United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2014
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 000-50700
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP
(Name of small business issuer in its charter)
Delaware |
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54-2113989 |
(State or other jurisdiction of |
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(I.R.S. Employer |
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Park Place Corporate Center One |
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15275 |
(Address of principal executive offices) |
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(zip code) |
Issuer’s telephone number, including area code: (412)-489-0006
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 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 þ No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “non accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):
Large accelerated filer |
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¨ |
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Accelerated filer |
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¨ |
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Non-accelerated filer |
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¨ |
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Smaller reporting company |
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þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP
(A Delaware Limited Partnership)
INDEX TO QUARTERLY REPORT
ON FORM 10-Q
2
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP
(Unaudited)
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March 31, |
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December 31, |
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ASSETS |
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|
|
|
|
|
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Current assets: |
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|
|
|
|
|
|
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Cash and cash equivalents |
|
$ |
42,500 |
|
|
$ |
5,600 |
|
Accounts receivable trade–affiliate |
|
|
239,500 |
|
|
|
214,100 |
|
Accounts receivable monetized gains-affiliate |
|
|
6,900 |
|
|
|
11,200 |
|
Current portion of derivative assets |
|
|
1,000 |
|
|
|
1,400 |
|
Total current assets |
|
|
289,900 |
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|
|
232,300 |
|
Oil and gas properties, net |
|
|
3,937,100 |
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|
|
3,969,800 |
|
Long-term derivative assets |
|
|
6,000 |
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|
|
7,000 |
|
|
|
$ |
4,233,000 |
|
|
$ |
4,209,100 |
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LIABILITIES AND PARTNERS’ CAPITAL |
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|
|
|
|
|
|
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Current liabilities: |
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|
|
|
|
|
|
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Accrued liabilities |
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$ |
18,900 |
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$ |
8,800 |
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Total current liabilities |
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18,900 |
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|
|
8,800 |
|
Asset retirement obligation |
|
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3,402,900 |
|
|
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3,353,100 |
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Long-term put premiums payable-affiliate |
|
|
11,200 |
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|
|
12,700 |
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Commitments and contingencies |
|
|
|
|
|
|
|
|
Partners’ capital: |
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|
|
|
|
|
|
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Managing general partner’s interest |
|
|
777,300 |
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|
|
798,700 |
|
Limited partners’ interest (4,024.00 units) |
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28,500 |
|
|
|
38,700 |
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Accumulated other comprehensive loss |
|
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(5,800 |
) |
|
|
(2,900 |
) |
Total partners’ capital |
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800,000 |
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|
|
834,500 |
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|
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$ |
4,233,000 |
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|
$ |
4,209,100 |
|
See accompanying notes to condensed financial statements.
3
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended |
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2014 |
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|
2013 |
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REVENUES |
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|
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Natural gas, oil and liquids |
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$ |
322,500 |
|
|
$ |
288,600 |
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Total revenues |
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322,500 |
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|
|
288,600 |
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COSTS AND EXPENSES |
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|
|
|
|
|
|
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Production |
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|
224,000 |
|
|
|
261,500 |
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Depletion |
|
|
32,700 |
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|
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203,600 |
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Accretion of asset retirement obligation |
|
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49,800 |
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|
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46,500 |
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General and administrative |
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47,600 |
|
|
|
56,000 |
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Total expenses |
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354,100 |
|
|
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567,600 |
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Net loss |
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$ |
(31,600 |
) |
|
$ |
(279,000 |
) |
Allocation of net loss: |
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|
|
|
|
|
|
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Managing general partner |
|
$ |
(21,400 |
) |
|
$ |
(145,300 |
) |
Limited partners |
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$ |
(10,200 |
) |
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$ |
(133,700 |
) |
Net loss per limited partnership unit |
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$ |
(3 |
) |
|
$ |
(33 |
) |
See accompanying notes to condensed financial statements.
4
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
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Three Months Ended |
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2014 |
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2013 |
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Net loss |
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$ |
(31,600 |
) |
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$ |
(279,000 |
) |
Other comprehensive loss: |
|
|
|
|
|
|
|
|
Unrealized holding loss on cash flow hedging contracts |
|
|
(10,500 |
) |
|
|
(8,800 |
) |
Difference in estimated hedge gains receivable |
|
|
20,800 |
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|
|
22,600 |
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Reclassification adjustment for gains realized in net loss from cash flow hedges |
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(13,200 |
) |
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(17,200 |
) |
Total other comprehensive loss |
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(2,900 |
) |
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|
(3,400 |
) |
Comprehensive loss |
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$ |
(34,500 |
) |
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$ |
(282,400 |
) |
See accompanying notes to condensed financial statements.
5
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP
CONDENSED STATEMENT OF CHANGES IN PARTNERS’ CAPITAL
FOR THE THREE MONTHS ENDED
March 31, 2014
(Unaudited)
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Managing |
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Limited |
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Accumulated |
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Total |
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Balance at December 31, 2013 |
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$ |
798,700 |
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$ |
38,700 |
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|
$ |
(2,900 |
) |
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$ |
834,500 |
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Participation in revenues and expenses: |
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|
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|
|
|
|
|
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|
|
|
|
|
|
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Net production revenues |
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33,900 |
|
|
|
64,600 |
|
|
|
- |
|
|
|
98,500 |
|
Depletion |
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|
(21,200 |
) |
|
|
(11,500 |
) |
|
|
- |
|
|
|
(32,700 |
) |
Accretion of asset retirement obligation |
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(17,400 |
) |
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(32,400 |
) |
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- |
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|
|
(49,800 |
) |
General and administrative |
|
|
(16,700 |
) |
|
|
(30,900 |
) |
|
|
- |
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|
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(47,600 |
) |
Net loss |
|
|
(21,400 |
) |
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(10,200 |
) |
|
|
- |
|
|
|
(31,600 |
) |
Other comprehensive loss |
|
|
- |
|
|
|
- |
|
|
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(2,900 |
) |
|
|
(2,900 |
) |
Distributions to partners |
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|
- |
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|
|
- |
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|
|
- |
|
|
|
- |
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Balance at March 31, 2014 |
|
$ |
777,300 |
|
|
$ |
28,500 |
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|
$ |
(5,800 |
) |
|
$ |
800,000 |
|
See accompanying notes to condensed financial statements.
6
ATLAS AMERICA PUBLIC #12-2003 LIMITED PARTNERSHIP
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three Months Ended |
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2014 |
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2013 |
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Cash flows from operating activities: |
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|
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|
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Net loss |
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$ |
(31,600 |
) |
|
$ |
(279,000 |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
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Depletion |
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32,700 |
|
|
|
203,600 |
|
Non-cash loss on derivative value |
|
|
1,300 |
|
|
|
15,000 |
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Accretion of asset retirement obligation |
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|
49,800 |
|
|
|
46,500 |
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Changes in operating assets and liabilities: |
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|
|
|
|
|
|
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(Increase) decrease in accounts receivable-affiliate |
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(25,400 |
) |
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|
2,600 |
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Increase in accrued liabilities |
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|
10,100 |
|
|
|
2,500 |
|
Net cash provided by (used in) operating activities |
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|
36,900 |
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|
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(8,800 |
) |
Cash flows from investing activities: |
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|
|
|
|
|
|
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Proceeds from the sale of tangible equipment |
|
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- |
|
|
|
8,800 |
|
Net cash provided by investing activities |
|
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- |
|
|
|
8,800 |
|
Cash flows from financing activities: |
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|
|
|
|
|
|
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Distributions to partners |
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- |
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|
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- |
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Net cash used in financing activities |
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- |
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- |
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Net increase in cash and cash equivalents |
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36,900 |
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- |
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Cash and cash equivalents at beginning of year |
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|
5,600 |
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|
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- |
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Cash and cash equivalents at end of period |
|
$ |
42,500 |
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|
$ |
- |
|
See accompanying notes to condensed financial statements.
7
ATLAS AMERICA PUBLIC #12-2003 Limited Partnership
NOTES TO CONDENSED FINANCIAL STATEMENTS
March 31, 2014
(Unaudited)
NOTE 1 - DESCRIPTION OF BUSINESS
Atlas America Public #12-2003 Limited Partnership (the “Partnership”) is a Delaware limited partnership, formed on July 15, 2003 with Atlas Resources, LLC serving as its Managing General Partner and Operator (“Atlas Resources” or “MGP”). Atlas Resources is an indirect subsidiary of Atlas Resource Partners, L.P. (“ARP”) (NYSE: ARP).
In March 2012, the MGP’s ultimate parent, Atlas Energy L.P. (“Atlas Energy”) (NYSE: ATLS), contributed to ARP, a newly-formed exploration and production master limited partnership, substantially all of Atlas Energy’s natural gas and oil development and production assets and its partnership management business, including ownership of the MGP.
On February 17, 2011, Atlas Energy L.P., formerly known as Atlas Pipeline Holdings, L.P., a then-majority owned subsidiary of Atlas Energy, Inc. and parent of the general partner of Atlas Pipeline Partners, L.P. (“APL”) (NYSE: APL), completed an acquisition of assets from Atlas Energy, Inc., which included its investment partnership business, its oil and gas exploration, development and production activities conducted in Tennessee, Indiana, and Colorado, certain shallow wells and leases in New York and Ohio, certain well interests in Pennsylvania and its ownership and management of investments in Lightfoot Capital Partners, L.P. and related entities (the “Transferred Business”).
The Partnership has drilled and currently operates wells located in Pennsylvania. The Partnership has no employees and relies on the MGP for management, which in turn, relies on its parent company, Atlas Energy, for administrative services. The Partnership’s operating cash flows are generated from its wells, which produce natural gas and oil. Produced natural gas and oil is then delivered to market through third-party gas gathering systems. The Partnership does not plan to sell any of its wells and intends to produce them until they are depleted or become uneconomical to produce, at which time they will be plugged and abandoned or sold. The Partnership expects that no other wells will be drilled and no additional funds will be required for drilling.
The accompanying condensed financial statements, which are unaudited, except that the balance sheet at December 31, 2013 is derived from audited financial statements, are presented in accordance with the requirements of Form 10-Q and accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim reporting. They do not include all disclosures normally made in financial statements contained in the Partnership’s Form 10-K. These interim financial statements should be read in conjunction with the audited financial statements and notes thereto presented in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2013. The results of operations for the three months ended March 31, 2014 may not necessarily be indicative of the results of operations for the year ended December 31, 2014.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
In management’s opinion, all adjustments necessary for a fair presentation of the Partnership’s financial position, results of operations and cash flows for the periods disclosed have been made. Management has considered for disclosure any material subsequent events through the date the financial statements were issued.
In addition to matters discussed further in this note, the Partnership’s significant accounting policies are detailed in its audited financial statements and notes thereto in the Partnership’s annual report on Form 10-K for the year ended December 31, 2013 filed with the Securities and Exchange Commission (“SEC”).
Use of Estimates
Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities that exist at the date of the Partnership’s financial statements, as well as the reported amounts of revenues and costs and expenses during the reporting periods. The Partnership’s financial statements are based on a number of significant estimates, including the revenue and expense accruals, depletion, asset impairments, fair value of derivative instruments and the probability of forecasted transactions. Actual results could differ from those estimates.
8
The natural gas industry principally conducts its business by processing actual transactions as much as 60 days after the month of delivery. Consequently, the most recent two months’ financial results were recorded using estimated volumes and contract market prices. Differences between estimated and actual amounts are recorded in the following months’ financial results. Management believes that the operating results presented for the three months ended March 31, 2014 and 2013 represent actual results in all material respects (see “Revenue Recognition” accounting policy for further description).
Accounts Receivable and Allowance for Possible Losses
In evaluating the need for an allowance for possible losses, the MGP performs ongoing credit evaluations of the Partnership’s customers and adjusts credit limits based upon payment history and the customers’ current creditworthiness as determined by review of such customers’ credit information. Credit is extended on an unsecured basis to many of the Partnership’s energy customers. At March 31, 2014 and December 31, 2013, the MGP’s credit evaluation indicated that the Partnership had no need for an allowance for possible losses.
Oil and Gas Properties
Oil and gas properties are stated at cost. Maintenance and repairs that generally do not extend the useful life of an asset for two years or more through the replacement of critical components are expensed as incurred. Major renewals and improvements that generally extend the useful life of an asset for two years or more through the replacement of critical components are capitalized.
The Partnership follows the successful efforts method of accounting for oil and gas producing activities. Oil and natural gas liquids are converted to gas equivalent basis (“Mcfe”) at the rate of one barrel to six mcf of natural gas.
The Partnership’s depletion expense is determined on a field-by-field basis using the units-of-production method. Depletion rates for lease, well and related equipment costs are based on proved developed reserves associated with each field. Depletion rates are determined based on reserve quantity estimates and the capitalized cost of developed producing properties. The Partnership recorded depletion expense on natural gas and oil properties of $32,700 and $203,600 for the three months ended March 31, 2014 and 2013, respectively.
Upon the sale or retirement of a complete field of a proved property, the Partnership eliminates the cost from the property accounts and the resultant gain or loss is reclassified to the Partnership’s statements of operations. Upon the sale of an individual well, the Partnership credits the proceeds to accumulated depreciation and depletion within its balance sheets. Upon the sale of an entire interest where the property had been assessed for impairment, a gain or loss is recognized in the statement of operations.
The following is a summary of oil and gas properties at the dates indicated:
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March 31, |
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December 31, |
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Proved properties: |
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|
|
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|
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Leasehold interests |
|
$ |
1,131,600 |
|
|
$ |
1,131,600 |
|
Wells and related equipment |
|
|
51,851,900 |
|
|
|
51,851,900 |
|
Total natural gas and oil properties |
|
|
52,983,500 |
|
|
|
52,983,500 |
|
Accumulated depletion and impairment |
|
|
(49,046,400 |
) |
|
|
(49,013,700 |
) |
Oil and gas properties, net |
|
$ |
3,937,100 |
|
|
$ |
3,969,800 |
|
Impairment of Long-Lived Assets
The Partnership reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined that an asset’s estimated future cash flows will not be sufficient to recover its carrying amount, an impairment charge will be recorded to reduce the carrying amount of that asset to its estimated fair value if such carrying amount exceeds the fair value.
9
The review of the Partnership’s oil and gas properties is done on a field-by-field basis by determining if the historical cost of proved properties less the applicable accumulated depletion, depreciation and amortization and abandonment is less than the estimated expected undiscounted future cash flows. The expected future cash flows are estimated based on the Partnership’s plans to continue to produce and develop proved reserves. Expected future cash flow from the sale of the production of reserves is calculated based on estimated future prices. The Partnership estimates prices based upon current contracts in place, adjusted for basis differentials and market related information, including published futures prices. The estimated future level of production is based on assumptions surrounding future prices and costs, field decline rates, market demand and supply and the economic and regulatory climates. If the carrying value exceeds the expected future cash flows, an impairment loss is recognized for the difference between the estimated fair market value (as determined by discounted future cash flows) and the carrying value of the assets.
The determination of oil and natural gas reserve estimates is a subjective process and the accuracy of any reserve estimate depends on the quality of available data and the application of engineering and geological interpretation and judgment. Estimates of economically recoverable reserves and future net cash flows depend on a number of variable factors and assumptions that are difficult to predict and may vary considerably from actual results.
In addition, reserve estimates for wells with limited or no production history are less reliable than those based on actual production. Estimated reserves are often subject to future revisions, which could be substantial, based on availability additional information which could cause the assumptions to be modified. The Partnership cannot predict what reserve revisions may be required in future periods. The Partnership may have to pay additional consideration in the future as a well becomes uneconomic under the terms of the Partnership Agreement in order to recover these reserves. There were no oil and gas properties impairments recorded during the three months ended March 31, 2014 and 2013 and during the year ended December 31, 2013.
Working Interest
The Partnership Agreement establishes that revenues and expenses will be allocated to the MGP and limited partners based on their ratio of capital contributions to total contributions (“working interest”). The MGP is also provided an additional working interest of 7% as provided in the Partnership Agreement. Due to the time necessary to complete drilling operations and accumulate all drilling costs, estimated working interest percentage ownership rates are utilized to allocate revenues and expenses until the wells are completely drilled and turned on-line into production. Once the wells are completed, the final working interest ownership of the partners is determined and any previously allocated revenues and expenses based on the estimated working interest percentage ownership are adjusted to conform to the final working interest percentage ownership.
Revenue Recognition
The Partnership generally sells natural gas and crude oil at prevailing market prices. Generally, the Partnership’s sales contracts are based on pricing provisions that are tied to a market index, with certain fixed adjustments based on proximity to gathering and transmission lines and the quality of its natural gas. Generally, the market index is fixed two business days prior to the commencement of the production month. Revenue and the related accounts receivable are recognized when produced quantities are delivered to a custody transfer point, persuasive evidence of a sales arrangement exists, the rights and responsibility of ownership pass to the purchaser upon delivery, collection of revenue from the sale is reasonably assured and the sales price is fixed or determinable. Revenues from the production of natural gas and crude oil, in which the Partnership has an interest with other producers, are recognized on the basis of its percentage ownership of working interest and/or overriding royalty.
The MGP and its affiliates perform all administrative and management functions for the Partnership, including billing revenues and paying expenses. Accounts receivable trade-affiliate on the Partnership’s balance sheets includes the net production revenues due from the MGP. The Partnership accrues unbilled revenue due to timing differences between the delivery of natural gas, NGL’s, crude oil, and condensate and the receipt of a delivery statement. These revenues are recorded based upon volumetric data from the Partnership’s records and management estimates of the related commodity sales and transportation and compression fees, which are, in turn, based upon applicable product prices. The Partnership had unbilled revenues at March 31, 2014 and December 31, 2013 of $185,000 and $170,800, respectively, which were included in accounts receivable trade-affiliate within the Partnership’s balance sheets.
Comprehensive Loss
Comprehensive loss includes net loss and all other changes in equity of a business during a period from transactions and other events and circumstances from non-owner sources that, under accounting principles generally accepted in the United States of America, have not been recognized in the calculation of net loss. These changes, other than net loss, are referred to as “other comprehensive loss” and, for the Partnership, include changes in the fair value of derivative contracts accounted for as cash flow hedges.
10
Recently Adopted Accounting Standards
In July 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-11, Income Taxes (Topic 740) - Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“Update 2013-11”), which, among other changes, requires an entity to present an unrecognized tax benefit as a liability and not net with deferred tax assets when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional income taxes under the tax law of the applicable jurisdiction that would result from the disallowance of a tax position or when the tax law of the applicable tax jurisdiction does not require, and the entity does not intend to, use the deferred tax asset for such purpose. These requirements are effective for interim and annual reporting periods beginning after December 15, 2013. Early adoption was permitted. These amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Partnership adopted the requirements of Update 2013-11 upon its effective date of January 1, 2014, and it had no material impact on its financial position, results of operations or related disclosures.
In February 2013, the FASB issued ASU 2013-04, Obligations Resulting from Joint and Several Liability Arrangements for Which the Total Amount of the Obligation is Fixed at the Reporting Date (“Update 2013-04”). Update 2013-04 provides guidance for the recognition, measurement and disclosure of obligations resulting from joint and several liability arrangements, for which the total amount of the obligation within the scope of this guidance is fixed at the reporting date, except for obligations addressed within existing guidance in U.S. GAAP. Examples of obligations within the scope of this update include debt arrangements, other contractual obligations and settled litigation and judicial rulings. Update 2013-04 requires an entity to measure joint and several liability arrangements, for which the total amount of the obligation is fixed at the reporting date as the sum of the amount the reporting entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the reporting entity expects to pay on behalf of its co-obligors. In addition, Update 2013-04 provides disclosure guidance on the nature and amount of the obligation as well as other information. Update 2013-04 is effective for fiscal years and interim periods within those years, beginning after December 15, 2013. The Partnership adopted the requirements of Update 2013-04 upon its effective date of January 1, 2014, and it had no material impact on its financial position, results of operations or related disclosures.
NOTE 3 - ASSET RETIREMENT OBLIGATION
The Partnership recognizes an estimated liability for the plugging and abandonment of its oil and gas wells and related facilities. It also recognizes a liability for future asset retirement obligations if a reasonable estimate of the fair value of that liability can be made. The estimated liability is based on the MGP’s historical experience in plugging and abandoning wells, estimated remaining lives of those wells based on reserve estimates, external estimates as to the cost to plug and abandon the wells in the future and federal and state regulatory requirements. The liability is discounted using an assumed credit-adjusted risk-free interest rate. Revisions to the liability could occur due to changes in cost estimates, remaining lives of the wells or if federal or state regulators enact new plugging and abandonment requirements. The associated asset retirement costs from revisions are capitalized as part of the carrying amount of the long-lived asset. The Partnership has no assets legally restricted for purposes of settling asset retirement obligations. Except for its oil and gas properties, the Partnership has determined that there are no other material retirement obligations associated with tangible long-lived assets.
The MGP’s historical practice and continued intention is to retain distributions from the limited partners as the wells within the Partnership near the end of their useful life. On a partnership-by-partnership basis, the MGP assesses its right to withhold amounts related to plugging and abandonment costs based on several factors including commodity price trends, the natural decline in the production of the wells, and current and future costs. Generally, the MGP’s intention is to retain distributions from the limited partners as the fair value of the future cash flows of the limited partners’ interest approaches the fair value of the future plugging and abandonment cost. Upon the MGP’s decision to retain all future distributions to the limited partners of the Partnership, the MGP will assume the related asset retirement obligations of the limited partners. As of March 31, 2014 the MGP has not withheld any funds for plugging.
A reconciliation of the Partnership’s liability for plugging and abandonment costs for the periods indicated is as follows:
|
|
Three Months Ended |
|
|||||
|
|
2014 |
|
|
2013 |
|
||
Asset retirement obligation at beginning of period |
|
$ |
3,353,100 |
|
|
$ |
3,420,800 |
|
Accretion expense |
|
|
49,800 |
|
|
|
46,500 |
|
Asset retirement obligation at end of period |
|
$ |
3,402,900 |
|
|
$ |
3,467,300 |
|
11
NOTE 4 - DERIVATIVE INSTRUMENTS
The MGP, on behalf of the Partnership, uses a number of different derivative instruments, principally swaps, collars and options, in connection with the Partnership’s commodity price risk management activities. Management enters into financial instruments to hedge forecasted commodity sales against the variability in expected future cash flows attributable to changes in market prices. Swap instruments are contractual agreements between counterparties to exchange obligations of money as the underlying commodities are sold. Under commodity-based swap agreements, the Partnership receives or pays a fixed price and receives or remits a floating price based on certain indices for the relevant contract period. Commodity-based put option instruments are contractual agreements that require the payment of a premium and grant the purchaser of the put option the right, but not the obligation, to receive the difference between a fixed, or strike, price and a floating price based on certain indices for the relevant contract period, if the floating price is lower than the fixed price. The put option instrument sets a floor price for commodity sales being hedged. Costless collars are a combination of a purchased put option and a sold call option, in which the premiums net to zero. The costless collar eliminates the initial cost of the purchased put, but places a ceiling price for commodity sales being hedged.
The MGP 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 commodity derivative contracts to the forecasted transactions. The MGP assesses, both at the inception of the derivative and on an ongoing basis, whether the derivative was effective in offsetting changes in the forecasted cash flow of the hedged item. If the MGP determines that a derivative is not effective as a hedge or that it has ceased to be an effective hedge due to the loss of adequate correlation between the hedging instrument and the underlying item being hedged, the MGP will discontinue hedge accounting for the derivative and subsequent changes in the derivative fair value, which are determined by management of the MGP through the utilization of market data, will be recognized immediately within gain (loss) on mark-to-market derivatives in the Partnership’s statements of operations. For derivatives qualifying as hedges, the Partnership recognizes the effective portion of changes in fair value of derivative instruments as accumulated other comprehensive income and reclassifies the portion relating to the Partnership’s commodity derivatives to gas and oil production revenues within the Partnership’s statements of operations as the underlying transactions are settled. For non-qualifying derivatives and for the ineffective portion of qualifying derivatives, the Partnership recognizes changes in fair value within gain (loss) on mark-to-market derivatives in the Partnership’s statements of operations as they occur.
The Partnership enters into derivative contracts with various financial institutions, utilizing master contracts based upon the standards set by the International Swaps and Derivatives Association, Inc. These contracts allow for rights of offset at the time of settlement of the derivatives. Due to the right of offset, derivatives are recorded on the Partnership’s balance sheets as assets or liabilities at fair value on the basis of the net exposure to each counterparty. Potential credit risk adjustments are also analyzed based upon the net exposure to each counterparty. Premiums paid for purchased options are recorded on the Partnership’s balance sheets as the initial value of the options. The Partnership reflected net derivative assets on its balance sheet of $7,000 and $8,400 at March 31, 2014 and December 31, 2013, respectively.
12
The Partnership enters into commodity future option and collar contracts to achieve more predictable cash flows by hedging its exposure to changes in commodity prices. At any point in time, such contracts may include regulated 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 physical delivery of the commodity. Crude oil contracts are based on a West Texas Intermediate (“WTI”) index. NGL fixed price swaps are priced based on a WTI crude oil index. These contracts have qualified and been designated as cash flow hedges and recorded at their fair values.
At March 31, 2014, the Partnership had the following commodity derivatives:
Natural Gas Put Options
Production |
|
Volumes |
|
|
Average |
|
|
Fair Value |
|
|||
|
|
(MMBtu) (1) |
|
|
(per MMBtu) (1) |
|
|
|
|
|||
2014 |
|
|
8,300 |
|
|
$ |
3.80 |
|
|
$ |
500 |
|
2015 |
|
|
8,800 |
|
|
$ |
4.00 |
|
|
|
2,700 |
|
2016 |
|
|
8,800 |
|
|
$ |
4.15 |
|
|
|
3,800 |
|
|
|
|
|
|
|
|
|
|
|
$ |
7,000 |
|
(1) | “MMBtu” represents million British Thermal Units. |
(2) | Fair value based on forward New York Mercantile Exchange (“NYMEX”) natural gas prices, as applicable. |
Effects of Derivative Instruments on Statements of Operations:
The following table summarizes the gain or loss recognized in the statements of operations for the three months ended March 31, 2014 and 2013:
|
|
Three Months Ended |
|
|||||
|
|
2014 |
|
|
2013 |
|
||
Gain from cash flow hedges reclassified from accumulated other comprehensive loss into natural gas, oil and liquids revenues |
|
$ |
13,200 |
|
|
$ |
17,200 |
|
As the underlying prices and terms in the Partnership’s derivative contracts were consistent with the indices used to sell its natural gas and oil, there were no gains or losses recognized during the three months ended March 31, 2014 and 2013 for hedge ineffectiveness or as a result of the discontinuance of any cash flow hedges.
Monetized Gains
Prior to February 17, 2011, Atlas Energy Inc., (“AEI”) monetized its derivative instruments, including those related to the future natural gas and oil production of the Transferred Business. AEI also monetized derivative instruments that were specifically related to the future natural gas and oil production of the Partnership. At March 31, 2014 and December 31, 2013, remaining hedge monetization cash proceeds of $13,200 and $17,600 related to the amounts hedged on behalf of the Partnerships’ limited partners were included within accounts receivable monetized gains-affiliate. The Partnership will allocate the monetized net proceeds to the limited partners based on the natural gas and oil production generated over the period of the original derivative contracts.
13
During June 2012, the MGP used the undistributed monetized funds to purchase natural gas put options on behalf of the limited partners of the Partnership only. A premium (“put premium”) was paid to purchase the contracts and will be allocated to natural gas production revenues generated over the contractual term of the purchased hedging instruments. At March 31, 2014 and December 31, 2013, the put premiums were recorded as short-term payables to affiliate of $6,300 and $6,400, respectively, and long-term payables to affiliate of $11,200 and $12,700, respectively. Furthermore, the current portions of the put premium liability are included in accounts receivable monetized gains-affiliate in the Partnership’s balance sheets.
The following table summarizes the gross and net values of the Partnership’s affiliate balances on the Partnership’s balance sheets for the periods indicated:
|
|
Gross Amounts |
|
|
Gross Amounts |
|
|
Net Amount of |
|
|||
Offsetting Assets |
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable monetized gains-affiliate |
|
$ |
13,200 |
|
|
$ |
(6,300 |
) |
|
$ |
6,900 |
|
As of December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable monetized gains-affiliate |
|
$ |
17,600 |
|
|
$ |
(6,400) |
|
|
$ |
11,200 |
|
|
|
Gross Amounts |
|
|
Gross Amounts |
|
|
Net Amount of |
|
|||
Offsetting Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
Put premiums payable-affiliate |
|
$ |
(6,300 |
) |
|
$ |
6,300 |
|
|
$ |
- |
|
Long-term put premiums payable-affiliate |
|
|
(11,200 |
) |
|
|
- |
|
|
|
(11,200 |
) |
Total |
|
$ |
(17,500 |
) |
|
$ |
6,300 |
|
|
$ |
(11,200 |
) |
As of December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
Put premiums payable-affiliate |
|
$ |
(6,400 |
) |
|
$ |
6,400 |
|
|
$ |
- |
|
Long-term put premiums payable-affiliate |
|
|
(12,700 |
) |
|
|
- |
|
|
|
(12,700 |
) |
Total |
|
$ |
(19,100 |
) |
|
$ |
6,400 |
|
|
$ |
(12,700 |
) |
14
Accumulated Other Comprehensive Income (Loss)
As a result of the monetization and the early settlement of natural gas and oil derivative instruments, the put options, and the unrealized gains recognized in earnings in prior periods due to natural gas and oil property impairments, the Partnership recorded a net deferred loss on its balance sheets in accumulated other comprehensive loss of $5,800 as of March 31, 2014. Included in accumulated other comprehensive loss are unrealized gains of $8,500, net of the MGP interest, that were recognized into earnings as a result of oil and gas property impairments in prior periods. During the current year, $1,700 of net gains were recorded by the Partnership and allocated only to the limited partners. Of the remaining $5,800 of net unrealized loss in accumulated other comprehensive income, the Partnership will reclassify $600 of net losses to the Partnership’s statements of operations over the next twelve month period and the remaining $5,200 in later periods.
NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The Partnership has established a hierarchy to measure its financial instruments at fair value, which requires it to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs represent market data obtained from independent sources, whereas unobservable inputs reflect the Partnership’s own market assumptions, which are used if observable inputs are not reasonably available without undue cost and effort. The hierarchy defines three levels of inputs that may be used to measure fair value:
Level 1– Unadjusted quoted prices in active markets for identical, unrestricted assets and liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.
Level 3 – Unobservable inputs that reflect the entity’s own assumptions about the assumptions market participants would use in the pricing of the asset or liability and are consequently not based on market activity but rather through particular valuation techniques.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The carrying values of cash, accounts receivable and accounts payable approximate their respective fair values due to the short term maturities of such financial instruments. The Partnership uses a market approach fair value methodology to value the assets and liabilities for its outstanding derivative contracts (see Note 4). The Partnership manages and reports the derivative assets and liabilities on the basis of its net exposure to market risks and credit risks by counterparty. The Partnership’s commodity derivative contracts are valued based on observable market data related to the change in price of the underlying commodity and are therefore defined as Level 2 assets and liabilities within the same class of nature and risk. These derivative instruments are calculated by utilizing commodity indices, quoted prices for futures and options contracts traded on open markets that coincide with the underlying commodity, expiration period, strike price (if applicable) and pricing formula utilized in the derivative instrument.
15
Information for assets and liabilities measured at fair value at March 31, 2014 and December 31, 2013 is as follows:
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
As of March 31, 2014 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets, gross |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity puts |
|
$ |
- |
|
|
$ |
7,000 |
|
|
$ |
- |
|
|
$ |
7,000 |
|
Derivative liabilities, gross |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity puts |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Total derivatives, fair value, net |
|
$ |
- |
|
|
$ |
7,000 |
|
|
$ |
- |
|
|
$ |
7,000 |
|
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
As of December 31, 2013 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative assets, gross |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity puts |
|
$ |
- |
|
|
$ |
8,400 |
|
|
$ |
- |
|
|
$ |
8,400 |
|
Derivative liabilities, gross |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity puts |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Total derivatives, fair value, net |
|
$ |
- |
|
|
$ |
8,400 |
|
|
$ |
- |
|
|
$ |
8,400 |
|
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
The Partnership estimates the fair value of asset retirement obligations based on discounted cash flow projections using numerous estimates, assumptions and judgments regarding such factors at the date of establishment of an asset retirement obligation such as: amounts and timing of settlements, the credit-adjusted risk-free rate of the Partnership and estimated inflation rates (see Note 3). There were no additional assets or liabilities that were measured at fair value on a nonrecurring basis for the three months ended March 31, 2014 and 2013.
NOTE 6 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Partnership has entered into the following significant transactions with the MGP and its affiliates as provided under its Partnership Agreement. Administrative costs, which are included in general and administrative expenses in the Partnership’s statements of operations, are payable at $75 per well per month. Monthly well supervision fees, which are included in production expense in the Partnership’s statement of operations, are payable at $313 per well per month for operating and maintaining the wells. Transportation fees, which are included in production expenses in the Partnership’s statements of operations, are generally payable at 13% of the natural gas sales price.
The following table provides information with respect to these costs and the periods incurred:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2014 |
|
|
2013 |
|
||
Administrative |
|
$ |
33,100 |
|
|
$ |
37,600 |
|
Supervision |
|
|
138,400 |
|
|
|
157,200 |
|
Transportation |
|
|
38,600 |
|
|
|
29,700 |
|
Total |
|
$ |
210,100 |
|
|
$ |
224,500 |
|
The MGP and its affiliates perform all administrative and management functions for the Partnership, including billing revenues and paying expenses. Accounts receivable trade-affiliate on the Partnership’s balance sheets includes the net production revenues due from the MGP.
16
NOTE 7 - COMMITMENTS AND CONTINGENCIES
General Commitments
Subject to certain conditions, investor partners may present their interests for purchase by the MGP. The purchase price is calculated by the MGP in accordance with the terms of the partnership agreement. The MGP is not obligated to purchase more than 5% of the units in any calendar year. In the event that the MGP is unable to obtain the necessary funds, it may suspend its purchase obligation.
Beginning one year after each of the Partnership’s wells has been placed into production, the MGP, as operator, may retain $200 per month per well to cover estimated future plugging and abandonment costs. As of March 31, 2014, the MGP has not withheld any such funds. The MGP is currently evaluating its right to exercise this option based on several factors such as commodity prices, the natural decline in well production, and current and future plugging costs.
Legal Proceedings
The Partnership is a party to various routine legal proceedings arising out of the ordinary course of its business. Management believes that none of these actions, individually or in the aggregate, will have a material adverse effect on the Partnership’s financial condition or results of operations.
Forward-Looking Statements
When used in this Form 10-Q, the words “believes”, “anticipates,” “expects” and similar expressions are intended to identify forward-looking statements. These risks and uncertainties could cause actual results to differ materially from the results stated or implied in this document. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly release the results of any revisions to forward-looking statements which we may make to reflect events or circumstances after the date of this Form 10-Q or to reflect the occurrence of unanticipated events.
General
Atlas America Public #12-2003 Limited Partnership (“we”, “us” or the “Partnership”) is a Delaware limited partnership, formed on July 15, 2003 with Atlas Resources, LLC serving as its Managing General Partner and Operator (“Atlas Resources” or “MGP”). Atlas Resources is an indirect subsidiary of Atlas Resource Partners, L.P. (“ARP”) (NYSE: ARP).
We have drilled and currently operate wells located in Pennsylvania. We have no employees and rely on our MGP for management, which in turn, relies on its parent company, Atlas Energy L.P. (“Atlas Energy”), for administrative services.
We do not plan to sell any of our wells and intend to produce them until they are depleted or become uneconomical to produce, at which time they will be plugged and abandoned or sold. We expect that no other wells will be drilled and no additional funds will be required for drilling.
Overview
The following discussion provides information to assist in understanding our financial condition and results of operations. Our operating cash flows are generated from our wells, which produce primarily natural gas, but also some oil. Our produced natural gas and oil is then delivered to market through affiliated or third-party gas gathering systems. Our ongoing operating and maintenance costs have been and are expected to be fulfilled through revenues from the sale of our natural gas and oil production. We pay our MGP, as operator, a monthly well supervision fee, which covers all normal and regularly recurring operating expenses for the production and sale of natural gas and oil such as:
— | well tending, routine maintenance and adjustment; |
— | reading meters, recording production, pumping, maintaining appropriate books and records; and |
— | preparation of reports for us and government agencies. |
17
The well supervision fees, however, do not include costs and expenses related to the purchase of certain equipment, materials, and brine disposal. If these expenses are incurred, we pay cost for third-party services, materials, and a competitive charge for services performed directly by our MGP or its affiliates. Also, beginning one year after each of our wells has been placed into production, our MGP, as operator, may retain $200 per month, per well to cover the estimated future plugging and abandonment costs of the well. As of March 31, 2014, our MGP had not withheld any funds for this purpose.
Markets and Competition
The availability of a ready market for natural gas and oil produced by us, and the price obtained, depends on numerous factors beyond our control, including the extent of domestic production, imports of foreign natural gas and oil, political instability or terrorist acts in oil and gas producing countries and regions, market demand, competition from other energy sources, the effect of federal regulation on the sale of natural gas and oil in interstate commerce, other governmental regulation of the production and transportation of natural gas and oil and the proximity, availability and capacity of pipelines and other required facilities. Our MGP is responsible for selling our production. During 2014 and 2013, we experienced no problems in selling our natural gas and oil. Product availability and price are the principal means of competition in selling natural gas and oil production. While it is impossible to accurately determine our comparative position in the industry, we do not consider our operations to be a significant factor in the industry.
Results of Operations
The following table sets forth information relating to our production revenues, volumes, sales prices, production costs and depletion during the periods indicated:
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2014 |
|
|
2013 |
|
||
Production revenues (in thousands): |
|
|
|
|
|
|
|
|
Gas |
|
$ |
306 |
|
|
$ |
245 |
|
Oil |
|
|
12 |
|
|
|
42 |
|
Liquids |
|
|
5 |
|
|
|
2 |
|
Total |
|
$ |
323 |
|
|
$ |
289 |
|
Production volumes: |
|
|
|
|
|
|
|
|
Gas (mcf/day) (1) |
|
|
659 |
|
|
|
749 |
|
Oil (bbl/day) (1) |
|
|
1 |
|
|
|
5 |
|
Liquids (bbl/day) (1) |
|
|
1 |
|
|
|
1 |
|
Total (mcfe/day) (1) |
|
|
671 |
|
|
|
785 |
|
Average sales prices: (2) |
|
|
|
|
|
|
|
|
Gas (per mcf) (1) (3) |
|
$ |
5.19 |
|
|
$ |
3.85 |
|
Oil (per bbl) (1) |
|
$ |
90.90 |
|
|
$ |
93.84 |
|
Liquids (per bbl) (1) |
|
$ |
53.01 |
|
|
$ |
57.67 |
|
Production costs: |
|
|
|
|
|
|
|
|
As a percent of revenues |
|
|
69 |
% |
|
|
91 |
% |
Per mcfe (1) |
|
$ |
3.70 |
|
|
$ |
3.72 |
|
Depletion per mcfe |
|
$ |
0.54 |
|
|
$ |
2.89 |
|
(1) | “Mcf” represents thousand cubic feet, “mcfe” represents thousand cubic feet equivalent, and “bbl” represents barrels. Bbl is converted to mcfe using the ratio of six mcfs to one bbl. |
(2) | Average sales prices represent accrual basis pricing after adjusting for the effect of previously recognized gains resulting from prior period impairment charges. |
(3) | Average gas prices are calculated by including in total revenue derivative gains previously recognized into income in connection with prior period impairment charges and dividing by the total volume for the period. Previously recognized derivative gains were $1,300 and $15,000 for the three months ended March 31, 2014 and 2013, respectively. |
18
Natural Gas Revenues. Our natural gas revenues were $306,400 and $244,400 for the three months ended March 31, 2014 and 2013, respectively, an increase of $62,000 (25%). The $62,000 increase in natural gas revenues for the three months ended March 31, 2014 as compared to the prior year similar period was attributable to a $91,400 increase in our natural gas sales prices after the effect of financial hedges, which was driven by market conditions, partially offset by a $29,400 decrease in production volumes. Our production volumes decreased to 659 mcf per day for the three months ended March 31, 2014 from 749 mcf per day for the three months ended March 31, 2013, a decrease of 90 mcf per day (12%). The overall decrease in natural gas production volumes for the three months ended March 31, 2014 as compared to the prior year similar period resulted primarily from the normal decline inherent in the life of a well.
Oil Revenues. We drill wells primarily to produce natural gas, rather than oil, but some wells have limited oil production. Our oil revenues were $11,500 and $41,900 for the three months ended March 31, 2014 and 2013, respectively, a decrease of $30,400 (73%). Our production volumes were 1.41 bbls per day for the three months ended March 31, 2014 and 4.96 bbls per day for the three months ended March 31, 2013, a decrease of 3.55 bbls per day (72%). The change in oil revenues was attributable to a $30,000 decrease in production volumes and a $400 decrease in price.
Natural Gas Liquids Revenue. The majority of our wells produce “dry gas”, which is composed primarily of methane and requires no additional processing before being transported and sold to the purchaser. Some wells, however, produce “wet gas”, which contains larger amounts of ethane and other associated hydrocarbons (i.e. “natural gas liquids”) that must be removed prior to transporting the gas. Once removed, these natural gas liquids are sold to various purchasers. Our natural gas liquids revenues were $4,600 and $2,300 for the three months ended March 31, 2014 and 2013, respectively, an increase of $2,300 (100%). Our production volumes were 0.97 bbls and 0.45 bbls per day for the three months ended March 31, 2014 and 2013, respectively, an increase of 0.52 bbls per day.
Costs and Expenses. Production expenses were $224,000 and $261,500 for the three months ended March 31, 2014 and 2013, respectively, a decrease of $37,500 (14%). This decrease was mostly attributable to a decrease in monthly supervision fees due to wells being temporarily shut-in.
Depletion of oil and gas properties as a percentage of oil and gas revenues was 10% and 71% for the three months ended March 31, 2014 and 2013, respectively. These percentage changes are directly attributable to changes in revenues, oil and gas reserve quantities, product prices and production volumes and changes in the depletable cost basis of oil and gas properties.
General and administrative expenses for the three months ended March 31, 2014 and 2013 were $47,600 and $56,000, respectively, a decrease of $8,400 (15%). These expenses include third-party costs for services as well as the monthly administrative fees charged by our MGP. The decreases for the three months ended March 31, 2014 is primarily due to a decrease in third-party costs as compared to the prior year similar period.
Liquidity and Capital Resources
Cash provided by operating activities was $36,900 for the three months ended March 31, 2014 a $45,700 increase compared to $8,800 of cash used in operating activities for the three months ended March 31, 2013. This increase was mostly due to an increase in net earnings before depletion and accretion of $79,800, and an increase in the change in accrued liabilities of $7,600. The increase was partially offset by a decrease in a net non-cash loss on hedge instruments of $13,700, and a decrease in the change in accounts receivable trade-affiliate of $28,000 for the three months ended March 31, 2014 compared to the three months ended March 31, 2013.
Cash provided by investing activities was $8,800 for the three months ended March 31, 2013, from the sale of tangible equipment.
Our MGP may withhold funds for future plugging and abandonment costs. Any additional funds, if required, will be obtained from production revenues or borrowings from our MGP or its affiliates, which are not contractually committed to make loans to us. The amount that we may borrow may not at any time exceed 5% of our total subscriptions and we will not borrow from third-parties.
19
The Partnership is generally limited to the amount of funds generated by the cash flows from our operations, which we believe is adequate to fund future operations and distributions to our partners. Historically, there has been no need to borrow funds from our MGP to fund operations.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. On an on-going basis, we evaluate our estimates, including those related to our asset retirement obligations, depletion and certain accrued receivables and liabilities. We base our estimates on historical experience and on various other assumptions that we believe reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. A discussion of significant accounting policies we have adopted and followed in the preparation of our financial statements is included within “Notes to Financial Statements” in Part I, Item 1, “Financial Statements” in this quarterly report and in our Annual Report on Form 10-K for the year ended December 31, 2013.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934 reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chairman of the Board of Directors, Chief Executive Officer, President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Under the supervision of our Chairman of the Board of Directors, Chief Executive Officer, President, and Chief Financial Officer, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our Chairman of the Board of Directors, Chief Executive Officer, President and Chief Financial Officer, concluded that, at March 31, 2014, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There have been no changes in the Partnership’s internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
The MGP is not aware of any legal proceedings filed against the Partnership.
Affiliates of the MGP and their subsidiaries are party to various routine legal proceedings arising in the ordinary course of their collective business. The MGP’s management believes that none of these actions, individually or in the aggregate, will have a material adverse effect on the MGP’s financial condition or results of operations.
20
EXHIBIT INDEX
Exhibit No. |
|
Description |
4.0 |
|
Amended and Restated Certificate and Agreement of Limited Partnership for Atlas America Public #12-2003 Limited Partnership (1) |
|
|
|
31.1 |
|
Certification Pursuant to Rule 13a-14/15(d)-14 |
|
|
|
31.2 |
|
Certification Pursuant to Rule 13a-14/15(d)-14 |
|
|
|
32.1 |
|
Section 1350 Certification |
|
|
|
32.2 |
|
Section 1350 Certification |
|
|
|
101 |
|
Interactive Data File |
(1) | Filed on September 3, 2003 in the Form S-1 Registration Statement dated September 3, 2003, File No. 333-105811 |
21
Pursuant to the requirements of the Securities of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Atlas America Public #12-2003 Limited Partnership
|
|
ATLAS RESOURCES, LLC, Managing General Partner |
|
|
|
|
|
Date: May 15, 2014 |
|
By: |
/s/ FREDDIE M. KOTEK |
|
|
|
Freddie M. Kotek, |
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.
Date: May 15, 2014 |
|
By: |
/s/ SEAN P. MCGRATH |
|
|
|
Sean P. McGrath, |
22
Exhibit 31.1
CERTIFICATION
I, Freddie M. Kotek, certify that:
1. | I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2014 of Atlas America Public #12-2003 Limited Partnership; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have; |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within the entity, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: |
|
/s/ FREDDIE M. KOTEK |
Name: |
|
Freddie M. Kotek |
Title: |
|
Chief Executive Officer of the Managing General Partner |
Date: |
|
May 15, 2014 |
Exhibit 31.2
CERTIFICATION
I, Sean P. McGrath, certify that:
1. | I have reviewed this quarterly report on Form 10-Q for the quarter ended March 31, 2014 of Atlas America Public #12-2003 Limited Partnership; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have; |
(a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within the entity, particularly during the period in which this report is being prepared; |
(b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | valuated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: |
|
/s/ SEAN P. MCGRATH |
Name: |
|
Sean P. McGrath |
Title: |
|
Chief Financial Officer of the Managing General Partner |
Date: |
|
May 15, 2014 |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Atlas America Public #12-2003 Limited Partnership (the “Partnership”) on Form 10-Q for the period ended March 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Freddie M. Kotek, Chief Executive Officer of the Managing General Partner, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. |
By: |
|
/s/ FREDDIE M. KOTEK |
Name: |
|
Freddie M. Kotek |
Title: |
|
Chief Executive Officer of the Managing General Partner |
Date: |
|
May 15, 2014 |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Atlas America Public #12-2003 Limited Partnership (the “Partnership”) on Form 10-Q for the period ended March 31, 2014 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sean P. McGrath, Chief Financial Officer of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) | the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. |
By: |
|
/s/ SEAN P. MCGRATH |
Name: |
|
Sean P. McGrath |
Title: |
|
Chief Financial Officer of the Managing General Partner |
Date: |
|
May 15, 2014 |