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Penn Virginia Resource has added a news release to its Investor Relations website. Title: Penn Virginia Resource Partners, L.P. Announces Third Quarter 2008 Results
Date: 11/5/2008 4:11:00 PM
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RADNOR, Pa.--(BUSINESS WIRE)--Nov. 5, 2008--Penn Virginia Resource
Partners, L.P. (NYSE: PVR) today reported financial and operational
results for the three months ended September 30, 2008 and provided an
update of full-year 2008 guidance.
Third Quarter 2008 Highlights
Third quarter 2008 highlights and results, with comparisons to
third quarter 2007 results, included the following:
-- Distributable cash flow (DCF), a non-GAAP (generally accepted
accounting principles) measure, of $29.4 million, as compared
to $31.9 million;
-- Operating income of $40.0 million, as compared to $31.8
million;
-- Adjusted net income, a non-GAAP measure, of $16.3 million, or
$0.20 per limited partner unit, as compared to $24.0 million,
or $0.44 per limited partner unit;
-- Quarterly record net income of $44.6 million, or $0.60 per
limited partner unit, as compared to $16.7 million, or
$0.29 per limited partner unit;
-- Coal production by lessees of 8.5 million tons, as compared to
a quarterly record 8.8 million tons;
-- Quarterly record average coal royalties per ton of $3.92
($3.67 net of coal royalties expense), as compared to $2.76
($2.65 net of coal royalties expense);
-- Quarterly record coal and natural resource management segment
revenues of $41.7 million ($39.5 million net of coal royalties
expense), as compared to $28.4 million ($27.4 million net of
coal royalties expense);
-- Quarterly record natural gas midstream system throughput
volumes of 27.7 Bcf, or 302 million cubic feet (MMcf) per day,
as compared to 17.8 Bcf, or 194 MMcf per day; and
-- Midstream gross margin of $30.0 million, or $1.08 per thousand
cubic feet (Mcf), as compared to $24.2 million, or $1.35 per
Mcf.
Reconciliations of non-GAAP financial measures to GAAP-based
measures appear in the financial tables later in this release.
DCF for the third quarter of 2008 of $29.4 million was eight
percent lower than DCF in the third quarter of 2007 due to:
-- a $9.4 million increase in cash paid to settle derivatives;
-- a $3.8 million "make-whole" payment related to the early
repayment of senior unsecured notes;
-- a $2.4 million increase in interest expense; and
-- a $1.1 million increase in maintenance capital expenditures.
These decreases to DCF were partially offset by:
-- an $11.5 million increase in operating income, prior to
depreciation, depletion and amortization (DD&A) expense, from
the coal and natural resource management segment (PVR Coal &
Natural Resource Management), primarily due to increased
average coal royalties; and
-- a $3.0 million increase in operating income, prior to DD&A
expense, from the natural gas midstream segment (PVR
Midstream), primarily due to increased system throughput
volumes as a result of plant expansions, acquisitions and
increased production by local producers.
Compared to record DCF of $40.2 million in the second quarter of
2008, DCF in the third quarter of 2008 decreased by $10.8 million, or
27 percent. This sequential decrease was primarily due to:
-- a $4.4 million increase in cash paid to settle derivatives;
-- a $3.9 million decrease in PVR Midstream operating income,
prior to DD&A expense, primarily due to the impacts of
Hurricane Ike upon the processing gross margin;
-- the $3.8 million make-whole payment; and
-- a $1.7 million increase in interest expense.
These decreases to DCF were partially offset by a $3.6 million
increase in PVR Coal & Natural Resource Management operating income,
prior to DD&A expense, primarily due to increased average coal
royalties.
The $7.7 million, or 32 percent, decrease in adjusted net income
as compared to the prior year quarter was primarily due to:
-- the increase in cash paid to settle derivatives;
-- the make-whole payment; and
-- the increase in interest expense.
The decrease was partially offset by an $8.3 million increase in
operating income primarily due to an $8.6 million, or 48 percent,
increase in operating income from PVR Coal & Natural Resource
Management.
The $27.9 million, or 167 percent, increase in net income as
compared to the prior year quarter was due to a $26.5 million increase
in derivatives income resulting from changes in the valuation of
unrealized derivative positions and the increase in operating income,
partially offset by the make-whole payment and the increase in
interest expense.
Cash Distribution
As previously announced, on November 14, 2008, PVR will pay to
unitholders of record as of November 6, 2008 a quarterly cash
distribution covering the period of July 1 through September 30, 2008
in the amount of $0.47 per unit, or an annualized rate of $1.88 per
unit. On an annualized basis, this represents a $0.04 per unit, or
two percent, increase over the annualized distribution of $1.84 per
unit paid for the second quarter of 2008 and a nine percent increase
over the annualized distribution of $1.72 per unit for the same
quarter of 2007.
Management Comment
A. James Dearlove, Chief Executive Officer of PVR, said, "We are
pleased to report our results for the third quarter of 2008, which
were led by the continued solid performance from our PVR Coal &
Natural Resource Management segment. Due to these results and
continued confidence in our outlook, we recently increased our
quarterly distribution for the seventh consecutive quarter to an
annualized distribution of $1.88 per unit, or nine percent higher than
the annualized amount in the same quarter a year ago.
"PVR Coal & Natural Resource Management had another strong
quarter, with record operating income primarily as a result of a 10
percent sequential increase in average coal royalties per ton. We
continue to benefit from higher coal prices, especially in the
Illinois Basin and Northern Appalachia, where average coal royalties
per ton increased by 27 percent and 17 percent, respectively, over the
second quarter of 2008, as well as Central Appalachia where the
average coal royalties per ton increased 10 percent from $4.75 in the
second quarter to $5.23 in the third quarter. The impact, primarily in
Central Appalachia and to a lesser extent in the Illinois Basin, of
lessee contract renewals at higher prices have improved our average
coal royalties per ton and we expect continued strength for the
balance of 2008 and into 2009. Accordingly, we have increased guidance
for our full-year 2008 average coal royalties per ton while slightly
decreasing lessee tonnage guidance.
"During the third quarter, PVR Midstream's daily system throughput
volumes increased 16 percent over the second quarter of 2008,
primarily as a result of contributions from the new Spearman and
Crossroads processing plants, as well as acquisitions in the Fort
Worth Basin and the panhandle of Texas. However, gross margin for PVR
Midstream was adversely impacted in the aftermath of Hurricane Ike
which forced us to curtail natural gas liquids (NGL) production at two
of our processing plants in the third quarter. Hurricane Ike caused no
damage to our facilities and all operations were back to normal by
mid-October. Despite these issues, we have re-affirmed our full-year
2008 system throughput volume guidance for PVR Midstream.
"As a partnership, we need to have access to capital to continue
the growth of our business segments. We recognize that access to the
debt and equity capital markets has become much more difficult
recently, and we cannot predict when those markets will improve. As of
the end of the third quarter, we had approximately $140 million of
unused borrowing capacity under our $700 million revolving credit
facility, which we believe provides adequate cushion to support our
working capital needs and some modest growth opportunities. We are
also confident that the fundamental characteristics of our business
segments remain strong."
Coal and Natural Resource Management Segment Review
During the third quarter of 2008, operating income for PVR Coal &
Natural Resource Management increased by 48 percent to $26.3 million
from $17.7 million in the prior year quarter. Revenues increased by 47
percent from the prior year quarter to $41.7 million primarily due to
a 36 percent increase in coal royalties revenue, along with a
109 percent increase in coal services and other revenues. Coal
royalties revenue increased primarily due to a 42 percent increase in
average coal royalties per ton to a record $3.92 from $2.76 in the
prior year quarter, partially offset by a 0.3 million ton, or four
percent, decrease in coal production by PVR's lessees to 8.5 million
tons in the third quarter of 2008 from a record 8.8 million tons in
the prior year quarter. Other revenues increased primarily due to
acquisitions of forestlands and oil and gas royalties at the end of
2007. Net of coal royalties expense, average coal royalties per ton
increased $1.02, or 38 percent, to $3.67 in the third quarter of 2008
as compared to $2.65 in the prior year quarter. The lessee production
decrease occurred primarily in Northern Appalachia and the Illinois
Basin, partially offset by an increase in Central Appalachia.
Operating expenses increased by 44 percent to $15.4 million primarily
due to increases in DD&A, general and administrative (G&A) and coal
royalties expenses.
Compared to the second quarter of 2008, the $2.3 million, or 10
percent, increase in third quarter 2008 segment operating income for
PVR Coal & Natural Resource Management was primarily due to a
$1.7 million increase in coal royalties revenue resulting from a
$0.34, or 10 percent, increase in average coal royalties per ton,
partially offset by a 0.3 million ton, or four percent, decrease in
lessee coal production. The sequential quarterly lessee production
decrease was primarily due to a longwall move in the third quarter at
a significant mine in Northern Appalachia and production shortfalls
due to adverse geology at significant mines in Central and Northern
Appalachia. Other revenues increased by $0.9 million while operating
expenses increased by $0.3 million.
Natural Gas Midstream Segment Review
Operating income for PVR Midstream decreased by two percent to
$13.7 million from $14.1 million in the prior year quarter. Midstream
gross margin increased by 24 percent to $30.0 million, from
$24.2 million in the prior year quarter primarily due to the record
system throughput volumes. The gross margin increase was more than
offset by higher operating and DD&A expenses, primarily due to
acquisitions and increased volumes from new plants. Adjusted for the
cash impact of derivatives, midstream gross margin was $17.5 million
in the third quarter of 2008, down 16 percent from $20.8 million in
the prior year quarter.
System throughput volumes at PVR's gas processing plants and
gathering systems increased 55 percent to a record 27.7 Bcf, or
approximately 302 MMcf per day, in the third quarter of 2008 from 17.8
Bcf, or approximately 194 MMcf per day, in the prior year quarter. The
volumes increased during the third quarter primarily as a result of
contributions of two new gas processing plants, the 60 MMcf per day
Spearman plant in the panhandle of Texas and the 80 MMcf per day
Crossroads plant in East Texas, which were both fully operational by
the end of the first and second quarters of 2008, respectively, as
well as contributions from gas gathering and transportation assets
acquired in the Fort Worth Basin in July 2008 and a pair of recent
pipeline asset acquisitions in the panhandle of Texas. Expenses other
than the cost of midstream gas increased by $7.1 million in the third
quarter of 2008 as compared to the prior year quarter, primarily due
to increased system throughput volumes and acquisitions.
Compared to the second quarter of 2008, the $6.6 million, or 33
percent, decrease in third quarter 2008 segment operating income for
PVR Midstream was primarily due to a decrease in gross margin to $30.0
million from $32.0 million in the second quarter of 2008, as well as
increases of $2.7 million in DD&A expense and a $1.3 million increase
in other operating expense related to acquisitions. The decrease in
gross margin was due to curtailments of NGL production during the
quarter as a result of hurricane-related plant shutdowns by end users
of NGLs along the Gulf Coast. The decrease in gross margin was
partially offset by higher system throughput volumes resulting from
the two new processing plants, as well as the acquisitions in the Fort
Worth Basin and panhandle of Texas.
Capital Resources and Impact of Derivatives
As of September 30, 2008, PVR had outstanding borrowings of $558.1
million under its $700 million revolving credit facility. The $146.4
million increase in outstanding borrowings as compared to the $411.7
million as of December 31, 2007 was primarily due to acquisitions and
capital expenditures during the first nine months of 2008, partially
offset by the net proceeds from a public offering of common units in
May 2008. In July 2008, $58.4 million of senior unsecured notes were
repaid, resulting in a $3.8 million make-whole payment to noteholders.
Interest expense increased from $4.7 million in the third quarter
of 2007 to $7.1 million in the third quarter of 2008 due to the higher
weighted average level of outstanding borrowings during the third
quarter of 2008 as compared to the prior year quarter.
For the third quarter of 2008, derivatives income was $15.7
million, as compared to expense of $10.7 million in the prior year
quarter. Cash settlements of derivatives included in these amounts
resulted in net cash payments of $14.1 million during the third
quarter of 2008 as compared to $4.7 million of net cash payments in
the prior year quarter. See the Natural Gas Midstream Segment Review
in this release for a discussion of the impact of derivatives on PVR
Midstream's gross margin. See the Guidance Table included in this
release for details of derivative positions as of September 30, 2008.
Guidance for 2008
See the Guidance Table included in this release for guidance
estimates for full-year 2008. These estimates, including capital
expenditure plans, are meant to provide guidance only and are subject
to revision as PVR's operating environment changes.
Conference Call
A joint conference call and webcast, during which management will
discuss third quarter 2008 financial and operational results for PVR
and Penn Virginia GP Holdings, L.P. (NYSE: PVG), is scheduled for
Thursday, November 6, 2008 at 1:00 p.m. ET. Prepared remarks by A.
James Dearlove, Chief Executive Officer, will be followed by a
question and answer period. Investors and analysts may participate via
phone by dialing 1-877-407-9205 five to ten minutes before the
scheduled start of the conference call, or via webcast by logging on
to PVR's website at www.pvresource.com at least 20 minutes prior to
the scheduled start of the call to download and install any necessary
audio software. A telephonic replay of the call will be available
until November 20, 2008 at 11:59 p.m. ET by dialing 1-877-660-6853 and
using the following replay pass codes: account #286, conference ID
#300124. An on-demand replay of the conference call will be available
at PVR's website beginning shortly after the call.
Headquartered in Radnor, PA, Penn Virginia Resource Partners, L.P.
(NYSE: PVR) is a publicly traded limited partnership formed by Penn
Virginia Corporation (NYSE: PVA). PVR manages coal properties and
related assets and operates a midstream natural gas gathering and
processing business.
For more information about PVR, visit its website at
www.pvresource.com.
Certain statements contained herein that are not descriptions of
historical facts are "forward-looking" statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Because such
statements include risks, uncertainties and contingencies, actual
results may differ materially from those expressed or implied by such
forward-looking statements. These risks, uncertainties and
contingencies include, but are not limited to, the following: the
volatility of commodity prices for natural gas, NGLs, crude oil and
coal; the relationship between natural gas, NGL and coal prices; the
projected demand for and supply of natural gas, NGLs and coal;
competition among producers in the coal industry generally and among
natural gas midstream companies; the extent to which the amount and
quality of actual production of our coal differs from estimated
recoverable coal reserves; our ability to generate sufficient cash
from our businesses to maintain and pay the quarterly distribution to
our general partner and our unitholders; the experience and financial
condition of our coal lessees and natural gas midstream customers,
including our lessees' ability to satisfy their royalty,
environmental, reclamation and other obligations to us and others;
operating risks, including unanticipated geological problems,
incidental to our coal and natural resource management or natural gas
midstream business; our ability to acquire new coal reserves or
natural gas midstream assets and new sources of natural gas supply and
connections to third-party pipelines on satisfactory terms; our
ability to retain existing or acquire new natural gas midstream
customers and coal lessees; the ability of our lessees to produce
sufficient quantities of coal on an economic basis from our reserves
and obtain favorable contracts for such production; the occurrence of
unusual weather or operating conditions including force majeure
events; delays in anticipated start-up dates of our lessees' mining
operations and related coal infrastructure projects and new processing
plants in our natural gas midstream business; environmental risks
affecting the mining of coal reserves or the production, gathering and
processing of natural gas; the timing of receipt of necessary
governmental permits by us or our lessees; hedging results; accidents;
changes in governmental regulation or enforcement practices,
especially with respect to environmental, health and safety matters,
including with respect to emissions levels applicable to coal-burning
power generators; uncertainties relating to the outcome of current and
future litigation regarding mine permitting; and risks and
uncertainties relating to general domestic and international economic
(including inflation, interest rates and financial and credit markets)
and political conditions (including the impact of potential terrorist
attacks).
Additional information concerning these and other factors can be
found in our press releases and public periodic filings with the
Securities and Exchange Commission, including our Annual Report on
Form 10-K for the year ended December 31, 2007. Many of the factors
that will determine our future results are beyond the ability of
management to control or predict. Readers should not place undue
reliance on forward-looking statements, which reflect management's
views only as of the date hereof. We undertake no obligation to revise
or update any forward-looking statements, or to make any other
forward-looking statements, whether as the result of new information,
future events or otherwise.
PENN VIRGINIA RESOURCE PARTNERS, L.P.
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - unaudited
(in thousands, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
Revenues
Natural gas midstream $ 241,282 $ 100,370 $ 601,127 $ 310,095
Coal royalties 33,308 24,426 88,911 73,455
Coal services 1,815 1,955 5,518 5,648
Other 8,871 3,453 23,039 9,350
---------- ---------- ---------- ----------
Total revenues 285,276 130,204 718,595 398,548
---------- ---------- ---------- ----------
Expenses
Cost of midstream gas
purchased 211,262 76,192 513,778 251,000
Operating 9,041 5,224 24,553 16,235
Taxes other than income 969 666 3,017 2,112
General and
administrative 7,078 5,706 20,339 17,108
Depreciation, depletion
and amortization 16,903 10,645 41,322 30,600
---------- ---------- ---------- ----------
Total expenses 245,253 98,433 603,009 317,055
---------- ---------- ---------- ----------
Operating income 40,023 31,771 115,586 81,493
Other income (expense)
Interest expense (7,060) (4,678) (17,366) (11,842)
Other (4,153) 299 (3,233) 931
Derivatives 15,742 (10,730) (6,424) (20,927)
---------- ---------- ---------- ----------
Net income $ 44,552 $ 16,662 $ 88,563 $ 49,655
---------- ---------- ---------- ----------
Allocation of net income:
General partner's
interest in net income $ 6,309 $ 3,385 $ 15,505 $ 8,819
Limited partners'
interest in net income $ 38,243 $ 13,277 $ 73,058 $ 40,836
Net income per limited
partner unit, basic and
diluted $ 0.60 $ 0.29 $ 1.45 $ 0.89
Weighted average number of
units outstanding, basic
and diluted 51,663 46,106 48,804 46,103
----------------------------------------------------------------------
Other data:
Distributions to
limited partners (per
unit) - (a) $ 0.47 $ 0.43 $ 1.38 $ 1.26
Distributions paid $ 29,841 $ 22,873 $ 80,199 $ 65,853
Distributable cash flow
(non-GAAP) - (b) $ 29,369 $ 31,902 $ 96,334 $ 88,279
Coal and natural
resource management
segment:
Coal royalty tons
(in thousands) 8,496 8,842 24,975 25,186
Average coal
royalties ($ per
ton) $ 3.92 $ 2.76 $ 3.56 $ 2.92
Average net coal
royalties ($ per
ton) - (c) $ 3.67 $ 2.65 $ 3.24 $ 2.74
Natural gas midstream
segment:
System throughput
volumes (MMcf) 27,744 17,844 68,915 50,763
Gross margin (in
thousands) $ 30,020 $ 24,178 $ 87,349 $ 59,095
(a) - These quarterly distributions are for the periods shown and are
payable within 45 days after the end of each quarter to unitholders
of record and to PVR's general partner.
(b) - See subsequent page for the calculation and description of
distributable cash flow.
(c) - The average net coal royalties per ton deducts coal royalties
expense, which are incurred primarily in Central Appalachia.
PENN VIRGINIA RESOURCE PARTNERS, L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS - unaudited
(in thousands)
September 30, December 31,
2008 2007
-------------- --------------
Assets
Cash $ 10,706 $ 19,530
Receivables 92,976 78,888
Derivative assets 3,825 1,212
Other current assets 4,792 4,104
-------------- --------------
Total current assets 112,299 103,734
Property, plant and equipment, net 884,737 731,282
Other long-term assets 242,046 96,263
-------------- --------------
Total assets $ 1,239,082 $ 931,279
-------------- --------------
Liabilities and partners' capital
Accounts payable and accrued
liabilities $ 80,351 $ 76,236
Current portion of long-term debt - 12,561
Deferred income 3,231 2,958
Derivative liabilities 16,988 41,733
-------------- --------------
Total current liabilities 100,570 133,488
Derivative liabilities 2,982 1,315
Other long-term liabilities 30,938 26,047
Long-term debt 558,100 399,153
Partners' capital 546,492 371,276
-------------- --------------
Total liabilities and partners'
capital $ 1,239,082 $ 931,279
-------------- --------------
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - unaudited
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
Cash flows from operating
activities
Net income $ 44,552 $ 16,662 $ 88,563 $ 49,655
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation, depletion
and amortization 16,903 10,645 41,322 30,600
Derivative contracts:
Total derivative
losses (gains) (14,239) 12,034 10,552 24,359
Cash settlements of
derivatives (14,054) (4,702) (33,279) (8,963)
Noncash interest
expense 1,175 164 1,543 494
Equity earnings, net of
distributions received (1,409) (255) (1,415) (1,133)
Other (986) - (1,607) (198)
Changes in operating
assets and liabilities (10,502) (5,528) (10,912) (8,478)
---------- ---------- ---------- ----------
Net cash provided by
operating
activities 21,440 29,020 94,767 86,336
---------- ---------- ---------- ----------
Cash flows from investing
activities
Acquisitions (156,791) (93,423) (253,031) (145,879)
Additions to property,
plant and equipment (16,062) (10,781) (54,902) (29,655)
Other 982 - 1,657 197
---------- ---------- ---------- ----------
Net cash used in
investing
activities (171,871) (104,204) (306,276) (175,337)
---------- ---------- ---------- ----------
Cash flows from financing
activities
Proceeds from issuance
partners' capital - - 140,958 -
Distributions to
partners (29,841) (22,873) (80,199) (65,853)
Proceeds from
borrowings, net 176,600 89,000 146,000 146,000
Other (3,454) - (4,074) 860
---------- ---------- ---------- ----------
Net cash provided by
financing
activities 143,305 66,127 202,685 81,007
---------- ---------- ---------- ----------
Net decrease in cash and
cash equivalents (7,126) (9,057) (8,824) (7,994)
Cash and cash equivalents
- beginning of period 17,832 12,503 19,530 11,440
---------- ---------- ---------- ----------
Cash and cash equivalents
- end of period $ 10,706 $ 3,446 $ 10,706 $ 3,446
---------- ---------- ---------- ----------
PENN VIRGINIA RESOURCE PARTNERS, L.P.
CERTAIN NON-GAAP FINANCIAL MEASURES - unaudited
(in thousands, except per unit data)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
Reconciliation of GAAP
"Net income" to Non-GAAP
"Distributable cash flow"
--------------------------
Net income $ 44,552 $ 16,662 $ 88,563 $ 49,655
Depreciation, depletion
and amortization 16,903 10,645 41,322 30,600
Commodity derivative
contracts:
Derivative losses
included in operating
income 1,503 1,304 4,128 3,432
Derivative losses
(gains) included in
other income (15,742) 10,730 6,424 20,927
Cash settlements of
derivatives (14,054) (4,702) (33,279) (8,963)
Maintenance capital
expenditures (3,793) (2,737) (10,824) (7,372)
---------- ---------- ---------- ----------
Distributable cash flow
(a) $ 29,369 $ 31,902 $ 96,334 $ 88,279
========== ========== ========== ==========
Distribution to Partners:
Limited partner units $ 23,827 $ 19,364 $ 64,862 $ 56,710
General partner interest 486 395 1,323 1,157
Incentive distribution
rights (b) 5,528 3,114 14,014 7,986
---------- ---------- ---------- ----------
Total cash distribution
paid during period $ 29,841 $ 22,873 $ 80,199 $ 65,853
========== ========== ========== ==========
Total cash distribution
paid per unit during
period $ 0.46 $ 0.42 $ 1.35 $ 1.23
========== ========== ========== ==========
Reconciliation of GAAP
"Net income" to Non-GAAP
"Net income as adjusted"
--------------------------
Net income as reported $ 44,552 $ 16,662 $ 88,563 $ 49,655
Adjustments for
derivatives:
Derivative losses
included in operating
income 1,503 1,304 4,128 3,432
Derivative losses
(gains) included in
other income (15,742) 10,730 6,424 20,927
Cash payments to settle
derivatives for the
period (14,054) (4,702) (33,279) (8,963)
---------- ---------- ---------- ----------
Net income as adjusted (c) $ 16,259 $ 23,994 $ 65,836 $ 65,051
========== ========== ========== ==========
Allocation of net income,
as adjusted:
General partner's
interest in net
income, as adjusted $ 5,743 $ 3,532 $ 15,050 $ 9,127
Limited partners'
interest in net
income, as adjusted $ 10,516 $ 20,462 $ 50,786 $ 55,924
Net income as adjusted,
per limited partner unit,
basic and diluted $ 0.20 $ 0.44 $ 1.04 $ 1.21
========== ========== ========== ==========
Reconciliation of GAAP
"Net income per limited
partner unit" reflecting
the impact of EITF 03-06
to Non-GAAP "Adjusted net
income per limited
partner unit"
--------------------------
Net income per limited
partner unit, basic and
diluted $ 0.60 $ 0.29 $ 1.45 $ 0.89
Impact of theoretical
distribution of earnings
pursuant to EITF 03-06 0.14 - 0.05 -
---------- ---------- ---------- ----------
Adjusted net income per
limited partner unit,
basic and diluted (d) $ 0.74 $ 0.29 $ 1.50 $ 0.89
========== ========== ========== ==========
(a) - Distributable cash flow represents net income plus depreciation,
depletion and amortization expenses, plus derivative losses (gains)
included in operating income and other income, less cash paid for
derivative settlements, less maintenance capital expenditures.
Distributable cash flow is a significant liquidity metric which is an
indicator of PVR's ability to generate cash flows at a level that can
sustain or support an increase in quarterly cash distributions paid
to its partners. Distributable cash flow is also the quantitative
standard used by investors and professional research analysts in the
valuation, comparison, rating and investment recommendations of
publicly traded partnerships. Distributable cash flow is presented
because management believes it is a useful adjunct to net cash
provided by operating activities under GAAP. Distributable cash flow
is not a measure of financial performance under GAAP and should not
be considered as an alternative to cash flows from operating,
investing or financing activities, as an indicator of cash flows, as
a measure of liquidity or as an alternative to net income.
(b) - In accordance with PVR's partnership agreement, incentive
distribution rights represent the right to receive an increasing
percentage of quarterly distributions of available cash from
operating surplus after the minimum quarterly distribution and the
target distribution levels have been achieved.
(c) - Net income as adjusted represents net income adjusted to exclude
the effects of non-cash changes in the fair value of derivatives.
Management believes this presentation is widely used by investors and
professional research analysts in the valuation, comparison, rating
and investment recommendations of companies in the natural gas
midstream industry. Management uses this information for comparative
purposes within the industry. Net income as adjusted is not a measure
of financial performance under GAAP and should not be considered as a
measure of liquidity or as an alternative to net income.
(d) - Net income per limited partner unit, as required by EITF 03-06,
is theoretical and pro forma in nature and does not reflect economic
probabilities of whether earnings for an accounting period would or
could be distributed to unitholders. PVR's Partnership Agreement does
not provide for the distribution of net income. Instead, it provides
for the distribution of available cash, which is a contractually
defined term that generally means all cash on hand at the end of each
quarter after establishment of sufficient cash reserves required to
operate PVR in a prudent manner. Accordingly, the distributions PVR
has paid historically and will pay in future periods are not impacted
by net income per limited partner unit as required by EITF 03-06.
In addition to net income per limited partner unit as calculated in
accordance with EITF 03-06, management intends to continue to present
"adjusted net income per limited partner unit," as reflected in the
table above, which is consistent with its presentation of net income
per limited partner unit in prior periods. "Adjusted net income per
limited partner unit," as presented in the table above, is defined as
net income after deducting the amount allocated to the general
partner's interests, including the managing general partners'
incentive distribution rights, divided by the weighted average number
of outstanding limited partner units during the period. As part of
this calculation, in accordance with the cash distribution
requirements contained in PVR's Partnership Agreement, PVR's net
income is first allocated to the general partner based on the amount
of incentive distributions attributable to the period. The remainder
is then allocated between the limited partners and the general
partner based on their respective percentage ownership in PVR.
Adjusted net income per limited partner unit is used as a
supplemental financial measure by its management and by external
users of its financial statements, such as investors, commercial
banks, research analysts and others. PVR's method of computing
adjusted net income per limited partner unit may not be the same
method used to compute similar measures reported by other publicly-
traded partnerships and may be computed differently by PVR in
different contexts.
PENN VIRGINIA RESOURCE PARTNERS, L.P.
QUARTERLY SEGMENT INFORMATION - unaudited
(in thousands)
Coal and Natural
Resource Natural Gas
Management Midstream Consolidated
---------------- ----------- ------------
Three Months Ended September
30, 2008
Revenues
Natural gas midstream $ - $ 241,282 $ 241,282
Coal royalties 33,308 - 33,308
Coal services 1,815 - 1,815
Timber 1,911 - 1,911
Oil and gas royalties 1,940 - 1,940
Other 2,686 2,334 5,020
---------------- ----------- ------------
Total revenues 41,660 243,616 285,276
---------------- ----------- ------------
Expenses
Cost of midstream gas
purchased - 211,262 211,262
Coal royalties expense 2,125 - 2,125
Other operating 752 6,164 6,916
Taxes other than income 373 596 969
General and
administrative 3,321 3,757 7,078
Depreciation, depletion
and amortization 8,794 8,109 16,903
---------------- ----------- ------------
Total expenses 15,365 229,888 245,253
---------------- ----------- ------------
Operating income $ 26,295 $ 13,728 $ 40,023
---------------- ----------- ------------
Additions to property and
equipment and acquisitions $ 497 $ 172,356 $ 172,853
----------------------------------------------------------------------
Coal and Natural
Resource Natural Gas
Management Midstream Consolidated
---------------- ----------- ------------
Three Months Ended September
30, 2007
Revenues
Natural gas midstream $ - $ 100,370 $ 100,370
Coal royalties 24,426 - 24,426
Coal services 1,955 - 1,955
Timber 113 - 113
Oil and gas royalties 264 - 264
Other 1,658 1,418 3,076
---------------- ----------- ------------
Total revenues 28,416 101,788 130,204
---------------- ----------- ------------
Expenses
Cost of midstream gas
purchased - 76,192 76,192
Coal royalties expense 979 - 979
Other operating 1,020 3,225 4,245
Taxes other than income 242 424 666
General and
administrative 2,630 3,076 5,706
Depreciation, depletion
and amortization 5,833 4,812 10,645
---------------- ----------- ------------
Total expenses 10,704 87,729 98,433
---------------- ----------- ------------
Operating income $ 17,712 $ 14,059 $ 31,771
---------------- ----------- ------------
Additions to property and
equipment and acquisitions $ 93,449 $ 10,755 $ 104,204
PENN VIRGINIA RESOURCE PARTNERS, L.P.
YEAR-TO-DATE SEGMENT INFORMATION - unaudited
(in thousands)
Coal and Natural
Resource Natural Gas
Management Midstream Consolidated
---------------- ----------- ------------
Nine Months Ended September
30, 2008
Revenues
Natural gas midstream $ - $ 601,127 $ 601,127
Coal royalties 88,911 - 88,911
Coal services 5,518 - 5,518
Timber 5,328 - 5,328
Oil and gas royalties 4,730 - 4,730
Other 6,523 6,458 12,981
---------------- ----------- ------------
Total revenues 111,010 607,585 718,595
---------------- ----------- ------------
Expenses
Cost of midstream gas
purchased - 513,778 513,778
Coal royalties expense 8,034 - 8,034
Other operating 1,488 15,031 16,519
Taxes other than income 1,115 1,902 3,017
General and
administrative 9,780 10,559 20,339
Depreciation, depletion
and amortization 22,733 18,589 41,322
---------------- ----------- ------------
Total expenses 43,150 559,859 603,009
---------------- ----------- ------------
Operating income $ 67,860 $ 47,726 $ 115,586
---------------- ----------- ------------
Additions to property and
equipment and acquisitions $ 25,186 $ 282,747 $ 307,933
----------------------------------------------------------------------
Coal and Natural
Resource Natural Gas
Management Midstream Consolidated
---------------- ----------- ------------
Nine Months Ended September
30, 2007
Revenues
Natural gas midstream $ - $ 310,095 $ 310,095
Coal royalties 73,455 - 73,455
Coal services 5,648 - 5,648
Timber 530 - 530
Oil and gas royalties 847 - 847
Other 4,830 3,143 7,973
---------------- ----------- ------------
Total revenues 85,310 313,238 398,548
---------------- ----------- ------------
Expenses
Cost of midstream gas
purchased - 251,000 251,000
Coal royalties expense 4,582 - 4,582
Other operating 2,086 9,567 11,653
Taxes other than income 832 1,280 2,112
General and
administrative 7,989 9,119 17,108
Depreciation, depletion
and amortization 16,643 13,957 30,600
---------------- ----------- ------------
Total expenses 32,132 284,923 317,055
---------------- ----------- ------------
Operating income $ 53,178 $ 28,315 $ 81,493
---------------- ----------- ------------
Additions to property and
equipment and acquisitions $ 146,915 $ 28,619 $ 175,534
PENN VIRGINIA RESOURCE PARTNERS, L.P.
GUIDANCE TABLE - unaudited
(dollars and tons in millions)
PVR is providing the following guidance regarding financial and
operational expectations for full-year 2008.
Actual
------------------------------
First Second Third
Quarter Quarter Quarter YTD Full-Year
2008 2008 2008 2008 2008 Guidance
------- ------- ------- ------ ---------------
Coal and Natural
Resource Management
Segment:
-----------------------
Coal royalty tons
(millions) (a) 7.7 8.8 8.5 25.0 33.0 - 33.5
Revenues:
Average coal
royalties per ton
(b) $ 3.14 3.58 3.92 3.56 3.55 - 3.65
Other (c) $ 6.3 7.4 8.4 22.1 27.0 - 28.0
Expenses:
Cash operating
expenses (d) $ 6.3 7.5 6.6 20.4 25.5 - 26.5
Depreciation,
depletion and
amortization (e) $ 6.4 7.5 8.8 22.7 30.0 - 31.0
Capital expenditures:
Expansion and
acquisitions (f) $ 0.1 24.6 0.5 25.2 27.0 - 28.0
Maintenance capital
expenditures $ - - - - 0.2 - 0.3
Total segment
capital
expenditures $ 0.1 24.6 0.5 25.2 27.2 - 28.3
Natural Gas Midstream
Segment:
-----------------------
System throughput
volumes (MMcf per
day) 190 262 302 252 270 - 280
Expenses:
Cash operating
expenses (g) $ 8.1 8.9 10.5 27.5 37.0 - 39.0
Depreciation,
depletion and
amortization (h) $ 5.1 5.4 8.1 18.6 24.0 - 25.5
Capital expenditures:
Expansion and
acquisitions (i) $ 16.4 86.3 196.6 299.3 325.0 - 335.0
Maintenance capital
expenditures (j) $ 3.1 3.9 3.8 10.8 14.0 - 15.0
Total segment
capital
expenditures $ 19.5 90.2 200.4 310.1 339.0 - 350.0
Other:
-----------------------
Interest expense:
Average long-term
debt outstanding $412.5 411.8 510.1 454.3 485.0 - 495.0
Interest rate 5.3% 4.4% 4.5% 4.6% 4.6% - 4.8%
These estimates are meant to provide guidance only and are subject to
revision as PVR's operating environment changes.
Notes (changes from previous guidance):
(a) - Decreased tonnage guidance by 0.5 to 1.0 million tons to reflect
a longwall movement at a mine in Northern Appalachia and adverse
geology at significant mines in Central and Northern Appalachia.
(b) - Increased by $0.20 to 0.25 per ton to reflect expected higher
coal sales prices received by PVR lessees.
(c) - Increased by $0.5 to $1.0 million to reflect higher expected
coal services and other revenues.
(d) - Increased by $0.5 to $1.0 million to reflect higher expected
coal royalties expense.
(e) - Reduced the upper end of guidance by $0.5 million to reflect
lower expected depreciation, depletion and amortization expense.
(f) - Increased by $1.5 million to include higher levels of capital
expenditures during the first nine months of 2008.
(g) - Increased by $1.0 to $2.0 million to reflect higher expected
operating, general and administrative and taxes other than income
expenses.
(h) - Increased by $0.5 to 1.0 million to reflect higher expected
depreciation, depletion and amortization expense.
(i) - Increased by $10.0 million to include costs of additional
organic growth projects.
(j) - Increased by $2.0 to $3.0 million to reflect higher levels of
maintenance capital expenditures during the first nine months, as
well as the fourth quarter, of 2008.
PENN VIRGINIA RESOURCE PARTNERS, L.P.
DERIVATIVE CONTRACT SUMMARY - unaudited
As of September 30, 2008
Weighted Average Price -
Collars
Average Weighted ---------------------------
Volume Per Average Additional
Day Price Put Option Put Call
------------ ------------ ---------- ------- --------
Frac spread (in MMBtu) (per MMBtu)
Fourth quarter
2008 7,824 $ 5.02
Ethane sale
swaps (in gallons) (per gallon)
Fourth quarter
2008 34,440 $ 0.4700
Propane sale
swaps (in gallons) (per gallon)
Fourth quarter
2008 26,040 $ 0.7175
Crude oil sale
swaps (in barrels) (per barrel)
Fourth quarter
2008 560 $ 49.27
Natural gasoline
collars (in gallons) (per gallon)
Fourth quarter
2008 6,300 $1.4800 $ 1.6465
Crude oil
collars (in barrels) (per barrel)
Fourth quarter
2008 400 $ 65.00 $ 75.25
Natural gas sale
swaps (in MMBtu) (per MMBtu)
Fourth quarter
2008 4,000 $ 6.97
Crude oil three-
way collars (a) (in barrels) (per barrel)
First quarter
2009 through
fourth quarter
2009 1,000 $ 70.00 $ 90.00 $ 119.25
Frac spread
collars (in MMBtu) (per MMBtu)
First quarter
2009 through
fourth quarter
2009 6,000 $ 9.09 $ 13.94
Management estimates that, excluding the derivative positions
described above, for every $1.00 per MMBtu decrease or increase in
the natural gas price, natural gas midstream gross margin and
operating income for the last three months of 2008 would increase or
decrease by approximately $1.4 million. In addition, management
estimates that for every $5.00 per barrel increase or decrease in the
oil price, natural gas midstream gross margin and operating income
would increase or decrease by approximately $1.8 million. This
assumes that crude oil prices, natural gas prices and inlet volumes
remain constant at forecasted levels. These estimated changes in
gross margin and operating income exclude potential cash receipts or
payments in settling these derivative positions.
(a) - A three-way collar is a combination of options: a sold call, a
purchased put and a sold put. The sold call establishes the maximum
price that PVR will receive for the contracted commodity volumes. The
purchased put establishes the minimum price that PVR will receive for
the contracted volumes unless the market price for the commodity
falls below the sold put strike price, at which point the minimum
price equals the reference price (i.e., NYMEX) plus the excess of the
purchased put strike price over the sold put strike price.
CONTACT: Penn Virginia Resource Partners, L.P.
James W. Dean
Vice President, Investor Relations
Ph: (610) 687-8900
Fax: (610) 687-3688
E-Mail: invest@pennvirginia.com
SOURCE: Penn Virginia Resource Partners, L.P.
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