10KSB40 1 a2043338z10ksb40.txt FORM 10-KSB405 U.S. Securities and Exchange Commission Washington, D.C. 20549 Form 10-KSB (Mark One) |X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2000 |_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from _______ to _______ Commission file number 333-82389 Atlas-Energy for the Nineties-Public #8 Ltd. (Name of small business issuer in its charter) Pennsylvania 25-1836294 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 311 Rouser Road, Moon Township, Pennsylvania 15108 (Address of principal executive offices) (Zip Code) Issuer's telephone number (412) 262-2830 Securities registered under Section 12(b) of the Exchange Act Title of each class Name of each exchange on which registered None None Securities registered under Section 12(g) of the Exchange Act None (Title of Class) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. |X| State issuer's revenues for its most recent fiscal year. $2,712,857 State the aggregate market value of the voting stock held by non-affiliates of the Registrant. Not Applicable. Transitional Small Business Disclosure Format (check one): Yes |_| No |X| 1 FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS Other than statements of historical facts, the statements included in this report and its exhibits address activities, events or developments that we and our managing general partner anticipate will or may occur in the future. These forward-looking statements include such things as investment objectives, business strategy, estimated future capital expenditures, competitive strengths and goals, references to future success, and other similar matters. These statements are based on certain assumptions and analyses made by us in light of our experience and perception of historical trends, current conditions and expected future developments. However, whether actual results will conform with these expectations is subject to a number of risks and uncertainties, many of which are beyond our control, including general economic market or business conditions, changes in laws or regulations, uncertainties concerning the price of oil and gas, and other risks. Thus, all of the forward-looking statements made in this report and its exhibits are qualified by these cautionary statements. There can be no assurance that actual results will conform with our expectations. PART I ITEM 1. DESCRIPTION OF BUSINESS ATLAS-ENERGY FOR THE NINETIES-PUBLIC #8 LTD. (THE "PARTNERSHIP") Business Development. We were formed as a Pennsylvania limited partnership on June 11, 1999, with Atlas Resources, Inc. ("Atlas") as our managing general partner, to drill natural gas development wells. We have no employees and rely on our managing general partner for management. See Item 9 "Directors, Executive Officers and Significant Employees, Compliance With Section 16(A) of the Exchange Act." We began our drilling activities on our initial closing date of December 3, 1999. Our final closing date was December 31, 1999. We received total cash subscriptions from investors of $11,088,975 which were paid to our managing general partner acting as operator and general drilling contractor under the drilling and operating agreement. Our managing general partner contributed cash and leases for a total capital contribution of $3,148,181. We drilled and completed a total of 54.66 net development wells to the Clinton/Medina geological formation in Pennsylvania and Ohio. These wells are currently producing natural gas, which is our only product, and will continue to do so until they are depleted at which time they will be plugged and abandoned. We do not anticipate that we will sell any of our wells. No other wells will be drilled and thus no additional funds will be required for drilling. See Item 2 "Properties" for information concerning our wells. Our ongoing operating and maintenance costs have been and are expected to be fulfilled through revenues from our gas sales. Our managing general partner receives a monthly well supervision fee of $275 for serving as operator of each of our producing wells under the drilling and operating agreement. The well 2 supervision fee covers all normal and regularly recurring operating expenses for the production, delivery and sale of gas, such as: o well tending, routine maintenance and adjustment; o reading meters, recording production, pumping, maintaining appropriate books and records; and o preparing reports to us and to government agencies. The well supervision fees, however, do not include costs and expenses related to the purchase of equipment, materials or third party services and brine disposal. If these costs are incurred we will pay at cost for third party services and materials and a reasonable charge for services performed directly by our managing general partner or its affiliates. Also, beginning three years after each of our wells has been placed into production our managing general partner as operator may retain $200 of our revenues per month to cover the estimated future plugging and abandonment costs of the well. See Item 6 "Management's Discussion and Analysis or Plan of Operation". Markets and Regulations. Our managing general partner is responsible for selling our natural gas production, and its policy is to treat all wells in a given geographic area equally. It determines a weighted average selling price by dividing the sales proceeds of all natural gas sold by it and its affiliates in a geographic area by the volume of natural gas sold. Each of our managing general partner's affiliates, including us, then receives this price for all natural gas sold by it in the area. Our natural gas is being sold as discussed in Item 2, "Properties - Delivery Commitments." The price of natural gas is not regulated, although governmental agencies regulate its production and transportation as discussed below. The price of natural gas is subject to the supply and demand for the natural gas, along with other factors such as the natural gas' BTU content and where the wells are located. Currently there appears to be at least a near-term imbalance between the supply of natural gas and consumer demand because there were significant increases in the price of gas during the end of 2000 and the early part of 2001. However, we cannot predict whether or for how long these conditions will last. Natural gas prices remain volatile and could decrease in the future. The Federal Energy Regulatory Commission ("FERC") regulates the interstate transportation of natural gas and has sought to promote greater competition in natural gas markets. For example, traditionally natural gas was sold by producers to interstate pipeline companies which then resold the natural gas to local distribution companies for resale to end-users. FERC changed this market structure by requiring interstate pipelines to transport gas for other natural gas suppliers or producers. FERC later issued Order 636 which requires interstate pipeline companies to, among other things, separate their natural gas sales services from their transportation services and provide an open access transportation service that is comparable in quality for all gas suppliers or producers. FERC Order 636 is designed to ensure that interstate pipeline companies do not have a competitive advantage over other natural gas sellers because they also provide transportation services. FERC has also enacted other regulatory policies and competitive initiatives that are intended to increase the 3 flexibility of interstate natural gas transportation such as requiring interstate pipeline companies to develop electronic bulletin boards to provide standardized access to information concerning pipeline capacity and prices and FERC Order 637 which removed price ceilings on short-term capacity release transactions. The marketing of our natural gas production is also affected by numerous other factors beyond our control and the effect of which we cannot accurately predict. These factors include, but are not limited to, the following: o the availability and capacity of pipeline and other transportation facilities; o competition from other energy sources such as coal, oil and electricity; o local and state regulations regarding production and transportation; o fluctuating seasonal supply and demand because of various factors such as home heating requirements in the winter months; o political instability in oil producing countries; and o the amount of domestic production and foreign imports of natural gas and oil. For example, increased imports of Canadian natural gas have occurred and are expected to continue because of the North American Free Trade Agreement, NAFTA, which eliminated trade and investment barriers in the United States, Canada and Mexico, and new pipeline projects from Canada to the United States that have been constructed or proposed to FERC. These imports could have an adverse effect on both the volume of natural gas sold from our wells and the price received for the natural gas. We believe, however, that there have been several developments which have increased the demand for natural gas. For example, the Clean Air Act Amendments of 1990 contain incentives for developing "clean alternative fuel," which includes natural gas and liquefied petroleum gas for "clean-fuel vehicles." Also, the accelerating deregulation of electricity transmission has increased the electricity industry's reliance on natural gas because of increased competition in the electricity industry and the enforcement of stringent environmental regulations. For example, to reduce urban smog the Environmental Protection Agency has sought to enforce environmental regulations which increase the cost of operating coal-fired power plants, which in December 2000 produced more than half of the United States' electricity. The Department of Energy has also denied financial incentives to utilities to build more nuclear power plants and large scale hydroelectric projects. Together, these policies help make natural gas the fuel of choice for electricity producers which have started moving away from dirtier-burning fuels, such as coal and oil. The electricity industry has started plans to bring new natural gas-fired power plants into service, some of which are not designed to allow for switching to other fuels. Natural gas was used to generate approximately 16% of the United States' electricity in December 2000, and this demand is expected to increase through the decade. In addition to FERC's regulation of the interstate transportation of natural gas, the state regulatory agency where a producing natural gas well is located provides a comprehensive statutory and regulatory scheme on oil 4 and gas operations such as ours including supervising our production activities and the transportation of natural gas sold in intrastate markets. Our oil and gas operations in Pennsylvania are regulated by the Department of Environmental Resources, Division of Oil and Gas, and our oil and gas operations in Ohio are regulated by the Ohio Department of Natural Resources, Division of Oil and Gas. Among other things, the regulations involve: o new well permit and well registration requirements, procedures and fees; o minimum well spacing requirements; o restrictions on well locations and underground gas storage; o certain well site restoration, groundwater protection and safety measures; o landowner notification requirements; o certain bonding or other security measures; o various reporting requirements; o well plugging standards and procedures; and o broad enforcement powers. We believe we have complied in all material respects with applicable state regulations and do not expect that these regulations will have a material adverse impact on our operations. Our producing activities also must comply with various federal, state and local laws covering the discharge of materials into the environment, or otherwise relating to the protection of the environment. Although this compliance may cause delays or increase our costs, we do not believe these costs will be substantial. We cannot predict, however, the ultimate costs of complying with present and future environmental laws and regulations because these laws and regulations are constantly being revised and we cannot obtain insurance to protect against many types of environmental claims. There are also a number of proposals from time to time that are considered in Congress and in the legislatures and agencies of various states that if enacted would significantly and adversely affect the oil and gas industry, including us. For example, a proposal limiting the disposal of wastewater from our wells would substantially increase our operating costs. However, we cannot predict what proposals, if any, will be enacted and their subsequent effect on our activities. ITEM 2.PROPERTIES Drilling Activity. We drilled and completed 54.66 net wells by April 19, 2000. All our wells were productive and we will not drill any more wells. The following table shows our drilling activity since our formation. All the wells drilled were development wells, which means a well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive. We did not drill any exploratory wells. 5
Development Wells ----------------------------------------------------- Productive (1) Dry (2) -------------------------- ------------------------ Period Ending Gross (3) Net (4) Gross (3) Net (4) ------------- ---------- ------- --------- ------- 2000........................... 58 54.66 0 0 1999........................... 0 0 0 0
---------- (1) A "productive well" generally means a well that is not a dry hole. (2) A "dry hole" generally means a well found to be incapable of producing either oil or gas in sufficient quantities to justify completion as an oil or gas well. The term "completion" refers to the installation of permanent equipment for the production of oil or gas, or, in the case of a dry hole, to the reporting of abandonment to the appropriate agency. (3) A "gross" well is a well in which we have a working interest. (4) A "net" well equals the actual working interest we own in one gross well divided by one hundred. For example, a 50% working interest in a well is one gross well, but a .50 net well. Summary of Productive Wells. The table below shows the number of our productive gross and net wells by state at December 31, 2000.
Gas Wells ---------------- Location Gross Net -------- ----- --- Pennsylvania ............................................ 57 54.16 Ohio .................................................... 1 .5 -- ----- Total .............................................. 58 54.66 == =====
Production. The following table shows our net production in barrels ("bbls") of crude oil and in thousands of cubic feet ("mcf") of natural gas and the costs and weighted average selling prices thereof, for the periods indicated.
Average Production Cost (Lifting Cost) per Production (1) Average Sales Price Unit (2) -------------------------- ------------------------- ------------------ Period Ending Oil (bbls) Gas (mcf) per bbl per mcf per mcf ------ ---------- --------- ------- ------- ------- 2000............ 0 697,821 N/A (3) $3.85 $.60 1999............ 0 0 0 0 0
---------- (1) The production shown in the table is determined by multiplying the gross production of properties in which we have an interest by the percentage of the leasehold interest we own less the royalty interests of others. All of the wells we own other than 18 are subject to a 12.5% landowner's royalty and have an 87.5% net revenue interest. Of the remaining wells, three wells have an 85.9375% net revenue interest, two wells have an 86.7187% net revenue interest, one well has an 87.2183% net revenue interest, and we receive 93% of net revenues from twelve joint venture wells. (2) Production costs represent oil and gas operating expenses as reflected in our financial statements plus depreciation of support equipment and facilities. (3) N/A means not applicable. Oil and Gas Reserves. All of our oil and gas reserves are located in the United States. Estimates of our net proved developed and undeveloped oil and gas reserves as of December 31, 2000, and the present value (discounted at 10%) of estimated future net revenue before income tax from those reserves are shown in the following table. This information is based upon the engineering report dated December 15, 2000. 6
As of December 31, 2000 Present Value of Net Proved Reserves (1) Future Net Revenues ----------------------------------- ------------------- Oil Gas Total (Bbls) (Mcf) (Mcfe) (in thousands) ------ ----- ------ -------------- Proved Developed (2) .......... 0 8,159,362 8,159,362 $ 13,803 Proved Undeveloped (3) ........ 0 0 0 0 - --------- --------- --------- Total .................. 0 8,159,362 8,159,362 $ 13,803 = ========= ========= =========
---------- (1) "Proved reserves" generally means the estimated quantities of crude oil, natural gas, and natural gas liquids which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions, i.e., prices and costs as of the date the estimate is made. Prices include consideration of changes in existing prices provided by contractual arrangements, but not escalations based on future conditions. Reservoirs are considered proved if economic producibility is supported by either actual production or conclusive formation test. The area of a reservoir considered proved includes: that portion delineated by drilling and defined by gas-oil and/or oil-water contacts, if any; and the immediately adjoining portions not yet drilled, but which can be reasonably judged as economically productive on the basis of available geological and engineering data. (2) "Proved developed oil and gas reserves" generally means reserves that can be expected to be recovered through existing wells with existing equipment and operating methods. (3) "Proved undeveloped reserves" generally means reserves that are expected to be recovered either from new wells on undrilled acreage or from existing wells where a relatively major expenditure is required for recompletion. Reserves on undrilled acreage are limited to those drilling units offsetting productive units that are reasonably certain of production when drilled. Estimated future net revenues represent estimated future gross revenues from the production of proved reserves, net of estimated production and future development costs, using prices and costs in effect as of December 31, 2000. These prices were held constant throughout the life of the properties except when different prices were fixed and determinable from applicable contracts. These price assumptions resulted in a weighted average price of $4.42 per mcf for gas over the life of the properties. The amounts shown also do not reflect non-property related costs, such as: o general and administrative expenses; and o depreciation, depletion and amortization. The present value of estimated future net revenues is calculated by discounting estimated future net revenues by 10% annually. We can provide no assurance of the following: o that all of the proved reserves will be produced and sold within the periods assumed; o that the assumed prices will actually be realized for the production; or o that existing contracts will be honored. The values expressed are estimates only, and may not reflect realizable values or fair market values of the oil and gas ultimately extracted and recovered. Also, values do not necessarily reflect the actual costs that would be incurred to acquire equivalent oil and gas reserves. Reserves estimates involve subjective judgment, cannot 7 be measured exactly, and must be reviewed periodically and adjusted to reflect additional information gained from: o reservoir performance; o new geological and geophysical data; and o economic changes. Since December 31, 2000, we do not believe there has been a favorable or adverse event which would cause a significant change in our estimated reserves. We have not filed any estimates (on a consolidated basis) of our oil and gas reserves with, nor were such estimates included in any reports to, any Federal or foreign governmental agency other than the SEC within the 12 months before the date of this filing. For additional information concerning oil and gas reserves and activities, see the notes to our Financial Statements. Acreage. The table below shows the acres of developed and undeveloped oil and gas acreage in which we have an interest by state at December 31, 2000.
Developed Acreage Undeveloped Acreage (3) ---------------------- ------------------------ Location Gross (1) Net (2) Gross (1) Net (2) -------- --------- ------- --------- ------- Pennsylvania................. 2,675 2,644 0 0 Ohio......................... 40 20 0 0 ----- ----- - - Total................ 2,715 2,664 0 0 ===== ===== = =
---------- (1) A "gross" acre is an acre in which we own a working interest. (2) A "net" acre equals the actual working interest owned in one gross acre divided by one hundred. For example, a 50% working interest in an acre is one gross acre, but a .50 net acre. (3) "Undeveloped acreage" is those lease acres on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of oil and gas regardless of whether or not the acreage contains proved reserves. Delivery Commitments. We are not required to provide any fixed and determinable quantities of gas under any agreement. However, all of our gas in the Warren County area of Pennsylvania, which represents approximately 25% of our total production, will be sold to Belden & Blake Corporation pursuant to a joint venture agreement with Belden & Blake. Also, our managing general partner, Resource Energy, Inc. and Atlas Energy Group, Inc. have a gas supply agreement with First Energy Services Corporation for a 10-year term which began on April 1, 1999. First Energy Services Corporation is the marketing affiliate of First Energy Corporation which is an electric utility listed on the New York Stock Exchange that provides natural gas to industry and retail consumers. Subject to certain exceptions, First Energy Services Corporation must buy all of the natural gas produced and delivered by our managing general partner and its affiliates, which includes us, at certain delivery points with the facilities of: East Ohio Gas Company, National Fuel Gas Distribution, and Peoples Natural Gas Company, which are local distribution companies, and National Fuel Gas Supply, 8 Columbia Gas Transmission Corporation, Tennessee Gas Pipeline Company, and Texas Eastern Transmission Company, which are interstate pipelines. Generally, all of our gas is being sold under the agreement with First Energy Services Corporation other than the gas being sold under our managing general partner's contract with Wheatland Tube which expires September, 2001 and the agreement with Belden & Blake. The First Energy Services Corporation agreement establishes a price formula for each of the delivery points for either the first one or two years of the agreement which is tied to market indexes. If, at the end of the applicable period, our managing general partner and First Energy Services Corporation cannot agree to a new price for any delivery point, then our managing general partner may arrange a sale of the gas for that delivery point to a third-party. If First Energy Services Corporation does not match this price, then the natural gas will be sold to the third-party. This process will be repeated at the end of each contract period which is usually one year and the contracts with National Fuel Resources, Inc. and NUI Energy Brokers, Inc. discussed below were entered into pursuant to this process. Since April 1, 2000, 75% of our natural gas production has been sold as follows: o approximately 40% of the 75% to National Fuel Resources, Inc., a marketing subsidiary of National Fuel Gas Company, which is a publicly traded company that distributes natural gas in southwest New York and northwest Pennsylvania through its regulated utility divisions; o approximately 17% of the 75% to NUI Energy Brokers, Inc., a marketing subsidiary of NUI Corporation, a publicly traded company that distributes natural gas to customers in six states through its regulated utility divisions; o approximately 10% to 15% of the 75% to Wheatland Tube; and o the remainder to First Energy Services Corporation as discussed above. The agreements with National Fuel Resources, Inc. and NUI Energy Brokers, Inc., however, expire on April 1, 2001, and our managing general partner and First Energy Services Corporation have been able to agree to new pricing arrangements for these delivery points under their agreement. Thus, for the next twelve months our managing general partner anticipates that approximately 25% of our natural gas will be sold to Belden & Blake, approximately 7.5% to 11.25% of our natural gas will be sold to Wheatland Tube until the Wheatland Tube agreement expires September, 2001, and the remainder of our natural gas will be sold to First Energy Services Corporation. Finally, the marketing of natural gas has been influenced by the availability of certain financial instruments which may be used as hedge instruments to guarantee a price or narrow the range of prices which will ultimately be paid for future deliveries of natural gas. Our managing general partner may enter into natural gas futures and options contracts, directly with NYMEX regulated and NYMEX based over-the-counter products or indirectly through the exercise of price triggers, floors, and ceilings with First Energy Services Corporation. The instruments employed by the managing general partner generally cover one-month periods for up to eighteen 9 months in the future. To assure that the financial instruments will be used solely for hedging price risks and not for speculative purposes, our managing general partner has established a committee to assure that all financial trading is done in compliance with hedging policies and procedures. Our managing general partner does not intend to contract for positions that it cannot offset with actual production. Although hedging provides our managing general partner's partnerships, including us, some protection against falling prices, these activities could also reduce the potential benefits of price increases, depending on the instrument. ITEM 3. LEGAL PROCEEDINGS None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS None. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information. There is no established public trading market for our units and we do not anticipate a market will develop. Our units may be transferred only in accordance with the provisions of Article VI of our partnership agreement which require that: o our managing general partner consent; o the transfer not result in materially adverse tax consequences to us; and o the transfer not violate federal or state securities laws. An assignee of a unit may become a substituted partner only on meeting the following conditions: o the assignor of the unit gives the assignee the right; o our managing general partner consents to the substitution; o the assignee pays to us all costs and expenses incurred in connection with the substitution; and o the assignee of the unit executes and delivers the instruments which our managing general partner requires to effect the substitution and to confirm his or her agreement to be bound by the terms of our partnership agreement. A substitute partner is entitled to all of the rights of full ownership of the assigned units, including the right to vote. Holders. As of December 31, 2000, we had 380 interest holders. Dividends. Our managing general partner reviews our accounts quarterly to determine whether cash distributions are appropriate and the amount to be distributed, if any. We distribute those funds to you and the 10 other participants which our managing general partner determines are not necessary for us to retain. We will not advance or borrow for purposes of distributions if the amount of the distributions would exceed our accrued and received revenues for the previous four quarters, less paid and accrued operating costs with respect to the revenues. The determination of the revenues and costs will be made in accordance with generally accepted accounting principles, consistently applied, and cash distributions to our managing general partner may only be made in conjunction with distributions to you and the other participants. During the calendar year ending December 31, 2000, we distributed the following: o $1,100,738 to you and the other participants; and o $341,406 to our managing general partner. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION Management's Discussion and Analysis should be read in conjunction with our Financial Statements and the notes to our Financial Statements. Results of Operations Twelve Months Ended December 31, 2000. Net earnings for the twelve months ended December 31, 2000 was $1,248,479. The Partnership commenced production in January, 2000. Natural gas sales revenue for the twelve months ended December 31, 2000, amounted to $2,688,468, based on natural gas production of 697,821 Mcf. The average sales price for gas production during this period was $3.85 per Mcf. Our revenues from our natural gas sales will be affected by changes in natural gas prices which are driven by general market conditions as discussed in Item 1 "Description of Business Atlas-Energy for the Nineties - Public #8 Ltd. (the "Partnership") - Markets and Regulations". Expenses for the 2000 fiscal year amounted to $1,464,378 consisting primarily of depletion and depreciation. Financial Condition Liquidity. Cash provided by operating activities during the twelve months ended December 31, 2000, amounted to $1,461,934 and results primarily from sales of natural gas produced. The Partnership's working capital increased from $(15,003) at December 31, 1999, to $781,972 at December 31, 2000. The increase is attributable to the commencement of natural gas production for new wells turned on-line during the year, which resulted in higher receivables in connection with sales of gas produced. Capital Resources. There were no new material commitments for us to make capital expenditures during the period and we do not expect any in the foreseeable future. Any additional funds which may be required will be obtained from production revenues or borrowings from our managing general partner or its affiliates, which are not contractually committed to make a loan. The amount that may be borrowed may not at any tine exceed 5% of our total subscriptions, and no borrowings will be obtained from third parties. 11 ITEM 7. FINANCIAL STATEMENTS Our Financial Statements for the last fiscal year, together with the opinion of the accountants thereon, begin following page 18 of this report. ITEM 8. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES, COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Responsibilities of Atlas. We have no employees and rely on our managing general partner, which also serves as driller-operator of the wells, for management. Our managing general partner has complete and exclusive discretion and control over our operations and activities and makes all of our decisions affecting the wells which we have drilled. Our managing general partner provides continuing review and analysis of all wells and monitors all expenditures and commitments made on our behalf. In addition, our managing general partner performs administrative services relating to our funding and operation, participant reporting, financial budgeting and record keeping. Because we have no equity securities registered pursuant to Section 12 of the Exchange Act, there is no required compliance with Section 16(A) of the Exchange Act. Business of Atlas. Our managing general partner was incorporated in 1979 and its affiliate, Atlas Energy Group, Inc., an Ohio corporation which was the first of the Atlas group of companies, was incorporated in 1973. As of December 31, 2000, our managing general partner and its affiliates operated approximately 3,500 natural gas and oil wells located in Ohio, Pennsylvania and New York. In September, 1998, Atlas Group, the former parent company of our managing general partner, merged into Atlas America, Inc., a newly formed wholly-owned subsidiary of Resource America, Inc. Resource America is a publicly-traded company principally engaged in energy, energy finance and real estate finance. Atlas America has and is continuing the existing business of Atlas Group and is headquartered at 311 Rouser Road, Moon Township, Pennsylvania 15108 which is also the managing general partner's primary office. Our managing general partner and its affiliates under Atlas America employ a total of approximately one hundred fifty-seven persons, consisting of four geologists, five landmen, three engineers, eighty-seven drilling/production personnel and thirty-seven accounting/information technology and gas marketing personnel. The balance of the personnel are administrative. 12 ORGANIZATIONAL DIAGRAM (1)(2) This organizational diagram does not include all of the subsidiaries of Resource America.
----------------------------------------------------------- Resource America, Inc. ----------------------------------------------------------- | ----------------------------------------------------------- Atlas America, Inc. ----------------------------------------------------------- | ----------------------------------------------------------- AIC, Inc. ----------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------- | | | | | | ------------------- -------------------- --------------------- ------------------- ------------------- ------------------ Atlas Resources, Atlas Energy Transatco, Inc., Atlas Information Anthem Securities Atlas Energy Inc., managing Corporation, which owns 50% of Management, Inc., registered Group, Inc., general partner, managing general Topico, operates L.L.C., markets broker-dealer driller and driller and partner of pipeline in Ohio information and and dealer- operator in Ohio operator in exploratory technology manager Pennsylvania drilling services partnerships and driller and operator ------------------- --------------------- --------------------- ------------------- ------------------- ------------------ | | | | ------------------- ----------------- ARD AED Investments, Investments, Inc. Inc. ------------------- -----------------
---------- (1) Resource Energy, Viking Resources, and Atlas Noble Corporation, which are subsidiaries of Resource America, are also engaged in the oil and gas business. Resource Energy has been an energy subsidiary of Resource America since 1973. Resource America acquired Viking Resources in August 1999, and Atlas Noble was formed in October 2000 after Resource America acquired all of the assets of Kingston Oil Corporation. In the near term Resource Energy, Viking Resources, and Atlas Noble will retain their separate corporate existence, however, Atlas America will manage their assets and employees including sharing common employees. Also, many of the officers and directors of our managing general partner serve as officers and directors of those entities. (2) Atlas Pipeline Partners, L.P. (and Atlas Pipeline Operating Partnership) is a master limited partnership formed by a subsidiary of Atlas America as managing general partner using Atlas America and Viking Resources personnel who act as its officers and employees. It has acquired the natural gas gathering system and related facilities from Atlas America, Resource Energy, and Viking Resources. The gathering system consists of approximately 1,000 miles of intrastate pipelines located in Pennsylvania, Ohio, and New York. It is anticipated that this master limited partnership will gather and deliver the majority of the natural gas produced by each partnership managed by our managing general partner and its affiliates, including us, to industrial end-users in the area, local distribution companies, or interstate pipeline systems. Officers, Directors and Key Personnel. The officers and directors of our managing general partner will serve until their successors are elected. The officers, directors and key personnel of our managing general partner are as follows:
NAME AGE POSITION OR OFFICE ---- --- ------------------ James R. O'Mara 57 President, Chief Executive Officer and a Director Frank P. Carolas 41 Executive Vice President of Land and Geology and a Director Jeffrey C. Simmons 42 Executive Vice President of Operations and a Director Michael L. Staines 51 Senior Vice President, Secretary and a Director Nancy J. McGurk 45 Vice President, Chief Financial Officer and Chief Accounting Officer Jack L. Hollander 45 Vice President of Direct Participation Programs William R. Seiler 46 Controller and Assistant Secretary
James R. O'Mara. President, Chief Executive Officer and a Director. Mr. O'Mara also serves as Vice Chairman and a Director of Atlas America. Mr. O'Mara joined Atlas Energy in 1975. 13 Frank P. Carolas. Executive Vice President - Land and Geology and a Director. Mr. Carolas also serves as Executive Vice President - Land and Geology of Atlas America and Viking Resources. Mr. Carolas is a certified petroleum geologist and has been with Atlas since 1981. Jeffrey C. Simmons. Executive Vice President - Operations and a Director. Mr. Simmons also serves as Executive Vice President - Operations of Atlas America and Viking Resources. Mr. Simmons joined Resource America in 1986 as senior petroleum engineer. Michael L. Staines. Senior Vice President, Secretary and a Director. Mr. Staines is also Executive Vice President, Secretary and Managing Director, Business Development of Atlas America and Atlas Pipeline Partners, and a Director of Atlas America since 1998, Senior Vice President and a Director of Resource America since 1998 and 1989, respectively, Secretary of Resource America from 1989 to 1998, and President, Chief Executive Officer and a Director of Resource Energy since 1997. Nancy J. McGurk. Vice President, Chief Financial Officer and Chief Accounting Officer. Ms. McGurk also serves as Vice President, Chief Financial Officer and Chief Accounting Officer of Atlas America and has been Vice President of Resource America since 1992. Before that she had served as Treasurer and Chief Accounting Officer of Resource America since 1989. Jack L. Hollander. Vice President - Direct Participation Programs. Mr. Hollander also serves as Vice President - Direct Participation Programs of Atlas America. Mr. Hollander joined our managing general partner in January, 2001. Before that Mr. Hollander was in the private practice of law with a concentration in tax matters, real estate transactions and consulted with and assisted technology companies in raising capital. William R. Seiler. Controller and Assistant Secretary. Mr. Seiler also serves as Vice President and Treasurer of Atlas America. Mr. Seiler had over 25 years of accounting, financial reporting, financial analysis, and mergers and acquisitions experience in the oil and gas industry with Consolidated Natural Gas Company before joining Atlas America and our managing general partner in July of 1999. Key Personnel. John S. Coffey. Director of Anthem Securities, Inc. Mr. Coffey joined Anthem Securities, Inc. in May 2000. He was previously associated with Financial Investment Analysts, Inc. from November 1984 to May 2000, as a Financial Planner, Principal and Registered Investment Advisor. ITEM 10. EXECUTIVE COMPENSATION We have no employees and rely on the employees of our managing general partner and its affiliates for services. Thus, we did not directly pay any compensation to the employees of our managing general partner for 14 the last fiscal year. See Item 12, "Certain Relationships and Related Transactions," below for compensation which we paid to our managing general partner. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of December 31, 2000, we had issued and outstanding 1,110.9811 units. No officer or director of our managing general partner owns any units. Also, no partner beneficially owns more than 10% of our outstanding units. Resource America owns 100% of the common stock of Atlas America, which owns 100% of the common stock of AIC, Inc., which owns 100% of the common stock of our managing general partner. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Oil and Gas Revenues. Our managing general partner is allocated 29% of our oil and gas revenues in return for having paid organization and offering costs equal to 15% of our subscriptions, 43.75% of tangible costs and contributing all leases for a total capital contribution of $3,148,181. During the calendar year ending December 31, 2000, our managing general partner received $657,920 from our net production revenues. Leases. Our managing general partner contributed to us (at the lower of fair market value or its cost of the prospects) 58 undeveloped prospects to drill approximately 54.66 net wells. Our managing general partner received a credit in the amount of $198,000 for these prospects. During 2000, our managing general partner did not enter into any further lease transactions with us and none are anticipated. Administrative Costs. Our managing general partner and its affiliates receive an unaccountable, fixed payment reimbursement for their administrative costs of $75 per well per month, which is proportionately reduced if we acquired less than 100% of the working interest in a well. During the calendar year ending December 31, 2000, our managing general partner received $35,098 for its administrative costs. Direct Costs. Our managing general partner and its affiliates are reimbursed for all direct costs expended on our behalf. During the calendar year ending December 31, 2000, our managing general partner received $113,203 as reimbursement for direct costs. Drilling Contracts. On the initial closing date as amended on the final closing date, we entered into a drilling contract with our managing general partner to drill and complete 54.66 net wells. We paid our managing general partner for drilling and completing our wells an amount equal to $37.81 per foot to the depth of the well at its deepest penetration, proportionately reduced if we acquired less than 100% of the working interest in a well. The total amount received by our managing general partner was $11,088,975 for drilling and completing the wells. During 2000, we did not enter into any further drilling transactions and none are anticipated. 15 Per Well Charges. Our managing general partner, as operator, is reimbursed at actual cost for all direct expenses incurred on our behalf and receives well supervision fees for operating and maintaining the wells during producing operations in the amount of $275 per well per month subject to an annual adjustment for inflation. The well supervision fees are proportionately reduced to the extent we acquired less than 100% of the working interest in a well. During the calendar year ending December 31, 2000, our managing general partner received $104,208 for well supervision fees. Transportation and Marketing Fees. We pay a combined transportation and marketing charge at a competitive rate for each mcf transported to Atlas Pipeline Partners, L.P. for natural gas which we produce. See footnote 2 to the Organizational Diagram for a discussion of Atlas Pipeline Partners, L.P. For the year ended December 31, 2000, we paid $202,368. Other Compensation. For the calendar year ending December 31, 2000, our managing general partner did not advance any funds nor did it provide any equipment, supplies or other services. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K We have not filed any reports on Form 8-K during the last quarter of the period covered by this report. For certain exhibits see exhibit index on page 18. 16 SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Atlas-Energy for the Nineties-Public #8 Ltd. By: (Signature and Title): Atlas Resources, Inc., Managing General Partner By (Signature and Title): /s/ James R. O'Mara ---------------------------------------- James R. O'Mara, President, Chief Executive Officer and a Director Date: March 30, 2001 In accordance with the Exchange Act, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title): /s/ James R. O'Mara ---------------------------------------- James R. O'Mara, President, Chief Executive Officer and a Director Date: March 30, 2001 By (Signature and Title): /s/ Frank P. Carolas ---------------------------------------- Frank P. Carolas, Executive Vice President of Land and Geology and a Director Date: March 30, 2001 By (Signature and Title): /s/ Jeffrey C. Simmons ---------------------------------------- Jeffrey C. Simmons, Executive Vice President of Operations and a Director Date: March 30, 2001 Supplemental information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Exchange Act by Non-reporting Issuers An annual report will be furnished to security holders subsequent to the filing of this report. 17 EXHIBIT INDEX
Description Location ----------- -------- 4(a) Certificate of Limited Partnership for Previously filed in the Atlas-Energy for the Nineties-Public #8 Ltd. Form 10-KSB for the period ending December 31, 1999 4(b) Amended and Restated Certificate and Agreement Previously filed in the of Limited Partnership for Atlas-Energy for the Form 10-KSB for the Nineties-Public #8 Ltd. period ending December 31, 1999 10(a) Drilling and Operating Agreement with exhibits Previously filed in the Form 10-KSB for the period ending December 31, 1999
18 AUDITED FINANCIAL STATEMENTS ATLAS-ENERGY FOR THE NINETIES-PUBLIC #8 LTD. A PENNSYLVANIA LIMITED PARTNERSHIP JANUARY 1, 2000 TO DECEMBER 31, 2000 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Partners ATLAS-ENERGY FOR THE NINETIES - PUBLIC #8 LTD. A PENNSYLVANIA LIMITED PARTNERSHIP We have audited the accompanying balance sheets of Atlas-Energy for The Nineties - Public #8 Ltd., A Pennsylvania Limited Partnership, as of December 31, 2000 and 1999, and the related statements of operations, changes in partners' capital accounts and cash flows for the year ending December 31, 2000 and the period June 18, 1999 (date of formation) to December 31, 1999. 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 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Atlas-Energy for The Nineties - Public #8 Ltd. as of December 31, 2000 and 1999 and the results of its operations, changes in partners' capital accounts and cash flows for the year ending December 31, 2000 and the period June 18, 1999 (date of formation) to December 31 1999, in conformity with accounting principles generally accepted in the United States. /s/ Grant Thornton LLP Cleveland, Ohio March 1, 2001 Atlas-Energy for the Nineties - Public #8 Ltd. (A Pennsylvania Limited Partnership) BALANCE SHEETS December 31 ASSETS
2000 1999 ------------ ------------ Cash $ 19,790 $ - Accounts receivable - affiliate 785,058 - Oil and gas wells and leases (Successful Efforts) 12,573,810 12,573,810 Less accumulated depletion and depreciation (990,640) - ------------ ------------ 11,583,170 12,573,810 ------------ ------------ $ 12,388,018 $ 12,573,810 ============ ============ LIABILITIES AND PARTNERS' CAPITAL Accounts payable - affiliate $ 11,768 $ - Accrued liabilities 11,108 - Interest payable - 15,003 Partners' capital: Managing General Partner 1,583,850 1,469,832 Limited Partners (1,110.98 units) 10,781,292 11,088,975 ------------ ------------ 12,365,142 12,558,807 ------------ ------------ $ 12,388,018 $ 12,573,810 ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. Atlas-Energy for the Nineties - Public #8 Ltd. (A Pennsylvania Limited Partnership) STATEMENTS OF OPERATIONS For the years ended December 31
June 18, 1999 (date of formation) to December 31, 2000 1999 ------------ ------------------- Revenues Natural gas sales $ 2,688,468 $ - Interest income 24,389 - ------------ ------------ 2,712,857 - Expenses Well operating and transportation expense 315,571 - Well supervision fees - affiliate 104,208 - Depletion and depreciation of oil and gas wells and leases 990,640 - Professional and other expenses 18,861 - General and administrative fees - affiliate 35,098 - Organization costs - 20,000 Interest expense - 15,003 ------------ ------------ Total expenses 1,464,378 35,003 ------------ ------------ NET EARNINGS (LOSS) $ 1,248,479 $ (35,003) ============ ============ ALLOCATION OF NET EARNINGS (LOSS): Managing General Partner $ 455,424 $ (35,003) ============ ============ Limited Partners $ 793,055 $ - ============ ============ Net earnings per limited partnership interest $ 713.83 $ 0.00 ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. Atlas-Energy for the Nineties - Public #8 Ltd. (A Pennsylvania Limited Partnership) STATEMENT OF OPERATIONS AND CHANGES IN PARTNERS' CAPITAL ACCOUNTS For the periods ended December 31, 2000 and 1999
Managing General Limited Partner Partners Total ------------ ------------ ------------ BALANCE AT JUNE 18, 1999 $ - $ - $ - Partners' Capital Contributions Cash - 11,088,975 11,088,975 Syndication costs 1,643,346 - 1,643,346 Organization costs 20,000 - 20,000 Tangible costs 1,286,835 - 1,286,835 Leasehold costs 198,000 - 198,000 ------------ ------------ ------------ 3,148,181 11,088,975 14,237,156 Syndication costs (1,643,346) - (1,643,346) Participation in revenue and expenses: Organization costs (20,000) - (20,000) Interest expense (15,003) - (15,003) ------------ ------------ ------------ Net loss (35,003) - (35,003) ------------ ------------ ------------ BALANCE AT DECEMBER 31, 1999 1,469,832 11,088,975 12,558,807 Participation in revenue and expenses: Net production revenues 657,920 1,610,769 2,268,689 Subordination of Managing General Partner's income (76,815) 76,815 - Interest income 7,073 17,316 24,389 Depletion and depreciation (117,106) (873,534) (990,640) General and administrative (15,648) (38,311) (53,959) ------------ ------------ ------------ NET EARNINGS 455,424 793,055 1,248,479 Distributions (341,406) (1,100,738) (1,442,144) ------------ ------------ ------------ BALANCE AT DECEMBER 31, 2000 $ 1,583,850 $ 10,781,292 $ 12,365,142 ============ ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS FINANCIAL STATEMENT. Atlas-Energy for the Nineties - Public #8 Ltd. (A Pennsylvania Limited Partnership) STATEMENTS OF CASH FLOWS For the years ended December 31
June 18, 1999 (date of formation) to December 31, 2000 1999 ------------ ------------------- Cash flows from operating activities: Net earnings (loss) $ 1,248,479 $ (35,003) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Organization costs - 20,000 Depletion and depreciation 990,640 - Increase in accounts receivable (785,058) - Increase in accounts payable and accrued liabilities 22,876 - (Decrease) increase in interest payable (15,003) 15,003 ------------ ------------ Net cash provided by operating activities 1,461,934 - Cash flows from investing activities: Payments for oil and gas well drilling contracts - (11,088,975) ------------ ------------ Net cash used in investing activities - (11,088,975) Cash flows from financing activities: Partners' capital contributions - 11,088,975 Capital distributions (1,442,144) - ------------ ------------ Net cash (used in) provided by operating activities (1,442,144) 11,088,975 ------------ ------------ NET INCREASE IN CASH 19,790 - Cash at beginning of year - - ------------ ------------ Cash at end of year $ 19,790 $ - ============ ============ SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES: Assets contributed by Managing General Partner $ - $ 3,148,181 ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS. Atlas-Energy for the Nineties - Public #8 Ltd. (A Pennsylvania Limited Partnership) NOTES TO FINANCIAL STATEMENTS December 31, 2000 and 1999 1. NATURE OF OPERATIONS Atlas-Energy for the Nineties - Public #8 Ltd. (the "Partnership") is a Pennsylvania Limited Partnership which includes Atlas Resources, Inc. ("Atlas") of Pittsburgh, Pennsylvania, as Managing General Partner and Operator, and 380 Limited Partners. The Partnership was formed on June 18, 1999 to drill and operate gas wells located primarily in Mercer County, Pennsylvania. At December 31, 2000, the Partnership had various working interests in 58 wells. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of significant accounting policies consistently applied in the preparation of the accompanying financial statements follows: BASIS OF ACCOUNTING The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. OIL AND GAS WELLS AND LEASES The Partnership uses the successful efforts method of accounting for oil and gas producing activities. Costs to acquire mineral interests in oil and gas properties and to drill and equip wells are capitalized. Depreciation and depletion is computed on a field-by-field basis by the unit-of-production method based on periodic estimates of oil and gas reserves. Undeveloped leaseholds and proved properties are assessed periodically or whenever events or circumstances indicate that the carrying amount of these assets may not be recoverable. Proved properties are assessed based on estimates of future cash flows. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Atlas-Energy for the Nineties - Public #8 Ltd. (A Pennsylvania Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2000 and 1999 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) ORGANIZATION COSTS In 1998, the AICPA issued Statement of Position 98-5 ("SOP 98-5"), Reporting on the Costs of Start-Up Activities. This statement requires costs of start-up activities and organization costs, as defined, to be expensed as incurred. The Partnership adopted the provisions of SOP 98-5 effective January 1, 1999 and as a result organization costs were expensed as incurred. NEW ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133 (SFAS 133), ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. SFAS 133 will require the Partnership to recognize all derivatives as either assets or liabilities in its balance sheet and to measure those instruments at fair value. The Partnership is required to adopt SFAS 133 effective January 1, 2001. The effect of adopting SFAS 133 on the Partnership's financial position, results of operations and cash flows will be dependent on the extent of future hedging activities. The Emerging Issues Task Force (EITF) reached a consensus, effective in the fourth quarter 2000, on EITF Issue 00-10, ACCOUNTING FOR SHIPPING AND HANDLING FEES AND COSTS. The consensus states that amounts billed for transportation and other shipping and handling fees should be classified as revenues and that the costs should be classified as an operating expense and not netted against natural gas revenues. The Partnership adopted this consensus in the fourth quarter and reclassified prior year's costs to conform with this presentation. The change had no material impact on the Company's financial condition, results of operations or cash flows. 3. FEDERAL INCOME TAXES The Partnership is not treated as a taxable entity for federal income tax purposes. Any item of income, gain, loss, deduction or credit flows through to the partners as though each partner had incurred such item directly. As a result, each partner must take into account his pro rata share of all items of partnership income and deductions in computing his federal income tax liability. 4. PARTICIPATION IN REVENUES AND COSTS Atlas and the other partners generally participate in revenues and costs in the following manner:
OTHER ATLAS PARTNERS ---------------------- Organization and offering costs 100% 0% Lease costs 100% 0% Revenues 29% 71% Direct operating costs 29% 71% Intangible drilling costs 0% 100% Tangible costs 43.75% 56.25% Tax deductions: Intangible drilling and development costs 0% 100% Depreciation 43.75% 56.25% Depletion allowances 29% 71%
Atlas-Energy for the Nineties - Public #8 Ltd. (A Pennsylvania Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2000 and 1999 5. TRANSACTIONS WITH ATLAS AND ITS AFFILIATES The Partnership has entered into the following significant transactions with Atlas and its affiliates as provided under the Partnership agreement: Drilling contracts to drill and complete wells for the Partnership at a cost of $37.81 per foot on completed wells. Drilling costs paid in 1999, amounted to $11,088,975. No drilling costs were incurred in 2000. Administrative costs payable to Atlas at $75 per well per month. Administrative costs incurred in 2000 were $35,098. No administrative costs were incurred in 1999. Monthly supervision fees payable to Atlas. Well supervision fees incurred in 2000 were $104,208. No well supervision fees were incurred in 1999. Reimbursement to Atlas of gas transportation and marketing charges. 6. PURCHASE COMMITMENT Subject to certain conditions, investor partners may present their interests beginning in 2004 for purchase by Atlas. Atlas is not obligated to purchase more than 5% of the units in any calendar year to date, no such presentments have been made. 7. SUBORDINATION OF MANAGING GENERAL PARTNER'S REVENUE SHARE Under the terms of the partnership agreement, Atlas may be required to subordinate a part of its partnership revenues in an amount up to 11.6% of production revenues of the Partnership, net of related operating costs, administrative costs and well supervision fees to the receipt by participants of cash distributions from the Partnership equal to at least 10% of their agreed subscriptions of approximately $11,000,000, determined on a cumulative basis, in each of the first five years of Partnership operations, commencing with the first distribution of revenues to the participants. During the subordination period, Atlas can be reimbursed for any subordination advances to the extent distributions exceed the 10% return. In 2000, Atlas subordinated $76,815 of its revenues to the other partners. Atlas-Energy for the Nineties - Public #8 Ltd. (A Pennsylvania Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2000 and 1999 8. INDEMNIFICATION In order to limit the potential liability of the investor general partners, Atlas has agreed to indemnify each investor general partner from any liability incurred which exceeds such partner's share of Partnership assets. 9. HEDGING ACTIVITIES Atlas enters into natural gas futures and option contracts to hedge its exposure to changes in natural gas prices. At any point in time, such contracts may include regulated New York Mercantile Exchange ("NYMEX") futures and options contracts and non-regulated over-the-counter futures contracts with qualified counterparties. NYMEX contracts are generally settled with offsetting positions, but may be settled by the delivery of natural gas. Although hedging provides Atlas and its affiliates, including the Partnership, some protection against falling prices, these activities could also reduce the potential benefits of price increases, depending upon the instrument. At December 31, 2000, Atlas had natural gas futures and options contracts covering approximately 34,000 dekatherms ("Dth") of the Partnership's gas production maturing February 2001 through August 2001 at a combined average price of $5.24 per Dth. As these contracts qualify and have been designated as hedges, any gains or losses resulting from market price changes are deferred and recognized as a component of sales revenues in the month the gas is sold. The Partnership recognized a loss of approximately $290,000 on settled contracts covering natural gas production for the year ended December 31, 2000. 10. NATURAL GAS AND OIL PRODUCING ACTIVITIES (UNAUDITED) The supplementary information summarized below presents the results of natural gas and oil activities in accordance with SFAS No. 69, "Disclosures About Oil and Gas Producing Activities". No consideration has been given in the following information to the income tax effect of the activities as the Partnership is not treated as a taxable entity for income tax purposes. (1) CAPITALIZED COSTS The following table presents the capitalized costs related to natural gas and oil product activities:
2000 1999 ------------ ------------ Capitalized costs at December 31: Proved properties $ 12,573,810 $ 12,573,810 Accumulated depreciation and depletion (990,640) - ------------ ------------ NET CAPITALIZED COSTS $ 11,583,170 $ 12,573,810 ============ ============
Atlas-Energy for the Nineties - Public #8 Ltd. (A Pennsylvania Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2000 and 1999 10. NATURAL GAS AND OIL PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED) (2) RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES The following table presents the results of operations related to natural gas and oil production for the year ended December 31, 2000: Natural gas sales $ 2,688,468 Production costs (419,779) Depreciation and depletion (990,640) ----------- Results of operations from producing activities $ 1,278,049 ===========
Depreciation and depletion of natural gas and oil properties are expensed at unit cost rates calculated annually based on the estimated volume of recoverable gas and the related costs. (3) RESERVE INFORMATION The information presented below represents estimates of proved natural gas and oil reserves. Reserves are estimated in accordance with guidelines established by the Securities and Exchange Commission and the Financial Accounting Standards Board which require that reserve estimates be prepared under existing economic and operating conditions with no provision for price and cost escalation except by contractual arrangements. Proved reserves are estimated quantities of oil and natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs. Proved developed reserves and are those which are expected to be recovered through existing wells with existing equipment and operating methods. All reserves are proved developed reserves and are located in the Appalachian Basin area. There are numerous uncertainties inherent in estimating quantities of proved reserves and in projecting future net revenues and the timing of development expenditures. The reserve data presented represents estimates only and should not be construed as being exact. In addition, the standardized measures of discounted future net cash flows may not represent the fair market value of the Company's oil and gas reserves or the present value of future cash flows of equivalent reserves, due to anticipated future changes in oil and gas prices and in production and development costs and other factors for which effects have not been provided. Atlas-Energy for the Nineties - Public #8 Ltd. (A Pennsylvania Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2000 and 1999 10. NATURAL GAS AND OIL PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED) (3) RESULTS OF OPERATIONS FOR OIL AND GAS PRODUCING ACTIVITIES - CONT'D
2000 ----------- NATURAL GAS (MCF) ----------- Proved developed reserves: Beginning of period - Production (697,821) Current additions 8,857,183 ----------- END OF PERIOD 8,159,362 ===========
(4) STANDARD MEASURE OF DISCOUNTED FUTURE CASH FLOWS The standardized measure of discounted future net cash flows is information provided for the financial statement user as a common base for comparing oil and gas reserves of enterprises in the industry. The following schedule presents the standardized measure of estimated discounted future net cash flows from the Company's proved reserves. Estimated future cash flows are determined by using the weighted average price received for the month of December 2000 adjusted only for fixed and determinable increases in natural gas prices provided by contractual agreements. The standardized measure of future net cash flows was prepared using the prevailing economic conditions existing at December 31, 2000 and such conditions continually change. Accordingly, such information should not serve as a basis in making any judgment on the potential value of recoverable reserves or in estimating future results of operations.
2000 ------------ Future cash inflows $ 36,071,336 Future production costs (10,323,735) ------------ FUTURE NET CASH FLOW 25,747,601 10% annual discount for estimated timing of cash flows (11,944,127) ------------ Standardized measure of discounted future net cash flows $ 13,803,474 ============
Atlas-Energy for the Nineties - Public #8 Ltd. (A Pennsylvania Limited Partnership) NOTES TO FINANCIAL STATEMENTS - CONTINUED December 31, 2000 and 1999 10. NATURAL GAS AND OIL PRODUCING ACTIVITIES (UNAUDITED) (CONTINUED) Summary of changes in the standardized measure of discounted future net cash flows:
2000 ------------ BALANCE, BEGINNING OF PERIOD $ - Sales of gas and oil produced - net of related costs (2,268,689) Discoveries and extensions 16,072,163 ------------ BALANCE, END OF PERIOD $ 13,803,474 ============