, net of tax of $32 and $201 in 2003 and<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2002, respectively</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(53</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(329</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total shareholders&#146; equity</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,647</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,246</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Total liabilities and shareholders&#146; equity</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">59,625</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">58,150</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">The accompanying notes are an integral part of these balance sheets.</font></p>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-89</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf90"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Spectrum Field Services, Inc.</b><br>
<b>Statements of operations</b><br>
<b>For the years ended December 31, 2003, 2002 and 2001</b><br>
(in thousands)</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2001</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">SALES OF NATURAL GAS AND LIQUIDS</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">98,772</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">65,760</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">86,316</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">COST OF NATURAL GAS AND LIQUIDS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">78,827</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">49,659</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">64,160</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Gross profit</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">19,945</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">16,101</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">22,156</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">OPERATING EXPENSE</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,262</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,954</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,891</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">GENERAL AND ADMINISTRATIVE EXPENSE</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,322</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,374</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,947</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,889</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">DEPRECIATION</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">16,050</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,407</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,779</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">(LOSS) INCOME FROM OPERATIONS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(6,689</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">477</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,539</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">INTEREST EXPENSE</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,725</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,659</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,423</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">OTHER (EXPENSE) INCOME, net</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(843</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">299</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">(LOSS) INCOME BEFORE INCOME TAXES</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(10,257</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,172</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,415</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">INCOME TAX (BENEFIT) PROVISION</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(4,303</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(500</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,677</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">NET (LOSS) INCOME</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,954</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,672</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,738</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">PREFERRED STOCK DIVIDENDS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,054</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">752</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">643</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">NET (LOSS) INCOME ATTRIBUTABLE TO COMMON<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SHAREHOLDERS</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(7,008</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,424</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,095</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
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</table>
<p align="center"><font face="serif" size="2">The accompanying notes are an integral part of these financial statements.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-90</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf91"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Spectrum Field Services, Inc.</b><br>
<b>Statements of comprehensive income (loss)</b><br>
<b>As of December 31, 2003, 2002 and 2001</b><br>
(in thousands)</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2001</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">NET (LOSS) INCOME</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">(5,954</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">(1,672</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">2,738</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">OTHER COMPREHENSIVE INCOME (LOSS):</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Change in value of derivative instruments, net of tax of $169, $(201) and $0<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in 2003, 2002 and 2001, respectively</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">276</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(329</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">COMPREHENSIVE (LOSS) INCOME</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,678</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,001</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,738</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">RECONCILIATION OF ACCUMULATED OTHER COMPREHENSIVE LOSS:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Balance, beginning of period</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(329</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Current period reclassification to earnings, net of tax of $793, $5 and $0<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;in 2003, 2002 and 2001, respectively</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,293</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Current period change, net of tax of $623, $206 and $0 in 2003, 2002 and<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2001, respectively</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,017</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(336</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Balance, end of period</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(53</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(329</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
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    <td><font face="serif" size="2">&nbsp;</font></td>
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  </tr>
</table>
<p align="center"><font face="serif" size="2">The accompanying notes are an integral part of these financial statements.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-91</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf92"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"><b>Spectrum Field Services, Inc.</b><br>
<b>Statements of changes in shareholders&#146; equity</b><br>
<b>For the years ended December 31, 2003, 2002 and 2001</b><br>
(in thousands, except share data)</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Preferred Stock</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Common Stock</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Additional</b><br>
<b>Paid-in</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Retained</b><br>
<b>Earnings</b><br>
<b>(Accumulated</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Treasury Stock</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Deferred</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Accumulated</b><br>
<b>Other</b><br>
<b>Comprehensive</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Shares</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Amount</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Shares</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Amount</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Capital</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Deficit)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Preferred</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Common</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Compensation</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Loss</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Total</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Balance, December 31, 2000</font></div></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">10,886,576</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="2%"><font face="serif" size="1">10,887</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">2,211,109</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="2%"><font face="serif" size="1">22</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">2,643</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">2,058</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">&#151;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="2%"><font face="serif" size="1">&#151;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">(665</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="1">)</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">&#151;</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="2%"><font face="serif" size="1">14,945</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Repurchase of shares</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(3,754</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(5,932</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(9,686</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Net income available to common share-
holders</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,095</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,095</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Vesting of restricted common stock</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">166</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">166</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Vesting of phantom units</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">112</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">112</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Balance, December 31, 2001</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,886,576</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,887</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,211,109</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">22</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,755</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">4,153</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(3,754</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(5,932</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(499</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">7,632</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Repurchase of restricted common stock</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(320</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(320</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Repurchase of preferred shares</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(4</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(4</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Issuance of stock</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,969,471</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,969</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">545,529</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">5</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">540</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,514</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Net loss attributable to common share-
holders</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(2,424</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(2,424</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Vesting of restricted common stock</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">289</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Cancellation of unvested restricted common
stock</font></div></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">(44,444</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">(140</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">140</font></td>
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  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Net change in accumulated other compre-
hensive loss</font></div></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">(329</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Termination of phantom unit plan</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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    <td align="right" valign="bottom"><font face="serif" size="1">(112</font></td>
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  </tr>
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</table>
<p align="center"><font face="serif" size="2">F-92</font></p>
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<div style="page-break-before:always"></div>
<page>
<a name="pf93"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Spectrum Field Services, Inc.</b><br>
<b>Statements of changes in shareholders&#146; equity &#150; continued</b><br>
<b>For the years ended December 31, 2003, 2002 and 2001</b><br>
<b>(in thousands, except share data)</b></font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Preferred Stock</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Common Stock</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Additional</b><br>
<b>Paid-in</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Retained</b><br>
<b>Earnings</b><br>
<b>(Accumulated</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Treasury Stock</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Deferred</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Accumulated</b><br>
<b>Other</b><br>
<b>Comprehensive</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Shares</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Amount</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Shares</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Amount</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Capital</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Deficit)</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Preferred</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Common</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Compensation</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Loss</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Total</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Balance, December 31, 2002</font></div></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">13,856,047</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="2%"><font face="serif" size="1">13,856</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">2,712,194</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="2%"><font face="serif" size="1">27</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">3,043</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">1,729</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">(3,758</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="1">)</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="2%"><font face="serif" size="1">(6,252</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="1">)</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">(70</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="1">)</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="1">(329</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="1">)</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom" width="2%"><font face="serif" size="1">8,246</font></td>
    <td width="2%"><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Issuance of restricted stock</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">10,000</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">32</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(32</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
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    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Net loss attributable to common share-
holders</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(7,008</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(7,008</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Vesting of restricted common stock</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">59</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">59</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Compensation expense for stock options</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">74</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">74</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Net change in accumulated other compre-
hensive loss</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">&#151;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">276</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">276</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1">Balance, December 31, 2003</font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">13,856,047</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">13,856</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">2,722,194</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">27</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">3,149</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(5,279</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(3,758</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(6,252</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(43</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">(53</font></td>
    <td valign="bottom"><font face="serif" size="1">)</font></td>
    <td valign="bottom"><font face="serif" size="1">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="1">1,647</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
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</table>
<p align="center"><font face="serif" size="2">The accompanying notes are an integral part of these financial statements.</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<p align="center"><font face="serif" size="2">F-93</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf94"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Spectrum Field Services, Inc.</b><br>
<b>Statements of cash flows</b><br>
<b>For the years ended December 31, 2003, 2002 and 2001</b><br>
(in thousands)</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2001</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH FLOWS FROM OPERATING ACTIVITIES:</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="4%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Net loss (income)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,954</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,672</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,738</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Adjustments to reconcile net loss to net cash provided by operating activities&#151;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Depreciation and amortization of loan origination fees</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">16,364</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,718</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,127</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Deferred income taxes</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,717</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(196</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,870</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Noncash compensation expense</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">133</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">177</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">278</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Unrealized (gain) loss on ineffective hedges</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(105</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">189</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Loss (gain) on sale of assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">456</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(10</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Impairment of property, plant and equipment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,889</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:6%"><font face="serif" size="2">Noncash interest expense</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,188</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">946</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">386</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:6%"><font face="serif" size="2">Changes in assets and liabilities&#151;</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Accounts receivable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(919</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,505</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,474</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:9%"><font face="serif" size="2">Inventories</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">374</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">201</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(287</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Prepaid expenses and other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">92</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(45</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:9%"><font face="serif" size="2">Income tax receivable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">207</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">816</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(973</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Other assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(749</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(989</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(160</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:9%"><font face="serif" size="2">Accounts payable</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,372</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(29</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(1,204</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:9%"><font face="serif" size="2">Accrued producer payables</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">361</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">2,426</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(4,829</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:9%"><font face="serif" size="2">Accrued liabilities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(105</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">40</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(917</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:12%"><font face="serif" size="2">Net cash provided by operating activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10,998</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,956</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,503</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH FLOWS FROM INVESTING ACTIVITIES:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Capital expenditures</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(17,410</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,844</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,949</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Proceeds from sale of assets</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,628</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">169</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:12%"><font face="serif" size="2">Net cash used in investing activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(15,782</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(2,675</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,949</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH FLOWS FROM FINANCING ACTIVITIES:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Borrowings from long-term debt</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,600</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">284</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,850</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Payments on long-term debt</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(4,510</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,848</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,000</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Borrowings under line of credit</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,208</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,700</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">13,350</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Payments on line of credit</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5,650</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(6,050</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(9,050</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Proceeds from issuance of stock</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,514</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Repurchase of stock</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(324</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Borrowings from subordinated notes</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,515</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(5</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Dividends paid</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(322</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Loan origination fees</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(169</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(98</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(50</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:12%"><font face="serif" size="2">Net cash provided by (used in) financing activities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,479</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(3,312</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,778</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">NET CHANGE IN CASH</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(305</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(31</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">332</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH, beginning of period</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">478</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">509</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">177</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">CASH, end of period</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">173</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">478</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">509</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">SUPPLEMENTAL INFORMATION:</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash paid for interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,076</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,384</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,226</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cash paid for income taxes</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">774</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Noncash financing activity &#150; paid in kind interest</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,188</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">946</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">386</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Noncash financing activity &#150; issuance of restricted common stock</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">32</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Noncash financing activity &#150; capital lease</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">125</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Noncash financing activity &#150; repurchase of preferred and common stock and<br>
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;extinguishments of subordinated notes (Note A)</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">13,000</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">The accompanying notes are an integral part of these financial statements.</font></p>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-94</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf95"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Spectrum Field Services, Inc.</b><br>
<b>Notes to financial statements</b><br>
<b>December 31, 2003, 2002 and 2001</b><br>
(in thousands, except share data)</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>A &#151; OPERATIONS AND ORGANIZATION</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Spectrum Field Services, Inc. (the Company), was incorporated in Delaware on May 8, 2000. The Company was formed to acquire and operate natural gas processing plants and gathering systems in Velma, Oklahoma and Kingman, Kansas.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">On February 28, 2001, the Company entered into an agreement to repurchase the interest of one of the Company&#146;s equity investors, which was also a major customer of the Company. The agreement resulted in the Company forgiving $13,000 in accounts receivable owed
by the shareholder at February 28, 2001, in exchange for the retirement of the outstanding subordinated debt owed to the shareholder, the repurchase of all of the shareholder&#146;s common and Series A preferred stock, and the retirement of the shareholder&#146;s outstanding
stock warrant. This transaction was treated as a noncash transaction for presentation in the statement of cash flows. The Company refinanced the subordinated debt with additional borrowings of long-term debt.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">On August 1, 2003, the Company sold all of the assets of the Company&#146;s natural gas processing plant located in Kingman, Kansas for $1,200 with an effective date of April 1, 2003. The value of the plant was written down by $1,889 as of December 31, 2002, in
contemplation of the transaction in accordance with Statement of Financial Accounting Standards No. 144, <i>Accounting for the Impairment or Disposal of Long-Lived Assets </i>(SFAS 144). In 2003, an additional loss of $215 was recorded which related to the sale of the plant.
The additional loss was recorded as other expense in the Company&#146;s statement of operations.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
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    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">On December 30, 2003, the Company engaged Lehman Brothers to explore strategic alternatives for the Company including a merger, sale or other transactions involving the stock or assets of the Company.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
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  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>B &#151; SIGNIFICANT ACCOUNTING POLICIES AND BALANCE SHEET DETAIL</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>1. Accounts Receivable</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company grants credit to its customers for the purchase of natural gas and natural gas liquids. Accounts receivable consist of amounts billed to customers and an accrual for sales not yet billed. The Company writes off accounts receivable when management believes
the receivables to be uncollectible. A summary of accounts receivable at December 31 is as follows:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Customer receivables</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">119</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">44</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Accrued sales</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,354</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,510</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">8,473</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">7,554</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>2. Inventories</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company&#146;s inventories are primarily comprised of replacement pipe, natural gas and natural gas liquids and are stated at the lower of cost or market.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-95</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf96"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Spectrum Field Services, Inc.</b><br>
<b>Notes to financial statements</b><br>
<b>December 31, 2003, 2002 and 2001</b><br>
(in thousands, except share data)</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">A summary of inventories at December 31 is as follows:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Replacement pipe</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="2%"><font face="serif" size="2">76</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="2%"><font face="serif" size="2">110</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Natural gas</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">65</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">179</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Natural gas liquids</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">232</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">38</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">32</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">179</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">553</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>3. Property, Plant and Equipment</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Property, plant and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets as follows:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Buildings and improvements</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">7 to 39 years</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Plant, machinery and equipment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">10 to 20 years</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Rights of way</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">20 years</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Office furniture and equipment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5 to 7 years</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Autos</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5 years</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Maintenance, repairs and betterments, including replacement of minor items of physical properties, are charged to expense. Major additions to physical properties are capitalized. The cost of the assets retired or sold is credited to the asset accounts and the related
accumulated depreciation is charged to the accumulated depreciation accounts. The gain or loss from sale or retirement of property, if any, is included in the statement of operations.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">A summary of property, plant and equipment at December 31 is as follows:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Land</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">181</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">181</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Buildings and improvements</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">486</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">287</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Plant, machinery and equipment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">48,415</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">48,797</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Rights of way</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">6,313</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,079</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Office furniture and equipment</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,329</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,515</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Autos</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">275</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">242</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Construction in process</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">445</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">57,444</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">56,101</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Less- accumulated depreciation</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(10,394</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(8,327</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">47,050</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">47,774</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>4. Security Deposits</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Security deposits primarily represent amounts paid by the Company to the Velma Gas Plant&#146;s electricity provider to finance the upgrade of the electricity provider&#146;s facilities to accommodate the Company&#146;s additional electricity requirements resulting from the addition of
several new electric compressors at the Velma Gas Plant. The electricity provider is required to repay the amount paid by the Company over time based on the Company&#146;s electric power consumption. Management projects such payments to occur over a six-year period.
The Company has classified the amount expected to be received from the electricity provider within one year as a current asset. No interest is charged on the outstanding balance.</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-96</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf97"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Spectrum Field Services, Inc.</b><br>
<b>Notes to financial statements</b><br>
<b>December 31, 2003, 2002 and 2001</b><br>
(in thousands, except share data)</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>5. Other Long-Term Assets</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Other long-term assets consist primarily of loan origination fees and deposits made for the purchase of equipment. Loan origination fees are capitalized at cost and amortized over the term of the associated notes using the straight-line method. The following is a summary
of the Company&#146;s other assets at December 31:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>December 31, 2003</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>December 31, 2002</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Gross Carrying</b><br>
<b>Amount</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Accumulated</b><br>
<b>Amortization</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Gross Carrying</b><br>
<b>Amount</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Accumulated</b><br>
<b>Amortization</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Loan origination fees (3-5 years)</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">1,122</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">(872</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">953</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">(558</font></td>
    <td valign="bottom" width="2%"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Deposits for equipment purchases</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">750</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">14</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Total</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,122</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(872</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,717</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">(558</font></td>
    <td valign="bottom"><font face="serif" size="2">)</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>6. Long-Lived Assets</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company periodically evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets may warrant revision or that the remaining balance of long-lived assets may not be recoverable. When factors
indicate that long-lived assets should be evaluated for possible impairment, the Company uses an estimate of the related operation&#146;s undiscounted cash flows over the remaining life of the assets in measuring whether the assets are recoverable. When undiscounted cash
flows are less than book value of the assets, the required impairment is calculated as the excess of the book value of the assets over the discounted cash flows. Impairment charges of $0, $1,889 and $0 were recorded for the years ended December 31, 2003, 2002 and 2001,
respectively.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>7. Revenue and Cost Recognition</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Revenue and costs are recognized at the time the natural gas is processed and the natural gas and natural gas liquids are delivered at the tailgate of the plant to market. For 2003 and 2002, approximately 20% of the Company&#146;s natural gas supply comes from one supplier.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>8. Income Taxes</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, <i>Accounting for Income Taxes </i>(SFAS 109), which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred
income tax assets and liabilities are computed for those differences that have future tax consequences using currently enacted tax laws and future rates that will apply to the periods in which they are expected to affect taxable income.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">At December 31, 2003 and 2002, the Company had net noncurrent deferred tax assets and net noncurrent deferred tax liabilities of approximately $1,644 and $2,063, respectively. The deferred tax liabilities are primarily generated due to the difference between
depreciation calculated for financial reporting and income tax purposes. The deferred tax assets relate primarily to net operating loss carryforwards and recognition of an impairment loss for financial reporting purposes in 2002. At December 31, 2003, the Company has
net operating loss carryforwards of approximately $14,700, which will begin to expire in 2022. No valuation allowance has been recorded against the Company&#146;s deferred tax asset as management expects future taxable income will be sufficient to utilize the Company&#146;s
net operating loss carryforwards.</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-97</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf98"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Spectrum Field Services, Inc.</b><br>
<b>Notes to financial statements</b><br>
<b>December 31, 2003, 2002 and 2001</b><br>
(in thousands, except share data)</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company&#146;s 2003 income tax benefit consists of a current income tax benefit of $614 and a deferred income tax benefit of $3,689. The Company&#146;s 2002 income tax benefit consists of a current income tax benefit of $696 and a deferred income tax expense of $196. The
Company&#146;s 2001 income tax provision consists of a current income tax benefit of $193 and a deferred income tax expense of $1,870. The effective tax rate differs from the enacted federal income tax rate primarily due to state income taxes and tax credits.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>9. Use of Estimates in the Preparation of Financial Statements</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates include, but are not limited to, estimating accrued revenue and producer payments, evaluating the
realizability of long-lived assets, and estimating the fair value of derivatives. Actual results could differ from those estimates.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>10. Reclassifications</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Certain reclassifications of previously reported amounts for 2002 and 2001 have been made to conform with the 2003 presentation format. These reclassifications had no impact on net loss.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>11. Concentration of Credit Risk</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company extends trade credit to various companies in the natural gas and natural gas liquids market in the normal course of business. In 2003 and 2002, respectively, the Company had two primary customers that accounted for approximately 87% and 96% of the
Company&#146;s sales and 80% and 83% of the Company&#146;s accounts receivable at December 31, 2003 and 2002. During 2001, the Company had three primary customers (one of which was a shareholder of the Company through February 28, 2001). In 2001, sales to three
customers accounted for approximately 97% of the Company&#146;s sales. Management believes the credit worthiness of its customers mitigates the concentration risk.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>12. Derivative Instruments</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company applies the provisions of Statement of Financial Accounting Standards No. 133, <i>Accounting for Derivative Instruments and Hedging Activities </i>(SFAS 133). SFAS 133 requires each derivative instrument to be recorded in the balance sheet as either an asset or
liability measured at fair value. Changes in a derivative&#146;s fair value are recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative&#146;s gains and losses to offset related results on the hedged
item in the statement of operations. Companies must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>13. Restricted Common Stock</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company has granted restricted common stock to certain key employees. The Company applies fixed plan accounting in accordance with Accounting Principles Board Opinion No. 25, <i>Accounting for Stock Issued to Employees. </i>Accordingly, the Company records the
issuance of restricted stock as an increase to equity with a corresponding offset to deferred compensation (presented as a reduction in equity on the balance sheet). The deferred compensation is reduced by recording compensation expense over the vesting period.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-98</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf99"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Spectrum Field Services, Inc.</b><br>
<b>Notes to financial statements</b><br>
<b>December 31, 2003, 2002 and 2001</b><br>
(in thousands, except share data)</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>14. Recently Issued Accounting Pronouncements</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company accounts for expected future costs associated with its obligation to perform site reclamation and dismantle facilities of abandoned plants and pipelines under Statement of Financial Accounting Standards (SFAS) No. 143, <i>Accounting for Asset Retirement
Obligations. </i>If a reasonable estimate of the fair value of an abandonment obligation can be made, SFAS 143 requires the Company to record a liability (an asset retirement obligation or ARO) on the balance sheets in other noncurrent liabilities and to capitalize the asset
retirement cost in the period in which the retirement obligation is incurred. In general, the amount of an ARO and the associated costs capitalized will be equal to the estimated future cost to satisfy the abandonment obligation using current prices after discounting the
future cost back to the date that the abandonment obligation was incurred using the credit-adjusted risk-free rate for the Company. After recording these amounts, the ARO will be accreted to its future estimated value using the credit-adjusted risk-free rate and the
additional capitalized costs will be depreciated on a straight-line basis over the productive life of the related assets. The Company has not recorded an asset retirement obligation as of December 31, 2003, as management believes the amount to be immaterial to the
Company&#146;s financial statements.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">In April 2002, the FASB issued SFAS No. 145, <i>Recission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections. </i>Under the provisions of SFAS No. 145, gains and losses from the extinguishment of debt generally will no
longer be classified as extraordinary items in the statement of operations. The provisions of SFAS No. 145 related to the extinguishment of debt become effective for the Company beginning in 2003. The adoption did not have a material impact on the Company&#146;s
financial position or results of operations.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">In June 2002, the FASB issued SFAS No. 146, <i>Accounting for Costs Associated with Exit or Disposal Activities, </i>which requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit
or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity. SFAS 146 is effective for
fiscal years beginning after December 31, 2002, with early application encouraged. The Company adopted this standard January 1, 2003. The adoption did not have a material impact on the Company&#146;s financial position or results of operations.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">In December 2002, the FASB issued SFAS No. 148, <i>Accounting for Stock-Based Compensation &#150; Transition and Disclosure &#150; an amendment of FAS 123. </i>The standard provides additional transition guidance for companies that elect to voluntarily adopt the accounting
provisions of SFAS No. 123, Accounting For Stock-Based Compensation. SFAS No. 148 does not change the provisions of SFAS No. 123 that permit entities to continue to apply the intrinsic value method of APB 25, Accounting for Stock Issued to Employees. The
Company currently has no stock options outstanding to employees and already applies the accounting provisions of SFAS No. 123 to the stock options discussed in Note H. Accordingly, the adoption of SFAS No. 148 did not have a material impact on the Company&#146;s
financial position or results of operations.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">In November 2002, the FASB issued Interpretation No. 45 (FIN 45), <i>Guarantees, Including Indirect Guarantees of Indebtedness of Others. </i>FIN 45 requires that upon the issuance of guarantees, the guarantor must recognize a liability for the fair value of the obligations it
assumes under the guarantee. Liability recognition is required on a prospective basis for guarantees that are made or modified after December 31, 2002. The adoption of FIN 45 had no impact on the Company&#146;s financial position or results of operations.</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-99</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf100"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Spectrum Field Services, Inc.</b><br>
<b>Notes to financial statements</b><br>
<b>December 31, 2003, 2002 and 2001</b><br>
(in thousands, except share data)</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">In January 2003, the FASB issued Interpretation No. 46 (FIN 46), <i>Consolidation of Variable Interest Entities, an interpretation of ARB 51. </i>The primary objectives of FIN 46 are to provide guidance on the identification of entities for which control is achieved through means
other than through voting rights (variable interest entities or VIEs) and how to determine when and which business enterprise should consolidate the VIE. This new model for consolidation applies to an entity which either (1) the equity investors, if any, do not have a
controlling financial interest or (2) the equity investment at risk is insufficient to finance that entity&#146;s activities without receiving additional subordinated financial support from other parties. The adoption of this standard did not have any impact on the Company&#146;s
financial position or results of operations.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">In April 2003, the FASB issued Statement No. 149, <i>Amendment of Statement 133 on Derivative Instruments and Hedging Activities. </i>SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments embedded in other contracts (collectively
referred to as derivatives) and for hedging activities under SFAS 133. SFAS 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. The Company adopted SFAS 149 as of July 1, 2003. The
adoption of SFAS 149 did not have a material impact on the Company&#146;s financial position or results of operations.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>C &#151; DERIVATIVE INSTRUMENTS</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company entered into certain financial swap instruments, some of which settled during the years ended December 31, 2003 and 2002, that are designated as cash flow hedging instruments in accordance with SFAS 133. The maturities of the instruments outstanding
at December 31, 2003, are less than one year. The swap instruments are contractual agreements to exchange obligations of money between the buyer and seller of the instruments as natural gas volumes during the pricing period are sold. The swaps are tied to a set fixed
price for the seller and floating price determinants for the buyer priced on certain indices at the end of the relevant trading period. The Company entered into these instruments to hedge the forecasted gas plant residue sales to variability in expected future cash flows
attributable to changes in natural gas prices. For the swaps that were settled during the year ended December 31, 2003, the Company reclassified into earnings a before-tax loss of $2,086, that was previously reported in accumulated other comprehensive loss. For the
swaps that were settled during the year ended December 31, 2002, the Company reclassified into earnings a before-tax gain of $12, that was previously reported in accumulated other comprehensive income (loss).</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company entered into several swaps that were designed to hedge natural gas liquids prices during 2003 and 2002 that did not meet specific hedge accounting criteria. The Company recognized a before-tax loss of $254 and $189 related to these swaps during the years
ending December 31, 2003 and 2002, respectively.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-100</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf101"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Spectrum Field Services, Inc.</b><br>
<b>Notes to financial statements</b><br>
<b>December 31, 2003, 2002 and 2001</b><br>
(in thousands, except share data)</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>D &#151; LONG-TERM DEBT</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">A summary of long-term debt at December 31 is as follows:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2003</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>2002</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Senior Term Note payable to a bank, interest payable quarterly at<br>
LIBOR or the bank&#146;s reference rate plus an applicable margin based<br>
on the Company&#146;s leverage ratio (interest rate of 4.46% at<br>
December 31, 2003), quarterly principal payments of approximately<br>
$1,000 through June 30, 2005, with the remaining balance due July<br>
2005</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">18,850</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="4%"><font face="serif" size="2">21,850</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Advancing Term Loan payable to a bank entered into July 1, 2003,<br>
interest payable quarterly at LIBOR plus 3.25% (interest rate of 4.71%<br>
at December 31, 2003), quarterly principal payments of $230 through<br>
June 30, 2005, with balance due July 2005</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">5,170</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Subordinated notes payable to shareholders, interest payable quarterly at<br>
8.00%, outstanding principal due in July 2007</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,603</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">14,415</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">$12,000 revolving line of credit, interest payable monthly at PRIME plus<br>
..75% or the bank&#146;s reference rate plus an applicable margin based on<br>
the Company&#146;s leverage ratio (interest rate of 4.75% at December 31,<br>
2003), outstanding principal due in July 2005</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,208</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1,650</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Other</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">281</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">361</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">44,112</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">38,276</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Less- current maturities</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">4,995</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3,076</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">39,117</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">35,200</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Substantially all of the Company&#146;s assets are pledged under these loan agreements. The terms of these agreements place certain financial and operating covenants on the Company, the most restrictive being a debt-to-capitalization ratio and a fixed charge ratio. The
Company was in compliance with all covenants at December 31, 2003.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">At December 31, 2003, the Company entered into an agreement to modify the terms of the revolving line of credit. Per this agreement, the amount available to the Company under the line of credit is increased to $12,000. However, if the Company does not consummate a
sale of all or substantially all of the Company&#146;s assets by June 30, 2004, the total amount available under the line of credit is reduced to $6,000 and any amount owed by the Company at June 30, 2004, over $6,000 must be repaid to the bank in an amount not to exceed
$1,800. The remaining balance will be due in July 2005.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">On July 23, 2002, the Company borrowed an additional $3,515 and issued subordinated notes to shareholders. In 2003 and 2002, the Company issued additional subordinated notes to its shareholders in lieu of making cash interest payments. Such notes totaled $1,188 and
$946 during 2003 and 2002, respectively. The transactions are reflected as noncash financing activities on the Company&#146;s statement of cash flows.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-101</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf102"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Spectrum Field Services, Inc.</b><br>
<b>Notes to financial statements</b><br>
<b>December 31, 2003, 2002 and 2001</b><br>
(in thousands, except share data)</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The future maturities of long-term debt at December 31, 2003, are as follows:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2004</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">4,995</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2005</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">23,394</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">81</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2007</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">15,642</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">44,112</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>E &#150; COMMITMENTS AND CONTINGENCIES</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>1. Leases</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company&#146;s corporate activities are conducted from leased office facilities located in Tulsa, Oklahoma. The Company also leases certain machinery, equipment and automobiles used in its operations.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Future minimum rental payments required under noncancelable operating leases for each of the years ended December 31 are as follows:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2004</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="2%"><font face="serif" size="2">80</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2005</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">3</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">2006</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">84</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><hr noshade size="2"></td>
    <td><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Rental expense was approximately $399, $444 and $496 for the years ended December 31, 2003, 2002 and 2001, respectively.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>2. Letters of Credit</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">At December 31, 2003, the Company has four outstanding letters of credit in favor of various parties totaling $1,792. The letters of credit expire at various times in 2004 and 2005.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>3. Legal Proceedings</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">At December 31, 2003, the Company is party to various legal proceedings incidental to its business. Certain claims have been filed or are pending against the Company. In one matter, the Company has been named as a co-defendant in a lawsuit in which certain royalty
owners of the Company&#146;s co-defendant allege that the Company has been purchasing gas at below market prices. The gas involved in this legal proceeding represents a very small portion of the gas purchased by the Company. The Company plans on defending itself
vigorously. If the plaintiffs are ultimately successful, the Company believes it has the ability to seek indemnification from its co-defendant. As the lawsuit is in preliminary stages, management is unable to assess the likelihood of an unfavorable outcome or estimate the
amounts, if any, that will ultimately be payable. Accordingly, no accrual has been made in the Company&#146;s balance sheet as of December 31, 2003. In the opinion of management, the resolution of various legal proceedings will not have a material effect on the financial
position or results of operations of the Company.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">On November 10, 2003, the Company settled a lawsuit filed against the Company by a former shareholder. The settlement agreement requires the Company to pay the former shareholder $1,820. At December 31, 2003, the Company has recorded an accrual of $1,820,
which is included in accounts </font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-102</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf103"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Spectrum Field Services, Inc.</b><br>
<b>Notes to financial statements</b><br>
<b>December 31, 2003, 2002 and 2001</b><br>
(in thousands, except share data)</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">payable in the balance sheet and other expense in the statement of operations. The amount was paid in January 2004.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">On March 9, 2004, the Oklahoma Tax Commission (OTC) filed a petition against the Company alleging that the Company underpaid gross production taxes beginning in June 2000. The OTC is seeking a settlement of $5,000 plus interest and penalties. The Company plans
on defending itself vigorously. As the lawsuit is in preliminary stages, management is unable to assess the likelihood of an unfavorable outcome or estimate the amounts, if any, that will ultimately be payable. Accordingly, no accrual has been made in the Company&#146;s
balance sheet as of December 31, 2003.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>4. Employment Agreements</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company had outstanding agreements with two key employees to provide severance payments to those employees upon the occurrence of certain triggering events, including the sale of the Company&#146;s assets, a merger, or liquidation of the Company. Termination of
both employees will result in a liability of between $142 and $229.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>F &#151; COMMON AND PREFERRED STOCK</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Each share of Series A preferred stock is due quarterly dividends payable in arrears at a rate of 8% per Series A share beginning September 30, 2000. During 2001, the Company paid $322 of dividends to preferred stockholders representing dividends for the first two
quarters of the year. Dividends for the last two quarters of 2001 and all of 2002 and 2003 have been declared but not paid and are recorded as dividends payable in the balance sheet. Additionally, each share is redeemable for cash at the option of the shareholder upon a
change of control at a price equal to the original price paid for the shares plus any accrued and unpaid dividends. The shares of Series A preferred stock shall, with respect to dividend rights and rights upon liquidation, receive preference over any common stock.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>1. Incentive Stock Plan and Stock Option Plan</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company adopted the Spectrum Field Services, Inc. 2000 Incentive Stock Plan (the Plan) in order to attract, motivate and retain quality employees and to encourage valued employees to have a proprietary interest in the Company. Under the Plan, the Company may
issue to selected employees Non-Qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Units or Performance Shares, or Phantom Stock Rights. The Company has reserved 222,222 shares of common stock for issuance
under the Plan.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">During 2000, the Company granted key employees 211,110 shares of restricted common stock valued at $665 when issued ($3.15 per share), as determined by management. The employees vest in the restricted stock ratably over a four-year period beginning in 2001. As
vesting occurs, the Company will reverse the deferred compensation and charge compensation expense equal to the estimated fair value of the vested shares at the time of the grant.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">During 2002, the Company entered into agreements with three officers holding unvested restricted common shares. According to the agreements, the Company accelerated the vesting of some shares and repurchased all of the officers&#146; vested shares for $320. In addition,
all remaining unvested shares were cancelled for those officers. The Company reversed $140 of deferred compensation related to the cancellation of the unvested shares in 2002 as a result.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">During January 2003, the Company granted 10,000 shares of restricted common stock to an employee. The stock at the time of grant was valued at $3.15, which represented management&#146;s estimate of the fair value of the restricted stock on the grant date. This grant vests
75% in 2003 and the remaining 25% in 2004.</font></div></td>
  </tr>
</table>
<p>&nbsp;</p>
<p align="center"><font face="serif" size="2">F-103</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf104"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Spectrum Field Services, Inc.</b><br>
<b>Notes to financial statements</b><br>
<b>December 31, 2003, 2002 and 2001</b><br>
(in thousands, except share data)</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company recorded $59, $289 and $166 of expense in 2003, 2002 and 2001, respectively, related to the vesting of restricted common stock. As of December 31, 2003, 54,444 shares of restricted common stock are outstanding.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">In 2002, the Company granted certain stock options to two key employees of the Company. The options will vest if a qualified triggering event occurs. A triggering event is determined to be the earlier occurrence of (i) the date of an initial public offering of the Company&#146;s
common stock, (ii) the sale of all or substantially all of the assets of the Company or (iii) immediately before (a) the sale of all the outstanding common stock of the Company by the holders thereof or (b) the merger of the Company or similar business combination with
another entity in which the Company is not the survivor.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The number of options granted under the two agreements was 111,110. At December 31, 2003 and 2002, no options were vested as a triggering event had not occurred. The exercise price of the options is $1.00 per share. The options granted are accounted for using fixed
plan accounting in accordance with APB No. 25 as management determined that both the exercise price and the number of shares under option that will eventually vest were known at the grant date. The intrinsic value of the options was determined to be $239 at the
grant date based on management&#146;s best estimate of the fair value of the Company&#146;s shares at the grant date. The Company records compensation expense over the expected service period. As of December 31, 2003, the Company has recorded cumulative compensation
expense of $74. The remaining $165 of compensation expense will be recorded over the remaining service period or when a triggering event occurs which causes the options to immediately vest.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The effect of Statement of Financial Standards No. 123, <i>Accounting for Stock Based Compensation </i>(SFAS 123) is not material. Therefore, the Company has made no disclosure of the pro forma net income as if SFAS 123 had been adopted. All options granted under the
agreements expire after ten years.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">Transactions in stock options are summarized as follows:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  </table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Shares</b><br>
<b>Under Option</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Exercise Price</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Outstanding at December 31, 2001</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">&#151;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="6%"><font face="serif" size="2">&#151;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Granted</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">111,110</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1.00</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Exercised</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cancelled</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Outstanding at December 31, 2002</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">111,110</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1.00</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Granted</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%"><font face="serif" size="2">Exercised</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><div style="margin-left:3%"><font face="serif" size="2">Cancelled</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&#151;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">Outstanding at December 31, 2003</font></div></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">111,110</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">1.00</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-104</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf105"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Spectrum Field Services, Inc.</b><br>
<b>Notes to financial statements</b><br>
<b>December 31, 2003, 2002 and 2001</b><br>
(in thousands, except share data)</font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The following is a summary of stock options outstanding as of December 31, 2003:</font></div></td>
  </tr>
 <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Options Outstanding</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="5" align="center" valign="bottom"><font face="serif" size="1"><b>Options Exercisable</b></font><br>
<hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="1"><b>Exercise</b><br>
<b>Price</b></font></div></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Number</b><br>
<b>of</b><br>
<b>Shares</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Remaining</b><br>
<b>Contractual</b><br>
<b>Life</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Number</b><br>
<b>of</b><br>
<b>Shares</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td colspan="2" align="center" valign="bottom"><font face="serif" size="1"><b>Exercise</b><br>
<b>Price</b></font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top">
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
    <td><hr noshade size="1"></td>
    <td><hr noshade size="1"></td>
    <td><font face="serif" size="1">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><div style="margin-left:3%; text-indent:-3%"><font face="serif" size="2">$1.00</font></div></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">111,110</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="10%"><font face="serif" size="2">9.0</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td width="1%"><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">&#151;</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
    <td valign="bottom" width="1%"><font face="serif" size="2">$</font></td>
    <td align="right" valign="bottom" width="8%"><font face="serif" size="2">1.00</font></td>
    <td width="2%"><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="1"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#eeeeee">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td align="right" valign="bottom"><font face="serif" size="2">111,110</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td><font size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td colspan="2" valign="bottom"><hr noshade size="2"></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
    <td><font face="serif" size="2">&nbsp;</font></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>2. Phantom Unit Plan</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">In August 2001, the Company adopted the Employee Participation Unit Plan (the EPU Plan). Under the EPU Plan, the Company was authorized to issue 167,190 phantom units to employees from time to time at the discretion of the Board of Directors. Phantom units are
designed to allow holders of the phantom units to share in the value of the Company with the common shareholders. Holders of phantom units had no voting or other privileges typically available to common shareholders.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">During 2002 and 2001, the Company granted 151,800 phantom units to employees. All units granted vested ratably over a five-year period. The participants of the EPU Plan receive benefits equal to the estimated fair value of their vested units only upon normal
retirement, disability or a change of control. The form of the benefits to be paid under the EPU Plan was at the discretion of the Board of Directors.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The EPU Plan met the criteria for variable plan accounting under the provisions of APB 25. Accordingly, at each reporting period, compensation cost was measured based on the estimated fair value of the vested phantom units. Compensation expense (benefit) was
recorded to the extent that the fair value of vested units increased (decreased) from the previous reporting period. The Company recorded $112 of compensation expense related to the outstanding phantom units during 2001. During 2002, the Company cancelled the EPU
Plan and paid $54 to the participants of the EPU Plan, which was recorded as expense. Additionally, the Company reversed the previously recognized compensation expense of $112.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2"><b>3. Shareholders&#146; Commitment</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">On March 23, 2001, two shareholders of the Company signed an agreement committing to purchase up to $6,500 of additional debt or equity securities if requested to do so by the holders of the senior debt. The agreements were amended in 2003 and 2002 to $5,500 and
$3,000, respectively. Such request can only occur if an event of default (as defined in the credit agreement) has occurred and is continuing. As of December 31, 2003, this commitment was $4,500 and expires on June 30, 2004.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">On July 23, 2002, the Company received additional capitalization from the equity owners. The Company issued 545,529 shares of common stock ($.01 par value) and 2,969,471 shares of Series A preferred stock ($.01 par value) in exchange for $3,514 of cash. The Company
also issued additional subordinated notes to certain shareholders of $3,515. The Company pays a commitment fee to the shareholders related to the agreements. Fees paid to the shareholders totaled approximately $110, $60 and $130 in 2003, 2002 and 2001.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-105</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pf106"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font face="serif" size="2"></font><font face="serif" size="2"><b>Spectrum Field Services, Inc.</b><br>
<b>Notes to financial statements</b><br>
<b>December 31, 2003, 2002 and 2001</b><br>
(in thousands, except share data)</font></p>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr valign="bottom">
    <td><div align="left"><font face="serif" size="2"><b>G &#150; BENEFIT PLANS</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">The Company sponsors a defined contribution retirement plan. The Company makes discretionary matching contributions to the plan. The Company expensed contributions of approximately $84, $151 and $181 for the years ended December 31, 2003, 2002 and 2001,
respectively.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>H &#150; CHANGE IN ACCOUNTING ESTIMATE</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">In December 2002, the Company began a project to replace certain gas-powered compressors with electric-powered compressors at its natural gas processing plant in Velma, Oklahoma. The project was completed in October 2003. In 2002, management revised the
estimated useful lives of the previous gas-powered compressors to reflect usage of those assets through July 2003. The Company treated the change in useful life as a change in accounting estimate. Accordingly, the Company revised its depreciation calculation on a
prospective basis from the date the project was probable, which was November 30, 2002. As a result, the Company recorded additional depreciation expense of $1,342 during 2002 and depreciated the remaining net book value of $9,868 in 2003. Additionally, the
Company excelerated depreciation in 2003 on certain other compressors that were not originally part of this project. This resulted in additional depreciation of $497.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">In April 2003, the Company began a project to replace the Sulphur Recovery Unit (SRU) at its natural gas processing plant in Velma, Oklahoma. Management revised the estimated useful life of the SRU to reflect usage of the asset through October 2003. The Company
treated the change in useful life as a change in accounting estimate. As a result, the Company depreciated the remaining net book value of $3,287 in 2003. The project was completed in March 2004.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>I &#150; RELATED PARTY TRANSACTIONS</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">During 2003, the Company had sales to an affiliate of approximately $687, which is recorded as accrued sales at December 31, 2003. During 2002, there were no sales to affiliates.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">During part of 2001, one of the Company&#146;s primary customers was a shareholder. All transactions between the Company and the shareholder were at prevailing market rates. During 2001, the Company had sales to the shareholder of approximately $15,000. At December
31, 2001, no amounts were due from the shareholder.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">During 2003, 2002 and 2001, the Company had sales of condensate to an affiliate of approximately $453, $1,663 and $2,100, respectively.</font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td><div align="left"><font face="serif" size="2"><b>J &#150; SUBSEQUENT EVENT</b></font></div></td>
  </tr>
</table>
<table width="100%" align="center" border="0" cellpadding="0" cellspacing="0">
  <tr>
    <td>&nbsp;</td>
    <td>&nbsp;</td>
  </tr>
  <tr valign="top">
    <td width="3%"><font face="serif" size="2">&nbsp;</font></td>
    <td><div align="left"><font face="serif" size="2">On June 10, 2004, the Company, along with Energy Spectrum Partners II LP, Energy Spectrum Partners III LP and other various sellers, entered into a Securities Purchase Agreement with Atlas Pipeline Operating Partnership, L.P. to sell the outstanding capital stock of
the Company for a total purchase price of $104,000 adjusted for changes in net working capital, less amounts owed for long-term debt and adjusted for other transaction costs.</font></div></td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">F-106</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pa1"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="right"><font face="serif" size="2"></font><font face="serif" size="2"><b>APPENDIX A</b></font></p>
<p align="center"><font face="serif" size="2"><b>AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP  OF  ATLAS PIPELINE HOLDINGS, L.P.</b></font></p>
<p align="center"><font face="serif" size="2">A-1</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pbaccov"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></p>
<p align="left"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></p>
<p align="center"><font face="serif" size="5"><b>ATLAS PIPELINE HOLDINGS, L.P.</b></font></p>
<p align="center"><font face="serif" size="4"><b>3,600,000 Common Units</b></font></p>
<p align="center"><font face="serif" size="4"><b>Representing Limited Partner Interests</b></font></p>
<hr width="200" size="1" noshade>
<p align="center"><font face="serif" size="2">PROSPECTUS</font></p>
<p align="center"><font face="serif" size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 2006</font></p>
<hr width="200" size="1" noshade>
<p align="center"><font face="serif" size="5"><b>L</b><b><small>EHMAN</small> B</b><b><small>ROTHERS</small></b></font></p>
<p align="left"><font face="serif" size="2">&nbsp;</font></p>
<div style="page-break-before:always"></div>
<hr noshade align="center" width="100%" size="2">


<a name="pii1"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font size="2" face="serif"><b>PART II</b></font></p>
<p align="center"><font size="2" face="serif"><b>INFORMATION NOT REQUIRED IN THE PROSPECTUS</b></font></p>
<table width="100%"  border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="8%"><font size="2" face="serif"><b>Item 13.</b></font></td>
    <td><font size="2" face="serif"><b>Other Expenses of Issuance and Distribution.</b></font></td>
  </tr>
</table>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Set
    forth below are the expenses (other than underwriting discounts and commissions)
    expected to be incurred in connection with the issuance and distribution
    of the securities registered hereby. With the exception of the Securities
    and Exchange Commission registration fee, the NASD filing fee, the amounts
set forth below are estimates.</font></p>
<table width="80%" border="0" align="center" cellpadding="0" cellspacing="0">
<tr valign="top">
<td align="left" valign="bottom"><font size="2" face="serif">SEC registration fee</font></td>
<td width="2%" align="center"><font size="2" face="serif">$</font></td>
<td width="12%" align="right"><div align="right"><font size="2" face="serif">11,074.50</font></div></td>
<td width="2%" align="right">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" valign="bottom"><font size="2" face="serif">NASD filing fee</font></td>
<td align="center">&nbsp;</td>
<td align="left"><div align="right"><font size="2" face="serif">&nbsp;10,436.00</font></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" valign="bottom"><font size="2" face="serif">Printing and engraving expenses</font></td>
<td align="center">&nbsp;</td>
<td align="left"><div align="right"><font size="2" face="serif">&nbsp;275,489.50</font></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" valign="bottom"><font size="2" face="serif">Fees and expenses of legal counsel</font></td>
<td align="center">&nbsp;</td>
<td align="left"><div align="right"><font size="2" face="serif">&nbsp;425,000.00</font></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" valign="bottom"><font size="2" face="serif">Accounting fees and expenses</font></td>
<td align="center">&nbsp;</td>
<td align="left"><div align="right"><font size="2" face="serif">&nbsp;400,000.00</font></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" valign="bottom"><font size="2" face="serif">Transfer agent and registrar fees</font></td>
<td align="center">&nbsp;</td>
<td align="left"><div align="right"><font size="2" face="serif">&nbsp;&nbsp;3,000.00</font></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" valign="bottom"><font size="2" face="serif">New York Stock Exchange listing fee</font></td>
<td align="center">&nbsp;</td>
<td align="left"><div align="right"><font size="2" face="serif">&nbsp;150,000.00</font></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left" valign="bottom"><font size="2" face="Times New Roman, Times, serif">Structuring Fee</font></td>
  <td align="center">&nbsp;</td>
  <td align="left"><div align="right"><font size="2" face="serif">*</font></div></td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" valign="bottom"><font size="2" face="serif">Miscellaneous</font></td>
<td align="center">&nbsp;</td>
<td align="left"><div align="right"><font size="2" face="serif">&nbsp;</font></div></td>
<td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left" valign="bottom">&nbsp;</td>
  <td align="center"><hr size="1" noshade></td>
  <td align="right"><hr align="right" size="1" noshade></td>
  <td align="right">&nbsp;</td>
</tr>
<tr valign="top">
<td align="left" valign="bottom"><font size="2" face="serif">Total</font></td>
<td align="center"><font size="2" face="serif">$</font></td>
<td align="right"><div align="right"></div></td>
<td align="right">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left" valign="bottom">&nbsp;</td>
  <td align="center"><hr size="2" noshade></td>
  <td align="right"><hr size="2" noshade></td>
  <td align="right">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left" valign="bottom"><hr align="left" width="15%" size="1" noshade></td>
  <td align="center">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="left" valign="bottom"><font size="2" face="serif">*To be filed by
    amendment.</font></td>
  <td align="center">&nbsp;</td>
  <td align="right">&nbsp;</td>
  <td align="right">&nbsp;</td>
</tr>
</table>
<br>
<table width="100%"  border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="8%"><font size="2" face="serif"><b>Item 14.</b></font></td>
    <td><font size="2" face="serif"><b>Indemnification of Officers and Members
    of Our Board of Directors.</b></font></td>
  </tr>
</table>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
    section of the prospectus entitled &#8220;The
    Partnership Agreement of Atlas Pipeline Holdings, L.P.&#150;Indemnification&#8221; discloses
    that we will generally indemnify officers, directors and affiliates of the
    general partner to the fullest extent permitted by the law against all losses,
    claims, damages or similar events and is incorporated herein by this reference.
    Reference is also made to Section __ of the Underwriting
    Agreement filed as an exhibit to this registration statement in which Atlas
    and certain of its affiliates will agree to indemnify the underwriters
    against certain liabilities, including liabilities under the Securities Act
    of 1933, as amended, and to contribute to payments that may be required to
    be made in respect of these liabilities.  Subject
to any terms, conditions or restrictions set forth in the partnership agreement,
Section&nbsp;17-108 of the Delaware Revised Uniform Limited Partnership Act empowers
a Delaware limited partnership to indemnify and hold harmless any partner or
other persons from and against all claims and demands whatsoever.</font></p>
<table width="100%"  border="0" cellspacing="0" cellpadding="0">
  <tr>
    <td width="8%"><font size="2" face="serif"><b>Item 15.</b></font></td>
    <td><font size="2" face="serif"><b>Exhibits.</b></font></td>
  </tr>
</table>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The
following documents are filed as exhibits to this registration statement:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" align="center" border="0">
  <tr valign="top">
    <td align="center"><font size="1" face="serif"><b>Exhibit</b></font><br>
        <font size="1" face="serif"><b>Number</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="1" face="serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center" valign="bottom"><font size="1" face="serif"><b>Description</b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><font size="2" face="serif">1.1</font><font size="2" face="serif">*</font></td>
    <td width="2%" align="left">&nbsp;</td>
    <td width="1%" align="right">&nbsp;</td>
    <td width="5%" align="center"><font size="2" face="serif">&#151;</font></td>
    <td width="2%" align="left">&nbsp;</td>
    <td width="1%" align="right">&nbsp;</td>
    <td width="78%" align="left"><font size="2" face="serif">Form of Underwriting
        Agreement</font></td>
    <td width="2%" align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center"><font size="2" face="serif"> 3.1*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Certificate of Limited Partnership
        of Atlas Pipeline Holdings, L.P.</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center" bgcolor="#ffffff"><font size="2" face="serif"> 3.2*</font></td>
    <td align="left" bgcolor="#ffffff">&nbsp;</td>
    <td align="right" bgcolor="#ffffff">&nbsp;</td>
    <td align="center" bgcolor="#ffffff"><font size="2" face="serif">&#151;</font></td>
    <td align="left" bgcolor="#ffffff">&nbsp;</td>
    <td align="right" bgcolor="#ffffff">&nbsp;</td>
    <td align="left" bgcolor="#ffffff"><font size="2" face="serif">Amended and
        Restated Agreement of Limited Partnership of Atlas
        Pipeline Holdings, L.P.</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center" bgcolor="#ffffff"><font size="2" face="serif">3.3*</font></td>
    <td align="left" bgcolor="#ffffff">&nbsp;</td>
    <td align="right" bgcolor="#ffffff">&nbsp;</td>
    <td align="center" bgcolor="#ffffff"><font size="2" face="serif">&#151;</font></td>
    <td align="left" bgcolor="#ffffff">&nbsp;</td>
    <td align="right" bgcolor="#ffffff">&nbsp;</td>
    <td align="left" bgcolor="#ffffff"><font size="2" face="Times New Roman, Times, serif">Certificate
    of Formation of Atlas Pipeline Holdings GP, LLC</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center" bgcolor="#ffffff"><font size="2" face="serif">3.4*</font></td>
    <td align="left" bgcolor="#ffffff">&nbsp;</td>
    <td align="right" bgcolor="#ffffff">&nbsp;</td>
    <td align="center" bgcolor="#ffffff"><font size="2" face="serif">&#151;</font></td>
    <td align="left" bgcolor="#ffffff">&nbsp;</td>
    <td align="right" bgcolor="#ffffff">&nbsp;</td>
    <td align="left" bgcolor="#ffffff"><font size="2" face="Times New Roman, Times, serif">Amended
        and Restated Limited Liability Company Agreement of Atlas Pipeline Holdings
    GP, LLC</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center" bgcolor="#ffffff"><font size="2" face="serif">3.5*</font></td>
    <td align="left" bgcolor="#ffffff">&nbsp;</td>
    <td align="right" bgcolor="#ffffff">&nbsp;</td>
    <td align="center" bgcolor="#ffffff"><font size="2" face="serif">&#151;</font></td>
    <td align="left" bgcolor="#ffffff">&nbsp;</td>
    <td align="right" bgcolor="#ffffff">&nbsp;</td>
    <td align="left" bgcolor="#ffffff"><font size="2" face="serif">Second Amended
        and Restated Agreement of Limited Partnership of Atlas Pipeline Partners,
        L.P.</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center"><font size="2" face="serif">3.6*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Form of Contribution Agreement</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center"><font size="2" face="serif">5.1*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Opinion of Vinson&nbsp;&amp; Elkins
        L.L.P. as to the legality of the securities being registered</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><font size="2" face="serif">8.1*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Opinion of Vinson&nbsp;&amp; Elkins
        L.L.P. relating to tax matters</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><font size="2" face="serif">10.1*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">Credit
        Agreement among Atlas America, Inc., Resource America, Inc., Wachovia
        Bank, National Association, and other banks party thereto,
    dated March 12, 2004</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><font size="2" face="serif">10.2*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">First Amendment to March 12, 2004 Credit Agreement, dated
    July 10, 2004</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center"><font size="2" face="serif">10.3*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Revolving Credit and Term Loan
        Agreement, dated as of April 14, 2005 among Atlas Pipeline Partners,
        L.P., Wachovia Bank, National Association and the other parties thereto</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center"><font size="2" face="serif">10.4*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">First Amendment to Revolving
        Credit and Term Loan Agreement, dated as of April 14, 2005, among Atlas
        Pipeline Partners, L.P., Wachovia Bank National Association and the other
        parties thereto</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center"><font size="2" face="serif">10.5*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Master Natural Gas Gathering
        Agreement among Atlas Pipeline Partners, L.P., Atlas Pipeline Operating
        Partnership, Atlas America, Inc., Resource Energy, Inc. and Viking Resources
        Corporation</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center"><font size="2" face="serif">10.6*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Omnibus Agreement among Atlas
        Pipeline Partners, L.P., Atlas Pipeline Operating Partnership, Atlas
        America, Inc., Resource Energy, Inc. and Viking Resources Corporation</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><font size="2" face="serif">21.1*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">List of Subsidiaries of Atlas
        Pipeline Holdings, L.P.</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center"><font size="2" face="serif">23.1&nbsp;&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Consent of Grant Thornton
          LLP</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><font size="2" face="serif">23.2&nbsp;&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Consent of Ernst&nbsp;&amp; Young
        LLP </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><font size="2" face="serif">23.3*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Consent of Vinson&nbsp;&amp; Elkins
        L.L.P. (contained in Exhibit&nbsp;5.1)</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center"><font size="2" face="serif">23.4*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Consent of Vinson&nbsp;&amp; Elkins
        L.L.P. (contained in Exhibit&nbsp;8.1)</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><font size="2" face="serif">24.1*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Powers of Attorney (contained
        on page&nbsp;II-3)</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><hr size="1" noshade></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td colspan="7" align="left"><font size="2" face="serif">* To be filed
    by amendment.</font></td>
    <td align="left">&nbsp;</td>
  </tr>
</table>
<p align="center"><font face="serif" size="2">II-1</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pii2"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<div align="left">
  <table width="100%"  border="0" cellspacing="0" cellpadding="0">
    <tr>
      <td width="8%"><font size="2" face="serif"><b>Item 16.</b></font></td>
      <td><font size="2" face="serif"><b>Undertakings.</b></font></td>
    </tr>
  </table>
<font size="2" face="serif"></font></div>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.</font></p>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.  In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.</font></p>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned registrant hereby undertakes that:</font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td width="3%"><font size="2" face="serif">(1)</font></td>
<td align="left">
<font size="2" face="serif"> For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule&nbsp;430A and contained in a form of prospectus filed by the registrant pursuant to Rule&nbsp;424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.</font></td>
</tr>
</table>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
<td width="3%"><font size="2" face="serif">&nbsp;</font></td>
<td width="3%"><font size="2" face="serif">(2)</font></td>
<td align="left">
<font size="2" face="serif"> For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.</font></td>
</tr>
</table>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant undertakes to send to each limited partner at least on an annual basis a detailed statement of any transactions with Atlas America or its affiliates, and of fees, commissions, compensation and other benefits paid, or accrued to Atlas America or its affiliates for the fiscal year completed, showing the amount paid or accrued to each recipient and the services performed.</font></p>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The registrant undertakes to provide to the limited partners the financial statements required by Form&nbsp;10-K for the first full fiscal year of operations of the partnership.</font></p>
<p align="center"><font face="serif" size="2">II-2</font></p>
<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pii3"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="left"><font size="2" face="serif"><b>SIGNATURES</b></font></p>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant
    to the requirements of the Securities Act of 1933, as amended, the Registrant
    has duly caused this Registration Statement to be signed on its behalf by
    the undersigned, thereunto duly authorized, in the Commonwealth of Philadelphia,
    State of Pennsylvania, on January 12, 2006.</font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td colspan="3" align="left"><font size="2" face="serif"><b>Atlas Pipeline Holdings,
    L.P.</b></font></td>
</tr>
<tr valign="top">
<td width="50%">&nbsp;</td>
<td width="6%">&nbsp;</td>
<td width="6%">&nbsp;</td>
<td>&nbsp;</td> </tr>
<tr valign="top">
  <td>&nbsp;</td>
  <td>&nbsp;</td>
  <td colspan="2"><div style="margin-left: 12%; text-indent: -12%"><font size="2" face="serif">By:</font> <font size="2">Atlas
        Pipeline Holdings GP, LLC, <br>
  its general partner</font></div></td>
  </tr>
<tr valign="top">
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td> </tr>
<tr valign="top">
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td>
<td>&nbsp;</td> </tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left">&nbsp;</td>
<td colspan="2" align="left"><div style="margin-left: 12%; text-indent: -12%"><font size="2" face="serif">By:&nbsp;&nbsp;/s/ Edward E. Cohen</font></div></td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="left">&nbsp;</td>
  <td colspan="2" align="left"><hr align="center" size="1" noshade>
  </td>
  </tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td colspan="2" align="left"><font size="2" face="serif">Name:&nbsp;&nbsp;Edward E. Cohen</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td colspan="2" align="left"><font size="2" face="serif">Title:&nbsp;&nbsp;Chairman of the Board and Chief Executive Officer</font></td>
</tr>
</table>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;KNOWN
    ALL PERSONS BY THESE PRESENTS, that the persons whose signatures appear below,
    constitute and appoint Edward E. Cohen and Matthew A. Jones, and each of
    them, as their true and lawful attorneys-in-fact and agents, with full power
    of substitution and resubstitution, for them and in their names, places and
    steads, in any and all capacities, to sign the Registration Statement to
    be filed in connection with the public offering of common units representing
    limited partnership interests of Atlas Pipeline Holdings, L.P., and any and
    all amendments (including post-effective amendments) to the Registration
    Statement, and any subsequent registration statement filed pursuant to Rule
    462(b) under the Securities Act of 1933, as amended, and to file the same,
    with all exhibits thereto, and the other documents in connection therewith,
    with the Securities and Exchange Commission, granting unto said attorneys-in-fact
    and agents, and each of them, full power and authority to do and perform
    each and every act and thing requisite and necessary to be done in connection
    therewith, as fully to all intents and purposes as they might or could do
    in person, hereby ratifying and conforming all that said attorneys-in-fact
    and agents, or any of them, or their or his or her substitute or substitutes,
    may lawfully do or cause to be done by virtue hereof.</font></p>
<p align="left"><font size="2" face="serif">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.</font></p>
<table width="100%" cellspacing="0" cellpadding="0" border="0">
<tr valign="top">
<td align="center" width="42%"><font size="2" face="serif"><b><u>Signature</u></b></font></td>
<td align="center" width="33%"><font size="2" face="serif"><b><u>Title</u></b></font></td>
<td align="center"><font size="2" face="serif"><b><u>Date</u></b></font></td>
</tr>
<tr valign="top">
<td></td>
<td>&nbsp;</td>
<td>&nbsp;</td>
</tr>
<tr valign="top">
<td align="center"><font size="2" face="serif">&nbsp;</font></td>
<td align="center">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top">
  <td align="center"><font size="2" face="serif">/s/ Edward E. Cohen</font><BR>
<hr align="center" size="1" noshade></td>
  <td align="center"><font size="2" face="serif">Chairman of the Board and Chief Executive Officer</font></td>
<td align="center"><font size="2" face="serif">1/12/2006</font></td>
</tr>
<tr valign="top">
<td align="center"><font size="2" face="serif">Edward E. Cohen</font></td>
<td align="center">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top">
  <td align="center">&nbsp;</td>
  <td align="center">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="center">&nbsp;</td>
  <td align="center">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="center"><font size="2" face="serif">/s/ Jonathan Z. Cohen</font><BR>
<hr align="center" size="1" noshade>
  </td>
  <td align="center"><font size="2" face="serif">Vice Chairman of the Board</font></td>
<td align="center"><font size="2" face="serif">1/12/2006</font></td>
</tr>
<tr valign="top">
  <td align="center"><font size="2" face="serif">Jonathan Z. Cohen</font></td>
  <td align="center">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="center">&nbsp;</td>
  <td align="center">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="center">&nbsp;</td>
  <td align="center">&nbsp;</td>
  <td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top">
  <td align="center"><font size="2" face="serif">/s/ Robert R. Firth</font><BR>
<hr align="center" size="1" noshade>
  </td>
  <td align="center"><font size="2" face="serif">President</font></td>
<td align="center"><font size="2" face="serif">1/12/2006</font></td>
</tr>
<tr valign="top">
  <td align="center"><font size="2" face="serif">Robert R. Firth</font></td>
  <td align="center">&nbsp;</td>
  <td align="center">&nbsp;</td>
</tr>
<tr valign="top">
<td align="center">&nbsp;</td>
<td align="center">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top">
  <td align="center">&nbsp;</td>
  <td align="center">&nbsp;</td>
  <td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top">
  <td align="center"><font size="2" face="serif">/s/ Matthew A. Jones</font><BR>
<hr align="center" size="1" noshade>
  </td>
  <td align="center"><font size="2" face="serif">Chief Financial Officer</font></td>
<td align="center"><font size="2" face="serif">1/12/2006</font></td>
</tr>
<tr valign="top">
  <td align="center"><font size="2" face="serif">Matthew A. Jones</font></td>
  <td align="center">&nbsp;</td>
  <td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top">
  <td align="left">&nbsp;</td>
  <td align="center">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="center">&nbsp;</td>
  <td align="center">&nbsp;</td>
  <td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top">
  <td align="center"><font size="2" face="serif">/s/ Lisa Washington</font><BR>
<hr align="center" size="1" noshade>
  </td>
  <td align="center"><font size="2" face="serif">Chief Legal Officer and Secretary</font></td>
<td align="center"><font size="2" face="serif">1/12/2006</font></td>
</tr>
<tr valign="top">
  <td align="center"><font size="2" face="serif">Lisa Washington</font></td>
  <td align="center">&nbsp;</td>
  <td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top">
  <td align="center">&nbsp;</td>
  <td align="center">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="center">&nbsp;</td>
  <td align="center">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="center"><font size="2" face="serif">/s/ Steven J. Doherty</font><BR>
<hr align="center" size="1" noshade>
  </td>
  <td align="center"><font size="2" face="serif">Director</font></td>
<td align="center"><font size="2" face="serif">1/12/2006</font></td>
</tr>
<tr valign="top">
  <td align="center"><font size="2" face="serif">Steven J. Doherty</font></td>
  <td align="center">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="center">&nbsp;</td>
  <td align="center">&nbsp;</td>
  <td align="left">&nbsp;</td>
</tr>
<tr valign="top">
  <td align="center">&nbsp;</td>
  <td align="center">&nbsp;</td>
  <td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top">
  <td align="center"><font size="2" face="serif">/s/ William G. Karis</font><BR>
<hr align="center" size="1" noshade>
  </td>
  <td align="center"><font size="2" face="serif">Director</font></td>
<td align="center"><font size="2" face="serif">1/12/2006</font></td>
</tr>
<tr valign="top">
  <td align="center"><font size="2" face="serif">William G. Karis</font></td>
  <td align="center">&nbsp;</td>
  <td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top">
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
<td align="center">&nbsp;</td>
<td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top">
  <td align="center">&nbsp;</td>
  <td align="center">&nbsp;</td>
  <td align="left"><font size="2" face="serif">&nbsp;</font></td>
</tr>
<tr valign="top">
  <td align="center"><font size="2" face="serif">/s/ Harvey G. Magarick</font><BR>
<hr align="center" size="1" noshade>
  </td>
  <td align="center"><font size="2" face="serif">Director</font></td>
<td align="center"><font size="2" face="serif">1/12/2006</font></td>
</tr>
<tr valign="top">
  <td align="center"><font size="2" face="serif">Harvey G. Magarick</font></td>
  <td align="center">&nbsp;</td>
  <td align="center">&nbsp;</td>
</tr>
</table>
<p align="center"><font face="serif" size="2">II-3</font></p>

<hr noshade align="center" width="100%" size="2">
<div style="page-break-before:always"></div>
<page>
<a name="pii4"></a>
<p><a href="#contents"><font size="2">Back to Contents</font></a></p>
<p align="center"><font size="2" face="serif"><b>INDEX</b></font></p>
<table width="100%" border="0" align="center" cellpadding="0" cellspacing="0">
  <tr valign="top">
    <td align="center"><font size="1" face="serif"><b>Exhibit</b></font><br>
        <font size="1" face="serif"><b>Number</b></font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="1" face="serif">&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center" valign="bottom"><font size="1" face="serif"><b>Description</b></font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><hr size="1" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><hr size="1" noshade>
    </td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><font size="2" face="serif">1.1</font><font size="2" face="serif">*</font></td>
    <td width="2%" align="left">&nbsp;</td>
    <td width="1%" align="right">&nbsp;</td>
    <td width="5%" align="center"><font size="2" face="serif">&#151;</font></td>
    <td width="2%" align="left">&nbsp;</td>
    <td width="1%" align="right">&nbsp;</td>
    <td width="78%" align="left"><font size="2" face="serif">Form of Underwriting
        Agreement</font></td>
    <td width="2%" align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center"><font size="2" face="serif"> &nbsp;3.1*&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Certificate of Limited Partnership
        of Atlas Pipeline Holdings, L.P.</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center" bgcolor="#ffffff"><font size="2" face="serif"> &nbsp;3.2*&nbsp;</font></td>
    <td align="left" bgcolor="#ffffff">&nbsp;</td>
    <td align="right" bgcolor="#ffffff">&nbsp;</td>
    <td align="center" bgcolor="#ffffff"><font size="2" face="serif">&#151;</font></td>
    <td align="left" bgcolor="#ffffff">&nbsp;</td>
    <td align="right" bgcolor="#ffffff">&nbsp;</td>
    <td align="left" bgcolor="#ffffff"><font size="2" face="serif">Amended and
        Restated Agreement of Limited Partnership of Atlas Pipeline Holdings,
        L.P.</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center" bgcolor="#ffffff"><font size="2" face="serif">&nbsp;3.3*&nbsp;</font></td>
    <td align="left" bgcolor="#ffffff">&nbsp;</td>
    <td align="right" bgcolor="#ffffff">&nbsp;</td>
    <td align="center" bgcolor="#ffffff"><font size="2" face="serif">&#151;</font></td>
    <td align="left" bgcolor="#ffffff">&nbsp;</td>
    <td align="right" bgcolor="#ffffff">&nbsp;</td>
    <td align="left" bgcolor="#ffffff"><font size="2" face="Times New Roman, Times, serif">Certificate
    of Formation of Atlas Pipeline Holdings GP, LLC</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center" bgcolor="#ffffff"><font size="2" face="serif">&nbsp;3.4*&nbsp;</font></td>
    <td align="left" bgcolor="#ffffff">&nbsp;</td>
    <td align="right" bgcolor="#ffffff">&nbsp;</td>
    <td align="center" bgcolor="#ffffff"><font size="2" face="serif">&#151;</font></td>
    <td align="left" bgcolor="#ffffff">&nbsp;</td>
    <td align="right" bgcolor="#ffffff">&nbsp;</td>
    <td align="left" bgcolor="#ffffff"><font size="2" face="Times New Roman, Times, serif">Amended
        and Restated Limited Liability Company Agreement of Atlas Pipeline
    Holdings GP, LLC</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center" bgcolor="#ffffff"><font size="2" face="serif">3.5*</font></td>
    <td align="left" bgcolor="#ffffff">&nbsp;</td>
    <td align="right" bgcolor="#ffffff">&nbsp;</td>
    <td align="center" bgcolor="#ffffff"><font size="2" face="serif">&#151;</font></td>
    <td align="left" bgcolor="#ffffff">&nbsp;</td>
    <td align="right" bgcolor="#ffffff">&nbsp;</td>
    <td align="left" bgcolor="#ffffff"><font size="2" face="serif">Second Amended
        and Restated Agreement of Limited Partnership of Atlas Pipeline Partners,
        L.P.</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center"><font size="2" face="serif">3.6*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Form of Contribution Agreement</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center"><font size="2" face="serif">5.1*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Opinion of Vinson&nbsp;&amp; Elkins
        L.L.P. as to the legality of the securities being registered</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><font size="2" face="serif">8.1*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>

    <td align="left"><font size="2" face="serif">Opinion of Vinson&nbsp;&amp; Elkins
        L.L.P. relating to tax matters</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><font size="2" face="serif">10.1*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">Credit
        Agreement among Atlas America, Inc., Resource America, Inc., Wachovia
        Bank, National Association, and other banks party thereto, dated March
    12, 2004</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><font size="2" face="serif">10.2*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="Times New Roman, Times, serif">First
        Amendment to March 12, 2004 Credit Agreement, dated July 10, 2004</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center"><font size="2" face="serif">10.3*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Revolving Credit and Term Loan
        Agreement, dated as of April 14, 2005 among Atlas Pipeline Partners,
        L.P., Wachovia Bank, National Association and the other parties thereto</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center"><font size="2" face="serif">10.4*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">First Amendment to Revolving
        Credit and Term Loan Agreement, dated as of April 14, 2005, among Atlas
        Pipeline Partners, L.P., Wachovia Bank National Association and the other
        parties thereto</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center"><font size="2" face="serif">10.5*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Master Natural Gas Gathering
        Agreement among Atlas Pipeline Partners, L.P., Atlas Pipeline Operating
        Partnership, Atlas America, Inc., Resource Energy, Inc. and Viking Resources
        Corporation</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center"><font size="2" face="serif">10.6*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Omnibus Agreement among Atlas
        Pipeline Partners, L.P., Atlas Pipeline Operating Partnership, Atlas
        America, Inc., Resource Energy, Inc. and Viking Resources Corporation</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><font size="2" face="serif">21.1*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">List of Subsidiaries of Atlas
        Pipeline Holdings, L.P.</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center"><font size="2" face="serif">23.1&nbsp;&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Consent of Grant Thornton LLP</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><font size="2" face="serif">23.2&nbsp;&nbsp;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Consent of Ernst&nbsp;&amp; Young
        LLP </font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><font size="2" face="serif">23.3*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Consent of Vinson&nbsp;&amp; Elkins
        L.L.P. (contained in Exhibit&nbsp;5.1)</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#FFFFFF">
    <td align="center"><font size="2" face="serif">23.4*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Consent of Vinson&nbsp;&amp; Elkins
        L.L.P. (contained in Exhibit&nbsp;8.1)</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><font size="2" face="serif">24.1*</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center"><font size="2" face="serif">&#151;</font></td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left"><font size="2" face="serif">Powers of Attorney (contained
        on page&nbsp;II-3)</font></td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td align="center"><hr size="1" noshade>
    </td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="center">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="right">&nbsp;</td>
    <td align="left">&nbsp;</td>
    <td align="left">&nbsp;</td>
  </tr>
  <tr valign="top" bgcolor="#ffffff">
    <td colspan="7" align="left"><font size="2" face="serif">* To be filed by
        amendment.</font></td>
    <td align="left">&nbsp;</td>
  </tr>
</table>
<div align="left"></div>
<p align="center">&nbsp;</p>
</body>
</html>
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Prepared and filed by St Ives Burrups
Click Here for Contents
As filed with the Securities
      and Exchange Commission on January 12,
      2006
Registration No.  333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Atlas Pipeline Holdings, L.P.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
1311
(Primary Standard Industrial
Classification Code Number)
Applied For
(I.R.S.  Employer
Identification Number)
Edward E. Cohen
311 Rouser Road
Moon Township, PA  15108
(412) 262-2830
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)
Edward E. Cohen
311 Rouser Road
Moon Township, PA  15108
(412) 262-2830
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Copies to:
Alan P. Baden
Vinson & Elkins L.L.P.
666 Fifth Avenue
New York, New York 10103
(212) 237-0000
Joshua Davidson
Baker Botts L.L.P.
910 Louisiana Street
Houston, Texas 77002
(713) 229-1234
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement becomes effective.
If
      any of the securities being registered on this form are to be offered on
      a delayed or continuous basis pursuant to Rule 415 under the Securities
Act of 1933, check the following box.
If
      this form is filed to register additional securities for an offering pursuant
      to Rule 462(b) under the Securities Act, check the following box and
      list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
If
      this form is a post-effective amendment filed pursuant to Rule 462(c)
      under the Securities Act, check the following box and list the Securities
      Act registration statement number of the earlier effective registration
statement for the same offering.
If
      this form is a post-effective amendment filed pursuant to Rule 462(d)
      under the Securities Act, check the following box and list the Securities
      Act registration statement number of the earlier effective registration
statement for the same offering.
If
      delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box.
CALCULATION OF REGISTRATION FEE
Title Of Each Class Of
Securities To Be Registered
Proposed Maximum Aggregate
Offering Price (1)(2)
Amount of
Registration Fee
Common units representing limited partner interests
$
103,500,000
$
11,074.50
(1)
Includes
common units issuable upon exercise of the underwriters'
option
to
acquire additional common
units.
(2)
Estimated
solely for the purpose of calculating the registration fee pursuant to Rule 457(o).
The
        registrant hereby amends this registration statement on such date or
        dates as may be necessary to delay its effective date until the registrant
        shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a),
may determine.
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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer
or sale is not permitted.
Subject to Completion, dated January 12, 2006
PROSPECTUS
ATLAS PIPELINE HOLDINGS, L.P.
3,600,000 Common Units
Representing Limited Partner Interests
This is the initial public offering of our common units. We own a 2.0% general partner interest, all the incentive distribution rights and an approximate 12.8% limited partner interest in Atlas Pipeline Partners, L.P., a midstream energy services provider engaged in the
transmission, gathering and processing of natural gas.
Before this offering, there has been no public market for our common units. We intend to apply to list the common units on the New York Stock Exchange under the symbol "          ." We expect the initial public offering price to be between $           and $           per unit.
We will use substantially all of the net proceeds from this offering to make a cash distribution to our existing unitholders. Please read "Use of Proceeds."
Investing in our common units involves risks. Please read "Risk factors" beginning on page 22.
These risks include the following:
•
Our only cash generating assets are our interests in Atlas Pipeline Partners, L.P., and our cash flow is therefore completely dependent upon the ability of Atlas Pipeline Partners, L.P. to make distributions to its partners.
•
You will experience immediate and substantial dilution of $24.63 per common unit in the pro forma net tangible book value of your common units.
•
If we or Atlas Pipeline Partners, L.P. were treated as a corporation for federal income tax purposes, or if we or Atlas were to become subject to entity-level taxation for federal or state income tax purposes, then our cash available for distribution to you would be substantially
reduced.
•
Our unitholders do not elect our general partner or vote on our general partner's officers or directors, and the rights of unitholders owning 20% or more of our units are further restricted under our partnership agreement. Following the completion of this offering, Atlas
America, Inc. will own approximately 82.9% of our common units, a sufficient number to prevent removal of our general partner without its consent.
•
The fiduciary duties of our general partner's officers and directors may conflict with those of Atlas Pipeline Partners GP, LLC, which is the general partner of Atlas Pipeline Partners, L.P.
•
You may be required to pay taxes on income from us even if you do not receive any cash distributions from us.
Per Common Unit
Total
Initial public offering price
$
$
Underwriting discount
(1)
$
$
Proceeds to us, before expenses
$
$
(1)
Excludes structuring fee payable to Lehman Brothers Inc. of                .
We have granted the underwriters a 30-day option to purchase up to an additional 540,000 common units from us on the same terms and conditions as set forth above if the underwriters sell more than 3,600,000 common units in this offering.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
Lehman Brothers, on behalf of the underwriters, expects to deliver the common units on or about           , 2006.
L
EHMAN
B
ROTHERS
, 2006
We own and control Atlas Pipeline Partners GP, LLC, the general partner of Atlas Pipeline Partners, L.P. (NYSE: APL), through which we own certain general partner interests, all the incentive distribution rights and 1,641,026 common units of Atlas Pipeline Partners, L.P.,
representing an approximate 12.8% limited partner interest. We do not have any other assets. The map below identifies Atlas Pipeline Partners, L.P.'s operations and their location.
Atlas Pipeline Partners, L.P. Operations
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TABLE OF CONTENTS
SUMMARY
1
Atlas Pipeline Holdings, L.P.
1
The Offering
6
Atlas Pipeline Partners, L.P.
8
Atlas' Principal Executive Offices and Internet Address
10
Comparison of Rights of Holders of Our Common Units and Atlas' Common Units
11
Summary of Risk Factors
13
Summary of Conflicts of Interest and Fiduciary Responsibilities
15
Summary Historical Consolidated and Pro Forma Financial Data
16
RISK FACTORS
22
Risks Inherent in an Investment in Us
22
Risks Related to Conflicts of Interest
31
Risks Relating to Atlas' Business
34
Tax Risks to Common Unitholders
42
USE OF PROCEEDS
45
CAPITALIZATION
46
DILUTION
47
CASH DISTRIBUTION POLICY AND RESTRICTIONS ON DISTRIBUTIONS
48
General
48
Our Initial Distribution Rate
50
Estimated Cash Available for Distributions
56
Assumptions and Considerations
59
Our Sources of Distributable Cash
61
SELECTED HISTORICAL AND OPERATING DATA
64
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
68
Overview
68
Atlas Pipeline Partners, L.P.
69
Overview of Atlas' Operations
69
Significant Acquisitions
70
Contractual Revenue Agreements
70
Results of Our Operations
71
Liquidity and Capital Resources
74
Atlas Partnership Distributions
76
Contractual Obligations and  Commercial Commitments
77
Atlas' Equity Offerings
77
Atlas' Shelf Registration Statement
78
Atlas' Credit Facility
78
NOARK Notes
79
Significant Announced
          Internal Growth Project
79
Environmental Regulation
79
Inflation and Changes in Prices
80
Critical Accounting Policies and Estimates
80
Quantitative and Qualitative Disclosures About Market Risk
84
BUSINESS
87
Atlas Pipeline Holdings, L.P.
87
Atlas Pipeline Partners, L.P.
90
Overview
90
Recent Acquisitions
91
Business Strategy
92
Competitive Strengths
93
The Midstream Natural Gas Gathering, Processing and Transmission Industry
94
Mid-Continent Operations
95
Appalachian Basin Operations
99
Relationship with Atlas America
100
Competition
103
Contracts and Customer Relationships
104
Regulation
104
Environmental Matters
106
Employees
109
Properties
109
Legal Proceedings
110
MANAGEMENT
111
Atlas Pipeline Holdings, L.P.
111
Board Committees
112
Election of Our Directors
113
Governance Matters
113
Compensation of Directors
114
Atlas Pipeline Holdings Long-Term Incentive Plan
114
Compensation Committee Interlocks and Insider Participation
115
Atlas Pipeline Partners, L.P.
116
Executive Officer Compensation
117
Long-Term Incentive Plan
118
Compensation of Managing Board Members
118
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
119
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
120
Our Relationship with Atlas Pipeline Partners, L.P.
120
The Contribution Agreement
120
Registration Rights
120
i
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Indemnification
          of Directors and Officers
120
Related Party
          Transactions Involving Atlas
121
CONFLICTS OF INTEREST AND FIDUCIARY DUTIES
122
Conflicts of Interest
122
Fiduciary Duties
124
DESCRIPTION OF THE COMMON UNITS
127
The Units
127
Transfer Agent and Registrar
127
Transfer of Common Units
127
THE PARTNERSHIP AGREEMENT OF ATLAS PIPELINE HOLDINGS, L.P.
129
Organization and Duration
129
Purpose
129
Power of Attorney
129
Capital Contributions
129
Limited Liability
129
Voting Rights
130
Issuance of Additional Securities
131
Amendments to Our Partnership Agreement
131
Prohibited Amendments
132
No Unitholder Approval
132
Opinion of Counsel and Unitholder Approval
133
Merger, Sale or Other Disposition of Assets
133
Termination or Dissolution
133
Liquidation and Distribution of Proceeds
134
Withdrawal or Removal of Our General Partner
134
Transfer of General Partner Interest
135
Transfer of Ownership Interests in Our General Partner
135
Change of Management Provisions
135
Limited Call Right
135
Meetings; Voting
136
Status as Limited Partner
136
Non-Citizen Assignees; Redemption
136
Indemnification
137
Reimbursement of Expenses
137
Books and Reports
137
Right to Inspect Our Books and Records
138
Registration Rights
138
THE PARTNERSHIP AGREEMENT OF ATLAS PIPELINE PARTNERS, L.P.
139
Organization and Duration
139
Purpose
139
The Units
139
Limited Voting Rights
139
Cash Distribution Policy
139
Power of Attorney
143
Capital Contributions
144
Limited Liability
144
Transfer Agent and Registrar
144
Transfer of Common Units
145
Issuance of Additional Securities
146
Amendment of Atlas' Partnership Agreement
146
Merger, Sale or Other Disposition of Assets of Atlas
148
Termination and Dissolution
148
Liquidation and Distribution of Proceeds
148
Withdrawal or Removal of Atlas' General Partner
148
Transfer of General Partner Interest And Incentive Distribution Rights
150
Change of Management Provisions
150
Limited Call Right
150
Meetings; Voting
150
Status as Limited Partner or Assignee
151
Non-Citizen Assignees; Redemption
151
Indemnification
151
Books and Reports
152
Right to Inspect Our Books and Records
152
Registration Rights
153
UNITS ELIGIBLE FOR FUTURE SALE
154
MATERIAL TAX CONSEQUENCES
155
Partnership Status
155
Limited Partner Status
156
Tax Consequences of Unit Ownership
157
Tax Treatment of Operations
162
Disposition of Common Units
163
Uniformity of Units
165
Tax-Exempt Organizations and Other Investors
166
Administrative Matters
166
State, Local, Foreign and Other Tax Considerations
168
INVESTMENT IN ATLAS PIPELINE HOLDINGS, L.P. BY EMPLOYEE BENEFIT PLANS
170
UNDERWRITING
171
Commissions and Expenses
171
Option to Purchase Additional Common Units
171
Lock-Up Agreements
172
Offering Price Determination
172
Indemnification
172
Directed Unit Program
172
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Stabilization,
	Short Positions and Penalty
    Bids
173
Electronic Distribution
173
NYSE
174
Discretionary Sales
174
Stamp Taxes
174
Relationships
174
VALIDITY OF THE COMMON UNITS
175
EXPERTS
175
WHERE YOU CAN FIND MORE INFORMATION
175
FORWARD-LOOKING STATEMENTS
175
INDEX TO FINANCIAL STATEMENTS
F-1
APPENDIX A — AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF ATLAS PIPELINE HOLDINGS, L.P.
A-1
Until                  , 2006 (the 25th day after the date of this prospectus), all dealers that effect transactions in the securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
You should rely only on the information contained in this prospectus. We have not, and the underwriters have not, authorized anyone to provide you with different information from that contained in this prospectus. If anyone provides you with different
or inconsistent information, you should not rely on it. We are not, and the underwriters are not, offering to sell our common units or seeking offers to buy our common units in any jurisdiction where offers or sales are not permitted. The information contained
in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of the common units offered hereby.
iii
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SUMMARY
This summary may not contain all of the information that is important to you. You should read this entire prospectus carefully, including the historical consolidated financial statements and pro forma financial statements and the notes to those financial
statements. Furthermore, you should carefully read "Summary of Risk Factors" and "Risk Factors" for more information about important risks that you should consider before making a decision to purchase our common units.
Except as otherwise indicated, the information presented in this prospectus assumes (1) an initial public offering price of $24.00 per common unit and (2) that the underwriters do not exercise their option to purchase additional common units. All references in this
prospectus to "we," "our," "us" or like terms refer to Atlas Pipeline Holdings, L.P., and unless the context requires otherwise, to Atlas Pipeline Partners GP, LLC, the general partner of Atlas Pipeline Partners, L.P. All references in this prospectus to "Atlas Pipeline GP"
refer to Atlas Pipeline Partners GP, LLC. All references in this prospectus to "Atlas" refer to Atlas Pipeline Partners, L.P. and its wholly-owned subsidiaries. All references in this prospectus to "Atlas America" refer to Atlas America, Inc. and its wholly-owned subsidiaries,
excluding Atlas Pipeline Holdings, L.P. and any of its wholly-owned subsidiaries. All references to our "partnership agreement" refer to the Amended and Restated Agreement of Limited Partnership of Atlas Pipeline Holdings, L.P. to be adopted contemporaneously with the
closing of this offering.
Atlas Pipeline Holdings, L.P.
Our cash generating assets consist of our interests in Atlas Pipeline Partners, L.P. (NYSE: APL), a publicly traded Delaware limited partnership. Atlas is a midstream energy service provider engaged in the transmission, gathering and processing of natural gas in the
Mid-Continent and Appalachian regions. Our interests in Atlas will initially consist of a 100% ownership interest in the general partner of Atlas, Atlas Pipeline Partners GP, LLC, which owns:
•
a 2.0% general partner interest in Atlas, which entitles it to receive 2.0% of the cash distributed by Atlas;
•
all of the incentive distribution rights in Atlas, which entitle it to receive increasing percentages, up to a maximum of 48.0%, of any cash distributed by Atlas as it reaches certain target distribution levels in excess of $0.42 per Atlas unit in any quarter; and
•
1,641,026 common units of Atlas, representing an approximate 12.8% limited partner interest in Atlas.
At Atlas' current quarterly distribution rate of $0.83 per common unit, aggregate quarterly cash distributions to us on all our interests in Atlas would be approximately $5.0 million. Based on this distribution, we expect that our initial quarterly distribution will be $0.225
per unit, or $0.90 per unit on an annualized basis.
Our primary objective is to increase our cash distributions to our unitholders through growth at Atlas. Atlas has grown both through strategic acquisitions and internal growth projects. Since Atlas' initial public offering in January 2000, it has completed five acquisitions
at an aggregate cost of approximately $516.7 million. Atlas' business strategy is to create capital-efficient growth in distributable cash flow to maximize its distribution to its unitholders by, among other things, (1) maximizing cash flows from its existing businesses through
marketing of its services and facilities and controlling its operating costs; (2) continuing to increase the amount of its operating cash flow generated by long-term, fee-based contracts; (3) expanding its existing businesses through internal growth opportunities; (4) expanding its
operations through strategic acquisitions; and (5) maintaining a flexible capital structure based on a strong balance sheet by financing its growth through a balanced combination of debt and equity.
1
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We intend to support Atlas in implementing its business strategy by assisting it in identifying, evaluating, and pursuing growth opportunities. In the future, we may also support the growth of Atlas through the use of our capital resources, which could involve loans or
capital contributions to Atlas to provide funding for the acquisition of a business or asset or for an internal growth project. We may also provide Atlas with other forms of credit support, such as guarantees related to financing a project or other types of support related to a
merger or acquisition transaction.
Atlas is required by its partnership agreement to distribute all of its cash on hand at the end of each quarter, less reserves established by its general partner in its sole discretion to provide for the proper conduct of Atlas' business or to provide for future distributions.
Since January 1, 2003, Atlas has increased the per unit quarterly cash distribution on its common units by approximately 48%, from the quarterly distribution of $0.56 per unit to $0.83 per unit declared for the fourth quarter of 2005. The following graph shows, for the period
from the first quarter of 2003 through the fourth quarter of 2005: (i) Atlas' quarterly distributions per unit and (ii) total distributions by Atlas to us.
While we, like Atlas, are structured as a limited partnership, our capital structure and cash distribution policy differ materially from those of Atlas. Most notably, our general partner does not have an economic interest in us and is not entitled to receive any distributions
from us, and our capital structure does not include incentive distribution rights. Therefore, all of our distributions are made on our common units, which is our only class of security outstanding.
Our ownership of Atlas' incentive distribution rights entitles us to receive an increasing percentage of cash distributed by Atlas as it reaches certain target distribution levels. The rights entitle us to receive the following:
•
13.0% of all cash distributed in a quarter after each Atlas unit has received $0.42 for that quarter;
•
23.0% of all cash distributed after each Atlas unit has received $0.52 for that quarter; and
•
48.0% of all cash distributed after each Atlas unit has received $0.60 for that quarter.
For the quarter ended December 31, 2005, Atlas declared a distribution of $0.83 per unit, which means we will receive 48.0% of the $0.23 incremental cash distribution per unit in excess of the
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maximum target distribution level of $0.60 per unit. Because the incentive distribution rights currently participate at the maximum 48.0% target cash distribution level, future growth in
distributions we receive from Atlas will not result from an increase in the target cash distribution level associated with the incentive distribution rights.
The graph set forth below demonstrates hypothetical cash distributions payable in respect of our interests in Atlas by showing the total cash allocated to us across an illustrative range of annualized cash distributions per unit made by Atlas. The graph illustrates the
impact to us of Atlas' raising or lowering its distribution from the most recently declared distribution of $0.83 per common unit ($3.32 on an annualized basis), which will be paid on February 14, 2006. This information assumes:
•
Atlas has 12,549,266 total units outstanding, representing the number of units outstanding at December 31, 2005; and
•
through Atlas Pipeline GP, we own (i) 1,641,026 Atlas common units, representing an approximate 12.8% limited partner interest in Atlas, (ii) a 2.0% general partner interest in Atlas and (iii) all the incentive distribution rights in Atlas.
This information is presented for illustrative purposes only and is not intended to be a prediction of future performance and does not attempt to illustrate the impact of changes in our or Atlas' business, including changes that may result from changes in natural gas, NGL
and condensate prices, changes in economic conditions, the impact of any future acquisitions or expansion projects or the issuance of additional units by Atlas. In addition, the level of cash distributions we receive may be affected by the various risks associated with an
investment in us and the underlying business of Atlas. Please read "Risk Factors."
We intend to pay to our unitholders, on a quarterly basis, distributions equal to the cash we receive from Atlas, less certain reserves for expenses and other uses of cash, including:
•
our general and administrative expenses, including expenses we will incur as the result of being a public company;
•
capital contributions to maintain or increase our ownership interest in Atlas; and
•
reserves our general partner believes prudent to maintain for the proper conduct of our business or to provide for future distributions.
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Based on Atlas' current quarterly distribution, the number of our units outstanding and our expected level of expenses and reserves that our general partner believes prudent to maintain, we expect that our initial quarterly distribution will be $0.225 per common unit, or
$0.90 per unit on an annualized basis. Due to our ownership of Atlas' incentive distribution rights, our cash flows are impacted by changes in Atlas' distributions to a greater extent than those of Atlas' common unitholders.
If Atlas is successful in implementing its business strategy and increasing distributions to its unitholders, we would generally expect to increase distributions to our unitholders, although the timing and amount of any such increased distributions will not necessarily be
comparable to the increased Atlas distributions. However, we cannot assure you that any distributions will be declared or paid. Please read "Cash Distribution Policy and Restrictions on Distributions."
Executive Offices
Our principal executive offices are located at 311 Rouser Road, Moon Township, Pennsylvania 15108, and our phone number is (412) 262-2830. Our website is located at www.atlaspipelineholdings.com. Information on our website is not incorporated by reference into
this prospectus and does not constitute a part of this prospectus.
Our Limited Partnership Structure and Management
We were formed in December 2005, as a Delaware limited partnership. The chart on the following page depicts our organization and ownership upon completion of this offering, at which time:
•
our general partner will own a non-economic general partner interest in us;
•
our public unitholders will own 3,600,000 of our common units, representing an approximate 17.1% limited partner interest in us;
•
our current owner, Atlas America, will own 17,500,000 of our common units, representing an approximate 82.9% limited partner interest in us; and
•
we will continue to own indirectly, through our ownership of Atlas Pipeline Partners GP, LLC, 1,641,026 Atlas common units representing an approximate 12.8% limited partner interest in Atlas, the 2.0% general partner interest in Atlas and all the incentive distribution
rights in Atlas.
Our general partner, Atlas Pipeline Holdings GP, LLC, will manage our operations and activities, including, among other things, establishing the quarterly cash distribution levels for our common units and reserves it believes prudent to maintain for the proper conduct of
our business or to provide for future distributions. Our general partner is entitled to reimbursement for out-of-pocket expenses it incurs on our behalf, but it is not entitled to any other compensation, fees, profits or other benefits for acting in its capacity as our general partner.
All of our executive officers and a majority of the directors of our general partner also serve as executive officers and directors of the general partner of Atlas. Atlas America will own all the membership interests in our general partner.
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Atlas Pipeline Holdings, L.P.'s Ownership and
Organizational Chart
After This Offering
Aggregate ownership of Atlas Pipeline Holdings, L.P. after this offering:
Common Units:
Public Unitholders
17.1
%
Atlas America, Inc.
82.9
%
Total
100.0
%
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The Offering
Common units offered to the public
3,600,000 common units.
4,140,000 common units, if the underwriters exercise their option to purchase additional common units in full.
Common units outstanding after
this offering
21,100,000 common units.
Use of proceeds
We expect to receive net proceeds of approximately $79.2 million from the sale of the common units, after deducting underwriting discounts and commissions and estimated offering expenses payable by
us. Substantially all of the net proceeds from this offering will be distributed to Atlas America.
The net proceeds from any exercise of the underwriters' option to purchase additional common units will be used to fund the redemption of an equal number of common units from Atlas America. Please read "Use of
Proceeds."
Cash distributions
We expect
          to make an initial quarterly distribution of $0.225 per common unit
          to the extent we have sufficient cash from operations after establishment
          of cash reserves and payment of fees and expenses.
Please read "Cash Distribution Policy and Restrictions on Distributions." We do not have any subordinated units and our general partner is not entitled to any distributions. Please read "Description of
the Common Units" and "The Partnership Agreement of Atlas Pipeline
Holdings, L.P."
We expect to pay you a prorated distribution for the first quarter during which we are a publicly traded partnership. Assuming that we become a publicly traded partnership before March 31, 2006, we will pay you a
prorated distribution for the period from the first day our common units are publicly traded to and including March 31, 2006. We expect to pay this cash distribution in May 2006.
The amount of pro forma available cash generated during the twelve months ended December 31, 2004 and the twelve months ended September 30, 2005 would have been insufficient by approximately $21.4
million and $10.0 million, respectively, to pay the full initial distribution amount on all our common units during those periods. Please read "Cash Distribution Policy and Restrictions on Distributions." We believe
that we will have sufficient cash available for distribution to pay the distributions at the initial distribution rate of $0.225 per unit on all the outstanding common units for each quarter for the year ending
December 31, 2006. See "Cash Distribution Policy and Restrictions on Distributions—Assumptions and Considerations" for the specific assumptions underlying this belief.
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Limited voting rights
Our general
          partner will manage and operate us. Unlike the holders of common stock
          in a corporation, you will have only limited voting rights on matters
          affecting our business. You will have no right to elect our general
          partner or its directors. Our general partner may not be removed except
          by a vote of the holders of at least 66 2/3% of the outstanding units,
          including any units owned by our affiliates,
voting together as a single class. Atlas America will own an aggregate of approximately
          82.9% of our common units. This will give Atlas America the ability
          to prevent our general partner's involuntary
removal. Please read "The Partnership Agreement of Atlas Pipeline Holdings, L.P.—Withdrawal
or Removal of Our General Partner."
Limited call right
If at any time our affiliates own more than 87.5% of our outstanding common units, our general partner has the right, but not the obligation, to purchase all of the remaining common units at a price not
less than the then current market price of the common units. At the completion of this offering, Atlas America will own approximately 82.9% of our common units.
Estimated ratio of taxable
          income
to distributions
We estimate that if you
          own the common units you purchase in this offering through the record
          date for distributions for the period ending      ,
            you will be allocated, on a cumulative basis, an amount of federal
            taxable income for that period that will be less than      %
            of the cash distributed to you with respect to that cumulative period.
            For example, if you receive an annual distribution of $0.90 per unit,
            we estimate that your average allocable federal taxable income per
            year will be no more than $      per unit. This estimate is based on assumptions with respect to our operations, gross income, capital
expenditures, cash flow and anticipated distributions. Our ratio of taxable income to cash distributions will be much greater than the ratio applicable to the holders of common units in Atlas because
remedial allocations of deductions to us from Atlas will be very limited and our ownership of incentive distribution rights will cause more taxable income to be allocated to us from Atlas. Further, if Atlas
is successful in increasing its distributions over time, our ratio of taxable income to cash distributions will increase. For the basis of this estimate, please read "Material Tax Consequences—Tax
Consequences of Unit Ownership—Ratio of Taxable Income to Distributions."
Exchange listing
We
            will apply to list the common units on the New York Stock Exchange
            under the symbol "     ."
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Atlas Pipeline Partners, L.P.
Atlas is a publicly-traded midstream energy services provider engaged in the transmission, gathering and processing of natural gas. Atlas conducts its business through two operating segments: its Mid-Continent operations and its Appalachian operations.
Through its Mid-Continent operations, Atlas owns and operates:
•
a 75% interest in a FERC-regulated, 565-mile interstate pipeline system, which we refer to as Ozark Gas Transmission, that extends from southeastern Oklahoma through Arkansas and into southeastern Missouri and which has throughput capacity of approximately 322
MMcf/d;
•
two natural gas processing plants with aggregate capacity of approximately 230 MMcf/d and one treating facility with a capacity of approximately 200 MMcf/d, all located in Oklahoma; and
•
1,765 miles of active natural gas gathering systems located in Oklahoma, Arkansas, northern Texas and the Texas panhandle, which transport gas from wells and central delivery points in the Mid-Continent region to Atlas' natural gas processing plants or Ozark Gas
Transmission.
Through its Appalachian operations, Atlas owns and operates 1,500 miles of active natural gas gathering systems located in eastern Ohio, western New York and western Pennsylvania. Through an omnibus agreement and other agreements between Atlas and Atlas
America, the parent of Atlas' general partner and our general partner and a leading sponsor of natural gas drilling investment partnerships in the Appalachian Basin, Atlas gathers substantially all of the natural gas for its Appalachian Basin operations from wells operated by
Atlas America. Among other things, the omnibus agreement requires Atlas America to connect wells it operates to Atlas' gathering systems that are located within 2,500 feet of Atlas' gathering systems. Atlas is also party to natural gas gathering agreements with Atlas America
under which Atlas receives gathering fees generally equal to a percentage, typically 16%, of the selling price of the natural gas it transports. These agreements are continuing obligations and have no specified term except that they will terminate if Atlas' general partner is
removed without cause.
Since Atlas' initial public offering in January 2000, Atlas has completed five acquisitions at an aggregate cost of approximately $516.7 million, including, most recently, the October 2005 acquisition of Atlas Arkansas Pipeline LLC, which we refer to as Atlas Arkansas
and which owns a 75% interest in NOARK Pipeline System, Limited Partnership, which we refer to as NOARK, and the April 2005 acquisition of ETC Oklahoma Pipeline, Ltd, which we refer to as Elk City.
Both Atlas' Mid-Continent and Appalachian operations are located in areas of abundant and long-lived natural gas production and significant new drilling activity. The Ozark Gas Transmission system and Atlas' gathering systems are connected to approximately 6,250
central delivery points or wells, giving Atlas significant scale in its service areas. Atlas provides gathering and processing services to the wells connected to its systems, primarily under long-term contracts. Atlas provides fee-based, FERC-regulated transmission services through
Ozark Gas Transmission under both long-term and short-term contractual arrangements. Atlas intends to increase the portion of the transmission services provided under long-term contracts. As a result of the location and capacity of the Ozark Gas Transmission system and
Atlas' gathering and processing assets, Atlas believes it is strategically positioned to capitalize on the significant increase in drilling activity in its service areas and the positive price differential across Ozark Gas Transmission, also known as basis spread. Atlas intends to
continue to expand its business through strategic acquisitions and internal growth projects, including its plan to construct the Sweetwater gas plant, that increase distributable cash flow per unit.
On October 31, 2005, Atlas acquired from Enogex, Inc., a wholly-owned subsidiary of OGE Energy Corp. (NYSE: OGE), which we refer to as Enogex, all of the outstanding equity of Atlas Arkansas for $165.3 million, including estimated related transaction costs, plus
$10.2 million for working capital adjustments. Atlas Arkansas owns a 75% interest in NOARK, with the remaining 25%
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interest being owned by Southwestern Energy Pipeline Company, which we refer to as Southwestern, a wholly-owned subsidiary of Southwestern Energy Company (NYSE: SWN). The NOARK
acquisition further expands Atlas' activities in the Mid-Continent region and provides an additional source of fee-based cash flows from a FERC-regulated interstate pipeline system and an
intrastate gas gathering system. NOARK's geographic position relative to Atlas' other businesses and interconnections with major interstate pipelines also provides it with internal growth
opportunities. NOARK's principal assets include:
•
The Ozark Gas Transmission system, a 565-mile FERC-regulated interstate pipeline system which extends from southeast Oklahoma through Arkansas and into southeast Missouri and has a throughput capacity of approximately 322 MMcf/d. The system includes
approximately 30 supply and delivery interconnections and two compressor stations.
•
A 365-mile intrastate natural gas gathering system, which we refer to as Ozark Gas Gathering, located in eastern Oklahoma and western Arkansas, and 11 associated compressor stations.
Ozark Gas Transmission transports natural gas from receipt points in eastern Oklahoma and western Arkansas to interstate pipelines in northeastern and central Arkansas and to local distribution companies in Arkansas and Missouri. Ozark Gas Gathering gathers natural
gas supplies in eastern Oklahoma and western Arkansas which are then transported through Ozark Gas Transmission. Ozark Gas Transmission's revenue is comprised of FERC-regulated transmission fees that are based on firm transportation rates and, to the extent capacity is
available following the reservation of firm system capacity, interruptible transportation rates. The Ozark transmission and gathering systems gathered and transported an average of 163.9 MMcf/d during the nine months ended September 30, 2005, and 207.2 MMcf/d during
October 2005.
The NOARK acquisition increases Atlas' size and presence in the Mid-Continent region, including extending its operations east into the Arkoma Basin where the Fayetteville Shale Play is located. The Mid-Continent region, one of the most prolific natural gas-producing
regions in North America, has recently experienced a significant increase in oil and gas drilling activity driven by long-term projections of continued growth in U.S. natural gas demand and the application of new drilling and production technologies. Atlas believes that the
increased drilling activity in the Mid-Continent area, combined with the positive basis spread across Ozark Gas Transmission, will result in increasing volumes gathered and transported on the Ozark Gas Gathering and Ozark Gas Transmission systems.
Atlas recently completed three new gathering and compression projects in Elk City which have increased, and we believe will continue to increase, gathered volumes and total gross margin. Atlas also plans to complete construction of a new natural gas processing
facility in Oklahoma near its Prentiss treating facility in the third quarter of 2006, which we refer to as the Sweetwater gas plant. The new plant will be scaled to 120 MMcf/d of processing capacity. Along with the Sweetwater gas plant, Atlas will construct a gathering system
to be located primarily in western Oklahoma and in the Texas panhandle, more specifically, Beckham and Roger Mills counties in Oklahoma and Hemphill County, Texas. Atlas is currently gathering approximately 30 MMcf/d of natural gas in the Elk City area for which it
earns gathering fees but does not earn processing fees due to the fact that the Elk City plant is currently processing at maximum capacity and is unable to process those volumes. As Atlas completes construction of the Sweetwater gas plant and gathering system, it expects to
increase the volumes it gathers in the Elk City area and to process those volumes at the Sweetwater gas plant, thereby enabling it to earn incremental gathering and processing fees. Atlas anticipates that construction of the Sweetwater gas plant and associated gathering system
will cost approximately $40.0 million and will generate cash flow of $8.0 million to $10.0 million annually.
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Atlas' Principal Executive Offices and Internet Address
Atlas' principal executive offices are located at 311 Rouser Road, Moon Township, Pennsylvania 15108, and its phone number is (412) 262-2830. Atlas maintains a website at
www.atlaspipelinepartners.com that provides information about its business and operations. Information contained on this website, however, is not incorporated into or otherwise a part of this prospectus. Atlas
also files annual, quarterly and current reports and other information with the Securities and Exchange Commission, or Commission. Atlas' Commission filings are available to the public at the Commission's
website at www.sec.gov. You may also read and copy any document Atlas files at the Commission's public reference room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the
operation of the Commission's public reference room by calling the Commission at 1-800-SEC-0330.
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Comparison of Rights of Holders of Our Common Units and Atlas' Common Units
Our common units and Atlas' common units are unlikely to trade in simple relation or proportion to one another. Instead, while the trading prices of our common units and Atlas' common units are likely to follow generally similar broad trends, the trading prices may
diverge because, among other things:
•
with respect to its distributions, Atlas' common unitholders have a priority over our incentive distribution rights in Atlas;
•
we participate in Atlas' general partner's distributions and the incentive distribution rights, and Atlas' common unitholders do not; and
•
we may in the future enter into other businesses separate from Atlas.
The following table compares certain features of Atlas' common units and our common units.
Atlas' Common Units
Our Common Units
Distributions and Incentive Distribution Rights
Atlas has historically made quarterly distributions to its
partners of its cash, less certain reserves for expenses
and other uses of cash, including reimbursement of
expenses owed to its general partner. For a more
detailed discussion, please read "The Partnership
Agreement of Atlas Pipeline Partners, L.P.—Cash
Distribution Policy." Atlas' general partner owns the
incentive distribution rights in Atlas.
We intend to pay our unitholders quarterly distributions
equal to the cash we receive from our Atlas
distributions, less certain reserves for expenses and
other uses of cash. Our general partner is not entitled to
any distributions. Therefore, our distributions are
allocated exclusively to our common unitholders.
Taxation of Entity and Entity Owners
Atlas is a flow-through entity that is not subject to an
entity-level federal income tax.
Similarly, we are a flow-through entity that is not
subject to an entity-level federal income tax.
Atlas expects that holders of its common units will
benefit for a period of time from tax basis adjustments
and remedial allocations of deductions.
We also expect that holders of our common units will
benefit for a period of time from tax basis adjustments
and remedial allocations of deductions as a result of our
ownership of common units of Atlas. However,
incentive distribution rights do not benefit from such
adjustments and allocations. Therefore, we expect the
ratio of our taxable income to the distributions you will
receive to be higher than the ratio of taxable income to
the distributions received by the common unitholders of
Atlas. Moreover, if Atlas is successful in increasing its
distributable cash flow over time, we expect the ratio of
our taxable income to distributions will increase.
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Atlas' Common Units
Our Common Units
Atlas' common unitholders will receive Schedule K-1s
from Atlas reflecting the unitholders' share of Atlas'
items of income, gain, loss and deduction at the end of
each fiscal year.
Our common unitholders also will receive Schedule
K-1s from us reflecting the unitholders' share of our
items of income, gain, loss and deduction at the end of
each fiscal year.
Sources of Cash Flow
Atlas currently generates its cash flow from its natural
gas transmission, gathering and processing operations.
Our only cash-generating assets consist of our interests
in Atlas, and we currently have no independent
operations. Accordingly, our financial performance
and our ability to pay cash distributions to our
unitholders is currently completely dependent upon the
performance of Atlas.
Limitation on Issuance of Additional Units
Atlas may issue an unlimited number of additional
partnership interests and other equity securities without
obtaining unitholder approval.
We also may issue an unlimited number of additional
partnership interests and other equity securities without
obtaining unitholder approval.
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Summary of Risk Factors
An investment in our common units involves risks associated with us and Atlas as well as tax characteristics associated with interests in publicly traded partnerships. You should consider carefully all the risk factors together with all of the other information included in
this prospectus before you invest in our units. The risks related to an investment in us, conflicts of interest, Atlas' business and tax consequences to our unitholders are described under the caption "Risk Factors." These risks include, but are not limited to, those described
below:
Risks Inherent in An Investment in Us
•
Our only cash generating assets are our interests in Atlas and our cash flow is therefore completely dependent upon the ability of Atlas to make distributions to its partners.
•
Restrictions in Atlas' credit facility and our proposed credit facility could limit our ability to make distributions to our unitholders.
•
In the future, we may not have sufficient cash to pay distributions at our estimated initial quarterly distribution level or to increase distributions.
•
We are largely dependent on Atlas for our growth. As a result of the fiduciary obligations of Atlas' general partner, which is our wholly owned subsidiary, to the unitholders of Atlas, our ability to pursue business opportunities independently will be limited.
•
Our ability to sell our partnership interests in Atlas may be limited by securities laws restrictions and liquidity constraints.
•
The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public markets, including sales by our existing unitholders.
•
Our unitholders do not elect our general partner or vote on our general partner's officers or directors, and the rights of our unitholders owning 20% or more of our units are further restricted under our partnership agreement. Following the completion of this offering, Atlas
America will own approximately 82.9% of our units, a sufficient number to block any attempt to remove our general partner.
•
Atlas may issue additional common units, which may increase the risk of it not having sufficient available cash to maintain or increase its per unit distribution level.
•
You will experience immediate and substantial dilution of $24.63 per common unit in the pro forma net tangible book value of your common units.
Risks Related to Conflicts of Interest
•
Although we control Atlas through our ownership of its general partner, Atlas' general partner owes fiduciary duties to Atlas and Atlas' unitholders, which may conflict with our interests.
•
The fiduciary duties of our general partner's officers and directors may conflict with those of Atlas' general partner's officers and directors.
•
Potential conflicts of interest may arise among our general partner, its affiliates and us. Our general partner and its affiliates have limited fiduciary duties to us and our unitholders, which may permit them to favor their own interests to the detriment of us and our unitholders.
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Risks Related to Atlas' Business
•
Atlas may be unsuccessful in integrating the operations from its recent acquisitions or any future acquisitions with its operations or in realizing all of the anticipated benefits of these acquisitions.
•
The amount of natural gas Atlas transports, treats or processes will decline over time unless Atlas is able to attract new wells to connect to its gathering systems.
•
The success of Atlas' Appalachian operations depends upon Atlas America's ability to drill and complete commercial producing wells.
•
The failure of Atlas America to perform its obligations under Atlas' natural gas gathering agreements may adversely affect Atlas' business.
•
The success of Atlas' Mid-Continent operations depends upon its ability to continually find and contract for new sources of natural gas supply from unrelated third parties.
•
Atlas' Mid-Continent operations currently depend on certain key producers for their supply of natural gas, and the loss of any of these key producers could reduce Atlas' revenue.
•
The curtailment of operations at, or closure of, either of Atlas' primary plants could harm its business.
Tax Risks to Our Common Unitholders
•
If we or Atlas were treated as a corporation for federal income tax purposes, or if we or Atlas were to become subject to entity-level taxation for state tax purposes, then our cash available for distribution to you would be substantially reduced.
•
A successful IRS contest of the federal income tax positions we or Atlas take may adversely affect the market for our common units or Atlas' units, and the costs of any contest will reduce cash available for distribution to our unitholders.
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Summary of Conflicts of Interest and Fiduciary Responsibilities
Conflicts of interest exist and may arise in the future as a result of the relationships among us, Atlas and our and their respective general partners and affiliates. Our general partner is controlled by Atlas America. Accordingly, Atlas America has the ability to elect,
remove and replace the directors and officers of our general partner. Similarly, through its indirect control of the general partner of Atlas, Atlas America has the ability to elect, remove and replace the directors and officers of the general partner of Atlas.
Our general partner and its directors and officers have fiduciary duties to manage our business in a manner beneficial to us and our partners. At the same time, Atlas' general partner and its directors and officers have fiduciary duties to manage Atlas' business in a
manner beneficial to Atlas and its partners, including us. Certain of the executive officers and non-independent directors of our general partner also serve as executive officers and directors of the general partner of Atlas. Consequently, these directors and officers may encounter
situations in which their fiduciary obligations to Atlas, on the one hand, and us, on the other hand, are in conflict.
The board of directors of Atlas' general partner or its conflicts committee will resolve any conflict between us and Atlas. The board of directors of our general partner or its conflicts committee will resolve any conflict between us and the owners of our general partner
and their affiliates. The resolution of these conflicts may not always be in our best interest or that of our unitholders. For a more detailed description of the conflicts of interest involving us and the resolution of these conflicts, please read "Conflicts of Interest and Fiduciary
Duties."
Our partnership agreement limits the liability and reduces the fiduciary duties owed by our general partner to our unitholders. Our partnership agreement also restricts the remedies available to unitholders for actions that might otherwise constitute breaches of our general
partner's fiduciary duties owed to unitholders. By purchasing our units, you are treated as having consented to various actions contemplated in the partnership agreement and conflicts of interest that might otherwise be considered a breach of fiduciary or other duties under
applicable state law. Please read "Conflicts of Interest and Fiduciary Duties—Fiduciary Duties" for a description of the fiduciary duties imposed on our general partner by Delaware law, the material modifications of these duties contained in our partnership agreement and
certain legal rights and remedies available to unitholders.
If a business opportunity in respect
    of any business activity in which Atlas is currently engaged is presented
    to us, our general partner or Atlas or its general partner, then Atlas will
    have the first right to pursue such opportunity. Pursuant to an omnibus agreement
    to be entered into in connection with the closing of this offering, we will
    agree to certain business opportunity arrangements to address potential conflicts
    that may arise between us and Atlas. For more information, please read "Conflicts
    of Interest and Fiduciary Duties."
For a description of our other relationships with our affiliates, please read "Certain Relationships and Related Party Transactions."
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Summary Historical Consolidated and Pro Forma Financial Data
We were formed in December 2005 and therefore do not have any historical financial statements. Since we will own and control Atlas Pipeline GP, the general partner of Atlas, the historical financial statements presented below are of Atlas Pipeline GP, on a
consolidated basis, including Atlas.
The historical financial data of Atlas Pipeline GP were derived from audited consolidated financial statements for each of the years ended December 31, 2002, 2003 and 2004 and at December 31, 2003 and 2004, which have been audited by Grant Thornton LLP, an
independent registered public accounting firm. The financial data for the nine months ended and at September 30, 2004 and 2005 were derived from unaudited consolidated financial statements of Atlas Pipeline GP.
We have also included unaudited pro forma financial data that reflects historical results of Atlas Pipeline GP as adjusted on a pro forma basis to give effect to Atlas' April 2004, July 2004, June 2005 and November 2005 offerings of common units, the issuance of Atlas'
$250 million of 8.125% senior unsecured notes, the completion of the NOARK acquisition and the acquisitions of Spectrum Field Services, Inc., which we refer to as Spectrum, and Elk City, and this offering.
The summary unaudited pro forma balance sheet information reflects the following transactions as if they occurred as of September 30, 2005:
•
the NOARK acquisition, which occurred on October 31, 2005, for consideration of $165.3 million, including estimated transaction costs plus $10.2 million for working capital adjustments, and the redemption of the portion of the NOARK 7.15% notes severally guaranteed
by Atlas Arkansas;
•
the amendment of Atlas' credit facility, which occurred on October 31, 2005, and borrowings under it to finance the NOARK acquisition;
•
Atlas' public offering of 2,700,000 common units, which was completed in November 2005, and 330,000 additional underwriter option units, which was completed in December 2005, each at a public offering price of $42.00 per common unit, the net proceeds of which were
principally used to repay indebtedness under its credit facility incurred in connection with the NOARK acquisition;
•
Atlas' issuance of $250.0 million of 8.125% senior unsecured notes in a private placement on December 20, 2005, the net proceeds of which were principally used to repay indebtedness under its credit facility; and
•
this offering and the application of the net proceeds as described under "Use of Proceeds."
The unaudited pro forma statement of income information for the year ended December 31, 2004 reflects the following transactions as if they occurred as of January 1, 2004:
•
Atlas' public offering of 750,000 common units, which was completed in April 2004 at a public offering price of $36.00 per common unit, the net proceeds of which were used principally to repay indebtedness under Atlas' then existing credit facility;
•
the Spectrum acquisition, which occurred in July 2004, for total consideration of $141.6 million, including the payment of income taxes due as a result of the transaction and other related transaction costs;
•
Atlas' public offering of 2,100,000 common units, which was completed in July 2004 at a public offering price of $34.76 per common unit, the net proceeds of which were used principally to repay indebtedness incurred in connection with the Spectrum acquisition;
•
the Elk City acquisition, which occurred in April 2005, for total consideration of $196.0 million, including related transaction costs;
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•
the closing of Atlas' $270.0 million credit facility, which occurred in April 2005, and borrowings under it to finance the Elk City acquisition and repay amounts outstanding under Atlas' previous credit facility;
•
Atlas' public offering of 2,300,000 common units, which was completed in June 2005 at a public offering price of $41.95 per common unit, the net proceeds of which were used principally to repay indebtedness incurred in connection with the Elk City acquisition;
•
the NOARK acquisition, which occurred on October 31, 2005, for consideration of $165.3 million, including estimated transaction costs, plus $10.2 million for working capital adjustments, and the redemption of the portion of the NOARK 7.15% notes severally guaranteed
by Atlas Arkansas;
•
the amendment of Atlas' credit facility, which occurred on October 31, 2005, and borrowings under it to finance the NOARK acquisition;
•
Atlas' public offering of 2,700,000 common units, which was completed in November 2005, and 330,000 additional underwriter option units, which was completed in December 2005, each at a public offering price of $42.00 per common unit, the net proceeds of which were
principally used to repay indebtedness under its credit facility incurred in connection with the NOARK acquisition;
•
Atlas' issuance of $250.0 million of 8.125% senior unsecured notes in a private placement on December 20, 2005, the net proceeds of which were principally used to repay indebtedness under its credit facility; and
•
this offering and the application of the net proceeds as described under "Use of Proceeds."
The unaudited pro forma statement of income information for the nine months ended September 30, 2005 reflects the following transactions as if they occurred as of January 1, 2005:
•
the Elk City acquisition, which occurred in April 2005, for total consideration of $196.0 million, including related transaction costs;
•
the closing of Atlas' $270.0 million credit facility, which occurred in April 2005, and borrowings under it to finance the Elk City acquisition and repay amounts outstanding under Atlas' previous credit facility;
•
Atlas' public offering of 2,300,000 common units, which was completed in June 2005, at a public offering price of $41.95 per common unit, the net proceeds of which were principally used to repay indebtedness incurred in connection with the Elk City acquisition;
•
the NOARK acquisition, which occurred on October 31, 2005, for consideration of $165.3 million, including estimated transaction costs plus $10.2 million for working capital adjustments, and the redemption of the portion of the NOARK 7.15% notes severally guaranteed
by Atlas Arkansas;
•
the amendment of Atlas' credit facility, which occurred on October 31, 2005, and borrowings under it to finance the NOARK acquisition;
•
Atlas' public offering of 2,700,000 common units, which was completed in November 2005, and 330,000 additional underwriter option units, which was completed in December 2005, each at a public offering price of $42.00 per common unit, the net proceeds of which were
principally used to repay indebtedness under its credit facility incurred in connection with the NOARK acquisition;
•
Atlas' issuance of $250.0 million of 8.125% senior unsecured notes in a private placement on December 20, 2005, the net proceeds of which were principally used to repay indebtedness under its credit facility; and
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•
this offering and the application of the net proceeds as described under "Use of Proceeds."
Elk City's historical fiscal year ended August 31, 2004 is not within 93 days of our fiscal year end. Accordingly, for pro forma purposes, statement of income information for the year ended December 31, 2004 is based on Elk City's historical financial results for the
twelve months ended November 30, 2004 and was created by subtracting the quarter ended November 30, 2003 from Elk City's income statement for the year ended August 31, 2004 and adding the quarter ended November 30, 2004. For our pro forma statement of income
information for the nine months ended September 30, 2005, we included Elk City's income statement for the three months ended February 28, 2005. Elk City was included within our historical results for the nine months ended September 30, 2005 from its date of acquisition
on April 14, 2005.
The unaudited pro forma balance sheet and the pro forma statements of income were derived by adjusting the historical financial statements of Atlas Pipeline GP. However, we believe that the adjustments provide a reasonable basis for presenting the significant effects of
the transactions described above. The unaudited pro forma financial data presented are for informational purposes only and are based upon available information and assumptions that we believe are reasonable under the circumstances. You should not construe the unaudited pro
forma financial data as indicative of the combined financial position or results of operations that we, Atlas Pipeline GP, Atlas, Spectrum, Elk City and NOARK would have achieved had the transactions been consummated on the dates assumed. Moreover, they do not purport
to represent our, Atlas Pipeline GP's, Atlas', Spectrum's, Elk City's or NOARK's combined financial position or results of operations for any future date or period.
The financial data below should be read together with, and are qualified in their entirety by reference to, Atlas Pipeline GP's historical consolidated and pro forma combined financial statements and the accompanying notes, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the historical consolidated financial statements and the accompanying notes of Spectrum, Elk City and its predecessor and Enogex Arkansas Pipeline, each of which is set forth elsewhere in this prospectus. The pro forma
data are not necessarily reflective of what our results would actually have been had the transactions actually occurred on the indicated date, nor do they reflect what may actually occur in the future.
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Pro Forma, as adjusted
Years Ended December
31,
Nine Months
Ended
September
30,
Year
Ended
December
31,
Nine
Months
Ended
September
30,
2002
2003
2004(1)
2004(1)
2005(2)
2004
2005
(unaudited)
(dollars
    in thousands)
(unaudited)
Statement of income data:
Revenue:
Natural gas and liquids
$
—
$
—
$
72,109
$
30,048
$
218,268
$
331,119
$
301,362
Transportation and compression
10,660
15,651
18,800
13,344
16,501
40,283
31,630
Interest income and other
7
98
382
282
352
711
496
Total revenue and other income
10,667
15,749
91,291
43,674
235,121
372,113
333,488
Costs and Expenses:
Natural gas and liquids
—
—
58,707
24,588
184,578
286,828
261,794
Plant operating
—
—
2,032
931
7,242
9,105
8,605
Transportation and compression
2,062
2,421
2,260
1,709
2,169
6,694
5,716
General and administrative
1,482
1,662
4,642
2,901
9,127
10,378
11,544
Depreciation and amortization
1,475
1,770
4,471
2,132
8,495
16,803
12,809
Loss (gain) on arbitration settlement, net
—
—
(1,457
)
2,987
138
(1,457
)
138
Interest
250
258
2,301
1,202
8,478
26,385
20,059
Minority interest in Atlas (3)
2,496
5,066
10,941
3,300
7,240
11,370
5,921
Minority interest in NOARK (4)
—
—
—
—
—
492
440
Other
—
—
—
—
—
555
—
Total costs and expenses
7,765
11,177
83,897
39,750
227,467
367,153
327,026
Net income
2,902
4,572
7,394
3,924
7,654
4,960
6,462
Premium on preferred unit redemption
—
—
(400
)
(400
)
—
(400
)
—
Net income attributable to owners
$
2,902
$
4,572
$
6,994
$
3,524
$
7,654
$
4,560
$
6,462
Balance sheet data (at period end):
Property, plant and equipment, net
$
23,764
$
29,628
$
175,259
$
172,312
$
304,704
$
462,626
Total assets
38,151
63,170
234,898
236,178
484,458
722,313
Total debt, including current portion
6,500
—
54,452
60,220
183,645
289,745
Total owners' equity (deficit)
11,157
15,729
21,405
15,325
(40,880
)
(40,885
)
Other financial data:
Gross margin (5)
$
10,660
$
15,651
$
32,202
$
18,804
$
50,191
$
84,574
$
71,198
EBITDA (6)
7,123
11,666
25,107
10,558
31,867
59,518
45,251
Adjusted EBITDA (6)
7,123
11,666
24,350
13,887
34,814
58,761
48,198
Maintenance capital expenditures
$
170
$
3,109
$
1,516
$
844
$
1,110
Expansion capital expenditures
5,060
4,526
8,527
3,575
33,409
Total capital expenditures
$
5,230
$
7,635
$
10,043
$
4,419
$
34,519
Operating data:
Appalachia:
Average throughput volumes (Mcf/d)
50,363
52,472
53,343
52,745
54,804
53,343
54,804
Average transportation rate per Mcf
$
0.58
$
0.82
$
0.96
$
0.92
$
1.10
$
0.96
$
1.10
Mid-Continent:
Velma system:
Gathered gas volume (Mcf/d)
—
—
56,441
55,580
69,091
54,315
69,091
Processed gas volume (Mcf/d)
—
—
55,202
54,755
64,581
52,391
64,581
Residue gas volume (Mcf/d)
—
—
42,659
41,555
52,471
40,702
52,471
NGL production (Bbl/d)
—
—
5,799
5,916
6,812
5,711
6,812
Condensate volume (Bbl/d)
—
—
185
204
269
191
269
Elk City system:
Gathered gas volume (Mcf/d)
—
—
—
—
242,294
239,804
246,539
Processed gas volume (Mcf/d)
—
—
—
—
116,688
120,505
116,304
Residue gas volume (Mcf/d)
—
—
—
—
107,182
110,164
106,391
NGL production (Bbl/d)
—
—
—
—
5,317
5,331
5,347
Condensate volume (Bbl/d)
—
—
—
—
121
108
136
NOARK system:
Average throughput volume (Mcf/d)
—
—
—
—
—
155,937
163,906
(1)
Includes Atlas' acquisition of Spectrum on July 16, 2004, representing five and one-half months' operations for the year ended December 31, 2004 and two and one-half months' operations for the nine months ended September 30, 2004.
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(2)
Includes Atlas' acquisition of Elk City on April 14, 2005, representing five and one-half months' operations for the nine months ended September 30, 2005.
(3)
Represents the minority interest in the net income of Atlas.
(4)
Represents Southwestern's 25% minority interest in NOARK, which was acquired on October 31, 2005.
(5)
We define gross margin as revenue less purchased product costs. Purchased product costs include the cost of natural gas and NGLs that Atlas purchases from third parties. We view gross margin as an important performance measure of core profitability of our operations and as a
key component of our internal financial reporting. We believe that investors benefit from having access to the same financial measures that our management uses. The GAAP measure most directly comparable to gross margin is net income. The following table reconciles our net
income to gross margin (in thousands):
Pro Forma, as adjusted
Years Ended December
31,
Nine Months
Ended
September
30,
Year
Ended
December
31,
Nine
Months
Ended
September
30,
2002
2003
2004
2004
2005
2004
2005
(unaudited)
(unaudited)
Net income
$
2,902
$
4,572
$
7,394
$
3,924
$
7,654
$
4,960
$
6,462
Plus (minus):
Interest income and other
(7
)
(98
)
(382
)
(282
)
(352
)
(711
)
(496
)
Plant operating
—
—
2,032
931
7,242
9,105
8,605
Transportation and compression
2,062
2,421
2,260
1,709
2,169
6,694
5,716
General and administrative
1,482
1,662
4,642
2,901
9,127
10,378
11,544
Depreciation and amortization
1,475
1,770
4,471
2,132
8,495
16,803
12,809
Loss (gain) on arbitration settlement, net
—
—
(1,457
)
2,987
138
(1,457
)
138
Interest
250
258
2,301
1,202
8,478
26,385
20,059
Minority interest in Atlas
2,496
5,066
10,941
3,300
7,240
11,370
5,921
Minority interest in NOARK
—
—
—
—
—
492
440
Other
—
—
—
—
—
555
—
Gross margin
$
10,660
$
15,651
$
32,202
$
18,804
$
50,191
$
84,574
$
71,198
(6)
EBITDA represents net income before net interest expense, income taxes, depreciation and amortization and minority interest in Atlas. Adjusted EBITDA is calculated by adding to EBITDA other non-cash items such as compensation expenses associated with unit issuances to
directors and employees. EBITDA and Adjusted EBITDA are not intended to represent cash flow and do not represent the measure of cash available for distribution. Our method of computing EBITDA may not be the same method used to compute similar measures reported by
other companies. Adjusted EBITDA includes net gain or loss on arbitration settlement as a non-recurring item. Adjusted EBITDA does not reflect approximately $1.0 million of additional general and administrative expenses we expect to incur in connection with our being a
public company after this offering.
Certain items excluded from EBITDA are significant components in understanding and assessing an entity's financial performance, such as their cost of capital and its tax structure, as well as historic costs of depreciable assets. We have included information concerning EBITDA
and Adjusted EBITDA because they provide investors and management with additional information as to Atlas' ability to pay its fixed charges and are presented solely as a supplemental financial measure. EBITDA and Adjusted EBITDA should not be considered as alternatives
to, or more meaningful than, net income or cash flow as determined in accordance with generally accepted accounting principles or as indicators of Atlas' operating performance or liquidity. The table below reconciles Adjusted EBITDA to EBITDA and EBITDA to our net
income (in thousands):
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Pro Forma, as adjusted
Years Ended December
31,
Nine Months
Ended
September
30,
Year
Ended
December
31,
Nine
Months
Ended
September
30,
2002
2003
2004
2004
2005
2004
2005
(unaudited)
(unaudited)
Net income
$
2,902
$
4,572
$
7,394
$
3,924
$
7,654
$
4,960
$
6,462
Plus:
Minority interest in Atlas
2,496
5,066
10,941
3,300
7,240
11,370
5,921
Interest expense
250
258
2,301
1,202
8,478
26,385
20,059
Depreciation and amortization
1,475
1,770
4,471
2,132
8,495
16,803
12,809
EBITDA
7,123
11,666
25,107
10,558
31,867
59,518
45,251
Adjustments:
Non-cash compensation expense
—
—
700
342
2,809
700
2,809
Loss (gain) on arbitration settlement, net
—
—
(1,457
)
2,987
138
(1,457
)
138
Adjusted EBITDA
$
7,123
$
11,666
$
24,350
$
13,887
$
34,814
$
58,761
$
48,198
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RISK FACTORS
Partnership interests are inherently different from capital stock of a corporation, although many of the business risks to which we are subject are similar to those that would be faced by a corporation engaged in a similar business. You should consider carefully the
following risk factors together with all of the other information included in this prospectus in evaluating an investment in our common units.
If any of the following risks were actually to occur, our business, financial condition or results of operations could be materially adversely affected. In that case, we might not be able to pay the quarterly distribution on our common units, the trading price of our
common units could decline and you could lose all or part of your investment.
Risks Inherent in an Investment in Us
Our only cash generating assets are our interests in Atlas, and our cash flow is therefore completely dependent upon the ability of Atlas to make distributions to its partners.
The amounts of cash that Atlas generates may not be sufficient for it to pay distributions at the current or any other level of distribution. Atlas' ability to make cash distributions depends primarily on its cash flow. Cash distributions do not depend directly on Atlas'
profitability, which is affected by non-cash items. Therefore, cash distributions may be made during periods when Atlas records losses and may not be made during periods when Atlas records profits. The actual amounts of cash Atlas generates will depend upon numerous
factors relating to its business which may be beyond its control, including:
•
the demand for and price of its natural gas and NGLs;
•
the volume of natural gas Atlas transports;
•
continued development of wells for connection to Atlas' gathering systems;
•
the availability of local, intrastate and interstate transportation systems;
•
the expenses Atlas incurs in providing its gathering services;
•
the cost of acquisitions and capital improvements;
•
Atlas' issuance of equity securities;
•
required principal and interest payments on Atlas' debt;
•
prevailing economic conditions;
•
fuel conservation measures;
•
alternate fuel requirements;
•
government regulation and taxation; and
•
technical advances in fuel economy and energy generation devices.
In addition, the actual amount of cash that Atlas will have available for distribution will depend on other factors, including:
•
the level of capital expenditures it makes;
•
the sources of cash used to fund its acquisitions;
•
its debt service requirements and restrictions on distributions contained in its current or future debt agreements; and
•
the amount of cash reserves established by Atlas' general partner for the conduct of Atlas' business.
Atlas is unable to borrow under its credit facility to pay distributions of available cash to unitholders because such borrowings would not constitute "working capital borrowings" under its partnership agreement. Because Atlas will be unable to borrow money to pay
distributions unless it establishes a facility that meets
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the definition contained in its partnership agreement, Atlas' ability to pay a distribution in any quarter is solely dependent on its ability to generate sufficient operating surplus with respect to that
quarter.
Because of these factors, Atlas may not have sufficient available cash each quarter to pay the current declared distribution of $0.83 per quarter or any other amount. Please read "—Risks Relating to Atlas' Business" for a discussion of risks affecting Atlas' ability to
generate distributable cash flow.
Restrictions in Atlas' credit facility and our proposed credit facility could limit our ability to make distributions to our unitholders.
We intend to enter into a credit facility after the closing of this offering. Atlas' credit facility, and any future credit facility we enter into, will contain covenants limiting the ability to incur indebtedness, grant liens, engage in transactions with affiliates and make
distributions to unitholders. Atlas' credit facility also contains covenants requiring Atlas to maintain certain financial ratios. In addition, Atlas is prohibited from making any distribution to unitholders if such distribution would cause an event of default or otherwise violate a
covenant under this credit facility.
Our partnership interests in Atlas are pledged under Atlas America's credit facility.
Atlas Pipeline GP has granted a security interest and pledged its limited partner and general partner interests in Atlas to Wachovia Bank pursuant to Atlas America's credit facility. If Atlas America or another party to the credit facility causes an event of default,
Wachovia Bank and the other lenders under Atlas America's credit facility could foreclose on the pledged Atlas partnership interests, which could cause us to lose our ability to manage Atlas and could have a material adverse effect on our business, financial condition and
results of operations.
If distributions on our common units are not paid with respect to any fiscal quarter, including those at the anticipated initial distribution rate, our unitholders will not be entitled to receive such payments in the future.
Our distributions to our unitholders will not be cumulative. Consequently, if distributions on our common units are not paid with respect to any fiscal quarter, including those at the anticipated initial distribution rate, our unitholders will not be entitled to receive such
payments in the future. Any distributions received by us from Atlas related to periods prior to the closing of this offering will be distributed entirely to Atlas America. In May 2006, we expect to pay a distribution to our unitholders equal to the initial quarterly distribution
prorated for the portion of the quarter ending March 31, 2006 that we are a publicly traded partnership.
We cannot assure you that we will have sufficient available cash to pay our initial quarterly distribution of $0.225 per unit for each quarter following the consummation of this offering.
The amount of available cash we need to pay our full initial quarterly distribution on the common units outstanding for the four quarters immediately following the completion of this offering is approximately $19.0 million. Our pro forma, as adjusted, available cash
deficit generated during fiscal 2004 would have been approximately $2.4 million. This amount would have been insufficient by approximately $21.4 million to pay our full initial quarterly distribution amount on all of our outstanding common units. Our pro forma, as adjusted,
available cash for the twelve months ended September 30, 2005 would have been approximately $9.0 million. This amount would have been insufficient by approximately $10.0 million to pay our full initial annual distribution amount on all of our outstanding units. Please see "Unaudited Pro Forma Available Cash" for a presentation of the amounts of available cash that we would have generated
for fiscal 2004 and the twelve months ended September 30, 2005.
In the future, we may not have sufficient cash to pay distributions at our estimated initial quarterly distribution level or to increase distributions.
The source of our earnings and cash flow will initially consist exclusively of cash distributions from Atlas. Therefore, the amount of distributions we are able to make to our unitholders may fluctuate based on the level of distributions Atlas makes to its partners. We
cannot assure you that Atlas will continue to make quarterly distributions at its current level or increase its quarterly distributions in the future. In addition, while
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we would expect to increase or decrease distributions to our unitholders if Atlas increases or decreases
distributions to us, the timing and amount of such increased or decreased distributions, if any, will not necessarily be comparable to the timing and amount of the increase or decrease in distributions made by Atlas to us.
Our ability to distribute cash received from Atlas to our unitholders is limited by a number of factors, including:
•
interest expense and principal payments on any current or future indebtedness;
•
restrictions on distributions contained in any current or future debt agreements;
•
our general and administrative expenses, including expenses we will incur as a result of being a public company;
•
expenses of our subsidiaries other than Atlas, including tax liabilities of our corporate subsidiaries, if any;
•
reserves necessary for us to make the necessary capital contributions to maintain our 2.0% general partner interest in Atlas as required by its partnership agreement upon the issuance of additional partnership securities by Atlas; and
•
reserves our general partner believes prudent for us to maintain for the proper conduct of our business or to provide for future distributions.
We cannot guarantee that in the future we will be able to pay distributions or that any distributions we do make will be at or above our estimated initial quarterly distribution. The actual amount of cash that is available for distribution to our unitholders will depend on
numerous factors, many of which are beyond our control or the control of our general partner. Our estimated cash available to pay distributions for the twelve months ending December 31, 2006 approximately equals the amount of cash we need to pay the expected annual
distribution of $0.90 per unit. Therefore, a reduction in the amount of cash distributed by Atlas per unit or on the incentive distribution rights, or an increase in our expenses may result in our not being able to pay the expected annual distribution of $0.90 per unit. We do not
have any subordinated units, which would have their distributions reduced before distributions to the common units are reduced.
Atlas' general partner, with our consent, may limit or modify the incentive distributions we are entitled to receive in order to facilitate the growth strategy of Atlas. Our general partner's board of directors can give this consent without a vote of our unitholders.
We own Atlas' general partner, which owns the incentive distribution rights in Atlas that entitle us to receive increasing percentages, up to a maximum of 48.0%, of any cash distributed by Atlas as it reaches certain target distribution levels in excess of $0.42 per unit in
any quarter. A substantial portion of the cash flows we receive from Atlas is provided by these incentive distributions. Atlas' board of directors may reduce the incentive distribution rights payable to us with our consent, which we may provide without the approval of our
unitholders.
In order to facilitate acquisitions by Atlas, the general partner of Atlas may elect to limit the incentive distributions we are entitled to receive with respect to a particular acquisition or unit issuance contemplated by Atlas. This is because a potential acquisition might not
be accretive to Atlas' unitholders as a result of the significant portion of that acquisition's cash flows which would be paid as incentive distributions to us. By limiting the level of incentive distributions in connection with a particular acquisition
or issuance of units of Atlas, the cash flows associated with that acquisition could be accretive to Atlas' unitholders as well as substantially beneficial to us. In doing so, the managing board of
Atlas' general partner would be required to consider both its fiduciary obligations to investors in Atlas as well as to us. Our partnership agreement specifically permits our general partner to
authorize the general partner of Atlas to limit or modify the incentive distribution rights held by us if our general partner determines that such limitation or modification does not adversely affect
our limited partners in any material respect.
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A reduction in Atlas' distributions will disproportionately affect the amount of cash distributions to which we are currently entitled.
Our ownership of the incentive distribution rights in Atlas, through our ownership of equity interests in Atlas Pipeline GP, the holder of the incentive distribution rights, entitles us to receive our pro rata share of specified percentages of total cash distributions made by
Atlas with respect to any particular quarter only in the event that Atlas distributes more than $0.42 per unit for such quarter. As a result, the holders of Atlas' common units have a priority over the holders of Atlas' incentive distribution rights to the extent of cash distributions
by Atlas up to and including $0.42 per unit for any quarter.
Our incentive distribution rights entitle us to receive increasing percentages, up to 48%, of all cash distributed by Atlas. Because the incentive distribution rights currently participate at the maximum 48% target cash distribution level in all distributions made by Atlas
above the current distribution level, future growth in distributions we receive from Atlas will not result from an increase in the target cash distribution level associated with the incentive distribution rights.
Furthermore, a decrease in the amount of distributions by Atlas to less than $0.60 per common unit per quarter would reduce Atlas Pipeline GP's percentage of the incremental cash distributions above $0.52 per common unit per quarter from 48% to 23%. As a result,
any such reduction in quarterly cash distributions from Atlas would have the effect of disproportionately reducing the amount of all distributions that we receive based on our ownership interest in the incentive distribution rights in Atlas as compared to cash distributions we
receive on our 2.0% general partner interest in Atlas and our Atlas common units.
Our ability to meet our financial needs may be adversely affected by our cash distribution policy and our lack of operational assets.
Our cash distribution policy, which is consistent with our partnership agreement, requires us to distribute all of our available cash quarterly. Our only cash generating assets are partnership interests, including incentive distribution rights, in Atlas, and we currently have
no independent operations separate from those of Atlas. Moreover, a reduction in Atlas' distributions will disproportionately affect the amount of cash distributions we receive. Given that our cash distribution policy is to distribute available cash and not retain it and that our
only cash generating assets are partnership interests in Atlas, we may not have enough cash to meet our needs if any of the following events occur:
•
an increase in our operating expenses;
•
an increase in general and administrative expenses;
•
an increase in principal and interest payments on our outstanding debt;
•
an increase in working capital requirements; or
•
an increase in cash needs of Atlas or its subsidiaries that reduces Atlas' distributions.
There is no guarantee that our unitholders will receive quarterly distributions from us.
While our cash distribution policy, which is consistent with the terms of our partnership agreement, requires that we distribute all of our available cash quarterly, our cash distribution policy is subject to the following restrictions and limitations and may be changed at
any time, including in the following ways:
•
We may lack sufficient cash to pay distributions to our unitholders due to a number of factors, including increases in our general and administrative expenses, principal and interest payments on debt we may incur, tax expenses, working capital requirements and anticipated cash needs of us or Atlas and its subsidiaries.
•
Our cash distribution policy will be, and Atlas' cash distribution policy is, subject to restrictions on distributions under our anticipated new credit facility and Atlas' credit agreements, respectively, such as material financial tests and covenants and limitations on paying
distributions during an event of default.
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•
Our general partner's board of directors will have the authority under our partnership agreement to establish reserves for the prudent conduct of our business and for future cash distributions to our unitholders, and the managing board of Atlas' general partner has the
authority under Atlas' partnership agreement to establish reserves for the prudent conduct of Atlas' business and for future cash distributions to Atlas' unitholders. The establishment of those reserves could result in a reduction in cash distributions to you from levels we
currently anticipate pursuant to our stated cash distribution policy.
•
Our partnership agreement, including our cash distribution policy contained therein, may be amended by a vote of the holders of a majority of our common units.
•
Even if our cash distribution policy is not amended, modified or revoked, the amount of distributions we pay under our cash distribution policy and the decision to make any distribution is determined by our general partner, taking into consideration the terms of our
partnership agreement, and the amount of distributions paid under Atlas' cash distribution policy and the decision to make any distribution to its unitholders is at the discretion of Atlas' general partner, taking into consideration the terms of its partnership agreement.
•
Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act, Atlas may not make a distribution to its partners if the distribution would cause its liabilities to exceed the fair value of its assets, and we may not make a distribution to you if the distribution
would cause our liabilities to exceed the fair value of our assets.
Because of these restrictions and limitations on our cash distribution policy and our ability to change our cash distribution policy, we may not have available cash to distribute to our unitholders, and there is no guarantee that our unitholders will receive quarterly
distributions from us.
Our cash distribution policy limits our ability to grow.
Because we distribute all of our available cash, our growth may not be as fast as businesses that reinvest their available cash to expand ongoing operations. In fact, our growth initially will be completely dependent upon Atlas' ability to increase its quarterly distribution
per unit because currently our only cash-generating assets are partnership interests in Atlas, including incentive distribution rights. If we issue additional units or incur debt to fund acquisitions and capital expenditures, the payment of distributions on those additional
units or interest on that debt could increase the risk that we will be unable to maintain or increase our per unit distribution level.
Consistent with the terms of its partnership agreement, Atlas distributes to its partners its available cash each quarter. In determining the amount of cash available for distribution, Atlas sets aside cash reserves, including reserves it believes prudent to maintain for the
proper conduct of its business or to provide for future distributions. Additionally, it has relied upon external financing sources, including commercial borrowings and other debt and equity issuances, to fund its acquisition capital expenditures. Accordingly, to the extent Atlas
does not have sufficient cash reserves or is unable to finance growth externally, its cash distribution policy will significantly impair its ability to grow. In addition, to the extent Atlas issues additional units in connection with any acquisitions or capital expenditures,
the payment of distributions on those additional units may increase the risk that Atlas will be unable to maintain or increase its per unit distribution level, which in turn may impact the available cash that we have to distribute to our unitholders. The incurrence of additional
debt to finance its growth strategy would result in increased interest expense to Atlas, which in turn may impact the available cash that we have to distribute to our unitholders.
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The amount of cash distributions from Atlas that we will be able to distribute to you will be reduced by the costs associated with being a public company, other general and administrative expenses, and reserves that our general partner believes prudent to
maintain for the proper conduct of our business and for future distributions.
Before we can pay distributions to our unitholders, we must first pay or reserve cash for our expenses, including the costs of being a public company and other operating expenses, and we may reserve cash for future distributions during periods of limited cash flows.
Prior to this offering, we have been a private company and have not filed reports with the Commission. Following this offering, we will become subject to the public reporting requirements of the Securities Exchange Act of 1934, as amended. Although we produce our
financial statements in accordance with GAAP, our internal accounting controls may not currently meet all standards applicable to companies with publicly traded securities. For example, as we become subject to the requirements of Section 404 of Sarbanes-Oxley for the fiscal
year ending December 31, 2007, our auditors may identify weaknesses or deficiencies in the operational effectiveness of our internal controls and procedures and may advise us that these weaknesses or deficiencies could collectively constitute a significant deficiency that may
rise to the level of a material weakness under Section 404. Similarly, Atlas is subject to Section 404 with the filing of its annual reports on Form 10-K, and its auditors may identify significant deficiencies and/or material weaknesses in its internal controls and procedures. In
addition, the amount of cash distributions from Atlas that will be available for distribution to our unitholders will be reduced by the costs associated with us becoming a public company.
In addition, we may reserve funds to maintain our 2.0% general partner interest in Atlas by making a capital contribution to Atlas when it issues additional common units.
We are largely dependent on Atlas for our growth. As a result of the fiduciary obligations of Atlas' general partner, which is our wholly owned subsidiary, to the unitholders of Atlas, our ability to pursue business opportunities independently will be limited.
We currently intend to grow primarily through the growth of Atlas. While we are not precluded from pursuing business opportunities independently of Atlas, our subsidiary, as the general partner of Atlas, has fiduciary duties to Atlas unitholders which would make it
difficult for us to engage in any business activity that is competitive with Atlas. Those fiduciary duties are applicable to us because we control the general partner through our ability to elect all of its directors. While there may be circumstances in which these fiduciary duties
may be satisfied while allowing us to pursue business opportunities independent of Atlas, we expect such opportunities to be limited. Accordingly, we may be unable to diversify our sources of revenue in order to increase cash distributions to you. See also "—Risks Related to
Conflicts of Interest."
Our ability to sell our partnership interests in Atlas may be limited by securities laws restrictions and liquidity constraints.
All of the 1,641,026 common units of Atlas that we own are unregistered, restricted securities, within the meaning of Rule 144 under the Securities Act of 1933. Unless we exercise our registration rights with respect to these common units, we are limited to selling into
the market in any three-month period an amount of Atlas common units that does not exceed the greater of 1% of the total number of common units outstanding or the average weekly reported trading volume of the common units for the four calendar weeks prior to the sale.
We face contractual limitations on our ability to sell our general partner interest and incentive distribution rights and the market for such interests is illiquid.
The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public markets, including sales by our existing unitholders.
After this offering, we will have 21,100,000 common units outstanding, which includes the 3,600,000 common units we are selling in this offering that may be resold in the public market immediately. All of our common units that were outstanding prior to our initial
public offering will be subject to resale restrictions under 180-day lock-up agreements with our underwriters. Each of the lock-up arrangements with the underwriters may be waived in the discretion of Lehman Brothers, Inc. Sales by any of our existing unitholders of a
substantial number of our common units in the public markets following this offering, or the perception that such sales might occur, could have a material adverse effect on the price of our common units
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or could impair our ability to obtain capital through an offering of equity securities. In addition, our general partner has agreed to provide registration rights to these holders, subject to certain
limitations. Please read "Units Eligible for Future Sale."
The control of our general partner may be transferred to a third party, and that party could replace our current management team, in each case without unitholder consent.
Our general partner may transfer its general partner interest to a third party in a merger or in a sale of all or substantially all of its assets without the consent of our unitholders. Furthermore, there is no restriction in our limited partnership agreement on the ability of the
owners of our general partner to transfer their ownership interest in our general partner to a third party. The owner of our general partner would then be in a position to replace the board of directors and officers of our general partner with its own choices and to control the
decisions taken by the board of directors and officers.
Atlas' unitholders have the right to remove Atlas' general partner with the approval of the holders of 66 2/3% of all units, which would cause us to lose our general partner interest and incentive distribution rights in Atlas and the ability to manage Atlas.
We currently manage Atlas through Atlas Pipeline GP, Atlas' general partner and our wholly-owned subsidiary. Atlas' partnership agreement, however, gives unitholders of Atlas the right to remove the general partner of Atlas upon the affirmative vote of holders of 66
2/3% of Atlas' outstanding units. If Atlas Pipeline GP were removed as general partner of Atlas, it would receive cash or common units in exchange for its 2.0% general partner interest and the incentive distribution rights and would lose its ability to manage Atlas. While the
common units or cash we would receive are intended under the terms of Atlas' partnership agreement to fully compensate us in the event such an exchange is required, the value of these common units or investments we make with the cash over time may not be equivalent to
the value of the general partner interest and the incentive distribution rights had we retained them.
If Atlas' general partner is not fully reimbursed or indemnified for obligations and liabilities it incurs in managing the business and affairs of Atlas, its value, and therefore the value of our common units, could decline.
The general partner of Atlas may make expenditures on behalf of Atlas for which it will seek reimbursement from Atlas. In addition, under Delaware partnership law, the general partner, in its capacity as the general partner of Atlas, has unlimited liability for the
obligations of Atlas, such as its debts and environmental liabilities, except for those contractual obligations of Atlas that are expressly made without recourse to the general partner. To the extent Atlas Pipeline GP incurs obligations on behalf of Atlas, it is entitled to be
reimbursed or indemnified by Atlas. If Atlas is unable or unwilling to reimburse or indemnify its general partner, Atlas Pipeline GP may be unable to satisfy these liabilities or obligations, which would reduce its value and therefore the value of our common units.
The initial public offering price of our common units may not be indicative of the market price of our common units after this offering. In addition, our unit price may be volatile.
Prior to this offering there has been no public market for our common units. An active market for our common units may not develop or may not be sustained after this offering. The initial public offering price of our common units will be determined by negotiations
between us and the underwriters based on numerous factors which we discuss in the "Underwriting" section of this prospectus. This price may not be indicative of the market price for our common units after this initial public offering. The market price of our common units
could be subject to significant fluctuations after this offering, and may decline below the initial public offering price. You may not be able to resell your common units at or above the initial public offering price. The following factors could affect our common unit price:
•
Atlas' operating and financial performance and prospects;
•
quarterly variations in the rate of growth of our financial indicators, such as distributable cash flow per common unit, net income and revenue;
•
changes in revenue or earnings estimates or publication of research reports by analysts;
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•
speculation in the press or investment community;
•
sales of our common units by our unitholders;
•
announcements by Atlas or its competitors of significant contracts, acquisitions, strategic partnerships, joint ventures, securities offerings or capital commitments;
•
general market conditions; and
•
domestic and international economic, legal and regulatory factors unrelated to Atlas' performance.
The stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies and partnerships. These broad market fluctuations may adversely affect the trading price of our common units.
Our common units and Atlas' common units may not trade in simple relation or proportion to one another. Instead, while the trading prices of our common units and Atlas' common units are likely to follow generally similar broad trends, the trading prices may diverge
because, among other things:
•
Atlas' cash distributions to its common unitholders have a priority over distributions on its incentive distribution rights;
•
we participate in the distributions on our general partner interest in Atlas and the incentive distribution rights in Atlas while Atlas' common unitholders do not; and
•
we may enter into other businesses separate and apart from Atlas or any of its affiliates.
You may have limited liquidity for your common units. A trading market may not develop for our common units, and you may not be able to resell your common units at the initial public offering price.
Prior to the offering, there has been no public market for our common units. We do not know the extent to which investor interest will lead to the development of a trading market or how liquid that market might be. Potential investors may be deterred from investing in
our common units for various reasons, including the very limited number of publicly traded entities whose assets consist exclusively of partnership interests in a publicly traded limited partnership. Also, you may not be able to resell your common units at or above the initial
public offering price. Additionally, the lack of liquidity may result in wide bid-ask spreads, contribute to significant fluctuations in the market price of our common units and limit the number of investors who are able to buy our common units.
Our unitholders do not elect our general partner or vote on our general partner's officers and directors, and the rights of unitholders owning 20% or more of our units are further restricted under our partnership agreement. Following the completion of this
offering, Atlas America will own approximately 82.9% of our units, a sufficient number to block any attempt to remove our general partner.
Unlike the holders of common stock in a corporation, our unitholders have only limited voting rights on matters affecting our business and, therefore, limited ability to influence management's decisions regarding our business. Our unitholders did not elect our general
partner or the officers or directors of our general partner and will have no right to elect our general partner or the officers and directors of our general partner on an annual or other continuing basis in the future. The board of directors of our general partner, including
independent directors, is chosen by the members of our general partner.
Furthermore, if our unitholders are dissatisfied with the performance of our general partner, they will have little ability to remove our general partner. Our general partner may not be removed except upon the vote of the holders of at least 66 2/3% of the outstanding
units voting together as a single class. Because Atlas America owns approximately 82.9% of our outstanding units, our general partner may not be removed without the consent of Atlas America.
Our unitholders' voting rights are further restricted by the provision in our limited partnership agreement stating that any units held by a person that owns 20% or more of any class of units then outstanding, other than our general partner, its affiliates, their transferees
and persons who acquired such units with the prior
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approval of the board of directors of our general partner, cannot be voted on any matter. In addition, our limited partnership agreement contains provisions limiting the ability of our unitholders
to call meetings or to acquire information about our operations, as well as other provisions limiting our unitholders' ability to influence the manner or direction of our management. As a result
of these provisions, the price at which our common units will trade may be lower because of the absence or reduction of a takeover premium in the trading price.
Atlas may issue additional units, which may increase the risk of it not having sufficient available cash to maintain or increase its per unit distribution level.
Atlas has wide discretion to issue additional units, including units that rank senior to its common units and the incentive distributions rights as to quarterly cash distributions, on the terms and conditions established by its general partner. The payment of distributions on
these additional Atlas units may increase the risk of Atlas being unable to maintain or increase its per unit distribution level. To the extent these new Atlas units are senior to the Atlas common units and the incentive distribution rights, their issuance will increase the
uncertainty of the payment of distributions on the common units and the incentive distribution rights. Neither the common units nor the incentive distribution rights are entitled to any arrearages from prior quarters.
We may issue an unlimited number of limited partner interests without the consent of our unitholders, which will dilute your ownership interest in us and may increase the risk that we will not have sufficient available cash to maintain or increase our per unit
distribution level.
We may issue an unlimited number of limited partner interests of any type without the approval of our unitholders on terms and conditions established by our general partner at any time. The issuance by us of additional common units or other equity securities of equal
or senior rank will have the following effects:
•
our unitholders' proportionate ownership interest in us will decrease;
•
the amount of cash available for distribution on each unit may decrease;
•
the relative voting strength of each previously outstanding unit may be diminished;
•
the ratio of taxable income to distributions may increase; and
•
the market price of the common units may decline.
Please read "The Partnership Agreement of Atlas Pipeline Holdings, L.P.—Issuance of Additional Securities."
If in the future we cease to manage and control Atlas through our ownership of its general partner interests, we may be deemed to be an investment company under the Investment Company Act of 1940.
If we cease to manage and control Atlas and are deemed to be an investment company under the Investment Company Act of 1940, we would either have to register as an investment company under the Investment Company Act of 1940, obtain exemptive relief from
the SEC or modify our organizational structure or our contract rights to fall outside the definition of an investment company. Registering as an investment company could, among other things, materially limit our ability to engage in transactions with affiliates, including the
purchase and sale of certain securities or other property to or from our affiliates, restrict our ability to borrow funds or engage in other transactions involving leverage and require us to add additional directors who are independent of us or our affiliates.
You will experience immediate and substantial dilution of $24.63 per common unit in the pro forma net tangible book value of your common units.
The offering price of our common units will be substantially higher than the pro forma net tangible book value per common unit of the outstanding common units immediately after the offering. If you purchase common units in this offering you will incur immediate
and substantial dilution in the pro forma net tangible book value per common unit from the price you pay for the common units.
Your liability as a limited partner may not be limited, and our unitholders may have to repay distributions or make additional contributions under certain circumstances.
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Under Delaware law, you could be held liable for our obligations to the same extent as our general partner if a court determined that the right or the exercise of the right by our unitholders as a group to remove or replace our general partner, to approve some
amendments to the limited partnership agreement or to take other action under our limited partnership agreement constituted participation in the "control" of our business.
Our general partner generally has unlimited liability for our obligations, such as our debts and environmental liabilities, except for those contractual obligations that are expressly made without recourse to our general partner. Additionally, the limitations on the liability
of holders of limited partner interests for the obligations of a limited partnership have not been clearly established in many jurisdictions.
In addition, Section 17-607 of the Delaware Revised Uniform Limited Partnership Act provides that, under some circumstances, a unitholder may be liable to us for the amount of a distribution for a period of three years from the date of the distribution. Please read
"The Partnership Agreement of Atlas Pipeline Holdings, L.P.—Limited Liability" for a discussion of the implications of the limitations on liability to a unitholder.
An increase in interest rates may cause the market price of our common units to decline.
Like all equity investments, an investment in our common units is subject to certain risks. In exchange for accepting these risks, investors may expect to receive a higher rate of return than would otherwise be obtainable from lower-risk investments. Accordingly, as
interest rates rise, the ability of investors to obtain higher risk-adjusted rates of return by purchasing government-backed debt securities may cause a corresponding decline in demand for riskier investments generally, including yield-based equity investments such as publicly-
traded limited partnership interests. Reduced demand for our common units resulting from investors seeking other more favorable investment opportunities may cause the trading price of our common units to decline.
Risks Related to Conflicts of Interest
Although we control Atlas through our ownership of its general partner, Atlas' general partner owes fiduciary duties to Atlas and Atlas' unitholders, which may conflict with our interests.
Conflicts of interest exist and may arise in the future as a result of the relationships between us and our affiliates, including Atlas' general partner, on the one hand, and Atlas and its limited partners, on the other hand. The directors and officers of Atlas Pipeline GP have
fiduciary duties to manage Atlas in a manner beneficial to us, its owner. At the same time, these directors and officers have a fiduciary duty to manage Atlas in a manner beneficial to Atlas and its limited partners. The managing board of Atlas or its conflicts committee will
resolve any such conflict and has broad latitude to consider the interests of all parties to the conflict. The resolution of these conflicts may not always be in our best interest or that of our unitholders.
For example, conflicts of interest may arise in the following situations:
•
the allocation of shared overhead expenses to Atlas and us;
•
the interpretation and enforcement of contractual obligations between us and our affiliates, on the one hand, and Atlas, on the other hand;
•
the determination and timing of the amount of cash to be distributed to Atlas' partners and the amount of cash reserved for the future conduct of Atlas' business;
•
the decision as to whether Atlas should make acquisitions, and on what terms; and
•
any decision we make in the future to engage in business activities independent of, or in competition with, Atlas.
The fiduciary duties of our general partner's officers and directors may conflict with those of Atlas' general partner's officers and directors.
Our general partner's officers and directors have fiduciary duties to manage our business in a manner beneficial to us and our partners. However, all of our general partner's executive officers and non-independent
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directors also serve as executive officers and directors of Atlas' general partner, and, as a result, have fiduciary duties to manage the business of Atlas in a manner beneficial to Atlas and its
partners. Consequently, these directors and officers may encounter situations in which their fiduciary obligations to Atlas, on one hand, and us, on the other hand, are in conflict. The resolution
of these conflicts of interest may not always be in our best interest or that of our unitholders. For a more detailed description of the conflicts of interest involving our general partner, please read
"Conflicts of Interest and Fiduciary Duties."
If we are presented with certain
      business opportunities, Atlas will have the first right to pursue such
      opportunities.
Pursuant to the omnibus agreement to be entered into in connection with the closing of this offering, we will agree to certain business opportunity arrangements to address potential conflicts that may arise between us and Atlas. If a business opportunity in respect of any business activity in which Atlas is currently engaged is presented to us, our general partner or Atlas or its general partner, then Atlas will have the first right to pursue such business opportunity. The omnibus agreement will provide, among other things, that Atlas will be presumed to desire to acquire the assets until such time as it advises us that it has abandoned such pursuit, and we may not pursue the opportunity prior to that time. Please read "Conflicts of Interest and Fiduciary Duties."
Atlas and affiliates of our general
      partner are not limited in their ability to compete with us, which could
      cause conflicts of interest and limit our ability to acquire additional
      assets or businesses which in turn could adversely affect our results of
      operations and cash available for distribution to our unitholders.
Neither our partnership agreement
    nor the omnibus agreement between us, Atlas, Atlas Pipeline GP and Atlas
    Pipeline Holdings GP, LLC will prohibit Atlas or affiliates of our general
    partner from owning assets or engaging in businesses that compete directly
    or indirectly with us or one another. In addition, Atlas and its affiliates
    or affiliates of our general partner, may acquire, construct or dispose of
    additional assets related to the transmission, gathering and processing of
    natural gas, NGLs or other assets in the future, without any obligation to
    offer us the opportunity to purchase or construct any of those assets. As
    a result, competition among these entities could adversely impact Atlas'
    or our results of operations and cash available for distribution. Please
    read "Conflicts of Interest and Fiduciary Duties."
Potential conflicts of interest may arise among our general partner, its affiliates and us. Our general partner and its affiliates have limited fiduciary duties to us and our unitholders, which may permit them to favor their own interests to the detriment of us and
our unitholders.
Following this offering, conflicts of interest may arise among our general partner and its affiliates, on the one hand, and us and our unitholders, on the other hand. As a result of these conflicts, our general partner may favor its own interests and the interests of its
affiliates over the interests of our unitholders. These conflicts include, among others, the following:
•
Our general partner is allowed to take into account the interests of parties other than us, including Atlas and its affiliates and any other businesses acquired in the future, in resolving conflicts of interest, which has the effect of limiting its fiduciary duty to our unitholders.
•
Our general partner has limited its liability and reduced its fiduciary duties under the terms of our partnership agreement, while also restricting the remedies available to our unitholders for actions that, without these limitations, might constitute breaches of fiduciary duties.
As a result of purchasing our units, unitholders consent to various actions and conflicts of interest that might otherwise constitute a breach of fiduciary or other duties under applicable state law.
•
Our general partner determines the amount and timing of our investment transactions, borrowings, issuances of additional partnership securities and reserves, each of which can affect the amount of cash that is available for distribution to our unitholders.
•
Our general partner determines which costs incurred by it and its affiliates are reimbursable by us.
•
Our partnership agreement
          does not restrict our general partner from causing us to pay it or
          its affiliates for any services rendered, or from entering into additional
          contractual arrangements with any
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of these entities on our behalf,
          so long as the terms of any such payments or
additional contractual arrangements are fair and reasonable to us.
•
Our general partner controls the enforcement of obligations owed to us by it and its affiliates.
•
Our general partner decides whether to retain separate counsel, accountants or others to perform services for us.
Please read "Certain Relationships and Related Party Transactions" and "Conflicts of Interest and Fiduciary Duties."
Our general partner may not be fully reimbursed for the use of its officers and employees by Atlas' general partner.
Our general partner shares officers and administrative personnel with Atlas' general partner to operate both our business and Atlas' business. In that case, our general partner's officers, who are also the officers of Atlas' general partner, will allocate, in their reasonable
and sole discretion, the time its employees spend on our behalf and on behalf of Atlas. These allocations may not necessarily be the result of arms-length negotiations between Atlas' general partner and our general partner. Although our general partner intends to be reimbursed
by Atlas' general partner for its employees' activities, due to the nature of the allocations, this reimbursement may not exactly match the actual time and overhead spent.
Our partnership agreement limits our general partner's fiduciary duties to us and our unitholders and restricts the remedies available to our unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.
Our partnership agreement contains provisions that reduce the standards to which our general partner would otherwise be held by state fiduciary duty law. For example, our partnership agreement:
•
permits our general partner to make a number of decisions in its individual capacity, as opposed to in its capacity as our general partner. This entitles our general partner to consider only the interests and factors that it desires, and it has no duty or obligation to give any
consideration to any interest of, or factors affecting, us, our affiliates or any limited partner. Examples include the exercise of its limited call right, its voting rights with respect to the units it owns, its registration rights and its determination whether or not to consent to any
merger or consolidation of our partnership or amendment to our partnership agreement;
•
provides that our general partner will not have any liability to us or our unitholders for decisions made in its capacity as a general partner so long as it acted in good faith, meaning it believed the decisions were in the best interests of our partnership;
•
generally provides that affiliated transactions and resolutions of conflicts of interest not approved by the audit and conflicts committee of the board of directors of our general partner and not involving a vote of unitholders must be on terms no less favorable to us than those
generally being provided to or available from unrelated third parties or be "fair and reasonable" to us and that, in determining whether a transaction or resolution is "fair and reasonable," our general partner may consider the totality of the relationships among the parties
involved, including other transactions that may be particularly advantageous or beneficial to us;
•
provides that in resolving conflicts of interest, it will be presumed that in making its decision the general partner acted in good faith, and in any proceeding brought by or on behalf of any limited partner or us, the person bringing or prosecuting such proceeding will have the
burden of overcoming such presumption; and
•
provides that our general partner and its officers and directors will not be liable for monetary damages to us, our limited partners or assignees for any acts or omissions unless there has been a final and non-appealable judgment entered by a court of competent jurisdiction
determining that the general partner or those other persons acted in bad faith or engaged in fraud or willful misconduct or, in the case of a criminal matter, acted with knowledge that such person's conduct was criminal.
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In order to become a limited partner of our partnership, our unitholders are required to agree to be bound by the provisions in the partnership agreement, including the provisions discussed above. Please read "Conflicts of Interest and Fiduciary Duties—Fiduciary
Duties."
Our general  partner has a limited call right that may require you to sell your units at an undesirable time or price.
If at any time our general partner and its affiliates own more than 87.5% of our outstanding units, our general partner will have the right, but not the obligation, which it may assign to any of its affiliates or to us, to acquire all, but not less than all, of the units held by
unaffiliated persons at a price not less than their then-current market price. As a result, you may be required to sell your units at an undesirable time or price and may not receive any return on your investment. You may also incur a tax
liability upon a sale of your units. At the completion of this offering, Atlas America will own approximately 82.9% of our units. Please read "The Partnership Agreement of Atlas Pipeline
Holdings, L.P.—Limited Call Right."
Risks Relating to Atlas' Business
Because our cash flow will initially consist exclusively of distributions from Atlas, risks to Atlas' business are also risks to us. We have set forth below the material risks to Atlas' business or results of operations, the occurrence of which could negatively impact Atlas'
financial performance and decrease the amount of cash it is able to distribute to us, thereby decreasing the amount of cash we have available for distribution to our unitholders.
Atlas may be unsuccessful in integrating the operations from its recent acquisitions or any future acquisitions with its operations and in realizing all of the anticipated benefits of these acquisitions.
Atlas acquired Elk City in April 2005 and completed the NOARK acquisition in October 2005 and is currently in the process of integrating their operations with its operations. Atlas also has an active, on-going program to identify other potential acquisitions. The
integration of previously independent operations with Atlas can be a complex, costly and time-consuming process. The difficulties of combining Elk City and NOARK, as well as any operations Atlas may acquire in the future, with its existing operations include, among other
things:
•
operating a significantly larger combined entity;
•
the necessity of coordinating geographically disparate organizations, systems and facilities;
•
integrating personnel with diverse business backgrounds and organizational cultures;
•
consolidating operational and administrative functions;
•
integrating internal controls, compliance under Sarbanes-Oxley Act of 2002 and other corporate governance matters;
•
the diversion of management's attention from other business concerns;
•
customer or key employee loss from the acquired businesses;
•
a significant increase in Atlas' indebtedness; and
•
potential environmental or regulatory liabilities and title problems.
The process of combining companies or the failure to integrate them successfully could harm Atlas' business or future prospects, and result in significant decreases in Atlas' gross margin and cash flows.
The acquisitions of the Elk City and NOARK operations have substantially changed Atlas' business, making it difficult to evaluate Atlas' business based upon its historical financial information.
The acquisitions of the Elk City and NOARK operations have significantly increased Atlas' size and substantially redefined its business plan, expanded Atlas' geographic market and resulted in large changes to its revenue and expenses. As a result of these acquisitions,
and Atlas' continued plan to acquire and integrate additional companies that it believes present attractive opportunities, Atlas' financial results for any period or changes in its results across periods may continue to dramatically change. Atlas' historical
financial results,
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therefore,
      should not be relied upon to accurately predict its future operating results,
      thereby making the evaluation of its business more difficult.
Due to its lack of asset diversification, negative developments in Atlas' operations would reduce its ability to make distributions to its unitholders.
Atlas relies exclusively on the revenue generated from its transportation, gathering and processing operations, and as a result, its financial condition depends upon prices of, and continued demand for, natural gas and NGLs. Due to Atlas' lack of asset-type diversification,
a negative development in one of these businesses would have a significantly greater impact on Atlas' financial condition and results of operations than if it maintained more diverse assets.
Atlas' construction of new assets may not result in revenue increases and is subject to regulatory, environmental, political, legal and economic risks, which could impair its results of operations and financial condition.
One of the ways Atlas may grow its business is through the construction of new assets, such as the Sweetwater gas plant. The construction of additions or modifications to Atlas' existing systems and facilities, and the construction of new assets, involve numerous
regulatory, environmental, political and legal uncertainties beyond Atlas' control and require the expenditure of significant amounts of capital. Any projects Atlas undertakes may not be completed on schedule at the budgeted cost, or at all. Moreover, its revenue may not
increase immediately upon the expenditure of funds on a particular project. For instance, if Atlas expands a gathering system, the construction may occur over an extended period of time, and it will not receive any material increases in revenue until the project is completed.
Moreover, Atlas may construct facilities to capture anticipated future growth in production in a region in which growth does not materialize. Since Atlas is not engaged in the exploration for and development of natural gas reserves, it often does not have access to estimates of
potential reserves in an area before constructing facilities in the area. To the extent Atlas relies on estimates of future production in Atlas' decision to construct additions to its systems, the estimates may prove to be inaccurate because there are numerous uncertainties inherent
in estimating quantities of future production. As a result, new facilities may not be able to attract enough throughput to achieve Atlas' expected investment return, which could impair Atlas' results of operations and financial condition. In addition, Atlas' actual revenue from a
project could materially differ from expectations as a result of the price of natural gas, the NGL content of the natural gas processed and other economic factors described in this section.
In particular, if the Sweetwater gas plant does not generate the incremental cash flow we expect, or if the generation of such cash flow is materially delayed, we may not have sufficient available cash to pay distributions at the initial distribution rate. In addition to the
risks discussed above, expected revenue from the Sweetwater gas plant could be reduced or delayed due to the following reasons:
•
difficulties in obtaining equity or debt financing for construction and operating costs;
•
difficulties in obtaining permits or other regulatory or third party consents;
•
construction and operating costs exceeding budget estimates;
•
revenue being less than expected due to lower commodity prices or lower demand;
•
difficulties in obtaining consistent supplies of natural gas; and
•
terms in operating agreements that are not favorable to us.
If Atlas is unable to obtain new rights-of-way or the cost of renewing existing rights-of-way increases, then it may be unable to fully execute its growth strategy and its cash flows could be reduced.
The construction of additions to Atlas' existing gathering assets may require it to obtain new rights-of-way before constructing new pipelines. Atlas may be unable to obtain rights-of-way to connect new natural gas supplies to its existing gathering lines or capitalize on
other attractive expansion opportunities. Additionally, it may become more expensive for Atlas to obtain new rights-of-way or to renew existing rights-of-way. If the cost of obtaining new rights-of-way or renewing existing rights-of-way increases, then Atlas' cash flows could
be reduced.
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Atlas' profitability is affected by the volatility of prices for natural gas and NGL products.
Atlas derives a majority of its gross margin from percentage of proceeds contracts. As a result, Atlas' income depends to a significant extent upon the prices at which the natural gas it transports and the NGLs it produces are sold. Additionally, changes in natural gas
prices may indirectly impact Atlas' profitability since prices can influence drilling activity and well operations and thus the volume of natural gas Atlas gathers and processes. Historically, the price of both natural gas and NGLs has been subject to significant volatility in
response to relatively minor changes in the supply and demand for natural gas and NGL products, market uncertainty and a variety of additional factors beyond Atlas' control, including those described in "Our only cash generating assets are our partnership interests in Atlas,
and our cash flow is therefore completely dependent upon the ability of Atlas to make distributions to its partners," above. Atlas expects this volatility to continue. This volatility may cause Atlas' gross margin and cash flows to vary widely from period to period. Atlas'
hedging strategies may not be sufficient to offset price volatility risk and, in any event, do not cover all of the throughput volumes subject to percentage of proceeds contracts. Moreover, hedges are subject to inherent risks, described in "—Atlas' hedging strategies may fail to
protect it and could reduce its gross margin and cash flow."
The amount of natural gas Atlas transports, treats or processes will decline over time unless it is able to attract new wells to connect to its gathering systems.
Production of natural gas from a well generally declines over time until the well can no longer economically produce natural gas and is plugged and abandoned. Failure to connect new wells to Atlas' gathering systems could, therefore, result in a substantial reduction of
the amount of natural gas transported over time and could, upon exhaustion of the current wells, cause Atlas to abandon one or more of its gathering systems and, possibly, cease operations. The primary factors affecting Atlas' ability to connect new supplies of natural gas to
its gathering systems include its success in contracting for existing wells that are not committed to other systems, the level of drilling activity near its gathering systems and, in the Mid-Continent region, its ability to attract natural gas producers away from its competitors'
gathering systems. Fluctuations in energy prices can greatly affect production rates and investments by third parties in the development of new oil and natural gas reserves. Drilling activity generally decreases as oil and natural gas prices decrease. Atlas has no control over the
level of drilling activity in its service areas, the amount of reserves underlying wells that connect to its systems and the rate at which production from a well will decline. In addition, Atlas has no control over producers or their production decisions, which are affected by,
among other things, prevailing and projected energy prices, demand for hydrocarbons, the level of reserves, geological considerations, governmental regulation and the availability and cost of capital. Because Atlas' operating costs are fixed to a significant degree, a reduction in
the natural gas volumes it transports, treats or processes would result in a reduction in Atlas' gross margin and cash flows.
The success of Atlas' Appalachian operations depends upon Atlas America's ability to drill and complete commercial producing wells.
Substantially all of the wells Atlas connects to its gathering systems in its Appalachian service area are drilled and operated by Atlas America for drilling investment partnerships sponsored by Atlas America. As a result, Atlas' Appalachian operations depend principally
upon the success of Atlas America in sponsoring drilling investment partnerships and completing wells for these partnerships. Atlas America operates in a highly competitive environment for acquiring undeveloped leasehold acreage and attracting capital. Atlas America may
not be able to compete successfully in the future in acquiring undeveloped leasehold acreage or in raising additional capital through its drilling investment partnerships. Furthermore, Atlas America is not required to connect wells for which it is not the operator to Atlas'
gathering systems. If Atlas America cannot or does not continue to sponsor drilling investment partnerships, if the amount of money raised by those partnerships decreases, or if the number of wells actually drilled and completed as commercially producing wells decreases, the
amount of natural gas transported by Atlas' Appalachian gathering systems would substantially decrease and could, upon exhaustion of the wells currently connected to its gathering systems, cause it to abandon one or more of its Appalachian gathering systems, thereby
materially reducing its gross margin and cash flows.
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The failure of Atlas America to perform its obligations under Atlas' natural gas gathering agreements may adversely affect Atlas' business.
Substantially all of Atlas' Appalachian operating system revenue currently consists of the fees Atlas receives under the master natural gas gathering agreement and other transportation agreements it has with Atlas America. Atlas expects to derive a material portion of its
gross margin from the services it provides under its contracts with Atlas America for the foreseeable future. Any factor or event adversely affecting Atlas America's business or its ability to perform under its contracts with Atlas or any default or nonperformance by Atlas
America of its contractual obligations to Atlas, could reduce Atlas' gross margin and cash flows.
The success of Atlas' Mid-Continent operations depends upon its ability to continually find and contract for new sources of natural gas supply from unrelated third parties.
Unlike its Appalachian operations, none of the drillers or operators in Atlas' Mid-Continent service area is an affiliate of Atlas. Moreover, Atlas' agreements with most of the drillers and operators with which its Mid-Continent operations do business do not require them
to dedicate significant amounts of undeveloped acreage to Atlas' systems. As a result, Atlas does not have assured sources to provide it with new wells to connect to its Mid-Continent gathering systems. Failure to connect new wells to its Mid-Continent operations will, as
described in "—The amount of natural gas Atlas transports, treats or processes will decline over time unless it is able to attract new wells to connect to its gathering systems," above, reduce its gross margin and cash flows.
Atlas' Mid-Continent operations currently depend on certain key producers for their supply of natural gas, and the loss of any of these key producers could reduce Atlas' revenue.
During 2004, Chesapeake, Kaiser-Francis Oil Company, Burlington Resources Inc., St. Mary Land and Exploration Company and Samson Resources Co. supplied Atlas' Mid-Continent system with a majority of its natural gas supply. If these producers reduce the
volumes of natural gas that they supply to Atlas, Atlas' gross margin and cash flows would be reduced unless it obtains comparable supplies of natural gas from other producers.
The curtailment of operations at, or closure of, either of Atlas' processing plants could harm its business.
Atlas has one processing plant for its Elk City operation and one active processing plant for its Velma operation. If operations at either plant were to be curtailed, or closed, whether due to accident, natural catastrophe, environmental regulation or for any other reason,
Atlas' ability to process natural gas from the relevant gathering system and, as a result, its ability to extract and sell NGLs, would be harmed. If this curtailment or stoppage were to extend for more than a short period, Atlas' gross margin and cash flows would be materially
reduced.
Atlas may face increased competition in the future in its Mid-Continent service areas.
Atlas' Mid-Continent operations
    may face competition for well connections. Duke Energy Field Services, LLC,
    ONEOK, Inc., Carrera Gas Company, Cimmarron Transportation, LLC and Enogex,
    Inc. operate competing gathering systems and processing plants in Atlas'
Velma service area. In Atlas' Elk City service area, ONEOK, Enbridge Energy
Partners, L.P., CenterPoint Energy, Inc. and Enogex operate competing gathering
systems and processing plants. Centerpoint Energy, Inc.'s interstate system
is the nearest direct competitor to Atlas'
Ozark Gas Transmission system. Centerpoint and Enogex Inc. operate competing
gathering systems in Ozark Gas Gathering's service area. Some of Atlas' competitors
have greater financial and other resources than Atlas does. If these companies
become more active in its Mid-Continent service areas, Atlas may not be able
to compete successfully with them in securing new well  connections or retaining
current well connections. If Atlas does not compete successfully, the amount
of natural gas it transports, processes and treats will decrease, reducing its
gross margin and cash flows.
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The amount of natural gas Atlas transports, treats or processes may be reduced if the public utility and interstate pipelines to which it delivers gas cannot or will not accept the gas.
Atlas' gathering systems principally serve as intermediate transportation facilities between sales lines from wells connected to its systems and the public utility or interstate pipelines to which it delivers natural gas. If one or more of these pipelines has service
interruptions, capacity limitations or otherwise does not accept the natural gas Atlas transports, and Atlas cannot arrange for delivery to other pipelines, local distribution companies or end users, the amount of natural gas it transports may be reduced. Since Atlas' revenue
depends upon the volumes of natural gas it transports, this could result in a material reduction in its gross margin and cash flows.
Before acquiring its Velma and Elk City operations, Atlas had no previous experience either in its Mid-Continent service area or in operating natural gas processing plants.
Atlas' Mid-Continent gathering systems are located in Oklahoma and northern Texas, areas in which it has been involved only since July 2004 as a result of the Velma acquisition and, in April 2005, the Elk City acquisition. In addition, as a result of these acquisitions,
Atlas began to operate natural gas processing plants, a business in which it had no prior operating experience. Atlas depends upon the experience, knowledge and business relationships that have been developed by the senior management of its Mid-Continent operations to
operate successfully in the region. The loss of the services of one or more members of Atlas' Mid-Continent senior management, in particular, Robert R. Firth, President, and David D. Hall, Chief Financial Officer, could limit its growth or ability to maintain its current level of
operations in the Mid-Continent region.
Atlas may not be able to execute its growth strategy successfully.
Atlas' strategy contemplates substantial growth through both the acquisition of other gathering systems and processing assets and the expansion of its existing gathering systems and processing assets. Atlas' growth strategy involves numerous risks, including:
•
it may not be able to identify suitable acquisition candidates;
•
it may not be able to make acquisitions on economically acceptable terms;
•
its costs in seeking to make acquisitions may be material, even if it cannot complete any acquisition it has pursued;
•
irrespective of estimates at the time it makes an acquisition, the acquisition may prove to be dilutive to earnings and operating surplus;
•
it may encounter difficulties in integrating operations and systems; and
•
any additional debt it incurs to finance an acquisition may impair Atlas' ability to service its existing debt.
Limitations on Atlas' access to capital or the market for its common units will impair its ability to execute its growth strategy.
Atlas' ability to raise capital for acquisitions and other capital expenditures depends upon ready access to the capital markets. Historically, Atlas has financed its acquisitions, and to a much lesser extent, expansions of its gathering systems, by bank credit facilities and
the proceeds of public equity offerings of its common units. If Atlas is unable to access the capital markets, it may be unable to execute its strategy of growth through acquisitions.
Atlas' hedging strategies may fail to protect it and could reduce its gross margin and cash flow.
Atlas pursues various hedging strategies to seek to reduce its exposure to losses from adverse changes in the prices for natural gas and NGLs. Atlas' hedging activities will vary in scope based upon the level and volatility of natural gas and NGL prices and other
changing market conditions. Atlas' hedging activity may fail to protect or could harm it because, among other things:
•
hedging can be expensive, particularly during periods of volatile prices;
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•
available hedges may not correspond directly with the risks against which it seeks protection;
•
the duration of the hedge may not match the duration of the risk against which it seeks protection; and
•
the party owing money in the hedging transaction may default on its obligation to pay.
Atlas' midstream natural gas operations may incur significant costs and liabilities resulting from a failure to comply with new or existing environmental regulations or a release of hazardous substances into the environment.
The operations of Atlas' gathering systems, plant and other facilities are subject to stringent and complex federal, state and local environmental laws and regulations. These laws and regulations can restrict or impact Atlas' business activities in many ways, including
restricting the manner in which it disposes of substances, requiring remedial action to remove or mitigate contamination, and requiring capital expenditures to comply with control requirements. Failure to comply with these laws and regulations may trigger a variety of
administrative, civil and criminal enforcement measures, including the assessment of monetary penalties, the imposition of remedial requirements, and the issuance of orders enjoining future operations. Certain environmental statutes impose strict, joint and several liability for
costs required to clean up and restore sites where substances and wastes have been disposed or otherwise released. Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property damage allegedly caused by the
release of substances or wastes into the environment.
There is inherent risk of the incurrence of environmental costs and liabilities in Atlas' business due to its handling of natural gas and other petroleum products, air emissions related to its operations, historical industry operations including releases of substances into the
environment, and waste disposal practices. For example, an accidental release from one of Atlas' pipelines or processing facilities could subject it to substantial liabilities arising from environmental cleanup, restoration costs and natural resource damages, claims made by
neighboring landowners and other third parties for personal injury and property damage, and fines or penalties for related violations of environmental laws or regulations. Moreover, the possibility exists that stricter laws, regulations or enforcement policies could significantly
increase Atlas' compliance costs and the cost of any remediation that may become necessary. Atlas may not be able to recover some or any of these costs from insurance.
Atlas is subject to operating and litigation risks that may not be covered by insurance.
Atlas' operations are subject to all operating hazards and risks incidental to transporting and processing natural gas and NGLs. These hazards include:
•
damage to pipelines, plants, related equipment and surrounding properties caused by floods and other natural disasters;
•
inadvertent damage from construction and farm equipment;
•
leakage of natural gas, NGLs and other hydrocarbons;
•
fires and explosions;
•
other hazards, including those associated with high-sulfur content, or sour gas, that could also result in personal injury and loss of life, pollution and suspension of operations; and
•
acts of terrorism directed at Atlas' pipeline infrastructure, production facilities, transmission and distribution facilities and surrounding properties.
As a result, Atlas may be a defendant in various legal proceedings and litigation arising from its operations. Atlas may not be able to maintain or obtain insurance of the type and amount it desires at reasonable rates. As a result of market conditions, premiums and
deductibles for some of Atlas' insurance policies have increased substantially, and could escalate further. In some instances, insurance could become unavailable or available only for reduced amounts of coverage. For example, insurance carriers are now requiring broad
exclusions for losses due to war risk and terrorist acts. If Atlas were to incur a significant liability for which it was not fully insured, its gross margin and cash flows would be materially reduced.
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Regulation of Atlas' gathering operations could increase its operating costs, decrease its revenue, or both.
Currently Atlas' gathering of natural gas from wells is exempt from regulation under the Natural Gas Act of 1938. However, the implementation of new laws or policies, or interpretations of existing laws, could subject Atlas to regulation by FERC under the Natural Gas
Act. Atlas expects that any such regulation would increase its costs, decrease its gross margin and cash flows, or both.
FERC regulation will still affect Atlas' business and the market for its products. FERC's policies and practices affect a range of Atlas' natural gas pipeline activities, including, for example, its policies on open access transportation, ratemaking, capacity release, and
market center promotion, which indirectly affect intrastate markets. In recent years, FERC has pursued pro-competitive policies in its regulation of interstate natural gas pipelines. However, Atlas cannot assure you that FERC will continue this approach as it considers matters
such as pipeline rates and rules and policies that may affect rights of access to natural gas transportation capacity.
Other state and local regulations will also affect Atlas' business. Matters subject to regulation include rates, service and safety. Atlas' gathering lines are subject to ratable take and common purchaser statutes in Texas and Oklahoma. Ratable take statutes generally
require gatherers to take, without undue discrimination, natural gas production that may be tendered to the gatherer for handling. Similarly, common purchaser statutes generally require gatherers to purchase without undue discrimination as to source of supply or producer.
These statutes restrict Atlas' right as an owner of gathering facilities to decide with whom it contracts to purchase or transport natural gas.
Federal law leaves any economic regulation of natural gas gathering to the states. Texas and Oklahoma have adopted complaint-based regulation of natural gas gathering activities, which allows natural gas producers and shippers to file complaints with state regulators in
an effort to resolve grievances relating to natural gas gathering access and, in Texas and Oklahoma, with respect to rate discrimination. Should a complaint be filed or regulation by the Texas Railroad Commission or Oklahoma Corporation Commission become more active,
Atlas' revenue could decrease.
Increased regulatory requirements relating to the integrity of the Ozark Gas Transmission pipeline will require it to spend additional money to comply with these requirements. Ozark Gas Transmission is subject to extensive laws and regulations related to pipeline
integrity. For example, federal legislation signed into law in December 2002 includes guidelines for the U.S. Department of Transportation and pipeline companies in the areas of testing, education, training and communication. Compliance with existing and recently enacted
regulations requires significant expenditures. Additional laws and regulations that may be enacted in the future, such as U.S. Department of Transportation implementation of additional hydrostatic testing requirements, could significantly increase the amount of these
expenditures.
Ozark Gas Transmission is subject to FERC rate-making policies that could have an adverse impact on Atlas' ability to establish rates that would allow it to recover the full cost of operating the pipeline.
Rate-making policies by FERC could affect Ozark Gas Transmission's ability to establish rates, or to charge rates that would cover future increases in its costs, or even to continue to collect rates that cover current costs. Natural gas companies may not charge rates that
have been determined not to be just and reasonable by FERC. The rates, terms and conditions of service provided by natural gas companies are required to be on file with FERC in FERC-approved tariffs. Pursuant to FERC's jurisdiction over rates, existing rates may be
challenged by complaint and proposed rate increases may be challenged by protest. Atlas cannot assure you that FERC will continue to pursue its approach of pro-competitive policies as it considers matters such as pipeline rates and rules and policies that may affect rights of
access to natural gas capacity and transportation facilities. Any successful complaint or protest against Ozark Gas Transmission's rates could reduce Atlas' revenue associated with providing transmission services. Atlas cannot assure you that it will be able to recover all of
Ozark Gas Transmission's costs through existing or future rates.
Ozark Gas Transmission is subject to regulation by FERC in addition to FERC rules and regulations related to the rates it can charge for its services.
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FERC's regulatory authority also extends to:
•
operating terms and conditions of service;
•
the types of services Ozark Gas Transmission may offer to its customers;
•
construction of new facilities;
•
acquisition, extension or abandonment of services or facilities;
•
accounts and records; and
•
relationships with affiliated companies involved in all aspects of the natural gas and energy businesses.
FERC action in any of these areas or modifications of its current regulations can impair Ozark Gas Transmission's ability to compete for business, the costs it incurs in its operations, the construction of new facilities or its ability to recover the full cost of operating its
pipeline. For example, the development of uniform interstate gas quality standards by FERC could create two distinct markets for natural gas—an interstate market subject to uniform minimum quality standards and an intrastate market with no uniform minimum quality
standards. Such a bifurcation of markets could make it difficult for Atlas' pipelines to compete in both markets or to attract certain gas supplies away from the intrastate market. The time FERC takes to approve the construction of new facilities could raise the costs of Atlas'
projects to the point where they are no longer economic.
FERC has authority to review pipeline contracts. If FERC determines that a term of any such contract deviates in a material manner from a pipeline's tariff, FERC typically will order the pipeline to remove the term from the contract and execute and refile a new
contract with FERC or, alternatively, to amend its tariff to include the deviating term, thereby offering it to all shippers. If FERC audits a pipeline's contracts and finds deviations that appear to be unduly discriminatory, FERC could conduct a formal enforcement investigation,
resulting in serious penalties and/or onerous ongoing compliance obligations.
Should Ozark Gas Transmission fail to comply with all applicable FERC administered statutes, rules, regulations and orders, it could be subject to substantial penalties and fines. Under the recently enacted Energy Policy Act of 2005, FERC has civil penalty authority
under the Natural Gas Act to impose penalties for current violations of up to $1,000,000 per day for each violation.
Finally, Atlas cannot give any assurance regarding the likely future regulations under which it will operate Ozark Gas Transmission or the effect such regulation could have on its business, financial condition, results of operations and ability to make distributions to its
unitholders.
Compliance with pipeline integrity regulations issued by the United States Department of Transportation and state agencies could result in substantial expenditures for testing, repairs and replacement.
United States Department of Transportation and state agency regulations require pipeline operators to develop integrity management programs for transportation pipelines located in "high consequence areas." The regulations require operators to:
•
perform ongoing assessments of pipeline integrity;
•
identify and characterize applicable threats to pipeline segments that could impact a high consequence area;
•
improve data collection, integration and analysis;
•
repair and remediate the pipeline as necessary; and
•
implement preventative and mitigating actions.
Atlas does not believe that the cost of implementing integrity management program testing along certain segments of its pipeline will have a material effect on its results of operations. This does not include the
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costs, if any, of any repair, remediation, preventative or mitigating actions that may be determined to be necessary as a result of the testing program, which costs could be substantial.
Tax Risks to Common Unitholders
For a discussion of the expected material federal income tax consequences of owning and disposing of common units, see "Material Tax Consequences."
If we or Atlas were treated as a corporation for federal income tax purposes, or if we or Atlas were to become subject to entity-level taxation for state tax purposes, then our cash available for distribution to you would be substantially reduced.
The value of our investment in Atlas depends largely on it being treated as a partnership for federal income tax purposes, which requires that 90% or more of Atlas' gross income for every taxable year consist of qualifying income, as defined in Section 7704 of the
Internal Revenue Code. Atlas may not meet this requirement or current law may change so as to cause, in either event, Atlas to be treated as a corporation for federal income tax purposes or otherwise subject to federal income tax. Moreover, the anticipated after-tax benefit of
an investment in our common units depends largely on our being treated as a partnership for federal income tax purposes. We have not requested, and do not plan to request, a ruling from the IRS on this or any other matter affecting us.
If Atlas were treated as a corporation for federal income tax purposes, it would pay federal income tax on its taxable income at the corporate tax rate, which is currently a maximum of 35%. Distributions to us would generally be taxed again as corporate distributions,
and no income, gains, losses, deductions or credits would flow through to us. As a result, there would be a material reduction in our anticipated cash flow, likely causing a substantial reduction in the value of our units.
If we were treated as a corporation for federal income tax purposes, we would pay federal income tax on our taxable income at the corporate tax rate. Distributions to you would generally be taxed again as corporate distributions, and no income, gains, losses, deductions
or credits would flow through to you. Because a tax would be imposed upon us as a corporation, our cash available for distribution to you would be substantially reduced. Thus, treatment of us as a corporation would result in a material reduction in our anticipated cash flow,
likely causing a substantial reduction in the value of our units.
Current law may change, causing us or Atlas to be treated as a corporation for federal income tax purposes or otherwise subjecting us or Atlas to entity level taxation. For example, because of widespread state budget deficits, several states are evaluating ways to subject
partnerships to entity level taxation through the imposition of state income, franchise or other forms of taxation. If any state were to impose a tax upon us or Atlas as an entity, the cash available for distribution to you would be reduced.
A successful IRS contest of the federal income tax positions we, or Atlas, take may adversely affect the market for our common units or Atlas units, and the costs of any contest will reduce cash available for distribution to our unitholders.
We have not requested a ruling from the IRS with respect to our treatment as a partnership for federal income tax purposes or any other matter that affects us. Moreover, Atlas has not requested any ruling from the IRS with respect to its treatment as a partnership for
federal income tax purposes or any other matter that affects it. The IRS may adopt positions that differ from the positions we or Atlas take. It may be necessary to resort to administrative or court proceedings to sustain some or all of the positions we or Atlas take. A court may
disagree with some or all of the positions we or Atlas take. Any contest with the IRS may materially and adversely impact the market for our common units or Atlas' units and the price at which they trade. In addition, the cost of any contest between Atlas and the IRS will
result in a reduction in cash available for distribution to Atlas unitholders and thus indirectly by us, as a unitholder and as the owner of the general partner of Atlas. Moreover, the costs of any contest between us and the IRS will result in a reduction in cash available for
distribution to our unitholders and thus will be borne indirectly by our unitholders.
You may be required to pay taxes on income from us even if you do not receive any cash distributions from us.
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You will be required to pay any federal income taxes and, in some cases, state and local income taxes on your share of our taxable income, whether or not you receive cash distributions from us. You may not receive cash distributions from us equal to your share of our
taxable income or even equal to the tax liability that results from the taxation of your share of our taxable income.
Our ratio of taxable income to cash distributions will be much greater than the ratio applicable to holders of common units in Atlas.
Our ratio of taxable income to cash distributions will be much greater than the ratio applicable to holders of common units in Atlas. Other holders of common units in Atlas will receive remedial allocations of deductions from Atlas. Although we will receive remedial
allocations of deductions from Atlas, remedial allocations of deductions to us will be very limited. In addition, our ownership of Atlas incentive distribution rights will cause more taxable income to be allocated to us from Atlas than will be allocated to holders who hold only
common units in Atlas. If Atlas is successful in increasing its distributions over time, our income allocations from our Atlas incentive distribution rights will increase, and, therefore, our ratio of taxable income to cash distributions will increase. Because our ratio of taxable
income to cash distributions will be greater than the ratio applicable to holders of common units in Atlas, your allocable taxable income will be significantly greater than that of a holder of common units in Atlas who receives cash distributions from Atlas equal to the cash
distributions you receive from us.
Tax gain or loss on disposition of our common units could be more or less than expected.
If you sell your common units, you will recognize a gain or loss equal to the difference between the amount realized and the adjusted tax basis in those common units. Prior distributions to you in excess of the total net taxable income allocated to you, which decreased
the tax basis in your common units, will, in effect, become taxable income to you if the common units are sold at a price greater than your tax basis in those common units, even if the price is less than the original cost. A substantial portion of the amount realized, whether or
not representing gain, may be ordinary income to you.
Tax-exempt entities and foreign persons face unique tax issues from owning common units that may result in adverse tax consequences to them.
Investment in common units by tax-exempt entities, including employee benefit plans and individual retirement accounts (known as IRAs) and non-U.S. persons raises issues unique to them. For example, virtually all of our income allocated to organizations exempt from
federal income tax, including individual retirement accounts and other retirement plans, will be unrelated business taxable income and will be taxable to such a unitholder. Distributions to non-U.S. persons will be reduced by withholding taxes imposed at the highest effective
applicable tax rate, and non-U.S. persons will be required to file United States federal income tax returns and pay tax on their share of our taxable income.
We treat each purchaser of our common units as having the same tax benefits without regard to the common units purchased. The IRS may challenge this treatment, which could adversely affect the value of the common units.
Because we cannot match transferors and transferees of common units, we will adopt depreciation and amortization positions that may not conform with all aspects of existing Treasury regulations. A successful IRS challenge to those positions could adversely affect the
amount of tax benefits available to our unitholders. It also could affect the timing of these tax benefits or the amount of gain on the sale of common units and could have a negative impact on the value of our common units or result in audits of and adjustments to our
unitholders' tax returns.
The sale or exchange of 50% or more of our or Atlas' capital and profits interests within a 12-month period will result in the termination of our or Atlas' partnership for federal income tax purposes.
We will be considered to have terminated our partnership for federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and profits within a 12-month period. Likewise, Atlas will be considered to have terminated its
partnership for federal income tax purposes if there is a sale or exchange of 50% or more of the total interests in Atlas' capital and profits within a 12-month period. The termination would, among other things, result in the closing of our or Atlas' taxable year for all
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unitholders and could result in a deferral of depreciation deductions allowable in computing our taxable income for the year in which the termination occurs. Thus, if this occurs, you will be
allocated an increased amount of federal taxable income for the year in which we are considered to be terminated as a percentage of the cash distributed to you with respect to that period.
Please read "Material Tax Consequences—Disposition of Common Units—Constructive Termination" for a discussion of the consequences of our termination for federal income tax purposes.
Unitholders may be subject to state and local taxes and return filing requirements as a result of investing in our common units.
In addition to federal income taxes, our unitholders will likely be subject to other taxes, including foreign, state and local taxes, unincorporated business taxes and estate, inheritance or intangible taxes that are imposed by the various jurisdictions in which we or Atlas do
business or own property now or in the future, even if our unitholders do not reside in any of those jurisdictions. Our unitholders will likely be required to file state and local income tax returns and pay state and local income taxes in some or all of these jurisdictions. Further,
unitholders may be subject to penalties for failure to comply with those requirements. We and Atlas presently anticipate that substantially all of our income will be generated in the following states: Arkansas, Missouri, New York, Ohio, Oklahoma, Pennsylvania and Texas.
Each of those states, except Texas, currently impose a personal income tax. We or Atlas may do business or own property in other states in the future. It is the responsibility of each unitholder to file all United States federal, state and local tax returns that may be required of
such unitholder. Our counsel has not rendered an opinion on the state or local tax consequences of an investment in the common units.
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USE OF PROCEEDS
We expect to receive net proceeds
    of approximately $79.2 million from the sale of 3,600,000 common units offered
    by this prospectus, after deducting underwriting discounts and commissions
    and estimated offering expenses payable by us. Our estimates assume an initial
    public offering price of $24.00 per common unit, the mid-point of the range
  set forth on the cover page of this prospectus, and no exercise of the underwriters' option to purchase additional units.
Substantially all of the net proceeds from this offering will be distributed to Atlas America. If the underwriters exercise all or any portion of their option to purchase additional common units, we will use all of the net proceeds from the sale of our common units sold
pursuant to the exercise of that option to fund the redemption of an equal number of common units from Atlas America. The redemption price per common unit will be equal to the price per common unit (net of underwriting discounts) sold to the underwriters upon exercise of
their option to purchase additional common units. Please read "Security Ownership of Certain Beneficial Owners and Management."
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CAPITALIZATION
The following table sets forth our cash and cash equivalents and our capitalization as of September 30, 2005 on a consolidated historical basis for Atlas Pipeline GP, and on a pro forma basis to reflect the following:
•
this offering and the application of the net proceeds as described in "Use of Proceeds;"
•
the amendment of Atlas' credit facility, which occurred on October 31, 2005, and borrowings under it to finance the NOARK acquisition;
•
the redemption of the portion of the NOARK 7.15% notes severally guaranteed by Atlas Arkansas in connection with the NOARK acquisition;
•
Atlas' public offering of 2,700,000 common units, which was completed in November 2005 and 330,000 additional underwriter option units which was completed in December 2005, each at a public offering price of $42.00 per common unit, the net proceeds of which were
principally used to repay indebtedness under its credit facility incurred in connection with the NOARK acquisition; and
•
Atlas' issuance of $250.0 million of 8.125% senior unsecured notes in a private placement on December 20, 2005, the net proceeds of which were principally used to repay indebtedness under its credit facility.
The historical financial data of Atlas Pipeline GP presented in the table below is derived from and should be read in conjunction with Atlas Pipeline GP's historical financial statements, including the accompanying notes, included elsewhere in this prospectus.
As of September 30, 2005
Historical
Pro forma, as adjusted
(in thousands)
Cash and cash equivalents
$
12,035
$
29,338
Debt:
Atlas Pipeline Partners, L.P.:
Credit facility
$
183,500
$
—
8.125% senior unsecured notes
—
250,000
NOARK 7.15% notes (1)
—
39,600
Other
145
145
Total debt
183,645
289,745
Minority interests (2)
227,908
348,612
Equity:
Owners' equity
5,564
5,559
Accumulated other comprehensive loss
(46,444
)
(46,444
)
Total owners' deficit
(40,880
)
(40,885
)
Total capitalization
$
370,673
$
597,472
(1)
These notes are severally guaranteed by Southwestern and amounts paid on these notes are to be paid from amounts otherwise distributable by NOARK to Southwestern. If such amount is insufficient, Southwestern is required to make a capital contribution to NOARK for such
insufficient amount.
(2)
Represents Atlas limited partner interests owned by non-affiliated partners.
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DILUTION
Dilution is the amount by which the offering price paid by the purchasers of common units sold in this offering will exceed the pro forma net tangible book value per unit after the offering. As of September 30, 2005, after giving effect to the offering of common units
and the application of the related net proceeds, and assuming the underwriters' option to purchase additional units is not exercised, our net tangible book value was $(13.3) million, or $(0.63) per common unit. Our tangible net book value is the sum of our owners' equity less
our pro rata share of goodwill and other intangible assets and accumulated other comprehensive loss, based upon estimated ownership interest in those items. Purchasers of common units in this offering will experience substantial and immediate dilution in net tangible book
value per common unit for financial accounting purposes, as illustrated in the following table:
Assumed initial public offering price per common unit
$
24.00
Pro forma net tangible book value per common unit before the offering (1)
$
(0.76
)
Increase in net tangible book value per common unit attributable to purchasers in the offering
0.13
Less: Pro forma net tangible book value per common unit after the offering (2)
(0.63
)
Immediate dilution in tangible net book value per common unit to new investors
$
24.63
(1)
Determined by dividing the total number of units (17,500,000) to be issued to Atlas America for its contribution of assets to us into our net tangible book value before this offering.
(2)
Determined by dividing the total number of units to be outstanding after the offering (21,100,000) and the application of the related net proceeds into our pro forma net tangible book value, after giving effect to the application of the expected net proceeds of the offering.
The following table sets forth the number of units that we will issue and the total consideration contributed to us by Atlas America in respect of its common units and by the purchasers of common units in this offering upon consummation of the transactions contemplated by this prospectus:
Units Acquired
Total
Consideration
Number
Percent
Amount
General partner and affiliates (1)
17,500,000
82.9
%
$
(92,443,000
)
New investors
3,600,000
17.1
%
86,400,000
Total
21,100,000
100.0
%
$
(6,043,000
)
(1)
Upon the consummation of this offering, an aggregate 17,500,000 units will be issued to Atlas America. The assets contributed by Atlas America were recorded at historical cost in accordance with GAAP. Book value of the consideration provided by Atlas America is as follows:
Atlas America
$(13,291,000
)
Less: Payments to Atlas America from net proceeds of this offering
79,152,000
Total consideration
$(92,443,000
)
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CASH DISTRIBUTION POLICY AND RESTRICTIONS ON DISTRIBUTIONS
You should read the following discussion of our cash distribution policy in conjunction with the specific assumptions included in this section. For more detailed information regarding the factors and assumptions upon which our cash distribution policy is based, please
see "–Assumptions and Considerations" below. In addition, you should read "Forward-Looking Statements" and "Risk Factors" for information regarding statements that do not relate strictly to historical or current facts and certain risks inherent in our and Atlas' business.
Unless otherwise stated, the information presented in this section assumes that the underwriters will exercise their option to purchase additional units in full. Because the proceeds of any exercise of the underwriters' option will be used to redeem a number of common units
from our affiliates equal to the number of common units issued pursuant to the exercise of that option, the number of our common units will not change upon the exercise of the option but the relative percentages of common units owned by the public and our affiliates will
change.
When discussing our operating results, we are referring to the operating results of Atlas Pipeline GP, our wholly-owned subsidiary, which are presented on a consolidated basis including Atlas. For additional information regarding our historical and pro forma
operating results, you should refer to the historical financial statements for the years ended December
31, 2002, 2003 and 2004, our unaudited historical financial statements for the nine months ended September
30, 2004 and 2005 and our unaudited pro forma financial
statements for the year ended December
31, 2004 and the nine months ended September
30, 2005, included elsewhere in this prospectus.
General
Rationale for Our Cash Distribution Policy
Our cash distribution policy reflects a basic judgment that our unitholders will be better served by our distributing our available cash rather than retaining it. It is important that you understand that our only cash-generating assets consist of our interests in Atlas from
which we receive quarterly distributions. We currently have no independent operations separate from those of Atlas and do not currently intend to conduct operations separate from those of Atlas. Because we believe we will have low cash requirements for operating expenses
and capital investments, we believe that our investors are best served by our distribution of all of our available cash as described below. Because we are not subject to an entity-level federal income tax, we have more cash to distribute to you than would be the case were we
subject to tax. Our cash distribution policy is consistent with the terms of our partnership agreement, which requires that we distribute all of our available cash quarterly.
Restrictions and Limitations on Cash Distributions and Our Ability to Change Our Cash Distribution Policy
There is no guarantee that unitholders will receive quarterly distributions from us. Our distribution policy is subject to certain restrictions and may be changed at any time, including:
•
Our cash distribution policy will be subject to restrictions on distributions under our anticipated new credit facility. Specifically, we anticipate that our new credit facility will contain certain material financial tests and covenants that we must satisfy. Should we be unable to
satisfy these restrictions under our new credit facility, or if we otherwise default under our new credit facility, we would be prohibited from making a distribution to you notwithstanding our stated cash distribution policy.
•
Atlas' cash distribution policy is subject to restrictions on distributions under its credit facility. Specifically, Atlas' credit facility contains material financial tests and covenants that it must satisfy. These financial tests and covenants are described in the prospectus under the
caption "Management's Discussion and Analysis of Financial Condition and Results of Operations—Debt Obligations—Atlas." Should Atlas be unable to satisfy these restrictions under its credit facility, it would be prohibited from making cash distributions to us, which in
turn would prevent us from making cash distributions to you notwithstanding our stated cash distribution policy.
•
Our general partner's board of directors will have the authority under our partnership agreement to establish reserves for the prudent conduct of our business and for future cash distributions to our
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unitholders, and the establishment of those reserves could result in a reduction in cash distributions to you from levels we currently anticipate pursuant to our stated cash distribution
policy.
•
The managing board of Atlas' general partner has the authority under Atlas' partnership agreement to establish reserves for the prudent conduct of its business and for future cash distributions to its unitholders, and the establishment of those reserves could result in a
reduction in cash distributions we would otherwise anticipate receiving from Atlas, which in turn could result in a reduction in cash distributions to you from levels we currently anticipate pursuant to our stated cash distribution policy.
•
While our partnership agreement requires us to distribute all of our available cash, our partnership agreement, including our cash distribution policy contained therein, may be amended by a vote of the holders of a majority of our common units. Following completion of this
offering and assuming the full exercise of the underwriters' option to purchase additional common units, Atlas America will own approximately 80.4% of our outstanding common units and will have the ability to amend our partnership agreement without the approval of any
other unitholders.
•
Even if our cash distribution policy is not amended, modified or revoked, the amount of distributions we pay under our cash distribution policy and the decision to make any distribution is determined by our general partner, taking into consideration the terms of our
partnership agreement.
•
The amount of distributions paid under Atlas' cash distribution policy and the decision to make any distribution to its unitholders is at the discretion of Atlas' general partner, taking into consideration the terms of its partnership agreement.
•
Under Section 17-607 of the Delaware Revised Uniform Limited Partnership Act, Atlas may not make a distribution to its partners if the distribution would cause its liabilities to exceed the fair value of its assets and we may not make a distribution to you if the distribution
would cause our liabilities to exceed the fair value of our assets.
•
We may lack sufficient cash to pay distributions to our unitholders due to a number of factors, including increases in general and administrative expenses, principal and interest payments on any current or future debt, tax expenses, working capital requirements and
anticipated cash needs of us or Atlas and its subsidiaries. Please read "Risk Factors" for a discussion of these factors.
Our Cash Distribution Policy Limits Our Ability to Grow
Because we distribute all of our available cash, our growth may not be as fast as businesses that reinvest their available cash to expand ongoing operations. In fact, since currently our only cash-generating assets are our interests in Atlas, our growth initially will be
completely dependent upon Atlas' ability to increase its quarterly distribution. If we issue additional interests or incur debt to fund acquisitions and growth capital expenditures, the payment of distributions on those additional units or interest on that debt could increase the risk
that we will be unable to maintain or increase our per unit distribution level.
Atlas' Ability to Grow is Dependent on its Ability to Access External Growth Capital
Consistent with the terms of its partnership agreement, Atlas distributes to its partners its available cash each quarter. In determining the amount of cash available for distribution, Atlas sets aside cash reserves, including reserves it believes prudent to maintain for the
proper conduct of its business or to provide for future distributions. Additionally, it has relied upon external financing sources, including commercial borrowings and other debt and equity issuances, to fund its acquisition capital expenditures. Accordingly, to the extent Atlas
does not have sufficient cash reserves or is unable to finance growth externally, its cash distribution policy will significantly impair its ability to grow. In addition, to the extent Atlas issues additional units in connection with any acquisitions or growth capital expenditures, the
payment of distributions on those additional units may increase the risk that Atlas will be unable to maintain or increase its per unit distribution level, which in turn may impact the available cash that we have to distribute to our unitholders. The incurrence of additional
commercial or other debt to finance its growth strategy would result in increased interest expense to Atlas, which in turn may impact the available cash that we have to distribute to our unitholders.
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Our Initial Distribution Rate
Our Cash Distribution Policy
Upon completion of this offering, the board of directors of our general partner will adopt a cash distribution policy pursuant to which we will declare an initial distribution of $0.225 per unit per quarter, or $0.90 per unit per year, to be paid no later than 50 days after
the end of each fiscal quarter. This equates to an aggregate cash distribution of approximately $4.7 million per quarter, or approximately $19.0 million per year, based on the common units outstanding immediately after completion of this offering.
The following table sets forth the assumed number of outstanding common units upon the closing of this offering, and the estimated per unit and aggregate distribution amounts payable on such common units during the year following the closing of this offering at our
initial distribution rate of $0.225 per common unit per quarter ($0.90 per common unit on an annualized basis):
Distributions on Our Common Units
Number of Common Units
One Quarter
Four Quarters
Estimated distributions on publicly held common units
4,140,000
$
931,500
$
3,726,000
Estimated distributions on common units held by Atlas America
16,960,000
3,816,000
15,264,000
Total
21,100,000
$
4,747,500
$
18,990,000
These distributions will not be cumulative. Consequently, if distributions on our common units are not paid with respect to any fiscal quarter at the anticipated initial distribution rate, our unitholders will not be entitled to receive such payments in the future. We will pay
our distributions on or about the 20th of each of February, May, August and November to holders of record on or about the 13th of each such month. If the distribution date does not fall on a business day, we will make the distribution on the business day immediately
preceding the indicated distribution date. Any distributions received by us from Atlas related to periods prior to the closing of this offering will be distributed entirely to Atlas America. In May 2006, we expect to pay a distribution to our unitholders equal to the initial quarterly
distribution prorated for the portion of the quarter ending March 31, 2006 that we are public.
Our cash distribution policy is consistent with the terms of our partnership agreement, which requires that we distribute all of our available cash quarterly. Under our partnership agreement, available cash is defined to generally mean, for each fiscal quarter, cash
generated from our business in excess of the amount of cash reserves established by our general partner to, among other things:
•
provide for the proper conduct of our business;
•
comply with applicable law, any of our debt instruments or other agreements; or
•
provide funds for distributions to our unitholders for any one or more of the next four quarters.
Atlas' Cash Distribution Policy
Like us, Atlas has adopted a cash distribution policy that requires it to distribute its available cash to its unitholders on a quarterly basis. Under Atlas' partnership agreement, available cash is defined to generally mean, for each fiscal quarter, cash generated from Atlas'
business in excess of the amount its general partner reasonably determines is necessary or appropriate to provide for the conduct of its business, comply with applicable law, any of its debt instruments or other agreements or provide for future distributions to its unitholders for
any one or more of the next four quarters. Atlas' determination of available cash takes into account the possibility of establishing cash reserves in some quarterly periods that it may use to pay cash distributions in other quarterly periods, thereby enabling it to maintain
relatively consistent cash distribution levels even if its business experiences fluctuations in its cash from operations due to seasonal and cyclical factors. Atlas' determination of available cash also allows it to maintain reserves to provide funding for its growth opportunities.
Atlas makes its quarterly distributions from cash generated from its transmission, gathering and processing operations and those distributions have grown over time as its business has grown,
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as a result of a substantial acquisition program and internal growth projects that are funded through external financing sources.
The following table sets forth the amount of quarterly cash distributions Atlas declared on its ownership interests for the periods indicated. The actual cash distributions (i.e., payments to the partners of Atlas) occur within 45 days after the end of such quarter. Atlas has
an established historical record of paying quarterly cash distributions to its partners.
Atlas Cash Distribution History
Distributions on L.P. Units
Distributions on 2.0% General Partner
Distributions on Incentive Distribution
Total Atlas Cash
Per Unit
Total
Interest
Rights
Distributions
(in thousands, except per unit)
2003
1st Quarter
$
0.560
$
1,827
$
40
$
95
$
1,962
2nd Quarter
$
0.580
$
2,526
$
55
$
155
$
2,736
3rd Quarter
$
0.620
$
2,700
$
60
$
269
$
3,029
4th Quarter
$
0.625
$
2,721
$
62
$
290
$
3,073
2004
1st Quarter
$
0.630
$
2,743
$
63
$
311
$
3,117
2nd Quarter
$
0.630
$
3,216
$
73
$
365
$
3,654
3rd Quarter
$
0.690
$
4,971
$
120
$
939
$
6,030
4th Quarter
$
0.720
$
5,187
$
130
$
1,150
$
6,467
2005
1st Quarter
$
0.750
$
5,404
$
138
$
1,362
$
6,904
2nd Quarter
$
0.770
$
7,319
$
190
$
1,983
$
9,492
3rd Quarter
$
0.810
$
7,711
$
205
$
2,360
$
10,276
4th Quarter
$
0.830
$
10,416
$
282
$
3,356
$
14,054
In the sections that follow, we present in detail the basis for our belief that we will be able to fully fund our initial distribution rate of $0.225 per common unit per quarter through the quarter ending December 31, 2006. In those sections we present two tables, including:
•
Our "Unaudited Pro Forma Available Cash," in which we present the amount of pro forma available cash that we would have had available for distribution to our unitholders with respect to the year ended December 31, 2004 and the twelve months ended September 30,
2005. Our calculation of pro forma available cash in this table should only be viewed as a general indication of the amount of cash available that we might have generated had we been formed in an earlier period.
•
Our "Estimated Cash Available for Distribution" in which we present our estimate of the minimum Adjusted EBITDA necessary for us to have sufficient cash available for distribution to pay distributions at the initial distribution rate on all the outstanding common units for
each quarter for the year ending December 31, 2006. In "Assumptions and Considerations" below, we also present our assumptions underlying our belief that Atlas will generate this minimum Adjusted EBITDA.
We do not as a matter of course make public projections as to future sales, earnings, or other results. However, we have prepared the prospective financial information set forth below to present the tables entitled "Unaudited Pro Forma Available Cash" and "Estimated
Cash Available for Distribution." The accompanying prospective financial information was not prepared with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants with respect to prospective financial information,
but, in our view, was prepared on a reasonable basis, reflects the best currently available estimates and judgments, and presents, to the best of management's knowledge and belief, the assumptions on which we base our belief that Atlas can generate the minimum Adjusted
EBITDA necessary for us to have sufficient cash available for distribution to pay a distribution on the common units at the initial distribution rate. However, this information is not fact and should not be relied upon as being necessarily indicative of
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future results, and readers of this prospectus are cautioned not to place undue reliance on the prospective financial information.
Neither our independent auditors, nor any other independent accountants, have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance
on such information or its achievability. Accordingly, they assume no responsibility for, and disclaim any association with, the prospective financial information.
Our pro forma available cash for the twelve months ended December 31, 2004 would not have been sufficient to pay the initial quarterly distribution of $0.225 per unit on the common units to be outstanding following the completion of this offering.
If we had completed the transactions contemplated in this prospectus on January 1, 2004, our pro forma available cash deficit generated during fiscal 2004 would have been approximately $2.4 million. This amount would have been insufficient by approximately $21.4
million to pay the full initial distribution amount on all our units.
Our pro forma available cash for the twelve months ended September
30, 2005 would not have been sufficient to pay the initial quarterly distribution of $0.225 per unit on the common units to be outstanding following the completion of this offering.
If we had completed the transactions contemplated in the prospectus on October 1, 2004, our pro forma available cash for the twelve months ended September 30, 2005 would have been approximately $9.0 million. This amount would have been insufficient by
approximately $10.0 million to pay the full initial distribution amount on all units.
We believe that we will have sufficient cash available for distribution to pay the full quarterly distributions at the initial distribution rate of $0.225 per unit on all the outstanding common units for each quarter for the year ending December 31, 2006. See "Assumptions
and Considerations" below for the specific assumptions underlying this belief.
Pro forma cash available for distribution includes estimated incremental general and administrative expenses we will incur as a result of being a publicly traded limited partnership, such as costs associated with annual and quarterly reports to unitholders, tax return and
Schedule K-1 preparation and distribution, investor relations, registrar and transfer agent fees, director compensation, accounting and audit fees and incremental insurance costs, including director and officer liability and business interruption insurance. We expect these
incremental general and administrative expenses initially to total approximately $1.0 million per year.
The pro forma financial statements, upon which pro forma cash available for distribution is based, do not purport to present our results of operations had the transactions contemplated in this prospectus actually been completed as of the dates indicated. Furthermore, cash
available for distribution is a cash accounting concept, while our pro forma financial statements have been prepared on an accrual basis. We derived the amounts of pro forma cash available for distribution shown above in the manner described in the table below. As a result,
the amount of pro forma cash available for distribution should only be viewed as a general indication of the amount of cash available for distribution that we might have generated had we been formed in earlier periods.
The following table illustrates, on a pro forma basis, for the year ended December 31, 2004 and for the twelve months ended September 30, 2005, the amount of available cash that would have been available for distributions to our unitholders, assuming in each case
that this offering had been consummated at the beginning of such period. Each of the pro forma adjustments presented below is explained in the footnotes to such adjustments.
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Unaudited Pro Forma Available Cash of Atlas Pipeline Holdings, L.P.
Year Ended December
31, 2004
Twelve Months Ended September
30, 2005
(in thousands, except per unit data and ratios)
Net Cash Provided by Operating Activities (1)
$
11,311
$
32,825
Plus (minus):
Cash interest expense
1,901
7,599
Non-recurring gain on arbitration settlement, net (2)
(1,457
)
(4,306
)
Net changes in working capital accounts, including net changes in price risk management assets and liabilities (3)
12,595
9,159
Adjusted EBITDA (4)
24,350
45,277
Plus: Pro forma acquisition adjustment to Adjusted EBITDA (5)
34,411
24,397
Pro forma Adjusted EBITDA
58,761
69,674
Less:
Pro forma cash interest expense (6)
(20,313
)
(20,313
)
Maintenance capital expenditures (7)
(1,516
)
(1,782
)
Expansion capital expenditures (8)
(8,527
)
(38,361
)
Estimated maintenance capital expenditures of acquisitions (9)
(1,615
)
(829
)
Pro forma distributions to non-affiliated owners of Atlas (10)
(36,747
)
(36,747
)
Estimated incremental general and administrative expense (11)
(1,000
)
(1,000
)
Plus:
Borrowings under Atlas credit facility for expansion capital expenditures (12)
8,527
38,361
Pro forma available cash at Atlas Pipeline Holdings, L.P.
$
(2,430
)
$
9,003
Expected Cash Distributions: (13)
Expected distribution per unit
$
0.90
$
0.90
Distributions to public common unitholders
$
3,726
$
3,726
Distributions to common units held by our affiliates
15,264
15,264
Total distributions
$
18,990
$
18,990
Shortfall (14)
$
(21,420
)
$
(9,987
)
Debt Covenant Ratios:
Atlas
Funded Debt/EBITDA (15)
4.3
x
3.5
x
EBITDA/Interest Expense (15)
3.0
x
3.6
x
Senior Secured Debt/EBITDA (15)
0.1
x
0.1
x
(1)
Reflects net cash provided by operating activities of Atlas Pipeline Holdings, L.P., derived from Atlas Pipeline GP's historical consolidated financial statements for the periods indicated without giving pro forma effect to the transactions described in footnote (5).
(2)
Represents the non-recurring net gain recognized in connection with the fourth quarter 2004 settlement associated with Atlas' terminated attempt to acquire Alaska Pipeline Company. Atlas settled the matter in the fourth quarter 2004 and received $5.5 million.
(3)
Atlas utilizes its $225.0 million credit facility to satisfy its working capital needs, thereby allowing it to avoid using cash flow available for distribution to satisfy working capital requirements. Therefore, we do not reflect any adjustments to cash available for distributions as a
result of these requirements. Atlas is unable to borrow under its credit facility to pay distributions of available cash to unitholders because such borrowings would not constitute "working capital borrowings" under its partnership agreement.
(4)
EBITDA represents net income before net interest expense, income taxes, depreciation and amortization and minority interest in Atlas. Adjusted EBITDA is calculated by adding to EBITDA other non-cash items such as compensation expenses associated with unit issuances to
directors and employees. EBITDA and Adjusted EBITDA are not intended to represent cash flow and do not represent the measure of cash available for distribution. Adjusted EBITDA does not reflect approximately $1.0 million
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of additional general and administrative expense we expect to incur in connection with us being a public company after this offering.
(5)
Reflects pro forma adjustments for Atlas' acquisitions of NOARK in October 2005, Elk City in April 2005, and Spectrum in July 2004. These acquisitions were accounted for under the purchase method of accounting. Accordingly, the results of operations for these acquisitions
are reflected in Atlas' historical operating results beginning on the day it closed the transactions. We have included the results of these acquisitions in our results on a pro forma basis as if the operations were acquired on January 1, 2004. The financial information for these
acquisitions was derived from audited financial statements and pro forma financial statements included in this prospectus. Our independent auditors have not examined, compiled, or otherwise applied procedures to our pro forma financial statements, and accordingly, do not
express an opinion or any other assurance on the pro forma financial information set forth below. The pro forma financial data should not be considered indicative of the historical results we would have had or the future results that we will have after this offering. We have set
forth below a summary of our pro forma adjustments to Adjusted EBITDA to reflect Atlas' acquisitions (in thousands):
Year Ended December
31, 2004
Historical
Spectrum
Elk City
NOARK
Pro Forma Adjustments
Total
Net income
$
55,977
$
7,583
$
3,429
$
(69,423
)
$
(2,434
)
Minority interest in Atlas
—
—
—
429
429
Depreciation and amortization
1,638
2,153
3,249
5,292
12,332
Interest expense
1,712
—
5,287
17,085
24,084
Income tax expense
32,319
—
2,162
(34,481
)
—
Non-cash compensation expense
6,369
—
—
(6,369
)
—
Gain recognized upon sale of Spectrum by previous owner
(89,109
)
—
—
89,109
—
Total adjustments
$
8,906
$
9,736
$
14,127
$
1,642
$
34,411
Twelve Months Ended September
30, 2005
Historical
Pro Forma
Elk City
NOARK
Adjustments
Total
Net income
$
4,893
$
5,373
$
(11,971
)
$
(1,705
)
Minority interest in Atlas
—
—
2,623
2,623
Depreciation and amortization
1,287
3,320
2,046
6,653
Interest expense
—
4,892
11,934
16,826
Income tax expense
—
3,464
(3,464
)
—
Total adjustments
$
6,180
$
17,049
$
1,168
$
24,397
(6)
Reflects an increase to interest expense of approximately $18.4 million and $12.7 million for the year ended December 31, 2004 and the twelve months ended September 30, 2005, respectively, as a result of interest expense related to Atlas' issuance of $250.0 million of its
8.125% senior notes. This amount does not reflect interest expense on NOARK's $39.6 million of 7.15% notes, for which our minority interest partner in NOARK is liable. Under the NOARK partnership agreement, payments on the NOARK notes will be made from amounts
otherwise distributable to the minority interest partner and, if that amount is insufficient, the minority interest partner is required to make a capital contribution to NOARK.
(7)
Reflects actual maintenance capital expenditures during the period.
(8)
Expansion capital expenditures for the year ended December 31, 2004 and the twelve months ended September 30, 2005 were $8.5 million and $38.4 million, respectively. The expansion capital expenditures for the year ended December 31, 2004 include gathering system
expansions and compressor upgrades of the Velma and Appalachian gathering systems. The $38.4 million of expansion capital expenditures for the twelve months ended September 30, 2005 include expansions of the Velma and Elk City gathering systems and processing
facilities to accommodate new wells drilled in their service areas and compressor upgrades and expansions of the Appalachian gathering system.
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(9)
Includes estimated adjustments to maintenance capital expenditures of $1.6 million and $0.8 million for the year ended December 31, 2004 and the twelve months ended September 30, 2005, respectively, to reflect pro forma maintenance capital expenditure activity for
recently completed acquisitions. These estimated adjustments are derived based on Atlas' experience in operating these assets as well as the specific characteristics of the businesses Atlas has acquired.
(10)
Reflects the cash distributions from Atlas to its unitholders other than us based upon the most recent announced quarterly distribution of $0.83 per limited partner unit or $3.32 per limited partner unit on an annualized basis.
(11)
Reflects approximately $1.0 million in incremental ongoing expenses associated with being a publicly-traded partnership, including, among other things, estimated incremental costs associated with annual and quarterly reports to unitholders, tax return and Schedule K-1
preparation and distribution, investor relations, registrar and transfer agent fees, director compensation, accounting and audit fees and incremental insurance costs, including director and officer liability and business interruption insurance.
(12)
Reflects borrowings incurred under Atlas' credit facility to finance its expansion capital expenditures. Because Atlas distributes substantially all of its available cash on a quarterly basis, Atlas has historically financed its growth capital expenditures through the use of external
financing alternatives, including borrowings under its credit facility and the public capital markets. In the future, Atlas anticipates that it will continue to utilize these external sources of financing to fund its acquisition growth strategy and expects to refinance all of its debt as it
matures.
(13)
The table below sets forth the assumed number of outstanding common units upon the closing of this offering, assuming the full exercise of the underwriters' option to purchase additional common units, and the estimated per unit and aggregate distribution amounts payable on
such common units during the year following the closing of this offering at our initial distribution rate:
Distributions on Our Common Units
Number of Common Units
Per Unit
Aggregate
Estimated distributions on publicly held common units
4,140,000
$
0.90
$
3,726,000
Estimated distributions on common units held by our affiliates
16,960,000
$
0.90
15,264,000
Total
21,100,000
$
18,990,000
(14)
We believe that we will have sufficient cash available for distribution to pay the full quarterly distributions at the initial distribution rate of $0.225 per unit on all the outstanding common units for each quarter for the year ending December 31, 2006. See "Assumptions and
Considerations" below for the specific assumptions we are making in projecting that we will have sufficient available cash for the four quarters in the year ending December 31, 2006.
(15)
Atlas' credit facility
          requires it to maintain a ratio of senior secured debt (as defined
          in the credit facility) to EBITDA (as defined in the credit facility)
          of not more than 6.0 to 1.0, reducing to 5.75 to 1.0 on March 31, 2006,
          4.5
          to 1.0 on June 30, 2006, and 4.0 to 1.0 on September 30, 2006; a funded
          debt (as defined in the credit facility) to EBITDA ratio of not more
          than 6.0 to 1.0, reducing to 5.75 to 1.0 on March 31, 2006 and to 4.5
          to 1.0 on June 30, 2006, and an interest coverage ratio (as defined
          in the credit facility) of not less than
2.5 to 1.0, increasing to 3.0 to 1.0 on March 31, 2006. The credit facility defines
          EBITDA to include pro forma adjustments, acceptable to the administrator
          of the facility, following material acquisitions. The definition of
          EBITDA contained in the credit facility is substantially similar to
          the definition of Adjusted EBITDA used in this prospectus, except that:
          (1) the credit facility definition of EBITDA includes net gain or loss
          on arbitration settlement, while the definition of Adjusted EBITDA
          excludes net gain or loss on arbitration settlement as a
non-recurring item, and (2) the credit facility definition of EBITDA includes
          EBITDA of NOARK only to the extent of cash distributions from NOARK,
          while the definition of Adjusted EBITDA includes Atlas' percentage
          interest in NOARK's EBITDA. The ratios described
above include only the operations of Atlas and its subsidiaries, and exclude
          our operations and those of our subsidiaries that are not subsidiaries
          of Atlas.
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Estimated Cash Available for Distributions
In order to pay the quarterly distribution to our common unitholders at our initial distribution rate of $0.225 per unit per quarter for each quarter in the period ending December 31, 2006, we estimate that Atlas must generate at least $79.4 million in Adjusted EBITDA
during the twelve months ending December 31, 2006. We refer to this amount as "Estimated Minimum Adjusted EBITDA." Estimated Minimum Adjusted EBITDA is intended to be an indicator or benchmark of the amount management considers to be the lowest amount of
Adjusted EBITDA necessary to generate sufficient available cash for us to make cash distributions to our common unitholders at our initial distribution rate of $0.225 per common unit per quarter (or $0.90 per common unit per year). The Estimated Minimum Adjusted
EBITDA should not be viewed as management's projection of the actual Adjusted EBITDA that will be generated during 2006.
Estimated Minimum Adjusted EBITDA of $79.4 million exceeds pro forma Adjusted EBITDA for the year ended December 31, 2004 by approximately $20.7 million and pro forma Adjusted EBITDA for the twelve months ended September 30, 2005 by approximately
$9.7 million. We believe that Atlas will generate the Estimated Minimum Adjusted EBITDA for the year ending December 31, 2006. In "—Assumptions and Considerations" below, we discuss the major assumptions underlying our belief that Atlas will be able to generate the
Estimated Minimum Adjusted EBITDA and we will have sufficient available cash to pay distributions at the initial distribution rate. We can give you no assurance that our assumptions will be realized or that Atlas will generate the Estimated Minimum Adjusted EBITDA or
the expected level of available cash, in which event we will not be able to pay the initial quarterly distribution on our common units. When considering how we calculate estimated cash available for distribution, please keep in mind all the risk factors and other cautionary
statements under the heading "Risk Factors" and elsewhere in the prospectus, which discuss factors that could cause cash available for distribution to vary significantly from our estimates.
As shown in the table below, we have also determined that if Atlas achieves the Estimated Minimum Adjusted EBITDA, Atlas would be permitted under the terms of its credit facility to make its distributions to its unitholders. In addition, we expect that we will be
permitted to make distributions at the initial distribution rate under our anticipated credit agreement.
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Atlas Pipeline Holdings, L.P. Estimated Cash Available for Distribution
Four Fiscal Quarters Ending December
31, 2006
(in thousands, except per unit data and ratios)
Estimated Minimum Adjusted EBITDA (1)
$
79,420
Less:
Cash interest expense (2)
(20,283
)
Maintenance capital expenditures (3)
(2,400
)
Expansion capital expenditures (4)
(45,537
)
Acquisition capital expenditures (5)
—
Incremental general and administration expense (6)
(1,000
)
Distributions to non-affiliated owners of Atlas (7)
(36,747
)
Plus:
Sources for expansion capital expenditures (8)
45,537
Estimated Available Cash at Atlas Pipeline Holdings, L.P.
$
18,990
Expected Cash Distributions by Atlas Pipeline Holdings, L.P.
Expected distribution per common unit
$
0.90
Distributions to our public common unitholders
$
3,726
Distributions to common units held by affiliates
15,264
Total distributions paid to our common unitholders (9)
$
18,990
Debt Covenant Ratios
Atlas
Funded Debt / EBITDA (10)
3.4
x
EBITDA / Interest Expense (10)
3.9
x
Senior Secured Debt / EBITDA (10)
0.3
x
(1)
We believe that Estimated Minimum Adjusted EBITDA for the year ending December 31, 2006 will be approximately $79.4 million. Estimated Minimum Adjusted EBITDA is approximately $20.7 million more than the pro forma Adjusted EBITDA Atlas generated for the
year ended December 31, 2004 and approximately $9.7 million more than the pro forma Adjusted EBITDA Atlas generated for the twelve months ended September 30, 2005. Please see "—Assumptions and Considerations" for a discussion of the assumptions underlying our
belief that we will be able to generate sufficient available cash for us to make cash distributions to our common unitholders at our initial distribution rate.
(2)
Our estimated cash interest expense is comprised of the following components:
(i)
Approximately $20.3 million associated with Atlas' $250.0 million of 8.125% senior unsecured notes;
(ii)
Approximately $0.7 million attributable to capital expenditures, a portion of which will be financed with cash on hand, and a portion of which will be financed with borrowings under Atlas' credit facility; and
(iii)
Offset by $0.7 million of capitalized interest related to the construction of the Sweetwater gas plant and associated gathering system.
(3)
We currently expect that our estimated maintenance capital expenditures will be approximately $2.4 million for the year ending December 31, 2006 in comparison to pro forma maintenance capital expenditures of $3.1 million and $2.6 million for the year ended December 31,
2004 and the twelve months ended September 30, 2005, respectively. The decrease in the estimated maintenance capital expenditures for the year ending December 31, 2006 primarily reflects the completion of maintenance projects during the prior historical periods.
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(4)
This reflects our estimated expenditure of $45.5 million for expansion capital for the year ending December 31, 2006. Our estimated expansion capital expenditures of approximately $45.5 million for the year ending December 31, 2006 includes approximately $30.0 million
associated with the construction of Atlas' Sweetwater gas plant and associated gathering system and $15.5 million for well connections and other internal expansion projects relating to Atlas' transmission, processing, and treatment operations. Our estimated $45.5 million of
expansion capital expenditures for the year ending December 31, 2006 as compared to the expansion capital expenditures for the year ended December 31, 2004 and the twelve months ended September 30, 2005 represents an increase of approximately $37.0 million and
approximately $7.1 million, respectively. The increased need for future expansion capital expenditures is primarily a result of the construction of the Sweetwater gas plant and an increase in well connections due to increased drilling activity in Atlas' area of operations.
(5)
Consistent with its acquisition strategy, Atlas is continuously pursuing strategic acquisitions that it expects to be accretive to its earnings. Since Atlas' inception in January 2000 through November 2005, Atlas has consummated five acquisitions for an aggregate purchase price of
approximately $516.7 million. While Atlas expects to continue to pursue acquisitions in the next twelve months, because of the uncertain nature of the acquisition environment, we have not included an estimate of future acquisition capital expenditure requirements. If Atlas is
successful in completing additional acquisitions, Atlas anticipates its primary source of consideration will be through commercial borrowings, other debt and common unit issuances. While the initial funding of its acquisitions may consist of debt financing, Atlas' financial
strategy is to finance acquisitions equally with equity and debt, and Atlas would expect to repay such debt with proceeds of equity issuances to achieve this relatively balanced financing ratio. If Atlas is unable to finance its growth through external sources or is unable to achieve
its targeted debt/equity ratios, our cash available to pay distributions may be negatively impacted.
(6)
Reflects approximately $1.0 million in incremental ongoing expenses associated with being a publicly-traded partnership, including, among other things, estimated incremental costs associated with annual and quarterly reports to unitholders, tax return and Schedule K-1
preparation and distribution, investor relations, registrar and transfer agent fees, director compensation, accounting and audit fees and incremental insurance costs, including director and officer liability and business interruption insurance.
(7)
Reflects the cash distributions from Atlas to its unitholders other than us based upon the most recent declared quarterly distribution of $0.83 per limited partner unit or $3.32 per limited partner unit on an annualized basis.
(8)
Atlas has historically financed internal growth and acquisitions through the use of cash on hand together with external financing sources, including borrowings under its credit facility and the issuance of debt and equity securities. Atlas
anticipates that it will use cash on hand together with available capacity under its credit facility to fund its projected $45.5 million of expansion capital expenditures.
(9)
Represents the amount required to fund distributions to our unitholders based upon the declared annualized distribution of $0.90 per unit and assuming the underwriters' option to purchase additional common units has been exercised in full.
(10)
Atlas' credit facility requires it to maintain a ratio of senior secured debt (as defined in the credit facility) to EBITDA (as defined in the credit facility) of not more than 6.0 to 1.0, reducing to 5.75 to 1.0 on March 31, 2006, 4.5 to 1.0 on June 30, 2006 and 4.0 to 1.0 on September
30, 2006; a funded debt (as defined in the credit facility) to EBITDA ratio of not more than 6.0 to 1.0, reducing to 5.75 to 1.0 on March 31, 2006 and to 4.5 to 1.0 on June 30, 2006, and an interest coverage ratio (as defined in the credit facility) of not less than 2.5 to 1.0,
increasing to 3.0 to 1.0 on March 31, 2006. The credit facility defines EBITDA to include pro forma adjustments, acceptable to the administrator of the facility, following material acquisitions. The definition of EBITDA contained in the credit facility is substantially similar to
the definition of Adjusted EBITDA used in this prospectus, except that: (1) the credit facility definition of EBITDA includes net gain or loss on arbitration settlement, while the definition of Adjusted EBITDA excludes net gain or loss on arbitration settlement as a non-recurring
item, and (2) the credit facility definition of EBITDA includes EBITDA of NOARK only to the extent of cash distributions from
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NOARK, while the definition of Adjusted EBITDA includes Atlas' percentage interest in NOARK's EBITDA. The ratios described above include only the operations of Atlas and its
subsidiaries, and exclude our operations and those of our subsidiaries that are not subsidiaries of Atlas.
Assumptions and Considerations
While we believe that the following assumptions are generally consistent with the actual performance of Atlas since its acquisitions of Elk City and NOARK in 2005 and Spectrum in 2004, and are reasonable in light of our current beliefs concerning future events, the
assumptions are inherently uncertain and are subject to significant business, economic, regulatory and competitive risks and uncertainties that could cause actual results to differ materially from those we anticipate. If our assumptions are not realized, the actual available cash
that Atlas generates, and thus the available cash of Atlas Pipeline GP could be substantially less than that currently expected and could, therefore, be insufficient to permit us to make our initial quarterly and annual distributions on our units, in which event the market price of
our units may decline materially. Consequently, the statement that we believe that we will have sufficient available cash to pay the initial distribution on our units for each quarter through December 31, 2006 should not be regarded as a representation by us or the underwriters
or any other person that we will make such a distribution. When reading this section, you should keep in mind the risk factors and other cautionary statements under the heading "Risk Factors" in this prospectus.
We believe that our interests in Atlas will generate sufficient cash flow to enable us to pay our initial quarterly distribution of $0.225 per unit on all of our units for the four quarters ending December 31, 2006. Our belief is based on a number of current assumptions
that we believe to be reasonable over the next four quarters.
Distribution Rate of Atlas.
Our estimate of cash distributions to be received from Atlas during the twelve months ending December 31, 2006 assumes that Atlas will continue to pay its recently declared quarterly distribution of $0.83 per common unit over the next
four quarters and that the amount of cash distributions we receive from Atlas will be sufficient to allow us to pay total distributions to our unitholders of approximately $19.0 million. We have assumed that Atlas Pipeline GP will maintain its 2.0% general partner interest in
Atlas by making proportionate cash contributions to Atlas in connection with Atlas' equity issuances.
Operating Performance of Atlas.
The primary determinant of Adjusted EBITDA is cash flow generated by the operations of Atlas. In order for us to pay distributions at the initial distribution rate, we believe that Atlas must achieve Estimated Minimum Adjusted
EBITDA of $79.4 million for the twelve months ending December 31, 2006.
Our estimates of Estimated Minimum Adjusted EBITDA are based on several general assumptions related to Atlas's operating performance, including:
Commodity Prices
.     Our estimate of Adjusted EBITDA for the twelve months ending December 31, 2006 assumes that there will not be any significant changes in the commodity prices Atlas received for natural gas, NGLs and condensate over the twelve months
ended September 30, 2005, taking into account Atlas' hedge positions.
We have assumed that for any hedges that expire in 2006, Atlas will realize the
average prices it received during the twelve month period ended September 30,
2005, such average prices including the
impact of hedge prices during that time.
In its Mid-Continent operations,
    for the twelve months ended September 30, 2005, taking into account Atlas' hedge
    positions during that period, Atlas realized average commodity prices of
    approximately $6.34 per Mcf of natural gas, approximately $0.77 per gallon
    of NGLs and approximately $51.92 per barrel of condensate in its Mid-Continent
    operations. Atlas has hedged portions of its Mid-Continent natural gas, NGL
    and condensate volumes for fixed prices for various periods through 2008.
    The following table summarizes Atlas' hedge positions for its Mid-Continent
    volumes through December 31, 2006:
Commodity
Average percentage of anticipated volumes hedged
Average fixed price
Natural gas
47%
$6.63/MMbtu
NGLs
54%
$0.68/gallon
Condensate
69%
$49.25/Bbl
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In its Appalachian operations, Atlas
    is a party to natural gas gathering agreements with Atlas America under which
    Atlas receives gathering fees generally equal to a percentage, typically
    16%, of the selling price of the natural gas it transports. Atlas was paid
    gathering fees based on an average price of approximately $6.85 per Mcf of
    natural gas during the twelve months ended September 30, 2005. Atlas is the
    beneficiary of, and consults with Atlas America with respect to, the hedging
    program Atlas America has established for its Appalachian natural gas production.
    Atlas America's hedging program impacts the gathering fees Atlas earns under
    its natural gas gathering agreements with Atlas America. We have assumed
    that Atlas will receive gathering fees based on an average price of $6.85
    per Mcf on Atlas America's unhedged natural gas production and $9.00 per
    Mcf on Atlas America's hedged natural gas production through December 31,
    2006.
Volumes.
Our estimate of Adjusted EBITDA for the twelve months ending December 31, 2006 assumes that Atlas' transportation, gathering and processing volumes will approximate those shown in the following table. For comparison purposes, we have shown the
corresponding pro forma volumetric data for the twelve months ended September 30, 2005:
Twelve Months Ended
Twelve Months Ending
September
30, 2005
December
31, 2006
Appalachia:
Average Throughput Volume (Mcf/d)
54,885
54,885
Mid-Continent:
Velma Residue Gas Volume (Mcf/d)
50,231
50,231
Velma NGL and Condensate Volume (Bbl/d)
6,776
6,776
Elk City Gathered Gas Volume (Mcf/d)
251,050
251,050
Elk City NGL and Condensate Volume (Bbl/d)
5,491
5,491
NOARK Average Throughput (Mcf/d)
168,540
225,000
Sweetwater Gathered Volume (Mcf/d) (1)
—
30,000
Sweetwater NGL and Condensate Volume (Bbl/d) (2)
—
1,866
(1)
Represents volumes currently being gathered in the Elk City area that are incremental to the 251,050 Mcf/d of Elk City gathered gas volumes. Atlas currently earns a gathering fee on this 30,000 Mcf/d but does not currently earn any processing fees due to the fact that the Elk
City plant is currently processing at maximum capacity and is unable to process those volumes.
(2)
Atlas anticipates that the Sweetwater gas plant will be operational beginning in the third quarter of 2006. These volumes represent the NGL and condensate production once the plant becomes operational from the 30,000 Mcf/d of volumes currently being gathered in the Elk City
area, which are assumed to remain flat for 2006.
Our Estimated Minimum Adjusted EBITDA
    assumes that Atlas' overall operating volumes in Velma and Elk City
    will remain at the same level as for the twelve months ended September 30,
    2005. Our estimate includes 30,000 Mcf/d of volumes currently being  gathered
    in the Elk City area that are incremental to the 251,050 Mcf/d of Elk City
    gathered gas volumes. In addition, our estimate includes NGL and condensate
    volumes relating to these incremental volumes produced after the Sweetwater
    gas plant becomes operational.
Our estimate also assumes that Atlas' gathering and transportation volumes related to NOARK will increase in 2006 as a result of increased drilling activity in the Mid-Continent area, including in the Fayetteville Shale play in the Arkoma basin. NOARK volumes are also expected to increase as a result of a positive basis spread across the Ozark Gas Transmission system.
Other Assumptions Used in Determining Estimated Minimum Adjusted EBITDA
•
Atlas will generate $108.1 million of gross margin through the operation of its Mid-Continent and Appalachia business segments, as compared to $100.6 million of pro forma gross margin for the twelve months ended September 30, 2005;
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•
Atlas' plant operating expenses are expected to be approximately $11.3 million for the twelve months ending December 31, 2006, as compared to $11.1 million of pro forma plant operating expenses for the twelve months ended September 30, 2005;
•
Atlas' transportation and compression expenses are expected to be approximately $7.4 million for the twelve months ending December 31, 2006, as compared to $7.5 million of pro forma transportation and compression expenses for the twelve months ended September 30,
2005;
•
Atlas' general and administrative expenses are expected to be approximately $14.4 million for the twelve months ending December 31, 2006, as compared to $14.6 million of pro forma general and administrative expenses for the twelve months ended September 30, 2005;
•
Atlas' maintenance capital expenditures are expected to be approximately $2.4 million for the twelve months ending December 31, 2006;
•
Atlas' growth capital expenditures are expected to be approximately $45.5 million for the twelve months ending December 31, 2006;
•
Based on Atlas' current businesses, Atlas will borrow approximately $23.4 million under its $225 million revolving credit facility;
•
Atlas' average interest rate on its $225 million revolving credit facility will be approximately 7.0%;
•
Atlas' average interest rate related to its $250 million senior unsecured notes will be 8.125%;
•
there will not be any new federal, state or local regulation of portions of the energy industry in which we and Atlas operate, or a new interpretation of existing regulation, that will be materially adverse to our or Atlas' business; and
•
market, regulatory, insurance and overall economic conditions will not change substantially.
Our Sources of Distributable Cash
Our only cash-generating assets currently consist of our partnership interests in Atlas. Therefore, our cash flow and resulting ability to make distributions initially will be completely dependent upon the ability of Atlas to make distributions in respect of those interests
and rights. The actual amount of cash that Atlas will have available for distribution will primarily depend on the amount of cash it generates from operations. The actual amount of this cash will fluctuate from quarter to quarter based on certain factors, including:
•
the level of capital expenditures Atlas makes;
•
the cost of capital used to fund acquisitions;
•
debt service requirements;
•
fluctuations in cash flow generated by Atlas' operating activities;
•
prevailing economic conditions;
•
fluctuations in working capital needs;
•
restrictions on distributions contained in Atlas' credit facility and senior notes; and
•
the amount, if any, of cash reserves established by Atlas' general partner in its discretion for the proper conduct of its business.
As Atlas makes quarterly distributions to its partners, we receive our share of such distributions in proportion to our ownership interest in Atlas. Upon completion of this offering, we will own, directly or indirectly:
•
a 100% ownership interest in the general partner of Atlas, which owns:
o  a 2.0% general partner interest in Atlas, which entitles it to receive 2.0% of the cash distributed by Atlas;
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o  all of the incentive distribution rights in Atlas, which entitle it to receive increasing percentages, up to a maximum of 48.0%, of any cash distributed by Atlas as it reaches certain target distribution levels in excess of $0.42 per Atlas unit in any quarter; and
o  1,641,026 common units of Atlas, representing an approximate 12.8% limited partner interest in Atlas.
Our Incentive Distribution Rights Related to Atlas' Cash Distributions.
The incentive distribution rights we own in Atlas represent our right to receive an increasing percentage of Atlas' quarterly distributions of available cash from operating surplus after Atlas has
made cash distributions in excess of its minimum quarterly distribution level. Atlas will distribute any available cash from operating surplus for that quarter among its unitholders and Atlas' general partner in the following manner:
•
First,
98.0% to all unitholders of Atlas pro rata and 2.0% to the general partner, until Atlas has distributed $0.42 for each outstanding common unit;
•
Second,
85.0% to all unitholders of Atlas, pro rata, 2.0% to the general partner and 13.0% to us, until a hypothetical unitholder has received a total of $0.52 per unit for that quarter, in addition to any distributions to Atlas' common unitholders to eliminate any cumulative
arrearages in payment of the minimum quarterly distribution on the common units ("second target distribution");
•
Third,
75.0% to all unitholders of Atlas, pro rata, 2.0% to the general partner and 23.0% to us, until each unitholder has received a total of $0.60 per unit for that quarter, in addition to any distributions to Atlas' common unitholders to eliminate any cumulative arrearages in
payment of the minimum quarterly distribution on the common units ("third target distribution"); and
•
Thereafter,
50.0% to all unitholders of Atlas, pro rata, 2.0% to the general partner and 48.0% to us.
Hypothetical Allocations of Distributions to Our Unitholders and Atlas' Unitholders.
The table set forth below demonstrates the percentage allocations among (i) the owners of Atlas, other than us, and (ii) Atlas Pipeline Holdings, L.P. as a result of certain assumed
quarterly distribution payments per common units made by Atlas, including the target distribution levels contained in Atlas' partnership agreement. This information assumes:
•
Atlas has 12,549,266 common units outstanding; and
•
we own (i) 1,641,026 Atlas common units, comprising approximately 12.8% of the outstanding common units in Atlas, (ii) a 2.0% general partner interest in Atlas and (iii) the incentive distribution rights in Atlas.
The percentage interests shown for us and the other Atlas unitholders for the minimum quarterly distribution amount are also applicable to distribution amounts that are less than the minimum quarterly distribution. The amounts presented below are intended to be
illustrative of the way in which we are entitled to an increasing share of distributions from Atlas as total distributions from Atlas increase and are not intended to represent a prediction of future performance based upon 12,549,266 Atlas limited partnership units outstanding at
December 31, 2005.
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Distribution Level
Atlas Quarterly Distribution Per Unit
Distributions to Owners of Atlas Other than Us as a Percentage of Total Distributions
Distributions to Us as a Percentage of Total Distributions (1)
Minimum Quarterly Distribution
$
0.42
85.2
%
14.8
%
Second Target Distribution
$
0.52
82.6
%
17.4
%
Third Target Distribution
$
0.60
79.6
%
20.4
%
Current Distribution
$
0.83
64.4
%
35.6
%
(1)
Includes distributions made with respect to our 2.0% general partner interest (aggregate), our approximate 12.8% limited partner interest in Atlas and our right to receive incentive payments.
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SELECTED HISTORICAL FINANCIAL AND OPERATING DATA
We were formed in December 2005 and therefore do not have any historical financial statements. Since we will own and control Atlas Pipeline Partners GP, LLC, the general partner of Atlas, the selected financial and operating data statements presented below are of
Atlas Pipeline Partners GP, LLC on a consolidated basis, including Atlas.
The following table sets forth selected financial data as of and for the period from inception to December 31, 2000 and the years ended December 31, 2001, 2002, 2003 and 2004 and the nine months ended September 30, 2004 and 2005. The historical financial data of
Atlas Pipeline GP were derived from the audited consolidated financial statements for each of the years ended December 31, 2002, 2003 and 2004 and at December 31, 2003 and 2004, which have been audited by Grant Thornton LLP, an independent registered public
accounting firm. The historical financial data of Atlas Pipeline GP were derived from the consolidated financial statements which are not included in this prospectus, for each of the years ended December 31, 2000 and 2001 and at December 31, 2000 and 2001. We derived the
financial data as of and for the nine months ended September 30, 2004 and 2005 from our unaudited consolidated financial statements included elsewhere in this prospectus.
The financial data below should be read together with, and are qualified in their entirety by reference to, our historical consolidated combined financial statements and the accompanying notes, "Management's Discussion and Analysis of Financial Condition and Results
of Operations," and the historical consolidated financial statements and the accompanying notes of Spectrum and Elk City and its predecessor set forth elsewhere in this prospectus.
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Inception through December 31,
Years Ended December 31,
Nine Months Ended September 30,
2000
2001
2002
2003
2004(1)
2004(1)
2005(2)
(
dollars
          in thousands)
(unaudited)
Statement of income data:
Revenue:
Natural gas and liquids
$
—
$
—
$
—
$
—
$
72,109
$
30,048
$
218,268
Transportation and compression
9,441
13,095
10,660
15,651
18,800
13,344
16,501
Interest income and other
25
35
7
98
382
282
352
Total revenue and other income
9,466
13,130
10,667
15,749
91,291
43,674
235,121
Costs and Expenses:
Natural gas and liquids
—
—
—
—
58,707
24,588
184,578
Plant operating
—
—
—
—
2,032
931
7,242
Transportation and compression
1,224
1,929
2,062
2,421
2,260
1,709
2,169
General and administrative
603
1,114
1,482
1,662
4,642
2,901
9,127
Depreciation and amortization
1,019
1,356
1,475
1,770
4,471
2,132
8,495
Loss (gain) on arbritation settlement, net
—
—
—
—
(1,457
)
2,987
138
Interest
9
176
250
258
2,301
1,202
8,478
Minority interest in Atlas(3)
3,101
3,810
2,496
5,066
10,941
3,300
7,240
Total costs and expenses
5,956
8,385
7,765
11,177
83,897
39,750
227,467
Net income
3,510
4,745
2,902
4,572
7,394
3,924
7,654
Premium on preferred unit redemption
—
—
—
—
(400
)
(400
)
—
Net income attributable to owners
$
3,510
$
4,745
$
2,902
$
4,572
$
6,994
$
3,524
$
7,654
Balance sheet data (at period end):
Property, plant and equipment, net
$
15,773
$
20,009
$
23,764
$
29,628
$
175,259
$
172,312
$
304,704
Total assets
21,877
31,603
38,151
63,170
234,898
236,178
484,458
Total debt, including current portion
—
2,089
6,500
—
54,452
60,220
183,645
Total owners' equity (deficit)
3,510
8,255
11,157
15,729
21,405
15,325
(40,880
)
Other financial data:
Gross margin (4)
$
9,441
$
13,095
$
10,660
$
15,651
$
32,202
$
18,804
$
50,191
EBITDA (5)
7,639
10,087
7,123
11,666
25,107
10,558
31,867
Adjusted EBITDA (5)
7,639
10,087
7,123
11,666
24,350
13,887
34,814
Maintenance capital expenditures
$
138
$
159
$
170
$
3,109
$
1,516
$
844
$
1,110
Expansion capital expenditures
1,192
1,569
5,060
4,526
8,527
3,575
33,409
Total capital expenditures
$
1,330
$
1,728
$
5,230
$
7,635
$
10,043
$
4,419
$
34,519
Operating data:
Appalachia:
Average throughput volumes (Mcf/d)
42,669
46,918
50,363
52,472
53,343
52,745
54,804
Average transportation rate per Mcf
$
0.65
$
0.76
$
0.58
$
0.82
$
0.96
$
0.92
$
1.10
Mid-Continent:
Velma system:
Gathered gas volume (Mcf/d)
—
—
—
—
56,441
55,580
69,091
Processed gas volume (Mcf/d)
—
—
—
—
55,202
54,755
64,581
Residue gas volume (Mcf/d)
—
—
—
—
42,659
41,555
52,471
NGL production (Bbl/d)
—
—
—
—
5,799
5,916
6,812
Condensate volume (Bbl/d)
—
—
—
—
185
204
269
Elk City system:
Gathered gas volume (Mcf/d)
—
—
—
—
—
—
242,294
Processed gas volume (Mcf/d)
—
—
—
—
—
—
116,688
Residue gas volume (Mcf/d)
—
—
—
—
—
—
107,182
NGL production (Bbl/d)
—
—
—
—
—
—
5,317
Condensate volume (Bbl/d)
—
—
—
—
—
—
121
(1)
Includes Atlas' acquisition of Spectrum on July 16, 2004, representing five and one-half months' operations for the year ended December 31, 2004 and two and one-half months' operations for the nine months ended September 30, 2004.
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(2)
Includes Atlas' acquisition of Elk City on April 14, 2005, representing five and one-half months' operations for the nine months ended September 30, 2005.
(3)
Represents the minority interest in the net income of Atlas.
(4)
We define gross margin as revenue less purchased product costs. Purchased product costs include the cost of natural gas and NGLs that Atlas purchases from third parties. Our management views gross margin as an important performance measure of core profitability of our
operations and as a key component of our internal financial reporting. We believe that investors benefit from having access to the same financial measures that our management uses. The following table reconciles our net income to gross margin (in thousands):
Inception through December 31,
Years Ended December 31,
Nine Months Ended September 30,
2000
2001
2002
2003
2004
2004
2005
(unaudited)
Net income
$
3,510
$
4,745
$
2,902
$
4,572
$
7,394
$
3,924
$
7,654
Plus (minus):
Interest income and other
(25
)
(35
)
(7
)
(98
)
(382
)
(282
)
(352
)
Plant operating
—
—
—
—
2,032
931
7,242
Transportation and compression
1,224
1,929
2,062
2,421
2,260
1,709
2,169
General and administrative
603
1,114
1,482
1,662
4,642
2,901
9,127
Depreciation and amortization
1,019
1,356
1,475
1,770
4,471
2,132
8,495
Loss (gain) on arbitration settlement, net
—
—
—
—
(1,457
)
2,987
138
Interest
9
176
250
258
2,301
1,202
8,478
Minority interest in Atlas
3,101
3,810
2,496
5,066
10,941
3,300
7,240
Gross margin
$
9,441
$
13,095
$
10,660
$
15,651
$
32,202
$
18,804
$
50,191
(5)
EBITDA represents net income before net interest expense, income taxes, depreciation and amortization and minority interest in Atlas. Adjusted EBITDA is calculated by adding to EBITDA other non-cash items such as compensation expenses associated with unit issuances to
directors and employees. EBITDA and Adjusted EBITDA are not intended to represent cash flow and do not represent the measure of cash available for distribution. Our method of computing EBITDA may not be the same method used to compute similar measures reported by
other companies. Adjusted EBITDA excludes net gain or loss on arbitration settlement as a non-recurring item. Adjusted EBITDA does not reflect approximately $1.0 million of additional general and administrative expense, we expect to incur in connection with our being a
public company after this offering.
Certain items excluded from EBITDA are significant components in understanding and assessing an entity's financial performance, such as their cost of capital and its tax structure, as well as historic costs of depreciable assets. We have included information concerning EBITDA
and Adjusted EBITDA because they provide investors and management with additional information as to Atlas' ability to pay its fixed charges and are presented solely as a supplemental financial measure. EBITDA and Adjusted EBITDA should not be considered as alternatives
to, or more meaningful than, net income or cash flow as determined in accordance with generally accepted accounting principles or as indicators of Atlas' operating performance or liquidity. The following table reconciles Adjusted EBITDA to EBITDA and EBITDA to our net
income (in thousands):
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Inception through December 31,
Years Ended December 31,
Nine Months Ended September 30,
2000
2001
2002
2003
2004
2004
2005
(unaudited)
Net income
$
3,510
$
4,745
$
2,902
$
4,572
$
7,394
$
3,924
$
7,654
Plus:
Minority interest in Atlas
3,101
3,810
2,496
5,066
10,941
3,300
7,240
Interest expense
9
176
250
258
2,301
1,202
8,478
Depreciation and amortization
1,019
1,356
1,475
1,770
4,471
2,132
8,495
EBITDA
7,639
10,087
7,123
11,666
25,107
10,558
31,867
Adjustments:
Non-cash compensation expense
—
—
—
—
700
342
2,809
Loss (gain) on arbitration settlement, net
—
—
—
—
(1,457
)
2,987
138
Adjusted EBITDA
$
7,639
$
10,087
$
7,123
$
11,666
$
24,350
$
13,887
$
34,814
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion of our financial condition and results of operations in conjunction with the historical and pro forma financial statements and notes thereto included elsewhere in this prospectus. For more detailed information regarding the basis
of presentation for the following information, you should read the notes to the historical and pro forma financial statements included elsewhere in this prospectus. In addition, you should read "Forward-Looking Statements" and "Risk Factors" for information regarding some
of the risks inherent in our business.
Overview
Financial Presentation
We reflect our ownership interest in Atlas on a consolidated basis, which means that our financial results are combined with Atlas' financial results. The non-controlling limited partner interests in Atlas will be reflected as an expense in our consolidated results of
operations and as a liability on our consolidated balance sheet. We initially will have no separate operating activities apart from those conducted by Atlas, and our cash flows currently consist of distributions from Atlas on our partnership interests in it, including the incentive
distribution rights that we own. Our historical consolidated results of operations reflect the results of operations of our wholly-owned subsidiary, Atlas Pipeline Partners GP, LLC, the general partner of Atlas. Throughout this discussion, when we refer to "our" consolidated
results of operations, we are referring to the results of consolidated operations of Atlas Pipeline GP. Atlas Pipeline GP's consolidated results of operations principally reflect the results of operations of Atlas adjusted for non-controlling partners' interest in Atlas' net income.
Accordingly, the discussion of our financial position and results of operations in this "Management's Discussion and Analysis of Financial Condition and Results of Operations" reflects the operating activities and results of operations of Atlas. The historical results of our
operations do not reflect the incremental expenses we expect to incur as a result of being a publicly traded partnership.
General
Our cash generating assets consist of our interests in Atlas, a publicly-traded Delaware limited partnership. Atlas is a midstream energy service provider engaged in the transmission, gathering and processing of natural gas in the Mid-Continent and Appalachian regions
of the United States. Our interests in Atlas will initially consist of a 100% ownership interest in Atlas Pipeline GP, the general partner of Atlas, which owns:
•
a 2.0% general partner interest in Atlas, which entitles it to receive 2.0% of the cash distributed by Atlas;
•
all of the incentive distribution rights in Atlas, which entitle it to receive increasing percentages, up to a maximum of 48.0%, of any cash distributed by Atlas as it reaches certain target distribution levels in excess of $0.42 per unit in any quarter; and
•
1,641,026 common limited partner units of Atlas, representing an approximate 12.8% limited partner interest.
At Atlas' current annual distribution rate of $3.32 per common unit, aggregate annual cash distributions to us on all our interests in Atlas would be approximately $20.0 million. The following table sets forth the historical Atlas distributions paid to its general partner,
Atlas Pipeline GP, our wholly-owned subsidiary, during the periods indicated:
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Atlas Cash Distributions to Atlas Pipeline GP
Year Ended December
31,
Twelve Months
2000
2001
2002
2003
2004
Ended
September
30,
2005
(in thousands)
Distributions on Atlas common units held by Atlas Pipeline GP
$
3,283
$
4,103
$
3,504
$
3,914
$
4,382
$
5,005
Distributions from ownership interest in the Atlas general partner
140
186
148
217
386
663
Distributions from Atlas incentive distribution rights held by Atlas Pipeline GP
585
911
273
809
2,765
6,855
Total
$
4,008
$
5,200
$
3,925
$
4,940
$
7,533
$
12,523
Atlas Pipeline Partners, L.P.
Atlas Pipeline Partners, L.P. is a publicly-traded Delaware limited partnership whose common units are listed on the New York Stock Exchange under the symbol "APL." Atlas Pipeline Partners, L.P.'s business activities are primarily conducted through, and its assets
are owned by, its subsidiary Atlas Pipeline Operating Partnership, L.P. and its subsidiaries, which are collectively referred to in this prospectus as Atlas.
Overview of Atlas' Operations
Through its Mid-Continent operations, which began in July 2004, Atlas owns and operates:
•
a 75% interest in a FERC-regulated, 565-mile interstate pipeline system, that extends from southeastern Oklahoma through Arkansas and into southeastern Missouri and which has throughput capacity of approximately 322 MMcf/d;
•
two natural gas processing plants with aggregate capacity of approximately 230 MMcf/d and one treating facility with a capacity of approximately 200 MMcf/d, all located in Oklahoma; and
•
1,765 miles of active natural gas gathering systems located in Oklahoma, Arkansas, northern Texas and the Texas panhandle, which transport gas from wells and central delivery points in the Mid-Continent region to its natural gas processing plants or transmission lines.
Through its Appalachian operations, Atlas owns and operates 1,500 miles of active natural gas gathering systems located in eastern Ohio, western New York and western Pennsylvania. These systems gather natural gas from more than 5,120 wells for delivery to a variety
of customers on major intra- and/or interstate pipeline systems and a limited number of direct end-users. Through an omnibus agreement and other agreements between Atlas and Atlas America, the parent of Atlas and our general partner and a leading sponsor of natural gas
drilling investment partnerships in the Appalachian Basin, Atlas gathers substantially all of the natural gas for its Appalachian operations from wells operated by Atlas America. Among other things, the omnibus agreement requires Atlas America to connect to Atlas' gathering
systems wells Atlas America operates that are located within 2,500 feet of Atlas' gathering systems. Atlas is also a party to natural gas gathering agreements with Atlas America under which it receives gathering fees generally equal to a percentage, typically 16%, of the selling
price of the natural gas it transports. These agreements are continuing obligations and have no specified term except that they will terminate if Atlas' general partner is removed without cause.
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Significant Acquisitions
Since Atlas' initial public offering in January 2000 through December 2005, Atlas has completed five acquisitions at an aggregate cost of approximately $516.7 million, including, most recently:
•
In October 2005, Atlas acquired from Enogex, a wholly-owned subsidiary of OGE Energy Corp., all of the outstanding equity of Atlas Arkansas, which owns a 75% interest in NOARK, for $165.3 million, including estimated related transaction costs, plus $10.2 million for
working capital adjustments. NOARK's principal assets include the Ozark Gas Transmission system, a 565-mile interstate natural gas pipeline, and Ozark Gas Gathering, a 365-mile natural gas gathering system. The remaining 25% interest in NOARK is owned by
Southwestern.
•
In April 2005, Atlas acquired all of the outstanding equity interests of Elk City for $196.0 million, including related transaction costs. Elk City's principal assets include approximately 300 miles of natural gas pipelines located in the Anadarko Basin in western Oklahoma and
the Texas panhandle, a natural gas processing facility in Elk City, Oklahoma, with a total capacity of approximately 200 MMcf/d and a gas treatment facility in Prentiss, Oklahoma, with a total capacity of approximately 200 MMcf/d.
•
In July 2004, Atlas acquired Spectrum for $141.6 million, including transaction costs and the payment of taxes due as a result of the transaction. Spectrum's principal assets consist of 1,100 miles of active and 800 miles of inactive natural gas gathering pipelines in the
Golden Trend area of Southern Oklahoma and the Barnett Shale area of North Texas and a natural gas processing facility in Stephens County, Oklahoma, with a total capacity of approximately 100 MMcf/d.
Contractual Revenue Arrangements
Atlas' principal revenue is generated from the transportation and sale of residue gas and NGLs. Variables which affect Atlas' revenue are:
•
the volumes of natural gas gathered, transported and processed by Atlas which, in turn, depend upon the number of wells connected to its gathering systems, the amount of natural gas they produce, and the demand for natural gas and NGLs; and
•
the transportation and processing fees paid to Atlas which, in turn, depend upon the price of the natural gas and NGLs it transports and processes, which itself is a function of the relevant supply and demand in the mid-continent, mid-Atlantic and northeastern areas of the
United States.
In Appalachia, substantially all of the gas Atlas transports is for Atlas America under percentage of proceeds, or POP, contracts, as described below, where Atlas earns a fee equal to a percentage, generally 16%, of the selling price of the gas subject, in most cases, to a
minimum of $0.35 or $0.40 per Mcf. Since Atlas' inception in January 2000, its Appalachian transportation fee has always exceeded this minimum. The balance of the Appalachian gas Atlas transports is for third-party operators generally under fixed fee contracts.
Atlas' revenue in the Mid-Continent region is determined primarily by the fees earned from the following types of arrangements:
Fee-Based Contracts.
These contracts provide for a set fee for gathering and processing raw natural gas. Atlas' revenue is a function of the volume of gas that it gathers and processes and is not directly dependent on the value of the natural gas.
POP Contracts.
These contracts provide for Atlas to retain a negotiated percentage of the sale proceeds from residue natural gas and NGLs it gathers and processes, with the remainder being remitted to the producer. In this situation, Atlas and the producer are directly dependent
on the volume of the commodity and its value; Atlas owns a percentage of that commodity and is directly subject to its market value.
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Keep-Whole Contracts.
These contracts require Atlas, as the processor, to bear the economic risk (the "processing margin risk") that the aggregate proceeds from the sale of the processed natural gas and NGLs could be less than the amount that the processor paid for the
unprocessed natural gas. However, since the gas received by the Elk City system, which is currently Atlas' only gathering system with keep-whole contracts, is generally low in liquids content and meets downstream pipeline specifications without being processed, the gas can be
bypassed around the Elk City processing plant and delivered directly into downstream pipelines during periods of margin risk. Therefore, the processing margin risk associated with such type of contracts is minimized.
As a result of Atlas' POP and keep whole contracts, Atlas' results of operations and financial condition substantially depend upon the price of natural gas and NGLs. Atlas believes that future natural gas prices will be influenced by supply deliverability, the severity of
winter and summer weather and the level of United States economic growth. Based on historical trends, Atlas generally expects NGL prices to follow changes in crude oil prices over the long term, which it believes will in large part be determined by the level of production
from major crude oil exporting countries and the demand generated by growth in the world economy. The number of active oil and gas rigs has increased in recent years, mainly due to recent significant increases in natural gas prices, which could result in sustained increases in
drilling activity during the current and future periods. However, energy market uncertainty could negatively impact North American drilling activity in the short term. Lower drilling levels over a sustained period would have a negative effect on natural gas volumes gathered
and processed.
Atlas closely monitors the risks associated with these commodity price changes on its future operations and, where appropriate, uses various commodity instruments such as natural gas, crude oil and NGL contracts to hedge a portion of the value of its assets and
operations from such price risks. Atlas does not realize the full impact of commodity price changes because some of its sales volumes were previously hedged at prices different than actual market prices.
Results of Our Operations
The results of operations discussed below principally reflect the activities of Atlas on and after January 1, 2002. Because our financial statements represent consolidated results of Atlas, our financial statements are substantially similar to Atlas'. The primary differences
in our financial statements include the following adjustments:
•
Interest of non-controlling limited partners in Atlas' net income and partners' capital.
We adjust our net income by excluding the income allocated to Atlas limited partner units that are not directly or indirectly owned by us. This allocation of Atlas' income to
non-controlling limited partners is reflected as minority interest expense in our consolidated statements of income. At the time of completion of the offering, we will own a 12.8% limited partner interest in Atlas and the non-affiliated unitholders will own a 85.2% limited
partner interest. Our consolidated balance sheet includes a minority interest liability which reflects the proportion of Atlas owned by its partners other than us.
•
Our general and administrative expenses.
We incur general and administrative expenses that are independent from Atlas' operations and are not reflected on Atlas' consolidated financial statements.
Nine Months Ended September
30, 2004 Compared to Nine Months Ended September
30, 2005
Revenue.
Natural gas and liquids revenue was $218.3 million for the nine months ended September 30, 2005, an increase of $188.3 million from $30.0 million for the first nine months of 2004. The increase was primarily attributable to contributions from the Elk City
system, acquired in April 2005, and the Velma system, acquired in July 2004, and an increase in commodity prices between periods. Gross natural gas gathered averaged 69.1 MMcf/d on the Velma system for the first nine months of 2005, an increase of 24% from the first
nine months of 2004. Gross natural gas gathered on the Elk City system averaged 242.3 MMcf/d from its date of acquisition through September 30, 2005.
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Appalachia transportation and compression revenue increased to $16.5 million for the nine months ended September 30, 2005 from $13.3 million for the first nine months of 2004. This $3.2 million increase was primarily due to an increase in the average transportation
rate earned and an increase in the volumes of natural gas Atlas transported. Atlas' average transportation rate was $1.10 per Mcf for the nine months ended September 30, 2005 as compared to $0.92 per Mcf for the prior year comparable period, an increase of $0.18 per Mcf.
Appalachia's average throughput volumes were 54.8 MMcf/d for the first nine months of 2005 as compared with 52.7 MMcf/d for the prior year comparable period, an increase of 2.1 MMcf/d. The increase in the average daily throughput volume was principally due to new
wells connected to Atlas' gathering system and the completion of a capacity expansion project on certain sections of its pipeline system during the current period.
Costs and Expenses.
Natural gas and liquids cost of goods sold of $184.6 million and plant operating expenses of $7.2 million for the nine months ended September 30, 2005 represented increases of $160.0 million and $6.3 million, respectively, from the prior year's
comparable period amounts due primarily to contributions from the acquisitions and an increase in commodity prices. Appalachia transportation and compression expenses increased $0.5 million to $2.2 million for the first nine months of 2005 due mainly to higher operating
costs as a result of compressors added in connection with Atlas' capacity expansion project and higher maintenance expense as a result of additional wells connected to the pipeline.
General and administrative expenses, including amounts reimbursed to affiliates, increased $6.2 million to $9.1 million for the nine months ended September 30, 2005 compared with $2.9 million for the prior year comparable period. This increase was mainly due to a
$2.6 million increase in non-cash compensation expense related to phantom units issued under Atlas' long-term incentive plan and $3.7 million of expenses associated with the acquisitions. Depreciation and amortization increased to $8.5 million for the nine months ended
September 30, 2005 compared with $2.1 million for the first nine months of 2004 due principally to the increased asset base associated with the acquisitions.
Interest expense increased to $8.5 million for the nine months ended September 30, 2005 as compared with $1.2 million for the prior year comparable period. This $7.3 million increase was primarily due to interest associated with borrowings under Atlas' credit facility
to finance the acquired assets and $1.0 million of accelerated amortization of deferred financing costs. This accelerated amortization was associated with the retirement of the term portion of Atlas' $270 million credit facility in April 2005. For the third quarter of 2004, Atlas
incurred $3.0 million of costs in connection with the terminated attempt to acquire Alaska Pipeline Company and subsequent legal action. Atlas settled the matter in the fourth quarter 2004 and received $5.5 million.
Minority interest in Atlas net income, which represents the allocation of Atlas earnings to its non-affiliated limited partners, increased to $7.2 million for the nine months ended September 30, 2005 as compared with $3.3 million for the prior year comparable period.
This $3.9 million increase was primarily due to an increase in Atlas' overall net income and an increase in the number of its outstanding limited partner units due to additional equity offerings in April 2004, July 2004 and June 2005.
Year Ended December
31, 2003 Compared to Year Ended December
31, 2004
Revenue.
Natural gas and liquids revenue of $72.1 million for the year ended December 31, 2004 was associated with the acquisition of Atlas' Velma operations in July 2004 and reflect approximately five and one half months of operations at Velma in 2004.
Appalachia transportation and compression revenue increased to $18.8 million for the year ended December 31, 2004 from $15.7 million for the prior year. This $3.1 million increase was primarily due to an increase in the average transportation rate earned and an increase in
the volumes of natural gas transported. The average transportation rate was $0.96 per Mcf for the year ended December 31, 2004 as compared with $0.82 per Mcf for the prior year, an increase of $0.14 per Mcf. The average daily throughput volumes were 53.3 MMcf/d for
the year ended December 31, 2004 as compared with 52.5 MMcf/d for the prior year, an increase of 0.8 MMcf/d. The increase in the average daily throughput volume was principally due to new wells connected to the Appalachia gathering system, partially offset by the
natural decline in production volumes from existing wells connected to it.
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Costs and Expenses.
Natural gas and liquids cost of goods sold of $58.7 million and plant operating expenses of $2.0 million for the year ended December 31, 2004 were associated with the acquisition of Atlas' Velma operations and reflect five and one half months of
activity at Velma. Appalachian transportation and compression expenses decreased slightly to $2.3 million for the year ended December 31, 2004 as compared with $2.4 million for the prior year. This decrease was primarily due to a decrease in compressor expenses due to
the purchase of several compressors that were previously leased at the end of 2003.
General and administrative expenses, including amounts reimbursed to affiliates, increased $3.0 million to $4.6 million for the year ended December 31, 2004 compared with $1.6 million for the prior year. This increase was mainly due to $1.1 million of general and
administrative expenses associated with Atlas' Velma operations, $0.8 million of expenses related to non-cash compensation expense for phantom units issued under our long-term incentive plan, a $0.5 million increase in allocations of compensation and benefits from Atlas
America and its affiliates due to management time associated with acquisitions and public offerings, and $0.3 million of costs associated with the implementation of Sarbanes-Oxley and the preparation and filing of two tax returns for 2003. The filing of two tax returns was a
result of our percentage interest in Atlas being reduced below 50% as a result of Atlas' offering of common units in May 2003, requiring a change in its tax year-end from September 30 to December 31. This necessitated the filing of an additional short year tax return. This
expense is non-recurring.
Depreciation and amortization increased to $4.5 million for the year ended December 31, 2004 compared with $1.8 million for the prior year due principally to the increased asset base associated with the acquisition of the Velma operations and pipeline extensions and
compressor upgrades in Appalachia.
Net gain on arbitration settlement of $1.5 million for the year ended December 31, 2004 is the result of a December 30, 2004 settlement agreement with SEMCO settling all issues and matters related to the terminated acquisition of Alaska Pipeline Company by Atlas
from SEMCO. The gain reflects $5.5 million received from SEMCO, net of $4.0 million of associated costs.
Interest expense increased to $2.3 million for the year ended December 31, 2004 as compared with $0.3 million for the prior year. This $2.0 million increase was primarily due to interest associated with borrowings under the credit facility to finance the acquisition of
the Velma operations.
Minority interest in Atlas net income increased to $10.9 million for the year ended December 31, 2004 as compared with $5.1 million for the prior year. This $5.8 million increase was primarily due to an increase in Atlas' overall net income and an increase in the
number of outstanding limited partner units due to additional equity offerings in May 2003, April 2004 and July 2004.
Year Ended December
31, 2002 Compared with Year Ended December
31, 2003
Revenue.
Appalachian transportation and compression revenue increased to $15.7 million for the year ended December 31, 2003 from $10.7 million for the prior year. This $5.0 million increase was primarily due to an increase in the average transportation rate earned
and an increase in the volumes of natural gas transported. The average transportation rate was $0.82 per Mcf for the year ended December 31, 2003 as compared with $0.58 per Mcf for the prior year, an increase of $0.24 per Mcf. Average daily throughput volumes were 52.5
MMcf/d for the year ended December 31, 2003 as compared with 50.4 MMcf/d for the prior year, an increase of 2.1 MMcf/d. The increase in the average daily throughput volume was principally due to new wells connected to the Appalachian gathering system, partially
offset by the natural decline in production volumes from existing wells connected to the system.
Costs and Expenses.
Transportation and compression expenses increased to $2.4 million for the year ended December 31, 2003 as compared with $2.1 million for the prior year. This increase was primarily due to an increase in compressor expenses due to additional
compressors and higher lease rates for these compressors.
General and administrative expenses, including amounts reimbursed to affiliates, increased $0.2 million to $1.7 million for the year ended December 31, 2003 compared with $1.5 million for the prior year. This increase was mainly due to a $0.6 million increase in
allocations of compensation and benefits from Atlas
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America and its affiliates due to management time associated with potential acquisitions and public offerings, partially offset by a decline in professional fees associated with potential
acquisitions and public offerings.
Depreciation and amortization increased to $1.8 million for the year ended December 31, 2003 compared with $1.5 million for the prior year due principally to the increased asset base associated with pipeline extensions and compressor upgrades and purchases.
Minority interest in Atlas net income increased to $5.1 million for the year ended December 31, 2003 as compared with $2.5 million for the prior year. This $2.6 million increase was primarily due to an increase in Atlas' overall net income and an increase in the
number of outstanding limited partner units due to an additional equity offering in May 2003.
Liquidity and Capital Resources
General
Atlas' primary sources of liquidity are cash generated from operations and borrowings under its credit facility. Atlas' primary cash requirements, in addition to normal operating expenses, are for debt service, capital expenditures and quarterly distributions to its
unitholders and us, as general partner. In general, Atlas expects to fund:
•
cash distributions and maintenance capital expenditures through existing cash and cash flows from operating activities;
•
expansion capital expenditures and working capital deficits through the retention of cash and additional borrowings; and
•
debt principal payments through additional borrowings as they become due or by the issuance of additional common units.
At September 30, 2005, Atlas had $183.5 million of outstanding borrowings under its credit facility and $7.7 million of outstanding letters of credit which are not reflected as borrowings on our consolidated balance sheet, with $33.8 million of available borrowing
capacity. In addition to the availability under the credit facility, Atlas has a universal shelf registration statement on file with the Securities and Exchange Commission, which allows it to issue equity or debt securities, See "—Atlas' Shelf Registration Statement." At
September 30, 2005, we had a working capital deficit of $9.6 million compared with working capital of $27.9 million at December 31, 2004. This decrease was primarily due to the settlement of accounts receivable from affiliates and an increase in the current portion of
Atlas' net hedge liability between periods and is reflected in the change in fair-market value of its derivative instruments based on the subsequent increases in the price of natural gas after Atlas entered into the hedges. These price increases will be reflected in our consolidated
statements of income when the contracts settle.
Cash Flows
Nine Months Ended September
30, 2004 Compared with Nine Months Ended September
30, 2005.
Net cash provided by operating activities of $31.0 million for the nine months ended September 30, 2005 increased $21.5 million from $9.5 million for the first nine
months of 2004. The increase is derived principally from increases in cash provided by working capital of $13.4 million, net income of $4.1 million, minority interest in Atlas' net income of $3.9 million, depreciation and amortization of $6.4 million, and non-cash
compensation expense of $2.5 million, partially offset by a $8.6 million increase in cash distributions to Atlas' minority interest partners. The increase in cash provided by working capital between periods is mainly due to timing of settlement of accounts receivable due from
affiliates. The increases in net income, minority interest and depreciation and amortization were principally due to the contribution from the acquisitions of Spectrum in July 2004 and Elk City in April 2005. The increase in cash distributions to Atlas minority interest partners
was due to an increase in their limited partner units outstanding and the distribution amount per limited partner unit.
Net cash used in investing activities was $229.9 million for the nine months ended September 30, 2005, an increase of $84.2 million from $145.7 million for the first nine months of 2004. This increase was
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principally due to the acquisitions mentioned previously and a $30.1 million increase in capital expenditures. See further discussion of capital expenditures under "— Capital Requirements."
Net cash provided by financing activities was $192.7 million for the nine months ended September 30, 2005, an increase of $42.5 million from $150.2 million for the first nine months of 2004. This increase was principally due to a $69.3 million increase in net
borrowings under Atlas' credit facility, mainly to fund the acquisition of the Elk City assets, partially offset by the distribution to owners.
Year Ended December
31, 2003 Compared with Year Ended December
31, 2004.
Net cash provided by operating activities of $11.3 million for the year ended December 31, 2004 increased $6.7 million from $4.6 million for the prior year. The increase is derived
principally from increases in net income of $2.4 million, minority interest in Atlas net income of $5.9 million, depreciation and amortization of $2.7 million, and non-cash compensation expense of $0.7 million, partially offset by an increase in cash distributions to Atlas
minority interest partners of $4.4 million. The increases in net income, minority interest and depreciation and amortization were principally due to the acquisition of the Velma operations in July 2004. The increase in cash distributions to Atlas minority interest partners was due
to an increase in its limited partner units outstanding and its distribution amount per limited partner unit.
Net cash used in investing activities was $151.8 million for the year ended December 31, 2004, an increase of $142.6 million from $9.2 million for the prior year. This increase was principally due to the acquisition of the Velma operations in July 2004 and a $2.4
million increase in capital expenditures. See further discussion of capital expenditures under "—Capital Requirements."
Net cash provided by financing activities was $143.6 million for the year ended December 31, 2004, an increase of $125.9 million from $17.7 million for the prior year. This increase was principally due to $67.9 million of additional net proceeds received from Atlas'
sales of its common units and $60.7 million of net borrowings under its credit facility, mainly to fund the acquisition of the Velma operations.
Year Ended December
31, 2002 Compared with Year Ended December
31, 2003.
Net cash provided by operating activities of $4.6 million for the year ended December 31, 2003 increased $4.0 million from $0.6 million for the prior year. The increase is derived
principally from increases in net income of $1.7 million, minority interest in Atlas net income of $2.6 million, and an increase in cash provided by working capital of $1.0 million, partially offset by an increase in cash distributions to Atlas minority interest partners of $1.5
million. The increases in net income and minority interest were principally due to an increase in the Appalachian average transportation rate. The increase in cash distributions to Atlas minority interest partners was due to an increase in its limited partner units outstanding and
its distribution amount per limited partner unit.
Net cash used in investing activities was $9.2 million for the year ended December 31, 2003, an increase of $4.0 million from $5.2 million for the prior year. This increase was principally due to a $2.4 million increase in capital expenditures and $1.5 million of
deferred costs associated with pending acquisitions. See further discussion of capital expenditures under "—Capital Requirements."
Net cash provided by financing activities was $17.7 million for the year ended December 31, 2003, an increase of $13.4 million from $4.3 million for the prior year. This increase was principally due to $25.2 million of net proceeds received from Atlas' sale of
common units, partially offset by $10.9 million of net reductions of outstanding borrowings under Atlas' credit facility.
Capital Requirements
Atlas' operations require continual investment to upgrade or enhance existing operations and to ensure compliance with safety, operational, and environmental regulations. The capital requirements for Atlas' operations consist primarily of:
•
maintenance capital expenditures to maintain equipment reliability and safety and to address environmental regulations; and
•
expansion capital expenditures to acquire complementary assets and to expand the capacity of Atlas' existing operations.
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The following table summarizes maintenance and expansion capital expenditures, excluding amounts paid for acquisitions, for the periods presented (in thousands):
Years Ended December
31,
Nine Months Ended
September
30,
2002
2003
2004
2004
2005
Maintenance capital expenditures
$
170
$
3,109
$
1,516
$
844
$
1,110
Expansion capital expenditures
5,060
4,526
8,527
3,575
33,409
Total capital expenditures
$
5,230
$
7,635
$
10,043
$
4,419
$
34,519
Expansion capital expenditures increased to $33.4 million for the nine months ended September 30, 2005, due principally to expansions of the Velma and Elk City gathering systems and processing facilities to accommodate new wells drilled in Atlas' service areas. In
addition, expansion capital expenditures increased due to compressor upgrades and gathering system expansions in the Appalachian region. Maintenance capital expenditures for the nine months ended September 30, 2005 remained relatively consistent compared with the prior
year period. As of September 30, 2005, Atlas is committed to expend approximately $36.6 million on pipeline extensions, compressor station upgrades and processing facility upgrades, including $13.1 million related to the Sweetwater gas plant. We anticipate that Atlas'
expansion capital expenditures will continue to increase in the fourth quarter of 2005 compared with the prior year period as a result of an increase in the estimated number of well connections to Atlas' gathering systems.
Expansion capital expenditures were $8.5 million for the year ended December 31, 2004, an increase of $4.0 million compared with $4.5 million for the prior year due principally to expansions of the Velma gathering system and processing facilities to accommodate
new wells drilled in Atlas' service areas and compressor upgrades and gathering system expansions in the Appalachian region. Maintenance capital expenditures were $1.5 million for the year ended December 31, 2004, a decrease of $1.6 million compared with $3.1 million
for the prior year due principally to the purchase of Appalachian pipeline compressors in 2003 to replace units which were formerly leased.
Expansion capital expenditures declined slightly to $4.5 million for the year ended December 31, 2003 due to the timing of expenditures for well connections, compressor upgrades, and gathering system expansions in the Appalachian region. Maintenance capital
expenditures were $3.1 million for the year ended December 31, 2003, an increase of $2.9 million compared with the prior year due principally to the purchase of Appalachian pipeline compressors in 2003 to replace units which were formerly leased.
Atlas Partnership Distributions
Atlas' partnership agreement requires that Atlas distribute 100% of available cash to its partners within 45 days following the end of each calendar quarter in accordance with their respective percentage interests. Available cash consists generally of all of Atlas' cash
receipts, less cash disbursements and net additions to reserves, including any reserves required under debt instruments for future principal and interest payments.
Atlas Pipeline GP, as general partner, is granted discretion by Atlas' partnership agreement to establish, maintain and adjust reserves for future operating expenses, debt service, maintenance capital expenditures, rate refunds and distributions for the next four quarters.
These reserves are not restricted by magnitude, but only by type of future cash requirements with which they can be associated. When Atlas Pipeline GP determines Atlas' quarterly distributions, it considers current and expected reserve needs along with current and expected
cash flows to identify the appropriate sustainable distribution level.
Available cash is initially distributed 98% to Atlas' limited partners and 2.0% to its general partner. These distribution percentages are modified to provide for incentive distributions to be paid to Atlas Pipeline GP if quarterly distributions to limited partners exceed
specified targets. Incentive distributions are generally defined as all cash distributions paid to its general partner that are in excess of 2.0% of the aggregate amount of cash being distributed. Incentive distributions declared were $2.8 million and $5.7 million for the year ended
December 31, 2004 and for the nine months ended September 30, 2005, respectively.
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Contractual Obligations and Commercial Commitments
The following tables summarizes Atlas' contractual obligations and commercial commitments at September 30, 2005 (in thousands):
Payments due by period
Contractual cash obligations:
Total
Less than 1 year
1 - 3 Years
4 - 5 Years
After 5 years
Long-term debt (1)
$
183,645
$
63
$
82
$
183,500
$
—
Operating leases
3,663
1,948
1,427
288
—
Total contractual cash obligations
$
187,308
$
2,011
$
1,509
$
183,788
$
—
(1)
Not included in the table above are estimated interest payments calculated at the rates in effect at September 30, 2005: 2006 – $12.3 million; 2007 – $12.3 million; 2008 – $12.3 million; 2009 – $12.3 million; and 2010 – $6.6 million.
The operating leases represent lease commitments for compressors, office space, and office equipment with varying expiration dates. These commitments are routine and were made in the normal course of Atlas' business.
Amount of commitment expiration per period
Other commercial commitments:
Total
Less than 1 year
1 – 3 Years
4 – 5 Years
After 5 years
Standby letters of credit
$
7,692
$
7,667
$
25
$
—
$
—
Other commercial commitments
36,642
36,642
—
—
—
Total commercial commitments
$
44,334
$
44,309
$
25
$
—
$
—
Other commercial commitments relate to commitments to install new compressors and sales lines for new well hookups, and expenditures for pipeline extensions.
Atlas' Equity Offerings
On November 28, 2005, Atlas sold 2,700,000 of its common units in a public offering for gross proceeds of $113.4 million. In addition, pursuant to an option granted to the underwriters of the offering, Atlas sold 330,000 common units on December 27, 2005 for gross
proceeds of $13.9 million, or aggregate total gross proceeds of $127.3 million including the November 2005 offering. The sale of the units resulted in net proceeds of approximately $120.9 million, after estimated underwriting commissions and other transaction costs. Atlas
primarily utilized the net proceeds from the sale to repay a portion of the amounts due under its credit facility. Subsequent to this equity offering, Atlas Pipeline GP's ownership interest in Atlas was 14.8%, including its 2.0% general partner interest.
In June 2005, Atlas sold 2,300,000 common units in a public offering for total gross proceeds of $96.5 million. The units were issued under Atlas' previously filed shelf registration statement. The sale of the common units resulted in net proceeds of approximately $91.7
million, after underwriting commissions and other transaction costs. Atlas primarily utilized the net proceeds from the sale to repay a portion of the amounts due under its credit facility.
In July 2004, Atlas sold 2,100,000 common units in a public offering for total gross proceeds of $73.0 million. The units were issued under Atlas' Form S-3 shelf registration statement. The sale of the common units resulted in net proceeds of approximately $67.5
million, after underwriting commissions and other transaction costs. Atlas utilized the net proceeds from the sale primarily to repay a portion of the amounts due under its credit facility and to redeem preferred units issued in connection with the acquisition of Spectrum Field
Services, Inc. in July 2004 for $20.4 million.
In April 2004, Atlas sold 750,000 common units in a public offering for total gross proceeds of $27.0 million. The units were issued under Atlas' shelf registration statement. The sale of the common units resulted in net proceeds of approximately $25.2 million, after
underwriting commissions and other transaction
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costs. Atlas utilized the net proceeds from the sale primarily to repay a portion of the amounts due under its credit facility.
In May 2003, Atlas sold 1,092,500 common units in a public offering for total gross proceeds of $27.3 million. The units were issued under Atlas' shelf registration statement. The sale of the units resulted in net proceeds of approximately $25.2 million, after
underwriting commissions and other transaction costs. Atlas utilized the net proceeds from the sale primarily to repay a portion of the amounts due under its credit facility.
Atlas' Shelf Registration Statement
Atlas has an effective shelf registration statement with the Securities and Exchange Commission that permits it to periodically issue equity and debt securities for a total value of up to $500 million.  On November 28, 2005, Atlas sold 2,700,000 of its common units in a
public offering for gross proceeds of $113.4 million. In addition, pursuant to an option granted to the underwriters of the offering, Atlas sold 330,000 common units on December 27, 2005 for gross proceeds of $13.9 million, or aggregate total gross proceeds of $127.3 million
including the November 2005 offering. The sale of the units resulted in net proceeds of approximately $120.9 million, after estimated underwriting commissions and other transaction costs. Atlas primarily utilized the net proceeds from the sale to repay a portion of the amounts
due under its credit facility. Subsequent to this equity offering, Atlas Pipeline GP's ownership interest in Atlas was 14.8%, including its 2.0% general partner interest. As of December 31, 2005, $372.7 million remains available for issuance under the shelf registration statement.
However, the amount, type and timing of any offerings will depend upon, among other things, the funding requirements of Atlas, prevailing market conditions, and compliance with Atlas' credit facility covenants.
Atlas' Credit Facility
In April 2005, Atlas entered into a new $270.0 million credit facility with a syndicate of banks, which replaced its existing $135.0 million facility. The facility was comprised of a five-year $225.0 million revolving line of credit and a five-year $45.0 million term loan.
The term loan portion of the credit facility was repaid and retired from the net proceeds of the June 2005 equity offering. The revolving portion of the credit facility bears interest, at Atlas' option, at either (i) Adjusted LIBOR plus the applicable margin, as defined, or (ii) the
higher of the federal funds rate plus 0.5% or the Wachovia Bank prime rate (each plus the applicable margin). The weighted average interest rate on the outstanding credit facility borrowings at December 31, 2004 and September 30, 2005 was 7.0% and 6.6%, respectively.
Up to $10.0 million of the credit facility may be utilized for letters of credit, of which $2.2 million and $7.7 million was outstanding at December 31, 2004 and September 30, 2005, respectively. These outstanding letter of credit amounts were not reflected as borrowings on
our consolidated balance sheet. Borrowings under the credit facility are secured by a lien on and security interest in all of Atlas' property and that of its subsidiaries, and by the guaranty of each of Atlas' subsidiaries. The credit facility contains customary covenants, including
restrictions on Atlas' ability to incur additional indebtedness; make certain acquisitions, loans or investments; make distribution payments to its unitholders if an event of default exists; or enter into a merger or sale of assets, including the sale or transfer of interests in its
subsidiaries.
The events which constitute an event of default are also customary for loans of this size, including payment defaults, breaches of representations or covenants contained in the credit agreements, adverse judgments against Atlas in excess of a specified amount, and a
change of control of Atlas' general partner.
The credit facility requires Atlas
    to maintain a ratio of senior secured debt (as defined in the credit facility)
    to EBITDA (as defined in the credit facility) of not more than 6.0 to 1.0,
    reducing to 5.75 to 1.0 on March 31, 2006, 4.5 to 1.0 on June 30, 2006, and
    4.0 to 1.0  on September 30, 2006; a funded debt (as defined in the credit
    facility) to EBITDA ratio of not more than 6.0 to 1.0, reducing to 5.75 to
    1.0 on March 31, 2006 and to 4.5 to 1.0 on June 30, 2006; and an interest
    coverage ratio (as defined in the credit facility) of not less than
2.5 to 1.0, increasing to 3.0 to 1.0 on March 31, 2006. The credit facility defines
    EBITDA to include pro forma adjustments, acceptable to the administrator
    of the facility, following material acquisitions. The definition of EBITDA
    contained in the credit facility is substantially  similar to the definition
    of Adjusted
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EBITDA used in this prospectus, except that: (1) the credit facility definition of EBITDA includes net gain or loss on arbitration settlement, while the definition of Adjusted EBITDA excludes
net gain or loss on arbitration settlement as a non-recurring item, and (2) the credit facility definition of EBITDA includes EBITDA of NOARK only to the extent of cash distributions from
NOARK, while the definition of Adjusted EBITDA includes Atlas' percentage interest in NOARK's EBITDA. The ratios described above include only the operations of Atlas and its
subsidiaries, and exclude our operations and those of our subsidiaries that are not subsidiaries of Atlas. As of September 30, 2005, pro forma for the acquisition of NOARK, Atlas' ratio of senior
secured debt to EBITDA was 5.4 to 1.0, its funded debt ratio was 5.4 to 1.0 and its interest coverage ratio was 2.8 to 1.0
Atlas is unable to borrow under its credit facility to pay distributions of available cash to unitholders because such borrowings would not constitute "working capital borrowings" pursuant to its partnership agreement. Because Atlas will be unable to borrow money to
pay distributions unless it establishes a facility that meets the definition contained in its partnership agreement, Atlas' ability to pay a distribution in any quarter is solely dependent on its ability to generate sufficient operating surplus with respect to that quarter.
NOARK Notes
As of November 30, 2005, NOARK's subsidiary, NOARK Pipeline Finance, L.L.C., had outstanding $66.0 million in principal amount of 7.15% notes due in 2018. The notes are governed by an indenture dated June 1, 1998 for which UMB Bank, N.A. serves as
trustee. Interest on the notes is payable semi-annually, in cash, in arrears on June 1 and December 1 of each year. Liability under the notes was allocated severally 40% to Atlas Arkansas, as successor to Enogex, and 60% to Southwestern, and the parties are several guarantors
for their respective allocations.
The notes are subject to a semi-annual redemption in installments of $1.0 million each at a redemption price of 100% of the principal, plus accrued and unpaid interest. Additionally, at the option of either Enogex or Southwestern, notes in an aggregate principal amount
guaranteed by either company as of a particular payment date may be redeemed at such notes' redemption price plus a make-whole premium and unpaid interest accrued to that date by giving the trustee at least 60 days notice. As part of the NOARK acquisition, Enogex
agreed to redeem its portion of the notes as promptly as practicable after the closing, and at the closing it deposited cash sufficient to redeem the notes into an escrow account. The redemption of $26.4 million of the notes was completed on December 5, 2005. After the
redemption, $39.6 million of notes remain outstanding, for which Southwestern remains liable. Under the partnership agreement, payments on the notes will be made from amounts otherwise distributable to Southwestern and, if that amount is insufficient, Southwestern is
required to make a capital contribution to NOARK. NOARK distributes cash available for distribution to the partners, after amounts payable on their respective allocations of the notes, in accordance with their percentage interests.
Significant Announced Internal Growth Project
On October 19, 2005, Atlas announced plans to complete construction of a new natural gas processing plant in Beckham County, Oklahoma near its Prentiss treating facility, in the third quarter of 2006. The new plant, to be known as the Sweetwater gas plant, will be
scaled to 120 MMcf/d of processing capacity. The Sweetwater gas plant will be located west of Atlas' Elk City gas plant, and is being built to further access natural gas production actively being developed in western Oklahoma and the Texas panhandle. Along with the
Sweetwater gas plant, Atlas will construct a gathering system to be located primarily in western Oklahoma and in the Texas panhandle, more specifically, Beckham and Roger Mills counties in Oklahoma and Hemphill County, Texas. Atlas anticipates that construction of the
Sweetwater gas plant and associated gathering system will cost approximately $40.0 million and will generate cash flow of $8.0 million to $10.0 million annually.
Environmental Regulation
Atlas' operations are subject to stringent and complex federal, state and local environmental laws and regulations governing the release of regulated materials into the environment or otherwise relating to
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environmental protection or human health or safety. We believe that Atlas' operations and facilities are in substantial compliance with applicable environmental laws and regulations. Failure to
comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial requirements, and the issuance of injunctions
limiting or preventing some or all of our operations. Atlas has an ongoing environmental compliance program. However, risks of accidental leaks or spills are associated with the transportation
of natural gas. There can be no assurance that Atlas will not incur significant costs and liabilities relating to claims for damages to property, the environment, natural resources, or persons
resulting from the operation of its business. Moreover, it is possible that other developments, such as increasingly strict environmental laws and regulations and enforcement policies hereunder,
could result in increased costs and liabilities to Atlas.
Environmental laws and regulations have changed substantially and rapidly over the last 25 years, and we anticipate that there will be continuing changes. One trend in environmental regulation is to increase reporting obligations and place more restrictions and
limitations on activities, such as emissions of pollutants, generation and disposal of wastes and use, storage and handling of chemical substances, that may impact human health, the environment and/or endangered species. Increasingly strict environmental restrictions and
limitations have resulted in increased operating costs for Atlas and other similar businesses throughout the United States. It is possible that the costs of compliance with environmental laws and regulations may continue to increase. Atlas will attempt to anticipate future
regulatory requirements that might be imposed and to plan accordingly, but there can be no assurance that Atlas will identify and properly anticipate each such charge, or that its efforts will prevent material costs, if any, from arising.
Inflation and Changes in Prices
Inflation affects the operating expenses of Atlas' gathering systems. Increases in those expenses are not necessarily offset by increases in transportation fees that the gathering operations are able to charge. While we anticipate that inflation will affect Atlas' future
operating costs, we can not predict the timing or amounts of any such effects. In addition, the value of Atlas' gathering systems has been and will continue to be affected by changes in natural gas prices. Natural gas prices are subject to fluctuations which we are unable to
control or accurately predict.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires making estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of actual revenue and expenses during the reporting period. Although we and Atlas believe our estimates are reasonable, actual results could differ from those estimates. Changes in these estimates
could materially affect our and Atlas' financial position, results of operations or cash flows. Key estimates used by Atlas' management include estimates used to record revenue and expense accruals, depreciation and amortization, asset impairment and fair values of assets
acquired. We summarize our and Atlas' significant accounting policies in our consolidated financial statements included in this prospectus. The critical accounting policies that we have identified are discussed below.
Use of Estimates
The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities that exist at the date of our consolidated financial statements, as well as the reported amounts of revenue and expense during the reporting periods. Actual results could differ from those estimates.
The natural gas industry principally conducts its business by processing actual transactions at the end of the month following the month of delivery. Consequently, our most current month's financial results include estimated volumes and market prices. Differences
between estimated and actual amounts are recognized in the following month's financial results. We believe that the operating results presented for the year ended
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December 31, 2004 and the nine months ended September 30, 2005 represent actual results in all material respects (see Revenue Recognition accounting policy for further description).
Receivables
In evaluating the realizability of accounts receivable, Atlas performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer's current creditworthiness, as determined by its review of the customers' credit
information. Atlas extends credit on an unsecured basis to many of its energy customers. At December 31, 2004 and September 30, 2005, no allowance was recorded for uncollectible accounts receivable impairment.
Revenue Recognition
Revenue in the Appalachian segment is recognized at the time the natural gas is transported through the gathering systems. Under the terms of its natural gas gathering agreements with Atlas America and its affiliates, Atlas receives fees for gathering natural gas from
wells owned by Atlas America, by drilling investment partnerships sponsored by Atlas America or by independent third parties. The fees received for the gathering services are generally the greater of 16% of the gross sales price for gas produced from the wells, or $0.35 or
$0.40 per Mcf, depending on the ownership of the well. Substantially all gas gathering revenue is derived under this agreement. Fees for transportation services provided to independent third parties whose wells are connected to Atlas's Appalachian gathering systems are at
separately negotiated prices.
Revenue in the Mid-Continent segment is recognized at the time the natural gas is processed and the resulting residue gas and NGLs are sold. The majority of this revenue is based on POP and fixed-fee contracts. Under its POP purchasing arrangements, Atlas purchases
natural gas at the wellhead, processes the natural gas by extracting NGLs and removing impurities and sells the residue gas and NGLs at market-based prices, remitting to producers a contractually-determined percentage of the sale proceeds.
Atlas accrues unbilled revenue due to timing differences between the delivery of natural gas, NGLs and oil and the receipt of a delivery statement. This revenue is recorded based upon volumetric data from its records and management estimates of the related
transportation and compression fees which are, in turn, based upon applicable product prices (see Use of Estimates accounting policy for further description). Atlas had unbilled revenue at December 31, 2004 and September 30, 2005 of $15.3 million and $42.1 million,
respectively, included in accounts receivable and accounts receivable-affiliates within our consolidated balance sheets.
Intangible Assets
At September 30, 2005, Atlas had $12.4 million of intangible assets, net of accumulated amortization of $0.5 million, which was recorded in connection with natural gas gathering contracts assumed in consummated acquisitions. Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets," ("SFAS No. 142") requires that intangible assets with finite useful lives be amortized over their respective estimated useful lives. If an intangible asset has a finite useful life, but the precise length of that life is not
known, that intangible asset must be amortized over the best estimate of its useful life. At a minimum, Atlas will assess the useful lives and residual values of all intangible assets on an annual basis to determine if adjustments are required. Amortization expense on the
customer contract intangible assets, which have an estimated life of 12 years and are amortized on a straight-line basis, was $0.5 million for the nine months ended September 30, 2005. There was no amortization expense on intangible assets recorded during the nine months
ended September 30, 2004. Amortization expense related to intangible assets is estimated to be $1.1 million for each of the next five calendar years.
Goodwill
At December 31, 2004 and September 30, 2005, Atlas had $2.3 million and $80.2 million, respectively, of goodwill which was recognized in connection with consummated acquisitions. Atlas tests its goodwill for impairment at each year end by comparing fair values
to its carrying values. The evaluation of impairment under SFAS No. 142 requires the use of projections, estimates and assumptions as to the future performance
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of Atlas' operations, including anticipated future revenue, expected future operating costs and the discount factor used. Actual results could differ from projections, resulting in revisions to Atlas'
assumptions and, if required, recognition of an impairment loss. Atlas' test of goodwill at December 31, 2004 resulted in no impairment, and no impairment indicators have been noted as of
September 30, 2005. Atlas will continue to evaluate its goodwill at least annually and when impairment indicators arise, and will reflect the impairment of goodwill, if any, within its
consolidated statements of income in the period in which the impairment is indicated.
Depreciation and Amortization
Atlas calculates its depreciation based on the estimated useful lives and salvage values of its assets. However, factors such as usage, equipment failure, competition, regulation or environmental matters could cause it to change its estimates, thus impacting the future
calculation of depreciation and amortization.
Impairment of Assets
In accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," Atlas reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount
of long-lived assets may not be recoverable. Atlas determines if its long-lived assets are impaired by comparing the carrying amount of an asset or group of assets with the estimated undiscounted future cash flows associated with such asset or group of assets. If the carrying
amount is greater than the estimated undiscounted future cash flows, an impairment loss is recognized to reduce the carrying value to fair value. Atlas' operations are subject to numerous factors which could affect future cash flows which we discuss in "Risk Factors." Atlas
continuously monitors these factors and pursue alternative strategies to maintain or enhance cash flows associated with these assets; however, we cannot assure you that Atlas can mitigate the effects, if any, on future cash flows related to any changes in these factors.
Fair Value of Derivative Commodity Contracts
Atlas enters into certain financial swap and option instruments that are classified as cash flow hedges in accordance with SFAS No. 133. Atlas enters into these instruments to hedge its forecasted natural gas, NGLs and condensate sales against the variability in expected
future cash flows attributable to changes in market prices. The swap instruments are contractual agreements between counterparties to exchange obligations of money as the underlying natural gas, NGLs and condensate is sold. Under these swap agreements, Atlas receives a
fixed price and pays a floating price based on certain indices for the relevant contract period.
Atlas formally documents all relationships between hedging instruments and the items being hedged, including its risk management objective and strategy for undertaking the hedging transactions. This includes matching the natural gas futures and options contracts to the
forecasted transactions. Atlas assesses, both at the inception of the hedge and on an ongoing basis, whether the derivatives are effective in offsetting changes in the forecasted cash flow of hedged items. If it is determined that a derivative is not effective as a hedge or that it
has ceased to be an effective hedge due to the loss of correlation between the hedging instrument and the underlying commodity, Atlas will discontinue hedge accounting for the derivative and subsequent changes in fair value for the derivative will be recognized immediately
within its consolidated statements of income.
Atlas records derivatives on the consolidated balance sheet as assets or liabilities at fair value. For derivatives qualifying as hedges, Atlas recognizes the effective portion of changes in fair value in owners' equity as accumulated other comprehensive income (loss) and
reclassifies them to earnings as such transactions are settled. For non-qualifying derivatives and for the ineffective portion of qualifying derivatives, Atlas recognizes changes in fair value within the consolidated statements of income as they occur. At December 31, 2004 and
September 30, 2005, Atlas reflected net hedging liabilities on the consolidated balance sheets of $2.6 million and $46.7 million, respectively. Of the $46.4 million net loss in accumulated other comprehensive loss at September 30, 2005, Atlas will reclassify $22.7 million of
losses to the consolidated statements of income over the next twelve month period as these contracts expire, and $23.7 million will be reclassified in later periods if the fair values of the instruments remain at current market
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values. Actual amounts that will be reclassified will vary as a result of future price changes. Ineffective hedge gains or losses are recorded within the consolidated statements of income while the
hedge contract is open and may increase or decrease until settlement of the contract. Atlas recognized losses of $27,000 and $4.4 million for the nine months ended September 30, 2004 and
2005, respectively, within the consolidated statements of income related to the settlement of qualifying hedge instruments. Atlas also recognized losses of $0.7 million for the nine months ended
September 30, 2005 and 2004, within the consolidated statements of income related to the change in market value of non-qualifying or ineffective hedges.
A portion of Atlas' future natural gas sales is periodically hedged through the use of swaps and collar contracts. Realized gains and losses on the derivative instruments that are classified as effective hedges are reflected in the contract month being hedged as an
adjustment to revenue.
Volume Measurement
Atlas records amounts for natural gas gathering and transportation revenue, NGL transportation and processing revenue, natural gas sales and natural gas purchases, and the sale of production based on volumetric calculations. Variances resulting from such calculations
are inherent in Atlas' business.
New Accounting Standards
In May 2005, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 154, "Accounting Changes and Error Corrections" ("SFAS No. 154"). SFAS No. 154 requires retrospective application to prior periods'
financial statements for changes in accounting principle. It also requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding
adjustment be made to the opening balance of retained earnings for that period rather than being reported in an income statement. The statement will be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The
impact of SFAS No. 154 will depend on the nature and extent of any voluntary accounting changes and corrections of errors after the effective date, but we do not currently expect SFAS No. 154 to have a material impact on our financial position or results of operations.
In March 2005, the FASB issued FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations" ("FIN 47"), which will result in (a) more consistent recognition of liabilities relating to asset retirement obligations, (b) more information about
expected future cash outflows associated with those obligations, and (c) more information about investments in long-lived assets because additional asset retirement costs will be recognized as part of the carrying amounts of the assets. FIN 47 clarifies that the term conditional
asset retirement obligation as used in SFAS No. 143, "Accounting for Asset Retirement Obligations," refers to a legal obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be
within the control of the entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement. Uncertainty about the timing and (or) method of settlement of a conditional asset retirement
obligation should be factored into the measurement of the liability when sufficient information exists. FIN 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than
the end of fiscal years ending after December 15, 2005. Retrospective application of interim financial information is permitted but is not required. Early adoption of this interpretation is encouraged. Atlas does not expect FIN 47 to have a material impact on the consolidated
financial statements.
In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (R) (revised 2004), "Share-Based Payment" ("SFAS No. 123 (R)")  which is a revision of SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 (R)
supersedes Accounting Principles Board Opinion ("APB") No. 25, "Accounting for Stock Issued to Employees," and amends SFAS No. 95, "Statement of Cash Flows." Generally, the approach to accounting in Statement 123 (R) requires all share-based payments to
employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values. Currently, Atlas follows APB No. 25 and its interpretations, which allow for valuation of
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share-based payments to employees at their intrinsic values. Under this methodology, Atlas recognizes compensation expense for phantom units granted only if the current market price of the
underlying units exceeds the exercise price. SFAS No. 123 (R) is effective for us beginning January 1, 2006. Atlas does not expect SFAS No. 123 (R) to have a material impact on the
consolidated financial statements.
Quantitative and Qualitative Disclosures About Market Risk
The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. The term "market risk" refers to the risk of loss arising from adverse changes in interest rates and
natural gas, NGL and condensate prices. The disclosures are not meant to be precise indicators of expected future losses, but rather indicators of reasonably possible losses. This forward-looking information provides indicators of how we view and manage our ongoing market
risk exposures. All of our market risk sensitive instruments were entered into for purposes other than trading.
All of Atlas' assets and liabilities are denominated in U.S. dollars and, as a result, it does not have exposure to currency exchange risks.
Atlas is exposed to various market risks, principally fluctuating interest rates and changes in commodity prices. These risks can impact Atlas' results of operations, cash flows and financial position. Atlas manages these risks through regular operating and financing
activities and periodic use of derivative financial instruments. The following analysis presents the effect on Atlas' results of operations, cash flows and financial position as if the hypothetical changes in market risk factors occurred on September 30, 2005. Only the potential
impacts of hypothetical assumptions are analyzed. The analysis does not consider other possible effects that could impact Atlas' business.
Interest Rate Risk.
At September 30, 2005, Atlas had a $225.0 million revolving credit facility ($183.5 million outstanding) to fund the expansion of its existing gathering systems, acquire other natural gas gathering systems and fund working capital movements as
needed. The weighted average interest rate for these borrowings was 6.6% at September 30, 2005. Holding all other variables constant, a 1% change in interest rates would change interest expense by $1.8 million.
Commodity Price Risk.
Atlas is exposed to commodity prices as a result of being paid for certain services in the form of commodities rather than cash. For gathering services, Atlas receives fees for commodities from the producers to bring the raw natural gas from the
wellhead to the processing plant. For processing services, Atlas either receives fees or commodities as payment for these services, based on the type of contractual agreement. Based on the current portfolio of gas supply contracts, Atlas is long condensate, NGL and natural gas
positions. A 10% change in the average price of NGLs, natural gas and condensate Atlas processes and sells would result in a change to our 2005 consolidated annual income, excluding the effect of minority interests in Atlas net income, of approximately $2.1 million.
Atlas enters into certain financial swap and option instruments that are classified as cash flow hedges in accordance with SFAS No. 133. Atlas enters into these instruments to hedge its forecasted natural gas, NGLs and condensate sales against the variability in expected
future cash flows attributable to changes in market prices. The swap instruments are contractual agreements between counterparties to exchange obligations of money as the underlying natural gas, NGLs and condensate is sold. Under these swap agreements, Atlas receives a
fixed price and pays a floating price based on certain indices for the relevant contract period.
Atlas formally documents all relationships between hedging instruments and the items being hedged, including its risk management objective and strategy for undertaking the hedging transactions. This includes matching the natural gas futures and options contracts to the
forecasted transactions. Atlas assesses, both at the inception of the hedge and on an ongoing basis, whether the derivatives are effective in offsetting changes in the forecasted cash flow of hedged items. If it is determined that a derivative is not effective as a hedge or that it
has ceased to be an effective hedge due to the loss of correlation between the hedging instrument and the underlying commodity, Atlas will discontinue hedge accounting for the derivative and subsequent changes in fair value for the derivative will be recognized immediately
within our consolidated statements of income.
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Derivatives are recorded on the consolidated balance sheet as assets or liabilities at fair value. For derivatives qualifying as hedges, Atlas recognizes the effective portion of changes in fair value in owners' equity as accumulated other comprehensive income (loss) and
reclassifies them to earnings as such transactions are settled. For non-qualifying derivatives and for the ineffective portion of qualifying derivatives, Atlas recognizes changes in fair value within the consolidated statements of income as they occur. At December 31, 2004 and
September 30, 2005, Atlas reflected net hedging liabilities on its consolidated balance sheets of $2.6 million and $46.7 million, respectively. Of the $46.4 million net loss in accumulated other comprehensive income (loss) at September 30, 2005, Atlas will reclassify $22.7
million of losses to its consolidated statements of income over the next twelve month period as these contracts expire, and $23.7 million will be reclassified in later periods if the fair values of the instruments remain at current market values. Actual amounts that will be
reclassified will vary as a result of future price changes. Ineffective hedge gains or losses are recorded within Atlas' consolidated statements of income while the hedge contract is open and may increase or decrease until settlement of the contract. Atlas recognized losses of
$27,000 and $4.4 million for the nine months ended September 30, 2004 and 2005, respectively, within our consolidated statements of income related to the settlement of qualifying hedge instruments. Atlas also recognized losses of $0.7 million for the nine months ended
September 30, 2005 and 2004, within its consolidated statements of income related to the change in market value of non-qualifying or ineffective hedges.
A portion of Atlas' future natural gas sales is periodically hedged through the use of swaps and collar contracts. Realized gains and losses on the derivative instruments that are classified as effective hedges are reflected in the contract month being hedged as an
adjustment to revenue.
As of September 30, 2005, Atlas had the following NGLs, natural gas, and crude oil volumes hedged:
Natural Gas Liquids Fixed – Price Swaps
Twelve Months Ended September
30,
Volumes
Average fixed price
Fair value liability(1)
(gallons)
(per gallon)
(in thousands)
2006
38,586,000
$
0.673
$
(16,742
)
2007
38,115,000
0.711
(12,188
)
2008
34,587,000
0.702
(9,037
)
2009
7,434,000
0.697
(1,781
)
$
(39,748
)
Natural Gas Fixed – Price Swaps
Twelve Months Ended September
30,
Volumes
Average fixed price
Fair value liability(3)
(MMbtu)(2)
(per MMbtu)
(in thousands)
2006
3,923,000
$
7.169
$
(5,767
)
2007
1,560,000
7.210
(1,658
)
2008
510,000
7.262
(1,037
)
$
(8,462
)
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Natural Gas Basis Swaps
Twelve Months Ended September
30,
Volumes
Average fixed price
Fair value asset(3)
(MMbtu)(2)
(per MMbtu)
(in thousands)
2006
4,262,000
$
(0.517
)
$
1,376
2007
1,560,000
(0.522
)
1,584
2008
510,000
(0.544
)
1,383
$
4,343
Crude Oil Fixed – Price Swaps
Twelve Months Ended September
30,
Volumes
Average fixed price
Fair value liability(3)
(Bbls)
(per Bbl)
(in thousands)
2006
67,800
$
51.329
$
(1,056
)
2007
80,400
55.187
(844
)
2008
82,500
58.475
(414
)
$
(2,314
)
Crude Oil Options
Twelve Months Ended September
30,
Option type
Volumes
Average strike price
Fair value liability(3)
(Bbls)
(per Bbl)
(in thousands)
2006
Puts purchased
15,000
$
30.00
$
—
2006
Calls sold
15,000
34.25
(481
)
$
(481
)
Total net liability
$
(46,662
)
(1)
Fair value based upon management estimates, including forecasted forward NGL prices as a function of forward NYMEX natural gas and light crude prices.
(2)
MMbtu represents million British Thermal Units.
(3)
Fair value based on forward NYMEX natural gas and light crude prices, as applicable.
In Atlas' Appalachian operations, it is the beneficiary of natural gas gathering agreements with Atlas America under which Atlas receives gathering fees generally equal to a percentage, typically 16% of the selling price, of the natural gas it transports. Atlas is the
beneficiary of, and consults with Atlas America with respect to, the hedging program it has established for its Appalachian natural gas production that mitigates the risks of Atlas' percentage of proceeds agreement with it. Atlas does not currently engage in any interest rate or
foreign currency exchange rate transactions, and as a result, it does not have exposure to those types of derivative risks.
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BUSINESS
Atlas Pipeline Holdings, L.P.
Our cash generating assets consist of our interests in Atlas Pipeline Partners, L.P., a publicly traded Delaware limited partnership. Atlas is a midstream energy service provider engaged in the transmission, gathering and processing of natural gas in the Mid-Continent and
Appalachian regions. Our interests in Atlas will initially consist of a 100% ownership interest in the general partner of Atlas, Atlas Pipeline GP, which owns:
•
a 2.0% general partner interest in Atlas, which entitles it to receive 2.0% of the cash distributed by Atlas;
•
all of the incentive distribution rights in Atlas, which entitle it to receive increasing percentages, up to a maximum of 48.0%, of any cash distributed by Atlas as it reaches certain target distribution levels in excess of $0.42 per Atlas unit in any quarter; and
•
1,641,026 common units of Atlas, representing an approximate 12.8% limited partner interest in Atlas.
At Atlas' current quarterly distribution rate of $0.83 per common unit, aggregate quarterly cash distributions to us on all our interests in Atlas would be approximately $5.0 million. Based on this distribution, we expect that our initial quarterly distribution will be $0.225
per unit, or $0.90 per unit on an annualized basis.
Our primary objective is to increase our cash distributions to our unitholders through growth at Atlas. Atlas has grown through strategic acquisitions and internal growth projects. Since Atlas' initial public offering in January 2000, it has completed five acquisitions at an
aggregate cost of approximately $516.7 million. Atlas' business strategy is to create capital-efficient growth in distributable cash flow to maximize its distribution to its unitholders by, among other things, (1) maximizing cash flows from its existing businesses through
marketing of its services and facilities and controlling its operating costs; (2) continuing to increase the amount of its operating cash flow generated by long-term, fee-based contracts; (3) expanding its existing businesses through internal growth opportunities; (4) expanding its
operations through strategic acquisitions; and (5) maintaining a flexible capital structure based on a strong balance sheet by financing its growth through a balanced combination of debt and equity.
We intend to support Atlas in implementing its business strategy by assisting it in identifying, evaluating, and pursuing growth opportunities. In the future, we may also support the growth of Atlas through the use of our capital resources, which could involve loans or
capital contributions to Atlas to provide funding for the acquisition of a business or asset or for an internal growth project. We may also provide Atlas with other forms of credit support, such as guarantees related to financing a project or other types of support related to a
merger or acquisition transaction.
Atlas is required by its partnership
    agreement to distribute all of its cash on hand at the end of each quarter,
    less reserves established by its general partner in its sole discretion to
    provide for the proper conduct of Atlas' business or to provide for
    future distributions.  Atlas has increased the per unit quarterly cash distribution
    on its common units by approximately 48%, from the quarterly distribution
    of $0.56 per unit declared for the first quarter of 2003 to $0.83 per unit
    declared for the fourth quarter of 2005. The following graph shows,
for the period from the first quarter of 2003 through the fourth quarter of 2005:
    (i) Atlas' quarterly distributions per unit and (ii) total distributions
    by Atlas to us.
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While we, like Atlas, are structured as a limited partnership, our capital structure and cash distribution policy differ materially from those of Atlas. Most notably, our general partner does not have an economic interest in us and is not entitled to receive any distributions
from us, and our capital structure does not include incentive distribution rights. Therefore, all of our distributions are made on our common units, which is our only class of security outstanding.
Our ownership of Atlas' incentive distribution rights entitles us to receive an increasing percentage of cash distributed by Atlas as it reaches certain target distribution levels. The rights entitle us to receive the following:
•
13.0% of all cash distributed in a quarter after each Atlas unit has received $0.42 for that quarter;
•
23.0% of all cash distributed after each Atlas unit has received $0.52 for that quarter; and
•
48.0% of all cash distributed after each Atlas unit has received $0.60 for that quarter.
For the quarter ended December 31, 2005, Atlas declared a distribution of $0.83 per unit, which means we will receive 48.0% of the $0.23 incremental cash distribution per unit in excess of the maximum target distribution level of $0.60 per unit. Because the incentive
distribution rights currently participate at the maximum 48.0% target cash distribution level, future growth in distributions we receive from Atlas will not result from an increase in the target cash distribution level associated with the incentive distribution rights.
The graph set forth below demonstrates hypothetical cash distributions payable in respect of our interests in Atlas by showing the total cash allocated to us across an illustrative range of annualized cash distributions per unit made by Atlas. The graph illustrates the
impact to us of Atlas raising or lowering its distribution from the most recently declared distribution of $0.83 per common unit ($3.32 on an annualized basis), which will be paid on February 14, 2006. This information assumes:
•
Atlas has 12,549,266 total units outstanding, representing the number of units outstanding at December 31, 2005; and
•
through Atlas Pipeline GP, we own (i) 1,641,026 Atlas common units, representing an approximate 12.8% limited partner interest in Atlas, (ii) a 2.0% general partner interest in Atlas and (iii) all the incentive distribution rights.
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This information is presented for illustrative purposes only and is not intended to be a prediction of future performance and does not attempt to illustrate the impact of changes in our or Atlas' business, including changes that may result from changes in natural gas, NGL
and condensate prices, changes in economic conditions, the impact of any future acquisitions or expansion projects or the issuance of additional units by Atlas. In addition, the level of cash distributions we receive may be affected by the various risks associated with an
investment in us and the underlying business of Atlas. Please read "Risk Factors."
We intend to pay to our unitholders, on a quarterly basis, distributions equal to the cash we receive from Atlas, less certain reserves for expenses and other uses of cash, including:
•
our general and administrative expenses, including expenses we will incur as the result of being a public company;
•
capital contributions to maintain or increase our ownership interest in Atlas; and
•
reserves our general partner believes prudent to maintain for the proper conduct of our business or to provide for future distributions.
Based on Atlas' current quarterly distribution, the number of our units outstanding and our expected level of expenses and reserves that our general partner believes prudent to maintain, we expect that our initial quarterly distribution will be $0.225 per common unit, or
$0.90 per unit on an annualized basis. Due to our ownership of Atlas' incentive distribution rights, our cash flows are impacted by changes in Atlas' distributions to a greater extent than those of Atlas' common unitholders.
If Atlas is successful in implementing its business strategy and increasing distributions to its unitholders, we would generally expect to increase distributions to our unitholders, although the timing and amount of any such increased distributions will not necessarily be
comparable to the increased Atlas distributions. However, we cannot assure you that any distributions will be declared or paid. Please read "Cash Distribution Policy and Restrictions on Distributions."
Our common units and Atlas' common units are unlikely to trade in simple relation or proportion to one another. Instead, while the trading prices of our common units and Atlas' common units are likely to follow generally similar broad trends, the trading prices may
diverge because, among other things:
•
with respect to Atlas distributions, Atlas' common unitholders have a priority over the incentive distribution rights; and
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•
we participate in Atlas' managing general partner's distributions and the incentive distribution rights, and Atlas' common unitholders do not; and
•
we may in the future enter into other businesses separate from Atlas or any of its affiliates.
Atlas Pipeline Partners, L.P.
Overview
Atlas is a publicly-traded midstream energy services provider engaged in the transmission, gathering and processing of natural gas. Atlas conducts its business through two operating segments: its Mid-Continent operations and its Appalachian operations.
Through its Mid-Continent operations, Atlas owns and operates:
•
a 75% interest in a FERC-regulated, 565-mile interstate pipeline system, which we refer to as Ozark Gas Transmission, that extends from southeastern Oklahoma through Arkansas and into southeastern Missouri and which has throughput capacity of approximately 322
MMcf/d;
•
two natural gas processing plants with aggregate capacity of approximately 230 MMcf/d and one treating facility with a capacity of approximately 200 MMcf/d, all located in Oklahoma; and
•
1,765 miles of active natural gas gathering systems located in Oklahoma, Arkansas, northern Texas and the Texas panhandle, which transport gas from wells and central delivery points in the Mid-Continent region to Atlas' natural gas processing plants or Ozark Gas
Transmission.
Through its Appalachian operations, Atlas owns and operates 1,500 miles of active natural gas gathering systems located in eastern Ohio, western New York and western Pennsylvania. Through an omnibus agreement and other agreements between Atlas and Atlas
America, the parent of Atlas' general partner and our general partner and a leading sponsor of natural gas drilling investment partnerships in the Appalachian Basin, Atlas gathers substantially all of the natural gas for its Appalachian Basin operations from wells operated by
Atlas America. Among other things, the omnibus agreement requires Atlas America to connect wells it operates to Atlas' gathering systems that are located within 2,500 feet of Atlas' gathering systems. Atlas is also party to natural gas gathering agreements with Atlas America
under which Atlas receives gathering fees generally equal to a percentage, typically 16%, of the selling price of the natural gas it transports. These agreements are continuing obligations and have no specified term except that they will terminate if Atlas' general partner is
removed without cause.
Since Atlas' initial public offering in January 2000, Atlas has completed five acquisitions at an aggregate cost of approximately $516.7 million, including, most recently, the October 2005 acquisition of Atlas Arkansas Pipeline LLC, which owns a 75% interest in
NOARK, and the April 2005 acquisition of Elk City.
Both Atlas' Mid-Continent and Appalachian operations are located in areas of abundant and long-lived natural gas production and significant new drilling activity. The Ozark Gas Transmission system and Atlas' gathering systems are connected to approximately 6,250
central delivery points or wells, giving Atlas significant scale in its service areas. Atlas provides gathering and processing services to the wells connected to its systems, primarily under long-term contracts. Atlas provides fee-based, FERC-regulated transmission services through
Ozark Gas Transmission under both long-term and short-term contractual arrangements. Atlas intends to increase the portion of the transmission services provided under long-term contracts. As a result of the location and capacity of the Ozark Gas Transmission system and
Atlas' gathering and processing assets, Atlas believes that it is strategically positioned to capitalize on the significant increase in drilling activity in its service areas and the positive price differential across Ozark Gas Transmission, also known as basis spread. Atlas intends to
continue to expand its business through strategic acquisitions and internal growth projects, including its plan to construct the Sweetwater gas plant, that increase distributable cash flow per unit.
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The following table shows the pro forma gross margin for our operating units for the periods indicated:
Pro forma
Year ended December
31, 2004
Nine months ended September
30, 2005
(dollars in thousands)
Mid-Continent:
Velma and Elk City
$
43,294
51.2
%
$
37,757
53.0
%
NOARK
22,480
26.6
%
16,940
23.8
%
$
65,774
77.8
%
$
54,697
76.8
%
Appalachia
18,800
22.2
%
16,501
23.2
%
$
84,574
100.0
%
$
71,198
100.0
%
Please see "—Summary Historical Consolidated and Pro Forma Financial Data" for a definition of gross margin and a reconciliation of pro forma gross margin to our pro forma net income.
Recent Acquisitions
Acquisition of Atlas Arkansas and Controlling Interest in NOARK
On October 31, 2005, Atlas acquired from Enogex all of the outstanding equity of Atlas Arkansas for $165.3 million, including estimated related transaction costs, plus $10.2 million for working capital adjustments. Atlas Arkansas owns a 75% interest in NOARK, with
the remaining 25% interest being owned by Southwestern. Before the closing of this acquisition, Atlas Arkansas converted from an Oklahoma corporation into an Oklahoma limited liability company and changed its name from Enogex Arkansas Pipeline Company. The
NOARK acquisition further expands Atlas' activities in the Mid-Continent region and provides an additional source of fee-based cash flows from a FERC-regulated interstate pipeline system and an intrastate gas gathering system. NOARK's geographic position relative to
Atlas' other businesses and interconnections with major interstate pipelines also provides Atlas with internal growth opportunities. NOARK's principal assets include:
•
The Ozark Gas Transmission system, a 565-mile FERC-regulated interstate pipeline system which extends from southeast Oklahoma through Arkansas and into southeast Missouri and has a throughout capacity of approximately 322 MMcf/d. The system includes
approximately 30 supply and delivery interconnections and two compressor stations.
•
The Ozark Gas Gathering system, a 365-mile intrastate natural gas gathering system, located in eastern Oklahoma and western Arkansas, and 11 associated compressor stations.
Atlas financed the acquisition by borrowing under its senior secured credit facility. Atlas expects the NOARK acquisition to be immediately accretive to its distributable cash flow per unit.
Ozark Gas Transmission transports natural gas from receipt points in eastern Oklahoma and western Arkansas, where the Arkoma Basin is located, to interstate pipelines in northeastern and central Arkansas and to local distribution companies in Arkansas and Missouri.
Ozark Gas Gathering provides access to natural gas supplies that are then transported through Ozark Gas Transmission. Ozark Gas Transmission's revenue is comprised of FERC-regulated transmission fees that are based on firm transportation rates and, to the extent capacity is
available following the reservation of firm system capacity, interruptible transportation rates. The Ozark transmission and gathering systems transported an average of 163.9 MMcf/d during the nine months ended September 30, 2005, and 207.2 MMcf/d during October 2005.
Atlas' gas supply strategy in the Mid-Continent region is to establish long-term, value-oriented relationships with its producing customers. Atlas has long-standing relationships with many of its Mid-Continent customers which account for a substantial majority of Atlas'
gathering and processing throughput. The Mid-Continent region, one of the most prolific natural gas-producing regions in North America, has recently experienced a significant increase in oil and gas drilling activity driven by long-term projections of continued growth in U.S.
natural gas demand and the application of new drilling and
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production technologies. Atlas believes that the increased drilling activity in the Mid-Continent area, combined with the positive basis spread across Ozark Gas Transmission, will result in
increasing volumes gathered and transported on the Ozark Gas Gathering and Ozark Gas Transmission systems.
As part of the acquisition, Enogex agreed to redeem the 40% portion of NOARK's 7.15% notes due 2018 for which it is severally liable as guarantor as promptly as practicable after the closing. At the closing, Enogex deposited $32.2 million with UMB Bank, N.A., as
escrow agent, in order to fulfill this redemption obligation. The redemption of $26.4 million was completed on December 5, 2005. After the redemption, $39.6 million of notes remain outstanding for which Southwestern, the other partner in NOARK, will remain liable for the
remaining 60% portion of the 7.15% notes. Under the NOARK partnership agreement, payments on the notes will be made from amounts otherwise distributable to Southwestern and, if that amount is insufficient, Southwestern is required to make a capital contribution to
NOARK.
Acquisition of Elk City
In April 2005, Atlas acquired all of the outstanding equity interests in Elk City for $196.0 million, including transaction costs. Elk City's principal assets include approximately 300 miles of natural gas pipelines located in the Anadarko Basin in western Oklahoma and
the Texas panhandle, a natural gas processing facility in Elk City, Oklahoma, with a total capacity of approximately 130 MMcf/d, and a gas treating facility in Prentiss, Oklahoma, with a total capacity of approximately 200 MMcf/d. Gathered volumes averaged 242.3 MMcf/d
for the nine months ended September 30, 2005. The system connects to over 300 receipt points. The acquisition expanded the scale of Atlas' Mid-Continent operations and built upon its experience in processing and gathering. Atlas recently completed three new gathering and
compression projects in Elk City which have increased, and Atlas believes will continue to increase, gathered volumes and total gross margin. Atlas also plans to complete construction of a new natural gas processing facility in Oklahoma near its Prentiss treating facility in the
third quarter of 2006, which we refer to as the Sweetwater gas plant. The new plant will be scaled to 120 MMcf/d of processing capacity. Along with the Sweetwater gas plant, Atlas will construct a gathering system to be located primarily in western Oklahoma and in the
Texas panhandle, more specifically, Beckham and Roger Mills counties in Oklahoma and Hemphill County, Texas. Atlas anticipates that construction of the Sweetwater gas plant and associated gathering system will cost approximately $40.0 million and will generate cash flow
of $8.0 million to $10.0 million annually.
Business Strategy
Atlas' primary objective is to increase cash flow and achieve sustainable, profitable growth while maintaining a strong credit profile and financial flexibility by executing the following strategies:
•
Maximize cash flows from its existing businesses through efficient marketing of its services and facilities and control of its operating costs.
Atlas intends to continue to control its operating costs by efficiently managing its existing and acquired businesses and achieving
economies of scale. Atlas has additional capacity in its gathering systems and has, or can upgrade at minimal cost, the capacity at its processing and treating facilities. As a result Atlas can readily increase the amount of natural gas it transports and processes.
•
Continuing to increase the amount of its operating cash flow generated by long-term, fee-based contracts.
Atlas intends to continue to secure long-term, fee-based contracts both in its existing operations and through strategic acquisitions in order to further diversify its
contract mix.
•
Expanding existing businesses through organic growth opportunities.
Atlas continually evaluates opportunities to expand its operations through the construction of pipeline extensions to connect additional wells and access additional reserves. In addition, Atlas plans to
complete the Sweetwater gas plant, a 120 MMcf/d natural gas processing plant near its Prentiss treatment plant, by the third quarter of 2006. Atlas believes that its agreements with Atlas America present a favorable source of organic growth and that its competitive position
and customer relationships in the Mid-Continent region will continue to yield additional expansion opportunities.
•
Expand operations through strategic acquisitions.
Atlas' recent acquisitions have provided geographic diversification and expanded the midstream services it provides. Atlas intends to continue
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to make accretive acquisitions of midstream energy assets such as natural gas gathering systems and natural gas and NGL transmission, processing and storage facilities. Atlas will seek
strategic opportunities in its current areas of operation, as well as other regions of the United States with significant natural gas and oil reserves or with growing demand for natural gas
and oil. Atlas believes that there will continue to be attractive acquisition opportunities in the midstream sector of the energy industry.
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Maintain a flexible capital structure based on a strong balance sheet by financing its growth through a balanced combination of debt and equity.
To provide financial flexibility to fund future acquisition and expansion opportunities, Atlas intends to continue to
opportunistically access the capital markets. Atlas intends to maintain a strong balance sheet by financing growth with a combination of long-term debt and equity. Including Atlas' initial public offering in 2000, Atlas has accessed the equity markets six times, raising
approximately $370.6 million in gross proceeds. Atlas expects to have unused capacity under its revolving credit facility to finance system expansions, acquisitions and working capital needs. Historically, because of its financial flexibility, Atlas has been able to take
advantage of opportunities for expansion and optimization as they arise.
Competitive Strengths
Strategically positioned for internal growth.
Atlas is a leading provider of natural gas gathering services in the Appalachian and Anadarko Basins and the Arkoma Basin, and the Golden Trend area of Oklahoma and the Appalachian Basin and of natural gas processing services in Oklahoma. These regions are
characterized by long-lived wells and substantial developed and undeveloped natural gas reserves which Atlas believes will continue to promote significant drilling activity. Atlas provides gathering and processing services to over 6,250 wells and central delivery points. Atlas
expects the breadth of its operations in its service areas, its customer focus and its relationship with Atlas America will allow Atlas to continue to connect new wells and capture new natural gas volumes quickly and cost effectively. Additionally, the NOARK acquisition
increases its size and presence in the Mid-Continent region, including expanding Atlas' operations east into the Arkoma Basin.
Diversified asset base.
Atlas' operations are divided between the active Mid-Continent Basin, including Arkansas, Oklahoma, southern Missouri, northern Texas and the Texas panhandle, where Atlas transports, gathers, processes and treats third-party gas volumes, and the Appalachian Basin,
where Atlas accesses new volumes through long-term gathering agreements with Atlas America. In addition, Atlas' revenue is generated under a variety of contract structures, including FERC-regulated transmission fees from Ozark Gas Transmission, fixed fees from Atlas'
gathering and treating businesses, percentage-of-proceeds contracts from Atlas' gathering and processing businesses and, to a lesser extent, keep-whole contracts from Atlas' Elk City processing plant, which Atlas may bypass during periods of unfavorable processing margins.
Stability from long-term contracts and strong customer relationships.
Atlas' gas supply strategy in the Mid-Continent region is to establish long-term, value-oriented relationships with its producing customers. Atlas has long-standing relationships with many of its Mid-Continent customers which account for a substantial majority of our
gathering and processing throughput. Ozark Gas Transmission also has strong relationships with numerous shippers that contract for transmission services either on a short or long-term firm basis or interruptible basis. In addition, Atlas' Appalachian operations generate
substantially all of their volumes under a long-term omnibus agreement with Atlas America whereby Atlas America is required to commit to Atlas' gathering system all wells it drills and operates that are within 2,500 feet of the system. Wells under this agreement are
committed for the life of their respective leases, typically over 30 years.
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Relationship with Atlas America.
As a result of Atlas' agreements with Atlas America, Atlas believes that the growth in the number of wells drilled by Atlas America and its affiliates in the Appalachian Basin will serve as an engine for its growth in the region. Atlas connected 411 Atlas America wells
to its Appalachian gathering system for the twelve months ended September 30, 2005, and 1,508 Atlas America wells from its inception in January 2000 through September 30, 2005.
Efficient assets that offer low maintenance capital expenditure requirements, system flexibility and superior customer service.
Atlas' transmission, gathering and processing systems carry low maintenance capital expenditure needs. In addition, a significant portion of Atlas' existing gathering systems and processing plants are new or have been recently expanded or replaced. Atlas' gathering
systems provide its customers increased flexibility through low pressure service and multiple pipeline interconnections, and its willingness to expand its systems quickly provides its customers with superior customer service.
Favorable commercial agreements that reduce commodity price risk.
Atlas derives substantially all of the operating income from its gathering and processing operations from fee-based and percentage-of-proceeds arrangements. Atlas has hedged a significant amount of its near-term equity natural gas production and equity NGL production
from its processing operations, which it believes should reduce volatility in its operating income. Furthermore, Atlas can bypass its Elk City processing plant during periods of unfavorable processing margins. Substantially all of the operating income generated by NOARK's
transmission and gathering assets is generated under fixed-fee agreements. In its Appalachian operations, Atlas is the beneficiary of, and consults with Atlas America with respect to, the hedging program Atlas America has established for its Appalachian natural gas production
that mitigates the risks of Atlas' percentage-of-proceeds agreement with it.
Experienced management and engineering team.
Through Atlas' general partner, Atlas has significant management and technical expertise. Atlas' senior management team averages approximately 20 years of experience in the oil and natural gas industry and currently manages 91 public and private drilling investment
partnerships. Atlas' operational and technical expertise has enabled it to identify assets that have not been fully utilized and to improve their performance upon integration into Atlas' operations.
The Midstream Natural Gas Gathering, Processing and Transmission Industry
The midstream natural gas gathering and processing industry is characterized by regional competition based on the proximity of gathering systems and processing plants to producing natural gas wells.
The natural gas gathering process begins with the drilling of wells into natural gas or oil bearing rock formations. Once a well has been completed, the well is connected to a gathering system. Gathering systems generally consist of a network of small diameter pipelines
that collect natural gas from points near producing wells and transport it to larger pipelines for further transmission. Gathering systems are operated at design pressures that will maximize the total throughput from all connected wells.
While natural gas produced in some areas, such as the Appalachian Basin, does not require treatment or processing, natural gas produced in many other areas, such as Atlas' Velma service area, is not suitable for long-haul pipeline transmission or commercial use and
must be compressed, transported via pipeline to a central processing facility, and then processed to remove the heavier hydrocarbon components such as NGLs and other contaminants that would interfere with pipeline transmission or the end use of the gas. Natural gas
processing plants generally treat (remove carbon dioxide and hydrogen sulfide) and remove the NGLs, enabling the treated, "dry" gas (stripped of liquids) to meet pipeline specification for long-haul transport to end users. After being separated from natural gas at the
processing plant, the mixed NGL stream, commonly referred to as "y-grade" or "raw mix," is typically transported on pipelines to a centralized facility for
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fractionation into discrete NGL purity products: ethane, propane, normal butane, isobutane, and natural gasoline.
Natural gas transmission pipelines receive natural gas from producers, other mainline transmission pipelines, shippers and gathering systems through system interconnects and redeliver the natural gas to processing facilities, local gas distribution companies, industrial
end-users, utilities and other pipelines. Generally natural gas transmission agreements generate revenue for these systems based on a fee per unit of volume transported.
Mid-Continent Operations
Atlas owns and operates a 565-mile interstate natural gas pipeline, approximately 2,565 miles of intrastate natural gas gathering systems, including approximately 800 miles of inactive pipeline, located in Oklahoma, Arkansas, southeast Missouri, northern Texas and the
Texas panhandle, and two processing plants and one stand-alone treating facility in Oklahoma. The Mid-Continent operations were formed through Atlas' acquisition of Spectrum in July 2004 and expanded through the Elk City acquisition in April 2005 and the NOARK
acquisition in October 2005. Ozark Gas Transmission transports natural gas from receipt points in eastern Oklahoma, including major intrastate pipelines, and western Arkansas, where the Arkoma Basin is located, to local distribution companies in Arkansas and Missouri and to
interstate pipelines in northeastern and central Arkansas. Ozark Gas Gathering provides access to natural gas supplies that are then transported through Ozark Gas Transmission. Atlas' gathering and processing assets service long-lived natural gas basins that continue to
experience an increase in drilling activity, including the Anadarko Basin and the Arkoma Basin and the Golden Trend area of Oklahoma. Atlas' systems gather natural gas from oil and natural gas wells and process the raw natural gas into merchantable, or residue gas, by
extracting NGLs and removing impurities. In the aggregate, the Mid-Continent systems have approximately 1,160 receipt points, consisting primarily of individual connections and, secondarily, of central delivery points which are linked to multiple wells. Atlas' gathering
systems currently connect with interstate and intrastate pipelines operated by Ozark Gas Transmission, ONEOK Gas Transportation, LLC, Southern Star Central Gas Pipeline, Inc., Panhandle Eastern Pipe Line Company, LP, Northern Natural Gas Company, CenterPoint Energy,
Inc., ANR Pipeline Company, Texas Eastern, Mississippi River Transmission and Natural Gas Pipeline Company of America.
Mid-Continent Overview
The heart of the Mid-Continent region is generally defined as running from Kansas through Oklahoma, branching into North and West Texas, southeast New Mexico as well as western Arkansas. The primary producing areas in the region include the Hugoton field in
southwest Kansas, the Anadarko basin in western Oklahoma, the Permian basin in West Texas and the Arkoma basin in western Arkansas and eastern Oklahoma.
According to the Energy Information Administration, Oklahoma accounted for approximately 9.0% of total 2003 domestic natural gas production, or 1.6 Tcf. From 2000 to 2003, Oklahoma reserves, which were 15.4 Tcf at December 31, 2003, grew at an annual
compound growth rate of 4.0%, significantly higher than total domestic reserves which grew at a rate of 2.1%. From 2000 to 2004, natural gas production in Oklahoma has grown at a compound annual rate of 1.2% while domestic natural gas production as a whole decreased
at a compound annual rate of 0.5%.
The number of active drilling rigs serving Oklahoma has increased significantly over the last three years. In 2004, the number of active rigs drilling in Oklahoma averaged 159 or a 75% increase over 2002. The areas served by our Velma, Elk City and NOARK assets
have also experienced an increase in oil and natural gas development as evidenced by a growth in well completions in the counties that the Elk City system, Velma system and NOARK system serve. In 2004, well permits in Carter, Garvin, Grady, Stephens, Beckham and
Washita counties totaled 809, a 20% increase compared to 2002.
FERC-Regulated Transmission System
Atlas owns a 75% interest in NOARK, which owns a 565-mile FERC-regulated natural gas interstate pipeline extending from southeast Oklahoma through Arkansas and into southeast Missouri. Ozark Gas
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Transmission delivers natural gas via 30 supply and delivery interconnects with major intrastate and interstate pipelines, including Mississippi River Transmission Corp., Natural Gas Pipeline
Company of America and Texas Eastern Transmission Corp., and receives natural gas from eight interconnects with intrastate pipelines, including Enogex, BP's Vastar gathering system,
Arkansas Oklahoma Gas Corporation, Arkansas Western Gas Company and ONEOK Gas Transmission. Ozark Gas Transmission recently entered into a firm transportation agreement with
Southwestern Energy Services Company under which Southwestern Energy Services has reserved capacity for 15,000 MMbtu/d through October 31, 2006.
Mid-Continent Gathering Systems
Velma.
The Velma gathering system is located in the Golden Trend area of Southern Oklahoma and the Barnett Shale area of North Texas. As of September 30, 2005, the gathering system had approximately 1,100 miles of active pipeline with approximately 580
receipt points consisting primarily of individual connections and, secondarily, of central delivery points which are linked to multiple wells. The system includes approximately 800 miles of inactive pipeline, much of which can be returned to active status as local drilling
activity warrants.
Elk City.
The Elk City gathering system includes approximately 300 miles of natural gas pipelines located in the Anadarko Basin in western Oklahoma. The Elk City gathering system connects to over 300 receipt points, with a majority of the western end of the system
located in close proximity to areas of high drilling activity. Atlas recently completed three new gathering and compression projects which will increase gathered volumes and, Atlas believes, have a significant positive effect on our earnings.
NOARK Gas Gathering.
NOARK owns Ozark Gas Gathering, 365 miles of intrastate natural gas gathering pipeline located in eastern Oklahoma and western Arkansas, providing access to both the well-established Arkoma basin and the newly-exploited Fayetteville
Shale. This system connects to approximately 250 receipt points and compresses and transports gas to interconnections with Ozark Gas Transmission.
Processing Plants
Velma.
The Velma processing plant, located in Stephens County, Oklahoma, is a single-train twin-expander cryogenic facility with a natural gas capacity of approximately 100 MMcf/d. The Velma plant is one of only two facilities in the area that is capable of treating
both high-content hydrogen sulfide and carbon dioxide gas. Atlas sells natural gas to purchasers at the tailgate of the Velma plant and sells NGL production to ONEOK Hydrocarbons Company. The Velma operations gather and process natural gas for approximately 150
producers. Atlas has made capital expenditures at the facility to improve its efficiency and competitiveness, including by implementing electric-powered compressors rather than higher-cost natural gas-powered compressors used by many of Atlas' competitors, which results in
higher revenue from higher efficiency and lower fuel costs. In addition, Atlas recently completed a compression expansion project that increased processing capacity by 30 MMcf/d.
Elk City.
The Elk City processing plant, located in Beckham County, Oklahoma, is a twin-train cryogenic natural gas processing plant with a total capacity of approximately 130 MMcf/d. Atlas sells natural gas to purchasers at the tailgate of its Elk City processing
plant and sells NGL production to ONEOK Hydrocarbons Company. The Prentiss treating facility, also located in Beckham County, is an amine treating facility with a total capacity of approximately 200 MMcf/d. Atlas' Elk City operations gather and process gas for more than
135 producers.
Atlas plans to complete construction of the Sweetwater gas processing facility near its Prentiss treatment plant by mid-2006. The new plant will initially be scaled to 120 MMcf/d of processing capacity. Along with the plant, Atlas will construct a gathering system to be
located primarily in Beckham and Roger Mills counties in Oklahoma and Hemphill County, Texas. Atlas anticipates that construction of the plant and associated gathering system will cost approximately $40.0 million and generate cash flow of $8.0 million to $10.0 million
annually.
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Enville.
Atlas' Enville, Oklahoma gas plant is currently inactive and is used as a field compression booster station.
NOARK Partnership
NOARK is an Arkansas limited partnership in which Atlas Arkansas owns a 74% general partner interest and a 1% limited partner interest and Southwestern owns a 25% general partner interest. The current configuration of NOARK's assets was completed in 1998 when
Enogex acquired its interest in the partnership, which at that point owned Ozark Gas Gathering, and acquired Ozark Gas Transmission and certain Warren Petroleum gathering assets and contributed them to the partnership.
The partnership is managed by a five-member management committee comprised of the partnership's project leader appointed by Atlas Arkansas, subject to Southwestern's consent which cannot be unreasonably withheld, two members appointed by Atlas Arkansas and
two members appointed by Southwestern. The management committee determines whether to distribute cash, may issue mandatory capital calls to the partners and may conduct expansion projects. An expansion to the system not included in an approved budget requires an 80%
vote of the partners; if a partner does not consent to an expansion within 30 days, the other partner may fund the project and receive a cash distribution equal to all of the net operating income attributable to the project until it has received 200% of its capital contribution,
before the non-consenting partner receives distributions attributable to the project.
Under the partnership agreement, day-to-day management of the partnership's operations is the responsibility of the project leader, who will be an employee of Atlas America. Atlas Arkansas has the sole power to remove the project leader and, upon a vacancy in that
position, to propose a new project leader, subject to the consent of Southwestern, not to be unreasonably withheld.
As described under "—Acquisition of Atlas Arkansas and Controlling Interest in NOARK," NOARK's subsidiary, NOARK Pipeline Finance, L.L.C., has outstanding $66.0 million in principal amount of 7.15% notes due in 2018 outstanding at November 30, 2005.
Liability under the notes is allocated 40% to us, as successor to Enogex upon acquisition, and 60% to Southwestern, and the parties are several guarantors for their respective allocations. As part of the NOARK acquisition, Enogex agreed to redeem its portion of the notes as
promptly as practicable after the closing. The redemption of $26.4 million of the notes was completed on December 5, 2005. After the redemption, $39.6 million of notes remain outstanding, for which Southwestern will remain liable. Under the partnership agreement, interest
and principal payments on the notes will be made from amounts otherwise distributable to Southwestern and, if that amount is insufficient, Southwestern is required to make a capital contribution to NOARK. NOARK distributes cash available for distribution after amounts
payable on the notes to the partners in accordance with their percentage interests.
Natural Gas Supply
In the Mid-Continent, Atlas has gas purchase, gathering and processing agreements with approximately 250 producers with terms ranging from one month to 15 years. These agreements provide for the purchase or gathering of gas under fixed-fee, percentage-of-proceeds
or keep-whole arrangements. Most of the agreements provide for compression, treating, and/or low volume fees. Producers generally provide, in-kind, their proportionate share of compressor fuel required to gather the gas and to operate the Velma and Elk City processing
plants. In addition, the producers generally bear their proportionate share of gathering system line loss and, except for keep-whole arrangements, bear gas plant "shrinkage," or the gas consumed in the production of NGLs.
Atlas has enjoyed long-term relationships with the majority of its Mid-Continent producers. For instance, on the Velma system, where Atlas has producer relationships going back over 20 years, Atlas' top four producers, which accounted for approximately 60% of its
Velma volumes for the year ended December 31, 2004, have recently executed renegotiated contracts with primary terms running into 2009 and 2010. At the end of the primary terms, most of the contracts with producers on Atlas' gathering systems have evergreen term
extensions.
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Natural Gas and NGL Marketing
Atlas sells natural gas to purchasers at the tailgate of both the Velma and Elk City plants and at various delivery points on Ozark Gas Gathering. During the year ended December 31, 2004, in its Velma operations, ONEOK Energy Marketing and Trading accounted for
31% of the residue natural gas sales and Tenaska Marketing Ventures accounted for 12% of such sales. Atlas currently sells the majority of its residue natural gas at the average of ONEOK Gas Transportation, LLC and Southern Star Central Gas Pipeline first-of-month indices
as published in Inside FERC. The Velma plant has access to ONEOK Gas Transportation, an intrastate pipeline, and Southern Star Central Gas Pipeline, an interstate pipeline. In Atlas' Elk City operations, Atlas sells substantially all of the residue gas to ONEOK Energy
Marketing, at first-of-month index pricing. The Elk City plant has access to five major interstate and intrastate downstream pipelines: Natural Gas Pipe Line of America, Panhandle Eastern Pipeline Co., CenterPoint Energy Gas Transmission Company, Northern Natural Gas
Company and Enogex. Ozark Gas Gathering gas prices are generally based on Texas Eastern "East LA" index as published in Inside FERC and have historically been sold to affiliates of Enogex and Southwestern.
Atlas sells its NGL production to ONEOK Hydrocarbons Company under two separate agreements. Under the Velma agreement, Atlas has the right to elect on a monthly basis until January 31, 2006 whether the NGLs are sold into the Mont Belvieu or Conway
markets. After that, NGLs will be sold on a 50% Mont Belvieu/50% Conway combined price. NGLs are priced at the average monthly Oil Price Information Service, or OPIS, price for the selected market. The Velma agreement has an initial term expiring February 1, 2011.
NGL production from Atlas' Elk City plant is also sold to ONEOK Hydrocarbons Company based on Conway OPIS postings. The Elk City agreement has an initial term expiring October 1, 2008.
Condensate is collected at the Velma gas plant and around the Velma gathering system and sold for Atlas' account to SemGroup, L.P. and EnerWest Trading while that collected at Elk City is sold to TEPPCO Crude Oil, L.P.
Natural Gas and NGL Hedging
Atlas' Mid-Continent operations are exposed to certain commodity price risks. These risks result from either taking title to natural gas and NGLs, including condensate, or being obligated to purchase natural gas to satisfy contractual obligations with certain producers.
Atlas mitigates a portion of these risks through a comprehensive risk management program which employs a variety of hedging tools. The resulting combination of the underlying physical business and the financial risk management program is a conversion from a physical
environment that consists of floating prices to a risk-managed environment that is characterized by fixed prices.
Atlas (a) purchases natural gas and subsequently sells processed natural gas and the resulting NGLs, (b) purchases natural gas and subsequently sells the unprocessed gas, or (c) transports and/or processes the natural gas for a fee without taking title to the commodities.
Scenario (b) exposes Atlas to a generally neutral price risk (long sales approximate short purchases) while scenario (c) does not expose Atlas to any price risk; in both scenarios, risk management is not required.
Atlas is exposed to commodity price risks when natural gas is purchased for processing. The amount and character of this price risk is a function of Atlas' contractual relationships with natural gas producers, or, alternatively, a function of cost of sales. Atlas is therefore
exposed to price risk at a gross profit level rather than revenue level. These cost-of-sales or contractual relationships are generally of two types:
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Percentage-of-proceeds: requires Atlas to pay a percentage of revenue to the producer. This results in Atlas being net long physical natural gas and NGLs.
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Keep-whole: requires Atlas to deliver the same quantity of natural gas at the delivery point as Atlas received at the receipt point; any resulting NGLs produced belong to Atlas. This results in Atlas being long physical NGLs and short physical natural gas.
Atlas hedges a portion of these risks by using fixed-for-floating swaps, which result in a fixed price, or by utilizing the purchase or sale of options, which result in a range of fixed prices.
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Atlas recognizes gains and losses from the settlement of its hedges in revenue when Atlas sells the associated physical residue natural gas or NGLs. Any gain or loss realized as a result of hedging is substantially offset in the market when Atlas sells the physical residue
natural gas or NGLs. All of Atlas' hedges are characterized as cash flow hedges as defined in Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Accounting." Atlas determines gains or losses on open and closed
hedging transactions as the difference between the hedge price and the physical price. This mark-to-market methodology uses daily closing NYMEX prices when applicable and an internally-generated algorithm for hedged commodities that are not traded on a market. To
ensure that these financial instruments will be used solely for hedging price risks and not for speculative purposes, Atlas has established a hedging committee to review its hedges for compliance with Atlas' hedging policies and procedures. In addition, Atlas does not enter into
a hedge where it cannot offset the hedge with physical residue natural gas or NGL sales.
Appalachian Basin Operations
Atlas owns and operates approximately 1,500 miles of intrastate gas gathering systems located in eastern Ohio, western New York and western Pennsylvania. Atlas' Appalachian operations serve approximately 5,100 wells with an average throughput of 54.8 MMcf/d of
natural gas for the nine months ended September 30, 2005. Atlas' gathering systems provide a means through which well owners and operators can transport the natural gas produced by their wells to interstate and public utility pipelines for delivery to customers. To a lesser
extent, Atlas' gathering systems transport natural gas directly to customers. These gathering systems connect with public utility pipelines operated by Peoples Natural Gas Company, National Fuel Gas Supply, Tennessee Gas Pipeline Company, National Fuel Gas Distribution
Company, East Ohio Gas Company, Columbia Gas of Ohio, Consolidated Natural Gas Co., Texas Eastern Pipeline, Columbia Gas Transmission Corp., Equitrans Pipeline Company, Gatherco Incorporated and Equitable Utilities. These systems are strategically located in the
Appalachian Basin, a region characterized by long-lived, predictable natural gas reserves that are close to major eastern U.S. markets.
Appalachian Basin Overview
The Appalachian Basin includes the states of Kentucky, Maryland, New York, Ohio, Pennsylvania, Virginia, West Virginia and Tennessee. It is the most mature oil and gas producing region in the United States, having established the first oil production in 1859. In
addition, the Appalachian Basin is strategically located near the energy-consuming regions of the mid-Atlantic and northeastern United States which has historically resulted in Appalachian producers selling their natural gas at a premium to the benchmark price for natural gas
on the NYMEX.
According to the Energy Information Administration, a branch of the U.S. Department of Energy, in 2003 there were 22.4 Tcf of natural gas consumed in the United States which represented approximately 22.9% of the total energy used. The Appalachian Basin
accounted for approximately 3.3% of total 2003 domestic natural gas production, or 647.9 Bcf. Additionally, in 2003 there were approximately 145,189 gas wells in the Appalachian Basin which represented roughly 36.9% of the total number of gas wells in the United States.
Of those wells, Atlas America and its drilling investment partnerships own interests in approximately 5,755 proved developed producing wells, 84% of which Atlas America operated in 2004.
Furthermore, according to the Natural Gas Annual 2003, an annual report published by the Energy Information Administration, Office of Oil and Gas, the Appalachian Basin holds 10.9 Tcf of economically recoverable gas reserves, representing approximately 5.8% of
total domestic reserves as of December 31, 2003. World Oil magazine, in its February 2005 issue, predicted that approximately 5,316 oil and gas wells will be drilled in the Appalachian Basin during 2005, approximately 13.3% of the total number of wells they predict will be
drilled in the United States during 2005, and an increase of 8% over the number of Appalachian Basin wells estimated to have been drilled during 2004, compared to an increase of 7.2% in the wells drilled in the United States from 2004 to 2005.
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Natural Gas Supply
Substantially all of the natural gas Atlas transports in the Appalachian Basin is derived from wells operated by Atlas America, a leading sponsor of natural gas drilling investment partnerships in the Appalachian Basin. Atlas America is the corporate parent of Atlas'
general partner and our general partner. Atlas is party to an omnibus agreement with Atlas America which is intended to maximize the use and expansion of its gathering systems and the amount of natural gas which Atlas transports in the region. Among other things, the
omnibus agreement requires Atlas America to connect to Atlas' gathering systems wells it operates that are located within 2,500 feet of Atlas' gathering systems. Atlas America can require Atlas to extend its lines to connect an Atlas America-operated well located more than
2,500 feet from Atlas' gathering system if it extends a flow line to within 1,000 feet; for other Atlas America-operated wells located more than 2,500 feet from Atlas' gathering systems, Atlas has a right to extend its lines. Atlas is also party to natural gas gathering agreements
with Atlas America under which Atlas receives gathering fees generally equal to a percentage, typically 16%, of the selling price of the natural gas Atlas transports. From the inception of Atlas' operations in January 2000 through September 30, 2005, Atlas connected 2,040
new wells to its Appalachian gathering system, 433 of which were added through acquisitions of other gathering systems. For the three months ended September 30, 2005, Atlas connected 151 wells to its gathering system and for the 12 months ended September 30, 2005,
Atlas connected 442 wells. Atlas' ability to increase the flow of natural gas through its gathering systems and to offset the natural decline of the production already connected to its gathering systems will be determined primarily by the number of wells drilled by Atlas America
and connected to Atlas' gathering systems and by Atlas' ability to acquire additional gathering assets.
Natural Gas Revenue
Atlas' Appalachian Basin revenue is determined primarily by the amount of natural gas flowing through its gathering systems and the price received for this natural gas. Atlas has an agreement with Atlas America under which Atlas America pays Atlas gathering fees
generally equal to a percentage, typically 16%, of the gross or weighted average sales price of the natural gas Atlas transports subject, in most cases, to minimum prices of $0.35 or $0.40 per Mcf. During the year ended December 31, 2004, Atlas received gathering fees
averaging $0.96 per Mcf and for the nine months ended September 30, 2005, Atlas received gathering fees averaging $1.10 per Mcf. Atlas charges other operators fees negotiated at the time Atlas connects their wells to its gathering systems or, in a pipeline acquisition, that
were established by the entity from which Atlas acquired the pipeline.
Because Atlas does not buy or sell gas in connection with its Appalachian operations, Atlas does not engage in hedging. Atlas America maintains a hedging program. Since Atlas receives transportation fees from Atlas America generally based on the selling price
received by Atlas America, these physical hedges mitigate the risk of Atlas' percentage-of-proceeds arrangements.
Relationship with Atlas America
Atlas began its operations in January 2000 by acquiring the gathering systems of Atlas America. Atlas America, through its interest in us, will own a limited partner interest and general partner interest in Atlas after this offering through its ownership of our general
partner, Atlas Pipeline Holdings GP, LLC. Atlas America and its affiliates sponsor limited and general partnerships to raise funds from investors to explore for, develop and produce natural gas and, to a lesser extent, oil from locations in eastern Ohio, western New York and
western Pennsylvania. Atlas' gathering systems are connected to approximately 4,550 wells developed and operated by Atlas America in the Appalachian Basin. Through agreements between Atlas and Atlas America, Atlas gathers substantially all of the natural gas for its
Appalachian Basin operations from wells operated by Atlas America.
Omnibus Agreement
Under the omnibus agreement, Atlas America and its affiliates agreed to add wells to the gathering systems and provide consulting services when Atlas constructs new gathering systems or extends existing
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systems. The omnibus agreement also imposes conditions upon Atlas' general partner's disposition of its general partner interest in Atlas. The omnibus agreement is a continuing obligation,
having no specified term or provisions regarding termination except for a provision terminating the agreement if Atlas' general partner is removed as general partner without cause. The omnibus
agreement may not be amended without the approval of the conflicts committee of the managing board of Atlas' general partner if, in the reasonable discretion of Atlas' general partner, such
amendment will adversely affect the common unitholders. Unitholders do not have explicit rights to approve any termination or material modification of the omnibus agreement, as stated in the
accompanying prospectus under "Atlas' Partnership Agreement—Limited Voting Rights." We anticipate that the conflicts committee of Atlas would submit to the common unitholders for their
approval any proposal to terminate or amend the omnibus agreement if Atlas' general partner determines, in its reasonable discretion, that the termination or amendment would materially
adversely affect Atlas' common unitholders.
Well Connections
Under the omnibus agreement, with respect to any well Atlas America drills and operates for itself or an affiliate that is within 2,500 feet of one of our gathering systems, Atlas America must, at its sole cost and expense, construct small diameter (two inches or less)
sales or flow lines from the wellhead of any such well to a point of connection to the gathering system. Where an Atlas America Well is located more than 2,500 feet from one of Atlas' gathering systems, but Atlas America has extended the flow line from the well to within
1,000 feet of the gathering system, Atlas America has the right to require Atlas, at its cost and expense, to extend its gathering system to connect to that well. With respect to other Atlas America Wells that are more than 2,500 feet from Atlas' gathering systems, Atlas has the
right, at its cost and expense, to extend its gathering system to within 2,500 feet of the well and to require Atlas America, at its cost and expense, to construct up to 2,500 feet of flow line to connect to the gathering system extension. If Atlas elects not to exercise its right to
extend its gathering systems, Atlas America may connect an Atlas America Well to a natural gas gathering system owned by someone other than Atlas or one of Atlas' subsidiaries or to any other delivery point; however, Atlas will have the right to assume the cost of
construction of the necessary flow lines, which then become Atlas' property and part of Atlas' gathering systems.
Consulting Services.
The omnibus agreement requires Atlas America to assist Atlas in identifying existing gathering systems for possible acquisition and to provide consulting services to Atlas in evaluating and making a bid for these systems. Atlas America must give
Atlas notice of identification by Atlas America or any of its affiliates of any gathering system as a potential acquisition candidate, and must provide Atlas with information about the gathering system, its seller and the proposed sales price, as well as any other information or
analyses compiled by Atlas America with respect to the gathering system. Atlas will have 30 days to determine whether it wants to acquire the identified system and advise Atlas America of this intent. If Atlas intends to acquire the system, Atlas has an additional 60 days to
complete the acquisition. If Atlas does not complete the acquisition, or advise Atlas America that it does not intend to acquire the system, then Atlas America may do so.
Gathering System Construction.
The omnibus agreement requires Atlas America to provide Atlas with construction management services if Atlas determines to expand one or more of its gathering systems. Atlas must reimburse Atlas America for its costs, including an
allocable portion of employee salaries, in connection with Atlas America's construction management services.
Disposition of Interest in Our General Partner.
Direct and indirect wholly-owned subsidiaries of Atlas America act as the general partners, operators or managers of the drilling investment partnerships sponsored by Atlas America. Atlas' general partner is a subsidiary
of Atlas America. Under the omnibus agreement, those subsidiaries, including Atlas' general partner, that currently act as the general partners, operators or managers of partnerships sponsored by Atlas America must also act as the general partners, operators or managers for all
new drilling investment partnerships sponsored by Atlas America. Atlas America and its affiliates may not divest their ownership of Atlas' general partner entity without divesting their ownership of the other entities to the same acquirer, except that Atlas America is permitted
to transfer its interest in Atlas' general partner to a wholly- or majority-owned direct or indirect subsidiary as long as Atlas America continues to control the new entity. For these purposes, divestiture means a sale of all or substantially all of
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the assets of an entity, the disposition of more than 50% of the capital stock or equity interest of an entity, or a merger or consolidation that results in Atlas America and its affiliates, on a
combined basis, owning, directly or indirectly, less than 50% of the entity's capital stock or equity interest, but excludes pledges to a lender in connection with a secured funding arrangement.
Atlas' general partner has pledged its interests in Atlas as security for the revolving credit facility of Atlas America.
Natural Gas Gathering Agreements
Under the master natural gas gathering agreement, Atlas receives a fee from Atlas America for gathering natural gas, determined as follows:
•
for natural gas from well interests allocable to Atlas America or its affiliates (excluding general or limited partnerships sponsored by them) that were connected to Atlas' gathering systems at February 2, 2000, the greater of $0.40 per Mcf or 16% of the gross sales price of
the natural gas transported;
•
for (i) natural gas from well interests allocable to general and limited partnerships sponsored by Atlas America that drill wells on or after December 1, 1999 that are connected to Atlas' gathering systems, (ii) natural gas from well interests allocable to Atlas America or its
affiliates (excluding general or limited partnerships sponsored by them) that are connected to Atlas' gathering systems after February 2, 2000, and (iii) well interests allocable to third parties in wells connected to Atlas' gathering systems at February 2, 2000, the greater of
$0.35 per Mcf or 16% of the gross sales price of the natural gas transported; and
•
for natural gas from well interests operated by Atlas America and drilled after December 1, 1999 that are connected to a gathering system that is not owned by Atlas and for which Atlas assumes the cost of constructing the connection to that gathering system, an amount
equal to the greater of $0.35 per Mcf or 16% of the gross sales price of the natural gas transported, less the gathering fee charged by the other gathering system.
Atlas America receives gathering fees from contracts or other arrangements with third party owners of well interests connected to Atlas' gathering systems. However, Atlas America must pay gathering fees owed to Atlas from its own resources regardless of whether
Atlas America receives payment under those contracts or arrangements.
The master natural gas gathering agreement is a continuing obligation and, accordingly, has no specified term or provisions regarding termination. However, if Atlas' general partner is removed as the general partner without cause, then no gathering fees will be due
under the agreement with respect to new wells drilled by Atlas America.
The master natural gas gathering agreement may not be amended without the approval of the conflicts committee of the managing board of Atlas' general partner if, in the reasonable discretion of Atlas' general partner, such amendment will adversely affect the common
unitholders. Unitholders do not have explicit rights to approve any termination or material modification of the master natural gas gathering agreement, as stated in the accompanying prospectus under "Atlas' Partnership Agreement—Limited Voting Rights." Atlas anticipates
that the conflicts committee would submit to the common unitholders for their approval any proposal to terminate or amend the master natural gas gathering agreement if Atlas' general partner determines, in its reasonable discretion, that the termination or amendment would
materially adversely affect Atlas' common unitholders.
In addition to the master natural gas gathering agreement, Atlas has three other gas gathering agreements with subsidiaries of Atlas America. Under two of these agreements, relating to wells located in southeastern Ohio which Atlas America acquired from Kingston Oil
Corporation and wells located in Fayette County, Pennsylvania which Atlas America acquired from American Refining and Exploration Company, Atlas receives a fee of $0.80 per Mcf. Under the third agreement, which covers wells owned by third parties unrelated to Atlas
America or the investment partnerships it sponsors, Atlas receives fees that range between $0.20 to $0.29 per Mcf or between 10% to 16% of the weighted average sales price for the natural gas Atlas transports.
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Atlas recently amended the gas gathering agreements with Atlas America to provide that the "gross sales price," for purposes of the agreements, will mean the price that is actually received, adjusted to take into account proceeds received or payments made pursuant to
financial hedging arrangements.
Competition
Atlas has encountered competition in acquiring midstream assets owned by third parties. In several instances Atlas submitted bids in auction situations and in direct negotiations for the acquisition of such assets and were either outbid by others or were unwilling to meet
the sellers' expectations. In the future, Atlas expects to encounter equal if not greater competition for midstream assets because, as natural gas prices increase, the economic attractiveness of owning such assets increases.
Mid-Continent
In Atlas' Mid-Continent service area, Atlas competes for the acquisition of well connections with several other gathering/servicing operations. These operations include plants operated by Duke Energy Field Services, ONEOK Field Services and Enbridge. Atlas believes
that the principal factors upon which competition for new well connections is based are:
•
the price received by an operator for its production after deduction of allocable charges, principally the use of the natural gas to operate compressors; and
•
responsiveness to a well operator's needs, particularly the speed at which a new well is connected by the gatherer to its system.
Atlas believes that its electric compressors operate more efficiently than the gas-operated compressors used by its competitors. As a result, Atlas believes that it can operate as or more cost-effectively than its competitors. Atlas also believes that its relationships with
operators connected to its system are good and that Atlas presents an attractive alternative for producers. However, if Atlas cannot compete successfully, Atlas may be unable to obtain new well connections and, possibly, could lose wells already connected to its systems.
Being a regulated entity, Ozark Gas Transmission faces somewhat more indirect competition that is more regional or even national in character. CenterPoint Energy, Inc.'s interstate system is the nearest direct competitor.
Appalachian Basin
Atlas' Appalachian Basin operations do not encounter direct competition in their service areas since Atlas America controls the majority of the drillable acreage in each area. However, because Atlas' Appalachian Basin operations principally serve wells drilled by Atlas
America, Atlas is affected by competitive factors affecting Atlas America's ability to obtain properties and drill wells, which affects its ability to expand its gathering systems and to maintain or increase the volume of natural gas it transports and, thus, its transportation
revenue. Atlas America also may encounter competition in obtaining drilling services from third-party providers. Any competition it encounters could delay Atlas America in drilling wells for its sponsored partnerships, and thus delay the connection of wells to Atlas' gathering
systems. These delays would reduce the volume of gas Atlas otherwise would have transported, thus reducing Atlas' potential transportation revenue.
As Atlas' omnibus agreement with Atlas America generally requires it to connect wells it operates to Atlas' system, Atlas does not expect any direct competition in connecting wells drilled and operated by Atlas America in the future. In addition, Atlas occasionally
connects wells operated by third parties. During 2004, Atlas connected 17 third party wells and for the first nine months of 2005, Atlas connected 16 third party wells.
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Contracts and Customer Relationships
In Atlas' Mid-Continent operations, Atlas either purchases gas from producers, or intermediaries, into receipt points on its systems and then sells the gas, and produced NGLs, if any, off of delivery points on its systems, or Atlas transports gas across its systems, from
receipt to delivery point, without taking title to the gas. Beyond the distinction of purchasing or transporting gas, Atlas has a variety of contractual relationships with its producers and shippers, including fixed-fee, percentage-of-proceeds and keep-whole. Ozark Gas
Transmission's revenue is comprised of FERC-regulated transmission fees that are based on firm transportation rates and, to the extent capacity is available following the reservation of firm system capacity, interruptible transportation rates. Under the fixed fee contracts, Atlas
provides gathering, compression, treating and dehydration services to its customers for a flat fee. Gross margin from fee-based services depends solely on throughput volume and is not affected by changes in commodity prices. Under the percentage-of-proceeds contracts, Atlas
purchases natural gas at the wellhead, processes the natural gas and sells the plant residue gas and NGLs at market-based prices, remitting to producers a percentage of the proceeds. Under keep-whole contracts, Atlas gathers natural gas from the producer, processes the natural
gas and sells the resulting NGLs at market price. The extraction of the NGLs lowers the Btu content of the natural gas. Therefore, under keep-whole contracts, Atlas must replace these Btus by either purchasing natural gas at market prices or making a cash payment to the
producer and Atlas' profitability is dependent upon the spread between the price of natural gas, Atlas' feedstock, and NGLs, Atlas' "manufactured" product. The gross margin associated with each of these contractual arrangements can vary from period to period due to a
variety of factors, including changing prices of natural gas and NGLs, producers' optionality between contract types (e.g., percentage-of-proceeds and keep-whole), and producers' optionality between transporting and selling gas.
Substantially all of the gas Atlas transports in its Appalachian operations is under a percentage-of-proceeds contract with Atlas America where Atlas calculates its transportation fee as a percentage of the price of the natural gas it transports. The natural gas Atlas
transports in its Appalachian operations does not require processing.
Regulation
Regulation by FERC of Interstate Natural Gas Pipelines
FERC regulates Atlas' interstate natural gas pipeline interests. Through Atlas Arkansas, Atlas owns a 75% interest in NOARK, which owns Ozark Gas Transmission. Ozark Gas Transmission transports natural gas in interstate commerce. As a result, Ozark Gas
Transmission qualifies as a "natural gas company" under the Natural Gas Act and is subject to the regulatory jurisdiction of FERC. In general, FERC has authority over natural gas companies that provide natural gas pipeline transportation services in interstate commerce, and
its authority to regulate those services includes:
•
rate structures;
•
rates of return on equity;
•
recovery of costs;
•
the services that our regulated assets are permitted to perform;
•
the acquisition, construction and disposition of assets; and
•
to an extent, the level of competition in that regulated industry.
Under the Natural Gas Act, FERC has authority to regulate natural gas companies that provide natural gas pipeline transportation services in interstate commerce. Its authority to regulate those services includes the rates charged for the services, terms and conditions of
service, certification and construction of new facilities, the extension or abandonment of services and facilities, the maintenance of accounts and records, the acquisition and disposition of facilities, the initiation and discontinuation of services, and various other matters. Natural
gas companies may not charge rates that have been determined not to be just and reasonable
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by FERC. In addition, FERC prohibits natural gas companies from unduly preferring or unreasonably discriminating against any person with respect to pipeline rates or terms and conditions of
service.
The rates, terms and conditions of service provided by natural gas companies are required to be on file with FERC in FERC-approved tariffs. Pursuant to FERC's jurisdiction over rates, existing rates may be challenged by complaint and proposed rate increases may be
challenged by protest. We cannot assure you that FERC will continue to pursue its approach of pro-competitive policies as it considers matters such as pipeline rates and rules and policies that may affect rights of access to natural gas transportation capacity, transportation and
storage facilities. Any successful complaint or protest against Ozark Gas Transmission's FERC-approved rates could have an adverse impact on our revenue associated with providing transmission services.
Gathering Pipeline Regulation
Section 1(b) of the Natural Gas Act exempts natural gas gathering facilities from the jurisdiction of the FERC. Atlas owns a number of intrastate natural gas pipelines in New York, Pennsylvania, Ohio, Arkansas, Texas and Oklahoma that Atlas believes would meet the
traditional tests FERC has used to establish a pipeline's status as a gatherer not subject to FERC jurisdiction. However, the distinction between the FERC-regulated transmission services and federally unregulated gathering services is the subject of regular litigation, so the
classification and regulation of some of Atlas' gathering facilities may be subject to change based on future determinations by FERC and the courts.
In Ohio, a producer or gatherer of natural gas may file an application seeking exemption from regulation as a public utility, except for the continuing jurisdiction of the Public Utilities Commission of Ohio to inspect its gathering systems for public safety purposes.
Atlas' operating subsidiary has been granted an exemption by the Public Utilities Commission of Ohio for its Ohio facilities. The New York Public Service Commission imposes traditional public utility regulation on the transportation of natural gas by companies subject to its
regulation. This regulation includes rates, services and siting authority for the construction of certain facilities. Atlas' gas gathering operations currently are not subject to regulation by the New York Public Service Commission. Atlas' operations in Pennsylvania currently are
not subject to the Pennsylvania Public Utility Commission's regulatory authority since they do not provide service to the public generally and, accordingly, do not constitute the operation of a public utility. Similarly, Atlas' operations in Arkansas are not subject to regulatory
oversight by the Arkansas Public Service Commission. In the event the Arkansas, Ohio, New York or Pennsylvania authorities seek to regulate our operations, Atlas believes that its operating costs could increase and Atlas' transportation fees could be adversely affected,
thereby reducing Atlas' net revenue and ability to make distributions to unitholders.
Atlas is currently subject to state ratable take and common purchaser statutes in Texas and Oklahoma. The ratable take statutes generally require gatherers to take, without discrimination, natural gas production that may be tendered to the gatherer for handling. Similarly,
common purchaser statutes generally require gatherers to purchase without discrimination as to source of supply or producer. These statutes are designed to prohibit discrimination in favor of one producer over another producer or one source of supply over another source of
supply. These statutes have the effect of restricting Atlas' right as an owner of gathering facilities to decide with whom it contracts to purchase or transport natural gas.
The state of Oklahoma has adopted a complaint-based statute that allows the Oklahoma Corporation Commission to resolve grievances relating to natural gas gathering access and to remedy discriminatory rates for providing gathering service where the parties are unable
to agree. In a similar way, the Texas Railroad Commission sponsors a complaint procedure for resolving grievances about natural gas gathering access and rate discrimination. No such complaints have been made against Atlas' Mid-Continent operations to date in Oklahoma or
Texas.
Natural gas gathering may receive greater regulatory scrutiny at both the state and federal levels now that FERC has taken a less stringent approach to regulation of the gathering activities of interstate pipeline transmission companies and a number of such companies
have transferred gathering facilities to unregulated affiliates. For example, the Texas Railroad Commission has approved changes to its regulations governing transportation and gathering services performed by intrastate pipelines and gatherers, which prohibit such
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entities from unduly discriminating in favor of one customer over another. Atlas' gathering operations could be adversely affected should they be subject in the future to the application of state
or federal regulation of rates and services.
Atlas' gathering operations also may be or become subject to safety and operational regulations relating to the design, installation, testing, construction, operation, replacement and management of gathering facilities. Additional rules and legislation pertaining to these
matters are considered or adopted from time to time. Atlas cannot predict what effect, if any, such changes might have on its operations, but the industry could be required to incur additional capital expenditures and increased costs depending on future legislative and regulatory
changes.
Sales of Natural Gas
A portion of Atlas' revenue is tied to the price of natural gas. The price of natural gas is not currently subject to federal regulation and, for the most part, is not subject to state regulation. Sales of natural gas are affected by the availability, terms and cost of pipeline
transportation. As noted above, the price and terms of access to pipeline transportation are subject to extensive federal and state regulation. FERC is continually proposing and implementing new rules and regulations affecting those segments of the natural gas industry, most
notably interstate natural gas transmission companies that remain subject to FERC's jurisdiction. These initiatives also may affect the intrastate transportation of natural gas under certain circumstances. The stated purpose of many of these regulatory changes is to promote
competition among the various sectors of the natural gas industry, and these initiatives generally reflect more light-handed regulation. Atlas cannot predict the ultimate impact of these regulatory changes to its operations, and we note that some of FERC's more recent proposals
may adversely affect the availability and reliability of interruptible transportation service on interstate pipelines. Atlas does not believe that it will be affected by any such FERC action materially differently than other companies with whom it competes.
Energy Policy Act of 2005
On August 8, 2005, the Energy Policy Act of 2005 was signed into law. The Energy Policy Act contains numerous provisions relevant to the natural gas industry and to interstate pipelines in particular. Overall, the legislation attempts to increase supply sources by
engaging in various studies of the overall resource base and attempting to advantage deep water production on the Outer Continental Shelf in the Gulf of Mexico. However, the primary provisions of interest to Atlas' interstate pipelines focus in two areas: (1) infrastructure
development; and (2) market transparency and enhanced enforcement. Regarding infrastructure development, the Energy Policy Act includes provisions to clarify that FERC has exclusive jurisdiction over the siting of liquefied natural gas terminals; provides for market based
rates for new storage facilities placed into service after the date of enactment; shortens depreciable life for gathering facilities; statutorily designates FERC as the lead agency for federal authorizations and permits; creates a consolidated record for all federal decisions relating to
necessary authorizations and permits; and provides for expedited judicial review of any agency action and review by only the D.C. Circuit Court of Appeals of any alleged failure of a federal agency to act by a deadline set by FERC as lead agency. Such provisions, however,
do not apply to review and authorization under the Coastal Zone Management Act of 1972. Regarding market transparency and manipulation rules, the Natural Gas Act is amended to prohibit market manipulation and add provisions for FERC to prescribe rules designed to
encourage the public provision of data and reports regarding the price of natural gas in wholesale markets. The Natural Gas Act and the Natural Gas Policy Act are also amended to increase monetary criminal penalties to $1,000,000 from current law at $5,000 and to add and
increase civil penalty authority to be administered by FERC to $1,000,000 per day per violation without any limitation as to total amount.
Environmental Matters
The operation of pipelines, plant and other facilities for gathering, compressing, treating, processing, or transporting natural gas, natural gas liquids and other products is subject to stringent and complex laws and regulations pertaining to health, safety and the
environment. As an owner or operator of these facilities, Atlas must comply with these laws and regulations at the federal, state and local levels. These laws and regulations can restrict or impact Atlas' business activities in many ways, such as:
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•
restricting the way Atlas can handle or dispose of its wastes;
•
limiting or prohibiting construction and operating activities in sensitive areas such as wetlands, coastal regions, or areas inhabited by endangered species;
•
requiring remedial action to mitigate pollution conditions caused by its operations or attributable to former operators; and
•
enjoining some or all of the operations of facilities deemed in non-compliance with permits issued pursuant to such environmental laws and regulations.
Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial requirements, and the issuance of orders enjoining future operations. Certain environmental statutes impose strict,
joint and several liability for costs required to clean up and restore sites where substances or wastes have been disposed or otherwise released. Moreover, it is not uncommon for neighboring landowners and other third parties to file claims for personal injury and property
damage allegedly caused by the release of substances or wastes into the environment.
Atlas believes that its operations are in substantial compliance with applicable environmental laws and regulations and that compliance with existing federal, state and local environmental laws and regulations will not have a material adverse effect on Atlas' business,
financial position or results of operations. Nevertheless, the trend in environmental regulation is to place more restrictions and limitations on activities that may affect the environment. As a result, there can be no assurance as to the amount or timing of future expenditures for
environmental compliance or remediation, and actual future expenditures may be different from the amounts Atlas currently anticipates. Moreover, Atlas cannot assure you that future events, such as changes in existing laws, the promulgation of new laws, or the development or
discovery of new facts or conditions will not cause Atlas to incur significant costs.
Hazardous Waste
Atlas' operations generate wastes, including some hazardous wastes, that are subject to the federal Resource Conservation and Recovery Act, as amended, or RCRA, and comparable state laws, which impose detailed requirements for the handling, storage, treatment and
disposal of hazardous and solid waste. RCRA currently exempts many natural gas gathering and field processing wastes from classification as hazardous waste. Specifically, RCRA excludes from the definition of hazardous waste produced waters and other wastes associated
with the exploration, development, or production of crude oil and natural gas. However, these oil and gas exploration and production wastes may still be regulated under state law or the less stringent solid waste requirements of RCRA. Moreover, ordinary industrial wastes such
as paint wastes, waste solvents, laboratory wastes, and waste compressor oils may be regulated as hazardous waste. The transportation of natural gas in pipelines may also generate some hazardous wastes that are subject to RCRA or comparable state law requirements.
Site Remediation
The Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or CERCLA, also known as "Superfund," and comparable state laws impose liability, without regard to fault or the legality of the original conduct, on certain classes of
persons responsible for the release of hazardous substances into the environment. Such classes of persons include the current and past owners or operators of sites where a hazardous substance was released, and companies that disposed or arranged for disposal of hazardous
substances at offsite locations such as landfills. Although petroleum as well as natural gas is excluded from CERCLA's definition of "hazardous substance," in the course of Atlas' ordinary operations it will generate wastes that may fall within the definition of a "hazardous
substance." CERCLA authorizes the EPA and, in some cases, third parties to take actions in response to threats to the public health or the environment and to seek to recover from the responsible classes of persons the costs they incur. Under CERCLA, Atlas could be subject
to joint and several, strict liability for the costs of cleaning up and restoring sites where hazardous substances have been released, for damages to natural resources, and for the costs of certain health studies.
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Atlas currently owns or leases, and has in the past owned or leased, numerous properties that for many years have been used for the measurement, gathering, field compression and processing of natural gas. Although Atlas used operating and disposal practices that were
standard in the industry at the time, petroleum hydrocarbons or wastes may have been disposed of or released on or under the properties owned or leased by Atlas or on or under other locations where such substances have been taken for disposal. In fact, there is evidence that
petroleum spills or releases have occurred at some of the properties owned or leased by Atlas. In addition, some of these properties have been operated by third parties or by previous owners whose treatment and disposal or release of petroleum hydrocarbons or wastes was not
under Atlas' control. These properties and the substances disposed or released on them may be subject to CERCLA, RCRA and analogous state laws. Under such laws, Atlas could be required to remove previously disposed wastes (including waste disposed of by prior owners
or operators), remediate contaminated property (including groundwater contamination, whether from prior owners or operators or other historic activities or spills), or perform remedial closure operations to prevent future contamination.
Air Emissions
Atlas' operations are subject to the federal Clean Air Act, as amended, and comparable state laws and regulations. These laws and regulations regulate emissions of air pollutants from various industrial sources, including processing plants and compressor stations, and
also impose various monitoring and reporting requirements. Such laws and regulations may require that Atlas obtain pre-approval for the construction or modification of certain projects or facilities expected to produce air emissions or result in the increase of existing air
emissions, obtain and strictly comply with air permits containing various emissions and operational limitations, or utilize specific emission control technologies to limit emissions. Atlas' failure to comply with these requirements could subject Atlas to monetary penalties,
injunctions, conditions or restrictions on operations, and potentially criminal enforcement actions. Atlas likely will be required to incur certain capital expenditures in the future for air pollution control equipment in connection with obtaining and maintaining operating permits
and approvals for air emissions. Atlas believes, however, that its operations will not be materially adversely affected by such requirements, and the requirements are not expected to be any more burdensome to Atlas than to any other similarly situated companies.
Water Discharges
Atlas' operations are subject to the Federal Water Pollution Control Act of 1972, as amended, also known as the Clean Water Act, and analogous state laws and regulations. These laws and regulations impose detailed requirements and strict controls regarding the
discharge of pollutants into state and federal waters. The discharge of pollutants is prohibited unless authorized by a permit or other agency approval. The Clean Water Act and regulations implemented thereunder also prohibit discharges of dredged and fill material in wetlands
and other waters of the United States unless authorized by an appropriately issued permit. Any unpermitted release of pollutants from Atlas' pipelines or facilities could result in administrative, civil and criminal penalties as well as significant remedial obligations.
Pipeline Safety
Atlas' pipelines are subject to regulation by the U.S. Department of Transportation, or the DOT, under the Natural Gas Pipeline Safety Act of 1968, as amended, or the NGPSA, pursuant to which the DOT has established requirements relating to the design, installation,
testing, construction, operation, replacement and management of pipeline facilities. The NGPSA covers the pipeline transportation of natural gas and other gases, and the transportation and storage of liquefied natural gas and requires any entity that owns or operates pipeline
facilities to comply with the regulations under the NGPSA, to permit access to and allow copying of records and to make certain reports and provide information as required by the Secretary of Transportation. Atlas believes that its pipeline operations are in substantial
compliance with existing NGPSA requirements; however, due to the possibility of new or amended laws and regulations or reinterpretation of existing laws and regulations, future compliance with the NGPSA could result in increased costs.
The DOT, through the Office of Pipeline Safety, recently finalized a series of rules intended to require pipeline operators to develop integrity management programs for gas transmission pipelines that, in the event
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of a failure, could affect "high consequence areas." "High consequence areas" are currently defined as areas with specified population densities, buildings containing populations of limited
mobility, and areas where people gather that are located along the route of a pipeline. The Texas Railroad Commission, the Oklahoma Corporation Commission and other state agencies have
adopted similar regulations applicable to intrastate gathering and transmission lines. Compliance with these existing rules has not had a material adverse effect on Atlas' operations but there is
no assurance that this trend will continue in the future.
Employee Health and Safety
Atlas is subject to the requirements of the Occupational Safety and Health Act, as amended, referred to as OSHA, and comparable state laws that regulate the protection of the health and safety of workers. In addition, the OSHA hazard communication standard requires
that information be maintained about hazardous materials used or produced in Atlas' operations and that this information be provided to employees, state and local government authorities and citizens.
Hydrogen Sulfide
Exposure to gas containing high levels of hydrogen sulfide, referred to as sour gas, is harmful to humans, and prolonged exposure can result in death. The gas produced at Atlas' Velma gas plant contains high levels of hydrogen sulfide, and Atlas employs numerous
safety precautions at the system to ensure the safety of Atlas' employees. There are various federal and state environmental and safety requirements for handling sour gas, and Atlas is in substantial compliance with all such requirements.
Employees
As is commonly the case with publicly traded limited partnerships, Atlas does not directly employ any of the persons responsible for Atlas' management or operations. In general, employees of Atlas America manage Atlas' gathering systems and operate Atlas' business.
Our affiliates will conduct business and activities of their own in which Atlas will have no economic interest. If these separate activities are significantly greater than Atlas' activities, there could be material competition between them, us and our affiliates for the time and effort
of the officers and employees who provide services to us. Our officers who provide services to Atlas are not required to work full time on Atlas' affairs. These officers may devote significant time to the affairs of our affiliates and be compensated by these affiliates for the
services rendered to them. There may be significant conflicts between them and our affiliates regarding the availability of these officers to manage them.
Properties
As of December 31, 2004, Atlas' principal facilities in Appalachia include approximately 1,500 miles of 2 to 12 inch diameter pipeline. Atlas' principal facilities in the Mid-Continent area consist of three natural gas processing plants, one treating facility, and
approximately 3,130 miles of active and inactive 2-to-42 inch diameter pipeline. Substantially all of Atlas' gathering systems are constructed within rights-of-way granted by property owners named in the appropriate land records. In a few cases, property for gathering system
purposes was purchased in fee. All of Atlas' compressor stations are located on property owned in fee or on property obtained via long-term leases or surface easements.
Atlas' property or rights-of-way are subject to encumbrances, restrictions and other imperfections, although these imperfections have not interfered, and Atlas' general partner does not expect that they will materially interfere with the conduct of Atlas' business. In many
instances, lands over which rights-of-way have been obtained are subject to prior liens which have not been subordinated to the right-of-way grants. In a few instances, Atlas' rights-of-way are revocable at the election of the land owners. In some cases, not all of the owners
named in the appropriate land records have joined in the right-of-way grants, but in substantially all such cases signatures of the owners of majority interests have been obtained. Substantially all permits have been obtained from public authorities to cross over or under, or to
lay facilities in or along, water courses, county roads, municipal streets, and state highways, where necessary, although in some instances these permits are revocable at the election of the grantor. Substantially all permits have also been
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obtained from railroad companies to cross over or under lands or rights-of-way, many of which are also revocable at the grantor's election.
Certain of Atlas' rights to lay and maintain pipelines are derived from recorded gas well leases, for wells that are currently in production; however, the leases are subject to termination if the wells cease to produce. In some of these cases, the right to maintain existing
pipelines continues in perpetuity, even if the well associated with the lease ceases to be productive. In addition, because many of these leases affect wells at the end of lines, these rights-of-way will not be used for any other purpose once the related wells cease to produce.
Atlas rents 24,959 square feet of office space through November 2009 in Tulsa, Oklahoma for its Mid-Continent operations. For a description of Atlas' natural gas processing plants, see "—Our Mid-Continent Operations—Processing Plants."
Legal Proceedings
On March 9, 2004, the Oklahoma Tax Commission filed a petition against Spectrum alleging that Spectrum underpaid gross production taxes beginning in June 2000. The OTC is seeking a settlement of $5.0 million plus interest and penalties. Atlas plans on defending
itself vigorously. Atlas has asserted a claim for indemnification by Chevron under the provisions of Atlas' contract with it. Chevron has acknowledged Atlas' claim notice pursuant to which Chevron will be responsible for the payment of any underpayment of taxes, which
would be the basis for any monetary judgment against them, but Chevron will reserve the issues of payment of penalties and reimbursement of Atlas' attorneys fees and costs for determination by arbitration following the end of the litigation. In addition, under the terms of the
Spectrum purchase agreement, $14.0 million has been placed in escrow to cover the costs of any adverse settlement resulting from the petition and other indemnification obligations of the purchase agreement.
Atlas is not subject to any other pending legal proceedings.
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MANAGEMENT
Atlas Pipeline Holdings, L.P.
Directors and Officers of Atlas Pipeline Holdings GP, LLC
The following table sets forth certain information with respect to the executive officers and members of the board of directors of our general partner, Atlas Pipeline Holdings GP, LLC. Executive officers and directors will serve until their successors are duly appointed or
elected.
Name
Age
Position with general partner
Edward E. Cohen
66
Chairman of the Board and Chief Executive Officer
Jonathan Z. Cohen
35
Vice Chairman of the Board
Robert R. Firth
51
President
Matthew A. Jones
44
Chief Financial Officer
Lisa Washington
38
Chief Legal Officer and Secretary
Steven J. Doherty
45
Director
William G. Karis
57
Director
Harvey G. Magarick
66
Director
Edward E. Cohen
has been the Chairman of the Board of Directors and Chief Executive Officer of our general partner since its formation in January 2006. Mr. Cohen also has been Chairman of the Board of Directors and Chief Executive Officer of Atlas America
since its formation in 2000 and of Atlas since its formation in 1999. Mr. Cohen has been Chairman of the Board of Directors of Resource America, Inc. (NASDAQ: REXI), since 1990, and a director since 1988. Mr. Cohen served as Chief Executive Officer of Resource
America from 1988 to 2004 and President of Resource America from 2000 to 2003. He is Chairman of the Board of Directors of Brandywine Construction & Management, Inc., a property management company, and a director of TRM Corporation, a publicly traded consumer
services company, Mr. Cohen is the father of Jonathan Z. Cohen.
Jonathan Z. Cohen
has been the Vice Chairman of the Board of Directors of our general partner since January 2006. Mr. Cohen also has been the President of Resource America since 2003, Chief Executive Officer of Resource America since 2004 and a director since
2002. He was the Chief Operating Officer of Resource America from 2002 to 2004 and Executive Vice President of Resource America from 2001 until 2003. Before that, Mr. Cohen had been a Senior Vice President since 1999. Mr. Cohen has been Vice Chairman of Atlas
America since its formation in 2000 and Vice Chairman of Atlas since its formation in 1999. Mr. Cohen has also served as Trustee and Secretary of RAIT Investment Trust, a publicly-traded real estate investment trust, since 1997, Vice Chairman of RAIT since 2003 and
Chairman of the Board of Directors of The Richardson Company, a sales consulting company, since 1999. Mr. Cohen is a son of Edward E. Cohen.
Robert R. Firth
has been the President of our general partner since January 2006. Mr. Firth also has been the President and Chief Executive Officer of Spectrum (acquired by Atlas in July 2004 and now known as Atlas Pipeline Mid-Continent LLC) since 2002. Mr.
Firth has held positions with Northern Natural Gas, Panda Resources, Transok, CMS Energy and ScissorTail Energy over his 30 years in the midstream energy sector.
Matthew A. Jones
has been the Chief Financial Officer of our general partner since January 2006. Mr. Jones also has been Chief Financial Officer of Atlas and Atlas America since March 2005. Prior to that time, Mr. Jones was a Managing Director with the Energy
Investment Banking Group at Friedman Billings Ramsey. Before that, Mr. Jones had been associated with Friedman Billings Ramsey's Specialty Finance and Real Estate Group. Mr. Jones is a Chartered Financial Analyst.
Lisa Washington
has been the Chief Legal Officer and Secretary of our general partner since January 2006. Ms. Washington is also the Vice President, Chief Legal Officer and Secretary of Atlas and Atlas America. From 1999 to 2005, Ms. Washington was an attorney
in the business department of the law firm of Blank Rome LLP.
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Steven J. Doherty
has been a member of the Board of Directors of our general partner since January 2006. Mr. Doherty, a Chartered Financial Analyst, has been a Vice President and Client Portfolio Manager of Loomis Sayles & Co., since 1996 and was a Vice
President and Portfolio Manager of Loomis Sayles between 1996 and 1999. From 1986 to 1996, Mr. Doherty was a Senior Portfolio Manager of Howard Hughes Medical Institute. Mr. Doherty is on the Board of Advisors of the George Washington University School of
Business and Public Management.
William G. Karis
has been a member of the Board of Directors of our general partner since January 2006 and has been the principal of Karis and Associates, LLC, a consulting company that provides financial and consulting services to the coal industry, since 1997.
Prior to that, Mr. Karis was President and CEO of CONSOL Inc. (now CONSOL Energy Company). Mr. Karis is a member of the Boards of Directors and is Chairman of the Audit and Finance Committees of Blue Danube Inc., PinnOak Resources, LLC (formerly US Steel
Mining), and Greenbriar Minerals, LLC.
Harvey G. Magarick
has been a member of the Board of Directors of our general partner since January 2006 and has maintained his own consulting practice since June 2004. From 1997 to 2004, Mr. Magarick was a partner at BDO Seidman. Mr. Magarick is a
member of the Board of Trustees of the Hirtle Callaghan Trust, an investment fund, and has been the Chairman of its audit committee since 2004.
Other Significant Employees
Sean P. McGrath
, 34, has been the Chief Accounting Officer of our general partner since January 2006. Mr. McGrath also has been the Chief Accounting Officer of Atlas since May 2005. Before that, Mr. McGrath had been the Chief Accounting Officer of Sunoco
Logistics Partners L.P., a publicly-traded partnership that transports, terminals and stores refined products and crude oil, since 2002. From 1998 to 2002, Mr. McGrath was Assistant Controller of Asplundh Tree Expert Co., a utility services and vegetation management
company.
Daniel C. Herz
, 29, has been the Vice President of Corporate Development of our general partner since January 2006. Mr. Herz also has been an employee of Atlas and Atlas America since January 2004 and has served as Vice President of Corporate Development
since December 2004. Mr. Herz was an Associate Investment Banker with Banc of America Securities from 2002 to 2003 and an Analyst from 1999 to 2002.
Board Committees
Audit Committee
Our general partner's board of directors will establish an audit committee to be effective upon the closing of this offering. The three independent members of our general partner's board of directors will serve on the audit committee that will review our external financial
reporting, maintain responsibility for engaging our independent auditors and review procedures for internal auditing and the adequacy of our internal accounting controls. In addition to satisfying certain other requirements, the members of the audit committee must meet the
independence standards for an audit committee of a board of directors established by the NYSE. Upon completion of this offering, Messrs. Doherty, Karis and Magarick will be the members of the Audit Committee.
Conflicts Committee
Our general partner's board of directors will establish a conflicts committee to be effective upon the closing of this offering. Ultimately, at least two members of our general partner's board of directors will serve on the conflicts committee, which will be charged with
reviewing specific matters that our general partner's board of directors believes may involve conflicts of interest. The conflicts committee will determine if the resolution of any conflict of interest submitted to it is fair and reasonable to us. In addition to satisfying certain other
requirements, the members of the conflicts committee must meet the independence standards for a conflicts committee of a board of directors established by the NYSE. Any matters approved by the conflicts committee will be conclusively deemed to be fair and reasonable to
us, approved by all of our unitholders, and not a breach by us of any duties we may owe to our unitholders.
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Compensation Committee
Our general partner's board of directors will establish a compensation committee of at least two directors to be effective upon the closing of this offering. The compensation committee will oversee compensation decisions and benefits for the officers of our general
partner and will administer our Long-Term Incentive Plan described below.
Compensation for the officers of our general partner shall be determined by the independent directors constituting the compensation committee of Atlas America, the sole shareholder of our general partner and the employer of all of the officers. Charges to us (and hence
indirectly compensation of officers attributable to, and payable by, us) will be cleared with the conflicts committee of the board of directors of our general partner.
Executive Committee
Our general partner's board of directors will establish an executive committee of four directors to be effective upon the closing of this offering. The role of the executive committee, which will be chaired by the Vice Chairman of the Board of our general partner, is to
exercise all powers of our general partner's board of directors between board meetings when it is not practical or feasible for the full board to meet. Upon completion of this offering, Messrs. Edward E. Cohen, Jonathan Z. Cohen, Robert R. Firth and Matthew A. Jones will be
the members of the Executive Committee.
Other Committees
Our general partner's board of directors may establish other committees from time to time to facilitate our management.
Election of Our Directors
Our general partner's limited liability company agreement establishes a board of directors that will be responsible for the oversight of our business and operations. Our general partner's board of directors will be elected by a voting majority, as defined in the limited
liability company agreement.
Governance Matters
Independence of Board Members.
Our general partner is committed to having at least three independent directors on its board of directors. Pursuant to the NYSE listing standards, a director will be considered independent if the board determines that he or she does not
have a material relationship with our general partner or us (either directly or as a partner, unitholder or officer of an organization that has a material relationship with our general partner or us). The initial independent directors are Steven J. Doherty, William G. Karis and
Harvey G. Magarick. The independent members of the board of directors of our general partner will serve as the initial members of the audit and conflicts and compensation committees.
Heightened Independence for Audit and Conflicts Committee Members.
As required by the Sarbanes-Oxley Act of 2002, the Commission has adopted rules that direct national securities exchanges and associations to prohibit the listing of securities of a public company
if members of its audit committee do not satisfy a heightened independence standard. In order to meet this standard, a member of an audit committee may not receive any consulting fee, advisory fee or other compensation from the public company other than fees for service as
a director or committee member and may not be considered an affiliate of the public company. The board of directors of our general partner expects that all members of its audit and conflicts committee will satisfy this heightened independence requirement.
Audit Committee Financial Expert.
An audit committee plays an important role in promoting effective corporate governance, and it is imperative that members of an audit committee have requisite financial literacy and expertise. As required by the Sarbanes-Oxley Act
of 2002, Commission rules require that a public company disclose whether or not its audit committee has an "audit committee financial expert" as a member. An "audit committee financial expert" is defined as a person who, based on his or her experience, possesses all of the
following attributes:
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•
An understanding of generally accepted accounting principles and financial statements;
•
An ability to assess the general application of such principles in connection with the accounting for estimates, accruals, and reserves;
•
Experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and level of complexity of issues that can reasonably be expected to be raised by our
financial statements, or experience actively supervising one or more persons engaged in such activities;
•
An understanding of internal controls and procedures for financial reporting; and
•
An understanding of audit committee functions.
The board of directors of our general partner expects that one of the independent directors will satisfy the definition of "audit committee financial expert."
Code of Ethics.
The board of directors of our general partner will adopt a code of ethics, the "Code of Ethical Conduct for Senior Financial Officers and Managers," that applies to the chief executive officer, chief financial officer, principal accounting officer and
senior financial and other managers. In addition to other matters, this code of ethics will establish policies to prevent wrongdoing and to promote honest and ethical conduct, including ethical handling of actual and apparent conflicts of interest, compliance with applicable laws,
rules and regulations, full, fair, accurate, timely and understandable disclosure in public communications and prompt internal reporting violations of the code.
Web Access.
We
    will provide access through our website to current information relating to
    governance, including a copy of the Code of Ethical Conduct for Senior Financial
    Officers
    and Managers and other matters impacting our governance principles. You will
    be able  to contact our investor relations department for paper copies of
    these documents free of charge.
Compensation of Directors
Our general partner does not contemplate paying additional remuneration to officers or employees of Atlas America who also serve on the board of directors of our general partner. Each non-employee director will receive an annual retainer of $35,000 in cash and an
annual grant of phantom units with distribution equivalent rights in an amount equal to the lesser of 500 units or $15,000 worth of units (based upon the market price of our common units) pursuant to our Long-Term Incentive Plan. Please see "—Atlas Pipeline Holdings
Long-Term Incentive Plan" below. In addition, our general partner will reimburse each non-employee director for out-of-pocket expenses and indemnify our general partner's board of directors for actions associated with serving as directors to the extent permitted under
Delaware law.
Atlas Pipeline Holdings Long-Term Incentive Plan
Prior to the closing of this offering, we will adopt the Atlas Pipeline Holdings, L.P. Long-Term Incentive Plan for the employees, directors and consultants of our general partner and its affiliates, including Atlas, who perform services for us. The long-term incentive plan
will consist of phantom units, unit options and tandem distribution equivalent rights with respect to phantom units. Units with respect to awards forfeited, terminated or paid without the delivery of units are available for delivery pursuant to other awards. The long-term
incentive plan will be administered by the compensation committee of the board of directors of our general partner.
The board of directors of our general partner and the compensation committee of the board may terminate or amend the long-term incentive plan at any time with respect to any units for which a grant has not yet been made. Our board of directors and the compensation
committee of the board also have the right to alter or amend the long-term incentive plan or any part of the long-term incentive plan from time to time, including increasing the number of units that may be granted, subject to unitholder approval as may be required by the
exchange upon which the common units are listed at that time, if any. Subject to adjustment as provided in the long-term incentive plan documents, the aggregate number of our units that may be awarded to participants is 2,100,000. However, no change in any outstanding
grant may be made that would
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materially reduce the benefits of the participant without the consent of the participant. The long-term incentive plan will expire upon its termination by the board of directors or the compensation
committee or, if earlier, when no units remain available under the long-term incentive plan for awards. Upon termination of the long-term incentive plan, awards then outstanding will continue
pursuant to the terms of their grants.
Phantom Units.
A phantom unit entitles the grantee to receive a common unit upon the vesting of the phantom unit or, in the discretion of the compensation committee, cash equivalent to the value of a common unit. In the future, the compensation committee may
determine to make grants of phantom units under the plan to employees, consultants and directors containing such terms as the compensation committee determines. The compensation committee will determine the period over which phantom units granted to employees and
members of our board will vest. The committee, in its discretion, may base its determination upon the achievement of specified financial objectives or other events. In addition, the phantom units will vest upon a change in control. If a grantee's employment, consulting or
membership on the board of directors terminates for any reason, the grantee's phantom units will be automatically forfeited unless, and to the extent, the compensation committee or the terms of the award agreement provide otherwise.
Options.
An option entitles the grantee to receive a common unit upon payment of the exercise price for the option, which exercise price may be equal to or more than the fair market value of a common unit on the date of grant of the option. The compensation
committee will determine the directors, employees and consultants to whom options are granted, the number of options, their vesting provisions, exercise price and other terms and conditions.
Common units to be delivered upon the vesting of phantom units or the exercise of options may be common units acquired by us in the open market, common units acquired by us from any other person or any combination of the foregoing. If we issue new common
units upon vesting of the phantom units or the exercise of options, the total number of common units outstanding will increase.
We intend that the issuance of any common units upon vesting of the phantom units under the plan serve as a means of incentive compensation for performance and not primarily as an opportunity to participate in the equity appreciation of our common units. Therefore,
plan participants will not pay any consideration for the common units they receive, and we will receive no remuneration for the units.
U.S. Federal Income Tax Consequences of Awards Under the Long-Term Incentive Plan.
Generally, when phantom units or options are granted, there are no income tax consequences for the participant or us. Upon the payment to the participant of common units and/or
cash in respect of the vesting of phantom units or DERs or the exercise of units, the participant recognizes compensation equal to the fair market value of the cash and/or units as of the date of payment.
On October 22, 2004, the American Jobs Creation Act of 2004 (H.R. 4520) (the "AJCA") was signed into law by the President. The AJCA added a new Section 409A to the Internal Revenue Code ("Section 409A") which significantly alters the rules relating to the
taxation of deferred compensation. Section 409A broadly applies to deferred compensation and potentially results in additional tax to participants. The Department of Treasury and IRS have issued guidance and proposed regulations under Section 409A, however further
guidance is anticipated. Based on current guidance, the award of options to employees, consultants and directors of certain of our affiliates may be very limited in order to meet the requirements of Section 409A. However, we expect that we will be able to structure awards
under the plan in a manner that complies with Section 409A. Because we expect additional guidance to be issued under Section 409A, we may be required to alter provisions of the plan and future awards.
DERs.
A distribution equivalent right or DER is a right granted in the committee's discretion with respect to a phantom unit that entitles the grantee to receive cash equal to the cash distributed on a common unit on such terms and conditions as the committee may
proscribe.
Compensation Committee Interlocks and Insider Participation
While certain of our executive officers and directors serve in such roles with Atlas America and the general partner of Atlas, none of our executive officers serves as a member of the board of directors or
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compensation committee of any entity that has one or more of its executive officers serving as a member of the board of directors or compensation committee of our general partner.
Atlas Pipeline Partners, L.P.
Managing Board Members, Executive Officers and Other Significant Employers of Atlas Pipeline Partners
The following table sets forth certain
    information with respect to the executive officers and members of the managing
    board of Atlas Pipeline Partners GP, LLC. Executive officers and directors
  will serve until their successors are duly appointed or elected.
Name
Age
Position with general partner
Year in which service began
Edward E. Cohen
66
Chairman of the Managing Board and Chief Executive Officer
1999
Jonathan Z. Cohen
35
Vice Chairman of the Managing Board
1999
Michael L. Staines
56
President, Chief Operating Officer and Managing Board Member
1999
Matthew A. Jones
44
Chief Financial Officer
2005
Tony C. Banks
51
Managing Board Member
1999
Curtis D. Clifford
63
Managing Board Member
2004
Gayle P.W. Jackson
59
Managing Board Member
2005
Martin Rudolph
59
Managing Board Member
2005
As described above, some of the managing board members, executive officers and other significant employees of our general partner, Atlas Pipeline Holdings GP, LLC, also serve as directors, executive officers and other significant employees of Atlas' general partner.
To the extent that we have described the business experience of these individuals above, we have not repeated that information below.
Michael L. Staines
has been an Executive Vice President of Atlas America since its formation. Mr. Staines is also the President and Chief Operating Officer of Atlas. Mr. Staines was Senior Vice President of Resource America from 1989 to 2004 and served as a
director from 1989 through 2000 and Secretary from 1989 through 1998. Mr. Staines is a member of the Ohio Oil and Gas Association, the Independent Oil and Gas Association of New York and the Independent Petroleum Association of America.
Tony C. Banks
is a Vice President of First Energy Solutions, Inc., a subsidiary of First Energy Corp., a public utility, since 2005. Mr. Banks is responsible for unregulated sales of electricity and energy-related products and services. Mr. Banks was previously the
Director of Marketing for First Energy Solutions. Before that, Mr. Banks was a consultant to utilities, energy service companies and energy technology firms. From 2000 through 2002, Mr. Banks was President of RAI Ventures, Inc. and Chairman of the Board of Optiron
Corporation, which was an energy technology subsidiary of Atlas America until 2002. In addition, Mr. Banks served as President of our general partner during 2000. He was Chief Executive Officer and President of Atlas America from 1998 through 2000.
Curtis D. Clifford
has been the principal of CL4D CO, an energy consulting, marketing and reporting firm since 1998. Mr. Clifford has 39 years' experience in the natural gas industry, from exploration, production and gathering to procurement, marketing and
consulting. He has been president of Amity Manor, Inc. since 1988 when he founded the company to develop housing for low-income elderly using tax credit financing. Mr. Clifford is a registered professional engineer in Pennsylvania.
Gayle P.W. Jackson
has been President of Energy Global, Inc., a consulting firm which specializes in corporate development, diversification and government relations strategies for energy companies, since 2004. From 2001 to 2004, Dr. Jackson served as Managing
Director of FE Clean Energy Group, a global private equity management firm that invests in energy companies and projects in Central and Eastern Europe, Latin America and Asia. From 1985 to 2001, Dr. Jackson was President of Gayle P.W. Jackson, Inc., a consulting firm
that advised energy companies on corporate development and diversification strategies and also advised national and international governmental institutions on energy policy. Dr. Jackson has been Deputy Chairman
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of the Federal Reserve Bank of St.
    Louis since 2003 and a Board member since 2000, and is a member of the Board
    of Directors of Ameren Corporation, a publicly-traded public utility holding
company.
Martin Rudolph
has been the Trustee of the AHP Settlement Trust, a $5 billion trust established to process litigation claims, since 2005. Before that, Mr. Rudolph was the director of tax planning, research and compliance for RSM McGladrey, Inc., a business services
firm from 2001 to 2005. From 1990 to 2001, he was a Managing Partner of Rudolph, Palitz LLC, which was merged with RSM McGladrey. Mr. Rudolph is a certified public accountant.
Other Significant Employees
David D. Hall, 48
, has been the Executive Vice President and Chief Financial Officer of Spectrum (acquired by Atlas in July 2004 and now known as Atlas Pipeline Mid-Continent LLC) since 2002. From 2000 to 2002, Mr. Hall served as a senior business analyst at
ScissorTail Energy. Mr. Hall has more than 25 years experience as a financial executive in the energy industry.
Messrs. Firth, McGrath and Herz and Ms. Washington also are significant employees of Atlas Pipeline Partners GP, LLC.
Reimbursement of Expenses of Atlas' General Partner and its Affiliates
Atlas does not directly employ any persons to manage or operate its business. These functions are provided by Atlas' general partner and employees of Atlas America. Atlas' general partner does not receive a management fee in connection with its management of Atlas
apart from its interest as general partner and its right to receive incentive distributions.
Atlas reimburses its general partner and its affiliates for compensation and benefits related to their executive officers, based upon an estimate of the time spent by such persons on activities for Atlas. Other indirect costs, such as rent for offices, are allocated to Atlas by
Atlas America based on the number of Atlas America employees who devote substantially all of their time to activities on Atlas' behalf. Atlas reimburses Atlas America at cost for direct costs incurred by them on Atlas' behalf.
Atlas' partnership agreement provides that its general partner will determine the costs and expenses that are allocable to Atlas in any reasonable manner determined by its general partner at its sole discretion. Atlas reimbursed its general partner and its affiliates $0.7
million and $1.4 million for the nine months ended September 30, 2004 and 2005, respectively, for compensation and benefits related to its executive officers. Direct reimbursements were $7.2 million and $17.1 million for the nine months ended September 30, 2004 and
2005, respectively, including certain costs that have been capitalized by Atlas. Atlas' general partner believes that the method utilized in allocating costs to Atlas is reasonable.
Executive Officer Compensation
The following table sets forth certain compensation information for the chief executive officer and each of the four other most highly compensated executive officers of Atlas' general partner in excess of $100,000 for 2004, 2003 and 2002. Atlas reimburses Atlas'
general partner and its affiliates for expenses incurred on Atlas' behalf, including the cost of officer compensation allocable to Atlas. It is not currently anticipated that Atlas will pay additional annual cash or cash bonus compensation to the officers of our general partner for
service to us, but that such officers will be compensated through the Long-Term Incentive Plan we are adopting concurrently with this offering.
Summary Compensation Table
Annual
          Compensation
All
          Other
Name and Principal Position
Year
Salary
Bonus
Compensation
(1)
Edward E. Cohen
Chairman of the Managing Board
and Chief Executive Officer
2004
2003
2002
$
$
$
133,950
179,600
0
$
$
$
193,800
119,700
0
$
931,500
Michael L. Staines
2004
$
219,400
$
45,600
$
298,080
President, Chief Operating Officer
2003
$
133,300
$
10,000
and Managing Board Member
2002
$
169,979
$
28,000
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(1)
Reflects grants of phantom units under the Atlas Long Term Incentive Plan, valued at the closing price of common units on the respective dates of grants. The phantom unit grants entitle the recipient, upon vesting, to receive one common unit or its then fair market value in cash
and include distribution equivalent rights. The number of phantom units held and the value of those phantom units, valued at the closing market price of Atlas common units on December 31, 2004, are: Mr. E. Cohen — 25,000 phantom units ($1,047,500) and Mr. Staines — 8,000
phantom units ($335,200).
Long-Term Incentive Plan
Atlas' general partner has adopted
    the Atlas Pipeline Partners, L.P. Long-Term Incentive Plan, referred to as
    the
    Plan, for employees of Atlas' general partner and its affiliates who perform
    services for Atlas. Awards contemplated by the Plan include phantom units and
    unit  options. The Plan currently permits the grant of phantom units and
    unit options covering an aggregate of 435,000 common units delivered upon
    vesting of such phantom units or unit options. The Plan is administered by
    a committee appointed by Atlas' general partner's
managing board, which sets the terms of awards under the Plan. This committee
    may make awards of either phantom units or options for an aggregate of 435,000
    common units, provided that the maximum number of phantom units that may
    be awarded in total to
non-employee managing board members is 10,000.
Phantom Units.
A phantom unit entitles the grantee to receive, upon the vesting of the phantom unit, a common unit (or cash equivalent, depending on the terms of the grant). As of December 31, 2004, grants of 58,752 unvested phantom units under the Plan remain
outstanding to employees, officers and directors of Atlas' general partner. This committee may, in the future, make additional grants under the plan to employees and directors containing such terms as such committee shall determine, including tandem distribution equivalent
rights with respect to phantom units. As a result of the vesting of these awards, Atlas recognized an expense of $0.7 million during 2004.
The issuance of the common units upon vesting of phantom units is primarily intended to serve as a means of incentive compensation for performance. Therefore, no consideration is paid to Atlas by the plan participants upon receipt of the common units.
Grants of 1,752 phantom units were made in 2004 to current non-employee directors of Atlas' general partner. These units vest and are payable in 25% increments.
The following table shows the vesting of phantom units granted under the Plan during 2004 to the named executive officers.
Remaining Unvested
Grants
(1)
Name
Total Units
Units
Value
Edward E. Cohen
25,000
25,000
$
1,047,500
Michael L. Staines
8,000
8,000
$
335,200
(1)
As if vested on December 31, 2004, at a market closing price of $41.90 per unit.
Compensation of Managing Board Members
Atlas' general partner does not pay additional remuneration to officers or employees of Atlas America who also serve as managing board members. In fiscal year 2004, each non-employee managing board member of Atlas' general partner received an annual retainer of
$20,000 in cash and an annual grant of phantom units with DERs in an amount equal to the lesser of 500 units or $15,000 worth of units (based upon the market price of our common units) pursuant to Atlas' Long-Term Incentive Plan, which was approved by Atlas'
unitholders on February 11, 2004. In addition, Atlas' general partner reimburses each non-employee board member for out-of-pocket expenses in connection with attending meetings of the board or committees. Atlas reimburses its general partner for these expenses and
indemnifies its general partner's managing board members for actions associated with serving as managing board members to the extent permitted under Delaware law.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Atlas Pipeline Holdings, L.P.
The following table sets forth certain information regarding the beneficial ownership of our common units prior to and as of the closing of this offering by:
•
each person who will beneficially own more than 5% of our common units;
•
each of the named executive officers of our general partner;
•
all of the directors of our general partner; and
•
all directors and executive officers of our general partner as a group.
All information with respect to beneficial ownership has been furnished by the respective directors or officers, as the case may be.
Common Units Beneficially Owned After
Offering
Name of Beneficial Owner
Common Units
Percent
Atlas America, Inc.
AIC, Inc.
Viking Resources Corporation
Resource Energy, Inc.
REI-NY, Inc.
Edward E. Cohen
Jonathan Z. Cohen
Robert R. Firth
Matthew A. Jones
Lisa Washington
Steven J. Doherty
William G. Karis
Harvey G. Magarick
All directors and officers of our general partner as a group (8 persons)
*
Less than 1%.
Atlas Pipeline Partners, L.P.
The following table sets forth certain information as of December 31, 2005 regarding beneficial ownership of Atlas' common units by:
•
each person known by Atlas Pipeline GP to beneficially own more than 5% of Atlas' common units;
•
each of the named executive officers of Atlas Pipeline GP;
•
all of the directors of Atlas Pipeline GP;
•
all of the directors and executive officers of Atlas Pipeline GP as a group.
All information with respect to beneficial ownership has been furnished by the respective directors or officers, as the case may be. Each person has sole voting and dispositive power over the common units shown unless otherwise indicated below. Atlas has 12,549,266
common units outstanding at December 31, 2005.
Common Units Beneficially Owned After Offering
Name of Beneficial Owner
Common Units
Percent
Atlas Pipeline GP
1,641,026
12.8%
Edward E. Cohen
10,350
*
Jonathan Z. Cohen
7,727
*
Michael L. Staines
2,000
*
Matthew A. Jones
0
*
Tony C. Banks (a)
195
*
Curtis D. Clifford
113
*
Gayle P.W. Jackson
0
*
Martin Rudolph
500
*
All directors and officers as a group (8 persons)
20,885
*
*
Less than 1%.
(a)
Represents the number of common units Mr. Banks has the right to receive upon vesting of previous grants of phantom units within the next 60 days.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Our Relationship with Atlas Pipeline Partners, L.P.
Our cash generating assets consist of our interests in Atlas Pipeline Partners, L.P., a publicly traded Delaware limited partnership. Atlas is a midstream energy service provider engaged in the transmission, gathering and processing of natural gas in the Mid-Continent and
Appalachian regions. Our interests in Atlas will initially consist of a 100% ownership interest in the general partner of Atlas, Atlas Pipeline GP, which owns:
•
a 2.0% general partner interest in Atlas, which entitles it to receive 2.0% of the cash distributed by Atlas;
•
all of the incentive distribution rights in Atlas, which entitle us to receive increasing percentages, up to a maximum of 48.0%, of any cash distributed by Atlas as it reaches certain target distribution levels in excess of $0.42 per Atlas unit in any quarter; and
•
1,641,026 common units of Atlas, representing an approximate 12.8% limited partner interest in Atlas.
Atlas is required by its partnership agreement to distribute all of its cash on hand at the end of each quarter, less reserves established by its general partner, in its sole discretion to provide for the proper conduct of Atlas' business or to provide for future distributions.
Our general partner will be reimbursed for direct and indirect expenses incurred on our behalf. Some of the non-independent directors of our general partner also serve as directors of Atlas' general partner.
The Contribution Agreement
Prior to the closing of this offering, the partnership interests we will own in Atlas, including the 2.0% general partner interest, the incentive distribution rights and 1,641,026 common units, are held, directly or indirectly, by Atlas America. In connection with this
offering, Atlas America and its affiliates have entered into a Contribution Agreement pursuant to which, at closing, the 2% general partner interest, incentive distribution rights and 1,641,026 common units, each representing partnership interests in Atlas, will be contributed to
us. As consideration for this contribution and in accordance with the terms of the Contribution Agreement, we will distribute substantially all of the proceeds we receive from this offering as well as 17,500,000 of our common units, assuming no exercise of the underwriters'
option to purchase additional units.
Registration Rights
Under our limited partnership agreement, we have agreed to register for sale under the Securities Act and applicable state securities laws (subject to certain limitations) any common units proposed to be sold by owners of Atlas' general partner or any of its respective
affiliates. These registration rights require us to file one registration statement. We have also agreed to include any securities held by the owners of Atlas' general partner or any of its respective affiliates in any registration statement that we file to offer securities for cash,
except that an offering relating solely to an employee benefit plan and other similar exceptions. We are obligated to pay all expenses incidental to the registration, excluding underwriting discounts and commissions. These registration rights are in addition to the registration
rights that we have agreed to provide our general partner and its affiliates pursuant to our limited partnership agreement. Please read "Units Eligible for Future Sale."
Indemnification of Directors and Officers
Under our limited partnership agreement and subject to specified limitations, we will indemnify to the fullest extent permitted by Delaware law, from and against all losses, claims, damages or similar events any director or officer, or while serving as a director or officer,
any person who is or was serving as a tax matters member or as a director, officer, tax matters member, employee, partner, manager, fiduciary or trustee of our company or any of our affiliates. Additionally, we will indemnify to the fullest extent permitted by law, from
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and against all losses, claims, damages or similar events any person who is or was an employee (other than an officer) or agent of our partnership at the time of the occurrence giving rise to the
indemnity being sought.
Related Party Transactions Involving Atlas
On June 30, 2005, Resource America, Inc. (RAI) distributed its 10.7 million shares of Atlas America to its shareholders. In connection with this distribution of Atlas America common stock to its shareholders, RAI and Atlas America entered into various agreements,
including a shared services agreement and a tax matters agreement, which govern the ongoing relationship between the two companies. Atlas is dependent upon the resources and services provided by Atlas America, and through these agreements, RAI and its affiliates.
Under an agreement between Atlas and Atlas America, Atlas America must construct up to 2,500 feet of sales lines from its existing wells in the Appalachian region to a point of connection to Atlas' gathering systems. Atlas must, at its own cost, extend its system to
connect to any such lines within 1,000 feet of its gathering systems. With respect to wells to be drilled by Atlas America that will be more than 3,500 feet from Atlas' gathering systems, Atlas has various options to connect those wells to its gathering systems at its own cost.
At December 31, 2005, Atlas' general partner owned 1,641,026 common units constituting 12.8% of the limited partner interest in Atlas.
Atlas' omnibus agreement and the natural gas gathering agreements with Atlas America and its affiliates were not the result of arms-length negotiations and, accordingly, Atlas cannot assure us that it could have obtained more favorable terms from independent third
parties similarly situated. However, since these agreements principally involve the imposition of obligations on Atlas America and its affiliates, Atlas does not believe that it could obtain similar agreements from independent third parties.
In connection with the acquisition of Spectrum, Atlas entered into commitment agreements with Resource America and Atlas America for the purchase by them of up to $25.0 million of preferred units in Atlas Pipeline Operating Partnership, L.P., Atlas' subsidiary. In
consideration for their commitments, upon the closing of the Spectrum acquisition and the purchase by each of $10.0 million preferred units, Atlas paid Resource America and Atlas America commitment fees of $750,000 and $500,000, respectively.
In connection with the proposed acquisition of Alaska Pipeline Company, L.L.C., Atlas paid Resource America a fee of $70,750 in the year ended December 31, 2004 for its commitment to repay certain financing that would have been required to complete the
acquisition.
Atlas does not currently directly employ any persons to manage or operate its business. These functions are provided by employees of Atlas America and/or its affiliates. Atlas' general partner does not receive a management fee in connection with its management of
Atlas apart from its interest as general partner and its right to receive incentive distributions.
Atlas reimburses its general partner, Atlas America and its affiliates for expenses they incur in managing its operations and for an allocation of the compensation paid to the executive officers of its general partner, based upon an estimate of the time spent by such
persons on activities for Atlas. Other indirect costs, such as rent for offices, are allocated to Atlas by Atlas America based on the number of its employees who devote substantially all of their time to activities on Atlas' behalf. Atlas reimburses Atlas America at cost for direct
costs incurred by them on Atlas' behalf. Atlas' partnership agreement provides that its general partners will determine the costs and expenses that are allocable to Atlas in any reasonable manner determined by its general partner at its sole discretion.
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CONFLICTS OF INTEREST AND FIDUCIARY DUTIES
Conflicts of Interest
General.
Conflicts of interest exist and may arise in the future as a result of the relationships among us, Atlas and our and its respective general partners and affiliates. The directors and officers of Atlas' general partner have fiduciary duties to manage Atlas in a
manner beneficial to us, its owner. At the same time, Atlas' general partner has a fiduciary duty to manage Atlas in a manner beneficial to Atlas and its limited partners. The managing board or the conflicts committee of the managing board of Atlas will resolve any such
conflict and has broad latitude to consider the interests of all parties to the conflict. The resolution of these conflicts may not always be in our best interest or that of our unitholders.
Conflicts Between Our General Partner and Its Affiliates and Our Partners.
Whenever a conflict arises between our general partner or its affiliates, on the one hand, and us or any of our other partners, on the other hand, our general partner will resolve that conflict.
Our partnership agreement contains provisions that modify and limit our general partner's fiduciary duties to our unitholders. Our partnership agreement also restricts the remedies available to unitholders for actions taken that, without those limitations, might constitute breaches
of our general partner's fiduciary duty to us.
Our general partner will not be in breach of its obligations under the partnership agreement or its duties to us or our unitholders if the resolution of the conflict is:
•
approved by the audit and conflicts committee, although our general partner is not obligated to seek such approval;
•
approved by the vote of a majority of the outstanding common units, excluding any common units owned by our general partner or any of its affiliates;
•
on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or
•
fair and reasonable to us, taking into account the totality of the relationships among the parties involved, including other transactions that may be particularly favorable or advantageous to us.
Our general partner may, but is not required to, seek the approval of such resolution from the audit and conflicts committee of its board. If our general partner does not seek approval from the audit and conflicts committee and its board of directors determines that the
resolution or course of action taken with respect to the conflict of interest satisfies either of the standards set forth in the third and fourth bullet points above, then it will be presumed that, in making its decision, the board of directors acted in good faith, and in any proceeding
brought by or on behalf of any limited partner or us, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. Unless the resolution of a conflict is specifically provided for in our partnership agreement, our general partner or
the audit and conflicts committee may consider any factors it determines in good faith to consider when resolving a conflict. When our partnership agreement requires someone to act in good faith, it requires that person to believe that he is acting in the best interests of the
partnership.
Conflicts of interest could arise in the situations described below, among others.
Actions taken by our general partner may affect the amount of cash available for distribution to our common unitholders.
The amount of cash that is available for distribution to our common unitholders is affected by decisions of our general partner regarding such matters as:
•
amount and time of cash expenditures;
•
asset sales or acquisitions;
•
borrowings;
•
the issuance of additional units;
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•
the creation, reduction or increase of reserves in any quarter; and
•
corporate opportunities.
We will reimburse our general partner and its affiliates for expenses.
We will reimburse our general partner and its affiliates for costs incurred in managing and operating us, including costs incurred in rendering corporate staff and support services to us. Our partnership agreement provides that our general partner will determine the
expenses that are allocable to us in any reasonable manner determined by our general partner in its sole discretion. Please read "Certain Relationships and Related Party Transactions."
Our general partner intends to limit its liability regarding our obligations.
Our general partner intends to limit its liability under contractual arrangements so that the other party has recourse only to our assets, and not against our general partner or its assets. Our partnership agreement provides that any action taken by our general partner to
limit its liability or our liability is not a breach of our general partner's fiduciary duties, even if we could have obtained more favorable terms without the limitation on liability.
Common unitholders will have no right to enforce obligations of our general partner and its affiliates under agreements with us.
Any agreements between us on the one hand, and our general partner and its affiliates, on the other, will not grant to the unitholders, separate and apart from us, the right to enforce the obligations of our general partner and its affiliates in our favor.
If we are presented with certain
      business opportunities, Atlas will have the first right to pursue such
      opportunities.
Pursuant to the omnibus agreement
    to be entered into in connection with the closing of this offering, we will
    agree to certain business opportunity arrangements to address potential conflicts
    that may arise between us and Atlas. If a business opportunity in respect
    of any business activity in which Atlas is currently engaged is presented
    to us, our general partner or Atlas or its general partner, then Atlas will
    have the first right to pursue such business opportunity. The omnibus agreement
    will provide, among other things, that Atlas will be presumed to desire to
    acquire the assets until such time as it advises us that it has abandoned
    such pursuit, and we may not pursue the opportunity prior to that time.
Atlas and affiliates of our general partner are not limited in their ability to compete with us, which could cause conflicts of interest and limit our ability to acquire additional assets or businesses which in turn could adversely affect our results of operations and cash available for distribution to our unitholders.
Neither our partnership agreement
    nor the omnibus agreement between us, Atlas, Atlas Pipeline GP and Atlas
    Pipeline Holdings GP, LLC will prohibit Atlas or affiliates of our general
    partner from owning assets or engaging in businesses that compete directly
    or indirectly with us or one another. In addition, Atlas and its affiliates
    or affiliates of our general partner, may acquire, construct or dispose of
    additional assets related to the transmission, gathering and processing of
    natural gas, NGLs or other assets in the future, without any obligation to
    offer us the opportunity to purchase or construct any of those assets. As
    a result, competition among these entities could adversely impact Atlas'    or our results of operations and cash available for distribution.
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Contracts between us, on the one hand, and our general partner and its affiliates, on the other, will not be the result of arm's-length negotiations.
Our partnership agreement allows our general partner to determine, in good faith, any amounts to pay itself or its affiliates for any services rendered to us. Our general partner may also enter into additional contractual arrangements with any of its affiliates on our behalf.
Neither the partnership agreement nor any of the other agreements, contracts and arrangements between us, on the one hand, and our general partner and its affiliates, on the other, are or will be the result of arm's-length negotiations.
Our general partner will determine, in good faith, the terms of any of these transactions entered into after the sale of the common units offered in this offering.
Common units are subject to our general partner's limited call right.
Our general partner may exercise its right to call and purchase common units as provided in our partnership agreement or assign this right to one of its affiliates or to us. Our general partner may use its own discretion, free of fiduciary duty restrictions, in determining
whether to exercise this right. As a result, a common unitholder may have his common units purchased from him at an undesirable time or price.
We may not choose to retain separate counsel for ourselves or for the holders of common units.
The attorneys, independent accountants and others who have performed services for us regarding this offering have been retained by our general partner. Attorneys, independent accountants and others who will perform services for us are selected by our general partner
or the conflicts committee, if established, and may perform services for our general partner and its affiliates. We may retain separate counsel for ourselves or the holders of our common units in the event of a conflict of interest between our general partner and its affiliates, on
the one hand, and us or the holders of our common units, on the other, depending on the nature of the conflict. We do not intend to do so in most cases.
Acquisitions of Competing Businesses; Potential Future Conflicts.
From time to time, we or our affiliates may acquire entities whose businesses compete with us or Atlas. In addition, future conflicts of interest may arise among us and any entities whose general partner
interests we or our affiliates acquire or between Atlas and such entities. It is not possible to predict the nature or extent of these potential future conflicts of interest at this time, nor is it possible to determine how we will address and resolve any such future conflicts of interest.
However, the resolution of these conflicts may not always be in our best interest or those of our unitholders. We do not currently intend to take any action which would limit the ability of Atlas to pursue its business strategy.
Fiduciary Duties
Our general partner is accountable to us and our unitholders as a fiduciary. Fiduciary duties owed to unitholders by our general partner are prescribed by law and our partnership agreement. The Delaware Revised Uniform Limited Partnership Act, which we refer to in
this prospectus as the Delaware Act, provides that Delaware limited partnerships may, in their partnership agreements, modify, restrict or expand the fiduciary duties otherwise owed by a general partner to limited partners and the partnership.
Our partnership agreement contains various provisions modifying and restricting the fiduciary duties that might otherwise be owed by our general partner. We have adopted these restrictions to allow our general partner to take into account the interests of other parties in
addition to our interests when resolving conflicts of interest. These modifications are detrimental to the common unitholders because they restrict the remedies available to unitholders for actions that, without those limitations, might constitute breaches of fiduciary duty, as
described below. The following is a summary of the material restrictions of the fiduciary duties owed by our general partner to the unitholders:
State-law fiduciary duty standards
Fiduciary duties are generally considered to include an obligation to act in
      good faith and with due care and loyalty. The duty of care, in the absence
      of a provision in a
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partnership agreement providing otherwise,
        would generally require a general partner to act for the partnership
        in the same manner as a prudent person would act on his own behalf. The
        duty of loyalty, in the absence of a provision in a partnership agreement
        providing otherwise, would generally prohibit a general partner of a
        Delaware limited partnership from taking any action or engaging in any
        transaction where a conflict of
interest is present.
The Delaware Act generally provides that
        a limited partner may institute legal action on behalf of the partnership
        to recover damages from a third party where a general partner has refused
        to institute the action or where an effort to cause a general partner
        to do so is not likely to succeed. In addition, the statutory or case
        law of some jurisdictions may permit a limited partner to institute legal
        action on behalf of himself and all other similarly situated limited
        partners to recover damages from a general partner for violations of
    its fiduciary duties to the limited partners.
Partnership agreement modified standards
Our partnership
          agreement contains provisions that waive or consent to conduct by our
          general partner and its affiliates that might otherwise raise issues
          about compliance with fiduciary duties or applicable law. For example,
          our partnership agreement provides that when our general partner is
          acting in its capacity as our general partner, as opposed to in its
          individual capacity, it must act in "good faith" and will
          not be subject to any other standard under applicable law. In addition,
          when our general partner is acting in its individual capacity, as opposed
          to in its capacity as our general partner, it may act without any fiduciary
          obligation to us or the unitholders whatsoever. These standards reduce
          the obligations to which our general partner would otherwise be held.
In addition to the other more specific provisions limiting the obligations of our general partner, our partnership agreement further provides that our general partner and its officers and directors will not be liable for
monetary damages to us, our unitholders or assignees for errors of judgment or for any acts or omissions unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining
that the general partner or its officers and directors acted in bad faith or engaged in fraud or willful misconduct, or in the case of a criminal matter, acted with the knowledge that such conduct was unlawful.
Special provisions regarding affiliated transactions.
Our partnership agreement generally provides that affiliated transactions and resolutions of conflicts of interest not involving a vote of unitholders and that are
not approved by the conflicts committee of the board of directors of our general partner must be:
•
on terms no less favorable to us than those generally being provided to or available from unrelated third parties; or
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•
"fair and reasonable" to us, taking into account the totality of the relationships between the parties involved (including other transactions that may be particularly favorable or advantageous to us).
If our general partner does not seek approval from the conflicts committee and its board of directors determines that the resolution or course of action taken with respect to the conflict of interest satisfies either of the
standards set forth in the bullet points above, then it will be presumed that, in making its decision, the board of directors, which may include board members affected by the conflict of interest, acted in good faith and
in any proceeding brought by or on behalf of any unitholders or the partnership, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption. These standards reduce the
obligations to which our general partner would otherwise be held.
In order to become one of our limited partners, a unitholder is required to agree to be bound by the provisions in our partnership agreement, including the provisions discussed above. This is in accordance with the policy of the Delaware Act favoring the principle of freedom
of contract and the enforceability of partnership agreements. The failure of a limited partner or assignee to sign a partnership agreement does not render the partnership agreement unenforceable against that person.
We must indemnify our general partner and its officers, directors, managers and certain other specified persons, to the fullest extent permitted by law, against liabilities, costs and expenses incurred by our general partner or these other persons. We must provide this
indemnification unless there has been a final and non-appealable judgment by a court of competent jurisdiction determining that these persons acted in bad faith or engaged in fraud or willful misconduct. We must also provide this indemnification for criminal proceedings
unless our general partner or these other persons acted with knowledge that their conduct was unlawful. Thus, our general partner could be indemnified for its negligent acts if it met the requirements set forth above. To the extent these provisions purport to include
indemnification for liabilities arising under the Securities Act, in the opinion of the SEC, such indemnification is contrary to public policy and, therefore, unenforceable. Please read "Description of Our Partnership Agreement—Indemnification."
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DESCRIPTION OF THE COMMON UNITS
The Units
The common units represent limited partner interests in us. The holders of units are entitled to participate in partnership distributions and exercise the rights or privileges available to unitholders under our partnership agreement. For a description of the rights and
preferences of holders of common units in and to partnership distributions, please read this section and "Cash Distribution Policy." For a description of the rights and privileges of unitholders under our partnership agreement, including voting rights, please read "The
Partnership Agreement of Atlas Pipeline Holdings, L.P."
Transfer Agent and Registrar
Duties
American Stock Transfer and Trust Company will serve as registrar and transfer agent for the common units. We will pay all fees charged by the transfer agent for transfers of common units except the following that must be paid by unitholders:
•
surety bond premiums to replace lost or stolen certificates, taxes and other governmental charges;
•
special charges for services requested by a common unitholder; and
•
other similar fees or charges.
There will be no charge to unitholders for disbursements of our cash distributions. We will indemnify the transfer agent, its agents and each of their stockholders, directors, officers and employees against all claims and losses that may arise out of acts performed or
omitted for its activities in that capacity, except for any liability due to any gross negligence or intentional misconduct of the indemnified person or entity.
Resignation or Removal
The transfer agent may resign, by notice to us, or be removed by us. The resignation or removal of the transfer agent will become effective upon our appointment of a successor transfer agent and registrar and its acceptance of the appointment. If no successor has been
appointed and has accepted the appointment within 30 days after notice of the resignation or removal, our general partner may act as the transfer agent and registrar until a successor is appointed.
Transfer of Common Units
By transfer of common units in accordance with our partnership agreement, each transferee of common units shall be admitted as a limited partner with respect to the common units transferred when such transfer and admission is reflected in our books and records. Each
transferee:
•
represents that the transferee has the capacity, power and authority to become bound by our partnership agreement;
•
automatically agrees to be bound by the terms and conditions of, and is deemed to have executed, our partnership agreement; and
•
gives the consents and approvals contained in our partnership agreement, such as the approval of all transactions and agreements that we are entering into in connection with our formation and this offering.
A transferee will become a substituted limited partner of our partnership for the transferred common units automatically upon the recording of the transfer on our books and records. Our general partner will cause any transfers to be recorded on our books and records no
less frequently than quarterly.
We may, at our discretion, treat the nominee holder of a common unit as the absolute owner. In that case, the beneficial holders' rights are limited solely to those that it has against the nominee holder as a result of any agreement between the beneficial owner and the
nominee holder.
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Common units are securities and are transferable according to the laws governing transfers of securities. In addition to other rights acquired upon transfer, the transferor gives the transferee the right to become a substituted limited partner in our partnership for the
transferred common units.
Until a common unit has been transferred on our books, we and the transfer agent may treat the record holder of the unit as the absolute owner for all purposes, except as otherwise required by law or stock exchange regulations.
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THE PARTNERSHIP AGREEMENT OF ATLAS PIPELINE HOLDINGS, L.P.
The following is a summary of the material provisions of our partnership agreement. The form of our partnership agreement is included as Appendix A in this prospectus.
We summarize the following provisions of our partnership agreement elsewhere in this prospectus:
•
with regard to distributions of available cash, please read "Cash Distribution Policy and Restrictions on Distributions;"
•
with regard to the fiduciary duties of our general partner, please read "Conflicts of Interest and Fiduciary Duties;"
•
with regard to rights of holders of units, please read "Description of the Common Units;" and
•
with regard to allocations of taxable income, taxable loss and other matters, please read "Material Tax Consequences."
Organization and Duration
We were formed on December 15, 2005 and have a perpetual existence.
Purpose
Under our partnership agreement, we are permitted to engage, directly or indirectly, in any business activity that is approved by our general partner and that lawfully may be conducted by a limited partnership organized under Delaware law and, in connection therewith,
to exercise all of the rights and powers conferred upon us pursuant to the agreements relating to such business activity; provided, however, that our general partner may not cause us to engage, directly or indirectly, in any business activity that our general partner determines
would cause us to be treated as an association taxable as a corporation or otherwise taxable as an entity for federal income tax purposes.
Although our general partner has the ability to cause us, our affiliates or our subsidiaries to engage in activities other than the ownership of partnership interests in Atlas, our general partner has no current plans to do so and may decline to do so free of any fiduciary
duty or obligation whatsoever to us or the limited partners, including any duty to act in good faith or in the best interest of us or our limited partners. Our general partner is authorized in general to perform all acts it determines to be necessary or appropriate to carry out our
purposes and to conduct our business. For a further description of limits on our business, please read "Certain Relationships and Related Transactions."
Power of Attorney
Each limited partner, and each person who acquires a unit from a unitholder, by accepting the unit, automatically grants to our general partner and, if appointed, a liquidator, a power of attorney to, among other things, execute and file documents required for our
qualification, continuance or dissolution. The power of attorney also grants the authority to amend, and to make consents and waivers under, our partnership agreement. Please read "—Amendments to Our Partnership Agreement."
Capital Contributions
Unitholders are not obligated to make additional capital contributions, except as described below under "—Limited Liability."
Limited Liability
Assuming that a limited partner does not participate in the control of our business within the meaning of the Delaware Act and that he otherwise acts in conformity with the provisions of our partnership agreement, his liability under the Delaware Act will be limited,
subject to possible exceptions, to the amount of capital he is obligated to contribute to us for his common units plus his share of any undistributed profits and assets. If it were determined, however, that the right, or exercise of the right, by the limited partners as a group:
•
to remove or replace the general partner;
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•
to approve some amendments to the partnership agreement; or
•
to take other action under the partnership agreement;
constituted "participation in the control" of our business for the purposes of the Delaware Act, then our limited partners could be held personally liable for our obligations under the laws of Delaware, to the same extent as our general partner. This liability would extend to
persons who transact business with us and reasonably believe that the limited partner is a general partner. Neither our partnership agreement nor the Delaware Act specifically provides for legal recourse against our general partner if a limited partner were to lose limited
liability through any fault of our general partner. While this does not mean that a limited partner could not seek legal recourse, we know of no precedent for this type of a claim in Delaware case law.
Under the Delaware Act, a limited partnership may not make a distribution to a partner if, after the distribution, all liabilities of the limited partnership, other than liabilities to partners on account of their partnership interests and liabilities for which the recourse of
creditors is limited to specific property of the partnership, would exceed the fair value of the assets of the limited partnership. For the purpose of determining the fair value of the assets of a limited partnership, the Delaware Act provides that the fair value of property subject to
liability for which recourse of creditors is limited shall be included in the assets of the limited partnership only to the extent that the fair value of that property exceeds the nonrecourse liability. The Delaware Act provides that a limited partner who receives a distribution and
knew at the time of the distribution that the distribution was in violation of the Delaware Act shall be liable to the limited partnership for the amount of the distribution for three years. Under the Delaware Act, a substituted limited partner of a limited partnership is liable for
the obligations of his assignor to make contributions to the partnership, except that such person is not obligated for liabilities unknown to him at the time he became a limited partner and that could not be ascertained from the partnership agreement.
Limitations on the liability of limited partners for the obligations of a limited partner have not been clearly established in many jurisdictions. While we currently have no operations distinct from Atlas, if in the future, by our ownership in an operating company or
otherwise, it were determined that we were conducting business in any state without compliance with the applicable limited partnership or limited liability company statute, or that the right or exercise of the right by the limited partners as a group to remove or replace the
general partner, to approve some amendments to our partnership agreement, or to take other action under our partnership agreement constituted "participation in the control" of our business for purposes of the statutes of any relevant jurisdiction, then the limited partners could
be held personally liable for our obligations under the law of that jurisdiction to the same extent as the general partner under the circumstances. We will operate in a manner that the general partner considers reasonable and necessary or appropriate to preserve the limited
liability of the limited partners.
Voting Rights
The following is a summary of the unitholder vote required for the matters specified below. In voting their units, affiliates of our general partner will have no fiduciary duty or obligation whatsoever to us or the limited partners, including any duty to act in good faith or
in the best interests of us or the limited partners.
Issuance of additional units
No approval right.
Amendment of our partnership agreement
Certain
          amendments may be made by our general partner without the approval
          of our unitholders. Other amendments generally require the approval
          of a majority of our outstanding units.
Please read "—Amendments to Our Partnership Agreement."
Merger of our partnership or the sale of all
or substantially all of our assets
A majority
          of our outstanding units in certain circumstances. Please read "—Merger,
          Sale or Other Disposition of Assets."
Dissolution of our partnership
A majority
          of our outstanding units. Please read "—Termination or Dissolution."
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Continuation of our business upon dissolution
A majority
          of our outstanding units. Please read "—Termination or Dissolution."
Withdrawal of our general partner
Under
            most circumstances, the approval of a majority of the units, excluding
            units held by our general partner and its affiliates, is required
            for the withdrawal of the general partner prior to
December 30, 2015 in a manner that would cause a dissolution of our partnership. Please read "—Withdrawal
or Removal of Our General Partner."
Removal of our general partner
Not less
          than 66 2/3 of the outstanding units, including units held by our general
          partner and its affiliates. Please read "—Withdrawal or Removal
          of Our General Partner."
Transfer
            of the general partner interest Our general partner may transfer
            all, but not less than all, of its general partner interest in us
            without a vote of our unitholders to (i) an affiliate (other than
            an individual) or (ii) another entity
in connection with its merger or consolidation with or into, or sale of all or
            substantially all of its assets to, such person. The approval of
            a majority of the units, excluding units held by the general partner
            and its affiliates, is required in other circumstances for a transfer
            of the general partner interest to a third party prior to December 31, 2015. Please read "—Transfer
            of
General Partner Interest."
Transfer of ownership interests in
our general partner
No approval
          required at any time. Please read "—Transfer of Ownership
          Interests in Our General Partner."
Issuance of Additional Securities
Our partnership agreement authorizes us to issue an unlimited number of additional limited partner interests and other equity securities on terms and conditions established by our general partner in its sole discretion without the approval of our unitholders.
It is possible that we will fund acquisitions through the issuance of additional units or other equity securities. Holders of any additional units we issue will be entitled to share equally with the then-existing holders of units in our cash distributions. In addition, the
issuance of additional partnership interests may dilute the value of the interests of the then-existing holders of units in our net assets.
In accordance with Delaware law and the provisions of our partnership agreement, we may also issue additional partnership interests that, in the sole discretion of our general partner, may have special voting rights to which units are not entitled.
Amendments to Our Partnership Agreement
General
Amendments to our partnership agreement may be proposed only by or with the consent of our general partner. However, our general partner will have no duty or obligation to propose any amendment and may decline to do so free of any fiduciary duty or obligation
whatsoever to us or the limited partners, including any duty to act in good faith or in the best interests of us or the limited partners. To adopt a proposed amendment, other than the amendments discussed below, our general partner is required to seek written approval of the
holders of the number of units required to approve the amendment or call a meeting of the
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limited partners to consider and vote upon the proposed amendment. Except as described below, an amendment must be approved by a majority of our outstanding units.
Prohibited Amendments
No amendment may be made that would:
(1)  enlarge the obligations of any limited partner without its consent, unless approved by at least a majority of the type or class of limited partner interests so affected; or
(2)  enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable by us to our general partner or any of its affiliates without the consent of our general partner, which may be
given or withheld at its option.
The provision of our partnership agreement preventing the amendments having the effects described in clauses (1) or (2) above can be amended upon the approval of the holders of at least 90% of the outstanding units.
No Unitholder Approval
Our general partner may generally make amendments to our partnership agreement without the approval of any limited partner to reflect:
(1) a change in the name of the partnership, the location of the partnership's principal place of business, the partnership's registered agent or its registered office;
(2) the admission, substitution, withdrawal or removal of partners in accordance with our partnership agreement;
(3) a change that, in the sole discretion of our general partner, is necessary or advisable for the partnership to qualify or to continue our qualification as a limited partnership or a partnership in which the limited partners have limited liability under the laws of any state
or to ensure that the partnership will not be treated as an association taxable as a corporation or otherwise taxed as an entity for federal income tax purposes;
(4) an amendment that is necessary, in the opinion of our counsel, to prevent the partnership or our general partner or its directors, officers, agents or trustees, from in any manner being subjected to the provisions of the Investment Company Act of 1940, the Investment
Advisors Act of 1940, or "plan asset" regulations adopted under the Employee Retirement Income Security Act of 1974, whether or not substantially similar to plan asset regulations currently applied or proposed;
(5) an amendment that our general partner determines to be necessary or appropriate for the authorization of additional partnership securities or rights to acquire partnership securities;
(6) any amendment expressly permitted in our partnership agreement to be made by our general partner acting alone;
(7) an amendment effected, necessitated or contemplated by a merger agreement that has been approved under the terms of our partnership agreement;
(8) any amendment that, in the discretion of our general partner, is necessary or advisable for the formation by the partnership of, or its investment in, any corporation, partnership or other entity, as otherwise permitted by our partnership agreement;
(9) a change in our fiscal year or taxable year and related changes;
(10) certain mergers or conveyances set forth in our partnership agreement; and
(11) any other amendments substantially similar to any of the matters described in (1) through (9) above.
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In addition, our general partner may make amendments to our partnership agreement without the approval of any limited partner or assignee if our general partner determines, at its option, that those amendments:
(1) do not adversely affect our limited partners in any material respect;
(2) are necessary or appropriate to satisfy any requirements, conditions or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute;
(3) are necessary or appropriate to facilitate the trading of limited partner interests or to comply with any rule, regulation, guideline or requirement of any securities exchange on which the limited partner interests are or will be listed for trading;
(4) are necessary or advisable for any action taken by our general partner relating to splits or combinations of units under the provisions of our partnership agreement; or
(5) are required to effect the intent of the provisions of our partnership agreement or are otherwise contemplated by our partnership agreement.
Finally, our partnership agreement specifically permits our general partner to authorize the general partner of Atlas to limit or modify the incentive distribution rights held by us if our general partner determines that such limitation or modification does not adversely
affect our limited partners in any material respect.
Opinion of Counsel and Unitholder Approval
Our general partner will not be required to obtain an opinion of counsel that an amendment will not result in a loss of limited liability to the limited partners or result in none of us, Atlas or Atlas's intermediate or operating partnerships being treated as an entity for
federal income tax purposes in connection with any of the amendments described under "—No Unitholder Approval." No other amendments to our partnership agreement will become effective without the approval of holders of at least 90% of the outstanding units unless we
first obtain an opinion of counsel to the effect that the amendment will not affect the limited liability under applicable law of any of our limited partners. Any amendment that reduces the voting percentage required to take any action must be approved by the affirmative vote of
limited partners constituting not less than the voting requirement sought to be reduced.
Merger, Sale or Other Disposition of Assets
Our partnership agreement generally prohibits our general partner, without the prior approval of a majority of our outstanding units, from causing us to, among other things, sell, exchange or otherwise dispose of all or substantially all of our assets in a single transaction
or a series of related transactions, including by way of merger, consolidation or other combination, or approving on our behalf the sale, exchange or other disposition of all or substantially all of the assets of our subsidiaries. Our general partner may, however, mortgage, pledge,
hypothecate or grant a security interest in all or substantially all of our assets without that approval. Our general partner may also sell all or substantially all of our assets under a foreclosure or other realization upon those encumbrances without that approval.
If conditions specified in our partnership agreement are satisfied, our general partner may merge us or any of our subsidiaries into, or convey some or all of our assets to, a newly formed entity if the sole purpose of that merger or conveyance is to effect a mere change
in our legal form into another limited liability entity. The unitholders are not entitled to dissenters' rights of appraisal under our partnership agreement or applicable Delaware law in the event of a merger or consolidation, a sale of substantially all of our assets or any other
transaction or event.
Termination or Dissolution
We will continue as a limited partnership until terminated under our partnership agreement. We will dissolve upon:
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(1) the election of our general partner to dissolve us, if approved by the holders of a majority of our outstanding units, excluding those units held by our general partner and its affiliates;
(2) there being no limited partners, unless we are continued without dissolution in accordance with applicable Delaware law;
(3) the entry of a decree of judicial dissolution of our partnership; or
(4) the withdrawal or removal of our general partner or any other event that results in its ceasing to be our general partner other than by reason of a transfer of its general partner interest in accordance with our partnership agreement or withdrawal or removal following
approval and admission of a successor.
Upon a dissolution under clause (4) above, the holders of a majority of our outstanding units excluding any units held by our general partner and its affiliates, may also elect, within specific time limitations, to continue our business on the same terms and conditions
described in our partnership agreement by appointing a successor general partner an entity approved by the holders of a majority of our outstanding units, excluding those units held by our general partner and its affiliates, subject to receipt by us of an opinion of counsel to the
effect that:
•
the action would not result in the loss of limited liability of any limited partner; and
•
none of our partnership nor the reconstituted limited partnership would be treated as an association taxable as a corporation or otherwise be taxable as an entity for federal income tax purposes upon the exercise of that right to continue.
Liquidation and Distribution of Proceeds
Upon our dissolution, unless we are reconstituted and continued as a new limited partnership, the liquidator authorized to wind up our affairs will, acting with all the powers of our general partner that the liquidator deems necessary or desirable in its good faith
judgment, liquidate our assets. The proceeds of the liquidation will be applied as follows:
•
first,
towards the payment of all of our creditors and the creation of a reserve for contingent liabilities; and
•
then,
to all partners in accordance with the positive balance in the respective capital accounts.
Under some circumstances and subject to some limitations, the liquidator may defer liquidation or distribution of our assets for a reasonable period of time. If the liquidator determines that a sale would be impractical or would cause a loss to our partners, our general
partner may distribute assets in kind to our partners.
Withdrawal or Removal of Our General Partner
Except as described below, our general partner has agreed not to withdraw voluntarily as our general partner prior to December 31, 2015 without obtaining the approval of a majority of our outstanding units, excluding those held by our general partner and its affiliates,
and furnishing an opinion of counsel regarding limited liability and tax matters. On or after December 31, 2015, our general partner may withdraw as general partner without first obtaining approval of any unitholder by giving 90 days' written notice, and that withdrawal will
not constitute a violation of our partnership agreement. In addition, our general partner may withdraw without unitholder approval upon 90 days' notice to our limited partners if at least 50% of our outstanding common units are held or controlled by one person and its affiliates
other than our general partner and its affiliates.
Upon the voluntary withdrawal of our general partner, the holders of a majority of our outstanding units, excluding the units held by the withdrawing general partner and its affiliates, may elect a successor to the withdrawing general partner. If a successor is not elected,
or is elected but an opinion of counsel regarding limited liability and tax matters cannot be obtained, we will be dissolved, wound up and liquidated, unless within 90 days after that withdrawal, the holders of a majority of our outstanding units, excluding the units held by the
withdrawing general partner and its affiliates, agree to continue our business and to appoint a successor general partner.
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Our general partner may not be removed unless that removal is approved by (i) the audit and conflicts committee of the general partner and (ii) not less than 66 2/3% of our outstanding units, including units held by our general partner and its affiliates, and we receive
an opinion of counsel regarding limited liability and tax matters. Any removal of our general partner is also subject to the approval of a successor general partner by a majority of our outstanding units, including those held by our general partner and its affiliates. The ownership
of more than 33 1/3% of the outstanding units by our general partner and its affiliates would give it the practical ability to prevent its removal. Upon completion of this offering, Atlas America will own approximately 82.9% of the outstanding units, assuming no exercise of its
underwriters' option to purchase additional units.
In addition, we will be required to reimburse the departing general partner for all amounts due the departing general partner, including, without limitation, all employee-related liabilities, including severance liabilities, incurred for the termination of any employees
employed by the departing general partner or its affiliates for our benefit.
Transfer of General Partner Interest
Except for transfer by our general partner of all, but not less than all, of its general partner interest in us to:
•
an affiliate of the general partner (other than an individual); or
•
another entity as part of the merger or consolidation of the general partner with or into another entity or the transfer by the general partner of all or substantially all of its assets to another entity,
our general partner may not transfer all or any part of its general partner interest in us to another entity prior to December 31, 2015 without the approval of a majority of the common units outstanding, excluding common units held by our general partner and its affiliates. As a
condition of this transfer, the transferee must assume the rights and duties of our general partner, agree to be bound by the provisions of the partnership agreement, and furnish an opinion of counsel regarding limited liability and tax matters.
Transfer of Ownership Interests in Our General Partner
At any time, Atlas America, Inc., as the sole member of our general partner, may sell or transfer all or part of its ownership interest in the general partner without the approval of our unitholders.
Change of Management Provisions
Our partnership agreement contains specific provisions that are intended to discourage a person or group from attempting to remove our general partner as general partner or otherwise change management. If any person or group other than our general partner and its
affiliates acquires beneficial ownership of 20% or more of any class of units, that person or group loses voting rights on all of its units. This loss of voting rights does not apply to any person or group that acquires the units from our general partner or its affiliates and any
transferees of that person or group approved by our general partner.
Limited Call Right
If at any time our general partner and its affiliates hold more than 87.5% of the outstanding limited partner interests of any class, our general partner will have the right, but not the obligation, which it may assign in whole or in part to any of its affiliates or us, to
acquire all, but not less than all, of the remaining limited partner interests of the class held by unaffiliated persons as of a record date to be selected by our general partner, on at least ten but not more than 60 days' notice. The purchase price in the event of this purchase is the
greater of:
•
the highest cash price paid by either our general partner or any of its affiliates for any limited partners interests of the class purchased within the 90 days preceding the date our general partner first mails notice of its election to purchase the limited partner interests; and
•
the current market price of the limited partner interests of the class as of the date three days prior to the date that notice is mailed.
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As a result of our general partner's right to purchase outstanding limited partner interests, a holder of limited partner interests may have his limited partner interests purchased at an undesirable time or price. The tax consequences to a unitholder of the exercise of this
call right are the same as a sale by that unitholder of his units in the market. Please read "Material Tax Consequences—Disposition of Units."
Upon completion of this offering, Atlas America will own 17,500,000 of our common units, representing approximately 82.9% of our outstanding common units, assuming no exercise of the underwriters' option to purchase additional units.
Meetings; Voting
Except as described below regarding a person or group owning 20% or more of units then outstanding, unitholders on the record date will be entitled to notice of, and to vote at, meetings of our limited partners and to act upon matters for which approvals may be
solicited. Units that are owned by non-citizen assignees will be voted by our general partner and our general partner will distribute the votes on those units in the same ratios as the votes of limited partners on other units are cast.
Our general partner does not anticipate that any meeting of unitholders will be called in the foreseeable future. Any action that is required or permitted to be taken by our unitholders may be taken either at a meeting of the unitholders or without a meeting if consents in
writing describing the action so taken are signed by holders of the number of units as would be necessary to authorize or take that action at a meeting. Meetings of the unitholders may be called by our general partner or by unitholders owning at least 20% of the outstanding
units. Unitholders may vote either in person or by proxy at meetings. The holders of a majority of the outstanding units, represented in person or by proxy, will constitute a quorum unless any action by the unitholders requires approval by holders of a greater percentage of the
units, in which case the quorum will be the greater percentage.
Each record holder of a unit has a vote according to his percentage interest in us, although additional limited partner interests having special voting rights could be issued. Please read "—Issuance of Additional Securities" above. However, if at any time any person or
group, other than our general partner and its affiliates, or a direct or subsequently approved transferee of our general partner or its affiliates, acquires, in the aggregate, beneficial ownership of 20% or more of any class of units then outstanding, that person or group will lose
voting rights on all of its units and the units may not be voted on any matter and will not be considered to be outstanding when sending notices of a meeting of unitholders, calculating required votes, determining the presence of a quorum or for other similar purposes.
Common units held in nominee or street name account will be voted by the broker or other nominee in accordance with the instruction of the beneficial owner unless the arrangement between the beneficial owner and his nominee provides otherwise.
Any notice, demand, request, report or proxy material required or permitted to be given or made to record holders of units under our partnership agreement will be delivered to the record holder by us or by the transfer agent.
Status as Limited Partner
By transfer of common units in accordance with our partnership agreement, each transferee of common units shall be admitted as a limited partner with respect to the transferred units when such transfer and admission is reflected in our books and records. Except as
described under "—Limited Liability," the common units will be fully paid, and unitholders will not be required to make additional contributions.
Non-Citizen Assignees; Redemption
If we are or become subject to federal, state or local laws or regulations that, in the reasonable determination of our general partner, create a substantial risk of cancellation or forfeiture of any property that we have an interest in because of the nationality, citizenship or
other related status of any limited partner, we may redeem the units held by the limited partner at their current market price. In order to avoid any cancellation or forfeiture, our general partner may require each limited partner to furnish information about his nationality,
citizenship or related status. If a limited partner fails to furnish information about his nationality, citizenship or other related status within 30 days after a request for the information or our general partner determines after receipt of the information that the limited partner is not
an eligible citizen, the
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limited partner may be treated as a non-citizen assignee. A non-citizen assignee is entitled to an interest equivalent to that of a limited partner for the right to share in allocations and
distributions from us, including liquidating distributions. A non-citizen assignee does not have the right to direct the voting of his units and may not receive distributions in kind upon our
liquidation.
Indemnification
Under our partnership agreement, in most circumstances, we will indemnify the following persons, to the fullest extent permitted by law, from and against all losses, claims, damages or similar events:
(1) our general partner;
(2) any departing general partner;
(3) any person who is or was an affiliate of our general partner or any departing general partner;
(4) any person who is or was an officer, director, member, partner, fiduciary or trustee of any entity described in (1), (2) or (3) above;
(5) any person who is or was serving as an officer, director, member, partner, fiduciary or trustee of another person at the request of the general partner or any departing general partner; and
(6) any person designated by our general partner.
Any indemnification under these provisions will only be out of our assets. Unless it otherwise agrees, our general partner will not be personally liable for, or have any obligation to contribute or loan funds or assets to us to enable us to effectuate, indemnification. We
may purchase insurance against liabilities asserted against and expenses incurred by persons for our activities, regardless of whether we would have the power to indemnify the person against liabilities under the partnership agreement.
Reimbursement of Expenses
Our partnership agreement requires us to reimburse our general partner for all direct and indirect expenses it incurs or payments it makes on our behalf and all other expenses allocable to us or otherwise incurred by our general partner in connection with operating our
business. These expenses include salary, bonus, incentive compensation and other amounts paid to persons who perform services for us or on our behalf and expenses allocated to our general partner by its affiliates. The general partner is entitled to determine in good faith the
expenses that are allocable to us.
Books and Reports
Our general partner is required to keep appropriate books of our business at our principal offices. The books will be maintained for both tax and financial reporting purposes on an accrual basis. For tax reporting purposes, our fiscal year end is September 30. For fiscal
reporting purposes, our fiscal year is the calendar year.
We will furnish or make available to record holders of units, within 120 days after the close of each fiscal year, an annual report containing audited financial statements and a report on those financial statements by our independent public accountants. Except for our
fourth quarter, we will also furnish or make available summary financial information within 90 days after the close of each quarter.
We will furnish each record holder of a unit with information reasonably required for tax reporting purposes within 90 days after the close of each calendar year. This information is expected to be furnished in summary form so that some complex calculations normally
required of partners can be avoided. Our ability to furnish this summary information to unitholders will depend on the cooperation of unitholders in supplying us with specific information. Every unitholder will receive information to assist him in determining his federal and
state tax liability and filing his federal and state income tax returns, regardless of whether he supplies us with information.
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Right to Inspect Our Books and Records
A limited partner can, for a purpose reasonably related to the limited partner's interest as a limited partner, upon reasonable demand stating the purpose of such demand and at his own expense, obtain:
•
a current list of the name and last known address of each partner;
•
a copy of our tax returns;
•
information as to the amount of cash and a description and statement of the agreed value of any other property or services, contributed or to be contributed by each partner and the date on which each became a partner;
•
copies of our partnership agreement, our certificate of limited partnership, amendments to either of them and powers of attorney which have been executed under our partnership agreement;
•
information regarding the status of our business and financial condition; and
•
any other information regarding our affairs as is just and reasonable.
Our general partner may, and intends to, keep confidential from the limited partners trade secrets and other information the disclosure of which our general partner believes in good faith is not in our best interest or which we are required by law or by agreements with
third parties to keep confidential.
Registration Rights
Under our partnership agreement, we have agreed to register for resale under the Securities Act and applicable state securities laws any units or other partnership securities proposed to be sold by our general partner or any of its affiliates or their assignees if an
exemption from the registration requirements is not otherwise available. We are obligated to pay all expenses incidental to the registration, excluding underwriting discounts and commissions. Please read "Units Eligible for Future Sale."
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THE PARTNERSHIP AGREEMENT OF ATLAS PIPELINE PARTNERS, L.P.
The following is a summary of the material provisions of Atlas' partnership agreement.
Organization and Duration
Atlas was formed in May 1999. Atlas will dissolve on December 31, 2098, unless sooner dissolved under the terms of Atlas' partnership agreement.
Purpose
Atlas' purpose under its partnership agreement is limited to serving as the limited partner of its operating partnership and engaging in any business activity that may be engaged in by its operating partnership or that is approved by Atlas' general partner. The operating
partnership agreement provides that Atlas' operating partnership may, directly or indirectly, engage in:
•
operations as conducted on February 2, 2000, including the ownership and operation of Atlas' gathering systems;
•
any other activity approved by Atlas' general partner, but only to the extent that the general partner reasonably determines that, as of the date of the acquisition or commencement of the activity, the activity generates "qualifying income" as that term is defined in Section
7704 of the Internal Revenue Code; or
•
any activity that enhances the operations described above.
The Units
Atlas' common units represent limited partner interests in Atlas. The holders of units are entitled to participate in partnership distributions and exercise the rights or privileges available to limited partners under Atlas' partnership agreement.
Limited Voting Rights
Holders of Atlas' units have limited voting rights and generally are entitled to vote only with respect to the following matters:
•
a sale or exchange of all or substantially all of our assets;
•
our dissolution or reconstitution;
•
our merger; and
•
termination or material modification of the omnibus agreement or master natural gas gathering agreement.
Removal of Atlas' general partner requires a two-thirds vote of all outstanding common units, excluding those held by Atlas' general partner and its affiliates. Atlas' partnership agreement permits us generally to make amendments to it that do not materially adversely
affect unitholders without the approval of any unitholders.
Cash Distribution Policy
Quarterly Distributions of Available Cash
Atlas' operating partnership is required by the operating partnership agreement to distribute to Atlas, within 45 days of the end of each fiscal quarter, all of its available cash for that quarter. Atlas, in turn, distributes to its partners all of the available cash received from
its operating partnership for that quarter.
Available cash generally means, for any of Atlas' fiscal quarters, all cash on hand at the end of the quarter less cash reserves that the general partner of Atlas determines are appropriate to provide for Atlas' operating costs, including potential acquisitions, and to provide
funds for distributions to the partners for any
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one or more of the next four quarters. Atlas generally makes distributions of all available cash within 45 days after the end of each quarter to holders of record on the applicable record date.
Distributions of Available Cash from Operating Surplus
Cash distributions are characterized as distributions from either operating surplus or capital surplus. This distinction affects the amounts distributed to unitholders relative to Atlas' general partner.
Operating surplus means:
•
Atlas' cash balance, excluding cash constituting capital surplus, less
•
all of Atlas' operating expenses, debt service payments, maintenance costs, capital expenditures and reserves established for future operations.
Capital surplus means capital generated only by borrowings other than working capital borrowings, sales of debt and equity securities and sales or other dispositions of assets for cash, other than inventory, accounts receivable and other assets disposed of in the ordinary
course of business.
Atlas treats all available cash distributed from any source as distributed from operating surplus until the sum of all available cash distributed since Atlas began operations equals Atlas' total operating surplus from the date Atlas began operations until the end of the
quarter that immediately preceded the distribution. This method of cash distribution avoids the difficulty of trying to determine whether available cash is distributed from operating surplus or capital surplus. Atlas treats any excess available cash, irrespective of its source, as
capital surplus, which would represent a return of capital, and Atlas' general partner will distribute it accordingly. For a discussion of distributions from capital surplus, see "—Distributions from Capital Surplus" below.
Atlas distributes available cash from operating surplus for any quarter in the following manner:
•
first, 98% to all unitholders of Atlas, pro rata, and 2.0% to our subsidiary, Atlas Pipeline GP, as the general partner of Atlas, until Atlas has distributed $0.42 for each outstanding common unit; and
•
after that, in the manner described in "—Incentive Distribution Rights" below.
The 2.0% allocation of available cash from operating surplus to our subsidiary, as the general partner of Atlas, includes Atlas' general partner's percentage interest in distributions from Atlas and Atlas' operating partnership on a combined basis.
Adjusted operating surplus for any period generally means operating surplus generated during that period, less:
•
any net increase in working capital borrowings during that period and
•
any net reduction in cash reserves for operating expenditures during that period not relating to an operating expenditure made during that period,
and plus:
•
any net decrease in working capital borrowings during that period and
•
any net increase in cash reserves for operating expenditures during that period required by any debt instrument for the repayment of principal, interest or premium.
Operating surplus generated during a period is equal to the difference between:
•
the operating surplus determined at the end of that period and
•
the operating surplus determined at the beginning of that period.
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Incentive Distribution Rights
By "incentive distribution rights" we mean our right to receive an increasing percentage of quarterly distributions of available cash from operating surplus after Atlas has made the minimum quarterly distributions and Atlas has met specified target distribution levels, as
described below. We may transfer our incentive distribution rights separately from our general partner interest without the consent of the unitholders.
Atlas makes incentive distributions to us for any quarter in which it has distributed available cash from operating surplus to the common unitholders in an amount equal to the minimum quarterly distribution. If this condition is satisfied, the remaining available cash will
be distributed as follows:
•
first,
85.0% to all units, pro rata, 2.0% to the general partner and 13.0% to us, until a hypothetical unitholder has received a total of $0.52 per unit for that quarter, in addition to any distributions to common unitholders to eliminate any cumulative arrearages in payment of the
minimum quarterly distribution on the common units;
•
second,
75.0% to all units, pro rata, 2.0% to the general partner and 23.0% to us until a hypothetical unitholder has received a total of $0.60 per unit for that quarter, in addition to any distributions to common unitholders to eliminate any cumulative arrearages in payment of
the minimum quarterly distribution on the common units; and
•
after that,
50.0% to all units, pro rata, 2.0% to the general partner and 48% to us.
The distributions to us that exceed its aggregate 2.0% general partner interest represent the incentive distribution rights.
Distributions from Capital Surplus
Atlas distributes available cash from capital surplus in the following manner:
•
first,
98.0% to all units, pro rata, and 2.0% to the general partner, until each common unit issued in the initial public offering has received distributions equal to $13.00 per unit; and
•
after that,
Atlas will distribute all available cash from capital surplus, as if it were from operating surplus.
When Atlas makes a distribution from capital surplus, Atlas will treat it as if it were a repayment of a limited partner's investment in its common units. For these purposes, the partnership agreement deems the investment to be $13.00 per common unit, which is the unit
price from Atlas' initial public offering. To reflect this repayment, Atlas will reduce the amount of the minimum quarterly distribution and the distribution levels at which our incentive distribution rights begin, which we refer to in this prospectus as "target distribution levels,"
by multiplying each amount by a fraction, determined as follows:
•
the numerator is $13.00 less all distributions from capital surplus including the distribution just made, and
•
the denominator is $13.00 less all distributions from capital surplus excluding the distribution just made.
The initial public offering price of $13.00 per common unit, less any distributions from capital surplus, is referred to as the "unrecovered unit price."
After the minimum quarterly distribution and the target distribution levels have been reduced to zero, Atlas will treat all distributions of available cash from all sources as if they were from operating surplus. Because the minimum quarterly distribution and the target
distribution levels will have been reduced to zero, we will then be entitled to receive 48.0% of all distributions of available cash, in addition to any distributions to which we may be entitled as a holder of units.
Distributions from capital surplus will not reduce the minimum quarterly distribution or target distribution levels for the quarter in which they are distributed.
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Adjustment of Minimum Quarterly Distribution and Target Distribution Levels
In addition to adjustments made upon a distribution of available cash from capital surplus, Atlas will proportionately adjust each of the following upward or downward, as appropriate, if any combination or subdivision of units occurs:
•
the minimum quarterly distribution, the target distribution levels, or the unrecovered unit price,
•
the number of common units issuable upon conversion of the subordinated units, and
•
other amounts calculated on a per unit basis.
For example, if a two-for-one split of the common units occurs, Atlas will reduce the minimum quarterly distribution, the target distribution levels and the unrecovered initial unit price of the common units to 50% of their initial levels.
Atlas will not make any adjustment for the issuance of additional common units for cash or property.
Atlas may also adjust the minimum quarterly distribution and the target distribution levels if legislation is enacted or if existing law is modified or interpreted in a manner that causes Atlas or its operating partnership to become taxable as a corporation or otherwise
subject to taxation as an entity for federal, state or local income tax purposes. In this event, Atlas will reduce the minimum quarterly distribution and the target distribution levels for each quarter after that time to amounts equal to the product of:
•
the minimum quarterly distribution and each of the target distribution levels multiplied by,
•
one minus the sum of:
•
the highest marginal federal income tax rate which could apply to the partnership that is taxed as a corporation plus:
•
any increase in the effective overall state and local income tax rate that would have been applicable in the preceding calendar year as a result of the new imposition of the entity level tax, after taking into account the benefit of any deduction allowable for federal income tax
purposes for the payment of state and local income taxes, but only to the extent of the increase in rates resulting from that legislation or interpretation.
For example, assuming Atlas is not previously subject to state and local income tax, if Atlas became taxable as a corporation for federal income tax purposes and subject to a maximum marginal federal, and effective state and local, income tax rate of 40%, then Atlas
would reduce the minimum quarterly distribution and the target distribution levels to 60% of the amount immediately before the adjustment.
Distributions of Cash Upon Liquidation
When Atlas commences dissolution and liquidation, Atlas will sell or otherwise dispose of its assets and adjust the partners' capital account balances to reflect any resulting gain or loss. Atlas will first apply the proceeds of liquidation to the payment of our creditors in
the order of priority provided in Atlas' partnership agreement and by law. After that, Atlas will distribute the proceeds to the unitholders and our general partner in accordance with their capital account balances, as so adjusted.
Atlas maintains capital accounts in order to ensure that the partnership's allocations of income, gain, loss and deduction are respected under the Internal Revenue Code. The balance of a partner's capital account also determines how much cash or other property the
partner will receive on liquidation of the partnership. A partner's capital account is credited with (increased by) the following items:
•
the amount of cash and fair market value of any property (net of liabilities) contributed by the partner to the partnership; and
•
the partner's share of "book" income and gain (including income and gain exempt from tax).
A partner's capital account is debited with (reduced by) the following items:
•
the amount of cash and fair market value (net of liabilities) of property distributed to the partner; and
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•
the partner's share of loss and deduction (including some items not deductible for tax purposes).
Partners are entitled to liquidating distributions in accordance with their capital account balances.
Upon our liquidation, any gain, or unrealized gain attributable to assets distributed in kind, will be allocated to the partners in the following manner:
•
first,
to the general partner and the holders of units who have negative balances in their capital accounts to the extent of and in proportion to those negative balances;
•
second,
98% to the common units, pro rata, and 2.0% to the general partner, until the capital account for each common unit is equal to the sum of:
the unrecovered unit price, and the amount of the minimum quarterly distribution for the quarter during which our liquidation occurs;
•
third,
85% to all units, pro rata, 2.0% to the general partner and 13.0% to us, until there has been allocated under this paragraph an amount per unit equal to:
the excess of the $0.52 target distribution per unit over the minimum quarterly distribution per unit for each quarter of Atlas' existence less:
the cumulative amount per unit of any distribution of available cash from operating surplus in excess of the minimum quarterly distribution per unit that was distributed 85.0% to the units, pro rata, and 15% to us for each quarter of our existence;
•
fourth,
75.0% to all units, pro rata, 2.0% to the general partner and 23.0% to us, until there has been allocated under this paragraph an amount per unit equal to:
the excess of the $0.60 target distribution per unit over the $0.52 target distribution per unit for each quarter of our existence less:
the cumulative amount per unit of any distributions of available cash from operating surplus in excess of the first target distribution per unit that was distributed 75.0% to the units, pro rata, and 23.0% to us for each quarter of our existence; and
•
after that,
50.0% to all units, pro rata, 48.0% to us and 2.0% to our general partner.
Upon Atlas' liquidation, any loss will generally be allocated to us and the unitholders in the following manner:
•
first,
98.0% to the holders of common units in proportion to the positive balances in their capital accounts and 2.0% to us, until the capital accounts of the common unitholders have been reduced to zero; and
•
after that,
100.0% to us.
In addition, Atlas will make interim adjustments to the capital accounts at the time Atlas issues additional equity interests or makes distributions of property. Atlas will base these adjustments on the fair market value of the interests or the property distributed and Atlas
will allocate any gain or loss resulting from the adjustments to the unitholders and us in the same manner as Atlas allocates gain or loss upon liquidation. In the event that Atlas makes positive interim adjustments to the capital accounts, Atlas will allocate any later negative
adjustments to the capital accounts resulting from the issuance of additional equity interests, Atlas' distributions of property, or upon Atlas' liquidation, in a manner which results, to the extent possible, in the capital account balances of us equaling the amount which would
have been our general partner's capital account balances if we had not made any earlier positive adjustments to the capital accounts.
Power of Attorney
Each limited partner, and each person who acquires a unit from a unitholder and executes and delivers a transfer application, grants to the general partner and, if appointed, a liquidator, a power of attorney to, among other things, execute and file documents required for
our qualification, continuance or dissolution and
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the amendment of Atlas' partnership agreement, and to make consents and waivers under Atlas' partnership agreement.
Capital Contributions
Unitholders are not obligated to make additional capital contributions, except as described below under "—Limited Liability."
Limited Liability
So long as a limited partner does not participate in the control of Atlas' business within the meaning of the Delaware Revised Uniform Limited Partnership Act and otherwise acts in conformity with the provisions of Atlas' partnership agreement, the limited partner's
liability under the Delaware Act will be limited to the amount of capital he is obligated to contribute to us for his common units plus his share of any undistributed profits and assets. If it were determined that a limited partner participated in the control of Atlas' business, then
the limited partner could be held personally liable for Atlas' obligations under Delaware law to the same extent as the general partner. This liability would extend only to persons who transact business with Atlas who reasonably believe that the limited partner is a general
partner. However, what constitutes participating in the control of a limited partnership's business has not been clearly established in all states. If it were determined, for example, that the right, or exercise of a right, by the limited partners to:
•
remove Atlas' general partner;
•
approve some amendments to our partnership agreement; or
•
take other action under our partnership agreement;
constituted participation in the control of our business, then limited partners could be held liable for our obligations to the same extent as the general partner.
Under the Delaware Act, Atlas cannot make a distribution to a partner if, after the distribution, all its liabilities, other than liabilities to partners on account of their partnership interests and liabilities for which the recourse of creditors is limited to specific property,
exceed the fair value of Atlas' assets. For the purpose of determining the fair value of the assets of a limited partnership, the Delaware Act provides that the fair value of property subject to liability for which recourse of creditors is limited shall be included in the assets of the
limited partnership only to the extent that the fair value of that property exceeds the nonrecourse liability. The Delaware Act provides that a limited partner who receives a distribution and knew at the time of the distribution that the distribution was in violation of the Delaware
Act is liable to the limited partnership for the amount of the distribution for three years. Under the Delaware Act, an assignee who becomes a substituted limited partner is liable for the obligations of his assignor to make contributions to the partnership, except the assignee is
not obligated for liabilities unknown to him at the time he became a limited partner and which he could not ascertain from Atlas' partnership agreement.
Atlas' operating partnership currently conducts business in Arkansas, Missouri, New York, Ohio, Oklahoma, Pennsylvania and Texas. The limitations on the liability of limited partners for the obligations of a limited partnership have not been clearly established in many
jurisdictions. If it were determined that Atlas was, by virtue of its limited partner interest in its operating partnership or otherwise, conducting business in any state under the applicable limited partnership statute, or that the right or exercise of the right by the limited partners as
a group to remove or replace the general partner, to approve some amendments to our partnership agreement, or to take other action under Atlas' partnership agreement constituted "participation in the control" of Atlas' business for purposes of the statutes of any relevant
jurisdiction, then the limited partners could be held personally liable for Atlas' obligations under the law of that jurisdiction to the same extent as the general partner. Atlas operates in a manner we consider reasonable and appropriate to preserve the limited liability of the
limited partners.
Transfer Agent and Registrar
American Stock Transfer and Trust Company is our registrar and transfer agent for the common units. Atlas pays all fees charged by the transfer agent for transfers of common units, except that the following fees must be paid by unitholders:
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•
surety bond premiums to replace lost or stolen certificates, taxes and other governmental charges;
•
special charges for services requested by a holder of a common unit; and
•
other similar fees or charges.
There is no charge to unitholders for disbursements of cash distributions.
Atlas will indemnify the transfer agent, its agents and each of their particular shareholders, directors, officers and employees against all claims and losses that may arise out of acts performed or omitted in its capacity as Atlas' transfer agent, except for any liability due
to any negligence, gross negligence, bad faith or intentional misconduct of the indemnified person or entity.
Transfer of Common Units
The transfer agent will not record a transfer of common units, and Atlas will not recognize the transfer, unless the transferee executes and delivers a transfer application. The form of transfer application appears on the reverse side of the certificates representing the
common units. By executing and delivering a transfer application, the transferee of common units:
•
becomes the record holder of the common units and is an assignee until admitted as a substituted limited partner;
•
automatically requests admission as a substituted limited partner;
•
agrees to be bound by the terms and conditions of our partnership agreement;
•
represents that the transferee has the capacity, power and authority to enter into Atlas' partnership agreement;
•
grants powers of attorney to officers of our general partner and our liquidator, as specified in Atlas' partnership agreement; and
•
makes the consents and waivers contained in Atlas' partnership agreement.
An assignee will become a substituted limited partner as to the transferred common units upon the consent of the general partner and the recordation of the name of the assignee on the general partner's books and records. The general partner may withhold its consent in
its sole discretion.
A transferee's broker, agent or nominee may complete, execute and deliver the transfer applications. Atlas is entitled to treat the nominee holder of a common unit as the absolute owner. In that case, the beneficial holder's rights are limited solely to those that it has
against the nominee holder as a result of any agreement between the beneficial owner and the nominee holder.
Common units are securities and are transferable according to the laws governing transfer of securities. In addition to the rights acquired upon transfer, the transferor gives the transferee the right to request admission as a substituted limited partner. A purchaser or
transferee of common units who does not execute and deliver a transfer application will have only:
•
the right to assign the common units to a purchaser or other transferee; and
•
the right to transfer the right to seek admission as a substituted limited partner.
Thus, a purchaser or transferee of common units who does not execute and deliver a transfer application will not receive:
•
cash distributions or federal income tax allocations unless the common units are held in a nominee or "street name" account and the nominee or broker has executed and delivered a transfer application; and
•
may not receive federal income tax information or reports furnished to record holders of common units.
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The transferor of common units must provide the transferee with all information necessary to transfer the common units. The transferor will not be required to insure the execution of the transfer application by the transferee and will have no liability or responsibility if
the transferee neglects or chooses not to execute and forward the transfer application to the transfer agent. See "—Status as Limited Partner or Assignee."
Until a common unit has been transferred on Atlas' books, Atlas and the transfer agent may treat the record holder of the unit as the absolute owner for all purposes, except as otherwise required by law or stock exchange regulations, even if Atlas or the transfer agent
has notice of an attempted transfer.
Issuance of Additional Securities
Atlas' partnership agreement authorizes it to issue an unlimited number of additional limited partner interests, debt and other securities for the consideration and on the terms and conditions established by the general partner in its sole discretion without the approval of
any limited partners. Atlas has funded, and will likely continue to fund, acquisitions through the issuance of additional common units or other equity securities. Holders of any additional common units Atlas issues will be entitled to share equally with the then-existing holders
of common units in Atlas' distributions of available cash. In addition, the issuance of additional partnership interests may dilute the value of the interests of the then-existing holders of common units in our net assets.
In accordance with Delaware law and the provisions of Atlas' partnership agreement, Atlas may also issue additional partnership securities that, in the sole discretion of the general partner, may have special voting rights to which the common units are not entitled.
Upon issuance of additional partnership securities, the general partner must make additional capital contributions to the extent necessary to maintain its combined 2.0% general partner interest in Atlas and in Atlas' operating partnership. We will be required to make
corresponding capital contributions to the general partner. Moreover, the general partner will have the right, which it may from time to time assign in whole or in part to us or to any of our affiliates, to purchase common units, subordinated units or other equity securities,
whenever, and on the same terms that, Atlas issues those securities to persons other than the general partner and its affiliates, to the extent necessary to maintain its percentage interest that existed immediately before each issuance. The holders of common units will not have
preemptive rights to acquire additional common units or other partnership interests.
Amendment of Atlas' Partnership Agreement
Amendments to Atlas' partnership agreement may be proposed only by or with the consent of the general partner, which the general partner may withhold in its sole discretion. In order to adopt a proposed amendment, other than the amendments discussed in "—No
Unitholder Approval" below, the general partner must seek written approval of the holders of the number of units required to approve the amendment or call a meeting of the limited partners to consider and vote upon the proposed amendment.
Prohibited Amendments
No amendment may be made that would:
•
change the percentage of outstanding units required to take partnership action, unless approved by the affirmative vote of unitholders constituting at least the voting requirement sought to be reduced;
•
enlarge the obligations of any limited partner without its consent, unless approved by at least a majority of the type or class of limited partner interests so affected;
•
enlarge the obligations of, restrict in any way any action by or rights of, or reduce in any way the amounts distributable, reimbursable or otherwise payable to the general partner or any of its affiliates without its consent, which may be given or withheld in its sole discretion;
•
change Atlas' term;
•
provide that Atlas is not dissolved upon the expiration of its term or upon an election to dissolve it by us as the general partner that is approved by holders of a majority of the units of each class; or
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•
give any person the right to dissolve Atlas other than the general partner's right to dissolve Atlas with the approval of holders of a majority of the units of each class.
The provision of Atlas' partnership agreement preventing the amendments having the effects described above can be amended upon the approval of the holders of at least 90% of the outstanding units voting together as a single class.
No Unitholder Approval
The general partner may amend Atlas' partnership agreement, without the approval of the unitholders, to:
•
change Atlas' name, the location of its principal place of business, its registered agent or registered office;
•
reflect the admission, substitution, withdrawal or removal of partners in accordance with Atlas' partnership agreement;
•
qualify Atlas or continue its qualification as a limited partnership under the laws of any state or to ensure that neither Atlas nor its operating partnership will be taxed as a corporation or otherwise taxed as an entity for federal income tax purposes;
•
prevent Atlas or the general partner, or its directors, officers, agents or trustees, from being subject to the provisions of the Investment Advisers Act of 1940 or "plan asset" regulations adopted under the Employee Retirement Income Security Act of 1974;
•
authorize additional limited or general partner interests;
•
reflect changes required by a merger agreement that has been approved under the terms of Atlas' partnership agreement;
•
permit Atlas to form or invest in any entity, other than the operating partnership, permitted by its partnership agreement;
•
change Atlas' fiscal year or taxable year; and
•
make other changes substantially similar to any of the matters described above.
In addition, the general partner may amend Atlas' partnership agreement, without the approval of the unitholders, if those amendments:
•
do not adversely affect the limited partners in any material respect;
•
are necessary to satisfy any requirements or guidelines contained in any opinion, directive, order, ruling or regulation of any federal or state agency or judicial authority or contained in any federal or state statute;
•
are necessary to facilitate the trading of limited partner interests or to comply with any rule or guideline of any securities exchange or interdealer quotation system on which the limited partner interests are or will be listed for trading;
•
are necessary for any action taken by the general partner relating to splits or combinations of units; or
•
are required to effect the intent expressed in this prospectus or the intent of the provisions of Atlas' partnership agreement or are otherwise contemplated by Atlas' partnership agreement.
Opinion of Counsel and Unitholder Approval
Except in the case of the amendments described above under "—No Unitholder Approval," amendments to Atlas' partnership agreement will not become effective without the approval of holders of at least 90% of the units unless Atlas obtains an opinion of counsel to
the effect that the amendment will not affect the limited liability under applicable law of any limited partner or cause Atlas or Atlas' operating partnership to be taxable as a corporation or otherwise to be taxed as an entity for federal income tax purposes (to the extent not
previously taxed as such). Subject to obtaining the opinion of counsel, any amendment that would have a material adverse effect on the rights or preferences of any type or class of outstanding units in relation
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to other classes of units will require the approval of at least a majority of the type or class of units so affected.
Merger, Sale or Other Disposition of Assets of Atlas
The general partner may not, without the prior approval of holders of a majority of the outstanding units of each class, sell, exchange or otherwise dispose of all or substantially all of Atlas' assets, including by way of merger, consolidation or other combination, or
approve on behalf of Atlas the sale, exchange or other disposition of all or substantially all of the assets of Atlas' operating partnership. However, the general partner may mortgage or otherwise grant a security interest in all or substantially all of its assets or sell all or
substantially all of Atlas' assets under a foreclosure without that approval. Furthermore, provided that conditions specified in Atlas' partnership agreement are satisfied, the general partner may merge Atlas or any of its subsidiaries into, or convey some or all of Atlas' and its
subsidiaries assets to, a newly formed entity if the sole purpose of that merger or conveyance changes our legal form into another limited liability entity.
The unitholders are not entitled to dissenters' rights of appraisal in the event of a merger, consolidation, sale of substantially all of our assets or any other transaction or event.
Termination and Dissolution
Atlas will continue until December 31, 2098, unless terminated sooner upon:
•
the election of the general partner to dissolve Atlas, if approved by the holders of a majority of the outstanding units of each class;
•
the sale, exchange or other disposition of all or substantially all of Atlas' assets and those of its operating partnership;
•
the entry of a decree of judicial dissolution of Atlas; or
•
the withdrawal or removal of the general partner or any other event that results in Atlas Pipeline GP ceasing to be Atlas' general partner other than the transfer of its general partner interest in accordance with Atlas' partnership agreement or withdrawal or removal following
approval and admission of a successor.
Upon a dissolution under the last item above, the holders of a majority of the units of each class may also elect, within specific time limitations, to reconstitute Atlas by forming a new limited partnership on terms identical to those in Atlas' partnership agreement and
having as general partner an entity approved by the holders of a majority of the units of each class subject to Atlas' receipt of an opinion of counsel to the effect that:
•
the action would not result in the loss of limited liability of any limited partner; and
•
Atlas, the reconstituted limited partnership, and the operating partnership would not be taxed as a corporation or otherwise be taxed as an entity for federal income tax purposes upon the exercise of that right to continue.
Liquidation and Distribution of Proceeds
Unless the general partner is reconstituted and continues as a new limited partnership, upon liquidation the liquidator will liquidate Atlas' assets and apply the proceeds of the liquidation as described in "—Cash Distribution Policy—Distributions of Cash Upon
Liquidation." The liquidator may defer liquidation or distribution of Atlas' assets for a reasonable period of time or distribute assets to partners in kind if it determines that a sale would be impractical or would cause undue loss to the partners.
Withdrawal or Removal of Atlas' General Partner
Atlas' general partner may withdraw as Atlas' general partner without first obtaining approval from the unitholders by giving 90 days' written notice. Atlas' general partner may also sell or otherwise transfer all of its general partner interests in Atlas without the approval
of the unitholders as described below under "—Transfer of General Partner Interest and Incentive Distribution Rights." Upon withdrawal, Atlas must
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reimburse the general partner for all expenses incurred by it on Atlas' behalf or allocable to Atlas in connection with operating its business.
If the general partner withdraws, other than as a result of a transfer of all or a part of its general partner interests in Atlas, the holders of a majority of the units may elect a successor to the withdrawing general partner. If a successor is not elected, or is elected but an
opinion of counsel regarding limited liability and tax matters cannot be obtained, Atlas will be dissolved and liquidated, unless within 180 days after that withdrawal the holders of a majority of the units agree in writing to continue Atlas' business and to appoint a successor
general partner.
The general partner may not be removed except by the vote of the holders of at least 66 2/3% of the outstanding common units, excluding common units held by the general partner and its affiliates, and Atlas receives an opinion of counsel regarding limited liability and
tax matters. Any removal is also subject to the approval of a successor general partner by the vote of the holders of a majority of the common units, excluding common units held by us as the general partner and our affiliates. If the general partner is removed under
circumstances where cause does not exist and does not consent to that removal:
•
the agreement of Atlas America to connect wells to Atlas' gathering systems will terminate;
•
the master natural gas gathering agreement with Atlas America will not apply to any future wells drilled by Atlas America although it will continue as to wells connected to the gathering system at the time of removal;
•
the obligations of Atlas America to provide assistance for the extension of Atlas' gathering systems and in the identification and acquisition of gathering systems from third parties will terminate; and
•
the general partner will have the right to convert its general partner interests and incentive distribution rights into common units or to receive cash in exchange for those interests from the successor general partner.
Atlas' partnership agreement defines "cause" as existing where a court has rendered a final, non-appealable judgment that the general partner has committed fraud, gross negligence or willful or wanton misconduct in its capacity as general partner.
Withdrawal or removal of the general partner as Atlas' general partner also constitutes withdrawal or removal as the general partner of Atlas' operating partnership.
In the event of removal of the general partner under circumstances where cause exists or a withdrawal of the general partner that violates Atlas' partnership agreement, a successor general partner will have the option to purchase the general partner interests and incentive
distribution rights of the departing general partner for a cash payment equal to the fair market value of those interests. Under all other circumstances where the general partner withdraws or is removed, the departing general partner will have the option to require the successor
general partner to purchase those interests for their fair market value. In each case, fair market value will be determined by agreement between the departing general partner and the successor general partner. If they cannot reach an agreement, an independent expert selected by
the departing general partner and the successor general partner will determine the fair market value. If the departing general partner and the successor general partner cannot agree on an expert, then an expert chosen by agreement of the experts selected by each of them will
determine the fair market value. If the purchase option is not exercised by either the departing general partner or the successor general partner, the general partner interests and incentive distribution rights will automatically convert into common units equal to the fair market
value of those interests. The successor general partner must indemnify the departing general partner (or its transferee) from all of Atlas' debt and liability arising on or after the date on which the departing general partner becomes a common unitholder as a result of the
conversion. Except for this limited indemnity right and the right of the departing general partner to receive distributions on its common units, no other payments will be made to Atlas' general partner after withdrawal.
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Transfer of General Partner Interest And Incentive Distribution Rights
Atlas' general partner may transfer all or any part of its general partner interest without obtaining the consent of the unitholders. As a condition to the transfer of a general partner interest, the transferee must assume the rights and duties of the general partner to whose
interest it has succeeded, furnish an opinion of counsel regarding limited liability and tax matters, agree to acquire all of the general partner's interest in Atlas' operating partnership and agree to be bound by the provisions of the partnership agreement of our operating
partnership.
The general partner's members may sell or transfer all or part of their interest in the general partner to an affiliate without the approval of the unitholders. Atlas America and its affiliates have agreed that they will not divest their interest in the general partner without
also divesting to the same acquirer their ownership interest in subsidiaries which act as the general partner of oil and gas investment partnerships sponsored by them.
Atlas Pipeline GP or a later holder may transfer its incentive distribution rights to an affiliate or another person as part of its merger or consolidation with or into, or sale of all or substantially all of our assets to, that person without the prior approval of the unitholders.
However, the transferee must agree to be bound by the provisions of Atlas' partnership agreement.
Change of Management Provisions
Atlas' partnership agreement contains specific provisions that are intended to discourage a person or group from attempting to remove Atlas' general partner or otherwise change management. If any person or group other than Atlas Pipeline GP and its affiliates acquires
beneficial ownership of 20% or more of any class of units, that person or group will lose voting rights on all of its units and the units will not be considered outstanding for the purposes of noticing meetings, determining the presence of a quorum, calculating required votes and
other similar matters. In addition, the removal of the general partner under circumstances where cause does not exist and the general partner does not consent to that removal has the adverse consequences described under "—Withdrawal or Removal of Atlas' General Partner."
Limited Call Right
If at any time not more than 20% of the outstanding limited partner interests of any class are held by persons other than the general partner and its affiliates, the general partner will have the right, which it may assign in whole or in part to any of its affiliates or to Atlas,
to acquire all, but not less than all, of the remaining limited partner interests of the class held by unaffiliated persons as of a record date selected by the general partner on at least 10 but not more than 60 days' notice. The purchase price is the greater of:
•
the highest cash price paid by the general partner or any of its affiliates for any limited partner interests of the class purchased within the 90 days preceding the date on which the general partner first mails notice of its election to purchase those limited partner interests; and
•
the current market price as of the date three days before the date the notice is mailed.
As a result of the general partner's right to purchase outstanding limited partner interests, a holder of limited partner interests may have his limited partner interests purchased at an undesirable time or price. The tax consequences to a unitholder of the exercise of this
call right are the same as a sale by that unitholder of his common units in the market.
Meetings; Voting
Except as described above under "—Change of Management Provisions," unitholders or assignees who are record holders of units on a record date will be entitled to notice of, and to vote at, meetings of Atlas' limited partners and to act upon matters for which
approvals may be solicited. Common units that are owned by an assignee who is a record holder, but who has not yet been admitted as a substituted limited partner, will be voted by the general partner at the written direction of the record holder. Absent direction of this kind,
the common units will not be voted, except that, in the case of common units held by the general partner on behalf of non-citizen assignees, the general partner will distribute the votes on those common units in the same ratios as the votes of limited partners on other units are
cast.
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Any action to be taken by the unitholders may be taken either at a meeting of the unitholders or without a meeting if consents in writing describing the action so taken are signed by holders of the same number of units as would be necessary to take the action. Meetings
of the unitholders may be called by the general partner or by unitholders owning at least 20% of the outstanding units of the class for which a meeting is proposed. Unitholders may vote either in person or by proxy at meetings. The holders of a majority of the outstanding
units of the class or classes for which a meeting has been called, represented in person or by proxy, will constitute a quorum unless any action by the unitholders requires approval by holders of a greater percentage of the units, in which case the quorum will be the greater
percentage.
Except as described above under "—Change of Management Provisions," each record holder will have a vote in accordance with his percentage interest, although additional limited partner interests having different voting rights could be issued. See "—Issuance of
Additional Securities." Common units held in nominee or street name account will be voted by the broker or other nominee in accordance with the instruction of the beneficial owner.
Atlas or the transfer agent will deliver any notice, report or proxy material required or permitted to be given or made to record holders of common units under Atlas' partnership agreement to the record holder.
Status as Limited Partner or Assignee
The common units will be fully paid, and, except as described above under "—Limited Liability," unitholders will not be required to make additional contributions.
An assignee of a common unit, after executing and delivering a transfer application, but pending its admission as a substituted limited partner, is entitled to an interest equivalent to that of a limited partner sharing in allocations and distributions, including liquidating
distributions. The general partner will vote and exercise other powers attributable to common units owned by an assignee who has not become a substituted limited partner at the written direction of the assignee. See "—Meetings; Voting." Atlas will not treat transferees who
do not execute and deliver a transfer application as assignees or as record holders of common units, and they will not receive cash distributions, federal income tax allocations or reports furnished to record holders. See "—Transfer of Common Units."
Non-Citizen Assignees; Redemption
If Atlas is or becomes subject to federal, state or local laws or regulations that, in the reasonable determination of us as the general partner, create a substantial risk of cancellation or forfeiture of any property in which Atlas has an interest because of the nationality,
citizenship or related status of any limited partner or assignee, Atlas may redeem the units held by the limited partner or assignee at their current market price. In order to avoid any cancellation or forfeiture, Atlas may require each limited partner or assignee to furnish
information about his nationality, citizenship or related status. If a limited partner or assignee fails to furnish this information within 30 days after a request for it, or Atlas determines after receipt of the information that the limited partner or assignee is not an eligible citizen,
then the limited partner or assignee may be treated as a non-citizen assignee. In addition to other limitations on the rights of an assignee who is not a substituted limited partner, a non-citizen assignee does not have the right to direct the voting of his units and may not receive
distributions in kind upon Atlas' liquidation.
Indemnification
Under the partnership agreement, Atlas will indemnify the following persons, by reason of their status as such, to the fullest extent permitted by law, from and against all losses, claims or damages arising out of or incurred in connection with Atlas' business:
•
the general partner;
•
any departing general partner;
•
any person who is or was an affiliate of the general partner or any departing general partner;
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•
any person who is or was a member, partner, officer, director, employee, agent or trustee of the general partner, any departing general partner or the operating partnership or any affiliate of a general partner, any departing general partner or the operating partnership; or
•
any person who is or was serving at the request of a general partner or any departing general partner or any affiliate of a general partner or any departing general partner as an officer, director, employee, member, partner, agent, fiduciary or trustee of another person.
Atlas' indemnification obligation arises only if the indemnified person acted in good faith and in a manner the person reasonably believed to be in, and not opposed to, Atlas' best interests. With respect to criminal proceedings, the indemnified person must not have had
reasonable cause to believe that the conduct was unlawful.
Any indemnification under these provisions will be only out of Atlas' assets. Atlas' general partner will not be personally liable for the indemnification obligations and will not have any obligation to contribute or loan funds to Atlas in connection with it. The partnership
agreement permits Atlas to purchase insurance against liabilities asserted against and expenses incurred by persons for Atlas' activities, regardless of whether Atlas would have the power to indemnify the person against liabilities under the partnership agreement.
Books and Reports
The general partner keeps appropriate books on Atlas' business at Atlas' principal offices. The books are maintained for both tax and financial reporting purposes on an accrual basis. For tax purposes, our fiscal year end is September 30. For financial reporting purposes,
our fiscal year is the calendar year.
Atlas furnishes or makes available to record holders of common units, within 120 days after the close of each fiscal year, an annual report containing audited financial statements and a report on those financial statements by Atlas' independent public accountants. Except
for its fourth quarter, Atlas also furnishes or makes available summary financial information within 90 days after the close of each quarter.
Atlas furnishes each record holder information reasonably required for tax reporting purposes within 90 days after the close of each calendar year. Atlas expects to furnish information in summary form so that some complex calculations normally required of partners can
be avoided. Atlas' ability to furnish this summary information to unitholders depends on the cooperation of unitholders in supplying it with specific information. Atlas will furnish every unitholder with information to assist him in determining his federal and state tax liability
and filing his federal and state income tax returns, regardless of whether he supplies Atlas with information.
Right to Inspect Our Books and Records
Atlas' partnership agreement provides that a limited partner can, for a purpose reasonably related to his interest as a limited partner, upon reasonable demand and at his own expense, have furnished to him:
•
a current list of the name and last known address of each partner;
•
a copy of Atlas' tax returns;
•
information as to the amount of cash, and a description and statement of the agreed value of any other property or services, contributed or to be contributed by each partner and the date on which each became a partner;
•
copies of Atlas' partnership agreement, the certificate of limited partnership and related amendments and powers of attorney under which they have been executed;
•
information regarding the status of our business and financial condition; and
•
other information regarding our affairs that is just and reasonable.
The general partner may keep confidential from the limited partners trade secrets or other information the disclosure of which general partner believes in good faith is not in Atlas' best interests or which Atlas is required by law or by agreements with third parties to
keep confidential.
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Registration Rights
Under the partnership agreement, Atlas has agreed to register for resale under the Securities Act and applicable state securities laws any common units, subordinated units or other partnership securities proposed to be sold by the general partner or any of our affiliates if
an exemption from the registration requirements is not otherwise available. Atlas is obligated to pay all expenses incidental to the registration, excluding underwriting discounts and commissions.
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UNITS ELIGIBLE FOR FUTURE SALE
After the sale of the common units offered hereby, management of our general partner will hold an aggregate of 17,500,000 common units, assuming no exercise of the underwriters' option to purchase additional units. The sale of these units could have an adverse
impact on the price of the common units or on any trading market that may develop.
The common units sold in the offering will generally be freely transferable without restriction or further registration under the Securities Act, except that any common units owned by an "affiliate" of ours may not be resold publicly except in compliance with the
registration requirements of the Securities Act or under an exemption under Rule 144 or otherwise. Rule 144 permits securities acquired by an affiliate of the issuer to be sold into the market in an amount that does not exceed, during any three-month period, the greater of:
•
1% of the total number of the securities outstanding; or
•
the average weekly reported trading volume of the common units for the four calendar weeks prior to the sale.
Sales under Rule 144 are also subject to specific manner of sale provisions, holding period requirements, notice requirements and the availability of current public information about us. A person who is not deemed to have been an affiliate of ours at any time during the
three months preceding a sale, and who has beneficially owned his common units for at least two years, would be entitled to sell common units under Rule 144 without regard to the public information requirements, volume limitations, manner of sale provisions and notice
requirements of Rule 144.
The partnership agreement does not restrict our ability to issue any partnership securities at any time. Any issuance of additional common units or other equity securities would result in a corresponding decrease in the proportionate ownership interest in us represented
by, and could adversely affect the cash distributions to and market price of, common units then outstanding. Please read "The Partnership Agreement of Atlas Pipeline Holdings, L.P.—Issuance of Additional Securities."
Under our partnership agreement, our general partner and its affiliates have the right to cause us to register under the Securities Act and state securities laws the offer and sale of any common units, subordinated units or other partnership securities that they hold. Subject
to the terms and conditions of our partnership agreement, these registration rights allow our general partner and its affiliates or their assignees holding any units or other partnership securities to require registration of any of these units or other partnership securities and to
include them in a registration by us of other units, including units offered by us or by any unitholder. Our general partner will continue to have these registration rights for two years following its withdrawal or removal as our general partner. In connection with any registration
of this kind, we will indemnify each unitholder participating in the registration and its officers, directors and controlling persons from and against any liabilities under the Securities Act or any state securities laws arising from the registration statement or prospectus. We will
bear all costs and expenses incidental to any registration, excluding any underwriting discounts and commissions. Except as described below, our general partner and its affiliates may sell their units or other partnership interests in private transactions at any time, subject to
compliance with applicable laws.
Our partnership, our general partner and the directors and executive officers of our general partner, have agreed not to sell any common units they beneficially own for a period of 180 days from the date of this prospectus. For a description of these lock-up provisions,
please read "Underwriting."
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MATERIAL TAX CONSEQUENCES
This section is a discussion of the material tax considerations that may be relevant to prospective unitholders who are individual citizens or residents of the United States and, unless otherwise noted in the following discussion, is the opinion of Vinson & Elkins L.L.P.,
tax counsel to the general partner and us, insofar as it relates to matters of United States federal income tax law and legal conclusions with respect to those matters. This section is based upon current provisions of the Internal Revenue Code, existing and proposed regulations
and current administrative rulings and court decisions, all of which are subject to change. Later changes in these authorities may cause the tax consequences to vary substantially from the consequences described below. Unless the context otherwise requires, references in this
section to "us" or "we" are references to Atlas Pipeline Holdings, L.P.
The following discussion does not comment on all federal income tax matters affecting us or the unitholders. Moreover, the discussion focuses on unitholders who are individual citizens or residents of the United States and has only limited application to corporations,
estates, trusts, nonresident aliens or other unitholders subject to specialized tax treatment, such as tax-exempt institutions, foreign persons, individual retirement accounts (IRAs), real estate investment trusts (REITs) or mutual funds. Accordingly, we urge each prospective
unitholder to consult, and depend on, his own tax advisor in analyzing the federal, state, local and foreign tax consequences particular to him of the ownership or disposition of common units.
All statements as to matters of law and legal conclusions, but not as to factual matters, contained in this section, unless otherwise noted, are the opinion of Vinson & Elkins L.L.P. and are based on the accuracy of the representations made by us.
No ruling has been or will be requested from the IRS regarding any matter affecting us or prospective unitholders. Instead, we will rely on opinions of Vinson & Elkins L.L.P. Unlike a ruling, an opinion of counsel represents only that counsel's best legal judgment and
does not bind the IRS or the courts. Accordingly, the opinions and statements made here may not be sustained by a court if contested by the IRS. Any contest of this sort with the IRS may materially and adversely impact the market for the common units and the prices at
which common units trade. In addition, the costs of any contest with the IRS, principally legal, accounting and related fees, will result in a reduction in cash available for distribution to our unitholders and our general partner and thus will be borne indirectly by our unitholders
and our general partner. Furthermore, the tax treatment of us, or of an investment in us, may be significantly modified by future legislative or administrative changes or court decisions. Any modifications may or may not be retroactively applied.
For the reasons described below, Vinson & Elkins L.L.P. has not rendered an opinion with respect to the following specific federal income tax issues: (1) the treatment of a unitholder whose common units are loaned to a short seller to cover a short sale of common
units (please read "Material Tax Consequences—Tax Consequences of Unit Ownership—Treatment of Short Sales"); (2) whether our monthly convention for allocating taxable income and losses is permitted by existing Treasury Regulations (please read "Material Tax
Consequences —Disposition of Common Units—Allocations Between Transferors and Transferees"); and (3) whether our method for depreciating Section 743 adjustments is sustainable in certain cases (please read "Material Tax Consequences—Tax Consequences of Unit
Ownership—Section 754 Election").
Partnership Status
A partnership is not a taxable entity and incurs no federal income tax liability. Instead, each partner of a partnership is required to take into account his share of items of income, gain, loss and deduction of the partnership in computing his federal income tax liability,
regardless of whether cash distributions are made to him by the partnership. Distributions by a partnership to a partner are generally not taxable unless the amount of cash distributed is in excess of the partner's adjusted basis in his partnership interest.
Section 7704 of the Internal Revenue Code provides that publicly traded partnerships will, as a general rule, be taxed as corporations. However, an exception, referred to as the "Qualifying Income Exception," exists with respect to publicly traded partnerships of which
90% or more of the gross income for every taxable year consists of "qualifying income." Qualifying income includes income and gains derived from the
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transportation, storage, processing and marketing of crude oil, natural gas and products thereof, including our allocable share of such income from Atlas. Other types of qualifying income
include interest (other than from a financial business), dividends, gains from the sale of real property and gains from the sale or other disposition of capital assets held for the production of
income that otherwise constitutes qualifying income. We estimate that less than      % of our current income is not qualifying income; however, this estimate could change from time to time.
Based upon and subject to this estimate, the factual representations made by us and the general partner and a review of the applicable legal authorities, Vinson & Elkins L.L.P. is of the opinion
that at least 90% of our current gross income constitutes qualifying income.
No ruling has been or will be sought from the IRS and the IRS has made no determination as to our status for federal income tax purposes or whether our operations generate "qualifying income" under Section 7704 of the Internal Revenue Code. Moreover, no ruling
has been or will be sought from the IRS and the IRS has made no determination as to Atlas' status for federal income tax purposes or whether its operations generate "qualifying income" under Section 7704 of the Internal Revenue Code. Instead, we will rely on the opinion
of Vinson & Elkins L.L.P. that, based upon the Internal Revenue Code, its regulations, published revenue rulings and court decisions and the representations described below, we will be classified as a partnership for federal income tax purposes.
In rendering its opinion, Vinson & Elkins L.L.P. has relied on factual representations made by us and our general partner. The representations made by us and our general partner upon which Vinson & Elkins L.L.P. has relied are:
(a)
Neither we, nor Atlas will elect to be treated as a corporation; and
(b)
For each taxable year, more than 90% of our gross income will be income that Vinson & Elkins L.L.P. has opined or will opine is "qualifying income" within the meaning of Section 7704(d) of the Internal Revenue Code.
If we fail to meet the Qualifying Income Exception, other than a failure that is determined by the IRS to be inadvertent and that is cured within a reasonable time after discovery, we will be treated as if we had transferred all of our assets, subject to liabilities, to a
newly formed corporation, on the first day of the year in which we fail to meet the Qualifying Income Exception, in return for stock in that corporation, and then distributed that stock to the unitholders in liquidation of their interests in us. This contribution and liquidation
should be tax-free to unitholders and us so long as we, at that time, do not have liabilities in excess of the tax basis of our assets. Thereafter, we would be treated as a corporation for federal income tax purposes.
If we were taxable as a corporation in any taxable year, either as a result of a failure to meet the Qualifying Income Exception or otherwise, our items of income, gain, loss and deduction would be reflected only on our tax return rather than being passed through to the
unitholders, and our net income would be taxed to us at corporate rates. Moreover, if Atlas were taxable as a corporation in any given year, our share of Atlas' items of income, gain, loss and deduction would not be passed through to us, and Atlas would pay tax on its income
at corporate rates. In addition, any distribution made to a unitholder would be treated as either taxable dividend income, to the extent of our current or accumulated earnings and profits, or, in the absence of earnings and profits, a nontaxable return of capital, to the extent of the
unitholder's tax basis in his common units, or taxable capital gain, after the unitholder's tax basis in his common units is reduced to zero. Accordingly, taxation of either us or Atlas as a corporation would result in a material reduction in a unitholder's cash flow and after-tax
return and thus would likely result in a substantial reduction of the value of the units.
The discussion below is based on Vinson & Elkins L.L.P.'s opinion that we and Atlas will be classified as a partnership for federal income tax purposes.
Limited Partner Status
Unitholders who have become limited partners of Atlas Pipeline Holdings, L.P. will be treated as partners of Atlas Pipeline Holdings, L.P. for federal income tax purposes. Also:
•
assignees who have executed and delivered transfer applications, and are awaiting admission as limited partners; and
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•
unitholders whose common units are held in street name or by a nominee and who have the right to direct the nominee in the exercise of all substantive rights attendant to the ownership of their common units will be treated as partners of Atlas Pipeline Holdings, L.P. for
federal income tax purposes.
As there is no direct authority addressing assignees of units who are entitled to execute and deliver transfer applications and thereby become entitled to direct the exercise of attendant rights, but who fail to execute and deliver transfer applications, Vinson & Elkins
L.L.P.'s opinion does not extend to those persons. Furthermore, a purchaser or other transferee of units who does not execute and deliver a transfer application may not receive some federal income tax information or reports furnished to record holders of units unless the units
are held in a nominee or street name account and the nominee or broker has executed and delivered a transfer application for those units.
A beneficial owner of common units whose units have been transferred to a short seller to complete a short sale would appear to lose his status as a partner with respect to those units for federal income tax purposes. Please read "Material Tax Consequences—Tax
Consequences of Unit Ownership—Treatment of Short Sales."
Income, gain, deductions or losses would not appear to be reportable by a unitholder who is not a partner for federal income tax purposes, and any cash distributions received by a unitholder who is not a partner for federal income tax purposes would therefore appear to
be fully taxable as ordinary income. These holders are urged to consult their own tax advisors with respect to their status as partners in Atlas Pipeline Holdings, L.P.
The references to "unitholders" in the discussion that follows are to persons who are treated as partners in Atlas Pipeline Holdings, L.P. for federal income tax purposes.
Tax Consequences of Unit Ownership
Flow-Through of Taxable Income
We will not pay any federal income tax. Instead, each unitholder will be required to report on his income tax return his share of our income, gains, losses and deductions without regard to whether corresponding cash distributions are received by him. Consequently, we
may allocate income to a unitholder even if he has not received a cash distribution. Each unitholder will be required to include in income his allocable share of our income, gains, losses and deductions for our taxable year ending with or within his taxable year. Our taxable
year ends on September 30.
Treatment of Distributions
Distributions by us to a unitholder generally will not be taxable to the unitholder for federal income tax purposes, except to the extent the amount of any such cash distribution exceeds his tax basis in his common units immediately before the distribution. Our cash
distributions in excess of a unitholder's tax basis generally will be considered to be gain from the sale or exchange of the common units, taxable in accordance with the rules described under "—Disposition of Common Units." Any reduction in a unitholder's share of our
liabilities for which no partner, including the general partner, bears the economic risk of loss, known as "nonrecourse liabilities," will be treated as a distribution of cash to that unitholder. To the extent our distributions cause a unitholder's "at risk" amount to be less than zero
at the end of any taxable year, he must recapture any losses deducted in previous years. Please read "Material Tax Consequences—Tax Consequences of Unit Ownership—Limitations on Deductibility of Losses."
A decrease in a unitholder's percentage interest in us because of our issuance of additional common units will decrease his share of our nonrecourse liabilities, and thus will result in a corresponding deemed distribution of cash. A non-pro rata distribution of money or
property may result in ordinary income to a unitholder, regardless of his tax basis in his common units, if the distribution reduces the unitholder's share of our "unrealized receivables," including depreciation recapture, and/or substantially appreciated "inventory items," both as
defined in the Internal Revenue Code, and collectively, "Section 751 Assets." To that extent, he will be treated as having been distributed his proportionate share of the Section 751 Assets and having exchanged those assets with us in return for the non-pro rata portion of the
actual distribution made to him. This latter deemed exchange will generally result in the unitholder's realization of ordinary income, which
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will equal the excess of (1) the non-pro rata portion of that distribution over (2) the unitholder's tax basis for the share of Section 751 Assets deemed relinquished in the exchange.
Ratio of Taxable Income to Distributions
We estimate that a purchaser of common units in this offering who owns those common units from the date of closing of this offering through the record date for distributions for the period ending      , will be allocated an amount of federal taxable income for that period
that will be      % or less of the cash distributed with respect to that period. We anticipate that after the taxable year ending      , the ratio of allocable taxable income to cash distributions to the unitholders will increase. Our ratio of taxable income to cash distributions will be
much greater than the ratio applicable to holders of common units of Atlas because remedial allocations of deductions to us from Atlas will be very limited and our ownership of incentive distribution rights will cause more taxable income to be allocated to us from Atlas.
Moreover, if Atlas is successful in increasing distributable cash flow over time, our income allocations from incentive distribution rights will increase, and, therefore, our ratio of taxable income to cash distributions will further increase. These estimates are based upon the
assumption that current rate of distributions from Atlas will approximate the amount required to make the initial quarterly distribution of $0.225 per common unit on all units and other assumptions with respect to capital expenditures, cash flow and anticipated cash
distributions. These estimates and assumptions are subject to, among other things, numerous business, economic, regulatory, competitive and political uncertainties beyond our control. Further, the estimates are based on current tax law and tax reporting positions that we will
adopt and with which the IRS could disagree. Accordingly, we cannot assure you that these estimates will prove to be correct. The actual ratio of taxable income could be higher or lower than our estimate of      %, and any differences could be material and could materially
affect the value of the common units. For example, the ratio of allocable taxable income to cash distributions to a purchaser of common units in this offering will be greater than      % with respect to the period described above if:
•
Atlas' gross income from operations exceeds the amount required to make the minimum quarterly distribution on all Atlas' units, yet Atlas only distributes the minimum quarterly distribution on all its units; or
•
Atlas makes a future offering of common units and uses the proceeds of the offering in a manner that does not produce substantial additional deductions during the period described above, such as to repay indebtedness outstanding at the time of this offering or to acquire
property that is not eligible for depreciation or amortization for federal income tax purposes or that is depreciable or amortizable at a rate significantly slower than the rate applicable to Atlas' assets at the time of this offering.
Basis of Common Units
A unitholder's initial tax basis for his common units will be the amount he paid for the common units plus his share of our nonrecourse liabilities. That basis will be increased by his share of our income and by any increases in his share of our nonrecourse liabilities.
That basis will be decreased, but not below zero, by distributions from us, by the unitholder's share of our losses, by any decreases in his share of our nonrecourse liabilities and by his share of our expenditures that are not deductible in computing taxable income and are not
required to be capitalized. A unitholder will have no share of our debt that is recourse to the general partner, but will have a share, generally based on his share of profits, of our nonrecourse liabilities. Please read "Material Tax Consequences—Disposition of Common
Units—Recognition of Gain or Loss."
Limitations on Deductibility of Losses
The deduction by a unitholder of his share of our losses will be limited to the tax basis in his units and, in the case of an individual unitholder or a corporate unitholder, if more than 50% of the value of the corporate unitholder's stock is owned directly or indirectly by
five or fewer individuals or some tax-exempt organizations, to the amount for which the unitholder is considered to be "at risk" with respect to our activities, if that is less than his tax basis. A unitholder must recapture losses deducted in previous years to the extent that
distributions cause his at risk amount to be less than zero at the end of any taxable year. Losses disallowed to a unitholder or recaptured as a result of these limitations will carry forward and will be allowable to the extent that his tax basis or at risk amount, whichever is the
limiting factor, is subsequently increased. Upon the taxable disposition of a unit, any gain recognized by a unitholder can be offset by losses
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that were previously suspended by the at risk limitation but may not be offset by losses suspended by the basis limitation. Any excess loss above that gain previously suspended by the at risk or
basis limitations is no longer utilizable.
In general, a unitholder will be at risk to the extent of the tax basis of his units, excluding any portion of that basis attributable to his share of our nonrecourse liabilities, reduced by any amount of money he borrows to acquire or hold his units, if the lender of those
borrowed funds owns an interest in us, is related to the unitholder or can look only to the units for repayment. A unitholder's at risk amount will increase or decrease as the tax basis of the unitholder's units increases or decreases, other than tax basis increases or decreases
attributable to increases or decreases in his share of our nonrecourse liabilities.
The passive loss limitations generally provide that individuals, estates, trusts and some closely-held corporations and personal service corporations can deduct losses from passive activities, which are generally corporate or partnership activities in which the taxpayer does
not materially participate, only to the extent of the taxpayer's income from those passive activities. As a general rule, the passive loss limitations are applied separately with respect to each publicly traded partnership. However, the application of the passive loss limitations to
tiered publicly traded partnerships is uncertain. We will take the position that any passive losses we generate that are reasonably allocable to our investment in Atlas will only be available to offset our passive income generated in the future that is reasonably allocable to our
investment in Atlas and will not be available to offset income from other passive activities or investments, including other investments in private businesses or investments we may make in other publicly traded partnerships. Moreover, because the passive loss limitations are
applied separately with respect to each publicly traded partnership, any passive losses we generate will not be available to offset your income from other passive activities or investments, including your investments in other publicly traded partnerships, such as Atlas, or salary
or active business income. Further, your share of our net income may be offset by any suspended passive losses from your investment in us, but may not be offset by our current or carryover losses from other passive activities, including those attributable to other publicly
traded partnerships. Passive losses that are not deductible because they exceed a unitholder's share of income we generate may be deducted in full when he disposes of his entire investment in us and Atlas in a fully taxable transaction with an unrelated party.
The IRS could take the position that for purposes of applying the passive loss limitation rules to tiered publicly traded partnerships, such as Atlas and us, the related entities are treated as one publicly traded partnership. In that case, any passive losses we generate would
be available to offset income from your investments in Atlas. However, passive losses that are not deductible because they exceed a unitholder's share of income we generate would not be deductible in full until a unitholder disposes of his entire investment in both us and
Atlas in a fully taxable transaction with an unrelated party.
The passive activity loss rules are applied after other applicable limitations on deductions, including the at risk rules and the basis limitation.
Limitations on Interest Deductions
The deductibility of a non-corporate taxpayer's "investment interest expense" is generally limited to the amount of that taxpayer's "net investment income." Investment interest expense includes:
•
interest on indebtedness properly allocable to property held for investment;
•
our interest expense attributed to portfolio income; and
•
the portion of interest expense incurred to purchase or carry an interest in a passive activity to the extent attributable to portfolio income.
The computation of a unitholder's investment interest expense will take into account interest on any margin account borrowing or other loan incurred to purchase or carry a unit. Net investment income includes gross income from property held for investment and
amounts treated as portfolio income under the passive loss rules, less deductible expenses, other than interest, directly connected with the production of investment income, but generally does not include gains attributable to the disposition of property held for investment. The
IRS has indicated that net passive income earned by a publicly traded partnership will be treated as
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investment income to its unitholders. In addition, the unitholder's share of our portfolio income will be treated as investment income.
Entity-Level Collections
If we are required or elect under applicable law to pay any federal, state, local or foreign income tax on behalf of any unitholder or the general partner or any former unitholder, we are authorized to pay those taxes from our funds. That payment, if made, will be treated
as a distribution of cash to the partner on whose behalf the payment was made. If the payment is made on behalf of a person whose identity cannot be determined, we are authorized to treat the payment as a distribution to all current unitholders. We are authorized to amend
the partnership agreement in the manner necessary to maintain uniformity of intrinsic tax characteristics of units and to adjust later distributions, so that after giving effect to these distributions, the priority and characterization of distributions otherwise applicable under the
partnership agreement is maintained as nearly as is practicable. Payments by us as described above could give rise to an overpayment of tax on behalf of an individual partner in which event the partner would be required to file a claim in order to obtain a credit or refund.
Allocation of Income, Gain, Loss and Deduction
In general, if we have a net profit, our items of income, gain, loss and deduction will be allocated to the unitholders in accordance with their percentage interests in us. If we have a net loss for the entire year, that loss will be allocated to the unitholders in accordance
with their percentage interests in us to the extent of their positive capital accounts and, second, to the general partner.
Specified items of our income, gain, loss and deduction will be allocated to account for the difference between the tax basis and fair market value of our assets at time of this offering, referred to in this discussion as "Contributed Property." The effect of these
allocations to a unitholder purchasing common units in this offering will be essentially the same as if the tax basis of our assets were equal to their fair market value at the time of this offering. In addition, items of recapture income will be allocated to the extent possible to
the partner who was allocated the deduction giving rise to the treatment of that gain as recapture income in order to minimize the recognition of ordinary income by some unitholders. Finally, although we do not expect that our operations will result in the creation of negative
capital accounts, if negative capital accounts nevertheless result, items of our income and gain will be allocated in such amount and manner as is needed to eliminate the negative balance as quickly as possible.
An allocation of items of our income, gain, loss or deduction, other than an allocation required by the Internal Revenue Code to eliminate the difference between a partner's "book" capital account, credited with the fair market value of Contributed Property, and "tax"
capital account, credited with the tax basis of Contributed Property, referred to in this discussion as the "Book-Tax Disparity," will generally be given effect for federal income tax purposes in determining a partner's share of an item of income, gain, loss or deduction only if
the allocation has substantial economic effect. In any other case, a partner's share of an item will be determined on the basis of his interest in us, which will be determined by taking into account all the facts and circumstances, including:
•
his relative contributions to us;
•
the interests of all the partners in profits and losses;
•
the interest of all the partners in cash flow; and
•
the rights of all the partners to distributions of capital upon liquidation.
Vinson & Elkins L.L.P. is of the opinion that, with the exception of the issues described in "—Tax Consequences of Unit Ownership—Section 754 Election" and "—Disposition of Common Units—Allocations Between Transferors and Transferees," allocations under our partnership agreement will be given effect for federal income tax purposes in determining a partner's share of an item of income, gain, loss or deduction.
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Treatment of Short Sales
A unitholder whose units are loaned to a "short seller" to cover a short sale of units may be considered as having disposed of those units. If so, he would no longer be treated for tax purposes as a partner with respect to those units during the period of the loan and may
recognize gain or loss from the disposition. As a result, during this period:
•
any of our income, gain, loss or deduction with respect to those units would not be reportable by the unitholder;
•
any cash distributions received by the unitholder as to those units would be fully taxable; and
•
all of these distributions would appear to be ordinary income.
Vinson & Elkins L.L.P. has not rendered an opinion regarding the treatment of a unitholder where common units are loaned to a short seller to cover a short sale of common units; therefore, unitholders desiring to assure their status as partners and avoid the risk of gain
recognition from a loan to a short seller are urged to modify any applicable brokerage account agreements to prohibit their brokers from borrowing their units. The IRS has announced that it is actively studying issues relating to the tax treatment of short sales of partnership
interests. Please also read "Material Tax Consequences—Disposition of Common Units—Recognition of Gain or Loss."
Alternative Minimum Tax
Each unitholder will be required to take into account his distributive share of any items of our income, gain, loss or deduction for purposes of the alternative minimum tax. The current minimum tax rate for noncorporate taxpayers is 26% on the first $175,000 of
alternative minimum taxable income in excess of the exemption amount and 28% on any additional alternative minimum taxable income. Prospective unitholders are urged to consult with their tax advisors as to the impact of an investment in units on their liability for the
alternative minimum tax.
Tax Rates
In general, the highest effective United States federal income tax rate for individuals is currently 35.0% and the maximum United States federal income tax rate for net capital gains of an individual is currently 15.0% if the asset disposed of was held for more than 12
months at the time of disposition.
Section 754 Election
We will make the election permitted by Section 754 of the Internal Revenue Code. That election is irrevocable without the consent of the IRS. The election will generally permit us to adjust a common unit purchaser's tax basis in our assets ("inside basis") under
Section 743(b) of the Internal Revenue Code to reflect his purchase price. This election does not apply to a person who purchases common units directly from us. The Section 743(b) adjustment belongs to the purchaser and not to other unitholders. For purposes of this
discussion, a unitholder's inside basis in our assets will be considered to have two components: (1) his share of our tax basis in our assets ("common basis") and (2) his Section 743(b) adjustment to that basis.
Treasury regulations under Section 743 of the Internal Revenue Code require, if the remedial allocation method is adopted (which we will adopt), a portion of the Section 743(b) adjustment attributable to recovery property to be depreciated over the remaining cost
recovery period for the Section 704(c) built-in gain. Under Treasury Regulation Section 1.167(c)-1(a)(6), a Section 743(b) adjustment attributable to property subject to depreciation under Section 167 of the Internal Revenue Code, rather than cost recovery deductions under
Section 168, is generally required to be depreciated using either the straight-line method or the 150% declining balance method. Under our partnership agreement, the general partner is authorized to take a position to preserve the uniformity of units even if that position is not
consistent with these Treasury Regulations. Please read "Material Tax Consequences—Uniformity of Units."
Although Vinson & Elkins L.L.P. is unable to opine as to the validity of this approach because there is no controlling authority on this issue, we intend to depreciate the portion of a Section 743(b) adjustment attributable to unrealized appreciation in the value of
Contributed Property, to the extent of any unamortized
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Book-Tax Disparity, using a rate of depreciation or amortization derived from the depreciation or amortization method and useful life applied to the common basis of the property, or treat that
portion as non-amortizable to the extent attributable to property the common basis of which is not amortizable. This method is consistent with the regulations under Section 743 of the Internal
Revenue Code but is arguably inconsistent with Treasury Regulation Section 1.167(c)-1(a)(6), which is not expected to directly apply to a material portion of our assets. To the extent this
Section 743(b) adjustment is attributable to appreciation in value in excess of the unamortized Book-Tax Disparity, we will apply the rules described in the Treasury Regulations and legislative
history. If we determine that this position cannot reasonably be taken, we may take a depreciation or amortization position under which all purchasers acquiring units in the same month would
receive depreciation or amortization, whether attributable to common basis or a Section 743(b) adjustment, based upon the same applicable rate as if they had purchased a direct interest in our
assets. This kind of aggregate approach may result in lower annual depreciation or amortization deductions than would otherwise be allowable to some unitholders. Please read "Material Tax
Consequences—Uniformity of Units."
A Section 754 election is advantageous if the transferee's tax basis in his units is higher than the units' share of the aggregate tax basis of our assets immediately prior to the transfer. In that case, as a result of the election, the transferee would have, among other items,
a greater amount of depreciation and depletion deductions and his share of any gain or loss on a sale of our assets would be less. Conversely, a Section 754 election is disadvantageous if the transferee's tax basis in his units is lower than those units' share of the aggregate tax
basis of our assets immediately prior to the transfer. Thus, the fair market value of the units may be affected either favorably or unfavorably by the election. A basis adjustment is required regardless of whether a Section 754 election is made in the case of a transfer of an
interest in us if we have a substantial built in loss immediately after the transfer or if we distribute property and have a substantial basis reduction. Generally, a built in loss or a basis reduction is substantial if it exceeds $250,000.
The calculations involved in the Section 754 election are complex and will be made on the basis of assumptions as to the value of our assets and other matters. For example, the allocation of the Section 743(b) adjustment among our assets must be made in accordance
with the Internal Revenue Code. The IRS could seek to reallocate some or all of any Section 743(b) adjustment allocated by us to our tangible assets or the tangible assets owned by Atlas to goodwill instead. Goodwill, as an intangible asset, is generally amortizable over a
longer period of time or under a less accelerated method than our tangible assets. We cannot assure you that the determinations we make will not be successfully challenged by the IRS and that the deductions resulting from them will not be reduced or disallowed altogether.
Should the IRS require a different basis adjustment to be made, and should, in our opinion, the expense of compliance exceed the benefit of the election, we may seek permission from the IRS to revoke our Section 754 election. If permission is granted, a subsequent purchaser
of units may be allocated more income than he would have been allocated had the election not been revoked.
Tax Treatment of Operations
Accounting Method and Taxable Year
We use the year ending September 30 as our taxable year and the accrual method of accounting for federal income tax purposes. Each unitholder will be required to include in income his share of our income, gain, loss and deduction for our taxable year ending within
or with his taxable year. In addition, a unitholder who has a taxable year ending on a date other than September 30 and who disposes of all of his units following the close of our taxable year but before the close of his taxable year must include his share of our income, gain,
loss and deduction in income for his taxable year, with the result that he will be required to include in income for his taxable year his share of more than one year of our income, gain, loss and deduction. Please read "Material Tax Consequences —Disposition of Common
Units—Allocations Between Transferors and Transferees."
Initial Tax Basis, Depreciation and Amortization
The tax basis of our assets and Atlas' assets will be used for purposes of computing depreciation and cost recovery deductions and, ultimately, gain or loss on the disposition of these assets. The tax basis of our assets we own at the time of this offering will be greater to
the extent such assets have been recently
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acquired. The federal income tax burden associated with the difference between the fair market value of our assets and Atlas' assets and their tax basis immediately prior to this offering will be
borne by our existing unitholders. Please read "Material Tax Consequences—Tax Consequences of Unit Ownership—Allocation of Income, Gain, Loss and Deduction."
To the extent allowable, we may elect to use the depreciation and cost
recovery methods that will result in the largest deductions being taken in the early years after
assets are placed in service. Property we subsequently acquire or construct may be depreciated
using accelerated methods permitted by the Internal Revenue Code.
If we or Atlas dispose of depreciable property by sale, foreclosure or otherwise, all or a portion of any gain, determined by reference to the amount of depreciation previously deducted and the nature of the property, may be subject to the recapture rules and taxed as
ordinary income rather than capital gain. Similarly, a unitholder who has taken cost recovery or depreciation deductions with respect to property we own or Atlas owns will likely be required to recapture some or all of those deductions as ordinary income upon a sale of his
interest in us. Please read "Material Tax Consequences—Tax Consequences of Unit Ownership—Allocation of Income, Gain, Loss and Deduction" and "Material Tax Consequences—Disposition of Common Units—Recognition of Gain or Loss."
The costs incurred in selling our units (called "syndication expenses") must be capitalized and cannot be deducted currently, ratably or upon our termination. There are uncertainties regarding the classification of costs as organization expenses, which may be amortized
by us, and as syndication expenses, which may not be amortized by us. The underwriting discounts and commissions we incur will be treated as syndication expenses.
Valuation and Tax Basis of Our Properties
The federal income tax consequences of the ownership and disposition of units will depend in part on our estimates of the relative fair market values, and the initial tax bases, of our assets and Atlas' assets. Although we may from time to time consult with professional
appraisers regarding valuation matters, we will make many of the relative fair market value estimates ourselves. These estimates and determinations of basis are subject to challenge and will not be binding on the IRS or the courts. If the estimates of fair market value or basis
are later found to be incorrect, the character and amount of items of income, gain, loss or deductions previously reported by unitholders might change, and unitholders might be required to adjust their tax liability for prior years and incur interest and penalties with respect to
those adjustments.
Disposition of Common Units
Recognition of Gain or Loss
Gain or loss will be recognized on a sale of units equal to the difference between the amount realized and the unitholder's tax basis for the units sold. A unitholder's amount realized will be measured by the sum of the cash or the fair market value of other property
received by him plus his share of our nonrecourse liabilities. Because the amount realized includes a unitholder's share of our nonrecourse liabilities, the gain recognized on the sale of units could result in a tax liability in excess of any cash received from the sale.
Prior distributions from us in excess of cumulative net taxable income for a common unit that decreased a unitholder's tax basis in that common unit will, in effect, become taxable income if the common unit is sold at a price greater than the unitholder's tax basis in
that common unit, even if the price received is less than his original cost.
Except as noted below, gain or loss recognized by a unitholder, other than a "dealer" in units, on the sale or exchange of a unit held for more than one year will generally be taxable as capital gain or loss. Capital gain recognized by an individual on the sale of units
held more than 12 months will generally be taxed at a maximum rate of 15%. However, a portion of this gain or loss will be separately computed and taxed as ordinary income or loss under Section 751 of the Internal Revenue Code to the extent attributable to assets giving
rise to depreciation recapture or other "unrealized receivables" or to "inventory items" we own or Atlas owns. The term "unrealized receivables" includes potential recapture items, including depreciation
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recapture. Ordinary income attributable to unrealized receivables, inventory items and depreciation recapture may exceed net taxable gain realized upon the sale of a unit and may be recognized
even if there is a net taxable loss realized on the sale of a unit. Thus, a unitholder may recognize both ordinary income and a capital loss upon a sale of units. Net capital losses may offset
capital gains and no more than $3,000 of ordinary income, in the case of individuals, and may only be used to offset capital gains in the case of corporations.
The IRS has ruled that a partner who acquires interests in a partnership in separate transactions must combine those interests and maintain a single adjusted tax basis for all those interests. Upon a sale or other disposition of less than all of those interests, a portion of
that tax basis must be allocated to the interests sold using an "equitable apportionment" method, which generally means that the tax basis allocated to the interest sold equals an amount that bears the same relation to the partner's tax basis in his entire interest in the partnership
as the value of the interest sold bears to the value of the partner's entire interest in the partnership. Treasury Regulations under Section 1223 of the Internal Revenue Code allow a selling unitholder who can identify common units transferred with an ascertainable holding
period to elect to use the actual holding period of the common units transferred. Thus, according to the ruling, a common unitholder will be unable to select high or low basis common units to sell as would be the case with corporate stock, but, according to the regulations,
may designate specific common units sold for purposes of determining the holding period of units transferred. A unitholder electing to use the actual holding period of common units transferred must consistently use that identification method for all subsequent sales or
exchanges of common units. A unitholder considering the purchase of additional units or a sale of common units purchased in separate transactions is urged to consult his tax advisor as to the possible consequences of this ruling and application of the regulations.
Specific provisions of the Internal Revenue Code affect the taxation of some financial products and securities, including partnership interests, by treating a taxpayer as having sold an "appreciated" partnership interest, one in which gain would be recognized if it were
sold, assigned or terminated at its fair market value, if the taxpayer or related persons enter(s) into:
•
a short sale;
•
an offsetting notional principal contract; or
•
a futures or forward contract with respect to the partnership interest or substantially identical property.
Moreover, if a taxpayer has previously entered into a short sale, an offsetting notional principal contract or a futures or forward contract with respect to the partnership interest, the taxpayer will be treated as having sold that position if the taxpayer or a related person
then acquires the partnership interest or substantially identical property. The Secretary of the Treasury is also authorized to issue regulations that treat a taxpayer that enters into transactions or positions that have substantially the same effect as the preceding transactions as
having constructively sold the financial position.
Allocations Between Transferors and Transferees
In general, our taxable income and losses will be determined annually, will be prorated on a monthly basis and will be subsequently apportioned among the unitholders in proportion to the number of units owned by each of them as of the opening of the applicable
exchange on the first business day of the month, which we refer to in this prospectus as the "Allocation Date." However, gain or loss realized on a sale or other disposition of our assets other than in the ordinary course of business will be allocated among the unitholders on
the Allocation Date in the month in which that gain or loss is recognized. As a result, a unitholder transferring units may be allocated income, gain, loss and deduction realized after the date of transfer.
The use of this method may not be permitted under existing Treasury Regulations as there is no controlling authority on the issue. Accordingly, Vinson & Elkins L.L.P. is unable to opine on the validity of this method of allocating income and deductions between
unitholders. If this method is not allowed under the Treasury Regulations, or only applies to transfers of less than all of the unitholder's interest, our taxable income or losses might be reallocated among the unitholders. We are authorized to revise our method of
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allocation between unitholders, as well as unitholders whose interests vary during a taxable year, to conform to a method permitted under future Treasury Regulations.
A unitholder who owns units at any time during a quarter and who disposes of them prior to the record date set for a cash distribution for that quarter will be allocated items of our income, gain, loss and deductions attributable to that quarter but will not be entitled to
receive that cash distribution.
Notification Requirements
A unitholder who sells any of his units other than through a broker generally is required to notify us in writing of that sale within 30 days after the sale (or, if earlier, January 15 of the year following the sale). A purchaser of units who purchases units from another
unitholder is generally required to notify us in writing of that purchase within 30 days after the purchase, unless a broker or nominee will satisfy such requirement. We are required to notify the IRS of that transaction and to furnish specified information to the transferor and
transferee. Failure to notify us of a purchase may, in some cases, lead to the imposition of penalties. However, these reporting requirements do not apply to a sale by an individual who is a citizen of the United States and who effects the sale or exchange through a broker.
Constructive Termination
We will be considered to have been terminated for tax purposes if there is a sale or exchange of 50% or more of the total interests in our capital and profits within a 12-month period. A constructive termination results in the closing of our taxable year for all unitholders.
In the case of a unitholder reporting on a taxable year other than a fiscal year ending September 30, the closing of our taxable year may result in more than 12 months of our taxable income or loss being includable in his taxable income for the year of termination. We would
be required to make new tax elections after a termination, including a new election under Section 754 of the Internal Revenue Code, and a termination would result in a deferral of our deductions for depreciation. A termination could also result in penalties if we were unable to
determine that the termination had occurred. Moreover, a termination might either accelerate the application of, or subject us to, any tax legislation enacted before the termination.
Uniformity of Units
Because we cannot match transferors and transferees of units, we must maintain uniformity of the economic and tax characteristics of the units to a purchaser of these units. In the absence of uniformity, we may be unable to completely comply with a number of federal
income tax requirements, both statutory and regulatory. A lack of uniformity can result from a literal application of Treasury Regulation Section 1.167(c)-1(a)(6). Any non-uniformity could have a negative impact on the value of the units. Please read "Material Tax
Consequences—Tax Consequences of Unit Ownership—Section 754 Election."
We intend to depreciate the portion of a Section 743(b) adjustment attributable to unrealized appreciation in the value of Contributed Property, to the extent of any unamortized Book-Tax Disparity, using a rate of depreciation or amortization derived from the
depreciation or amortization method and useful life applied to the common basis of that property, or treat that portion as nonamortizable, to the extent attributable to property the common basis of which is not amortizable, consistent with the regulations under Section 743 of
the Internal Revenue Code, even though that position may be inconsistent with Treasury Regulation Section 1.167(c)-1(a)(6), which is not expected to directly apply to a material portion of our assets. Please read "Material Tax Consequences—Tax Consequences of Unit
Ownership—Section 754 Election." To the extent that the Section 743(b) adjustment is attributable to appreciation in value in excess of the unamortized Book-Tax Disparity, we will apply the rules described in the Treasury Regulations and legislative history. If we determine
that this position cannot reasonably be taken, we may adopt a depreciation and amortization position under which all purchasers acquiring units in the same month would receive depreciation and amortization deductions, whether attributable to a common basis or Section
743(b) adjustment, based upon the same applicable rate as if they had purchased a direct interest in our property. If this position is adopted, it may result in lower annual depreciation and amortization deductions than would otherwise be allowable to some unitholders and risk
the loss of depreciation and amortization deductions not taken in the year that these deductions are otherwise allowable. This position will not be adopted if we determine that the loss of depreciation and amortization deductions will have a material adverse effect on the
unitholders. If we choose
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not to utilize this aggregate method, we may use any other reasonable depreciation and amortization method to preserve the uniformity of the intrinsic tax characteristics of any units that would
not have a material adverse effect on the unitholders. The IRS may challenge any method of depreciating the Section 743(b) adjustment described in this paragraph. If this challenge were
sustained, the uniformity of units might be affected, and the gain from the sale of units might be increased without the benefit of additional deductions. Please read "Material Tax
Consequences—Disposition of Common Units—Recognition of Gain or Loss."
Tax-Exempt Organizations and Other Investors
Ownership of units by employee benefit plans, other tax-exempt organizations, non-resident aliens, foreign corporations and other foreign persons raises issues unique to those investors and, as described below, may have substantially adverse tax consequences to them.
Employee benefit plans and most other organizations exempt from federal income tax, including individual retirement accounts and other retirement plans, are subject to federal income tax on unrelated business taxable income. Virtually all of our income allocated to a
unitholder that is a tax-exempt organization will be unrelated business taxable income and will be taxable to them.
Non-resident aliens and foreign corporations, trusts or estates that own units will be considered to be engaged in business in the United States because of the ownership of units. As a consequence, they will be required to file federal tax returns to report their share of our
income, gain, loss or deduction and pay federal income tax at regular rates on their share of our net income or gain. Moreover, under rules applicable to publicly traded partnerships, we will withhold at the highest applicable effective tax rate from cash distributions made
quarterly to foreign unitholders. Each foreign unitholder must obtain a taxpayer identification number from the IRS and submit that number to our transfer agent on a Form W-8BEN or applicable substitute form in order to obtain credit for these withholding taxes. A change in
applicable law may require us to change these procedures.
In addition, because a foreign corporation that owns units will be treated as engaged in a United States trade or business, that corporation may be subject to the United States branch profits tax at a rate of 30%, in addition to regular federal income tax, on its share of our
income and gain, as adjusted for changes in the foreign corporation's "U.S. net equity," which are effectively connected with the conduct of a United States trade or business. That tax may be reduced or eliminated by an income tax treaty between the United States and the
country in which the foreign corporate unitholder is a "qualified resident." In addition, this type of unitholder is subject to special information reporting requirements under Section 6038C of the Internal Revenue Code.
Under a published ruling of the IRS, the IRS has taken a position that a foreign unitholder who sells or otherwise disposes of a unit will be subject to federal income tax on gain realized on the sale or disposition of that unit to the extent that this gain is effectively
connected with a United States trade or business of the foreign unitholder. Because a foreign unitholder is considered to be engaged in business in the United States by virtue of the ownership of units, under this ruling a foreign unitholder who sells or otherwise disposes of a
unit generally will be subject to federal income tax on gain realized on the sale or disposition of units. Apart from the ruling, a foreign unitholder will not be taxed or subject to withholding upon the sale or disposition of a unit if he has owned less than 5% in value of the
units during the five-year period ending on the date of the disposition and if the units are regularly traded on an established securities market at the time of the sale or disposition.
Administrative Matters
Information Returns and Audit Procedures
We intend to furnish to each unitholder, within 90 days after the close of each calendar year, specific tax information, including a Schedule K-1, which describes his share of our income, gain, loss and deduction for our preceding taxable year. In preparing this
information, which will not be reviewed by counsel, we will take various accounting and reporting positions, some of which have been mentioned earlier, to determine each unitholder's share of income, gain, loss and deduction. We cannot assure you that those positions will
in all cases yield a result that conforms to the requirements of the Internal Revenue Code, Treasury Regulations
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or administrative interpretations of the IRS. Neither we nor Vinson & Elkins L.L.P. can assure prospective unitholders that the IRS will not successfully contend in court that those positions are
impermissible. Any challenge by the IRS could negatively affect the value of the units.
The IRS may audit our federal income tax information returns. Adjustments resulting from an IRS audit may require each unitholder to adjust a prior year's tax liability, and possibly may result in an audit of his return. Any audit of a unitholder's return could result in
adjustments not related to our returns as well as those related to our returns.
Partnerships generally are treated as separate entities for purposes of federal tax audits, judicial review of administrative adjustments by the IRS and tax settlement proceedings. The tax treatment of partnership items of income, gain, loss and deduction are determined in
a partnership proceeding rather than in separate proceedings with the partners. The Internal Revenue Code requires that one partner be designated as the "Tax Matters Partner" for these purposes. The partnership agreement names Atlas Pipeline Holdings GP, LLC as our Tax
Matters Partner.
The Tax Matters Partner will make some elections on our behalf and on behalf of unitholders. In addition, the Tax Matters Partner can extend the statute of limitations for assessment of tax deficiencies against unitholders for items in our returns. The Tax Matters Partner
may bind a unitholder with less than a 1% profits interest in us to a settlement with the IRS unless that unitholder elects, by filing a statement with the IRS, not to give that authority to the Tax Matters Partner. The Tax Matters Partner may seek judicial review, by which all
the unitholders are bound, of a final partnership administrative adjustment and, if the Tax Matters Partner fails to seek judicial review, judicial review may be sought by any unitholder having at least a 1% interest in profits or by any group of unitholders having in the
aggregate at least a 5% interest in profits. However, only one action for judicial review will go forward, and each unitholder with an interest in the outcome may participate.
A unitholder must file a statement with the IRS identifying the treatment of any item on his federal income tax return that is not consistent with the treatment of the item on our return. Intentional or negligent disregard of this consistency requirement may subject a
unitholder to substantial penalties.
Nominee Reporting
Persons who hold an interest in us as a nominee for another person are required to furnish to us:
(a) the name, address and taxpayer identification number of the beneficial owner and the nominee;
(b) whether the beneficial owner is:
1. a person that is not a United States person;
2. a foreign government, an international organization or any wholly owned agency or instrumentality of either of the foregoing; or
3. a tax-exempt entity;
(c) the amount and description of units held, acquired or transferred for the beneficial owner; and
(d) specific information including the dates of acquisitions and transfers, means of acquisitions and transfers, and acquisition cost for purchases, as well as the amount of net proceeds from sales.
Brokers and financial institutions are required to furnish additional information, including whether they are United States persons and specific information on units they acquire, hold or transfer for their own account. A penalty of $50 per failure, up to a maximum of
$100,000 per calendar year, is imposed by the Internal Revenue Code for failure to report that information to us. The nominee is required to supply the beneficial owner of the units with the information furnished to us.
Accuracy-Related Penalties
An additional tax equal to 20% of the amount of any portion of an underpayment of tax that is attributable to one or more specified causes, including negligence or disregard of rules or regulations, substantial understatements of income tax and substantial valuation
misstatements, is imposed by the Internal
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Revenue Code. No penalty will be imposed, however, for any portion of an underpayment if it is shown that there was a reasonable cause for that portion and that the taxpayer acted in good
faith regarding that portion.
For individuals, a substantial understatement of income tax in any taxable year exists if the amount of the understatement exceeds the greater of 10% of the tax required to be shown on the return for the taxable year or $5,000. The amount of any understatement subject
to penalty generally is reduced if any portion is attributable to a position adopted on the return:
(a) for which there is, or was, "substantial authority;" or
(b) as to which there is a reasonable basis and the pertinent facts of that position are disclosed on the return.
If any item of income, gain, loss or deduction included in the distributive shares of unitholders for a given year might result in an "understatement" of income for which no "substantial authority" exists, we must disclose the pertinent facts on our return. In addition, we
will make a reasonable effort to furnish sufficient information for unitholders to make adequate disclosure on their returns and to take other actions as may be appropriate to permit unitholders to avoid liability for penalties. More stringent rules apply to "tax shelters," which
we do not believe include us.
A substantial valuation misstatement exists if the value of any property, or the adjusted basis of any property, claimed on a tax return is 200% or more of the amount determined to be the correct amount of the valuation or adjusted basis. No penalty is imposed unless
the portion of the underpayment attributable to a substantial valuation misstatement exceeds $5,000 ($10,000 for most corporations). If the valuation claimed on a return is 400% or more than the correct valuation, the penalty imposed increases to 40%.
Reportable Transactions
If we were to engage in a "reportable transaction," we (and possibly you and others) would be required to make a detailed disclosure of the transaction to the IRS. A transaction may be a reportable transaction based upon any of several factors, including the fact that it
is a type of tax avoidance transaction publicly identified by the IRS as a "listed transaction" or that it produces certain kinds of losses in excess of $2.0 million. Our participation in a reportable transaction could increase the likelihood that our federal income tax information
return (and possibly your tax return) would be audited by the IRS. Please read "—Information Returns and Audit Procedures" above.
Moreover, if we were to participate in a reportable transaction with a significant purpose to avoid or evade tax, or in any listed transaction, you may be subject to the following provisions of the American Jobs Creation At of 2004:
•
accuracy related penalties with a broader scope, significantly narrower exceptions, and potentially greater amounts than described above at "—Accuracy Related Penalties."
•
for those persons otherwise entitled to deduct interest on federal tax deficiencies, nondeductability of interest on any resulting tax liability; and
•
in the case of a listed transaction, an extended statute of limitations.
We do not expect to engage in any reportable transactions.
State, Local, Foreign and Other Tax Considerations
In addition to federal income taxes, you likely will be subject to other taxes, such as state, local and foreign income taxes, unincorporated business taxes, and estate, inheritance or intangible taxes that may be imposed by the various jurisdictions in which we or Atlas do
business or own property or in which you are a resident. Although an analysis of those various taxes is not presented here, each prospective unitholder should consider their potential impact on his investment in us. We or Atlas will initially own property or do business in
Arkansas, New York, Ohio, Oklahoma, Pennsylvania and Texas, and each impose a personal income tax on individuals as well as an income tax on corporations and other entities, other than Texas. We may also own property or do business in other jurisdictions in the future.
Although you may not be required to file a return and pay taxes in some jurisdictions because your income from that jurisdiction falls below the filing
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and payment requirement, you will be required to file income tax returns and to pay income taxes in many of these jurisdictions in which we do business or own property and may be subject to
penalties for failure to comply with those requirements. In some jurisdictions, tax losses may not produce a tax benefit in the year incurred and may not be available to offset income in
subsequent taxable years. Some of the jurisdictions may require us, or we may elect, to withhold a percentage of income from amounts to be distributed to a unitholder who is not a resident of
the jurisdiction. Withholding, the amount of which may be greater or less than a particular unitholder's income tax liability to the jurisdiction, generally does not relieve a nonresident unitholder
from the obligation to file an income tax return. Amounts withheld will be treated as if distributed to unitholders for purposes of determining the amounts distributed by us. Please read "Material
Tax Consequences—Tax Consequences of Unit Ownership—Entity-Level Collections." Based on current law and our estimate of our future operations, the general partner anticipates that any
amounts required to be withheld will not be material.
It is the responsibility of each unitholder to investigate the legal and tax consequences, under the laws of pertinent jurisdictions, of his investment in us. Accordingly, each prospective unitholder is urged to consult, and depend upon, his tax counsel or other
advisor with regard to those matters. Further, it is the responsibility of each unitholder to file all state, local and foreign, as well as United States federal tax returns, that may be required of him. Vinson & Elkins L.L.P. has not rendered an opinion on the state,
local or foreign tax consequences of an investment in us.
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INVESTMENT IN ATLAS PIPELINE HOLDINGS L.P. BY EMPLOYEE BENEFIT PLANS
An investment in us by an employee benefit plan is subject to additional considerations because the investments of these plans are subject to the fiduciary responsibility and prohibited transaction provisions of ERISA and restrictions imposed by Section 4975 of the
Internal Revenue Code. For these purposes the term "employee benefit plan" includes, but is not limited to, qualified pension, profit-sharing and stock bonus plans, Keogh plans, simplified employee pension plans and tax deferred annuities or IRAs established or maintained by
an employer or employee organization. Among other things, consideration should be given to:
•
whether the investment is prudent under Section 404(a)(1)(B) of ERISA;
•
whether in making the investment, that plan will satisfy the diversification requirements of Section 404(a)(1)(C) of ERISA; and
•
whether the investment will result in recognition of unrelated business taxable income by the plan and, if so, the potential after-tax investment return.
The person with investment discretion with respect to the assets of an employee benefit plan, often called a fiduciary, should determine whether an investment in us is authorized by the appropriate governing instrument and is a proper investment for the plan.
Section 406 of ERISA and Section 4975 of the Internal Revenue Code prohibit employee benefit plans, and also IRAs that are not considered part of an employee benefit plan, from engaging in specified transactions involving "plan assets" with parties that are "parties
in interest" under ERISA or "disqualified persons" under the Internal Revenue Code with respect to the plan.
In addition to considering whether the purchase of common units is a prohibited transaction, a fiduciary of an employee benefit plan should consider whether the plan will, by investing in us, be deemed to own an undivided interest in our assets, with the result that our
operations would be subject to the regulatory restrictions of ERISA, including its prohibited transaction rules, as well as the prohibited transaction rules of the Internal Revenue Code.
The Department of Labor regulations provide guidance with respect to whether the assets of an entity in which employee benefit plans acquire equity interests would be deemed "plan assets" under some circumstances. Under these regulations, an entity's assets would
not be considered to be "plan assets" if, among other things:
(a) the equity interests acquired by employee benefit plans are publicly offered securities—i.e., the equity interests are widely held by 100 or more investors independent of the issuer and each other, freely transferable and registered under some provisions of the federal
securities laws;
(b) the entity is an "operating company,"—i.e., it is primarily engaged in the production or sale of a product or service other than the investment of capital either directly or through a majority-owned subsidiary or subsidiaries; or
(c) there is no significant investment by benefit plan investors, which is defined to mean that less than 25% of the value of each class of equity interest is held by the employee benefit plans referred to above, IRAs and other employee benefit plans not subject to ERISA,
including governmental plans.
Our assets should not be considered "plan assets" under these regulations because it is expected that the investment will satisfy the requirements in (a) above.
Plan fiduciaries contemplating a purchase of common units should consult with their own counsel regarding the consequences under ERISA and the Internal Revenue Code in light of the serious penalties imposed on persons who engage in prohibited transactions or
other violations.
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UNDERWRITING
Lehman Brothers Inc. is acting as sole book running manager. Under the terms of an underwriting agreement, which will be filed as an exhibit to the registration statement, each of the underwriters named below has severally agreed to purchase from us the respective
number of common units shown opposite its name below:
Underwriters
Number of common units
Lehman Brothers Inc.
Total
3,600,000
The underwriting agreement provides that the underwriters' obligation to purchase common units depends on the satisfaction of the conditions contained in the underwriting agreement including:
•
the obligation to purchase all of the common units offered hereby, if any of the common units are purchased;
•
the representations and warranties made by us to the underwriters are true;
•
there is no material change in the financial markets; and
•
we deliver customary closing documents to the underwriters.
Commissions and Expenses
The following table summarizes the underwriting discounts and commissions we will pay to the underwriters. These amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase additional common units. The underwriting fee is
the difference between the initial price to the public and the amount the underwriters pay to us for the common units.
No exercise
Full exercise
Per Unit
$
$
Total
$
$
Lehman Brothers Inc. has advised us that the underwriters propose to offer the common units directly to the public at the public offering price on the cover of this prospectus and to selected dealers, which may include the underwriters, at such offering price less a
selling concession not in excess of $                per unit. The underwriters may allow, and the selected dealers may re-allow, a discount from the concession not in excess of $       per unit to other dealers. After the offering, Lehman Brothers Inc. may change the offering price and
other selling terms.
The expenses of the offering that are payable by us are estimated to be $      (exclusive of underwriting discounts and commissions).
Option to Purchase Additional Common Units
We have granted the underwriters an option exercisable for 30 days after the date of this prospectus, to purchase, from time to time, in whole or in part, up to an aggregate of 540,000 common units at the public offering price less underwriting discounts and
commissions. This option may be exercised if the underwriters sell more than 3,600,000 common units in connection with this offering. To the extent that this option is exercised, each underwriter will be obligated, subject to certain conditions, to purchase its pro rata portion
of these additional common units based on the underwriter's percentage underwriting commitment in the offering as indicated in the table at the beginning of this Underwriting section. To the extent the underwriters purchase our common units pursuant to the exercise of this
option, we will redeem an equal amount of common units from Atlas America.
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Lock-Up Agreements
We, our affiliates that own common units, and the directors and executive officers of our general partner have agreed that, without the prior written consent of Lehman Brothers Inc., we and they will not directly or indirectly, offer, pledge, announce the intention to sell,
sell, contract to sell, sell an option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of any common units or any securities that may be converted into or exchanged for any common
units, enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the common units, make any demand for or exercise any right or file or cause to be filed a registration statement with respect to the registration
of any common units or securities convertible, exercisable or exchangeable into common units or any of our other securities or publicly disclose the intention to do any of the foregoing for a period of 180 days from the date of this prospectus other than permitted transfers.
The 180-day restricted period described in the preceding paragraph will be extended if:
•
during the last 17 days of the 180-day restricted period we issue an earnings release or announce material news or a material event; or
•
prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period,
in which case the restrictions described in the preceding paragraph will continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the announcement of the material news or material event.
Lehman Brothers Inc., in its sole discretion, may release the common units and other securities subject to the lock-up agreements described above in whole or in part at any time with or without notice. When determining whether or not to release common units and
other securities from lock-up agreements, Lehman Brothers Inc. will consider, among other factors, the holder's reasons for requesting the release, the number of common units and other securities for which the release is being requested and market conditions at the time.
Offering Price Determination
Prior to this offering, there has been no public market for our common units. The initial public offering price will be negotiated between the representatives and us. In determining the initial public offering price of our common units, the representatives will consider:
•
the history and prospects for the industry in which we compete;
•
our financial information;
•
the ability of our management and our business potential and earning prospects;
•
the prevailing securities markets at the time of this offering; and
•
the recent market prices of, and the demand for, publicly traded common units of generally comparable companies.
Indemnification
We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act and liabilities incurred in connection with the directed unit program referred to below, and to contribute to payments that the underwriters may be
required to make for these liabilities.
Directed Unit Program
At our request, the underwriters have reserved for sale at the initial public offering price up to       common units offered hereby for officers, directors, employees and certain other persons associated with us. The number of common units available for sale to the general
public will be reduced to the extent such
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persons purchase such reserved common units. Any reserved common units not so purchased will be offered by the underwriters to the general public on the same basis as the other common
units offered hereby.
Stabilization, Short Positions and Penalty Bids
The underwriters may engage in stabilizing transactions, short sales and purchases to cover positions created by short sales, and penalty bids or purchases for the purpose of pegging, fixing or maintaining the price of the common units, in accordance with Regulation M
under the Securities Exchange Act of 1934:
•
Stabilizing transactions permit bids to purchase the underlying security so long as the stabilizing bids do not exceed a specified maximum.
•
A short position involves a sale by the underwriters of common units in excess of the number of common units the underwriters are obligated to purchase in the offering, which creates the syndicate short position. This short position may be either a covered short position or a
naked short position. In a covered short position, the number of common units involved in the sales made by the underwriters in excess of the number of common units they are obligated to purchase is not greater than the number of common units that they may purchase by
exercising their option to purchase additional common units. In a naked short position, the number of common units involved is greater than the number of common units in their option to purchase additional common units. The underwriters may close out any short position
by either exercising their option to purchase additional common units and/or purchasing common units in the open market. In determining the source of common units to close out the short position, the underwriters will consider, among other things, the price of common
units available for purchase in the open market as compared to the price at which they may purchase common units through their option to purchase additional common units. A naked short position is more likely to be created if the underwriters are concerned that there could
be downward pressure on the price of the common units in the open market after pricing that could adversely affect investors who purchase in the offering.
•
Syndicate covering transactions involve purchases of the common units in the open market after the distribution has been completed in order to cover syndicate short positions.
•
Penalty bids permit Lehman Brothers Inc. to reclaim a selling concession from a syndicate member when the common units originally sold by the syndicate member is purchased in a stabilizing or syndicate covering transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common units or preventing or retarding a decline in the market price of the common units. As a result, the price of the
common units may be higher than the price that might otherwise exist in the open market. These transactions may be effected on The New York Stock Exchange or otherwise and, if commenced, may be discontinued at any time.
Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of the common units. In addition, neither we nor any of the underwriters make
representation that the underwriters will engage in these stabilizing transactions or that any transaction, once commenced, will not be discontinued without notice.
Electronic Distribution
A prospectus in electronic format may be made available on the Internet sites or through other online services maintained by one or more of the underwriters and/or selling group members participating in this offering, or by their affiliates. In those cases, prospective
investors may view offering terms online and, depending upon the particular underwriter or selling group member, prospective investors may be allowed to place orders online. The underwriters may agree with us to allocate a specific number of common units for sale to online
brokerage account holders. Any such allocation for online distributions will be made by the underwriters on the same basis as other allocations.
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Other than the prospectus in electronic format, the information on any underwriter's or selling group member's web site and any information contained in any other web site maintained by an underwriter or selling group member is not part of the prospectus or the
registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.
NYSE
We will apply to list our common units for quotation on The New York Stock Exchange under the symbol "     ."
Discretionary Sales
The underwriters have informed us that they do not intend to confirm sales to discretionary accounts that exceed 5% of the total number of common units offered by them.
Stamp Taxes
If you purchase common units offered in this prospectus, you may be required to pay stamp taxes and other charges under the laws and practices of the country of purchase, in addition to the offering price listed on the cover page of this prospectus.
Relationships
The underwriters may in the future perform investment banking and advisory services for us from time to time for which they may in the future receive customary fees and expenses. The underwriters may, from time to time, engage in transactions with or perform
services for us in the ordinary course of their business.
Lehman Brothers Inc. and its related entities have engaged and may engage in commercial and investment banking transactions with Atlas, Atlas America, its general partner and us in the ordinary course of their business. Lehman Brothers Inc. has received customary
compensation and expenses for these commercial and investment banking transactions. Lehman Brothers Inc. acted as the exclusive financial advisor to Energy Spectrum Capital Partners, which held a controlling interest in Spectrum, in the solicitation of proposals for a
potential sale transaction of Spectrum. In addition, Lehman Brothers Inc. acted as the exclusive financial advisor to OGE Energy Corporation in the solicitation of proposals for a potential sale transaction of Enogex Arkansas Pipeline Corporation, which became Atlas Arkansas.
Lehman Brothers Inc., acted as an underwriter in our follow-on offering in July 2004 and in November 2005.
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VALIDITY OF THE COMMON UNITS
The validity of the common units will be passed upon for us by Vinson & Elkins L.L.P., New York, New York, and for the underwriters by Baker Botts L.L.P., Houston, Texas.
EXPERTS
The consolidated financial statements of Atlas Pipeline Partners GP, LLC as of December 31, 2003 and 2004 and for each of the three years in the period ended December 31, 2004; the balance sheet of Atlas Pipeline Holdings, L.P. as of December 31, 2005; the
balance sheet of Atlas Pipeline Holdings GP, LLC as of December 31, 2005; the financial statements of ETC Oklahoma Pipeline, Ltd. as of August 31, 2003 and 2004 and for the year ended August 31, 2004 and for the eleven month period ended August 31, 2003; the
financial statements of the Elk City System (a division of Aquila Gas Pipeline Corporation) for the year ended September 30, 2002, the financial statements of Spectrum Field Services, Inc. as of December 31, 2002 and 2003 and for each of the three years in the period ended
December 31, 2003, have been audited by Grant Thornton LLP, independent registered public accountants, as indicated in their reports with respect thereto, herein in reliance upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Enogex Arkansas Pipeline Corporation at December 31, 2004 and 2003, and for each of the two years in the period ended December 31, 2004, have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon and included therein. Such consolidated financial statements are included herein in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, or the Commission, a registration statement on Form S-l regarding the common units. This prospectus does not contain all of the information found in the registration statement. For further information
regarding us and the common units offered by this prospectus, you may desire to review the full registration statement, including its exhibits and schedules, filed under the Securities Act. The registration statement of which this prospectus forms a part, including its exhibits and
schedules, may be inspected and copied at the public reference room maintained by the Commission at 100 F Street, N.E. Room 1580, Washington, D.C. 20549. Copies of the materials may also be obtained from the SEC at prescribed rates by writing to the public reference
room maintained by the Commission at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling the Commission at l-800-SEC-0330. The Commission maintains a web site on the Internet at
http://www.sec.gov. Our registration statement, of which this prospectus constitutes a part, can be downloaded from the Commission's web site.
We intend to furnish our unitholders annual reports containing our audited financial statements and furnish or make available quarterly reports containing our unaudited interim financial information for the first three fiscal quarters of each of our fiscal years.
FORWARD-LOOKING STATEMENTS
Some of the information in this prospectus may contain forward-looking statements. These statements can be identified by the use of forward-looking terminology including "may," "believe," "will," "expect," "anticipate," "estimate," "continue," or other similar
words. These statements discuss plans, strategies, events, future expectations, contain projections of results of operations or of financial condition, or state other "forward-looking" information that we expect will or may occur in the future. These forward-looking statements
involve risks and uncertainties. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this prospectus. The risk factors and other factors noted throughout this prospectus could cause our actual results to
differ materially from those contained in any forward-looking statement.
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Specific factors could cause our actual results to differ materially from those contained in any forward-looking statement. These factors include, but are not limited to:
•
increased competition in natural gas and NGL markets and Atlas' ability to respond to the competition;
•
fluctuations in natural gas and NGL prices, which could adversely affect Atlas' operating results and cash flows;
•
decreased availability of local, intrastate and interstate transportation systems;
•
increased expenses Atlas incurs in providing its gathering services;
•
technical advances in fuel economy and energy generation devices;
•
risks associated with the expansion of Atlas's operations and properties;
•
customer bankruptcies and/or cancellations or breaches of existing contracts;
•
customer delays or defaults in making payments;
•
fluctuations in natural gas and NGL demand, prices and availability due to labor and transportation costs and disruptions, equipment availability, governmental regulations and other factors;
•
Atlas' productivity levels and margins that Atlas earns on its coal sales;
•
greater than expected shortage of skilled labor;
•
any unanticipated increases in labor costs, adverse changes in work rules, or unexpected cash payments associated with workers' compensation claims;
•
any unanticipated increases in transportation costs and risk of transportation delays or interruptions;
•
greater than expected environmental regulation, costs and liabilities;
•
results of litigation; and
•
difficulty obtaining commercial property insurance, and risks associated with Atlas' participation (excluding any applicable deductible) in Atlas' commercial insurance property program.
If one or more of these or other risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results may differ materially from those described in any forward-looking statement. When considering forward-looking statements, you should
also keep in mind the risk factors described in "Risk Factors." The risk factors could also cause our actual results to differ materially from those contained in any forward-looking statement. We disclaim any obligation to update the above list or to announce publicly the result
of any revisions to any of the forward-looking statements to reflect future events or developments.
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INDEX TO FINANCIAL STATEMENTS
Page
Atlas Pipeline Holdings, L.P.
Unaudited Pro Forma Consolidated Financial Statements:
Introduction
F-3
Unaudited Pro Forma Consolidated Balance Sheet at September 30, 2005
F-6
Unaudited Pro
          Forma Consolidated Statements of Income for the Year Ended December
          31, 2004 and the Nine Months Ended September 30, 2005
F-7
Notes to Unaudited Pro Forma Consolidated Financial Statements
F-9
Atlas Pipeline Holdings, L.P.
Audited Balance Sheet:
Report of Independent Registered Public Accounting Firm
F-11
Balance Sheet at December 31, 2005
F-12
Note to Balance Sheet
F-13
Atlas Pipeline Holdings GP, LLC
Audited Balance Sheet:
Report of Independent Registered Public Accounting Firm
F-14
Balance Sheet at December 31, 2005
F-15
Note to Balance Sheet
F-16
Atlas Pipeline Partners GP, LLC
Audited Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firm
F-17
Consolidated Balance Sheets at December 31, 2003 and 2004 and September 30, 2005 (unaudited)
F-18
Consolidated Statements of Income for the Years Ended December 31, 2002, 2003 and 2004 and the Nine Months Ended September 30, 2004 and 2005 (unaudited)
F-19
Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2002, 2003 and 2004 and the Nine Months Ended September 30, 2004 and 2005 (unaudited)
F-20
Consolidated Statements of Owner's Equity (Deficit)
F-21
Consolidated Statements of Cash Flows for the Years Ended December 31, 2002, 2003 and 2004 and the Nine Months Ended September 30, 2004 and 2005 (unaudited)
F-22
Notes to Consolidated Financial Statements
F-23
Enogex Arkansas Pipeline Corporation
Audited Financial Statements:
Report of Independent Auditors
F-43
Consolidated Balance Sheets as of December 31, 2004 and 2003
F-44
Consolidated Statements of Income for the Year Ended December 31, 2004 and 2003
F-46
Consolidated Statements of Retained Earnings (Deficit) for the Year Ended December 31, 2004 and 2003
F-47
Consolidated Statements of Cash Flows for the Year Ended December 31, 2004 and 2003
F-48
Notes to Consolidated Financial Statements
F-49
Enogex Arkansas Pipeline Corporation
Unaudited Financial Statements:
Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004
F-55
Consolidated Statements of Income for the Nine Months Ended September 30, 2005 and 2004
F-57
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2005 and 2004
F-58
Notes to Consolidated Financial Statements
F-59
ETC Oklahoma Pipeline, Ltd.
Audited Financial Statements:
Report of Independent Registered Public Accounting Firm
F-63
Balance Sheets as of August 31, 2004 and 2003
F-64
Income Statements for the Twelve Months ended August 31, 2004 and the Eleven Months Ended August 31, 2003
F-65
Statements of Partners' Capital for the Twelve Months Ended August 31, 2004 and 2003
F-66
Statement of Cash Flows for the Twelve Months Ended August 31, 2004 and the Eleven Months Ended August 31, 2003
F-67
Notes to Financial Statements
F-68
ETC Oklahoma Pipeline, Ltd.
Unaudited Financial Statements:
Balance Sheet as of February 28, 2005
F-74
Income Statements for the Six Months Ended February 28, 2005 and February 29, 2004
F-75
Statements of Cash Flows for the Six Months Ended February 28, 2005 and February 29, 2004
F-76
Notes to Financial Statements
F-77
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INDEX TO FINANCIAL STATEMENTS (Continued)
Page
The Elk City System (a division of Aquila Gas Processing Corporation)
Audited Financial Statements:
Report of Independent Registered Public Accounting Firm
F-80
Carve-Out Statement of Income and Changes in Parent's Equity in Division for the Year Ended September 30, 2002
F-81
Carve-Out Statement of Cash Flow for the Year Ended September 30, 2002
F-82
Notes to Carve-Out Financial Statements
F-83
Spectrum Field Services, Inc.
Audited Financial Statements:
Report of Independent Certified Public Accountants
F-88
Balance Sheets as of December 31, 2003 and 2002
F-89
Statement of Operations for the Years Ended December 31, 2003, 2002, and 2001
F-90
Statements of Comprehensive Income (Loss) as of December 31, 2003, 2002 and 2001
F-91
Statements of Changes in Shareholders' Equity for the Years Ended December 31, 2003, 2002 and 2001
F-92
Statements of Cash Flows for the Years Ended December 31, 2003, 2002, and 2001
F-94
Notes to Financial Statements
F-95
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ATLAS PIPELINE HOLDINGS, L.P.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Unless indicated otherwise, the terms "our," "we," "us," "Atlas Holdings" and other similar language refer to Atlas Pipeline Holdings, L.P. We own and control Atlas Pipeline Partners GP, LLC, which is the general partner of Atlas Pipeline Partners, L.P., a publicly
traded limited partnership ("Atlas"). Since we own and control Atlas' general partner, we reflect our ownership interest in Atlas on a consolidated basis and our financial results are combined with those of Atlas and its general partner.
The following unaudited pro forma financial statements reflect our historical results as adjusted on a pro forma basis to give effect to Atlas' April 2004, July 2004, June 2005 and November 2005 offerings of common units, the December 2005 issuance of Atlas' senior
unsecured notes, the completion of the Spectrum, Elk City and NOARK acquisitions and this offering. The acquisition and other adjustments are described in the notes to the unaudited pro forma financial statements. The unaudited pro forma financial statements and
accompanying notes should be read together with "Selected Historical Financial and Operating Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," our historical financial statements and related notes and the historical financial
statements and related notes of Spectrum, Elk City and its predecessor and Enogex Arkansas Pipeline Corporation included in this registration statement.
We accounted for the NOARK acquisition and the acquisitions of Spectrum and Elk City in the unaudited pro forma financial statements using the purchase method of accounting in accordance with the guidance of Statement of Financial Accounting standards No. 141,
"Business Combinations." For purposes of developing the unaudited pro forma financial information, we have allocated the purchase prices to Spectrum's, Elk City's, and NOARK's gas gathering, processing and/or transmission facilities based on their fair market value.
Our summary unaudited pro forma balance sheet information reflects the following transactions as if they occurred as of September 30, 2005:
•
the NOARK acquisition, which occurred on October 31, 2005, for consideration of $165.3 million, including estimated transaction costs plus $10.2 million for working capital adjustments and $2.3 million of estimated transaction costs, and the redemption of the portion of
the NOARK 7.15% notes severally guaranteed by Atlas Arkansas;
•
the amendment of Atlas' credit facility, which occurred on October 31, 2005, and borrowings under it to finance the NOARK acquisition;
•
Atlas' public offering of 2,700,000 common units, which was completed in November 2005, and 330,000 additional underwriter option units, which was completed in December 2005, each at a public offering price of $42.00 per common unit, the net proceeds of which were
used principally to repay indebtedness incurred in connection with the NOARK acquisition;
•
Atlas' issuance of $250.0 million of 8.125% senior unsecured notes in a private placement on December 20, 2005, the net proceeds of which were used principally to repay indebtedness under its credit facility; and
•
this offering and the application of the net proceeds as described under "Use of Proceeds."
The unaudited pro forma statement of income information for the year ended December 31, 2004 reflects the following transactions as if they occurred as of January 1, 2004:
•
Atlas' public offering of 750,000 common units, which was completed in April 2004 at a public offering price of $36.00 per common unit, the net proceeds of which were used principally to repay indebtedness under Atlas' then existing credit facility;
•
the Spectrum acquisition, which occurred in July 2004, for total consideration of $141.6 million, including the payment of income taxes due as a result of the transaction and other related transaction costs;
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•
Atlas' public offering of 2,100,000 common units, which was completed in July 2004 at a public offering price of $34.76 per common unit, the net proceeds of which were used principally to repay indebtedness incurred in connection with the Spectrum acquisition;
•
the Elk City acquisition, which occurred in April 2005, for total consideration of $196.0 million, including related transaction costs;
•
the closing of Atlas' $270.0 million credit facility, which occurred in April 2005, and borrowings under it to finance the Elk City acquisition and repay amounts outstanding under Atlas' previous credit facility;
•
Atlas' public offering of 2,300,000 common units, which was completed in June 2005 at a public offering price of $41.95 per common unit, the net proceeds of which were used principally to repay indebtedness incurred in connection with the Elk City acquisition;
•
the NOARK acquisition, which occurred on October 31, 2005, for consideration of $165.3 million, including estimated transaction costs plus $10.2 million for working capital adjustments and $2.3 million of estimated transaction costs, and the redemption of the portion of
the NOARK 7.15% notes severally guaranteed by Atlas Arkansas;
•
the amendment of Atlas' credit facility, which occurred on October 31, 2005, and borrowings under it to finance the NOARK acquisition;
•
Atlas' public offering of 2,700,000 common units, which was completed in November 2005, and 330,000 additional underwriter option units, which was completed in December 2005, each at a public offering price of $42.00 per common unit, the net proceeds of which were
principally used to repay indebtedness incurred in connection with the NOARK acquisition;
•
Atlas' issuance of $250.0 million of 8.125% senior unsecured notes in a private placement on December 20, 2005, the net proceeds of which were used principally to repay indebtedness under its credit facility; and
•
this offering and the application of the net proceeds as described under "Use of Proceeds."
The unaudited pro forma statement of income information for the nine months ended September 30, 2005 reflects the following transactions as if they occurred as of January 1, 2005:
•
the Elk City acquisition, which occurred in April 2005, for total consideration of $196.0 million, including related transaction costs;
•
the closing of Atlas' $270.0 million credit facility, which occurred in April 2005, and borrowings under it to finance the Elk City acquisition and repay amounts outstanding under Atlas' previous credit facility;
•
Atlas' public offering of 2,300,000 common units, which was completed in June 2005, at a public offering price of $41.95 per common unit, the net proceeds of which were principally used to repay indebtedness incurred in connection with the Elk City acquisition;
•
the NOARK acquisition, which occurred on October 31, 2005, for consideration of $165.3 million, including estimated transaction costs plus $10.2 million for working capital adjustments and $2.3 million of estimated transaction costs, and the redemption of the portion of
the NOARK 7.15% notes severally guaranteed by Atlas Arkansas;
•
the amendment of Atlas' credit facility, which occurred on October 31, 2005, and borrowings under it to finance the NOARK acquisition;
•
Atlas' public offering of 2,700,000 common units, which was completed in November 2005, and 330,000 additional underwriter option units, which was completed in December 2005, each at a public offering price of $42.00 per common unit, the net proceeds of which were
used principally to repay indebtedness incurred in connection with the NOARK acquisition;
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•
Atlas' issuance of $250.0 million of 8.125% senior unsecured notes in a private placement on December 20, 2005, the net proceeds of which were used principally to repay indebtedness under its credit facility; and
•
this offering and the application of the net proceeds as described under "Use of Proceeds."
Elk City's historical fiscal year ended August 31, 2004 is not within 93 days of our fiscal year end. Accordingly, for pro forma purposes, statement of income information for the year ended December 31, 2004 is based on Elk City's historical financial results for the
twelve months ended November 30, 2004 and was created by subtracting the quarter ended November 30, 2003 from Elk City's income statement for the year ended August 31, 2004 and adding the quarter ended November 30, 2004. For our pro forma statement of income
information for the nine months ended September 30, 2005, we included Elk City's income statement for the three months ended February 28, 2005. Elk City was included within our historical results for the nine months ended September 30, 2005 from its date of acquisition
on April 14, 2005.
The unaudited pro forma balance sheet and the pro forma statements of income were derived by adjusting historical financial statements of Atlas Pipeline GP. However, our management believes that the adjustments provide a reasonable basis for presenting the
significant effects of the transactions described above. The unaudited pro forma financial data presented are for informational purposes only and are based upon available information and assumptions that we believe are reasonable under the circumstances. You should not
construe the unaudited pro forma financial data as indicative of the combined financial position or results of operations that we, Atlas Pipeline GP, Atlas, Spectrum, Elk City and NOARK would have achieved had the transactions been consummated on the dates assumed.
Moreover, they do not purport to represent our, Atlas', Atlas Pipeline GP's, Spectrum's, Elk City's or NOARK's combined financial position or results of operations for any future date or period.
The financial data below should be read together with, and are qualified in their entirety by reference to, Atlas Pipeline GP's historical consolidated and pro forma combined financial statements and the accompanying notes, "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the historical consolidated financial statements and the accompanying notes of Spectrum, Elk City and its predecessor and Enogex Arkansas Pipeline, each of which is set forth elsewhere in this prospectus. The pro forma
data is not necessarily reflective of what our results would actually have been had the transactions actually occurred on the indicated date, nor do they reflect what may actually occur in the future.
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ATLAS PIPELINE HOLDINGS, L.P.
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 2005
(in thousands)
Historical
Atlas
Pipeline
GP
Historical
NOARK
Adjustments
Atlas November
2005 Equity
Offering
Adjustments
Atlas Senior Notes
Offering
Adjustments
Pro
Forma
Atlas Pipeline
Holdings Equity
Offering
Pro Forma,
as adjusted
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
$
12,035
$
14,502
$
178,000
(a)
$
120,933
(e)
$
243,125
(f)
$
29,338
$
79,152
(g)
$
29,338
(177,757
)(a)
(120,933
)     (e)
(240,567
)(f)
(79,152
)(g)
Accounts
          receivable — affiliates
4,418
7,236
(5,145
)(b)
—
—
6,509
—
6,509
Accounts receivable
41,289
785
5,145
(b)
—
—
47,219
—
47,219
Current portion of hedge asset
14,993
—
—
—
—
14,993
—
14,993
Prepaid
          expenses and other current assets
1,595
324
—
—
—
1,919
—
1,919
Total current assets
74,330
22,847
243
—
2,558
99,978
—
99,978
PROPERTY, PLANT AND EQUIPMENT
324,517
146,509
32,006
(d)
—
—
503,032
—
503,032
Less — accumulated
          depreciation
(19,813
)
(20,593
)
—
—
—
(40,406
)
—
(40,406
)
Net
          property, plant and equipment
304,704
125,916
32,006
—
—
462,626
—
462,626
MINORITY
          INTEREST IN NOARK ASSETS
—
3,359
40,544
(d)
—
—
43,903
—
43,903
LONG-TERM HEDGE ASSET
5,970
—
—
—
—
5,970
—
5,970
INTANGIBLES, NET
12,398
—
—
—
—
12,398
—
12,398
GOODWILL
80,201
—
—
—
—
80,201
—
80,201
OTHER ASSETS
6,855
1,532
(425
)(c)
—
6,875
(f)
17,237
—
17,237
2,400
(a)
$
484,458
$
153,654
$
74,768
$
—
$
9,433
$
722,313
$
—
$
722,313
LIABILITIES AND OWNERS' EQUITY
CURRENT LIABILITIES:
Current
          portion of NOARK long-term debt
$
—
$
1,200
$
—
$
—
$
—
$
1,200
$
—
$
1,200
Current
          portion of other long-term debt
63
800
(800
)(d)
—
—
63
—
63
Accrued liabilities
6,360
3,037
—
—
—
9,397
—
9,397
Current
          portion of hedge liability
37,663
—
—
—
—
37,663
—
37,663
Accrued producer liabilities
32,543
—
—
—
—
32,543
—
32,543
Accounts payable
7,257
6,468
1,551
(b)
—
—
15,276
—
15,276
Accounts payable — affiliates
—
1,551
(1,551
)(b)
—
—
—
—
—
Total current liabilities
83,886
13,056
(800
)
—
—
96,142
—
96,142
LONG-TERM
          HEDGE LIABILITY
29,962
—
—
—
—
29,962
—
29,962
NOARK LONG-TERM DEBT
—
38,400
—
—
—
38,400
—
38,400
SENIOR UNSECURED DEBT
—
—
—
—
250,000
(f)
250,000
—
250,000
SENIOR SECURED DEBT
183,582
25,600
178,000
(a)
(120,933
)(e)
(240,567
)(f)
82
—
82
(25,600
)(d)
MINORITY INTEREST
227,908
—
(229
)(a)
120,933
(e)
—
348,612
—
348,612
DEFERRED INCOME TAXES
—
21,893
(21,893
)(d)
—
—
—
—
—
PARTNERS' EQUITY:
Partners' equity
5,564
54,705
(54,705
)(d)
—
—
5,559
79,152
(g)
5,559
(5
)(a)
(79,152
)(g)
Accumulated
          other comprehensive loss
(46,444
)
—
—
—
—
(46,444
)
—
(46,444
)
Total partners' equity
(40,880
)
54,705
(54,710
)
—
—
(40,885
)
—
(40,885
)
$
484,458
$
153,654
$
74,768
$
—
$
9,433
$
722,313
$
—
$
722,313
F-6
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ATLAS PIPELINE HOLDINGS, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
FOR THE YEAR ENDED DECEMBER 31, 2004
(in thousands, except per unit data)
Historical
Atlas
Pipeline
GP
Historical
Spectrum
Historical
Elk City
Historical
NOARK
Adjustments
Atlas
November
2005 Equity
Offering
Adjustments
Atlas Senior
Notes
Offering
Adjustments
Pro
Forma
Atlas Pipeline
Holdings
Equity
Offering
Pro Forma,
as
adjusted
REVENUE:
Natural gas and liquids — third parties
$
72,109
$
67,643
$
11,376
$
253
$
166,544
(h)
$
—
$
—
$
317,925
$
—
$
317,925
Natural gas and liquids — affiliates
—
—
123,975
55,763
(166,544
)  (h)
—
—
13,194
—
13,194
Transportation and compression —
third parties
76
—
—
10,364
4,143
(h)
—
—
14,583
—
14,583
Transportation and compression —
affiliates
18,724
—
—
11,119
(4,143
)  (h)
—
—
25,700
—
25,700
Interest income and other
382
—
—
329
—
—
—
711
—
711
Total revenue and other income
91,291
67,643
135,351
77,828
—
—
—
372,113
—
372,113
COSTS AND EXPENSES:
Natural gas and liquids
58,707
54,565
118,537
55,019
—
—
—
286,828
—
286,828
Plant operating
2,032
2,474
4,599
—
—
—
—
9,105
—
9,105
Transportation and compression
2,260
—
—
4,434
—
—
—
6,694
—
6,694
General and administrative
4,642
7,509
2,482
3,756
(2,482
)  (i)
—
—
10,378
—
(s)
10,378
840
(i)
(6,369
)  (j)
Gain on arbitration settlement, net
(1,457
)
—
—
—
—
—
—
(1,457
)
—
(1,457
)
Depreciation and amortization
4,471
1,638
2,153
3,249
(7,040
)  (k)
—
—
16,803
—
16,803
12,332
(k)
Minority interest in Atlas
10,941
—
—
—
429
(l)
—
—
11,370
—
11,370
Minority interest in NOARK
—
—
—
492
—
—
—
492
—
492
Interest
2,301
1,712
—
5,287
13,058
(m)(n)
(5,782
)    (p)
9,121
(q)
26,385
—
26,385
688
(r)
—
Other (income) expense
—
(88,551
)
(3
)
—
89,109
(j)
—
—
555
—
555
Total costs and expenses
83,897
(20,653
)
127,768
72,237
99,877
(5,782
)
9,809
367,153
—
367,153
Income (loss) before income taxes
7,394
88,296
7,583
5,591
99,877
5,782
(9,809
)
4,960
—
4,960
Provision for income taxes
—
(32,319
)
—
(2,162
)
34,481
(o)
—
—
—
—
—
Net income (loss)
7,394
55,977
7,583
3,429
(65,396
)
5,782
(9,809
)
4,960
—
4,960
Premium on preferred unit redemption
(400
)
—
—
—
—
—
—
(400
)
—
(400
)
Net income (loss) attributable to owners
$
6,994
$
55,977
$
7,583
$
3,429
$
(65,396
)
$
5,782
$
(9,809
)
$
4,560
$
—
$
4,560
Net income per unit
$
0.22
Weighted average units outstanding
21,100
(t)
F-7
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ATLAS PIPELINE HOLDINGS, L.P.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005
(in thousands, except per unit data)
Historical
Atlas
Pipeline GP
Historical
Elk City
Historical
NOARK
Adjustments
Atlas
November 2005
Equity
Offering
Adjustments
Atlas Senior
Notes
Offering
Adjustments
Pro
Forma
Atlas
Pipeline
Holdings
Equity
Offering
Pro Forma,
as
adjusted
REVENUE:
Natural gas and liquids — third parties
$
218,268
$
3,497
$
237
$
69,658
(h)
$
—
$
—
$
291,660
$
—
$
291,660
Natural gas and liquids — affiliates
—
37,235
42,125
(69,658
)  (h)
—
—
9,702
—
9,702
Transportation and compression — third parties
54
—
8,174
1,999
(h)
—
—
10,227
—
10,227
Transportation and compression — affiliates
16,447
—
6,955
(1,999
)  (h)
—
—
21,403
—
21,403
Interest income and other
352
—
144
—
—
—
496
—
496
Total revenue and other income
235,121
40,732
57,635
—
—
—
333,488
—
333,488
COSTS AND EXPENSES:
Natural gas and liquids
184,578
36,665
40,551
—
—
—
261,794
—
261,794
Plant operating
7,242
1,363
—
—
—
—
8,605
—
8,605
Transportation and compression
2,169
—
3,547
—
—
—
5,716
—
5,716
General and administrative
9,127
850
2,207
(850
)  (i)
—
—
11,544
—
(s)
11,544
210
(i)
Loss on arbitration settlement, net
138
—
—
—
—
—
138
—
138
Depreciation and amortization
8,495
628
2,475
(3,103
)  (k)
—
—
12,809
—
12,809
4,314
(k)
Minority interest in Atlas
7,240
—
—
(1,319
)  (l)
—
—
5,921
—
5,921
Minority interest in NOARK
—
—
440
—
—
—
440
—
440
Interest
8,478
—
3,654
9,062
(m)(n)
(5,782
)  (p)
4,131
(q)
20,059
—
20,059
516
(r)
—
Total costs and expenses
227,467
39,506
52,874
8,314
(5,782
)
4,647
327,026
—
327,026
Income (loss) before income taxes
7,654
1,226
4,761
(8,314
)
5,782
(4,647
)
6,462
—
6,462
Provision for income taxes
—
—
(1,887
)
1,887
(o)
—
—
—
—
—
Net income (loss)
$
7,654
$
1,226
$
2,874
$
(6,427
)
$
5,782
$
(4,647
)
$
6,462
$
—
$
6,462
Net income per unit
$
0.31
Weighted average units outstanding
21,100
(t)
F-8
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ATLAS PIPELINE HOLDINGS, L.P.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
a.
To reflect the application of $178,000,000 of borrowings under the Atlas credit facility for (a) payment to sellers and various acquisition costs of $175,123,000, which are allocated to the underlying assets and liabilities acquired as described in note d, (b) loan costs of
$2,400,000, which will be amortized over the remaining term of the credit facility, (c) interest of $234,000, all of which relates to post-September 30, 2005 periods and charged herein to owners' equity, and (d) the remaining $243,000 to Atlas. We describe Atlas' credit facility
under "Other Indebtedness."
b.
To reclassify affiliated receivables and payables to third-party receivables and payables.
c.
To remove $425,000 from Atlas' other assets for acquisition costs previously paid or accrued and to include that amount within the purchase price allocation described in note d below.
d.
To reflect the allocation of the total purchase price for NOARK and various acquisition costs of $175,548,000 to the assets and liabilities acquired, consisting of $175,123,000 payment to seller and various acquisition costs as described in note a and the $425,000 of acquisition
costs previously paid or accrued as described in note c. The deferred tax liability and affiliated accounts payable were not assumed by Atlas and remain the responsibility of the seller. Also reflects the repayment of $26,400,000 of the 7.15% NOARK notes by the seller from the
net proceeds from its sale of NOARK. This amount was deposited into an escrow account for the purpose of repayment and retirement of this portion of the notes. The remaining outstanding portion of the NOARK notes is severally guaranteed by Southwestern, the 25% minority
interest owner in NOARK. An acquisition adjustment has been included to adjust minority interest to reflect Southwestern's interest in the NOARK notes.
e.
To reflect net proceeds of $120,933,000, after estimated offering costs of $6,327,000, from the Atlas November 2005 sale of 2,700,000 common units and the December 2005 sale of 330,000 additional underwriter option units, each at $42.00 per unit, principally used to repay
borrowings under Atlas' credit facility.
f.
To reflect net proceeds of $243,125,000, after estimated offering costs of $6,875,000, from Atlas' December 2005 issuance of $250,000,000 of 8.125% senior unsecured notes due 2015, of which $240,567,000 was used to repay borrowings under Atlas' credit facility, with the
remaining $2,558,000 going to Atlas.
g.
To reflect net proceeds from this offering of $79,152,000, after estimated offering costs of $7,248,000, assuming 3,600,000 common units at a price of $24.00 per unit, which will be distributed to Atlas America.
h.
To reclassify affiliated revenue to third-party revenue.
i.
To reflect the elimination of the overhead allocated to Elk City by its parent and its replacement with an overhead allocation to be made by us in accordance with a new allocation agreement.
j.
To reflect the elimination of non-cash compensation costs of $6,369,000 related to the vesting of stock options upon change of control and the gain of $89,109,000, in each case, on the sale of Spectrum's assets to Atlas.
k.
To reflect the adjustment to depreciation expense for Spectrum, Elk City and NOARK for the periods these entities were not included within our historical results based upon the cost of the acquired gas gathering and transmission facilities using depreciable lives ranging from 3
to 40 years and using the straight-line method.
l.
To reflect adjustment of the minority interest in the net income of Atlas as a result of the net effect of the pro forma statement of income adjustments previously noted. The allocation of Atlas' net income to minority interests is based upon the historical distributions received by
its partners. It is impracticable to determine what the cash available would have been on a pro forma basis. Accordingly, the allocation of Atlas' net income to the minority interest owners reflects historical distributions.
F-9
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m.
To reflect the adjustments to interest expense resulting from borrowings under Atlas' credit facility to (a) finance the acquisitions of Spectrum, Elk City and NOARK, (b) reflect the net proceeds of the April 2004, July 2004, and June 2005 offerings of common units, and (c)
reflect the repayment of the portion of the NOARK notes severally guaranteed by NOARK.
n.
To reflect the amortization of deferred financing costs related to Atlas' credit facility to finance the Elk City acquisition and the amendment to the credit facility to finance the NOARK acquisition.
o.
To reflect the elimination of federal and state income taxes following the conversion of Spectrum and Atlas Arkansas, which were both C-corporations, to limited liability companies concurrent with their acquisition by Atlas.
p.
To reflect the adjustment to interest expense resulting from the repayment of amounts outstanding under Atlas' credit facility with proceeds from its November 2005 equity offering.
q.
To reflect the adjustment to interest expense resulting from the repayment of amounts outstanding under Atlas' credit facility with proceeds from their December 2005 issuance of senior unsecured notes.
r.
To reflect the amortization of deferred financing costs related to the issuance of Atlas' senior unsecured notes.
s.
We estimate we will incur on-going general and administrative costs as a result of being a public entity, including, among other things, estimated incremental accounting and audit fees, director fees, director and officer liability insurances expenses and other miscellaneous costs.
t.
To reflect the adjustment of our outstanding limited partner units.
F-10
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Atlas America, Inc.
We have audited the accompanying balance sheet of Atlas Pipeline Holdings, L.P. (the "Partnership") as of December 31, 2005. This financial statement is the responsibility of the Partnership's management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of
material misstatement. The Partnership is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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 balance sheet referred to above presents fairly, in all material respects, the financial position of Atlas Pipeline Holdings, L.P. as of December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.
/s/ GRANT THORNTON LLP
Cleveland, Ohio
January 3, 2006
F-11
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ATLAS PIPELINE HOLDINGS, L.P.
BALANCE SHEET
DECEMBER
31, 2005
ASSETS
Cash
$
1,000
OWNERS' EQUITY
Owners' equity
$
1,000
See accompanying note to balance sheet
F-12
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ATLAS PIPELINE HOLDINGS, L.P.
NOTE TO BALANCE SHEET
DECEMBER
31, 2005
NATURE OF OPERATIONS
Atlas Pipeline Holdings, L.P. (the "Partnership") is a Delaware limited partnership formed on December 15, 2005 to become the sole member of Atlas Pipeline Partners GP, LLC, which is the managing general partner of Atlas Pipeline Partners, L.P. ("Atlas"), a
publicly traded limited partnership. Atlas is a midstream energy service provider engaged in the transmission, gathering and processing of natural gas in the Mid-Continent and Appalachian regions of the United States. Our assets will consist of the following
partnership interests in Atlas to be contributed to us by Atlas Pipeline Partners GP, LLC:
•
The 100% ownership interest in Atlas Pipeline Partners GP, LLC, which owns a 2.0% general partner interest in Atlas;
•
The incentive distribution rights in Atlas associated with the general partner interest, which we hold through our ownership interests in Atlas Pipeline Partners GP, LLC; and
•
1,641,026 common limited partner units of Atlas, representing approximately 13.1% of the outstanding common limited partner units of Atlas, or approximately 12.8% of Atlas' partnership interests.
F-13
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Atlas America, Inc.
We have audited the accompanying balance sheet of Atlas Pipeline Holdings GP, LLC (the "Company") as of December 31, 2005. This financial statement is the responsibility of the Company's management. Our responsibility is to express an opinion on this financial
statement based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of
material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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 balance sheet referred to above presents fairly, in all material respects, the financial position of Atlas Pipeline Holdings GP, LLC as of December 31, 2005, in conformity with accounting principles generally accepted in the United States of America.
/s/ GRANT THORNTON LLP
Cleveland, Ohio
January 3, 2006
F-14
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ATLAS PIPELINE HOLDINGS GP, LLC
BALANCE SHEET
DECEMBER
31, 2005
ASSETS
Cash
$
1,000
OWNERS' EQUITY
Owners' equity
$
1,000
See accompanying note to balance sheet
F-15
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ATLAS PIPELINE HOLDINGS GP, LLC
NOTE TO BALANCE SHEET
DECEMBER
31, 2005
NATURE OF OPERATIONS
Atlas Pipeline Holdings GP, LLC (the "Company") is a Delaware limited liability company formed on December 15, 2005 and is the general partner of Atlas Pipeline Holdings, L.P., a Delaware limited partnership that was formed on December 15, 2005 to own
Atlas Pipeline Partners GP, LLC, the general partner of Atlas Pipeline Partners, L.P. ("Atlas") and owner of 1,641,026 of Atlas' common limited partner units. Atlas Pipeline Holdings GP, LLC's general partner interest is fixed without any requirement for capital
contributions in connection with additional unit issuances by Atlas Pipeline Holdings, L.P. because Atlas Pipeline Holdings GP, LLC has no economic interest in Atlas Pipeline Holdings, L.P.
F-16
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors
Atlas Pipeline Partners GP, LLC
We have audited the accompanying consolidated balance sheets of Atlas Pipeline Partners GP, LLC and subsidiaries (the "Company") as of December 31, 2003 and 2004, and the related consolidated statements of income, comprehensive income, owners' equity,
and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Atlas Pipeline Partners GP, LLC and subsidiaries as of December 31, 2003 and 2004 and the consolidated results of
their operations and cash flows for each of the three years in the period ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.
/s/ GRANT THORNTON LLP
Cleveland, Ohio
December 21, 2005
F-17
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
December
31,
September
30,
2003
2004
2005
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
15,078
$
18,214
$
12,035
Accounts receivable – affiliates
13,658
19,609
4,418
Accounts receivable
12
13,729
41,289
Current portion of hedge asset
—
40
14,993
Prepaid expenses
67
1,056
1,595
Total current assets
28,815
52,648
74,330
Property, plant and equipment, net
29,628
175,259
304,704
Long-term hedge asset
—
14
5,970
Intangibles, net
—
—
12,398
Goodwill
2,305
2,305
80,201
Other assets
2,422
4,672
6,855
$
63,170
$
234,898
$
484,458
LIABILITIES AND OWNERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt
$
—
$
2,303
$
63
Accrued liabilities
279
3,144
6,360
Current portion of hedge liability
—
1,959
37,663
Accrued producer liabilities
—
10,996
32,543
Accounts payable
242
2,341
7,257
Accounts payable – affiliates
1,673
—
—
Distribution payable
1,696
4,006
—
Total current liabilities
3,890
24,749
83,886
Long-term hedge liability
—
722
29,962
Long-term debt, less current portion
—
52,149
183,582
Minority interest
43,551
135,873
227,908
Commitments and contingencies
—
—
—
Owners' equity (deficit):
Owners' equity
15,729
22,723
5,564
Accumulated other comprehensive loss
—
(1,318
)
(46,444
)
Total owners' equity (deficit)
15,729
21,405
(40,880
)
$
63,170
$
234,898
$
484,458
See accompanying notes to consolidated financial statements
F-18
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands)
Nine Months Ended
Years Ended December
31,
September
30,
2002
2003
2004
2004
2005
(unaudited)
Revenue:
Natural gas and liquids
$
—
$
—
$
72,109
$
30,048
$
218,268
Transportation and compression —
affiliates
10,581
15,563
18,724
13,292
16,447
Transportation and compression —
third parties
79
88
76
52
54
Interest income and other
7
98
382
282
352
Total revenue and other income
10,667
15,749
91,291
43,674
235,121
Costs and expenses:
Natural gas and liquids
—
—
58,707
24,588
184,578
Plant operating
—
—
2,032
931
7,242
Transportation and compression
2,062
2,421
2,260
1,709
2,169
General and administrative
1,274
854
3,561
2,180
7,762
Compensation reimbursement — affiliates
208
808
1,081
721
1,365
Depreciation and amortization
1,475
1,770
4,471
2,132
8,495
Interest
250
258
2,301
1,202
8,478
Minority interest
2,496
5,066
10,941
3,300
7,240
Loss (gain) on arbitration settlement, net
—
—
(1,457
)
2,987
138
Total costs and expenses
7,765
11,177
83,897
39,750
227,467
Net income
2,902
4,572
7,394
3,924
7,654
Premium on preferred unit redemption
—
—
(400
)
(400
)
—
Net income attributable to owners
$
2,902
$
4,572
$
6,994
$
3,524
$
7,654
See accompanying notes to consolidated financial statements
F-19
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
Nine Months Ended
Years Ended December
31,
September
30,
2002
2003
2004
2004
2005
(unaudited)
Net income
$
2,902
$
4,572
$
7,394
$
3,924
$
7,654
Premium on preferred unit redemption
—
—
(400
)
(400
)
—
Net income attributable to owners
2,902
4,572
6,994
3,524
7,654
Other comprehensive loss:
Change in fair value of derivative
instruments accounted for as hedges
—
—
(1,320
)
(3,955
)
(49,507
)
Add: reclassification adjustment for
losses in net income
—
—
2
27
4,381
—
—
(1,318
)
(3,928
)
(45,126
)
Comprehensive income (loss)
$
2,902
$
4,572
$
5,676
$
(404
)
$
(37,472
)
See accompanying notes to consolidated financial statements
F-20
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OWNERS' EQUITY (DEFICIT)
(in thousands)
Accumulated
Other
Owners'
Comprehensive
Total Owners'
Equity
Loss
Equity (Deficit)
Balance at January 1, 2002
$
8,255
$
—
$
8,255
Net income
2,902
—
2,902
Balance at December 31, 2002
$
11,157
$
—
$
11,157
Net income
4,572
—
4,572
Balance at December 31, 2003
$
15,729
$
—
$
15,729
Other comprehensive loss
—
(1,318)
(1,318
)
Net income
6,994
—
6,994
Balance at December 31, 2004
$
22,723
$
(1,318
)
$
21,405
Other comprehensive loss (unaudited)
—
(45,126
)
(45,126
)
Net income (unaudited)
7,654
—
7,654
Distribution to owners (unaudited)
(24,813
)
—
(24,813
)
Balance at September 30, 2005 (unaudited)
$
5,564
$
(46,444
)
$
(40,880
)
See accompanying notes to consolidated financial statements
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Nine Months Ended
Years Ended December
31,
September
30,
2002
2003
2004
2004
2005
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
2,902
$
4,572
$
6,994
$
3,524
$
7,654
Adjustments to reconcile net income to net cash provided by operating activities:
Minority interest in net income
2,496
5,066
10,941
3,300
7,240
Distributions paid to minority interest limited partners in Atlas Pipeline
(3,526
)
(5,040
)
(9,427
)
(5,589
)
(14,234
)
Depreciation and amortization
1,475
1,770
4,471
2,132
8,495
Non-cash (gain) loss on derivative value
—
—
(210
)
585
(1,091
)
Non-cash compensation under long-term incentive plan
—
—
700
342
2,809
Amortization of deferred finance costs
90
106
400
163
1,741
Change in operating assets and liabilities, net of effects of acquisitions:
Increase decrease in accounts receivable and prepaid expenses
799
827
5,444
1,320
(24,779
)
Increase (decrease) in accounts payable and accrued liabilities
(82
)
413
(3,264
)
3,797
25,511
(Increase) decrease in accounts receivable – affiliates
(3,577
)
(3,075
)
(4,738
)
(90
)
17,652
Net cash provided by operating activities
577
4,639
11,311
9,484
30,998
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions
—
—
(141,626
)
(141,564
)
(195,201
)
Capital expenditures
(5,230
)
(7,635
)
(10,043
)
(4,419
)
(34,519
)
Other
(1,519
)
(128
)
255
(172
)
Net cash used in investing activities
(5,230
)
(9,154
)
(151,797
)
(145,728
)
(229,892
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under Atlas Pipeline credit facility
10,816
2,000
110,000
100,000
271,500
Repayments under Atlas Pipeline credit facility
(6,405
)
(8,500
)
(55,750
)
(40,000
)
(142,250
)
Net proceeds from issuance of Atlas Pipeline limited partner units
—
25,182
93,119
93,114
91,720
Distribution to owners
—
—
—
—
(24,813
)
Net proceeds from sale of Atlas Pipeline preferred units
—
—
20,000
20,000
—
Redemption of Atlas Pipeline preferred units
—
—
(20,000
)
(20,000
)
—
Other
(61
)
(948
)
(3,747
)
(2,928
)
(3,442
)
Net cash provided by financing activities
4,350
17,734
143,622
150,186
192,715
Net change in cash and cash equivalents
(303
)
13,219
3,136
13,942
(6,179
)
Cash and cash equivalents, beginning of period
2,162
1,859
15,078
15,078
18,214
Cash and cash equivalents, end of period
$
1,859
$
15,078
$
18,214
$
29,020
$
12,035
See accompanying notes to consolidated financial statements
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 — NATURE OF OPERATIONS
Atlas Pipeline Partners GP, LLC (the "Company") is a Delaware limited liability company formed in May 1999 to become the general partner of Atlas Pipeline Partners, L.P. (the "Atlas Pipeline"). The Company is wholly-owned by Atlas America, Inc. and its
affiliates ("Atlas America"), a publicly traded company (NASDAQ: ATLS).
Atlas Pipeline is a Delaware limited partnership formed in May 1999 to acquire, own and operate natural gas gathering systems previously owned by Atlas America. Atlas Pipeline's operations are conducted through subsidiary entities whose equity interests are
owned by Atlas Pipeline Operating Partnership, L.P. (the "Operating Partnership"), a wholly-owned subsidiary of Atlas Pipeline. The Company, through its general partner interests in Atlas Pipeline and the Operating Partnership, owns a 2.0% general partner interest in
the consolidated pipeline operations, through which it manages and effectively controls both Atlas Pipeline and the Operating Partnership. The remaining 98.0% ownership interest in the consolidated pipeline operations consists of limited partner interests in Atlas
Pipeline. At December 31, 2004, Atlas Pipeline had 5,563,659 common and 1,641,026 subordinated limited partnership units outstanding. In January 2005, these subordinated units, which are owned by the Company, were converted to common units as Atlas Pipeline
met stipulated tests under the terms of its partnership agreement allowing for such conversion. While the converted units are no longer subordinated to the rights of the common unitholders, these units have not yet been registered with the Securities and Exchange
Commission and, therefore, their resale in the public market is subject to restrictions under the Securities Act. At September 30, 2005, Atlas Pipeline had 9,505,016 common limited partnership units outstanding, including the 1,641,026 unregistered common units held
by the Company.
The Company, as general partner, manages the operations and activities of Atlas Pipeline and owes a fiduciary duty to Atlas Pipeline's unitholders. The Company is liable, as general partner, for all of Atlas Pipeline's debts (to the extent not paid from Atlas
Pipeline's assets), except for indebtedness or other obligations that are made specifically nonrecourse to the general partner.
The Company does not receive any management fee or other compensation for its management of Atlas Pipeline. The Company and its affiliates are reimbursed for expenses incurred on Atlas Pipeline's behalf. These expenses include the costs of employee,
officer, and managing board member compensation and benefits properly allocable to Atlas Pipeline and all other expenses necessary or appropriate to conduct the business of, and allocable to, Atlas Pipeline. The Atlas Pipeline partnership agreement provides that the
Company, as general partner, will determine the expenses that are allocable to Atlas Pipeline in any reasonable manner in its sole discretion.
The accompanying unaudited consolidated balance sheet as of September 30, 2005 and the consolidated statements of income, comprehensive income, cash flows and owners' equity for the nine months ended September 30, 2004 and 2005 are presented in
accordance with accounting principles generally accepted in the United States for interim reporting. In management's opinion, all adjustments necessary for the fair presentation of the Company's financial position, results of operations and cash flows for the periods
presented have been made. The related disclosures as of September 30, 2005 and for the nine month periods ended September 30, 2004 and 2005 are also unaudited.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, Atlas Pipeline, the Operating Partnership and the Operating Partnership's wholly-owned subsidiaries. The Partnership's limited partner equity interests owned by third-parties at
September 30, 2005 and December 31, 2003 and
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2004 are reflected as minority interests on the consolidated balance sheets. All material intercompany transactions have been eliminated.
Use of Estimates
The preparation of the Company's consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities that exist at the date of the Company's consolidated financial statements, as well as the reported amounts of revenue and costs and expenses during the reporting periods. Actual results could differ from those
estimates.
The natural gas industry principally conducts its business by processing actual transactions at the end of the month following the month of delivery. Consequently, the most current month's financial results for the Company include estimated volumes and market
prices. Differences between estimated and actual amounts are recognized in the following month's financial results. Management believes that the operating results presented for the three years ended December 31, 2004 and for the nine months ended September 30,
2004 and 2005 represent actual results in all material respects (see Revenue Recognition accounting policy for further description).
Cash Equivalents
The Company considers all highly liquid investments with a remaining maturity of three months or less at the time of purchase to be cash equivalents. These cash equivalents consist principally of temporary investments of cash in short-term money market
instruments.
Receivables
In evaluating the realizability of its accounts receivable, the Company performs ongoing credit evaluations of its customers and adjusts credit limits based upon payment history and the customer's current creditworthiness, as determined by the Company's review
of its customers' credit information. The Company extends credit on an unsecured basis to many of its customers. At December 31, 2003 and 2004 and September 30, 2005, the Company recorded no allowance for uncollectible accounts receivable impairment.
Property, Plant and Equipment
Property and Equipment are stated at cost or, upon acquisition of a business, at the fair value of the assets acquired. Depreciation expense is recorded for each asset over its estimated useful life using the straight-line method.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that an asset's estimated undiscounted future cash flows will not be sufficient
to recover its carrying amount, an impairment charge will be recorded to reduce the carrying amount for that asset to its estimated fair value if such carrying amount exceeds the fair value.
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Fair Value of Financial Instruments
For cash and cash equivalents, receivables and payables, the carrying amounts approximate fair values because of the short maturity of these instruments. The carrying value of long-term debt approximates fair market value since interest rates approximate
current market rates.
Derivative Instruments
The Company applies the provisions of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 requires each derivative instrument to be recorded in the balance
sheet as either an asset or liability measured at fair value. Changes in a derivative instrument's fair value are recognized currently in earnings unless specific hedge accounting criteria are met.
Intangible Assets
At September 30, 2005, the Company had $12.4 million of intangible assets, net of accumulated amortization of $0.5 million, which was recorded in connection with natural gas gathering contracts assumed in consummated acquisitions (see Note 7). There were
no intangible assets recorded as of December 31, 2003 or 2004. Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS No. 142") requires that intangible assets with finite useful lives be amortized over their respective
estimated useful lives. If an intangible asset has a finite useful life, but the precise length of that life is not known, that intangible asset must be amortized over the best estimate of its useful life. At a minimum, the Company will assess the useful lives and residual
values of all intangible assets on an annual basis to determine if adjustments are required. Amortization expense on the natural gas gathering contract intangible assets, which have an estimated life of 12 years and are being amortized on a straight-line basis, was $0.5
million for the nine months ended September 30, 2005. There was no amortization expense on intangible assets recorded during the three years ended December 31, 2004 and the nine months ended September 30, 2004. Amortization expense related to intangible
assets is estimated to be $1.1 million for each of the next five calendar years commencing 2006.
Goodwill
At December 31, 2003 and 2004 and September 30, 2005, the Company had $2.3 million, $2.3 million and $80.2 million, respectively, of goodwill which was recognized in connection with consummated acquisitions (see Note 7). The Company tests its goodwill
for impairment at each year end by comparing fair values to its carrying values. The evaluation of impairment under SFAS No. 142 requires the use of projections, estimates and assumptions as to the future performance of the Company's operations, including
anticipated future revenue, expected future operating costs and the discount factor used. Actual results could differ from projections, resulting in revisions to the Company's assumptions and, if required, recognition of an impairment loss. The Company's test of
goodwill at December 31, 2004 resulted in no impairment, and no impairment indicators have been noted as of September 30, 2005. The Company will continue to evaluate its goodwill at least annually and if impairment indicators arise, will reflect the impairment of
goodwill, if any, within the consolidated statements of income in the period in which the impairment is indicated.
Federal Income Taxes
The Company is a limited liability corporation and Atlas Pipeline is a limited partnership. As a result, the Company's and Atlas Pipeline's income for federal income tax purposes is reportable on the tax
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
returns of the individual owners and partners, respectively. Accordingly, no recognition has been given to income taxes in the Company's consolidated financial statements.
Stock Based Compensation
The Company issues phantom units of the Partnership to its directors and employees of Atlas America and its affiliates under its Long-Term Incentive Plan ("the Plan") (see Note 11). The Company accounts for the phantom units issued in connection with the
Plan under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and its related interpretations.
Minority Interests in Atlas Pipeline
The minority interests in our consolidated financial statements reflect the outside ownership interests in Atlas Pipeline, which were 61%, 76% and 84% at December 31, 2003 and 2004 and September 30, 2005, respectively. The minority interest in the
Company's consolidated net income is calculated quarterly by multiplying (i) the weighted average Atlas Pipeline limited partner units outstanding held by non-affiliated third-parties by (ii) the consolidated net income per Atlas Pipeline limited partner unit for the
respective quarter. The net income per Atlas Pipeline limited partner unit is calculated by dividing the net income allocated to limited partners, after the allocation of net income to the Company as general partner in accordance with the terms of the Atlas Pipeline
partnership agreement, by the total weighted average Atlas Pipeline limited partner units outstanding. The minority interest liability on the Company's consolidated balance sheets principally reflects the sum of the allocation of Atlas Pipeline consolidated net income to
the minority interests and the contributed capital of minority interests through the sale of limited partner units in Atlas Pipeline, partially offset by Atlas Pipeline quarterly cash distributions to the minority interest owners.
Environmental Matters
The Company is subject to various federal, state and local laws and regulations relating to the protection of the environment. The Company has established procedures for the ongoing evaluation of its operations, to identify potential environmental exposures and
to comply with regulatory policies and procedures.
The Company accounts for environmental contingencies in accordance with Statement of Financial Accounting Standards No. 5, "Accounting for Contingencies." Environmental expenditures that relate to current operations are expensed or capitalized as
appropriate. Expenditures that relate to an existing condition caused by past operations, and do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or clean-ups are probable, and the costs
can be reasonably estimated. The Company maintains insurance which may cover in whole or in part certain environmental expenditures. At December 31, 2003 and 2004 and September 30, 2005, the Company had no environmental matters requiring specific
disclosure or requiring the recognition of a liability.
Segment Information
The Company has two business segments: natural gas gathering and transmission located in the Appalachian Basin area ("Appalachia") and gathering, transmission and processing located in the Mid-Continent area ("Mid-Continent"). Appalachian revenue is, for
the most part, based on contractual arrangements with Atlas America and its affiliates. Mid-Continent revenue is, for the most part, derived from the sale of residue gas and NGLs to purchasers at the tailgate of the processing plant.
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revenue Recognition
Revenue in the Appalachian segment is recognized at the time the natural gas is transported through the gathering systems. Under the terms of its natural gas gathering agreements with Atlas America and its affiliates, the Company receives fees for gathering
natural gas from wells owned by Atlas America, by drilling investment partnerships sponsored by Atlas America or by independent third parties. The fees received for the gathering services are generally the greater of 16% of the gross sales price for gas produced from
the wells, or $0.35 or $0.40 per thousand cubic feet ("mcf"), depending on the ownership of the well. Substantially all gas gathering revenue is derived under this agreement. Fees for transportation services provided to independent third parties whose wells are
connected to the Company's Appalachian gathering systems are at separately negotiated prices.
Revenue in the Mid-Continent segment is recognized at the time the natural gas is processed and the resulting residue gas and natural gas liquids ("NGLs") are sold. The majority of this revenue is based on percentage of proceeds, or POP, and fixed-fee contracts.
Under its POP purchasing arrangements, the Company purchases natural gas at the wellhead, processes the natural gas by extracting NGLs and removing impurities and sells the residue gas and NGLs at market-based prices, remitting to producers a
contractually-determined percentage of the sale proceeds.
The Company accrues unbilled revenue due to timing differences between the delivery of natural gas, NGLs, and oil and the receipt of a delivery statement. This revenue is recorded based upon volumetric data from the Company's records and management
estimates of the related transportation and compression fees which are, in turn, based upon applicable product prices (see Use of Estimates accounting policy for further description). The Company had unbilled revenue at December 31, 2003 and 2004 and
September 30, 2005 of $2.6 million, $15.3 million and $42.1 million, respectively, included in accounts receivable and accounts receivable-affiliates within the consolidated balance sheets.
Comprehensive Income (Loss)
Comprehensive income (loss) includes net income and all other changes in the equity of a business during a period from transactions and other events and circumstances from non-owner sources. These changes, other than net income, are referred to as "other
comprehensive income (loss)" and for the Company include only changes in the fair value of unsettled hedge contracts.
New Accounting Standards
In May 2005, the Financial Accounting Standards Board ("FASB") issued SFAS No. 154, "Accounting Changes and Error Corrections" ("SFAS No. 154"). SFAS No. 154 requires retrospective application to prior periods' financial statements for changes in accounting
principle. It also requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment is made to the opening balance
of retained earnings for that period rather than being reported in an income statement. The statement will be effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The impact of SFAS No. 154 will depend
on the nature and extent of any voluntary accounting changes and corrections of errors after the effective date, but management does not currently expect SFAS No. 154 to have a material impact on the Company's financial position or results of operations.
In March 2005, the FASB issued FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations" ("FIN 47"), which will result in (a) more consistent recognition of liabilities relating to asset retirement obligations, (b) more information
about expected future cash outflows
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
associated with those obligations, and (c) more information about investments in long-lived assets because additional asset retirement costs will be recognized as part of the carrying
amounts of the assets. FIN 47 clarifies that the term conditional asset retirement obligation as used in SFAS No. 143, "Accounting for Asset Retirement Obligations," refers to a legal
obligation to perform an asset retirement activity in which the timing and (or) method of settlement are conditional on a future event that may or may not be within the control of the
entity. The obligation to perform the asset retirement activity is unconditional even though uncertainty exists about the timing and (or) method of settlement. Uncertainty about the timing
and (or) method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. FIN 47 also clarifies
when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective no later than the end of fiscal years ending
after December 15, 2005. Retrospective application of interim financial information is permitted but is not required. Early adoption of this interpretation is encouraged. The Company does
not expect FIN 47 to have a material impact on its consolidated financial statements.
In December 2004, the FASB issued SFAS No. 123 (R) (revised 2004) "Share-Based Payment," which is a revision of SFAS No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123 (R) supersedes Accounting Principals Board Opinion ("APB") No. 25,
"Accounting for Stock Issued to Employees," and amends SFAS No. 95, "Statement of Cash Flows." Generally, the approach to accounting in Statement 123 (R) requires all share-based payments to employees, including grants of employee stock options, to be recognized
in the financial statements based on their fair values. Currently, the Company follows APB No. 25 and its interpretations, which allow for valuation of share-based payments to employees at their intrinsic values. Under this methodology, the Company recognizes
compensation expense for phantom units granted at their fair value at the date of grant and compensation expense for options granted only if the current market price of the underlying units exceed the exercise price. SFAS No. 123 (R) is effective for the Company
beginning January 1, 2006. The Company does not expect SFAS No. 123 (R) to have a material impact on its consolidated financial statements.
NOTE 3 — ATLAS PIPELINE EQUITY OFFERINGS
In June 2005, Atlas Pipeline sold 2.3 million common units in a public offering for total gross proceeds of $96.5 million. The units were issued under Atlas Pipeline's previously filed Form S-3 shelf registration statement. The sale of the units resulted in net
proceeds of approximately $91.7 million, after underwriting commissions and other transaction costs. Atlas Pipeline primarily utilized the net proceeds from the sale to repay a portion of the amounts due under its credit facility.
In July 2004, Atlas Pipeline sold 2.1 million common units in a public offering for total gross proceeds of $73.0 million. The units were issued under Atlas Pipeline's previously filed Form S-3 shelf registration statement. The sale of the units resulted in net
proceeds of approximately $67.5 million, after underwriting commissions and other transaction costs. Atlas Pipeline utilized the net proceeds from the sale primarily to repay a portion of the amounts due under its credit facility and to redeem preferred units issued in
connection with the acquisition of Spectrum Field Services, Inc. in July 2004 for $20.4 million (see Note 7).
In April 2004, Atlas Pipeline sold 0.8 million common units in a public offering for total gross proceeds of $27.0 million. The units were issued under Atlas Pipeline's previously filed Form S-3 shelf registration statement. The sale of the units resulted in net
proceeds of approximately $25.2 million, after underwriting commissions and other transaction costs. Atlas Pipeline utilized the net proceeds from the sale primarily to repay a portion of the amounts due under its credit facility.
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In May 2003, Atlas Pipeline sold 1.1 million common units in a public offering for total gross proceeds of $27.3 million. The units were issued under Atlas Pipeline's previously filed Form S-3 shelf registration statement. The sale of the units resulted in net
proceeds of approximately $25.2 million, after underwriting commissions and other transaction costs. Atlas Pipeline utilized the net proceeds from the sale primarily to repay a portion of the amounts due under its credit facility.
NOTE 4 — ATLAS PIPELINE DISTRIBUTIONS
Atlas Pipeline is required to distribute, within 45 days of the end of each quarter, all of its available cash (as defined in its partnership agreement) for that quarter. If distributions in any quarter exceed specified per unit target levels, the Company, as general
partner, receives between 15% and 50% of such distributions in excess of the specified target levels. Distributions declared by Atlas Pipeline for the period from January 1, 2002 through September 30, 2005 were as follows:
Date
Atlas Pipeline
Total Atlas
Atlas Pipeline
Cash Distribution
Pipeline Cash
Cash Distribution
per Limited
Distribution To
Paid
For Quarter Ended
Partner Unit
Limited Partners
(in thousands)
May 10, 2002
March 31, 2002
$
0.520
$
843
August 8, 2002
June 30, 2002
$
0.535
$
867
November 8, 2002
September 30, 2002
$
0.540
$
875
February 7, 2003
December 31, 2002
$
0.540
$
875
May 9, 2003
March 31, 2003
$
0.560
$
908
August 8, 2003
June 30, 2003
$
0.580
$
1,574
November 7, 2003
September 30, 2003
$
0.620
$
1,682
February 6, 2004
December 31, 2003
$
0.625
$
1,696
May 7, 2004
March 31, 2004
$
0.630
$
1,710
August 6, 2004
June 30, 2004
$
0.630
$
2,182
November 5, 2004
September 30, 2004
$
0.690
$
3,839
February 11, 2005
December 31, 2004
$
0.720
$
4,006
May 13, 2005
March 31, 2005
$
0.750
$
4,173
August 5, 2005
June 30, 2005
$
0.770
$
6,055
November 14, 2005
September 30, 2005
$
0.810
$
6,382
NOTE 5 — PROPERTY, PLANT AND EQUIPMENT
The following is a summary of property, plant and equipment (in thousands):
Estimated
December
31,
September
30,
Useful Lives
2003
2004
2005
in Years
Pipelines, processing and compression facilities
$
36,390
$
168,932
$
304,795
15 – 40
Rights of way
623
14,128
15,109
20 – 40
Buildings
—
3,215
3,351
40
Furniture and equipment
—
517
700
3 – 7
Other
5
307
562
3 – 10
37,018
187,099
324,517
Less – accumulated depreciation
(7,390
)
(11,840
)
(19,813
)
$
29,628
$
175,259
$
304,704
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In April 2005, Atlas Pipeline completed the acquisition of ETC Oklahoma Pipeline, Ltd. for approximately $196.0 million (see Note 7). Due to its recent date of acquisition, the purchase price allocation is based upon estimated values determined by Atlas Pipeline,
which are subject to adjustment and could change significantly as this preliminary allocation is further evaluated. At September 30, 2005, the portion of the purchase price allocated to property, plant and equipment for this acquisition by Atlas Pipeline (see Note 7) was
included in pipelines, processing and compression facilities.
NOTE 6 — OTHER ASSETS
The following is a summary of other assets (in thousands):
December
31,
September
30,
2003
2004
2005
Deferred finance costs, net of accumulated amortization of $106, $506 and $1,237 at December 31, 2003 and 2004 and September 30, 2005, respectively
$
767
$
3,316
$
4,771
Security deposits
—
1,356
1,659
Alaska Pipeline Company acquisition costs (see Note 13)
1,579
—
—
Other
76
—
425
$
2,422
$
4,672
$
6,855
Deferred finance costs are recorded at cost and amortized over the term of the respective debt agreements (see Note 9).
NOTE 7 — ACQUISITIONS
Spectrum
In July 2004, Atlas Pipeline acquired Spectrum Field Services, Inc. ("Spectrum"), for approximately $141.6 million, including transaction costs and the payment of taxes due as a result of the transaction. Spectrum's principal assets included 1,900 miles of natural
gas pipelines and a natural gas processing facility in Velma, Oklahoma. The acquisition was accounted for using the purchase method of accounting under SFAS No. 141, "Business Combinations" ("SFAS No. 141"). The following table presents the purchase price
allocation, including professional fees and other related acquisition costs, to the assets acquired and liabilities assumed, based on their fair values at the date of acquisition (in thousands):
Cash and cash equivalents
$
803
Accounts receivable
18,505
Prepaid expenses
649
Property, plant and equipment
139,464
Other long-term assets
1,054
Total assets acquired
160,475
Accounts payable and accrued liabilities
(17,153
)
Hedging liabilities
(1,519
)
Long-term debt
(164
)
Total liabilities assumed
(18,836
)
Net assets acquired
$
141,639
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The results of Spectrum's operations are included within the Company's consolidated financial statements from its date of acquisition. In connection with financing the acquisition of Spectrum, Atlas Pipeline issued preferred units to Resource America, Inc., an
affiliate of Atlas America at the date of the transaction, and to Atlas America for an aggregate amount of $20.0 million. These preferred units were subsequently redeemed for $20.4 million, including a $0.4 million premium, with the net proceeds from Atlas Pipeline's
July 2004 equity offering (see Note 3).
Elk City
In April 2005, Atlas Pipeline acquired all of the outstanding equity interests in ETC Oklahoma Pipeline, Ltd. ("Elk City"), a Texas limited partnership, for $196.0 million, including related transaction costs. Elk City's principal assets included 318 miles of natural
gas pipelines located in the Anadarko Basin in western Oklahoma, a natural gas processing facility in Elk City, Oklahoma and a gas treatment facility in Prentiss, Oklahoma. The acquisition was accounted for using the purchase method of accounting under SFAS No.
141. The following table presents the preliminary purchase price allocation, including professional fees and other related acquisition costs, to the assets acquired and liabilities assumed, based on their fair values at the date of acquisition (in thousands) (unaudited):
Accounts receivable
$
5,587
Other assets
497
Property, plant and equipment
104,091
Intangible assets
12,890
Goodwill
77,896
Total assets acquired
200,961
Accounts payable and accrued liabilities
(4,970
)
Net assets acquired
$
195,991
Atlas Pipeline recorded goodwill in connection with this acquisition as a result of Elk City's significant cash flow and its strategic industry position. The results of Elk City's operations are included within the Company's consolidated financial statements from its
date of acquisition.
The following data presents unaudited pro forma revenue and net income for the Company as if the acquisitions discussed above and the equity offerings in April 2004, July 2004 and June 2005, the net proceeds of which were principally utilized to repay debt
borrowed to finance the acquisitions (see Note 3), had occurred on January 1, 2003. The Company has prepared these pro forma financial results for comparative purposes only. These pro forma financial results may not be indicative of the results that would have
occurred if Atlas Pipeline had completed these acquisitions at the beginning of the periods shown below or the results that will be attained in the future (in thousands):
Years Ended
Nine Months Ended
December
31,
September
30,
2003
2004
2004
2005
Total revenue and other income
$
230,082
$
294,285
$
194,186
$
275,853
Net income
$
2,409
$
6,714
$
3,404
$
7,306
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 — DERIVATIVE INSTRUMENTS
Atlas Pipeline enters into certain financial swap and option instruments that are classified as cash flow hedges in accordance with SFAS No. 133. Atlas Pipeline entered into these instruments to hedge the forecasted natural gas, NGL and condensate sales against
the variability in expected future cash flows attributable to changes in market prices. The swap instruments are contractual agreements between counterparties to exchange obligations of money as the underlying natural gas, NGL and condensate is sold. Under these
swap agreements, Atlas Pipeline receives a fixed price and pays a floating price based on certain indices for the relevant contract period.
Atlas Pipeline formally documents all relationships between hedging instruments and the items being hedged, including its risk management objective and strategy for undertaking the hedging transactions. This includes matching the natural gas futures and
options contracts to the forecasted transactions. Atlas Pipeline assesses, both at the inception of the hedge and on an ongoing basis, whether the derivatives are effective in offsetting changes in the forecasted cash flow of hedged items. If it is determined that a
derivative is not effective as a hedge or that it has ceased to be an effective hedge due to the loss of correlation between the hedging instrument and the underlying commodity, Atlas Pipeline will discontinue hedge accounting for the derivative and subsequent changes
in the derivative fair value, which it determines through utilization of market data, will be recognized immediately within the Company's consolidated statements of income.
Derivatives are recorded on the consolidated balance sheet as assets or liabilities at fair value. For derivatives qualifying as hedges, the effective portion of changes in fair value are recognized in owners' equity as accumulated other comprehensive income (loss)
and reclassified to natural gas and liquids revenue within the consolidated statements of income as the underlying transactions are settled. For non-qualifying derivatives and for the ineffective portion of qualifying derivatives, changes in fair value are recognized within
the consolidated statements of income as they occur. At December 31, 2004 and September 30, 2005, the Company reflected net hedging liabilities on its consolidated balance sheets of $2.6 million and $46.7 million, respectively. Prior to the acquisition of Spectrum in
July 2004, Atlas Pipeline had not entered into derivative instruments. Of the $46.4 million net loss in accumulated other comprehensive income (loss) at September 30, 2005, if the fair values of the instruments remain at current market values, $22.7 million of losses
will be reclassified to the consolidated statements of income over the next twelve month period as these contracts expire and $23.7 million will be reclassified in later periods. Actual amounts that will be reclassified will vary as a result of future price changes.
Ineffective hedge gains or losses are recorded in natural gas and liquids revenue within the consolidated statements of income while the hedge contract is open and may increase or decrease until settlement of the contract. The Company recognized losses of $2,000 for
the year ended December 31, 2004 and $27,000 and $4.4 million for the nine months ended September 30, 2004 and 2005, respectively, within its consolidated statements of income related to the settlement of qualifying hedge instruments. The Company also
recognized losses of $0.3 million for the year ended December 31, 2004 and $0.7 million for both the nine months ended September 30, 2004 and 2005 within its consolidated statements of income related to the change in market value of non-qualifying or ineffective
hedges.
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 31, 2004, the Company had the following natural gas liquids, natural gas, and crude oil volumes hedged:
Natural Gas Liquids Fixed — Price Swaps
Twelve
Average
Fair Value
Months
Volumes
Fixed Price
Liability(1)
Ended December
31,
(gallons)
(per gallon)
(in thousands)
2005
12,564,000
$
0.550
$
(1,208
)
2006
6,804,000
0.575
(500
)
$
(1,708
)
Natural Gas Fixed – Price Swaps
Twelve
Average
Fair Value
Months
Volumes
Fixed Price
Liability(3)
Ended December
31,
(MMBTU)(2)
(per MMBTU)
(in thousands)
2005
970,000
$
6.187
$
(71
)
2006
450,000
5.920
(172
)
$
(243
)
Crude Oil Fixed — Price Swaps
Twelve
Average
Fair Value
Months
Volumes
Fixed Price
Liability(3)
Ended December
31,
(barrels)
(per barrel)
(in thousands)
2006
18,000
$
38.767
$
(36)
Crude Oil Options
Twelve
Average
Fair Value
Months
Option Type
Volumes
Strike Price
Liability(3)
Ended December
31,
(barrels)
(per barrel)
(in thousands)
2005
Puts purchased
75,000
$
30.00
$
—
2005
Calls sold
75,000
34.30
(640
)
$
(640
)
Total liability
$
(2,627)
(1)
Fair value based upon management estimates, including forecasted forward NGL prices as a function of forward NYMEX natural gas and light crude prices.
(2)
MMBTU represents Million British Thermal Units.
(3)
Fair value based on forward NYMEX natural gas and light crude prices, as applicable.
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of September 30, 2005, the Company had the following NGLs, natural gas, and crude oil volumes hedged:
Natural Gas Liquids Fixed – Price Swaps
Twelve
Average
Fair Value
Months
Volumes
Fixed Price
Liability(1)
Ended September
30,
(gallons)
(per gallon)
(in thousands)
2006
38,586,000
$
0.673
$
(16,742
)
2007
38,115,000
0.711
(12,188
)
2008
34,587,000
0.702
(9,037
)
2009
7,434,000
0.697
(1,781
)
$
(39,748
)
Natural Gas Fixed – Price Swaps
Twelve
Average
Fair Value
Months
Volumes
Fixed Price
Liability(3)
Ended September
30,
(MMBTU)(2
)
(per MMBTU)
(in thousands)
2006
3,923,000
$
7.169
$
(5,767
)
2007
1,560,000
7.210
(1,658
)
2008
510,000
7.262
(1,037
)
$
(8,462
)
Natural Gas Basis Swaps
Twelve
Average
Fair Value
Months
Volumes
Fixed Price
Asset(3)
Ended September
30,
(MMBTU)(2)
(per MMBTU)
(in thousands)
2006
4,262,000
$
(0.517
)
$
1,376
2007
1,560,000
(0.522
)
1,584
2008
510,000
(0.544
)
1,383
$
4,343
Crude Oil Fixed – Price Swaps
Twelve
Average
Fair Value
Months
Volumes
Fixed Price
Liability(3)
Ended September
30,
(barrels)
(per barrel)
(in thousands)
2006
67,800
$
51.329
$
(1,056
)
2007
80,400
55.187
(844
)
2008
82,500
58.475
(414
)
$
(2,314
)
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Crude Oil Options
Twelve
Average
Fair Value
Months
Volumes
Strike Price
Liability(3)
Ended September
30,
Option Type
(barrels)
(per barrel)
(in thousands)
2006
Puts purchased
15,000
$
30.00
$
—
2006
Calls sold
15,000
34.25
(481
)
$
(481
)
Total net liability
$
(46,662
)
(1)
Fair value based upon management estimates, including forecasted forward NGL prices as a function of forward NYMEX natural gas and light crude prices.
(2)
MMBTU represents million British Thermal Units.
(3)
Fair value based on forward NYMEX natural gas and light crude prices, as applicable.
NOTE 9 — LONG-TERM DEBT
Total debt consists of the following (in thousands):
December
31,
September
30,
2004
2005
Atlas Pipeline Credit Facility:
Revolving credit facility
$
10,000
$
183,500
Term loan
44,250
—
Other debt
202
145
54,452
183,645
Less current maturities
(2,303
)
(63
)
$
52,149
$
183,582
In April 2005, Atlas Pipeline entered into a new $270.0 million credit facility (the "Credit Facility") with a syndicate of banks, which replaced its existing $135.0 million facility. The facility was comprised of a five-year $225.0 million revolving line of credit and a
five-year $45.0 million term loan. The term loan portion of the Credit Facility was repaid and retired from the net proceeds of the June 2005 equity offering (see Note 3). The revolving portion of the Credit Facility bears interest, at Atlas Pipeline's option, at either (i)
Adjusted LIBOR plus the applicable margin, as defined, or (ii) the higher of the federal funds rate plus 0.5% or the Wachovia Bank prime rate (each plus the applicable margin). The weighted average interest rate on the outstanding Credit Facility borrowings at
December 31, 2004 and September 30, 2005 was 7.0% and 6.6%, respectively. The interest rate on the outstanding balance of the term loan at December 31, 2004 was 7.75%. Up to $10.0 million of the credit facility may be utilized for letters of credit, of which $2.2
million and $7.7 million was outstanding at December 31, 2004 and September 30, 2005, respectively. These outstanding letter of credit amounts were not reflected as borrowings on the Company's consolidated balance sheet. Borrowings under the Credit Facility are
secured by a lien on and security interest in all of Atlas Pipeline's property and that of its subsidiaries, and by the guaranty of each of Atlas Pipeline's subsidiaries.
The Credit Facility contains customary covenants, including restrictions on Atlas Pipeline's ability to incur additional indebtedness; make certain acquisitions, loans or investments; make distribution payments to its unitholders if an event of default exists; or
enter into a merger or sale of assets, including
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the sale or transfer of interests in its subsidiaries. The Credit Facility also contains covenants requiring Atlas to maintain, on a rolling four-quarter basis, a maximum total debt to EBITDA
ratio (each as defined in the credit agreement) of 5.5 to 1, reducing to 4.5 to 1 on September 30, 2005 and thereafter; and an interest coverage ratio (as defined in the credit agreement) of
at least 3.0 to 1. Atlas Pipeline was in compliance with these covenants as of September 30, 2005, and was in compliance with the covenants of its previously existing credit facility as of
December 31, 2004. Based upon the definitions set forth within the credit agreement, Atlas Pipeline's ratio of total debt to EBITDA was 3.7 to 1 and the interest coverage ratio was 4.8 to 1
at September 30, 2005.
The aggregate amount of long-term debt maturities is as follows (in thousands):
Twelve Months Ended September 30:
2006
$
63
2007
62
2008
20
2010
183,500
$
183,645
Cash payments for interest related to long-term debt were $0.2 million, $0.2 million, and $2.1 million for the years ended December 31, 2002, 2003 and 2004, respectively.
NOTE 10 — COMMITMENTS AND CONTINGENCIES
Atlas Pipeline has noncancelable operating leases for equipment and office space. Total rental expense for the years ended December 31, 2002, 2003 and 2004 was $0.8 million, $1.0 million, and $0.8 million, respectively. The aggregate amount of remaining future
minimum annual lease payments as of September 30, 2005 is as follows (in thousands):
Twelve Months Ended September 30:
2006
$
1,308
2007
1,400
2008
678
2009
260
2010
143
$
3,789
Atlas is a party to various routine legal proceedings arising out of the ordinary course of its business. Management of the Company believes that the ultimate resolution of these actions, individually or in the aggregate, will not have a material adverse effect on
its financial condition or results of operations.
On March 9, 2004, the Oklahoma Tax Commission ("OTC") filed a petition against Spectrum alleging that Spectrum underpaid gross production taxes beginning in June 2000. The OTC is seeking a settlement of $5.0 million plus interest and penalties. Atlas
Pipeline plans on defending this action vigorously. In addition, under the terms of the Spectrum purchase agreement, $14.0 million has been placed in escrow to cover the costs of any adverse settlement resulting from the petition and other indemnification obligations
of the purchase agreement.
As of September 30, 2005, the Company is committed to expend approximately $36.6 million on pipeline extensions, compressor station upgrades and processing facility upgrades, including $13.1 million related to the Sweetwater Plant (see further description at
"Subsequent Events").
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 — LONG-TERM INCENTIVE PLAN
Atlas Pipeline has a Long-Term Incentive Plan that was established in February 2004 ("LTIP") in which officers, employees and non-employee managing board members of the Company and employees of the Company's affiliates and consultants are eligible to
participate. The LTIP is administered by a committee (the "Committee") appointed by the Company's managing board. The Committee may make awards of either phantom units or unit options for an aggregate of 435,000 common units. Only phantom units have been
granted under the LTIP through September 30, 2005.
A phantom unit entitles a grantee to receive a common unit upon vesting of the phantom unit or, at the discretion of the Committee, cash equivalent to the fair market value of a common unit. In addition, the Committee may grant a participant a distribution
equivalent right ("DER"), which is the right to receive cash per phantom unit in an amount equal to, and at the same time as, the cash distributions Atlas Pipeline makes on a common unit during the period the phantom unit is outstanding. A unit option entitles the
grantee to purchase Atlas Pipeline's common limited partner units at an exercise price determined by the Committee at its discretion. The Committee also has discretion to determine how the exercise price may be paid by the participant. Except for phantom units
awarded to non-employee managing board members of the Company, the Committee will determine the vesting period for phantom units and the exercise period for options. Through September 30, 2005, phantom units granted under the LTIP generally had vesting
periods of four years. The vesting period may also include the attainment of predetermined performance targets, which could increase or decrease the actual award settlement, as determined by the Committee. Phantom units awarded to non-employee managing board
members will vest over a four year period. Awards will automatically vest upon a change of control, as defined in the LTIP. Of the units outstanding under the LTIP at September 30, 2005, 31,214 units will vest within the following twelve months.
The Company accounts for equity awards under the LTIP in accordance with the provisions of APB No. 25 and its interpretations, which allows for valuation of these awards at their intrinsic values. Under this methodology, the Company recognizes
compensation expense for phantom units granted at their fair value at the date of grant. For options granted, the Company recognizes compensation expense at the date of the grant only if the current market price of the underlying units exceeds the exercise price.
The following table sets forth the LTIP phantom unit activity for the periods indicated:
Nine Months Ended
Years Ended December
31,
September
30,
2002
2003
2004
2004
2005
Outstanding, beginning of period
—
—
—
—
58,752
Granted(1)
—
—
59,598
59,598
67,338
Performance factor adjusted(2)
—
—
—
—
82,468
Matured
—
—
—
—
(14,686
)
Forfeited
—
—
(846
)
(846
)
(1,019
)
Outstanding, end of period
—
—
58,752
58,752
192,853
Non-cash compensation expense recognized
(in thousands)
$
—
$
—
$
700
$
342
$
2,809
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1)
The weighted average price for phantom unit awards on the date of grant was $37.14 for awards granted for the year ended December 31, 2004 and $37.14 and $48.58 for awards granted for the nine months ended September 30, 2004 and 2005, respectively. There were
no units awarded for the years ended December 31, 2002 and 2003.
(2)
Consists of adjustments to performance-based awards to reflect actual performance.
NOTE 12 — RELATED PARTY TRANSACTIONS
The Company, which is wholly-owned by Atlas America, is affiliated with Resource America, Inc., a publicly-traded entity, and its subsidiaries ("RAI"). Atlas America was a 100% owned subsidiary of RAI through the effective date of its initial public offering
(May 2004) and an 80% owned subsidiary from that date through June 29, 2005. On June 30, 2005, Resource America distributed its 10.7 million shares of Atlas America to its shareholders. In connection with this distribution of Atlas America common stock to its
shareholders, RAI and Atlas America entered into various agreements, including shared services and a tax matters agreement, which govern the ongoing relationship between the two companies.
Atlas Pipeline is dependent upon the resources and services provided by RAI, Atlas America and their affiliates and subsidiaries. Accounts receivable/payable-affiliates represents the net balance due from/to these related entities for natural gas transported through
the gathering systems, net of reimbursements for Atlas Pipeline costs and expenses paid by these Affiliates. Substantially all of Atlas Pipeline's revenue in Appalachia is from these Affiliates.
Atlas Pipeline does not directly employ any persons to manage or operate its business. These functions are provided by the Company, as general partner, and employees of these affiliated entities, primarily Atlas America. The Company does not receive a
management fee or other compensation in connection with its management of Atlas Pipeline apart from its interest as general partner and its right to receive incentive distributions. Atlas Pipeline reimburses the Company and/or its Affiliates for all direct and indirect
costs of services provided, including the cost of employees, officer and managing board member compensation and benefits properly allocable to Atlas Pipeline and all other expenses necessary or appropriate to the conduct of the business of, and allocable to, Atlas
Pipeline. The partnership agreement provides that the Company, as general partner, will determine the costs and expenses that are allocable to Atlas Pipeline in any reasonable manner it determines by the Company in its sole discretion.
Under an agreement with Atlas America and certain of its subsidiaries, Atlas America must construct up to 2,500 feet of sales lines from its existing wells to a point of connection to Atlas Pipeline's gathering systems. Atlas Pipeline must, at its own cost, extend
its system to connect to any such lines extended to within 1,000 feet of its gathering systems. With respect to wells to be drilled by Atlas America that will be more than 3,500 feet from Atlas Pipeline's gathering systems, Atlas Pipeline has various options to connect
those wells to its gathering systems at its own cost.
In connection with the proposed acquisition of Alaska Pipeline Company, L.L.C. ("Alaska Pipeline") (see Note 13), Atlas Pipeline paid RAI a fee of $70,750 in the year ended December 31, 2004.
NOTE 13 — SETTLEMENT OF ALASKA PIPELINE ARBITRATION
In September 2003, Atlas Pipeline entered into an agreement with SEMCO Energy, Inc. ("SEMCO") to purchase all of the stock of Alaska Pipeline. In order to complete the acquisition, Atlas Pipeline needed the approval of the Regulatory Commission of Alaska.
The Regulatory Commission initially approved the transaction, but on June 4, 2004, it vacated its order of approval based upon a motion for clarification or reconsideration filed by SEMCO. On July 1, 2004, SEMCO sent Atlas Pipeline a notice purporting to
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
terminate the transaction. Atlas Pipeline pursued its remedies under the acquisition agreement. In connection with the acquisition, subsequent termination and legal action, Atlas Pipeline
incurred costs of approximately $4.0 million. On December 30, 2004, Atlas Pipeline entered into a settlement agreement with SEMCO settling all issues and matters related to SEMCO's
termination of the sale of Alaska Pipeline to Atlas Pipeline and SEMCO paid Atlas Pipeline $5.5 million. Atlas Pipeline recognized expenses of $3.0 million and $0.1 million related to this
terminated transaction for the nine month periods ended September 30, 2004 and 2005, respectively, and a net gain of $1.5 million for the year ended December 31, 2004. These amounts
are shown under the caption "(Gain) loss on arbitration settlement, net" on the Company's consolidated statements of income.
NOTE 14 – OPERATING SEGMENT INFORMATION
The Company has two business segments: natural gas gathering and transmission located in the Appalachian Basin area ("Appalachia") of eastern Ohio, western New York and western Pennsylvania, and gathering and processing located in the Mid-Continent area
("Mid-Continent") of southern Oklahoma and northern Texas. Appalachia revenue is principally based on contractual arrangements with Atlas and its affiliates. Mid-Continent revenue is primarily derived from the sale of residue gas and NGLs to purchasers at the
tailgate of the processing plants. These operating segments reflect the way the Company manages its operations.
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following tables summarize the Company's operating segment data for the periods indicated (in thousands):
Nine Months Ended
Years Ended December
31,
September
30,
2002
2003
2004
2004
2005
Mid-Continent:
Revenue
Natural gas and liquids
$
—
$
—
$
72,109
$
30,048
$
218,268
Interest income and other
—
—
60
24
77
Total revenue and other income
—
—
72,169
30,072
218,345
Costs and expenses
Natural gas and liquids
—
—
58,707
24,588
184,578
Plant operating
—
—
2,032
931
7,242
General and administrative
—
—
1,088
634
4,307
Depreciation and amortization
—
—
2,408
613
6,597
Total costs and expenses
—
—
64,235
26,766
202,724
Segment profit
$
—
$
—
$
7,934
$
3,306
$
15,621
Appalachia:
Revenue
Transportation and compression – affiliates
$
10,581
$
15,563
$
18,724
$
13,292
$
16,447
Transportation and compression – third parties
79
88
76
52
54
Interest income and other
7
98
322
258
275
Total revenue and other income
10,667
15,749
19,122
13,602
16,776
Costs and expense
Transportation and compression
2,062
2,421
2,260
1,709
2,169
General and administrative
741
831
1,777
1,133
2,410
Depreciation and amortization
1,475
1,770
2,063
1,519
1,898
Total costs and expenses
4,278
5,022
6,100
4,361
6,477
Segment profit
$
6,389
$
10,727
$
13,022
$
9,241
$
10,299
Reconciliation of segment profit to net income:
Segment profit
Mid-Continent
$
—
$
—
$
7,934
$
3,306
$
15,621
Appalachia
6,389
10,727
13,022
9,241
10,299
Total segment profit
6,389
10,727
20,956
12,547
25,920
General and administrative
(741
)
(831
)
(1,777
)
(1,134
)
(2,410
)
Interest
(250
)
(258
)
(2,301
)
(1,202
)
(8,478
)
Gain (loss) on arbitration settlement, net
—
—
1,457
(2,987
)
(138
)
Minority interest
(2,496
)
(5,066
)
(10,941
)
(3,300
)
(7,240
)
Net income
$
2,902
$
4,572
$
7,394
$
3,924
$
7,654
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December
31,
September
30,
2003
2004
2005
Balance sheet
Total assets:
Mid-Continent
$
—
$
157,675
$
426,628
Appalachia
32,447
39,400
40,766
Corporate other
30,723
37,823
17,064
$
63,170
$
234,898
$
484,458
Goodwill:
Mid-Continent
$
—
$
—
$
77,896
Appalachia
2,305
2,305
2,305
$
2,305
$
2,305
$
80,201
The following tables summarize the Company's total revenue by product or service for the periods indicated (in thousands):
Nine Months Ended
Years Ended December
31,
September
30,
2002
2003
2004
2004
2005
Natural gas and liquids:
Natural gas
$
—
$
—
$
38,908
$
15,973
$
122,837
NGLs
—
—
31,631
14,031
86,761
Condensate
—
—
589
(294
)
3,768
Other (1)
—
—
981
338
4,902
Total
$
—
$
—
$
72,109
$
30,048
$
218,268
Transportation and Compression:
Affiliates
$
10,581
$
15,563
$
18,724
$
13,292
$
16,447
Third parties
79
88
76
52
54
Total
$
10,660
$
15,651
$
18,800
$
13,344
$
16,501
(1)
Includes treatment, processing, and other revenue associated with the products noted.
Atlas Pipeline sells natural gas and NGLs under contract to various purchasers in the normal course of business. For the year ended December 31, 2004, the Mid-Continent segment had two customers that accounted for approximately 34% and 25% of the
Company's consolidated total revenue. Additionally, the Mid-Continent segment had two customers that accounted for 39% and 31% of the Company's consolidated accounts receivable at December 31, 2004. Substantially all of the Appalachian segment's revenue is
derived from a master gas gathering agreement with Atlas America.
NOTE 15 — SUBSEQUENT EVENTS (UNAUDITED)
On January 9, 2006, Atlas Pipeline declared a cash distribution of $0.83 per unit on its limited partner units, representing the cash distribution for the quarter ended December 31, 2005. The distribution will be paid on February 14, 2006 to unitholders of record
at the close of business on February 7, 2006.
On December 20, 2005, Atlas Pipeline issued $250.0 million of 8.125% senior unsecured notes in a private placement for net proceeds of approximately $243.1 million, after estimated underwriting
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ATLAS PIPELINE PARTNERS GP, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
commissions and other transaction costs. Atlas Pipeline utilized the net proceeds principally to repay indebtedness under its credit facility.
On November 28, 2005, Atlas Pipeline sold 2.7 million of its common units in a public offering for gross proceeds of $113.4 million. In addition, pursuant to an option granted to the underwriters of the offering, Atlas Pipeline sold 0.3 million common units on
December 27, 2005 for gross proceeds of $13.9 million, or aggregate total gross proceeds of $127.3 million including the November 2005 offering. The units were issued under the Atlas Pipeline's previously filed Form S-3 shelf registration statement. The sale of the units
resulted in net proceeds of approximately $120.9 million, after estimated underwriting commissions and other transaction costs. Atlas primarily utilized the net proceeds from the sale to repay a portion of the amounts due under its credit facility. Subsequent to this
equity offering, the Company's ownership interest in Atlas Pipeline was 14.8%, including its 2.0% general partner interest.
On October 31, 2005, Atlas Pipeline acquired all of the outstanding equity interests in a subsidiary of OGE Energy Corp. which owns a 75% operating interest in NOARK Pipeline System, Limited Partnership ("NOARK"). NOARK's assets include a FERC-regulated
interstate pipeline and an unregulated natural gas gathering system. Total consideration of $173.2 million, including $10.2 million for working capital adjustments, was funded through borrowings under Atlas Pipeline amended credit facility, which was temporarily
increased to a borrowing capacity of $400 million.
On October 19, 2005, Atlas Pipeline announced plans to construct a new cryogenic gas processing plant in Beckham County, Oklahoma. The new facility, to be known as the Sweetwater gas plant, will be located west of Atlas Pipeline Elk City gas plant, and is
being built to further access natural gas production actively being developed in western Oklahoma and the Texas panhandle. Atlas Pipeline expects the Sweetwater plant to be completed in the third quarter of 2006.
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Report of Independent Auditors
The Board of Directors of
Enogex Arkansas Pipeline Corporation
We have audited the accompanying consolidated balance sheets of Enogex Arkansas Pipeline Corporation as of December 31, 2004 and 2003, and the related consolidated statements of income, retained earnings (deficit), and cash flows for the years then ended.
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and 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 consolidated financial position of Enogex Arkansas Pipeline Corporation at December 31, 2004 and 2003, and the consolidated results of its operations and its
cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.
/s/ Ernst & Young LLP
Oklahoma City, Oklahoma
October 31, 2005
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ENOGEX ARKANSAS PIPELINE CORPORATION
CONSOLIDATED BALANCE SHEETS
December
31,
2004
2003
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
3,156,938
$
14,596,140
Accounts receivable
1,046,153
501,635
Accounts receivable — affiliates
5,061,974
3,536,891
Accounts receivable — affiliates for income taxes
—
993,575
Accounts receivable — Southwestern and affiliates
2,112,338
1,610,235
Prepayments and other
124,201
65,082
Pipeline imbalance
197,884
1,089,421
Total current assets
11,699,488
22,392,979
PROPERTY, PLANT AND EQUIPMENT
In service
144,940,741
144,729,626
Construction work in progress
150,893
52,780
Other
2,034,072
2,034,072
Total property, plant and equipment
147,125,706
146,816,478
Less accumulated depreciation
18,798,507
15,725,853
Net property, plant and equipment
128,327,199
131,090,625
Minority interest in NOARK
3,799,917
6,350,495
Other assets and deferred charges
1,574,600
1,717,514
TOTAL ASSETS
$
145,401,204
$
161,551,613
See accompanying notes.
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ENOGEX ARKANSAS PIPELINE CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
December
31,
2004
2003
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable
$
5,393,537
$
3,978,296
Accounts payable — affiliates for income taxes
240,340
—
Accounts payable — affiliates
1,145,301
608,254
Accrued taxes other than income
858,717
842,325
Accrued interest
399,208
699,447
Accrued other
20,136
62,030
Long-term debt due within one year
800,000
1,065,147
Non-recourse debt of joint venture
1,200,000
1,200,000
Pipeline imbalance
483,009
243,193
Total current liabilities
10,540,248
8,698,692
LONG-TERM DEBT
Notes payable
—
7,950,108
Long-term debt
26,000,000
26,800,000
Non-recourse debt of joint venture
39,000,000
40,200,000
Total long-term debt
65,000,000
74,950,108
DEFERRED LIABILITIES
Deferred income taxes
19,585,000
17,282,000
Total deferred credits and other liabilities
19,585,000
17,282,000
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDER'S EQUITY
Common stock, $1 par value; 1,000 shares authorized, issued and outstanding
1,000
1,000
Retained earnings (Deficit)
2,118,152
(1,310,565
)
Advances from parent
48,156,804
61,930,378
Total stockholder's equity
50,275,956
60,620,813
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY
$
145,401,204
$
161,551,613
See accompanying notes.
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ENOGEX ARKANSAS PIPELINE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
Year
          Ended December
31,
2004
2003
OPERATING REVENUE
Gas transportation services
$
21,482,829
$
20,142,212
Natural gas sales
56,015,639
51,889,474
Other revenue
5,700
6,075
Total operating revenue
77,504,168
72,037,761
COST OF GOODS SOLD
55,018,930
54,785,414
GROSS MARGIN
22,485,238
17,252,347
OPERATING EXPENSES
General and administrative expenses
3,755,849
3,904,945
Operation and maintenance
3,333,126
3,514,728
Depreciation
3,248,719
3,294,553
Taxes other than income
1,101,303
1,100,050
Total operating expenses
11,438,997
11,814,276
OPERATING INCOME
11,046,241
5,438,071
OTHER INCOME (EXPENSE)
Gain on sale of assets
8,424
5,894,700
Other income
3,530
14,247
Minority interest
(491,979
)
(590,500
)
Net other income (expense)
(480,025
)
5,318,447
INTEREST INCOME (EXPENSE)
Interest income
199,629
98,663
Gain on retirement of debt
111,361
—
Interest on long-term debt and amortization
(4,998,590
)
(5,141,590
)
Interest on short-term debt and other interest charges
(288,322
)
(556,945
)
Net interest income (expense)
(4,975,922
)
(5,599,872
)
INCOME BEFORE TAXES
5,590,294
5,156,646
INCOME TAX EXPENSE
2,161,577
2,004,503
NET INCOME
$
3,428,717
$
3,152,143
See accompanying notes.
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ENOGEX ARKANSAS PIPELINE CORPORATION
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
Year
          Ended December
31,
2004
2003
BALANCE AT BEGINNING OF PERIOD
$
(1,310,565
)
$
(4,462,708
)
ADD: Net income
3,428,717
3,152,143
BALANCE AT END OF PERIOD
$
2,118,152
$
(1,310,565
)
See accompanying notes.
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ENOGEX ARKANSAS PIPELINE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year
          Ended December
31,
2004
2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$
3,428,717
$
3,152,143
Adjustments to reconcile net income to net cash provided by operating activities
Minority interest in NOARK net income
491,979
590,500
Gain on sale of assets
(8,424
)
(5,894,700
)
Net book value of retired assets
4,319
38,542
Depreciation
3,248,719
3,294,553
Amortization of debt and prepaid costs
142,914
212,400
Deferred income taxes
2,303,000
2,452,000
Change in certain current assets and liabilities
Accounts receivable
(544,518
)
(82,717
)
Accounts receivable — affiliates
(1,033,613
)
(893,762
)
Materials and supplies inventories
—
50,000
Pipeline imbalance assets
891,537
(248,449
)
Prepayments and other current assets
(59,119
)
(46,416
)
Accounts payable
1,415,241
156,849
Accounts payable — affiliates
777,387
608,254
Other accrued liabilities
(25,502
)
(451,252
)
Accrued interest
(300,239
)
276,405
Pipeline imbalance liabilities
239,816
(423,349
)
Other assets
—
115,413
Other liabilities
(20,945
)
898,578
Net Cash Provided by Operating Activities
10,951,269
3,804,992
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures
(571,614
)
(539,503
)
Proceeds from sale of assets
111,372
9,808,562
Repayment of advances from parent
(24,000,000
)
(7,500,000
)
Increase in advances from parent
10,226,426
3,411,935
Net Cash (Used in) Provided by Investing Activities
(14,233,816
)
5,180,994
CASH FLOWS FROM FINANCING ACTIVITIES
Retirement of long-term debt
(10,215,255
)
(2,000,000
)
Contribution from (Distribution to) minority interest
2,058,600
(2,500,000
)
Net Cash Used in Financing Activities
(8,156,655
)
(4,500,000
)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(11,439,202
)
4,485,986
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
14,596,140
10,110,154
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
3,156,938
$
14,596,140
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest
$
4,897,750
$
5,040,750
See accompanying notes.
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ENOGEX ARKANSAS PIPELINE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Summary of Significant Accounting Policies
Organization
Enogex Arkansas Pipeline Corporation ("Company"), a wholly owned subsidiary of Enogex Inc. ("Enogex") which itself is a wholly owned subsidiary of OGE Energy Corp., owns an interest in the NOARK Pipeline System, Limited Partnership ("NOARK"), an
Arkansas limited partnership. The Company's ownership interest in NOARK with respect to assets, liabilities (exclusive of long-term debt), equity, income and expense is 75 percent. Under the partnership agreement and the NOARK Private Placement Memorandum, the
Company is only responsible for 40 percent of the long-term debt of NOARK. At December 31, 2004, the general partners of NOARK consisted of the Company and Southwestern Energy Pipeline Company (Southwestern), a wholly owned subsidiary of Southwestern
Energy Company (SWN). The Company has a 75 percent interest (74 percent general partner interest and 1 percent limited partner interest) and Southwestern has a 25 percent interest in NOARK.
NOARK has four wholly owned subsidiaries consisting of Ozark Gas Transmission, L.L.C. (Ozark), NOARK Energy Services, L.L.C. ("NES"), Ozark Gas Gathering, L.L.C. ("OGG"), and NOARK Pipeline Finance, L.L.C. ("Finance"). The operations of NOARK and its
subsidiaries are organized into three activities including natural gas gathering, natural gas transportation and natural gas marketing. The operations of the gas transportation segment are conducted by Ozark, a Federal Energy Regulatory Commission regulated interstate
pipeline that extends from Southeast Oklahoma through Arkansas to southeast Missouri. The natural gas gathering and marketing operations are conducted by OGG. NES had no significant operations during 2004 or 2003. Finance was created to hold and service the
debt of the Partnership.
As more fully discussed in Note 5, a substantial portion of the activities of NOARK during 2004 and 2003 were conducted with its general partners and their affiliates.
Principles of Consolidation
The consolidated financial statements of the Company include the accounts and operations of the Company, NOARK and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenue and expenses during the reporting period. Changes to these assumptions and estimates could have a material effect on the Company's consolidated financial statements.
Allowance for Uncollectible Accounts Receivable
The allowance for uncollectible accounts receivable is calculated based on outstanding accounts receivable balances over 180 days old. In addition, other outstanding accounts receivable balances less than 180 days old are reserved on a case-by-case basis when the
Company believes the required payment of specific amounts owed is unlikely to occur. There was no allowance for uncollectible accounts receivable at December 31, 2004 and 2003, respectively.
Credit risk is the risk of financial loss to the Company if customers fail to perform their contractual obligations. The Company maintains credit policies with regard to its customers that management believes
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ENOGEX ARKANSAS PIPELINE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
minimize overall credit risk. These policies include the evaluation of a potential customer's financial condition (including credit rating) and collateral requirements under certain
circumstances. The Company also monitors the financial condition of existing customers on an ongoing basis.
Property, Plant and Equipment
All property, plant and equipment are recorded at cost. Newly constructed plant is added to plant balances at costs which include contracted services, direct labor, materials and overheads used during construction. Replacements of units of property are capitalized
as plant. For group assets, the replaced plant is removed from plant balances and charged to accumulated depreciation. For non-group assets, the replaced plant is removed from plant balances with the related accumulated depreciation and the remaining balance is
recorded as a loss in the Consolidated Statements of Operations as Other Expense. Repair and removal costs are included in the Consolidated Statements of Operations as Other Operation and Maintenance Expense.
The Company's property, plant and equipment are divided into the following major classes at December 31, 2004 and 2003, respectively.
Year ended December 31
2004
2003
Transportation assets
$
139,178,829
$
138,876,483
Gathering assets
7,946,877
7,939,995
Total property, plant and equipment
$
147,125,706
$
146,816,478
Depreciation
Depreciation and amortization of the Company's assets are computed using the straight-line method using estimated useful lives of three to 50 years for transportation, three to 30 years for gathering.
Revenue Recognition
The Company recognizes revenue from natural gas gathering and transportation services as the services are provided. Revenue associated with physical gas sales are recognized upon physical delivery of the gas.
Pipeline Imbalances
Pipeline imbalances occur when the actual amounts of natural gas delivered from or received by the NOARK pipeline systems differ from the amounts scheduled to be delivered or received. Imbalances are due to or due from shippers and operators and can be
settled in cash or made up in-kind. The Company values all imbalances at average market prices estimated to be in effect at the time the imbalance will be settled.
Minority Interest
In consolidation, the equity interest of Southwestern in NOARK has been adjusted per the provisions of the NOARK partnership agreement, as amended (the "Agreement") and is shown on the balance sheet of the Company as a minority interest asset. The
liquidation provisions of the partnership agreement provide for the Company to receive a disproportionate share of the value of NOARK equity upon liquidation of NOARK. The minority interest asset value as of December 31, 2004 and 2003 is $3,799,917 and
$6,350,495 respectively.
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ENOGEX ARKANSAS PIPELINE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
According to the terms of the agreement, NOARK's net income (loss) is split between partners in three steps. First, a special revenue allocation, as defined in the Agreement may be made to Southwestern. This special revenue allocation is effective through
December 31, 2009, and is calculated annually from an agreed upon maximum base amount ranging from $1,045,300 for 2003 and decreasing annually to $672,900 in 2009. The base amount may be reduced based upon an agreed upon formula specified in the
Agreement, not to be less than zero. There was not a special revenue allocation to Southwestern for 2004 or 2003 based on the agreed upon formula. Second, interest and debt amortization costs are split 60% to Southwestern and 40% to the Company. Third, the
remaining net income (loss) is split 25% to Southwestern and 75% to the Company. In accordance with the Agreement, Southwestern and the Company are each required to fund their share of any NOARK cash flow deficiencies to the extent that they are not funded
by NOARK's operations.
2.
Asset Sale
In 2002, Ozark entered into an Agreement of Sale and Purchase with Centerpoint Energy Gas Transmission Co. to sell approximately 29 miles of transmission lines of the Ozark pipeline located in Pittsburg and Latimer counties in Oklahoma for approximately
$10 million. Ozark received FERC approval for the sale on January 6, 2003. Ozark recognized approximately a $5.3 million gain in 2003 which is included in gain on sale of assets in the accompanying consolidated statement of income.
3.
Income Taxes
The items comprising income tax expense are as follows:
Year ended December 31
2004
2003
Benefit for Current Income Taxes
Federal
$
(119,266
)
$
(397,800
)
State
(22,157
)
(49,697
)
Total Benefit for Current Income Taxes
(141,423
)
(447,497
)
Provision for Deferred Income Taxes
Federal
1,967,000
2,094,000
State
336,000
358,000
Total Provision for Deferred Income Taxes
2,303,000
2,452,000
Total Income Tax Expense
$
2,161,577
$
2,004,503
The following schedule reconciles the statutory federal tax rate to the effective income tax rate:
Year ended December 31
2004
2003
Statutory federal tax rate
35.0
%
35.0
%
State income taxes, net of federal income tax benefit
3.7
3.9
Effective income tax rate as reported
38.7
%
38.9
%
The Company is a member of an affiliated group that files consolidated income tax returns. Income taxes are allocated to each company in the affiliated group based on its separate taxable income or loss. The Company follows the provisions of SFAS No. 109,
"Accounting for Income Taxes", which uses an asset and liability approach to accounting for income taxes. Under SFAS No. 109, deferred tax assets or liabilities are computed based on the difference between the financial statement and income tax bases of
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ENOGEX ARKANSAS PIPELINE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
assets and liabilities using the enacted marginal tax rate. Deferred income tax expenses or benefits are based on the changes in the asset or liability from period to period.
The components of Accumulated Deferred Taxes at December 31, 2004 and 2003, respectively, are as follows:
2004
2003
Non-Current Accumulated Deferred Tax Liabilities
Property
$
19,585,000
$
17,267,000
Other
—
15,000
Total non-current tax liabilities
$
19,585,000
$
17,282,000
4.
Long-Term Debt
On June 15, 1998, NOARK issued $80 million of long-term notes in a private placement offering (the Notes) through Finance. The Notes mature on June 1, 2018, and require semi-annual principal payments of $1.0 million plus interest at a fixed rate of 7.15%
with a final balloon payment of $40 million due at maturity. Enogex has guaranteed 40% of the Notes plus any accrued interest while SWN has guaranteed 60% of the Notes plus any accrued interest. In connection with the issuance of the Notes, NOARK incurred debt
issuance costs of approximately $2.2 million, which are being amortized on a basis that closely approximates the effective interest method. In connection with the issuance of the Notes, NOARK entered into a forward interest rate swap contract to hedge exposure to
changes in prevailing interest rates on the Notes described above. Due to changes in treasury note rates, NOARK paid $1,112,000 to settle the forward interest rate swap contract in 1998. The unamortized portion is included in other assets and deferred charges on the
consolidated balance sheets and is being amortized to interest expense over the life of the Notes.
On July 15, 2004 the Company retired a note that had been issued to a former interest owner of NOARK in the amount of $7,839,000. This note would have matured on July 1, 2020; as a result of retiring this note early the Company recognized a gain of
approximately $111,000.
Interest expense amounted to $4,885,833 and $5,028,833 in 2004 and 2003, respectively. Amortization of the deferred charges amounted to $112,757 in 2004 and 2003, and is included in interest on long-term debt in the accompanying consolidated statements of
income.
Future maturities of long-term debt are as follows:
2005
$
2,000,000
2006
2,000,000
2007
2,000,000
2008
2,000,000
2009
2,000,000
2010 and beyond
57,000,000
Total long-term debt
$
67,000,000
The estimated fair value of the Notes is approximately $77.5 million and $93.9 million at December 31, 2004 and 2003, respectively. The fair value of these notes is based on management's estimate of current rates available for similar issues with similar
maturities.
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ENOGEX ARKANSAS PIPELINE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5.
Related Party Transactions
Approximately $13,194,000 and $13,058,000 of gas sales, net of gathering services and fuel during the years ended December 31, 2004 and 2003, respectively, were generated with transactions from Southwestern and its affiliates. The Company also recorded
approximately $6,976,000 and $7,037,000 in transmission revenue for the years ended December 31, 2004 and 2003, respectively from Southwestern and its' affiliates. These revenue from Southwestern and its affiliates represent approximately 26 percent and 28 percent
of the Company's total operating revenue for the years ended December 31, 2004 and 2003, respectively.
Approximately $42,569,000 and $38,739,000 of the gas sales, net of gathering services and fuel during the years ended December 31, 2004 and 2003, respectively, were generated by transactions with Enogex and its affiliates. The Company also recorded
$4,143,000 and $4,258,000 in transmission revenue from Enogex and its affiliates. This revenue from Enogex and its affiliates represents approximately 60 percent of the Company's total operating revenue for both the years ended December 31, 2004 and 2003. At
December 31, 2004 and 2003, approximately $5,062,000 and $3,537,000 of accounts receivable, respectively, were outstanding with Enogex and its affiliates and are included in accounts receivable – affiliates in the accompanying consolidated balance sheets. Also
recorded in November 2004 was a favorable price adjustment in the amount of $2,507,000 for gas sales to an Enogex affiliate by NOARK from May 2002 through September 2004.
Enogex and its affiliates also perform administrative, accounting, engineering field operations, legal and financial services for the Company, as well as NOARK. In 2003, Enogex allocated overhead costs to the Company in accordance with a formula based on the
pro-rata amounts of property, headcount and gross margin of each business segment. In 2004 Enogex began using a method which allocates overhead based on hours incurred in support of each business segment. Approximately $3,756,000 and $3,905,000 of these
charges are included in general and administrative expenses in 2004 and 2003, respectively in the consolidated statements of income. At December 31, 2004 and 2003, the entire balance of accounts payable – affiliates in the accompanying consolidated balance sheets is
due to Enogex and its affiliates. During 2004 and 2003, natural gas purchases of approximately $259,000 and $48,000, respectively, were made from an affiliate of Enogex.
The balance of advances from Parent was $48,156,804 and $61,930,378 at December 31, 2004 and 2003, respectively. The advances originally consisted of assets contributed by Enogex to NOARK in 1998. During 2004 and 2003, the Company repaid $24,000,000
and $7,500,000 of these advances. The advances are non-interest bearing. Current transactions include administrative costs paid by the Parent on behalf of the Company and other costs allocated from the Parent to the Company, totaling $10,226,426 and $3,411,935 in
2004 and 2003, respectively.
6.
Commitments and Contingencies
In the normal course of business, lawsuits and claims arise against the Company and its subsidiaries. Management of the Company, after consultation with legal counsel, does not anticipate that liabilities arising from currently pending or threatened lawsuits and
claims would result in losses, which would materially affect the consolidated financial position of the Company or the results of its operations.
7.
Business Segments
The Company manages its operations on a consolidated basis. The Company has no operations that would quality as a separate operating segment under Statement of Financial Standards (SFAS) No. 131 "Disclosure About Segments of an Enterprise and Related
Information.
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ENOGEX ARKANSAS PIPELINE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8.
Subsequent events
On October 31, 2005, Enogex sold all of it's ownership in EAPC to Atlas Pipeline Partner, L.P. pursuant to a stock purchase agreement dated September 21, 2005. As a condition of the sale, Enogex will continue to perform certain administrative functions for a
period of time as required by the Transition Service Agreement.
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ENOGEX ARKANSAS PIPELINE CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
September
30,
December
31,
2005
2004
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
14,501,542
$
3,156,938
Accounts receivable
784,716
1,046,153
Accounts receivable — affiliates
5,145,094
5,061,974
Accounts receivable — Southwestern and affiliates
2,090,862
2,112,338
Prepayments and other
133,536
124,201
Pipeline imbalance
191,258
197,884
Total current assets
22,847,008
11,699,488
PROPERTY, PLANT AND EQUIPMENT
In service
144,415,825
144,940,741
Construction work in progress
58,742
150,893
Other
2,034,072
2,034,072
Total property, plant and equipment
146,508,639
147,125,706
Less accumulated depreciation
20,592,819
18,798,507
Net property, plant and equipment
125,915,820
128,327,199
Minority interest in NOARK
3,359,515
3,799,917
Other assets and deferred charges
1,531,702
1,574,600
TOTAL ASSETS
$
153,654,045
$
145,401,204
See accompanying notes.
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ENOGEX ARKANSAS PIPELINE CORPORATION
CONSOLIDATED BALANCE SHEETS (Continued)
(unaudited)
September
30,
December
31,
2005
2004
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable
$
6,467,924
$
5,393,537
Accounts payable — affiliates
1,040,658
1,145,301
Accounts payable — affiliates for income taxes
509,687
240,340
Accrued taxes other than income
756,945
858,717
Accrued interest
1,573,000
399,208
Customer deposits
65,000
—
Accrued other
—
20,136
Long-term debt due within one year
800,000
800,000
Non-recourse debt of joint venture
1,200,000
1,200,000
Pipeline imbalance
643,067
483,009
Total current liabilities
13,056,281
10,540,248
LONG-TERM DEBT
Long-term debt
25,600,000
26,000,000
Non-recourse debt of joint venture
38,400,000
39,000,000
Total long-term debt
64,000,000
65,000,000
DEFERRED LIABILITIES
Deferred income taxes
21,893,000
19,585,000
Total deferred credits and other liabilities
21,893,000
19,585,000
COMMITMENTS AND CONTINGENCIES (Note 4)
STOCKHOLDER'S EQUITY
Common stock, $1 par value; 1,000 shares authorized, issued and outstanding Common stock authorized, issued and outstanding
1,000
1,000
Retained earnings
4,992,191
2,118,152
Advances from parent
49,711,573
48,156,804
Total stockholder's equity
54,704,764
50,275,956
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY
$
153,654,045
$
145,401,204
See accompanying notes.
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ENOGEX ARKANSAS PIPELINE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
Nine
          Months Ended
September
30,
2005
2004
OPERATING REVENUE
Gas transportation services
$
15,128,825
$
15,556,731
Natural gas sales
42,362,507
37,677,107
Other revenue
3,775
4,275
Total operating revenue
57,495,107
53,238,113
COST OF GOODS SOLD
40,551,222
40,327,285
GROSS MARGIN
16,943,885
12,910,828
OPERATING EXPENSES
General and administrative expenses
2,206,424
2,613,129
Operation and maintenance
2,699,306
2,371,186
Depreciation
2,474,995
2,404,143
Taxes other than income
848,187
809,722
Total operating expenses
8,228,912
8,198,180
OPERATING INCOME
8,714,973
4,712,648
OTHER INCOME (EXPENSE)
Other income (expense)
(54,586
)
8,549
Minority interest
(440,402
)
609,670
Net other income (expense)
(494,988
)
618,219
INTEREST INCOME (EXPENSE)
Interest income
194,920
121,041
Gain on retirement of debt
—
111,361
Interest on long-term debt and amortization
(3,653,610
)
(3,760,860
)
Interest on short-term debt and other interest charges
—
(288,322
)
Net interest expense
(3,458,690
)
(3,816,780
)
INCOME BEFORE TAXES
4,761,295
1,514,087
INCOME TAX EXPENSE
1,887,257
584,577
NET INCOME
$
2,874,038
$
929,510
See accompanying notes
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ENOGEX ARKANSAS PIPELINE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine
          Months Ended
September
30,
2005
2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$
2,874,038
$
929,510
Adjustments to reconcile net income to net cash provided by
operating activities
Minority interest in NOARK net income (loss)
440,402
(609,670
)
Gain on sale of assets
—
(8,424
)
Net book value of retired assets
60,493
—
Depreciation
2,474,995
2,404,143
Amortization
133,286
96,293
Deferred income taxes
2,308,000
2,132,000
Change in certain current assets and liabilities
Accounts receivable
261,437
(113,766
)
Accounts receivable — affiliates
(61,644
)
(916,436
)
Pipeline imbalance assets
6,626
868,306
Prepayments and other current assets
(9,335
)
(22,173
)
Accounts payable
1,074,387
(13,889
)
Accounts payable — affiliates
164,704
325,101
Other accrued liabilities
(56,908
)
(126,480
)
Accrued interest
1,173,792
921,220
Pipeline imbalance liabilities
160,058
417,576
Other assets
(88,338
)
—
Other liabilities
—
(20,944
)
Net Cash Provided by Operating Activities
10,915,993
6,262,367
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures
(126,158
)
(360,746
)
Proceeds from sale of assets
—
111,372
Increase in advances from parent
1,554,769
10,373,164
Net Cash Provided by Investing Activities
1,428,611
10,123,790
CASH FLOWS FROM FINANCING ACTIVITIES
Retirement of long—term debt
(1,000,000
)
(9,215,255
)
Net Cash Used in Financing Activities
(1,000,000
)
(9,215,255
)
NET INCREASE IN CASH AND CASH EQUIVALENTS
11,344,604
7,170,902
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
3,156,938
14,596,140
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
14,501,542
$
21,767,042
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest
$
2,395,250
$
2,466,750
See accompanying notes.
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ENOGEX ARKANSAS PIPELINE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.
Summary of Significant Accounting Policies
Organization
Enogex Arkansas Pipeline Corporation ("Company"), a wholly owned subsidiary of Enogex Inc. ("Enogex") which is a wholly owned subsidiary of OGE Energy Corporation, owns an interest in the NOARK Pipeline System, Limited Partnership ("NOARK"), an
Arkansas limited partnership. The Company's ownership interest in NOARK with respect to assets, liabilities (exclusive of long-term debt), equity, income and expense is 75 percent. Under the partnership agreement and the NOARK Private Placement Memorandum, the
Company is only responsible for 40 percent of the long-term debt of NOARK. At September 30, 2005, the general partners of NOARK consisted of the Company and Southwestern Energy Pipeline Company (Southwestern), a wholly owned subsidiary of Southwestern
Energy Company (SWN). The Company has a 75 percent interest (74 percent general partner interest and 1 percent limited partner interest) and Southwestern has a 25 percent interest in NOARK.
NOARK has four wholly owned subsidiaries consisting of Ozark Gas Transmission, L.L.C. (Ozark), NOARK Energy Services, L.L.C. ("NES"), Ozark Gas Gathering, L.L.C. ("OGG"), and NOARK Pipeline Finance, L.L.C. ("Finance"). The operations of NOARK and its
subsidiaries are organized into two activities including natural gas gathering and natural gas transportation. The operations of the gas transportation segment are conducted by Ozark, a Federal Energy Regulatory Commission regulated interstate pipeline that extends
from Southeast Oklahoma through Arkansas to southeast Missouri. The natural gas gathering and marketing operations are conducted by OGG. NES had no operations during 2005 or 2004. Finance was created to hold and service the debt of the Partnership.
As more fully discussed in Note 3, a substantial portion of the activities of NOARK during 2005 and 2004 were conducted with its general partners and their affiliates.
Principles of Consolidation
The consolidated financial statements of the Company include the accounts and operations of the Company, NOARK and its subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation.
Basis of Presentation
The consolidated financial statements included herein have been prepared by the Company, without audit. In the opinion of management, all adjustments necessary to fairly present the consolidated financial position of the Company at September 30, 2005 and
December 31, 2004 and the results of its operations and cash flows for the nine months ended September 30, 2005 and 2004, have been included and are of a normal recurring nature. The consolidated financial statements and Notes thereto should be read in
conjunction with the audited consolidated financial statements and Notes thereto for the year ended December 31, 2004.
Use of Estimates
In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial
statements and the reported amounts of revenue and expenses during the reporting period. Changes to these assumptions and estimates could have a material effect on the Company's consolidated financial statements.
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ENOGEX ARKANSAS PIPELINE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Allowance for Uncollectible Accounts Receivable
The allowance for uncollectible accounts receivable is calculated based on outstanding accounts receivable balances over 180 days old. In addition, other outstanding accounts receivable balances less than 180 days old are reserved on a case-by-case basis when the
Company believes the required payment of specific amounts owed is unlikely to occur. There was no allowance for uncollectible accounts receivable at September 30, 2005 and December 31, 2004.
Credit risk is the risk of financial loss to the Company if customers fail to perform their contractual obligations. The Company maintains credit policies with regard to its customers that management believes minimize overall credit risk. These policies include the
evaluation of a potential customer's financial condition (including credit rating) and collateral requirements under certain circumstances. The Company also monitors the financial condition of existing customers on an ongoing basis.
Property, Plant and Equipment
All property, plant and equipment are recorded at cost. Newly constructed plant is added to plant balances at costs which include contracted services, direct labor, materials and overheads used during construction. Replacements of units of property are capitalized
as plant. For group assets, the replaced plant is removed from plant balances and charged to accumulated depreciation. For non-group assets, the replaced plant is removed from plant balances with the related accumulated depreciation and the remaining balance is
recorded as a loss in the Consolidated Statements of Operations as Other Expense. Repair and removal costs are included in the Consolidated Statements of Operations as Other Operation and Maintenance Expense.
The Company's property, plant and equipment are divided into the following major classes at September 30, 2005 and December 31, 2004.
2005
2004
Transportation assets
$
130,580,066
$
139,178,829
Gathering assets
15,928,573
7,946,877
Total property, plant and equipment
$
146,508,639
$
147,125,706
Depreciation
Depreciation and amortization of the Company's assets are computed using the straight-line method using estimated useful lives of three to 50 years for transportation, three to 30 years for gathering.
Revenue Recognition
The Company recognizes revenue from natural gas gathering and transportation services as the services are provided. Revenue associated with physical gas sales are recognized upon physical delivery of the gas.
Pipeline Imbalances
Pipeline imbalances occur when the actual amounts of natural gas delivered from or received by the NOARK pipeline systems differ from the amounts scheduled to be delivered or received. Imbalances are due to or due from shippers and operators and can be
settled in cash or made up in-kind.
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ENOGEX ARKANSAS PIPELINE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Minority Interest
In consolidation, the equity interest of Southwestern in NOARK has been adjusted per the provisions of the NOARK partnership agreement, as amended (the "agreement") and is shown on the balance sheet of the Company as a minority interest asset. The
liquidation provisions of the partnership agreement provide for the Company to receive a disproportionate share of the value of NOARK equity upon liquidation of NOARK. The minority interest asset value as of September 30, 2005 is $3,359,515 and at December 31,
2004 is $3,799,917.
According to the terms of the agreement, NOARK's net income (loss) is split between partners in three steps. First, a special revenue allocation, as defined in the Agreement may be made to Southwestern. This special revenue allocation is effective through
December 31, 2009, and is calculated annually from an agreed upon maximum base amount ranging from $979,100 for 2004 and decreasing annually to $672,900 in 2009. The base amount may be reduced based upon an agreed upon formula specified in the
Agreement, not to be less than zero. There was not a special revenue allocation to Southwestern for the nine months ended September 30, 2005 or 2004 based on the agreed upon formula. Second, interest and debt amortization costs are split 60% to Southwestern and
40% to the Company. Third, the remaining net income (loss) is split 25% to Southwestern and 75% to the Company. In accordance with the Agreement, Southwestern and the Company are each required to fund their share of any NOARK cash flow deficiencies to the
extent that they are not funded by NOARK's operations.
Income Taxes
The Company is a member of an affiliated group that files consolidated income tax returns. Income taxes are allocated to each company in the affiliated group based on its separate taxable income or loss. The Company follows the provisions of SFAS No. 109,
"Accounting for Income Taxes", which uses an asset and liability approach to accounting for income taxes. Under SFAS No. 109, deferred tax assets or liabilities are computed based on the difference between the financial statement and income tax bases of assets and
liabilities using the enacted marginal tax rate. Deferred income tax expenses or benefits are based on the changes in the asset or liability from period to period.
2.
Long-Term Debt
On June 15, 1998, NOARK issued $80 million of long-term notes in a private placement offering (the Notes) through Finance. The Notes mature on June 1, 2018, and require semi-annual principal payments of $1.0 million plus interest at a fixed rate of 7.15%
with a final balloon payment of $40 million due at maturity. Enogex has guaranteed 40% of the Notes plus any accrued interest while SWN has guaranteed 60% of the Notes plus any accrued interest. In connection with the issuance of the Notes, NOARK incurred debt
issuance costs of approximately $2.2 million, which are being amortized on a basis that closely approximates the effective interest method. In connection with the issuance of the Notes, NOARK entered into a forward interest rate swap contract to hedge exposure to
changes in prevailing interest rates on the Notes described above. Due to changes in treasury note rates, NOARK paid $1,112,000 to settle the forward interest rate swap contract in 1998. The unamortized portion is included in other assets and deferred charges on the
consolidated balance sheets and is being amortized to interest expense over the life of the Notes.
On July 15, 2004 the Company retired a note that had been issued to a former interest owner of NOARK in the amount of $7,839,000. This note would have matured on July 1, 2020; as a result of retiring this note early the Company recognized a gain of
$111,000.
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ENOGEX ARKANSAS PIPELINE CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Interest expense amounted to $3,569,042 and $3,676,292 in 2005 and 2004, respectively. Amortization of the deferred charges amounted to $84,568 in 2005 and 2004, and is included in interest on long-term debt in the accompanying consolidated statements of
income.
3.
Related Party Transactions
Approximately $9,702,000 and $9,363,000 of gas sales, net of gathering services and fuel during the nine months ended September 30, 2005 and 2004, respectively, were generated by transactions with Southwestern and its affiliates. The Company also recorded
approximately $4,956,000 and $5,306,000 in transmission revenue for the nine months ended September 30, 2005 and 2004, respectively, from Southwestern and its affiliates. This revenue represents approximately 25 percent and 28 percent of the Company's total
operating revenue for the nine months ended September 30, 2005 and 2004, respectively. Approximately $32,423,000 and $28,130,000 of gas sales, net of gathering services and fuel during the nine months ended September 30, 2005 and 2004, respectively, were
generated by transactions with Enogex and its affiliates. The Company also recorded approximately $1,999,000 and $3,219,000 in transmission revenue from Enogex and its affiliates. This revenue from Enogex and its affiliates represents approximately 61 percent and 59
percent of the Company's total operating revenue for the nine months ended September 30, 2005 and 2004, respectively. At September 30, 2005 and December 31, 2004, approximately $5,145,000 and $5,062,000 of accounts receivable, respectively, were outstanding
with Enogex and its affiliates.
Enogex and its affiliates also perform administrative, accounting, engineering field operations, legal and financial services for the Company, as well as NOARK. Approximately $2,206,000 and $2,613,000 of these charges are included in general and administrative
expenses in 2005 and 2004, respectively consolidated statements of income. At September 30, 2005 and December 31, 2004, the entire balance of accounts payable—affiliates in the accompanying consolidated balance sheets is due to Enogex and its affiliates.
During 2005 and 2004, natural gas purchases of approximately $182,000 and $169,000, respectively, were made from an affiliate of Enogex.
The balance of advances from Parent was $49,711,573 and $48,156,804 at September 30, 2005 and December 31, 2004, respectively. The advances originally consisted of assets contributed by Enogex to NOARK in 1998. Current transactions include
administrative costs paid by the Parent on behalf of the Company and other costs allocated from the Parent to the Company. During the nine months ended September 30, 2005 and 2004, the Company did not repay any of the advances from parent. In November
2004, the Company repaid $24,000,000 of these advances. The advances are non-interest bearing.
4.
Commitments and Contingencies
In the normal course of business, lawsuits and claims arise against the Company and its subsidiaries. Management of the Company, after consultation with legal counsel, does not anticipate that liabilities arising from currently pending or threatened lawsuits and
claims would result in losses, which would materially affect the consolidated financial position of the Company or the results of its operations.
5.
Subsequent Events
On October 31, 2005, Enogex sold all of it's ownership in EAPC to Atlas Pipeline Partner, L.P. pursuant to a stock purchase agreement dated September 21, 2005. As a condition of the sale, Enogex will continue to perform certain administrative functions for a
period of time as required by the Transition Service Agreement.
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Report of Independent Registered Public Accounting Firm
Board of Directors and
Atlas Pipeline Partners, L.P.
We have audited the accompanying balance sheets of ETC Oklahoma Pipeline, Ltd. (a Texas limited partnership) as of August 31, 2004 and 2003, and the related statements of income, partners' capital, and cash flows for the year ended August 31, 2004 and the
period from the beginning of operations (October 1, 2002) through August 31, 2003. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements
are free of material misstatement. The Partnership is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of ETC Oklahoma Pipeline, Ltd. as of August 31, 2004 and 2003, and the results of its operations and its cash flows for the year ended
August 31, 2004 and the period from inception (September 24, 2002) through August 31, 2003 in conformity with accounting principles generally accepted in the United States of America.
/s/Grant Thornton LLP
Cleveland, Ohio
April 25, 2005
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ETC OKLAHOMA PIPELINE, LTD.
BALANCE SHEETS
August
31, 2004 and 2003
(in thousands)
ASSETS
2004
2003
CURRENT ASSETS:
Cash
$
—
$
—
Receivables —
Trade
1,773
1,098
Related parties
22,305
7,121
Exchanges
213
730
Materials and supplies
63
63
Other current assets
—
49
Total current assets
24,354
9,061
PROPERTY, PLANT AND EQUIPMENT
47,492
40,305
ACCUMULATED DEPRECIATION
(3,938
)
(1,589
)
PROPERTY, PLANT AND EQUIPMENT, NET
43,554
38,716
Total assets
$
67,908
$
47,777
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payables —
Trade exchanges
$
19,825
$
7,694
Exchanges
188
576
Accrued expenses
577
640
Total current liabilities
20,590
8,910
COMMITMENTS AND CONTINGENCIES (See Note H)
PARTNERS' CAPITAL
Limited partner
47,271
38,828
General partner
47
39
Total partners' capital
47,318
38,867
Total liabilities and partners' capital
$
67,908
$
47,777
The accompanying notes are an integral part of these financial statements.
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ETC OKLAHOMA PIPELINE, LTD.
INCOME STATEMENTS
(in thousands)
Year
          Ended
August
31, 2004
Eleven
Months Ended
August
31, 2003
OPERATING REVENUE:
Third party
$
11,977
$
7,607
Related party
123,320
84,834
Total revenue
135,297
92,441
COSTS AND EXPENSES:
Cost of products sold
119,495
79,055
Operating
4,726
2,914
General and administrative
2,664
2,887
Depreciation and amortization
2,249
1,591
Total costs and expenses
129,134
86,447
NET INCOME
$
6,163
$
5,994
The accompanying notes are an integral part of these financial statements.
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ETC OKLAHOMA PIPELINE, LTD.
STATEMENTS OF PARTNERS' CAPITAL
August
31, 2004 and 2003
(in thousands)
Limited
Partners' Capital
General
Partners'
Capital
Total Partners'
Capital
Balance, October 1, 2002
$
—
$
—
$
—
Capital contribution
32,840
33
32,873
Net income
5,988
6
5,994
Balance, August 31, 2003
38,828
39
38,867
Capital contribution
2,286
2
2,288
Net income
6,157
6
6,163
Balance, August 31, 2004
$
47,271
$
47
$
47,318
The accompanying notes are an integral part of these financial statements.
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ETC OKLAHOMA PIPELINE, LTD.
STATEMENTS OF CASH FLOWS
(in thousands)
Year
          Ended
August
31, 2004
Eleven
          Months
Ended
August
31, 2003
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
6,163
$
5,994
Adjustments to reconcile net income to net cash provided by operating activities —
Depreciation and amortization
2,249
1,591
Other, net
1
—
Changes in operating assets and liabilities —
Receivables
(157
)
(1,829
)
Related party receivables
(7,181
)
(18,289
)
Other current assets
49
(49
)
Payables
11,743
8,269
Accrued expenses
(63
)
380
Net cash provided by (used in) operating activities
12,804
(3,933
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment
(4,873
)
(7,321
)
Proceeds from sale of assets
72
86
Net cash used in investing activities
(4,801
)
(7,235
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Working capital from (to) parent
(8,003
)
11,168
Net change in cash
—
—
Cash beginning of year
—
—
Cash end of year
$
—
$
—
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash asset contribution
$
2,288
$
32,873
Cash paid for interest
$
—
$
—
Cash paid for income taxes
$
—
$
—
The accompanying notes are an integral part of these financial statements.
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ETC OKLAHOMA PIPELINE LTD.
NOTES TO FINANCIAL STATEMENTS
A — ORGANIZATION AND BUSINESS
ETC Oklahoma Pipeline, Ltd. (Elk City or the Company) is a Texas limited partnership, which began operations in October 2002. LG PL, LLC, a wholly-owned subsidiary of La Grange Acquisition, L.P. (La Grange) owns a 0.1% general partner interest and La Grange
Acquisition, L.P. owns a 99.9% limited partner interest. Elk City owns a natural gas gathering pipeline system and gas processing plant in Oklahoma. La Grange acquired the Oklahoma natural gas gathering and gas processing assets of Aquila Gas Pipeline Corporation
(Aquila), a subsidiary of Aquila, Inc., in October 2002. These assets are referred to herein as "the Elk City system."
The Elk City system is a 318-mile gathering system located in western Oklahoma that gathers, compresses, treats and processes natural gas from the Anadarko Basin. The Elk City system also includes the Elk City processing plant and one treating facility. The Elk City
system is connected, either directly or indirectly, to six major interstate and intrastate natural gas pipelines providing access to natural gas markets throughout the United States. The Elk City system has a processing capacity of approximately 130 million cubic feet per
day (MMcf/d).
B — SIGNIFICANT ACCOUNTING POLICIES
1. Basis of Presentation
Financial statements are presented for the year ended August 31, 2004 and for the eleven months ended August 31, 2003.
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America.
2. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.
Some of the other more significant estimates made by management include, but are not limited to the useful lives for depreciation and amortization and general business reserves. Actual results could differ from those estimates.
3. Cash
La Grange provides cash to the Company for working capital and capital expenditures. Cash transfers are recorded through related party receivables and payables. Cash receipts of the Company are immediately transferred to La Grange to reduce the intercompany
balance with La Grange.
4. Accounts Receivable
Elk City deals with counter parties that are typically either investment grade (Standard & Poors BBB or higher) or are otherwise secured with a letter of credit or other form of security (corporate guaranty or prepayment). Management reviews accounts receivable
balances each week. Credit limits are assigned and monitored for all counter parties. The majority of payments are due on the 25th of the month following delivery.
Management closely monitors credit exposure for potential doubtful accounts. Management believes that an occurrence of bad debt is unlikely; therefore, an allowance for doubtful accounts was not
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ETC OKLAHOMA PIPELINE LTD.
NOTES TO FINANCIAL STATEMENTS
deemed necessary at August 31, 2004 and 2003, respectively. Bad debt expense is recognized at the time an account is deemed uncollectible. An account receivable will be written off
in the event a counter party files for bankruptcy protection or the account is turned over for collection and the collector deems the account uncollectible. No bad debt expense was
recorded during the year ended August 31, 2004 or the eleven months ended August 31, 2003.
5. Materials and Supplies
Materials and supplies are stated at the lower of cost (determined on a first-in, first-out basis) or market value.
6. Inventories and Exchanges
Inventories and exchanges consist of natural gas liquids (NGLs) on hand or natural gas and NGL delivery imbalances with others and are presented net by customer/supplier. These amounts turn over monthly and management believes the cost approximates market
value. Accordingly, these volumes are valued at market prices.
7. Property, Plant and Equipment
Pipeline, property, plant, and equipment are stated at cost less accumulated depreciation. The cost of property additions includes labor and materials, applicable overhead and payroll-related costs. Additions and improvements that add to the productive capacity or
extend the useful life of the asset are capitalized. Expenditures for maintenance and repairs that do not add capacity or extend the useful life are charged to expense as incurred. Upon disposition or retirement of pipeline components or gas plant components, any gain
or loss is recorded to accumulated depreciation. When entire pipeline systems, gas plants or other property and equipment are retired or sold, any gain or loss is included in operations.
Depreciation of the gathering pipeline systems, gas plants, and processing equipment is provided using the straight-line method based on an estimated useful life of primarily 20 years.
8. Federal and State Income Taxes
The Company is organized under the provisions of the Texas Revised Limited Partnership Act. Accordingly, taxable income or loss, which may vary substantially from the net income or loss reported for financial reporting purposes is generally included in the federal
and state income tax returns of each partner.
9. Revenue Recognition
Revenue for sales of natural gas and NGLs is recognized upon delivery. Service revenue, including transportation, treating, compression and gas processing, is recognized at the time service is performed. Elk City contracts consist primarily of transportation contracts
and keep-whole arrangements. Under transportation contracts, the Company receives a fee for transporting gas through its system. The revenue earned from transportation contracts is directly related to volume of natural gas transported through the system and is not
directly dependent on commodity prices. Under keep-whole arrangements, the Company gathers natural gas from the producer, processes the natural gas and sells the resulting NGLs at market prices to an affiliated company.
10. Shipping and Handling Costs
In accordance with the Emerging Issues Task Force Issue 00-10,
"Accounting for Shipping and Handling Fees and Costs,"
the Company classified fees deducted from payments to producers for compression and treating of gas as revenue.
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ETC OKLAHOMA PIPELINE LTD.
NOTES TO FINANCIAL STATEMENTS
11. Asset Retirement Obligation
The Company accounts for its asset retirement obligations in accordance with Statement of Financial Accounting Standards No. 143,
"Accounting for Asset Retirement Obligations"
(SFAS No. 143). SFAS No. 143 requires the Company to record the fair value of an asset
retirement obligation as a liability in the period in which it incurs a legal obligation for the retirement of tangible long-lived assets, typically at the time the assets are placed into service. A corresponding asset is also recorded and depreciated over the life of the asset.
After the initial measurement, any changes in the amount of the liability resulting from the passage of time and revisions to either the timing or amount of estimated cash flows would be recognized prospectively.
The Company has determined that it is obligated by contractual requirements to remove facilities or perform other remediation upon retirement of certain of its assets. Determination of the amounts to be recognized is based upon numerous estimates and assumptions,
including expected settlement dates, future retirement costs, future inflation rates and the credit-adjusted risk-free interest rates. However, the Company is not able to reasonably determine the fair value of the asset retirement obligations as of August 31, 2004, because
the settlement dates are indeterminable. An asset retirement obligation will be recorded in the periods the settlement dates can reasonably determined.
12. Impairment of Long-lived Assets
Long-lived assets, including property, plant and equipments are reviewed for impairment whenever facts and circumstances indicate impairment may be present. When impairment indicators are present, the Company evaluates whether the assets in question are able
to generate sufficient cash flows to recover their carrying value on an undiscounted basis. If an asset is deemed to be impaired, the amount of impairment is determined as the amount by which the net carrying value exceeds discounted estimated net cash flows.
C — ACQUISITION
In October 2002, La Grange purchased certain operating assets from Aquila, primarily consisting of natural gas gathering, treating and processing assets in Texas and Oklahoma, for $264 million in cash. At the closing of the acquisition, approximately $33 million of the
purchase price was allocated to the Elk City assets based on the relative fair value of all assets acquired.
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ETC OKLAHOMA PIPELINE LTD.
NOTES TO FINANCIAL STATEMENTS
The assets acquired and purchase price allocation were as follows:
Elk City Assets
Materials and supplies
$
63
Property, plant and equipment
33,070
Accrued expenses
(260
)
$
32,873
D — PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consisted of the following:
Estimated
Useful Lives
(Years)
Balance at
August
31,
2004
Balance at
August
31,
2003
Midstream pipelines and equipment
20
$
45,445
$
36,574
Midstream right of way
20
903
103
Linepack
N/A
48
48
Construction in progress
N/A
901
3,443
Other
5
195
137
Total
47,492
40,305
Accumulated depreciation and amortization
(3,938
)
(1,589
)
Property, plant and equipment, net
$
43,554
$
38,716
E — RELATED PARTY TRANSACTIONS
The Company entered into various types of transactions with La Grange, or its subsidiaries, for the year ended August 31, 2004 and eleven months ended August 31, 2003. The Company sold the majority of natural gas gathered and NGLs produced by the Company to
La Grange or its subsidiaries. La Grange purchased the gas and NGLs at an index based price. Additionally, the Company reimbursed La Grange for certain employees who provided services to the Company and for other costs (primarily general and administrative
expense) related to the Company's operations. La Grange also provided working capital necessary for the operations of the Company.
The following table summarizes transactions for the periods presented:
Year Ended
August
31, 2004
Eleven Months
Ended
August
31, 2003
Natural gas sales to affiliated companies
$
77,169
$
60,380
NGLs sales to affiliated companies
46,151
24,454
Compression services from affiliated company
91
—
Allocated costs from affiliated companies
2,663
2,887
Working capital from affiliated companies
(3,185
)
(11,168
)
Transfers of property, plant and equipment from affiliated companies
2,288
32,873
The related party receivable due from La Grange was $22,305 and $7,121 at August 31, 2004 and August 31, 2003, respectively.
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ETC OKLAHOMA PIPELINE LTD.
NOTES TO FINANCIAL STATEMENTS
F — MAJOR CUSTOMERS AND SUPPLIERS
The Company sold 91.1% and 91.8% of natural gas and NGLs produced to ETC Marketing, Ltd., a subsidiary of La Grange, for the year ended August 31, 2004 and for the eleven months ended August 31, 2003, respectively.
For the year ended August 31, 2004 and the eleven months ended August 31, 2003, the Company had gross purchases as a percentage of cost of sales from nonaffiliated major suppliers as follows:
Year Ended
August
31, 2004
Eleven Months Ended
August
31, 2003
St. Mary Operating Company
22.8
%
14.1
%
Samson Resources Company
18.2
%
23.4
%
Stephens Production Company
12.8
%
8.8
%
Management believes that the diversification of suppliers is sufficient to enable the Company to purchase all of its supply needs at market prices without a material disruption of operations if supplies are interrupted from any of the Company's existing sources.
Although no assurances can be given that supplies will be readily available in the future, we expect a sufficient supply to continue to be available.
G — RETIREMENT AND BENEFITS
La Grange has a defined contribution plan for virtually all employees with discretionary matching. Pursuant to the plan, employees of the Company can defer a portion of their compensation and contribute it to a deferred account. La Grange did not elect to match
contributions to this plan during the year ended August 31, 2004 and the eleven months ended August 31, 2003. Therefore, no expense related to the plan is recorded in the accompanying financial statements.
H — COMMITMENTS AND CONTINGENCIES
1. Lease Obligations
The Company has operating leases for compressors under noncancelable agreements. Future annual minimum lease payments for each of the next five years and thereafter as of August 31, 2004 are as follows:
Year ending August 31:
2005
$
522
2006
522
2007
522
2008
522
2009
500
After 2009
72
$
2,660
Rental expense relating to operating leases was $675 and $555 for the year ended August 31, 2004 and eleven months ended August 31, 2003, respectively.
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ETC OKLAHOMA PIPELINE LTD.
NOTES TO FINANCIAL STATEMENTS
2. Litigation
The Company is involved in various lawsuits, claims and regulatory proceedings incidental to its business. In the opinion of management, the outcome of such matters will not have a material adverse effect on the Company's financial position or results of operations.
3. Environmental
The Company's operations are subject to extensive federal, state and local environmental laws and regulations that require expenditures for remediation at operating facilities and waste disposal sites. Although the Company believes its operations are in substantial
compliance with applicable environmental laws and regulations, risks of additional costs and liabilities are inherent in the natural gas pipeline and processing business, and there can be no assurance that significant costs and liabilities will not be incurred. Moreover, it
is possible that other developments, such as increasingly stringent environmental laws, regulations and enforcement policies thereunder, and claims for damages to property or persons resulting from the operations, could result in substantial costs and liabilities.
Accordingly, the Company has adopted policies, practices, and procedures in the areas of pollution control, product safety, occupational health, and the handling, storage, use, and disposal of hazardous materials to prevent material environmental or other damage, and
to limit the financial liability, which could result from such events. However, some risk of environmental or other damage is inherent in the natural gas pipeline and processing business, as it is with other entities engaged in similar businesses.
In conjunction with the acquisition of the Texas and Oklahoma natural gas gathering and gas processing assets from Aquila, Aquila, Inc. agreed to indemnify La Grange Acquisition, L.P. for any environmental liabilities from those operations prior to October 1, 2002.
Environmental exposures and liabilities are difficult to assess and estimate due to unknown factors such as the magnitude of possible contamination, the timing and extent of remediation, the determination of the Company's liability in proportion to other parties,
improvements in cleanup technologies and the extent to which environmental laws and regulations may change in the future. Although environmental costs may have a significant impact on the results of operations for any single period, the Company believes that
such costs will not have a material adverse effect on its financial position. Elk City did not accrue for environmental liabilities as of August 31, 2004 or 2003.
I — SUBSEQUENT EVENT
On April 14, 2005, Elk City's parent company completed the sale of the Company to Atlas Pipeline Partners, L.P. for $190 million in cash, subject to certain adjustments as defined in the purchase and sale agreement.
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ETC OKLAHOMA PIPELINE, LTD.
BALANCE SHEET
February
28, 2005
(unaudited)
(in thousands)
ASSETS
CURRENT ASSETS:
Cash
$
—
Receivables —
Trade
2,294
Related parties
27,671
Exchanges
716
Materials and supplies
63
Other current assets
497
Total current assets
31,241
PROPERTY, PLANT AND EQUIPMENT
50,004
ACCUMULATED DEPRECIATION
(5,243
)
PROPERTY, PLANT AND EQUIPMENT, net
44,761
Total assets
$
76,002
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payables —
Trade
$
23,206
Exchanges
209
Accrued expenses
162
Total current liabilities
23,577
COMMITMENTS AND CONTINGENCIES (See Note D)
PARTNERS' CAPITAL:
Limited partner
52,373
General partner
52
Total partners' capital
52,425
Total liabilities and partners' capital
$
76,002
The accompanying notes are an integral part of this financial statement.
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ETC OKLAHOMA PIPELINE, LTD.
INCOME STATEMENTS
(unaudited)
(in thousands)
Six
          Months Ended
February
28, 2005
Six
          Months Ended
February
29, 2004
OPERATING REVENUE:
Third party
$
6,841
$
5,138
Related party
77,355
54,789
Total revenue
84,196
59,927
COSTS AND EXPENSES:
Cost of products sold
74,330
52,757
Operating
2,624
2,297
General and administrative
1,437
1,331
Depreciation and amortization
1,236
1,076
Total costs and expenses
79,627
57,461
NET INCOME
$
4,569
$
2,466
The accompanying notes are an integral part of these financial statements.
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ETC OKLAHOMA PIPELINE, LTD.
STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)
Six
          Months Ended
February
28, 2005
Six
          Months Ended
February
29, 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$
4,569
$
2,466
Adjustments to reconcile net income to net cash provided by operating activities —
Depreciation and amortization
1,236
1,076
Loss on disposal of assets
—
3
Changes in operating assets and liabilities —
Receivables
(1,024
)
(521
)
Related party receivables
(12,560
)
(21,586
)
Other current assets
(497
)
47
Payables
3,402
11,764
Accrued expenses
(415
)
(402
)
Net cash used in operating activities
(5,289
)
(7,153
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment
(1,905
)
(2,545
)
Proceeds from sale of assets
—
72
Net cash used in investing activities
(1,905
)
(2,473
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Working capital from parent
7,194
9,626
Net change in cash
—
—
Cash beginning of year
—
—
Cash end of year
$
—
$
—
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Non-cash asset contribution
$
538
$
2,288
Cash paid for interest
$
—
$
—
Cash paid for income taxes
$
—
$
—
The accompanying notes are an integral part of these financial statements.
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ETC OKLAHOMA PIPELINE, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six months ended February 28, 2005
A — ORGANIZATION AND BUSINESS
ETC Oklahoma Pipeline, Ltd. (Elk City or the Company) is a Texas limited partnership. LG PL, LLC, a wholly-owned subsidiary of La Grange Acquisition, L.P. (La Grange) owns a 0.1% general partner interest and La Grange Acquisition, L.P. owns a 99.9% limited partner
interest. Elk City owns a natural gas gathering pipeline system and gas processing plant in Oklahoma. These assets are referred to herein as "the Elk City system."
The Elk City system is a 318-mile gathering system located in western Oklahoma that gathers, compresses, treats and processes natural gas from the Anadarko Basin. The Elk City system also includes the Elk City processing plant and one treating facility. The Elk City
system is connected, either directly or indirectly, to six major interstate and intrastate natural gas pipelines providing access to natural gas markets throughout the United States. The Elk City system has a processing capacity of approximately 130 million cubic feet per
day (MMcf/d).
B — SIGNIFICANT ACCOUNTING POLICIES
1. Basis of Presentation
The interim financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP") and on the same basis as the audited financial statements for the year ended August 31, 2004. Certain
information and footnote disclosures normally included in annual financial statements prepared in accordance with US GAAP have been omitted pursuant to the rules and regulations of the SEC. Because the interim financial statements do not include all of the
information and footnotes required by US GAAP, they should be read in conjunction with the audited financial statements and related notes for the year ended August 31, 2004. The results of operations for an interim period may not give a true indication of results for
a full year. There are no other components of comprehensive income other than net income.
2. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. The natural gas industry conducts its business by processing actual transactions at the end of the month following the
month of delivery. Consequently, the most current month's financial results are estimated using volume estimates and market prices. Any difference between estimated results and actual results are recognized in the following month's financial statements. Management
believes that the operating results estimated for the six months ending February 28, 2005 and February 29, 2004 represent the actual results in all material respects.
Some of the other more significant estimates made by management include, but are not limited to the useful lives for depreciation and amortization, and general business reserves. Actual results could differ from those estimates.
3. Cash
La Grange provides cash to the Company for working capital and capital expenditures. Cash transfers are recorded through related party receivables and payables. Cash receipts of the Company are immediately transferred to La Grange to reduce the intercompany
balance with LaGrange.
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ETC OKLAHOMA PIPELINE, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six months ended February 28, 2005
4. Accounts Receivable
Elk City deals with counter parties that are typically either investment grade (Standard & Poors BBB or higher) or are otherwise secured with a letter of credit or other form of security (corporate guaranty or prepayment). Management reviews accounts receivable
balances each week. Credit limits are assigned and monitored for all counter parties. The majority of payments are due on the 25th of the month following delivery.
Management closely monitors credit exposure for potential doubtful accounts. Management believes that an occurrence of bad debt is unlikely; therefore, an allowance for doubtful accounts was not deemed necessary at February 28, 2005. Bad debt expense is
recognized at the time an account is deemed uncollectible. An account receivable will be written off in the event a counter party files for bankruptcy protection or the account is turned over for collection and the collector deems the account uncollectible. No bad debt
expense was recorded during the six months ended February 28, 2005 or six months ended February 29, 2004.
C — RELATED PARTY TRANSACTIONS
The Company entered into various types of transactions with La Grange, or its subsidiaries for the six months ended February 28, 2005 and February 29, 2004.
The following table summarized transactions for the six month periods ended February 28, 2005 and February 29, 2004:
2005
2004
Natural gas sales to affiliated companies
$
47,886
$
33,957
NGLs sales to affiliated companies
29,469
20,832
Compression services from affiliated company
207
—
Allocated costs from affiliated companies
1,437
1,329
Working capital to (from) related companies
4,009
(1,542
)
Transfer of property, plant and equipment from related parties
539
2,288
The related party receivable due from La Grange was $27,671 as of February 28, 2005.
D — COMMITMENTS AND CONTINGENCIES
1. Litigation
The Company is involved in various lawsuits, claims and regulatory proceedings incidental to its business. In the opinion of management, the outcome of such matters will not have a material adverse effect on the Company's financial position or results of operations.
2. Environmental
The Company's operations are subject to extensive federal, state and local environmental laws and regulations that require expenditures for remediation at operating facilities and waste disposal sites. Although the Company believes its operations are in substantial
compliance with applicable environmental laws and regulations, risks of additional costs and liabilities are inherent in the natural gas pipeline and processing business, and there can be no assurance that significant costs and liabilities will not be incurred. Moreover, it
is possible that other developments, such as increasingly stringent environmental laws, regulations and enforcement policies thereunder, and claims for damages to property or persons resulting from the operations, could result in substantial costs and liabilities.
Accordingly, the Company has adopted policies, practices, and procedures in the
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ETC OKLAHOMA PIPELINE, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Six months ended February 28, 2005
areas of pollution control, product safety, occupational health, and the handling, storage, use, and disposal of hazardous materials to prevent material environmental or other damage,
and to limit the financial liability, which could result from such events. However, some risk of environmental or other damage is inherent in the natural gas pipeline and processing
business, as it is with other entities engaged in similar businesses.
In conjunction with the acquisition of the Texas and Oklahoma natural gas gathering and gas processing assets from Aquila, Aquila, Inc. agreed to indemnify La Grange Acquisition, L.P. for any environmental liabilities from those operations prior to October 1, 2002.
Environmental exposures and liabilities are difficult to assess and estimate due to unknown factors such as the magnitude of possible contamination, the timing and extent of remediation, the determination of the Company's liability in proportion to other parties,
improvements in cleanup technologies and the extent to which environmental laws and regulations may change in the future. Although environmental costs may have a significant impact on the results of operations for any single period, the Company believes that
such costs will not have a material adverse effect on its financial position. Elk City did not accrue for environmental liabilities as of February 28, 2005.
E — SUBSEQUENT EVENT
On April 14, 2005, Elk City's parent company completed the sale of the Company to Atlas Pipeline Partners, L.P. for $190 million in cash, subject to certain adjustments as defined in the purchase and sale agreement.
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Report of Independent Registered Public Accounting Firm
Board of Directors and
Atlas Pipeline Partners, L.P.
We have audited the accompanying carve-out statements of income and changes in parent's equity and cash flows of the Elk City System (a division of the Aquila Gas Pipeline Corporation), for the year ended September 30, 2002. These financial statements are
the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, 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 carve-out financial statements referred to above present fairly, in all material respects, the results of operations of the Elk City System of Aquila Gas Pipeline Corporation for the year ended September 30, 2002, in conformity with accounting
principles generally accepted in the United States of America.
/s/Grant Thornton LLP
Cleveland, Ohio
April 25, 2005
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THE ELK CITY SYSTEM
CARVE-OUT STATEMENT OF INCOME AND CHANGES
IN PARENT'S EQUITY IN DIVISION
For the year ended September
30, 2002
(in thousands)
OPERATING REVENUE:
Third party
$
5,599
Related party
46,643
Total revenue
52,242
COSTS AND EXPENSES:
Cost of products sold
41,610
Operating
3,881
General and administrative
1,389
Depreciation and amortization
3,811
Asset impairment
12,850
Total costs and expenses
63,541
LOSS FROM OPERATIONS
(11,299
)
OTHER INCOME:
Gain on disposal of assets
14
LOSS BEFORE INCOME TAXES
(11,285
)
INCOME TAX BENEFIT
(4,439
)
NET LOSS
(6,846
)
Parent's beginning equity in division
11,763
Parent's ending equity in division
$
4,917
The accompanying notes are an integral part of this financial statement.
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THE ELK CITY SYSTEM
CARVE-OUT STATEMENT OF CASH FLOWS
For the year ended September
30, 2002
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
(6,846
)
Adjustments to reconcile net loss to net cash provided by operating activities —
Depreciation and amortization
3,811
Asset impairment
12,850
Deferred income taxes
(4,864
)
Other, net
(15
)
Changes in operating assets and liabilities —
Receivables
(1,726
)
Materials and supplies
148
Other current assets
(34
)
Payables
942
Related party payables
5,167
Accrued expenses
49
Income taxes payable
425
Net cash provided by operating activities
9,907
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment
(5,045
)
Proceeds from sale of assets
115
Net cash used in investing activities
(4,930
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Working capital from parent
(4,977
)
Net cash used in financing activities
(4,977
)
Net change in cash and cash equivalents
—
Cash and cash equivalents, beginning of year
—
Cash and cash equivalents, end of year
$
—
The accompanying notes are an integral part of this financial statement.
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THE ELK CITY SYSTEM
NOTES TO CARVE-OUT FINANCIAL STATEMENTS
Year ended September 30, 2002
(in thousands)
A — ORGANIZATION AND BUSINESS
Aquila Gas Processing Corporation (AGP), a Delaware Corporation and a wholly-owned subsidiary of Aquila Gas Pipeline Corporation (Aquila), owned the Elk City natural gas gathering pipeline system and gas processing plant in Oklahoma. Collectively, those assets are
referred to herein as the Elk City System. The Elk City System is considered a business as defined in the rules and regulations of the U.S. Securities and Exchange Commission and is sometimes referred to herein as the "Company".
The Elk City system, a 318-mile gathering system located in western Oklahoma, gathers, compresses, treats and processes natural gas from the Anadarko Basin. The Elk City System also includes the Elk City processing plant and one treating facility. The Elk City System
is connected, either directly or indirectly, to six major interstate and intrastate natural gas pipelines providing access to natural gas markets throughout the United States. The Elk City System has a processing capacity of approximately 130 million cubic feet per day
(MMcf/d).
B — SIGNIFICANT ACCOUNTING POLICIES
1. Basis of Presentation
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America. The accompanying financial statements present the operations and cash flows of the Elk City System on a
carve-out basis. Accordingly, the carve-out financial statements reflect a reasonable allocation of the costs historically incurred by AGP.
2. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period.
Significant estimates made by management include, but are not limited to the useful lives for depreciation and amortization, and general business reserves. Actual results could differ from those estimates.
3. Impairment of Long-lived Assets
The Company evaluates the carrying value of long-lived assets to be held and used when events and circumstances warrant such a review. The carrying value of long-lived assets would be considered impaired when the projected undiscounted cash flows are less than
carrying value. In that event, a loss would be recognized based on the amount by which the carrying value exceeds the fair value. Fair value is determined primarily by available market valuations, or, if applicable, discounted cash flows.
As a result of the sale to La Grange (See Note H), the Company recorded an impairment of $12,850 for the year ended on September 30, 2002, to write down the Elk City assets to their net realizable value.
4. Revenue Recognition
Revenue for sales of natural gas and natural gas liquids (NGLs) is recognized upon delivery. Service revenue, including transportation, treating, compression and gas processing, is recognized at the time
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THE ELK CITY SYSTEM
NOTES TO CARVE-OUT FINANCIAL STATEMENTS
Year ended September 30, 2002
(in thousands)
service is performed. Elk City System contracts consist primarily of transportation contracts and keep-whole arrangements. Under transportation contracts, the Company receives a fee
for transporting gas through its system. The revenue earned from transportation contracts is directly related to volume of natural gas transported through the system and is not
directly dependent on commodity prices. Under keep-whole arrangements, the Company gathers natural gas from the producer, processing the natural gas and selling the resulting
NGLs at market prices to an affiliated company.
5. Shipping and Handling Costs
In accordance with the Emerging Issues Task Force Issue 00-10, "Accounting for Shipping and Handling Fees and Costs," the Company classifies fees deducted from payments to producers for compression and treating of gas as revenue.
6. Commodity Risk Management
In 1999, Aquila Gas Pipeline transferred all of its energy trading operations and management thereof to Aquila Energy Market (AEM), a wholly owned subsidiary of Aquila, Inc. AEM enters into forward physical contracts with third parties for the benefit of Aquila and
where deemed necessary entered into intercompany financial derivative positions (e.g., swaps, futures and options) with Aquila and other affiliates to assist them in managing their exposures. Thus, Aquila has forward physical contracts with third parties and financial
derivative positions with AEM and affiliates. This activity was not pushed down to the carve-out financial statements of Elk City.
7. Stock Compensation
Some of the Company's employees received stock options in Aquila. As permitted under accounting principles generally accepted in the United States of America, Aquila elected to account for the options under Accounting Principles Board Opinion No. 25, and because
the options strike price was equal to or greater than the fair value at the date of the grant, no compensation expense was recognized for the year ended September 30, 2002. As these were Aquila options, the Company does not have full access to the information
necessary to disclose what compensation expense would have been, had Aquila accounted for the options under Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation
, which requires compensation expense be recognized for
the fair value of the options at the date of grant. La Grange Acquisition does not have a stock option plan in place for its employees.
8. Federal and State Income Taxes
The Elk City System was included in the consolidated federal income tax returns filed by Aquila. Accordingly, all tax balances were ultimately settled through Aquila. The Company had generally accounted for its taxes on a stand-alone or separate return basis (see Note
D). Periodically, taxes payable were settled through the intercompany accounts with Aquila and were not funded in cash.
The Company provides for income taxes in accordance with Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes
(Statement No. 109). Statement No. 109 requires that deferred tax assets and liabilities be established for the basis
differences between the reported amounts of assets and liabilities for financial reporting purposes and income tax purposes.
9. Asset Retirement Obligation
The Company accounts for its asset retirement obligations in accordance with Statement of Financial Accounting Standards No. 143,
Accounting for Asset Retirement Obligations
(SFAS No. 143). SFAS No. 143 requires the Company to record the fair value of an asset
retirement obligation as a liability in
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THE ELK CITY SYSTEM
NOTES TO CARVE-OUT FINANCIAL STATEMENTS
Year ended September 30, 2002
(in thousands)
the period in which it incurs a legal obligation for the retirement of tangible long-lived assets, typically at the time the assets are placed into service. A corresponding asset is also
recorded and depreciated over the life of the asset. After the initial measurement, any changes in the amount of the liability resulting from the passage of time and revisions to either
the timing or amount of estimated cash flows would be recognized prospectively.
The Company has determined that it is obligated by contractual requirements to remove facilities or perform other remediation upon retirement of certain of our assets. Determination of the amounts to be recognized is based upon numerous estimates and
assumptions, including expected settlement dates, future retirement costs, future inflation rates and the credit-adjusted risk-free interest rates. However, the Company is not able to reasonably determine the fair value of the asset retirement obligations as of
September 30, 2002, because the settlement dates are indeterminable. An asset retirement obligation will be recorded in the periods in which the settlement dates can reasonably be determined.
C — RELATED PARTY TRANSACTIONS
The Company entered into various types of transactions with Aquila for the year ended September 30, 2002. The Company sold the majority of natural gas and NGLs produced to Aquila. Additionally, the Company reimbursed Aquila for certain employees who
provided services to the Company and for other costs (primarily general and administrative expense) related to the Company's operations. Aquila also provided the working capital necessary for the operations of the Company.
The following table summarized transactions for the year ended September 30, 2002:
Natural gas sales to affiliated companies
$
16,391
NGLs sales to affiliated companies
30,252
Allocated costs from affiliated companies
1,389
Working capital to affiliated companies
3,732
D — INCOME TAXES
A reconciliation between the expected tax computed using the US federal statutory income tax rate and the provision for income taxes is as follows:
2002
Statutory federal income tax (35%)
$
(3,950
)
State and local income taxes — net of federal income tax effect (4.3%)
(489
)
Total
$
(4,439
)
E — RETIREMENT AND BENEFITS
For the year ended September 30, 2002, certain Aquila employees received stock options to purchase Aquila's common stock. As permitted under generally accepted accounting principles, Aquila elected to account for the options under Accounting Principles Board
Opinion No. 25, and because the options strike price was equal to or greater than the fair value at the date of grant, no compensation expense was recognized. As these were Aquila, Inc. options, the Company does not have full access to the information necessary to
disclose what compensation would have been, had Aquila accounted for the options under Statement of Financial Accounting Standards No. 123, "Accounting for
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THE ELK CITY SYSTEM
NOTES TO CARVE-OUT FINANCIAL STATEMENTS
Year ended September 30, 2002
(in thousands)
Stock-Based Compensation", which requires compensation expense be recognized for the fair value of the options at the date of grant. The Company does not have a stock option plan
in place for its employees.
Aquila had a defined contribution plan for virtually all employees. Pursuant to the plan, employees of the Company can defer a portion of their compensation and contribute it to a deferred account. Aquila's matching contribution to the plan for the Company employees
was $34 for the year ended September 30, 2002.
Aquila had a stock contribution plan under which eligible employees received a Company contribution of 3% of their base income in Aquila's common stock. The Company's expense associated with this plan for the Company employees for the year ended
September 30, 2002 was $19.
F — COMMITMENTS AND CONTINGENCIES
1. Litigation
The Company is involved in various lawsuits, claims and regulatory proceedings incidental to its business. In the opinion of management, the outcome of such matters will not have a material adverse effect on the Company's financial position or results of operations.
2. Environmental
The Company's operations are subject to extensive federal, state and local environmental laws and regulations that require expenditures for remediation at operating facilities and waste disposal sites. Although the Company believes its operations are in substantial
compliance with applicable environmental laws and regulations, risks of additional costs and liabilities are inherent in the natural gas pipeline and processing business, and there can be no assurance that significant costs and liabilities will not be incurred. Moreover, it
is possible that other developments, such as increasingly stringent environmental laws, regulations and enforcement policies thereunder, and claims for damages to property or persons resulting from the operations, could result in substantial costs and liabilities.
Accordingly, the Company has adopted policies, practices, and procedures in the areas of pollution control, product safety, occupational health, and the handling, storage, use, and disposal of hazardous materials to prevent material environmental or other damage, and
to limit the financial liability, which could result from such events. However, some risk of environmental or other damage is inherent in the natural gas pipeline and processing business, as it is with other entities engaged in similar businesses.
Environmental exposures and liabilities are difficult to assess and estimate due to unknown factors such as the magnitude of possible contamination, the timing and extent of remediation, the determination of the Company's liability in proportion to other parties,
improvements in cleanup technologies and the extent to which environmental laws and regulations may change in the future. Although environmental costs may have a significant impact on the results of operations for any single period, the Company believes that
such costs will not have a material adverse effect on its financial position. Elk City did not accrue for environmental liabilities as of September 30, 2002.
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THE ELK CITY SYSTEM
NOTES TO CARVE-OUT FINANCIAL STATEMENTS
Year ended September 30, 2002
(in thousands)
G — MAJOR CUSTOMERS AND SUPPLIERS
The Company sold 89.3% of natural gas and NGLs produced to Aquila for the year ended September 30, 2002.
For the year ended September 30, 2002, the Company had gross purchases as a percentage of cost of sales from nonaffiliated major suppliers as follows:
St. Mary Operating Company
19.8
%
Exxon Company, U.S.A
10.7
%
Management believes that the diversification of suppliers is sufficient to enable the Company to purchase all of its supply needs at market prices without a material disruption of operations if supplies are interrupted from any of the Company's existing sources.
Although no assurances can be given that supplies will be readily available in the future, we expect a sufficient supply to continue to be available.
H — SUBSEQUENT EVENT
In October 2002, La Grange Acquisition, L.P. purchased the Elk City System from Aquila.
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Report of Independent Certified Public Accountants
Board of Directors
Spectrum Field Services, Inc.
We have audited the accompanying balance sheets of Spectrum Field Services, Inc. (a Delaware corporation) as of December 31, 2003 and 2002, and the related statements of operations, comprehensive income (loss), changes in shareholders' equity and cash flows
for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 Spectrum Field Services, Inc. as of December 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America.
/s/ GRANT THORNTON LLP
Tulsa, Oklahoma
May 17, 2004
(except with respect to the matters
discussed in Note J, as to which the
date is June 10, 2004)
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Spectrum Field Services, Inc.
Balance sheets
December 31, 2003 and 2002
(in thousands, except share data)
2003
2002
ASSETS
CURRENT ASSETS:
Cash
$
173
$
478
Accounts receivable
8,473
7,554
Inventories
179
553
Prepaid expenses and other
108
200
Income tax receivable
—
207
Security deposits
257
—
Deferred income taxes
10
—
Total current assets
9,200
8,992
PROPERTY, PLANT AND EQUIPMENT, net
47,050
47,774
DEFERRED INCOME TAXES
1,644
—
SECURITY DEPOSITS
1,481
225
OTHER ASSETS, net
250
1,159
Total assets
$
59,625
$
58,150
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable
$
4,800
$
1,428
Accrued producer payables
6,470
6,109
Accrued liabilities
129
234
Hedge liabilities
338
719
Current maturities of long-term debt
4,995
3,076
Total current liabilities
16,732
11,566
LONG-TERM DEBT, less current maturities
39,117
35,200
PREFERRED DIVIDENDS PAYABLE
2,129
1,075
DEFERRED INCOME TAXES
—
2,063
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $0.01 par value; 8.0% cumulative; 20,000,000 shares authorized;
13,856,047 shares of Series A preferred stock issued; 11,052,304 shares
outstanding at December 31, 2003 and 2002
13,856
13,856
Common stock, $0.01 par value; 5,000,000 shares authorized; 2,722,194 and
2,712,194 shares issued; 2,084,891 and 2,074,891 shares outstanding at
December 31, 2003 and 2002, respectively
27
27
Additional paid-in capital
3,149
3,043
Retained earnings (accumulated deficit)
(5,279
)
1,729
Treasury stock – preferred, at cost
(3,758
)
(3,758
)
Treasury stock – common, at cost
(6,252
)
(6,252
)
Deferred compensation
(43
)
(70
)
Accumulated other comprehensive loss, net of tax of $32 and $201 in 2003 and
2002, respectively
(53
)
(329
)
Total shareholders' equity
1,647
8,246
Total liabilities and shareholders' equity
$
59,625
$
58,150
The accompanying notes are an integral part of these balance sheets.
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Spectrum Field Services, Inc.
Statements of operations
For the years ended December 31, 2003, 2002 and 2001
(in thousands)
2003
2002
2001
SALES OF NATURAL GAS AND LIQUIDS
$
98,772
$
65,760
$
86,316
COST OF NATURAL GAS AND LIQUIDS
78,827
49,659
64,160
Gross profit
19,945
16,101
22,156
OPERATING EXPENSE
6,262
6,954
8,891
GENERAL AND ADMINISTRATIVE EXPENSE
4,322
2,374
2,947
IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT
—
1,889
—
DEPRECIATION
16,050
4,407
2,779
(LOSS) INCOME FROM OPERATIONS
(6,689
)
477
7,539
INTEREST EXPENSE
(2,725
)
(2,659
)
(3,423
)
OTHER (EXPENSE) INCOME, net
(843
)
10
299
(LOSS) INCOME BEFORE INCOME TAXES
(10,257
)
(2,172
)
4,415
INCOME TAX (BENEFIT) PROVISION
(4,303
)
(500
)
1,677
NET (LOSS) INCOME
(5,954
)
(1,672
)
2,738
PREFERRED STOCK DIVIDENDS
1,054
752
643
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON
SHAREHOLDERS
$
(7,008
)
$
(2,424
)
$
2,095
The accompanying notes are an integral part of these financial statements.
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Spectrum Field Services, Inc.
Statements of comprehensive income (loss)
As of December 31, 2003, 2002 and 2001
(in thousands)
2003
2002
2001
NET (LOSS) INCOME
$
(5,954
)
$
(1,672
)
$
2,738
OTHER COMPREHENSIVE INCOME (LOSS):
Change in value of derivative instruments, net of tax of $169, $(201) and $0
in 2003, 2002 and 2001, respectively
276
(329
)
—
COMPREHENSIVE (LOSS) INCOME
$
(5,678
)
$
(2,001
)
$
2,738
RECONCILIATION OF ACCUMULATED OTHER COMPREHENSIVE LOSS:
Balance, beginning of period
$
(329
)
$
—
$
—
Current period reclassification to earnings, net of tax of $793, $5 and $0
in 2003, 2002 and 2001, respectively
1,293
7
—
Current period change, net of tax of $623, $206 and $0 in 2003, 2002 and
2001, respectively
(1,017
)
(336
)
—
Balance, end of period
$
(53
)
$
(329
)
$
—
The accompanying notes are an integral part of these financial statements.
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Spectrum Field Services, Inc.
Statements of changes in shareholders' equity
For the years ended December 31, 2003, 2002 and 2001
(in thousands, except share data)
Preferred Stock
Common Stock
Additional
Paid-in
Retained
Earnings
(Accumulated
Treasury Stock
Deferred
Accumulated
Other
Comprehensive
Shares
Amount
Shares
Amount
Capital
Deficit)
Preferred
Common
Compensation
Loss
Total
Balance, December 31, 2000
10,886,576
$
10,887
2,211,109
$
22
$
2,643
$
2,058
$
—
$
—
$
(665
)
$
—
$
14,945
Repurchase of shares
—
—
—
—
—
—
(3,754
)
(5,932
)
—
—
(9,686
)
Net income available to common share-
holders
—
—
—
—
—
2,095
—
—
—
—
2,095
Vesting of restricted common stock
—
—
—
—
—
—
—
—
166
—
166
Vesting of phantom units
—
—
—
—
112
—
—
—
—
—
112
Balance, December 31, 2001
10,886,576
10,887
2,211,109
22
2,755
4,153
(3,754
)
(5,932
)
(499
)
—
7,632
Repurchase of restricted common stock
—
—
—
—
—
—
—
(320
)
—
—
(320
)
Repurchase of preferred shares
—
—
—
—
—
—
(4
)
—
—
—
(4
)
Issuance of stock
2,969,471
2,969
545,529
5
540
—
—
—
—
—
3,514
Net loss attributable to common share-
holders
—
—
—
—
—
(2,424
)
—
—
—
—
(2,424
)
Vesting of restricted common stock
—
—
—
—
—
—
—
—
289
—
289
Cancellation of unvested restricted common
stock
—
—
(44,444
)
—
(140
)
—
—
—
140
—
—
Net change in accumulated other compre-
hensive loss
—
—
—
—
—
—
—
—
—
(329
)
(329
)
Termination of phantom unit plan
—
—
—
—
(112
)
—
—
—
—
—
(112
)
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Spectrum Field Services, Inc.
Statements of changes in shareholders' equity – continued
For the years ended December 31, 2003, 2002 and 2001
(in thousands, except share data)
Preferred Stock
Common Stock
Additional
Paid-in
Retained
Earnings
(Accumulated
Treasury Stock
Deferred
Accumulated
Other
Comprehensive
Shares
Amount
Shares
Amount
Capital
Deficit)
Preferred
Common
Compensation
Loss
Total
Balance, December 31, 2002
13,856,047
$
13,856
2,712,194
$
27
$
3,043
$
1,729
$
(3,758
)
$
(6,252
)
$
(70
)
$
(329
)
$
8,246
Issuance of restricted stock
—
—
10,000
—
32
—
—
—
(32
)
—
—
Net loss attributable to common share-
holders
—
—
—
—
—
(7,008
)
—
—
—
—
(7,008
)
Vesting of restricted common stock
—
—
—
—
—
—
—
—
59
—
59
Compensation expense for stock options
—
—
—
—
74
—
—
—
—
—
74
Net change in accumulated other compre-
hensive loss
—
—
—
—
—
—
—
—
—
276
276
Balance, December 31, 2003
13,856,047
$
13,856
2,722,194
$
27
$
3,149
$
(5,279
)
$
(3,758
)
$
(6,252
)
$
(43
)
$
(53
)
$
1,647
The accompanying notes are an integral part of these financial statements.
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Spectrum Field Services, Inc.
Statements of cash flows
For the years ended December 31, 2003, 2002 and 2001
(in thousands)
2003
2002
2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (income)
$
(5,954
)
$
(1,672
)
$
2,738
Adjustments to reconcile net loss to net cash provided by operating activities—
Depreciation and amortization of loan origination fees
16,364
4,718
3,127
Deferred income taxes
(3,717
)
(196
)
1,870
Noncash compensation expense
133
177
278
Unrealized (gain) loss on ineffective hedges
(105
)
189
—
Loss (gain) on sale of assets
456
(10
)
—
Impairment of property, plant and equipment
—
1,889
—
Noncash interest expense
1,188
946
386
Changes in assets and liabilities—
Accounts receivable
(919
)
(2,505
)
1,474
Inventories
374
201
(287
)
Prepaid expenses and other
92
(45
)
—
Income tax receivable
207
816
(973
)
Other assets
(749
)
(989
)
(160
)
Accounts payable
3,372
(29
)
(1,204
)
Accrued producer payables
361
2,426
(4,829
)
Accrued liabilities
(105
)
40
(917
)
Net cash provided by operating activities
10,998
5,956
1,503
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures
(17,410
)
(2,844
)
(5,949
)
Proceeds from sale of assets
1,628
169
—
Net cash used in investing activities
(15,782
)
(2,675
)
(5,949
)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings from long-term debt
6,600
284
3,850
Payments on long-term debt
(4,510
)
(5,848
)
(3,000
)
Borrowings under line of credit
8,208
1,700
13,350
Payments on line of credit
(5,650
)
(6,050
)
(9,050
)
Proceeds from issuance of stock
—
3,514
—
Repurchase of stock
—
(324
)
—
Borrowings from subordinated notes
—
3,515
—
Other
—
(5
)
—
Dividends paid
—
—
(322
)
Loan origination fees
(169
)
(98
)
(50
)
Net cash provided by (used in) financing activities
4,479
(3,312
)
4,778
NET CHANGE IN CASH
(305
)
(31
)
332
CASH, beginning of period
478
509
177
CASH, end of period
$
173
$
478
$
509
SUPPLEMENTAL INFORMATION:
Cash paid for interest
$
1,076
$
1,384
$
3,226
Cash paid for income taxes
$
—
$
—
$
774
Noncash financing activity – paid in kind interest
$
1,188
$
946
$
386
Noncash financing activity – issuance of restricted common stock
$
32
$
—
$
—
Noncash financing activity – capital lease
$
—
$
—
$
125
Noncash financing activity – repurchase of preferred and common stock and
extinguishments of subordinated notes (Note A)
$
—
$
—
$
13,000
The accompanying notes are an integral part of these financial statements.
F-94
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Spectrum Field Services, Inc.
Notes to financial statements
December 31, 2003, 2002 and 2001
(in thousands, except share data)
A — OPERATIONS AND ORGANIZATION
Spectrum Field Services, Inc. (the Company), was incorporated in Delaware on May 8, 2000. The Company was formed to acquire and operate natural gas processing plants and gathering systems in Velma, Oklahoma and Kingman, Kansas.
On February 28, 2001, the Company entered into an agreement to repurchase the interest of one of the Company's equity investors, which was also a major customer of the Company. The agreement resulted in the Company forgiving $13,000 in accounts receivable owed
by the shareholder at February 28, 2001, in exchange for the retirement of the outstanding subordinated debt owed to the shareholder, the repurchase of all of the shareholder's common and Series A preferred stock, and the retirement of the shareholder's outstanding
stock warrant. This transaction was treated as a noncash transaction for presentation in the statement of cash flows. The Company refinanced the subordinated debt with additional borrowings of long-term debt.
On August 1, 2003, the Company sold all of the assets of the Company's natural gas processing plant located in Kingman, Kansas for $1,200 with an effective date of April 1, 2003. The value of the plant was written down by $1,889 as of December 31, 2002, in
contemplation of the transaction in accordance with Statement of Financial Accounting Standards No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets
(SFAS 144). In 2003, an additional loss of $215 was recorded which related to the sale of the plant.
The additional loss was recorded as other expense in the Company's statement of operations.
On December 30, 2003, the Company engaged Lehman Brothers to explore strategic alternatives for the Company including a merger, sale or other transactions involving the stock or assets of the Company.
B — SIGNIFICANT ACCOUNTING POLICIES AND BALANCE SHEET DETAIL
1. Accounts Receivable
The Company grants credit to its customers for the purchase of natural gas and natural gas liquids. Accounts receivable consist of amounts billed to customers and an accrual for sales not yet billed. The Company writes off accounts receivable when management believes
the receivables to be uncollectible. A summary of accounts receivable at December 31 is as follows:
2003
2002
Customer receivables
$
119
$
44
Accrued sales
8,354
7,510
$
8,473
$
7,554
2. Inventories
The Company's inventories are primarily comprised of replacement pipe, natural gas and natural gas liquids and are stated at the lower of cost or market.
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Spectrum Field Services, Inc.
Notes to financial statements
December 31, 2003, 2002 and 2001
(in thousands, except share data)
A summary of inventories at December 31 is as follows:
2003
2002
Replacement pipe
$
76
$
110
Natural gas
65
179
Natural gas liquids
—
232
Other
38
32
$
179
$
553
3. Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets as follows:
Buildings and improvements
7 to 39 years
Plant, machinery and equipment
10 to 20 years
Rights of way
20 years
Office furniture and equipment
5 to 7 years
Autos
5 years
Maintenance, repairs and betterments, including replacement of minor items of physical properties, are charged to expense. Major additions to physical properties are capitalized. The cost of the assets retired or sold is credited to the asset accounts and the related
accumulated depreciation is charged to the accumulated depreciation accounts. The gain or loss from sale or retirement of property, if any, is included in the statement of operations.
A summary of property, plant and equipment at December 31 is as follows:
2003
2002
Land
$
181
$
181
Buildings and improvements
486
287
Plant, machinery and equipment
48,415
48,797
Rights of way
6,313
5,079
Office furniture and equipment
1,329
1,515
Autos
275
242
Construction in process
445
—
57,444
56,101
Less- accumulated depreciation
(10,394
)
(8,327
)
$
47,050
$
47,774
4. Security Deposits
Security deposits primarily represent amounts paid by the Company to the Velma Gas Plant's electricity provider to finance the upgrade of the electricity provider's facilities to accommodate the Company's additional electricity requirements resulting from the addition of
several new electric compressors at the Velma Gas Plant. The electricity provider is required to repay the amount paid by the Company over time based on the Company's electric power consumption. Management projects such payments to occur over a six-year period.
The Company has classified the amount expected to be received from the electricity provider within one year as a current asset. No interest is charged on the outstanding balance.
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Spectrum Field Services, Inc.
Notes to financial statements
December 31, 2003, 2002 and 2001
(in thousands, except share data)
5. Other Long-Term Assets
Other long-term assets consist primarily of loan origination fees and deposits made for the purchase of equipment. Loan origination fees are capitalized at cost and amortized over the term of the associated notes using the straight-line method. The following is a summary
of the Company's other assets at December 31:
December 31, 2003
December 31, 2002
Gross Carrying
Amount
Accumulated
Amortization
Gross Carrying
Amount
Accumulated
Amortization
Loan origination fees (3-5 years)
$
1,122
$
(872
)
$
953
$
(558
)
Deposits for equipment purchases
—
—
750
—
Other
—
—
14
—
Total
$
1,122
$
(872
)
$
1,717
$
(558
)
6. Long-Lived Assets
The Company periodically evaluates whether events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets may warrant revision or that the remaining balance of long-lived assets may not be recoverable. When factors
indicate that long-lived assets should be evaluated for possible impairment, the Company uses an estimate of the related operation's undiscounted cash flows over the remaining life of the assets in measuring whether the assets are recoverable. When undiscounted cash
flows are less than book value of the assets, the required impairment is calculated as the excess of the book value of the assets over the discounted cash flows. Impairment charges of $0, $1,889 and $0 were recorded for the years ended December 31, 2003, 2002 and 2001,
respectively.
7. Revenue and Cost Recognition
Revenue and costs are recognized at the time the natural gas is processed and the natural gas and natural gas liquids are delivered at the tailgate of the plant to market. For 2003 and 2002, approximately 20% of the Company's natural gas supply comes from one supplier.
8. Income Taxes
The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes
(SFAS 109), which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred
income tax assets and liabilities are computed for those differences that have future tax consequences using currently enacted tax laws and future rates that will apply to the periods in which they are expected to affect taxable income.
At December 31, 2003 and 2002, the Company had net noncurrent deferred tax assets and net noncurrent deferred tax liabilities of approximately $1,644 and $2,063, respectively. The deferred tax liabilities are primarily generated due to the difference between
depreciation calculated for financial reporting and income tax purposes. The deferred tax assets relate primarily to net operating loss carryforwards and recognition of an impairment loss for financial reporting purposes in 2002. At December 31, 2003, the Company has
net operating loss carryforwards of approximately $14,700, which will begin to expire in 2022. No valuation allowance has been recorded against the Company's deferred tax asset as management expects future taxable income will be sufficient to utilize the Company's
net operating loss carryforwards.
F-97
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Spectrum Field Services, Inc.
Notes to financial statements
December 31, 2003, 2002 and 2001
(in thousands, except share data)
The Company's 2003 income tax benefit consists of a current income tax benefit of $614 and a deferred income tax benefit of $3,689. The Company's 2002 income tax benefit consists of a current income tax benefit of $696 and a deferred income tax expense of $196. The
Company's 2001 income tax provision consists of a current income tax benefit of $193 and a deferred income tax expense of $1,870. The effective tax rate differs from the enacted federal income tax rate primarily due to state income taxes and tax credits.
9. Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Significant estimates include, but are not limited to, estimating accrued revenue and producer payments, evaluating the
realizability of long-lived assets, and estimating the fair value of derivatives. Actual results could differ from those estimates.
10. Reclassifications
Certain reclassifications of previously reported amounts for 2002 and 2001 have been made to conform with the 2003 presentation format. These reclassifications had no impact on net loss.
11. Concentration of Credit Risk
The Company extends trade credit to various companies in the natural gas and natural gas liquids market in the normal course of business. In 2003 and 2002, respectively, the Company had two primary customers that accounted for approximately 87% and 96% of the
Company's sales and 80% and 83% of the Company's accounts receivable at December 31, 2003 and 2002. During 2001, the Company had three primary customers (one of which was a shareholder of the Company through February 28, 2001). In 2001, sales to three
customers accounted for approximately 97% of the Company's sales. Management believes the credit worthiness of its customers mitigates the concentration risk.
12. Derivative Instruments
The Company applies the provisions of Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities
(SFAS 133). SFAS 133 requires each derivative instrument to be recorded in the balance sheet as either an asset or
liability measured at fair value. Changes in a derivative's fair value are recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged
item in the statement of operations. Companies must formally document, designate, and assess the effectiveness of transactions that receive hedge accounting.
13. Restricted Common Stock
The Company has granted restricted common stock to certain key employees. The Company applies fixed plan accounting in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees.
Accordingly, the Company records the
issuance of restricted stock as an increase to equity with a corresponding offset to deferred compensation (presented as a reduction in equity on the balance sheet). The deferred compensation is reduced by recording compensation expense over the vesting period.
F-98
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Spectrum Field Services, Inc.
Notes to financial statements
December 31, 2003, 2002 and 2001
(in thousands, except share data)
14. Recently Issued Accounting Pronouncements
The Company accounts for expected future costs associated with its obligation to perform site reclamation and dismantle facilities of abandoned plants and pipelines under Statement of Financial Accounting Standards (SFAS) No. 143,
Accounting for Asset Retirement
Obligations.
If a reasonable estimate of the fair value of an abandonment obligation can be made, SFAS 143 requires the Company to record a liability (an asset retirement obligation or ARO) on the balance sheets in other noncurrent liabilities and to capitalize the asset
retirement cost in the period in which the retirement obligation is incurred. In general, the amount of an ARO and the associated costs capitalized will be equal to the estimated future cost to satisfy the abandonment obligation using current prices after discounting the
future cost back to the date that the abandonment obligation was incurred using the credit-adjusted risk-free rate for the Company. After recording these amounts, the ARO will be accreted to its future estimated value using the credit-adjusted risk-free rate and the
additional capitalized costs will be depreciated on a straight-line basis over the productive life of the related assets. The Company has not recorded an asset retirement obligation as of December 31, 2003, as management believes the amount to be immaterial to the
Company's financial statements.
In April 2002, the FASB issued SFAS No. 145,
Recission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
Under the provisions of SFAS No. 145, gains and losses from the extinguishment of debt generally will no
longer be classified as extraordinary items in the statement of operations. The provisions of SFAS No. 145 related to the extinguishment of debt become effective for the Company beginning in 2003. The adoption did not have a material impact on the Company's
financial position or results of operations.
In June 2002, the FASB issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal Activities,
which requires companies to recognize costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit
or disposal plan. Examples of costs covered by the standard include lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity. SFAS 146 is effective for
fiscal years beginning after December 31, 2002, with early application encouraged. The Company adopted this standard January 1, 2003. The adoption did not have a material impact on the Company's financial position or results of operations.
In December 2002, the FASB issued SFAS No. 148,
Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FAS 123.
The standard provides additional transition guidance for companies that elect to voluntarily adopt the accounting
provisions of SFAS No. 123, Accounting For Stock-Based Compensation. SFAS No. 148 does not change the provisions of SFAS No. 123 that permit entities to continue to apply the intrinsic value method of APB 25, Accounting for Stock Issued to Employees. The
Company currently has no stock options outstanding to employees and already applies the accounting provisions of SFAS No. 123 to the stock options discussed in Note H. Accordingly, the adoption of SFAS No. 148 did not have a material impact on the Company's
financial position or results of operations.
In November 2002, the FASB issued Interpretation No. 45 (FIN 45),
Guarantees, Including Indirect Guarantees of Indebtedness of Others.
FIN 45 requires that upon the issuance of guarantees, the guarantor must recognize a liability for the fair value of the obligations it
assumes under the guarantee. Liability recognition is required on a prospective basis for guarantees that are made or modified after December 31, 2002. The adoption of FIN 45 had no impact on the Company's financial position or results of operations.
F-99
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Spectrum Field Services, Inc.
Notes to financial statements
December 31, 2003, 2002 and 2001
(in thousands, except share data)
In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
Consolidation of Variable Interest Entities, an interpretation of ARB 51.
The primary objectives of FIN 46 are to provide guidance on the identification of entities for which control is achieved through means
other than through voting rights (variable interest entities or VIEs) and how to determine when and which business enterprise should consolidate the VIE. This new model for consolidation applies to an entity which either (1) the equity investors, if any, do not have a
controlling financial interest or (2) the equity investment at risk is insufficient to finance that entity's activities without receiving additional subordinated financial support from other parties. The adoption of this standard did not have any impact on the Company's
financial position or results of operations.
In April 2003, the FASB issued Statement No. 149,
Amendment of Statement 133 on Derivative Instruments and Hedging Activities.
SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments embedded in other contracts (collectively
referred to as derivatives) and for hedging activities under SFAS 133. SFAS 149 is effective for contracts entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. The Company adopted SFAS 149 as of July 1, 2003. The
adoption of SFAS 149 did not have a material impact on the Company's financial position or results of operations.
C — DERIVATIVE INSTRUMENTS
The Company entered into certain financial swap instruments, some of which settled during the years ended December 31, 2003 and 2002, that are designated as cash flow hedging instruments in accordance with SFAS 133. The maturities of the instruments outstanding
at December 31, 2003, are less than one year. The swap instruments are contractual agreements to exchange obligations of money between the buyer and seller of the instruments as natural gas volumes during the pricing period are sold. The swaps are tied to a set fixed
price for the seller and floating price determinants for the buyer priced on certain indices at the end of the relevant trading period. The Company entered into these instruments to hedge the forecasted gas plant residue sales to variability in expected future cash flows
attributable to changes in natural gas prices. For the swaps that were settled during the year ended December 31, 2003, the Company reclassified into earnings a before-tax loss of $2,086, that was previously reported in accumulated other comprehensive loss. For the
swaps that were settled during the year ended December 31, 2002, the Company reclassified into earnings a before-tax gain of $12, that was previously reported in accumulated other comprehensive income (loss).
The Company entered into several swaps that were designed to hedge natural gas liquids prices during 2003 and 2002 that did not meet specific hedge accounting criteria. The Company recognized a before-tax loss of $254 and $189 related to these swaps during the years
ending December 31, 2003 and 2002, respectively.
F-100
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Spectrum Field Services, Inc.
Notes to financial statements
December 31, 2003, 2002 and 2001
(in thousands, except share data)
D — LONG-TERM DEBT
A summary of long-term debt at December 31 is as follows:
2003
2002
Senior Term Note payable to a bank, interest payable quarterly at
LIBOR or the bank's reference rate plus an applicable margin based
on the Company's leverage ratio (interest rate of 4.46% at
December 31, 2003), quarterly principal payments of approximately
$1,000 through June 30, 2005, with the remaining balance due July
2005
$
18,850
$
21,850
Advancing Term Loan payable to a bank entered into July 1, 2003,
interest payable quarterly at LIBOR plus 3.25% (interest rate of 4.71%
at December 31, 2003), quarterly principal payments of $230 through
June 30, 2005, with balance due July 2005
5,170
—
Subordinated notes payable to shareholders, interest payable quarterly at
8.00%, outstanding principal due in July 2007
15,603
14,415
$12,000 revolving line of credit, interest payable monthly at PRIME plus
..75% or the bank's reference rate plus an applicable margin based on
the Company's leverage ratio (interest rate of 4.75% at December 31,
2003), outstanding principal due in July 2005
4,208
1,650
Other
281
361
44,112
38,276
Less- current maturities
4,995
3,076
$
39,117
$
35,200
Substantially all of the Company's assets are pledged under these loan agreements. The terms of these agreements place certain financial and operating covenants on the Company, the most restrictive being a debt-to-capitalization ratio and a fixed charge ratio. The
Company was in compliance with all covenants at December 31, 2003.
At December 31, 2003, the Company entered into an agreement to modify the terms of the revolving line of credit. Per this agreement, the amount available to the Company under the line of credit is increased to $12,000. However, if the Company does not consummate a
sale of all or substantially all of the Company's assets by June 30, 2004, the total amount available under the line of credit is reduced to $6,000 and any amount owed by the Company at June 30, 2004, over $6,000 must be repaid to the bank in an amount not to exceed
$1,800. The remaining balance will be due in July 2005.
On July 23, 2002, the Company borrowed an additional $3,515 and issued subordinated notes to shareholders. In 2003 and 2002, the Company issued additional subordinated notes to its shareholders in lieu of making cash interest payments. Such notes totaled $1,188 and
$946 during 2003 and 2002, respectively. The transactions are reflected as noncash financing activities on the Company's statement of cash flows.
F-101
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Spectrum Field Services, Inc.
Notes to financial statements
December 31, 2003, 2002 and 2001
(in thousands, except share data)
The future maturities of long-term debt at December 31, 2003, are as follows:
2004
$
4,995
2005
23,394
2006
81
2007
15,642
$
44,112
E – COMMITMENTS AND CONTINGENCIES
1. Leases
The Company's corporate activities are conducted from leased office facilities located in Tulsa, Oklahoma. The Company also leases certain machinery, equipment and automobiles used in its operations.
Future minimum rental payments required under noncancelable operating leases for each of the years ended December 31 are as follows:
2004
$
80
2005
3
2006
1
$
84
Rental expense was approximately $399, $444 and $496 for the years ended December 31, 2003, 2002 and 2001, respectively.
2. Letters of Credit
At December 31, 2003, the Company has four outstanding letters of credit in favor of various parties totaling $1,792. The letters of credit expire at various times in 2004 and 2005.
3. Legal Proceedings
At December 31, 2003, the Company is party to various legal proceedings incidental to its business. Certain claims have been filed or are pending against the Company. In one matter, the Company has been named as a co-defendant in a lawsuit in which certain royalty
owners of the Company's co-defendant allege that the Company has been purchasing gas at below market prices. The gas involved in this legal proceeding represents a very small portion of the gas purchased by the Company. The Company plans on defending itself
vigorously. If the plaintiffs are ultimately successful, the Company believes it has the ability to seek indemnification from its co-defendant. As the lawsuit is in preliminary stages, management is unable to assess the likelihood of an unfavorable outcome or estimate the
amounts, if any, that will ultimately be payable. Accordingly, no accrual has been made in the Company's balance sheet as of December 31, 2003. In the opinion of management, the resolution of various legal proceedings will not have a material effect on the financial
position or results of operations of the Company.
On November 10, 2003, the Company settled a lawsuit filed against the Company by a former shareholder. The settlement agreement requires the Company to pay the former shareholder $1,820. At December 31, 2003, the Company has recorded an accrual of $1,820,
which is included in accounts
F-102
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Spectrum Field Services, Inc.
Notes to financial statements
December 31, 2003, 2002 and 2001
(in thousands, except share data)
payable in the balance sheet and other expense in the statement of operations. The amount was paid in January 2004.
On March 9, 2004, the Oklahoma Tax Commission (OTC) filed a petition against the Company alleging that the Company underpaid gross production taxes beginning in June 2000. The OTC is seeking a settlement of $5,000 plus interest and penalties. The Company plans
on defending itself vigorously. As the lawsuit is in preliminary stages, management is unable to assess the likelihood of an unfavorable outcome or estimate the amounts, if any, that will ultimately be payable. Accordingly, no accrual has been made in the Company's
balance sheet as of December 31, 2003.
4. Employment Agreements
The Company had outstanding agreements with two key employees to provide severance payments to those employees upon the occurrence of certain triggering events, including the sale of the Company's assets, a merger, or liquidation of the Company. Termination of
both employees will result in a liability of between $142 and $229.
F — COMMON AND PREFERRED STOCK
Each share of Series A preferred stock is due quarterly dividends payable in arrears at a rate of 8% per Series A share beginning September 30, 2000. During 2001, the Company paid $322 of dividends to preferred stockholders representing dividends for the first two
quarters of the year. Dividends for the last two quarters of 2001 and all of 2002 and 2003 have been declared but not paid and are recorded as dividends payable in the balance sheet. Additionally, each share is redeemable for cash at the option of the shareholder upon a
change of control at a price equal to the original price paid for the shares plus any accrued and unpaid dividends. The shares of Series A preferred stock shall, with respect to dividend rights and rights upon liquidation, receive preference over any common stock.
1. Incentive Stock Plan and Stock Option Plan
The Company adopted the Spectrum Field Services, Inc. 2000 Incentive Stock Plan (the Plan) in order to attract, motivate and retain quality employees and to encourage valued employees to have a proprietary interest in the Company. Under the Plan, the Company may
issue to selected employees Non-Qualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Performance Units or Performance Shares, or Phantom Stock Rights. The Company has reserved 222,222 shares of common stock for issuance
under the Plan.
During 2000, the Company granted key employees 211,110 shares of restricted common stock valued at $665 when issued ($3.15 per share), as determined by management. The employees vest in the restricted stock ratably over a four-year period beginning in 2001. As
vesting occurs, the Company will reverse the deferred compensation and charge compensation expense equal to the estimated fair value of the vested shares at the time of the grant.
During 2002, the Company entered into agreements with three officers holding unvested restricted common shares. According to the agreements, the Company accelerated the vesting of some shares and repurchased all of the officers' vested shares for $320. In addition,
all remaining unvested shares were cancelled for those officers. The Company reversed $140 of deferred compensation related to the cancellation of the unvested shares in 2002 as a result.
During January 2003, the Company granted 10,000 shares of restricted common stock to an employee. The stock at the time of grant was valued at $3.15, which represented management's estimate of the fair value of the restricted stock on the grant date. This grant vests
75% in 2003 and the remaining 25% in 2004.
F-103
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Spectrum Field Services, Inc.
Notes to financial statements
December 31, 2003, 2002 and 2001
(in thousands, except share data)
The Company recorded $59, $289 and $166 of expense in 2003, 2002 and 2001, respectively, related to the vesting of restricted common stock. As of December 31, 2003, 54,444 shares of restricted common stock are outstanding.
In 2002, the Company granted certain stock options to two key employees of the Company. The options will vest if a qualified triggering event occurs. A triggering event is determined to be the earlier occurrence of (i) the date of an initial public offering of the Company's
common stock, (ii) the sale of all or substantially all of the assets of the Company or (iii) immediately before (a) the sale of all the outstanding common stock of the Company by the holders thereof or (b) the merger of the Company or similar business combination with
another entity in which the Company is not the survivor.
The number of options granted under the two agreements was 111,110. At December 31, 2003 and 2002, no options were vested as a triggering event had not occurred. The exercise price of the options is $1.00 per share. The options granted are accounted for using fixed
plan accounting in accordance with APB No. 25 as management determined that both the exercise price and the number of shares under option that will eventually vest were known at the grant date. The intrinsic value of the options was determined to be $239 at the
grant date based on management's best estimate of the fair value of the Company's shares at the grant date. The Company records compensation expense over the expected service period. As of December 31, 2003, the Company has recorded cumulative compensation
expense of $74. The remaining $165 of compensation expense will be recorded over the remaining service period or when a triggering event occurs which causes the options to immediately vest.
The effect of Statement of Financial Standards No. 123,
Accounting for Stock Based Compensation
(SFAS 123) is not material. Therefore, the Company has made no disclosure of the pro forma net income as if SFAS 123 had been adopted. All options granted under the
agreements expire after ten years.
Transactions in stock options are summarized as follows:
Shares
Under Option
Exercise Price
Outstanding at December 31, 2001
—
—
Granted
111,110
$
1.00
Exercised
—
—
Cancelled
—
—
Outstanding at December 31, 2002
111,110
$
1.00
Granted
—
—
Exercised
—
—
Cancelled
—
—
Outstanding at December 31, 2003
111,110
$
1.00
F-104
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Spectrum Field Services, Inc.
Notes to financial statements
December 31, 2003, 2002 and 2001
(in thousands, except share data)
The following is a summary of stock options outstanding as of December 31, 2003:
Options Outstanding
Options Exercisable
Exercise
Price
Number
of
Shares
Remaining
Contractual
Life
Number
of
Shares
Exercise
Price
$1.00
111,110
9.0
—
$
1.00
111,110
2. Phantom Unit Plan
In August 2001, the Company adopted the Employee Participation Unit Plan (the EPU Plan). Under the EPU Plan, the Company was authorized to issue 167,190 phantom units to employees from time to time at the discretion of the Board of Directors. Phantom units are
designed to allow holders of the phantom units to share in the value of the Company with the common shareholders. Holders of phantom units had no voting or other privileges typically available to common shareholders.
During 2002 and 2001, the Company granted 151,800 phantom units to employees. All units granted vested ratably over a five-year period. The participants of the EPU Plan receive benefits equal to the estimated fair value of their vested units only upon normal
retirement, disability or a change of control. The form of the benefits to be paid under the EPU Plan was at the discretion of the Board of Directors.
The EPU Plan met the criteria for variable plan accounting under the provisions of APB 25. Accordingly, at each reporting period, compensation cost was measured based on the estimated fair value of the vested phantom units. Compensation expense (benefit) was
recorded to the extent that the fair value of vested units increased (decreased) from the previous reporting period. The Company recorded $112 of compensation expense related to the outstanding phantom units during 2001. During 2002, the Company cancelled the EPU
Plan and paid $54 to the participants of the EPU Plan, which was recorded as expense. Additionally, the Company reversed the previously recognized compensation expense of $112.
3. Shareholders' Commitment
On March 23, 2001, two shareholders of the Company signed an agreement committing to purchase up to $6,500 of additional debt or equity securities if requested to do so by the holders of the senior debt. The agreements were amended in 2003 and 2002 to $5,500 and
$3,000, respectively. Such request can only occur if an event of default (as defined in the credit agreement) has occurred and is continuing. As of December 31, 2003, this commitment was $4,500 and expires on June 30, 2004.
On July 23, 2002, the Company received additional capitalization from the equity owners. The Company issued 545,529 shares of common stock ($.01 par value) and 2,969,471 shares of Series A preferred stock ($.01 par value) in exchange for $3,514 of cash. The Company
also issued additional subordinated notes to certain shareholders of $3,515. The Company pays a commitment fee to the shareholders related to the agreements. Fees paid to the shareholders totaled approximately $110, $60 and $130 in 2003, 2002 and 2001.
F-105
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Spectrum Field Services, Inc.
Notes to financial statements
December 31, 2003, 2002 and 2001
(in thousands, except share data)
G – BENEFIT PLANS
The Company sponsors a defined contribution retirement plan. The Company makes discretionary matching contributions to the plan. The Company expensed contributions of approximately $84, $151 and $181 for the years ended December 31, 2003, 2002 and 2001,
respectively.
H – CHANGE IN ACCOUNTING ESTIMATE
In December 2002, the Company began a project to replace certain gas-powered compressors with electric-powered compressors at its natural gas processing plant in Velma, Oklahoma. The project was completed in October 2003. In 2002, management revised the
estimated useful lives of the previous gas-powered compressors to reflect usage of those assets through July 2003. The Company treated the change in useful life as a change in accounting estimate. Accordingly, the Company revised its depreciation calculation on a
prospective basis from the date the project was probable, which was November 30, 2002. As a result, the Company recorded additional depreciation expense of $1,342 during 2002 and depreciated the remaining net book value of $9,868 in 2003. Additionally, the
Company excelerated depreciation in 2003 on certain other compressors that were not originally part of this project. This resulted in additional depreciation of $497.
In April 2003, the Company began a project to replace the Sulphur Recovery Unit (SRU) at its natural gas processing plant in Velma, Oklahoma. Management revised the estimated useful life of the SRU to reflect usage of the asset through October 2003. The Company
treated the change in useful life as a change in accounting estimate. As a result, the Company depreciated the remaining net book value of $3,287 in 2003. The project was completed in March 2004.
I – RELATED PARTY TRANSACTIONS
During 2003, the Company had sales to an affiliate of approximately $687, which is recorded as accrued sales at December 31, 2003. During 2002, there were no sales to affiliates.
During part of 2001, one of the Company's primary customers was a shareholder. All transactions between the Company and the shareholder were at prevailing market rates. During 2001, the Company had sales to the shareholder of approximately $15,000. At December
31, 2001, no amounts were due from the shareholder.
During 2003, 2002 and 2001, the Company had sales of condensate to an affiliate of approximately $453, $1,663 and $2,100, respectively.
J – SUBSEQUENT EVENT
On June 10, 2004, the Company, along with Energy Spectrum Partners II LP, Energy Spectrum Partners III LP and other various sellers, entered into a Securities Purchase Agreement with Atlas Pipeline Operating Partnership, L.P. to sell the outstanding capital stock of
the Company for a total purchase price of $104,000 adjusted for changes in net working capital, less amounts owed for long-term debt and adjusted for other transaction costs.
F-106
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APPENDIX A
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP  OF  ATLAS PIPELINE HOLDINGS, L.P.
A-1
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ATLAS PIPELINE HOLDINGS, L.P.
3,600,000 Common Units
Representing Limited Partner Interests
PROSPECTUS
, 2006
L
EHMAN
B
ROTHERS
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution.
Set
    forth below are the expenses (other than underwriting discounts and commissions)
    expected to be incurred in connection with the issuance and distribution
    of the securities registered hereby. With the exception of the Securities
    and Exchange Commission registration fee, the NASD filing fee, the amounts
set forth below are estimates.
SEC registration fee
$
11,074.50
NASD filing fee
10,436.00
Printing and engraving expenses
275,489.50
Fees and expenses of legal counsel
425,000.00
Accounting fees and expenses
400,000.00
Transfer agent and registrar fees
3,000.00
New York Stock Exchange listing fee
150,000.00
Structuring Fee
*
Miscellaneous
Total
$
*To be filed by
    amendment.
Item 14.
Indemnification of Officers and Members
    of Our Board of Directors.
The
    section of the prospectus entitled "The
    Partnership Agreement of Atlas Pipeline Holdings, L.P.–Indemnification" discloses
    that we will generally indemnify officers, directors and affiliates of the
    general partner to the fullest extent permitted by the law against all losses,
    claims, damages or similar events and is incorporated herein by this reference.
    Reference is also made to Section __ of the Underwriting
    Agreement filed as an exhibit to this registration statement in which Atlas
    and certain of its affiliates will agree to indemnify the underwriters
    against certain liabilities, including liabilities under the Securities Act
    of 1933, as amended, and to contribute to payments that may be required to
    be made in respect of these liabilities.  Subject
to any terms, conditions or restrictions set forth in the partnership agreement,
Section 17-108 of the Delaware Revised Uniform Limited Partnership Act empowers
a Delaware limited partnership to indemnify and hold harmless any partner or
other persons from and against all claims and demands whatsoever.
Item 15.
Exhibits.
The
following documents are filed as exhibits to this registration statement:
Exhibit
Number
Description
1.1
*
—
Form of Underwriting
        Agreement
3.1*
—
Certificate of Limited Partnership
        of Atlas Pipeline Holdings, L.P.
3.2*
—
Amended and
        Restated Agreement of Limited Partnership of Atlas
        Pipeline Holdings, L.P.
3.3*
—
Certificate
    of Formation of Atlas Pipeline Holdings GP, LLC
3.4*
—
Amended
        and Restated Limited Liability Company Agreement of Atlas Pipeline Holdings
    GP, LLC
3.5*
—
Second Amended
        and Restated Agreement of Limited Partnership of Atlas Pipeline Partners,
        L.P.
3.6*
—
Form of Contribution Agreement
5.1*
—
Opinion of Vinson & Elkins
        L.L.P. as to the legality of the securities being registered
8.1*
—
Opinion of Vinson & Elkins
        L.L.P. relating to tax matters
10.1*
—
Credit
        Agreement among Atlas America, Inc., Resource America, Inc., Wachovia
        Bank, National Association, and other banks party thereto,
    dated March 12, 2004
10.2*
—
First Amendment to March 12, 2004 Credit Agreement, dated
    July 10, 2004
10.3*
—
Revolving Credit and Term Loan
        Agreement, dated as of April 14, 2005 among Atlas Pipeline Partners,
        L.P., Wachovia Bank, National Association and the other parties thereto
10.4*
—
First Amendment to Revolving
        Credit and Term Loan Agreement, dated as of April 14, 2005, among Atlas
        Pipeline Partners, L.P., Wachovia Bank National Association and the other
        parties thereto
10.5*
—
Master Natural Gas Gathering
        Agreement among Atlas Pipeline Partners, L.P., Atlas Pipeline Operating
        Partnership, Atlas America, Inc., Resource Energy, Inc. and Viking Resources
        Corporation
10.6*
—
Omnibus Agreement among Atlas
        Pipeline Partners, L.P., Atlas Pipeline Operating Partnership, Atlas
        America, Inc., Resource Energy, Inc. and Viking Resources Corporation
21.1*
—
List of Subsidiaries of Atlas
        Pipeline Holdings, L.P.
23.1
—
Consent of Grant Thornton
          LLP
23.2
—
Consent of Ernst & Young
        LLP
23.3*
—
Consent of Vinson & Elkins
        L.L.P. (contained in Exhibit 5.1)
23.4*
—
Consent of Vinson & Elkins
        L.L.P. (contained in Exhibit 8.1)
24.1*
—
Powers of Attorney (contained
        on page II-3)
* To be filed
    by amendment.
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Item 16.
Undertakings.
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.  In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1)
For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
(2)
For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
The registrant undertakes to send to each limited partner at least on an annual basis a detailed statement of any transactions with Atlas America or its affiliates, and of fees, commissions, compensation and other benefits paid, or accrued to Atlas America or its affiliates for the fiscal year completed, showing the amount paid or accrued to each recipient and the services performed.
The registrant undertakes to provide to the limited partners the financial statements required by Form 10-K for the first full fiscal year of operations of the partnership.
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SIGNATURES
Pursuant
    to the requirements of the Securities Act of 1933, as amended, the Registrant
    has duly caused this Registration Statement to be signed on its behalf by
    the undersigned, thereunto duly authorized, in the Commonwealth of Philadelphia,
    State of Pennsylvania, on January 12, 2006.
Atlas Pipeline Holdings,
    L.P.
By:
Atlas
        Pipeline Holdings GP, LLC,
its general partner
By:  /s/ Edward E. Cohen
Name:  Edward E. Cohen
Title:  Chairman of the Board and Chief Executive Officer
KNOWN
    ALL PERSONS BY THESE PRESENTS, that the persons whose signatures appear below,
    constitute and appoint Edward E. Cohen and Matthew A. Jones, and each of
    them, as their true and lawful attorneys-in-fact and agents, with full power
    of substitution and resubstitution, for them and in their names, places and
    steads, in any and all capacities, to sign the Registration Statement to
    be filed in connection with the public offering of common units representing
    limited partnership interests of Atlas Pipeline Holdings, L.P., and any and
    all amendments (including post-effective amendments) to the Registration
    Statement, and any subsequent registration statement filed pursuant to Rule
    462(b) under the Securities Act of 1933, as amended, and to file the same,
    with all exhibits thereto, and the other documents in connection therewith,
    with the Securities and Exchange Commission, granting unto said attorneys-in-fact
    and agents, and each of them, full power and authority to do and perform
    each and every act and thing requisite and necessary to be done in connection
    therewith, as fully to all intents and purposes as they might or could do
    in person, hereby ratifying and conforming all that said attorneys-in-fact
    and agents, or any of them, or their or his or her substitute or substitutes,
    may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
Signature
Title
Date
/s/ Edward E. Cohen
Chairman of the Board and Chief Executive Officer
1/12/2006
Edward E. Cohen
/s/ Jonathan Z. Cohen
Vice Chairman of the Board
1/12/2006
Jonathan Z. Cohen
/s/ Robert R. Firth
President
1/12/2006
Robert R. Firth
/s/ Matthew A. Jones
Chief Financial Officer
1/12/2006
Matthew A. Jones
/s/ Lisa Washington
Chief Legal Officer and Secretary
1/12/2006
Lisa Washington
/s/ Steven J. Doherty
Director
1/12/2006
Steven J. Doherty
/s/ William G. Karis
Director
1/12/2006
William G. Karis
/s/ Harvey G. Magarick
Director
1/12/2006
Harvey G. Magarick
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INDEX
Exhibit
Number
Description
1.1
*
—
Form of Underwriting
        Agreement
3.1*
—
Certificate of Limited Partnership
        of Atlas Pipeline Holdings, L.P.
3.2*
—
Amended and
        Restated Agreement of Limited Partnership of Atlas Pipeline Holdings,
        L.P.
3.3*
—
Certificate
    of Formation of Atlas Pipeline Holdings GP, LLC
3.4*
—
Amended
        and Restated Limited Liability Company Agreement of Atlas Pipeline
    Holdings GP, LLC
3.5*
—
Second Amended
        and Restated Agreement of Limited Partnership of Atlas Pipeline Partners,
        L.P.
3.6*
—
Form of Contribution Agreement
5.1*
—
Opinion of Vinson & Elkins
        L.L.P. as to the legality of the securities being registered
8.1*
—
Opinion of Vinson & Elkins
        L.L.P. relating to tax matters
10.1*
—
Credit
        Agreement among Atlas America, Inc., Resource America, Inc., Wachovia
        Bank, National Association, and other banks party thereto, dated March
    12, 2004
10.2*
—
First
        Amendment to March 12, 2004 Credit Agreement, dated July 10, 2004
10.3*
—
Revolving Credit and Term Loan
        Agreement, dated as of April 14, 2005 among Atlas Pipeline Partners,
        L.P., Wachovia Bank, National Association and the other parties thereto
10.4*
—
First Amendment to Revolving
        Credit and Term Loan Agreement, dated as of April 14, 2005, among Atlas
        Pipeline Partners, L.P., Wachovia Bank National Association and the other
        parties thereto
10.5*
—
Master Natural Gas Gathering
        Agreement among Atlas Pipeline Partners, L.P., Atlas Pipeline Operating
        Partnership, Atlas America, Inc., Resource Energy, Inc. and Viking Resources
        Corporation
10.6*
—
Omnibus Agreement among Atlas
        Pipeline Partners, L.P., Atlas Pipeline Operating Partnership, Atlas
        America, Inc., Resource Energy, Inc. and Viking Resources Corporation
21.1*
—
List of Subsidiaries of Atlas
        Pipeline Holdings, L.P.
23.1
—
Consent of Grant Thornton LLP
23.2
—
Consent of Ernst & Young
        LLP
23.3*
—
Consent of Vinson & Elkins
        L.L.P. (contained in Exhibit 5.1)
23.4*
—
Consent of Vinson & Elkins
        L.L.P. (contained in Exhibit 8.1)
24.1*
—
Powers of Attorney (contained
        on page II-3)
* To be filed by
        amendment.