8-KOther Events

ATMOS ENERGY CORP 8-K Report, Corporate Update (Dec 21, 2010)

Filed December 21, 2010For Securities:ATO

Summary

Atmos Energy Corporation (ATO) filed an 8-K on December 21, 2010, to report the outcome of a significant lawsuit filed in April 2009 in Kentucky. The litigation involved royalty disputes related to their Park City Gathering Project, stemming from a third-party producer's failure to pay royalties to landowners and investors/working interest owners. Although Atmos Energy companies had contracts to gather and sell natural gas, they did not have direct contractual relationships with the landowners or investors. The jury, on December 17, 2010, delivered a substantial verdict against Atmos Energy and two subsidiaries, Atmos Energy Marketing, LLC and Atmos Gathering Company, LLC. The verdict includes $492,509 in compensatory damages and $7,237,635 in punitive damages for the landowners, and $3,374,160 in compensatory damages and $20,244,960 in punitive damages for the investors/working interest owners. The company strongly believes the trial court erred and that the verdict is unsupported by evidence and law, and intends to appeal.

Key Highlights

  • 1Atmos Energy Corporation and two subsidiaries were found liable in a Kentucky lawsuit concerning royalty payments for its Park City Gathering Project.
  • 2A jury awarded significant damages to landowners and investors/working interest owners totaling over $31 million in compensatory and punitive damages.
  • 3Landowners were awarded $492,509 in compensatory and $7,237,635 in punitive damages.
  • 4Investors/working interest owners were awarded $3,374,160 in compensatory and $20,244,960 in punitive damages.
  • 5Atmos Energy asserts no direct contractual relationship existed with the landowners or investors/working interest owners.
  • 6The company intends to appeal the jury's verdict, believing it to be legally and evidentially unsupported.
  • 7Atmos Energy expresses confidence that the final outcome of the litigation and appeal will not materially adversely affect its financial condition, results of operations, or net cash flows.

Frequently Asked Questions

The lawsuit stemmed from royalty disputes related to Atmos Energy's Park City Gathering Project. A third-party producer failed to pay royalties to landowners and investors/working interest owners for natural gas produced from their properties. While Atmos Energy companies were involved in gathering and selling the gas, they maintained they had no direct contractual relationship with these parties.

The jury awarded a total of $492,509 in compensatory damages and $7,237,635 in punitive damages to the landowners, and $3,374,160 in compensatory damages and $20,244,960 in punitive damages to the investors/working interest owners. This brings the total damages awarded to approximately $31.35 million.

Yes, Atmos Energy strongly believes the trial court erred and that the jury's verdict is unsupported by evidence and contrary to the law. The company intends to exercise its right to appeal the verdict.

Despite the substantial jury award, Atmos Energy believes that the final outcome of the litigation and appeal will not have a material adverse effect on its financial condition, results of operations, or net cash flows. This confidence is based on their belief in the merits of their appeal.