I still prefer Atlas to either Continental or Range Resources, and worth noting is that Continental does not pay a dividend, and the dividend yield for Range Resources is only 0.2%. Atlas Resource is also well below the other two on a price to book and price to sales basis:
| Price to Book | Price to Sales | |
| Atlas Resources | 1.3 | 2.4 |
| Continental Resources | 5.3 | 7.6 |
| Range Resources | 5.0 | 8.8 |
Atlas’ robust production growth
Production has been on the rise for both Atlas Resource and Atlas Pipeline. For the first nine months of 2012, Atlas Resource produced 60,531 Mcfd of natural gas, compared to the 31,687 Mcfd in 2011, almost 50% production growth. Meanwhile, total production costs fell from $1.15 per Mcfe to $0.92 per Mcfe for the same time period.
As for its sister company Atlas Pipeline, the company gathered 35% more gas and processed 31% more for the first nine months of 2012, compared to the same period in 2011.
Dividend on the rise
The production growth is expected to continue and translate into doubling revenues for Atlas Resource 2013, in part thanks to its $255 million North Texas acquisition that added 250 wells and 88,000 acres to its portfolio. This will help the company meet expectations to pay out between $2.35 and $2.50 a unit in 2013. If the oil and gas company does manage to pay out $2.35 per unit (and in accordance to the sliding scale below) in dividends, at the stock’s current trading range its dividend yield would be upwards of 10%.
As Atlas Resource ramps up production thanks to its newly acquired assets, the benefits could be recognized for both Atlas Resource and Atlas Energy shareholders. According to Atlas Energy and Atlas Resource partnership agreement, Atlas Resource must distribute 100% of all available cash to unit holders. This is initially set up as a 98% (limited partners) and 2% (general partner) split, but as the amount of cash available for distribution increases, so does Atlas Energy’s (Atlas Resource’s general partner) share of the cash. Here is how the distribution rights from Atlas Resource to Atlas Energy shakeout:
– 13% of all cash distributed in any quarter after each common unit has received $0.46
– 23% of all cash distributed in any quarter after each common unit has received $0.50
– 48% of all cash distributed in any quarter after each common unit has received $0.60
For investors bullish on the entire industry, a good pick could be Atlas Energy, which has exposure to the production, gathering, and processing of natural gas.
Don’t be fooled
The Atlas Resource dividend is high, and in the context of the company alone might appear to be too high–but with the backing of Atlas Energy, this could well be an underappreciated dividend payer. The oil and gas company also has a healthy balance sheet when compared to major peers:
| Debt Ratio | |
| Atlas Resource Partners | 19.5% |
| Cabot Oil & Gas | 23.6% |
| Range Resources | 42.0% |
| Continental Resources | 35.0% |
| EQT Corp | 28.0% |
Although Cooperman (check out Cooperman’s upside picks) appears to be one of the few hedge fund interested in Atlas Resource Partners (see all the hedge funds owning Atlas), it doesn’t mean investors shouldn’t give the company a look.
The article Billionaire Leon Cooperman Has Found A Dividend Monster originally appeared on Fool.com and is written by Marshall Hargrave.
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