Atlas Pipeline Partners Leases Land in Largest U.S. Natural Gas Discovery

August 20, 2010

Many investors assume that when a company sells its assets, much like BP in the wake of its Gulf of Mexico disaster, the company is rescuing itself from probable monetary difficulties.

However, some companies sell off existing assets in order to free-up capital in order to invest in potentially profitable endeavors.  Such is the case with Atlas Pipeline Partners, LP of Pennsylvania.

Atlas Pipeline Partners recently announced that they are planning to sell their production facility in Elk City, Oklahoma for $682 million.  Although many investors and analysts would see that kind of news as a highly-justified reason for selling their investment in a company, in the case of Atlas, the price of their shares increased.

Although many companies, such as BP, sell assets to create ‘emergency funds’, Atlas Pipeline Partners has done so in order to lease land and create facilities on the largest natural gas deposit in the United States, called the Marcellus formation, located on the East Coast in the states of Pennsylvania, New York and West Virginia.

As early as 2002, many geologists were aware of the Marcellus formation – a huge area of shale that holds at least 500 trillion cubic feet of natural gas.  Many analysts suggest that an amount of gas that large could power much of the United States for at least 200 years.

Unfortunately, in 2002, the Marcellus formation gained very little interest in natural gas circles due to the lack of profitability in vertically drilling in the region.

However, drilling technologies have advanced exponentially in the last 8 years, creating the ability to drill horizontally, which immediately puts the Marcellus formation into the area of enormous natural gas profitability.

One of Atlas Pipeline’s joint ventures, Laurel Mountain Midstream, LLC, is currently operating over 1,800 miles of natural gas pipelines within the Marcellus shale formation.

The area currently controlled by Laurel Mountain Midstream contains nearly 6,900 natural gas wells across Pennsylvania and northern West Virginia, with a daily output of more than 100 million cubic feet of natural gas – estimated at a value of over $1 million per day.

Currently, Atlas Pipeline Partners are creating a new series of pipelines estimated to produce five times the current amount of natural gas once they are finished – 500 million cubic feet of natural gas per day, which adds up to $1.68 billion per year.  This figure is much larger than that of many existing natural gas facilities in Africa, the Middle East, and Alaska.  Additionally, Laurel Mountain Midstream estimates that the area could be viable for at least 50 years.