ATLAS
AMERICA, INC.
October
8, 2008
Mr.
H.
Christopher Owings
Assistant
Director
Division
of Corporation Finance
Mail
Stop
3561
United
States Securities and
Exchange
Commission
100
F
Street, N.E.
Washington,
D.C. 20549
|
|
Re: |
Atlas
America, Inc.
Form
10-K for Fiscal Year Ended December 31, 2007
Filed
February 29, 2008
Form
10-Q for Quarter Ended March 31, 2008
Filed
May 9, 2008
File
No. 1-32169
|
Dear
Mr.
Owings:
A
copy of
this letter has been furnished through EDGAR as correspondence.
This
letter sets forth the Registrant’s response to the request that representation
be given to the Staff of the Division of Corporation Finance (the “Staff”) of
the Securities and Exchange Commission (the “Commission”) that the Registrant
will include additional disclosures in the Summary of Significant Accounting
Policies—Principles of Consolidation, —Oil and Gas Properties, and —Impairment
of Long-Lived Assets beginning with its Form 10Q as of September 30, 2008 and
in
all future filings. The following disclosures are reproduced in their entirety
and include the additional language requested as set forth below.
Principles
of Consolidation
The
consolidated financial statements include the accounts of the Company and its
subsidiaries, all of which are wholly-owned except for Atlas Pipeline Holdings
and Atlas Energy Resources, which are majority-controlled by the Company. In
accordance with established practice in the oil and gas industry, the Company
includes in its consolidated financial statements its pro-rata share of assets,
liabilities, income and lease operating and general and administrative costs
and
expenses of the energy partnerships in which it has an interest. The Company’s
financial statements do not include proportional consolidation of the depletion
or impairment expenses of the partnerships it invests in, but rather calculates
these items to its own economics as further explained below. All material
intercompany transactions have been eliminated.
Mr.
H. Christopher Owings
Page
2
Oil
and Gas Properties
The
Company follows the successful efforts method of accounting for oil and gas
producing activities. Acquisition costs of leases and development activities
are
capitalized. Exploratory drilling costs are capitalized pending determination
of
whether a well is successful. Exploratory wells subsequently determined to
be
dry holes are charged to expense. Costs resulting in exploratory discoveries
and
all development costs, whether successful or not, are capitalized. Geological
and geophysical costs and delay rentals are expensed. Oil is converted to gas
equivalent basis (“Mcfe”) at the rate one barrel equals 6 Mcf.
Depletion
depreciation and amortization expense is determined on a field-by-field basis
using the units-of-production method, with depletion, depreciation and
amortization rates for leasehold acquisition costs based on estimated proved
reserves and depletion, depreciation and amortization rates for well and related
equipment costs based on proved developed reserves associated with each
field. Depletion rates are determined based on reserve quantity
estimates and the capitalized costs of undeveloped and developed producing
properties. Capitalized costs of developed producing properties in each field
are aggregated to include the Company’s costs of property interests in
uncontrolled but proportionately consolidated from investment partnerships,
wells drilled solely by the Company, properties purchased and working interests
with other outside operators.
Upon
the
sale or retirement of a complete field of a proved property, the cost is
eliminated from the property accounts, and the resultant gain or loss is
reclassified to income. Upon the sale of an individual well, the proceeds are
credited to accumulated depreciation and depletion. Upon the sale of an entire
interest in an unproved property where the property had been assessed for
impairment individually, a gain or loss is recognized in the statements of
income. If a partial interest in an unproved property is sold, any funds
received are accounted for as a reduction of the cost in the interest
retained.
Impairment
of Long-Lived Assets
The
Company’s long-lived assets are reviewed for impairment annually or whenever
events or changes in circumstances indicate that their carrying amounts may
not
be recoverable. Long-lived assets are reviewed for potential impairments at
the
lowest levels for which there are identifiable cash flows that are largely
independent of other groups of assets.
Mr.
H. Christopher Owings
Page
3
The
review of the Company’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 Company’s plans to continue to produce and
develop proved reserves. Expected future cash flow from the sale of production
of reserves is calculated based on estimated future prices. The Company
estimates prices based upon current contracts in place at December 31, 2007
adjusted for basis differentials and market related information including
published futures prices. The estimated future level of production is based
on
assumptions surrounding future levels of prices and costs, field decline rates,
market demand and supply, and the economic and regulatory climates. If the
carrying value exceeds such 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
Company’s method of calculating its reserves may result in reserve quantities
and values which are greater than those which would be calculated by the
investment partnerships which the Company sponsors and owns an interest in
but
does not control. The Company’s reserve quantities include reserves in excess of
its proportionate share of reserves in a partnership which the Company may
be
unable to recover due to the partnership legal structure. The Company may have
to pay additional consideration in the future as a well or investment
partnership becomes uneconomic under the terms of the partnership agreement
in
order for the Company to recover these excess reserves and to acquire any
additional residual interests in the wells held by other partnership investors.
The acquisition of any well interest from the partnership by the Company is
governed under the partnership agreement and must be at fair market value
supported by an appraisal of an independent expert selected by the
Company.
Mr.
H. Christopher Owings
Page
4
Unproved
properties are reviewed annually for impairment or whenever events or
circumstances indicate that the carrying amount of an asset may not be
recoverable. Impairment charges are recorded if conditions indicate the Company
will not explore the acreage prior to expiration of the applicable leases or
if
it is determined that the carrying value of the properties is above their fair
value.
If
you
have any questions or comments regarding this letter, please contact Nancy
J.
McGurk, Chief Accounting Officer, at (330) 896-8510, ext. 201 or Lisa
Washington, Chief Legal Officer, at (215) 717-3387.
| |
Very
truly yours,
|
| |
|
| |
Atlas
America, Inc.
|
| |
|
| |
/s/
Nancy J. McGurk
|
| |
|
| |
Nancy
J. McGurk
|
| |
Chief
Accounting Officer
|