ATLAS ENERGY GROUP, LLC AND SUBSIDIARIES

COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS

 (unaudited; in thousands, except per unit data)

Three Months Ended

Years Ended

December 31,

December 31,

Revenues:

2015

2014

2015

2014

      Gas and oil production

$        68,596

$     133,302

$      368,845

$     475,758

      Well construction and completion

12,840

46,647

76,505

173,564

      Gathering and processing

1,385

2,820

7,431

14,107

      Administration and oversight

511

3,492

7,812

15,564

      Well services

5,254

6,518

23,822

24,959

      Gain on mark-to-market derivatives

57,619

2,819

268,085

2,819

      Other, net

408

572

993

1,739

          Total revenues

146,613

196,170

753,493

708,510

Costs and expenses:

      Gas and oil production

39,974

49,706

171,882

184,296

      Well construction and completion

11,165

40,562

66,526

150,925

      Gathering and processing

2,207

3,625

9,613

15,525

      Well services

2,427

2,482

9,162

10,007

      General and administrative

27,532

26,989

109,569

90,476

      Depreciation, depletion and amortization

35,886

64,566

166,929

242,079

      Asset impairment

294,444

580,654

973,981

580,654

          Total costs and expenses

413,635

768,584

1,507,662

1,273,962

Operating loss

(267,022)

(572,414)

(754,169)

(565,452)

Loss on asset sales and disposal

(905)

(176)

(1,181)

(1,859)

Loss on extinguishment of debt

—

—

(4,726)

—

Interest expense

(29,430)

(21,961)

(125,658)

(73,435)

Net loss

(297,357)

(594,551)

(885,734)

(640,746)

Preferred unitholders' dividends

(1,014)

—

(3,360)

—

Loss attributable to non-controlling interests

228,905

437,611

649,316

471,439

Net loss attributable to unitholders'/owner's interests

$       (69,466)

$  (156,940)

$     (239,778)

$   (169,307)

Allocation of net loss attributable to unitholders'/owner's interests:

Portion applicable to owner's interest (period prior
     to the transfer of assets on February 27, 2015)

$                —

$  (156,940)

$      (10,475)

$   (169,307)

Portion applicable to unitholders' interest (period
     subsequent to the transfer of assets on February 27, 2015)

(69,466)

—

(229,303)

—

Net loss attributable to unitholders' /owner's
interests

$       (69,466)

$  (156,940)

$     (239,778)

$   (169,307)

Net loss attributable to unitholders per common unit:

Basic

$          (2.67)

$              —

$          (8.82)

$             —

Diluted

$          (2.67)

$              —

$          (8.82)

$             —

Weighted average common units outstanding:

Basic

26,011

—

26,011

—

Diluted

26,011

—

26,011

—

ATLAS ENERGY GROUP, LLC AND SUBSIDIARIES

COMBINED CONSOLIDATED BALANCE SHEETS

 (unaudited; in thousands)

December 31,

December 31,

ASSETS

2015

2014

Current assets:

      Cash and cash equivalents

$             31,214

$             58,358

      Accounts receivable

65,920

115,290

      Advances to affiliates

−

4,389

      Current portion of derivative asset

159,763

144,259

      Subscriptions receivable

19,877

32,398

      Prepaid expenses and other

22,997

26,789

          Total current assets

299,771

381,483

Property, plant and equipment, net

1,316,897

2,419,289

Intangible assets, net

456

691

Goodwill, net

13,639

13,639

Long-term derivative asset

198,371

130,602

Other assets, net

88,980

80,611

$        1,918,114

$        3,026,315

LIABILITIES AND UNITHOLDERS'/OWNER'S EQUITY

Current liabilities:

      Current portion of long-term debt

$                    —

$               1,500

      Accounts payable

52,550

123,670

      Liabilities associated with drilling contracts

21,483

40,611

      Accrued interest

25,452

26,479

      Accrued well drilling and completion costs

33,555

92,910

      Accrued liabilities

45,014

170,786

          Total current liabilities

178,054

455,956

Long-term debt, less current portion

1,607,182

1,541,085

Asset retirement obligations and other

124,919

114,059

Commitments and contingencies

Unitholders'/owner's equity:

      Common unitholders' deficit

(99,788)

—

      Series A preferred equity

37,515

—

      Owner's equity

—

147,308

      Accumulated other comprehensive income

4,284

54,008

(57,989)

201,316

      Non-controlling interests

65,948

713,899

Total unitholders'/owner's equity

7,959

915,215

$         1,918,114

$         3,026,315

ATLAS ENERGY GROUP, LLC

Financial and Operating Highlights

(unaudited)

Three Months Ended

Years Ended

December 31,

December 31,

2015

2014

2015

2014

Net loss attributable to unitholders per common unit -  basic

$             (2.67)

$              —

$             (8.82)

$              —

Production volume: ⁽¹⁾⁽²⁾

  ATLAS GROWTH:

Natural gas (Mcfd)

449

796

557

691

Oil (Bpd)

967

104

667

117

Natural gas liquids (Bpd)

71

99

81

88

Total (Mcfed)

6,679

2,018

5,047

1,920

  ATLAS RESOURCE:

Natural gas (Mcfd)

203,121

239,690

216,613

238,054

Oil (Bpd)

4,898

5,440

5,139

3,436

Natural gas liquids (Bpd)

2,824

4,040

3,155

3,802

Total (Mcfed)

249,450

296,571

266,374

281,486

  TOTAL:

Natural gas (Mcfd)

203,570

240,486

217,170

238,745

Oil (Bpd)

5,865

5,544

5,806

3,553

Natural gas liquids (Bpd)

2,895

4,140

3,236

3,891

Total (Mcfed)

256,129

298,590

271,421

283,406

Average realized sales prices:⁽²⁾

  ATLAS GROWTH:

Natural gas (per Mcf)

$             2.13

$             3.45

$             2.55

$             4.00

Oil (per Bbl) ⁽⁴⁾

$           44.11

$           71.75

$           46.83

$           88.61

Natural gas liquids (per Bbl)

$           12.07

$           22.11

$           12.51

$           28.80

  ATLAS RESOURCE:

Natural gas (per Mcf) ⁽³⁾

$             3.42

$             3.66

$             3.41

$             3.76

Oil (per Bbl)⁽⁴⁾

$           85.26

$           84.81

$           84.30

$           87.76

Natural gas liquids (per Bbl) ⁽⁵⁾

$           23.17

$           26.97

$           22.40

$           29.59

Production costs per Mcfe:⁽²⁾⁽⁶⁾

  ATLAS GROWTH:

Lease operating expenses per Mcfe

$             0.51

$             2.35

$             0.83

$           2.47

Production taxes per Mcfe

0.28

0.43

0.31

0.48

Transportation and compression expenses per Mcfe

0.10

0.02

0.07

0.00

Total production costs per Mcfe

$             0.89

$             2.79

$             1.21

$           2.95

  ATLAS RESOURCE:

Lease operating expenses per Mcfe

$             1.33

$             1.32

$             1.34

$           1.27

Production taxes per Mcfe

0.17

0.28

0.19

0.27

Transportation and compression expenses per Mcfe

0.23

0.22

0.24

0.25

Total production costs per Mcfe

$             1.73

$             1.82

$             1.76

$           1.80

  TOTAL:

Lease operating expenses per Mcfe

$             1.31

$             1.33

$             1.33

$           1.28

Production taxes per Mcfe

0.17

0.28

0.19

0.27

Transportation and compression expenses per Mcfe

0.23

0.22

0.23

0.25

Total production costs per Mcfe

$             1.71

$             1.83

$             1.75

$           1.81

⁽²⁾   "Mcf" and "Mcfd" represent thousand cubic feet and thousand cubic feet per day; "Mcfe" and "Mcfed" represent thousand cubic feet equivalents and thousand cubic feet equivalents per day, and "Bbl" and "Bpd" represent barrels and barrels per day.  Barrels are converted to Mcfe using the ratio of six Mcf's to one barrel.

⁽³⁾   ARP's average sales prices for natural gas before the effects of financial hedging were $1.96 per Mcf and $3.52 per Mcf for the three months ended December 31, 2015 and 2014, respectively, and $2.23 per Mcf and $3.93 per Mcf for the years ended December 31, 2015 and 2014, respectively. ARP's amounts exclude the impact of subordination of ARP's production revenues to investor partners within its investor partnerships. Including the effects of this subordination, ARP's average natural gas sales prices were $3.39 per Mcf ($1.93 per Mcf before the effects of financial hedging) and $3.61 per Mcf ($3.46 per Mcf before the effects of financial hedging) for the three months ended December 31, 2015 and 2014, respectively, and $3.36 per Mcf ($2.19 per Mcf before the effects of financial hedging) and $3.67 per Mcf ($3.84 per Mcf before the effects of financial hedging) for the years ended December 31, 2015 and 2014, respectively.

⁽⁴⁾   AGP's average sales price for oil before the effects of financial hedging was $41.27 per barrel and $71.75 per barrel for the three months ended December 31, 2015 and 2014, respectively, and $44.98 per barrel and $88.61 per barrel for the years ended December 31, 2015 and 2014, respectively. ARP's average sales prices for oil before the effects of financial hedging were $36.13 per barrel and $65.29 per barrel for the three months ended December 31, 2015 and 2014, respectively, and $44.19 per barrel and $82.22 per barrel for the years ended December 31, 2015 and 2014, respectively.

⁽⁵⁾   ARP's average sales prices for natural gas liquids before the effects of financial hedging were $11.99 per barrel and $21.80 per barrel for the three months ended December 31, 2015 and 2014, respectively, and $12.77 per barrel and $29.39 per barrel for the years ended December 31, 2015 and 2014, respectively.

⁽⁶⁾   Production costs include labor to operate the wells and related equipment, repairs and maintenance, materials and supplies, property taxes, severance taxes, insurance, production overhead and transportation and compression expenses. These amounts exclude the effects of ARP's proportionate share of lease operating expenses associated with subordination of production revenue to investor partners within ARP's investor partnerships. Including the effects of these costs, ARP's lease operating expenses per Mcfe were $1.32 per Mcfe ($1.72 per Mcfe for total production costs) and $1.31 per Mcfe ($1.80 per Mcfe for total production costs) for the three months ended December 31, 2015 and 2014, respectively, and $1.32 per Mcfe ($1.74 per Mcfe for total production costs) and $1.25 per Mcfe ($1.77 per Mcfe for total production costs) for the years ended December 31, 2015 and 2014, respectively. Including the effects of these costs, total lease operating expenses per Mcfe were $1.29 per Mcfe ($1.70 per Mcfe for total production costs) and $1.31 per Mcfe ($1.81 per Mcfe for total production costs) for the three months ended December 31, 2015 and 2014, respectively, and $1.31 per Mcfe ($1.73 per Mcfe for total production costs) and $1.26 per Mcfe ($1.78 per Mcfe for total production costs) for the years ended December 31, 2015 and 2014, respectively.

ATLAS ENERGY GROUP, LLC

Financial Information

(unaudited; in thousands except per unit amounts)

Three Months Ended

Years Ended

December 31,

December 31

Reconciliation of net loss to non-GAAP measures⁽¹⁾:

2015

2014

2015

2014

Net loss

$     (297,357)

$      (594,551)

$      (885,734)

$          (640,746)

Distributable cash flow not attributable to unitholders prior to
     February 27, 2015 (the asset transfer date)⁽²⁾

—

(15,823)

(4,291)

(58,738)

Atlas Resource net loss attributable to unitholders

62,926

153,157

177,410

151,831

Atlas Resource cash distributions earned by ATLS⁽³⁾

2,816

18,720

30,930

73,284

Atlas Growth net loss attributable to unitholders

6

352

237

837

Atlas Growth cash distributions earned by ATLS⁽³⁾

154

64

441

197

Non-recurring spinoff and acquisition costs

—

—

17,825

77

Amortization of deferred finance costs and predecessor

    Term Loan interest expense

761

329

16,785

1,270

Non-cash stock compensation expense

2,357

—

5,678

—

Gain on asset sales and disposal

—

(7)

—

(10)

Loss on extinguishment of debt

—

—

4,726

—

Preferred unit distributions

(1,014)

—

(3,360)

—

Other non-cash adjustments

369

148

2,105

559

Loss attributable to non-controlling interests

228,905

437,611

649,316

471,439

Distributable Cash Flow attributable to unitholders⁽¹⁾

$               (77)

$                  —

$          12,068

$                    —

Supplemental Adjusted EBITDA and Distributable Cash Flow Summary:

Atlas Resource Cash Distributions Earned⁽³⁾:

Limited Partner Units

$            2,699

$          14,580

$          28,871

$            57,905

Series A Preferred Units (2%)

117

1,074

2,059

4,077

Incentive Distribution Rights

—

3,066

—

11,302

Total Atlas Resource Cash Distributions Earned⁽³⁾

2,816

18,720

30,930

73,284

per limited partner unit

$            0.038

$            0.590

$            1.013

$              2.343

Atlas Growth Cash Distributions Earned⁽³⁾

154

64

441

197

Total Cash Distributions Earned

2,970

18,784

31,371

73,481

Cash general and administrative expenses⁽⁴⁾

(1,444)

(1,146)

(9,406)

(6,909)

Other, net

1,066

701

4,494

2,187

Adjusted EBITDA⁽¹⁾

2,592

18,339

26,459

68,759

Cash interest expense⁽⁵⁾

(1,655)

(2,516)

(6,740)

(10,021)

Preferred unit distributions

(1,014)

—

(3,360)

—

Distributable Cash Flow⁽¹⁾

$               (77)

$         15,823

$         16,359

$            58,738

Distributable cash flow not attributable to unitholders prior to
   February 27, 2015 (the asset transfer date)⁽²⁾

—

(15,823)

(4,291)

(58,738)

Distributable Cash Flow attributable to unitholders⁽¹⁾

$               (77)

$                 —

$         12,068

$                   —

⁽¹⁾

EBITDA and Distributable Cash Flow is relevant and useful, because they help ATLS' investors understand its operating performance, allows for easier comparison of its results with other master limited partnerships ("MLP"), and is a critical component in the determination of quarterly cash distributions. As a MLP, ATLS is required to distribute 100% of available cash, as defined in its limited partnership agreement ("Available Cash") and subject to cash reserves established by its general partner, to investors on a quarterly basis. ATLS refers to Available Cash prior to the establishment of cash reserves as DCF. EBITDA, Adjusted EBITDA and DCF should not be considered in isolation of, or as a substitute for, net income as an indicator of operating performance or cash flows from operating activities as a measure of liquidity. While ATLS' management believes that its methodology of calculating EBITDA, Adjusted EBITDA and DCF is generally consistent with the common practice of other MLPs, such metrics may not be consistent and, as such, may not be comparable to measures reported by other MLPs, who may use other adjustments related to their specific businesses. EBITDA, Adjusted EBITDA and DCF are supplemental financial measures used by ATLS' management and by external users of ATLS' financial statements such as investors, lenders under its credit facilities, research analysts, rating agencies and others to assess its:

·           Operating performance as compared to other publicly traded partnerships and other companies in the upstream and midstream energy sectors, without regard to financing methods, historical cost basis or capital structure;

·           Ability to generate sufficient cash flows to support its distributions to unitholders;

·           Ability to incur and service debt and fund capital expansion;

·           Viability of potential acquisitions and other capital expenditure projects; and

·           Ability to comply with financial covenants in its debt facility, which is calculated based upon Adjusted EBITDA.

DCF is determined by calculating EBITDA, adjusting it for non-cash, non-recurring and other items to achieve Adjusted EBITDA, and then deducting cash interest expense and maintenance capital expenditures. ATLS defines EBITDA as net income (loss) plus the following adjustments:

·           Interest expense;

·           Income tax expense;

·           Depreciation, depletion and amortization.

ATLS defines Adjusted EBITDA as EBITDA plus the following adjustments:

·           Cash distributions paid by ARP and AGP within 45 days after the end of the respective quarter, based upon their distributable cash flow generated during that quarter;

·           Asset impairments;

·           Acquisition and related costs;

·           Non-cash stock compensation;

·           (Gains) losses on asset disposal;

·           Cash proceeds received from monetization of derivative transactions;

·           Amortization of premiums paid on swaption derivative contracts; and

·           Other items.

ATLS adjusts DCF for non-cash, non-recurring and other items for the sole purpose of evaluating its cash distribution for the quarterly period, with EBITDA and Adjusted EBITDA adjusted in the same manner for consistency. ATLS defines DCF as Adjusted EBITDA less the following adjustments:

·           Cash interest expense; and

·           Maintenance capital expenditures.

⁽²⁾

In accordance with prevailing accounting literature, ATLS has adjusted its historical financial statements to present them combined with the historical financial results of the spin-off assets for all periods prior to its spin-off date of February 27, 2015.

⁽³⁾

Represents the cash distribution paid by ARP and AGP within 45 days after the end of each quarter, based upon the distributable cash flow generated during the respective quarter.

⁽⁴⁾

Excludes non-cash stock compensation expense and certain non-recurring spinoff costs and acquisition and related costs.

⁽⁵⁾

Excludes non-cash amortization of deferred financing costs.

ATLAS ENERGY GROUP, LLC

CAPITALIZATION INFORMATION

 (unaudited; in thousands)

December 31, 2015

Atlas

Atlas

Energy

Resource

Consolidated

Total debt

$        72,700

$  1,534,482

$     1,607,182

Less:  Cash

(29,861)

(1,353)

(31,214)

Total net debt

42,839

1,533,129

1,575,968

Unitholders' equity (deficit)

83,922

(84,628)

      7,959⁽¹⁾

Total capitalization

$        126,761

$  1,448,501

$    1,583,927

Ratio of net debt to capitalization

0.34x 

⁽¹⁾        Net of eliminated amounts.             

December 31, 2014

Atlas

Atlas

Energy

Resource

Consolidated

Total debt

$        148,125

$1,394,460

$    1,542,585

Less:  Cash

(43,111)

(15,247)

(58,358)

Total net debt

105,014

1,379,213

1,484,227

Owner's equity

267,637

947,537

      915,215⁽²⁾

Total capitalization

$        372,651

$2,326,750

$    2,399,442

Ratio of net debt to capitalization

0.28x 

⁽²⁾        Net of eliminated amounts.             

ATLAS ENERGY GROUP, LLC

CONSOLIDATING STATEMENTS OF OPERATIONS

 (unaudited; in thousands)

Three Months Ended December 31, 2015

Atlas

Atlas

Energy

Resource

Eliminations

Consolidated

Revenues:

      Gas and oil production

$          3,840

$        64,756

$                 −

$        68,596

      Well construction and completion

−

12,840

−

12,840

      Gathering and processing

−

1,385

−

1,385

      Administration and oversight

−

511

−

511

      Well services

−

5,254

−

5,254

      Gain on mark-to-market derivatives

102

57,517

−

57,619

      Other, net

247

161

−

408

          Total revenues

4,189

142,424

−

146,613

Costs and expenses:

      Gas and oil production

545

39,429

−

39,974

      Well construction and completion

−

11,165

−

11,165

      Gathering and processing

−

2,207

−

2,207

      Well services

−

2,427

−

2,427

      General and administrative

5,964

21,568

−

27,532

      Depreciation, depletion and amortization

3,856

32,030

−

35,886

      Asset impairment

55

294,389

−

294,444

          Total costs and expenses

10,420

403,215

−

413,635

Operating loss

(6,231)

(260,791)

−

(267,022)

Loss on asset sales and disposal

−

(905)

−

(905)

Interest expense

(2,402)

(27,028)

−

(29,430)

Net loss

(8,633)

(288,724)

−

(297,357)

Preferred unitholders' dividends

(1,014)

−

−

(1,014)

  Loss attributable to non-controlling
   interests

−

−

228,905

228,905

Net loss attributable to unitholders

$         (9,647)

$     (288,724)

$      228,905

$       (69,466)

ATLAS ENERGY GROUP, LLC

COMBINED CONSOLIDATING STATEMENTS OF OPERATIONS

 (unaudited; in thousands)

Three Months Ended December 31, 2014

Atlas

Atlas

Energy

Resource

Eliminations

Consolidated

Revenues:

      Gas and oil production

$          1,144

$      132,158

$                 −

$      133,302

      Well construction and completion

−

46,647

−

46,647

      Gathering and processing

−

2,820

−

2,820

      Administration and oversight

−

3,492

−

3,492

      Well services

−

6,518

−

6,518

      Gain on mark-to-market derivatives

−

2,819

−

2,819

      Other, net

325

247

−

572

          Total revenues

1,469

194,701

−

196,170

Costs and expenses:

      Gas and oil production

518

49,188

−

49,706

      Well construction and completion

−

40,562

−

40,562

      Gathering and processing

−

3,625

−

3,625

      Well services

−

2,482

−

2,482

      General and administrative

5,534

21,455

−

26,989

      Depreciation, depletion and amortization

720

63,846

−

64,566

      Asset impairment

6,880

573,774

−

580,654

          Total costs and expenses

13,652

754,932

−

768,584

Operating loss

(12,183)

(560,231)

−

(572,414)

Gain (loss) on asset sales and disposal

7

(183)

−

(176)

Interest expense

(2,845)

(19,116)

−

(21,961)

Net loss

(15,021)

(579,530)

−

(594,551)

  Loss attributable to non-controlling
   interests

−

−

437,611

437,611

Net loss attributable to owner

$       (15,021)

$     (579,530)

$      437,611

$     (156,940)

ATLAS ENERGY GROUP, LLC

COMBINED CONSOLIDATING STATEMENTS OF OPERATIONS

 (unaudited; in thousands)

Year Ended December 31, 2015

Atlas

Atlas

Energy

Resource

Eliminations

Consolidated

Revenues:

      Gas and oil production

$        11,846

$      356,999

$                 −

$      368,845

      Well construction and completion

−

76,505

−

76,505

      Gathering and processing

−

7,431

−

7,431

      Administration and oversight

−

7,812

−

7,812

      Well services

−

23,822

−

23,822

      Gain on mark-to-market derivatives

862

267,223

−

268,085

      Other, net

752

241

−

993

          Total revenues

13,460

740,033

−

753,493

Costs and expenses:

      Gas and oil production

2,229

169,653

−

171,882

      Well construction and completion

−

66,526

−

66,526

      Gathering and processing

−

9,613

−

9,613

      Well services

−

9,162

−

9,162

      General and administrative

43,601

65,968

−

109,569

      Depreciation, depletion and amortization

8,951

157,978

−

166,929

      Asset impairment

7,346

966,635

−

973,981

          Total costs and expenses

62,127

1,445,535

−

1,507,662

Operating loss

(48,667)

(705,502)

−

(754,169)

Loss on asset sales and disposal

−

(1,181)

−

(1,181)

Loss on extinguishment of debt

(4,726)

−

−

(4,726)

Interest expense

(23,525)

(102,133)

−

(125,658)

Net loss

(76,918)

(808,816)

−

(885,734)

Preferred unitholders' dividends

(3,360)

−

−

(3,360)

  Loss attributable to non-controlling
   interests

−

−

649,316

649,316

Net loss attributable to unitholders/owner

$       (80,278)

$     (808,816)

$      649,316

$     (239,778)

ATLAS ENERGY GROUP, LLC

COMBINED CONSOLIDATING STATEMENTS OF OPERATIONS

 (unaudited; in thousands)

Year Ended December 31, 2014

Atlas

Atlas

Energy

Resource

Eliminations

Consolidated

Revenues:

      Gas and oil production

$         5,707

$      470,051

$                 −

$      475,758

      Well construction and completion

−

173,564

−

173,564

      Gathering and processing

−

14,107

−

14,107

      Administration and oversight

−

15,564

−

15,564

      Well services

−

24,959

−

24,959

      Gain on mark-to-market derivatives

−

2,819

−

2,819

      Other, net

1,149

590

−

1,739

          Total revenues

6,856

701,654

−

708,510

Costs and expenses:

      Gas and oil production

2,070

182,226

−

184,296

      Well construction and completion

−

150,925

−

150,925

      Gathering and processing

−

15,525

−

15,525

      Well services

−

10,007

−

10,007

      General and administrative

18,127

72,349

−

90,476

      Depreciation, depletion and amortization

2,156