RADNOR, Pa.--
Penn Virginia Corporation (NYSE:PVA) today reported financial and operational results for the three months ended September 30, 2008 and provided updates to full-year 2008 guidance.
Third Quarter 2008 Highlights and Guidance Update
Third quarter 2008 highlights and results, with comparisons to third quarter 2007 results, included the following:
-- Quarterly record oil and gas production of 11.7 billion cubic
feet of natural gas equivalent (Bcfe), or 127.1 million cubic
feet of natural gas equivalent (MMcfe) per day, as compared to
11.1 Bcfe, or 120.7 MMcfe per day;
-- Quarterly record operating income of $122.3 million, as
compared to $51.9 million;
-- Operating cash flow, a non-GAAP (generally accepted accounting
principles) measure, of $97.5 million as compared to $78.9
million;
-- Quarterly record adjusted net income, a non-GAAP measure which
excludes the effects of a non-cash change in derivatives fair
value, of $46.1 million, or $1.08 per diluted share, as
compared to $18.6 million, or $0.49 per diluted share;
-- Quarterly record net income of $123.7 million, or $2.90 per
diluted share, as compared to net income of $17.1 million, or
$0.45 per diluted share; and
-- Full-year oil and gas production guidance of between 46.5 and
47.5 Bcfe, or between 127.0 and 129.8 MMcfe per day, as
compared to the previous guidance range of 46.5 to 48.0 Bcfe.
Reconciliations of non-GAAP financial measures to GAAP-based measures appear in the financial tables later in this release.
In the third quarter of 2008, operating income was a record $122.3 million, which was $70.4 million, or 136 percent, higher than the third quarter of 2007. The increase was primarily due to 228 percent higher operating income in the oil and gas segment, 48 percent higher operating income in the coal and natural resource management segment (PVR Coal & Natural Resource Management) and lower corporate general and administrative (G&A) expense, partially offset by two percent lower operating income in the natural gas midstream segment (PVR Midstream).
Operating cash flow in the third quarter of 2008 increased to $97.5 million, up $18.6 million, or 24 percent, as compared to the third quarter of 2007 primarily due to the increase in operating income, partially offset by an increase in cash paid to settle derivatives, a "make-whole" payment related to the early repayment of senior unsecured notes of Penn Virginia Resource Partners, L.P. (PVR) and higher cash income taxes paid.
The increase in adjusted net income in the third quarter of 2008 as compared to the third quarter of 2007 was primarily due to the increase in operating income, partially offset by the increase in cash paid to settle derivatives.
The increase in net income in the third quarter of 2008 as compared to the third quarter of 2007 was primarily due to a $129.6 million increase in derivatives income, resulting mainly from changes in the valuation of unrealized derivative positions, and higher operating income, partially offset by higher income tax expense and higher minority interest.
Management Comment
A. James Dearlove, President and Chief Executive Officer of PVA, said, "We are pleased with this quarter's record results, with strong contributions from our oil and gas segment and our PVR Coal & Natural Resource Management segment. Our oil and gas segment benefited from record quarterly production and high commodity prices, while PVR Coal & Natural Resource Management reported record operating income and average coal royalties per ton.
"We expect growth in our oil and gas segment from a number of our project areas, including the Lower Bossier (Haynesville) Shale in East Texas, the Granite Wash formation in the Mid-Continent region, the Selma Chalk in Mississippi and Appalachian horizontal coalbed methane (HCBM). We are encouraged by all of our initial Lower Bossier Shale horizontal wells, Granite Wash horizontal wells and Selma Chalk horizontal wells for which we have results. In Appalachia, in addition to continued HCBM drilling, we have expanded our acreage position in areas of Pennsylvania that we believe to be prospective for the Marcellus Shale with initial exploration expected in late 2009.
"PVR continues to experience growth in the cash flows from its coal and natural resource management and midstream segments as a result of strong coal fundamentals and increased system throughput volumes due to recent midstream expansions and acquisitions. PVR Coal & Natural Resource Management had a solid third quarter due to the rise in average coal royalties per ton to a record $3.92, which was 42 percent higher than the prior year quarter and 10 percent higher than the second quarter of 2008. The increase was primarily due to the renewals of a substantial portion of PVR's lessees' contracts for production in Central Appalachia and the Illinois Basin at higher prices.
"During the third quarter, PVR Midstream increased its system throughput volumes by 55 percent over the prior year quarter and 16 percent relative to the second quarter of 2008 as a result of contributions from two new processing plants and recent acquisitions of gathering and transportation systems in Texas. However, the increase in system throughput volumes in the quarter was more than offset by the impact of Hurricane Ike, which forced PVR Midstream to curtail natural gas liquids (NGL) production during September and October.
"We own 77 percent of Penn Virginia GP Holdings, L.P. (NYSE: PVG), the owner of the general partner and largest limited partner unitholder of PVR. PVG currently provides approximately $46 million of annualized cash distributions to PVA - approximately 19 percent higher than the annualized amount in the prior year quarter.
"Like most of the independent oil and gas industry, we are taking a cautious approach to our capital spending plans as we exit 2008 and enter 2009. We are in the process of designing our 2009 capital spending budget, which will reflect our ongoing view of industry and capital markets conditions. Based on currently available information, we believe our inventory of drilling locations and financial position is sufficient to allow us to continue to grow production and reserves in 2009."
Oil and Gas Segment Review
Record third quarter 2008 oil and gas production of 11.7 Bcfe was five percent higher than the 11.1 Bcfe in the third quarter of 2007 and was two percent higher than the 11.4 Bcfe in the second quarter of 2008. See PVA's separate operational update news release dated October 29, 2008 for a more detailed discussion of third quarter 2008 drilling and production operations for the oil and gas segment.
Oil and gas segment operating income for the third quarter of 2008 was $89.0 million, a 228 percent increase from the $27.2 million in the third quarter of 2007. Total oil and gas revenues increased by 84 percent from $85.3 million in the third quarter of 2007 to $156.7 million in the third quarter of 2008. The increase in revenues was primarily attributable to a 61 percent increase in the realized natural gas price and a 63 percent increase in the realized crude oil price. Revenues also grew as a result of the production increase, which was primarily attributable to a 441 percent increase in NGL production as a result of the new PVR Midstream processing plant in East Texas.
In the third quarter of 2008, total oil and gas segment expenses increased by $9.6 million, or 16 percent, to $67.7 million, or $5.79 per Mcfe produced, from $58.2 million, or $5.24 per Mcfe produced, in the third quarter of 2007, as discussed below:
-- Third quarter 2008 cash operating expenses increased by $6.0
million, or 29 percent, to $26.7 million, or $2.29 per Mcfe
produced, from $20.8 million, or $1.86 per Mcfe produced, in the
third quarter of 2007. The overall increase in cash operating
expenses was primarily due to the production increase. Increases
in cash operating expenses per unit of production as compared to
the prior year quarter are discussed below:
-- Lease operating expense increased to $1.29 per Mcfe from $1.10
per Mcfe, primarily due to increased compressor rentals in the
East Texas region due to volume growth, where PVA's drilling
program is highly active, and increased processing fees related to
PVR Midstream's East Texas gas processing plant;
-- Taxes other than income increased to $0.56 per Mcfe from $0.39
per Mcfe, primarily due to increased severance taxes related to
higher commodity prices in the third quarter of 2008 relative to
the prior year quarter; and
-- G&A expense increased to $0.44 per Mcfe from $0.37 per Mcfe,
primarily due to increased staffing costs.
-- Exploration expense decreased to $8.3 million in the third quarter
of 2008, as compared to $12.9 million in the prior year quarter,
primarily due to decreases in dry hole costs and leasehold
expenses, partially offset by increases in geological, geophysical
and other expenses.
-- Depletion, depreciation and amortization (DD&A) expense increased
by $10.5 million, or 47 percent, to $32.7 million, or $2.79 per
Mcfe, in the third quarter of 2008 from $22.2 million, or $2.00
per Mcfe, in the prior year quarter. The overall increase in DD&A
expense was primarily due to the higher depletion rate per unit of
production, a result of higher drilling costs and acquisitions as
well as the production increase.
Coal & Natural Resource Management and Natural Gas Midstream Segment Review (PVR and PVG)
Operating income for PVR Coal & Natural Resource Management increased 48 percent to $26.3 million in the third quarter of 2008 from $17.7 million in the prior year quarter. Hurricane-related curtailments caused operating income for PVR Midstream to decrease two percent to $13.7 million in the third quarter of 2008 from $14.1 million in the prior year quarter. Financial and operational results and full-year 2008 guidance for each of these segments are provided in the financial tables later in this release. In addition, operational updates for these segments are discussed in more detail in PVR's news release dated November 5, 2008 (please visit PVR's website, www.pvresource.com under "For Investors," for a copy of the release).
As previously announced, on November 19, 2008, PVG 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 $0.38 per unit, or an annualized rate of $1.52 per unit. On an annualized basis, this represents a $0.08 per unit, or six percent, increase over the annualized distribution of $1.44 per unit paid for the second quarter of 2008 and a 27 percent increase over the annualized distribution of $1.20 per unit for the same quarter of 2007.
As a result of PVG's distribution increase, PVA will receive a cash distribution of approximately $11.4 million in the fourth quarter of 2008, which would be approximately $45.7 million on an annualized basis.
PVG owns PVR's general partner, including the incentive distribution rights, and is PVR's largest limited partner unitholder. PVG derives its cash flow solely from cash distributions received from PVR. As the owner of the general partner and largest unitholder of PVG, PVA reports its financial results on a consolidated basis with the financial results of PVG.
A conversion of the GAAP-compliant financial statements ("As reported") to the equity method of accounting ("As adjusted") is included in the "Conversion to Non-GAAP Equity Method" table in this release. Using the equity method, PVG's results are reduced to a few line items and the results from oil and gas operations and corporate are therefore highlighted. Management believes that this is useful since the oil and gas and corporate segments provide a majority of the cash flow from operations generated by PVA, as compared to distributions PVA receives from PVG. Management believes that the financial statements presented using the equity method are less complex and more comparable to those of other oil and gas exploration and production companies.
Capital Resources and Impact of Derivatives
As of September 30, 2008, PVA had outstanding borrowings of $410.0 million, including $230.0 million of convertible senior subordinated notes due 2012 and $180.0 million of borrowings under its $479.0 million revolving credit facility. The $58.0 million increase in outstanding borrowings as compared to the $352.0 million at December 31, 2007 was primarily due to higher spending to fund PVA's oil and gas capital expenditures during the first nine months of 2008.
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.
Consolidated interest expense increased from $10.8 million in the third quarter of 2007 to $11.9 million in the third quarter of 2008. The increase was due to higher weighted average levels of outstanding borrowings during the third quarter of 2008 as compared to the prior year quarter.
Based on derivatives currently in place for natural gas production, PVA has hedged approximately 55 percent of natural gas production for the fourth quarter of 2008, based on the midpoint of production guidance, at weighted average floors and ceilings of $8.50 and $11.15 per MMBtu. In 2009, PVA has hedged approximately 42 million cubic feet of natural gas per day at weighted average floors and ceilings of $8.94 and $11.72 per MMBtu. See the Guidance Table included in this release for details of production guidance and derivative positions.
Due to decreases in natural gas and crude oil prices experienced during the third quarter, the mark-to-market valuation of PVA and PVR open hedging positions resulted in derivatives income of $125.1 million, as compared to expense of $4.5 million in the prior year quarter. Included in derivatives income for the third quarter of 2008 was $109.4 million related to PVA's oil and gas segment and $15.7 million of derivatives income related to PVR. Cash settlements of derivatives included in these amounts resulted in net cash payments of $19.8 million during the third quarter of 2008, as compared to $0.6 million of net cash receipts in the third quarter of 2007. Included in the cash settlement of derivatives for the third quarter of 2008 was $5.7 million of net cash payments related to PVA's oil and gas segment and $14.1 million of net cash payments related to PVR. Most of the mark-to-market based derivative income represents prospective future payments assuming commodity prices remain as indicated by the futures markets on the September 30, 2008 valuation date.
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 PVA's and PVR's operating environments change.
Third Quarter 2008 Financial and Operational Results Conference Call
A conference call and webcast, during which management will discuss third quarter 2008 financial and operational results for PVA, is scheduled for Thursday, November 6, 2008 at 3:00 p.m. ET. Prepared remarks by A. James Dearlove, President and 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 PVA's website at www.pennvirginia.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 #300120. An on-demand replay of the conference call will be available at PVA's website beginning shortly after the call.
Headquartered in Radnor, PA and a member of the S&P SmallCap 600 Index, Penn Virginia Corporation (NYSE: PVA) is an independent natural gas and oil company focused on the exploration, acquisition, development and production of reserves in onshore regions of the United States, including the Cotton Valley play in East Texas, the Selma Chalk play in Mississippi, the Mid-Continent region, the Appalachian Basin and the Gulf Coast of Louisiana and Texas. PVA also owns approximately 77 percent of Penn Virginia GP Holdings, L.P. (NYSE: PVG), the owner of the general partner and the largest unitholder of Penn Virginia Resource Partners, L.P. (NYSE: PVR), a manager of coal and natural resource properties and related assets and the operator of a midstream natural gas gathering and processing business. For more information, please visit PVA's website at www.pennvirginia.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; our ability to develop and replace oil and gas reserves and the price for which such reserves can be acquired; the relationship between natural gas, NGL, oil and coal prices; the projected demand for and supply of natural gas, NGLs, crude oil and coal; the availability and costs of required drilling rigs, production equipment and materials; our ability to obtain adequate pipeline transportation capacity for our oil and gas production; competition among producers in the oil and natural gas and coal industries generally and among natural gas midstream companies; the extent to which the amount and quality of actual production of our oil and natural gas or PVR's coal differs from estimated proved oil and gas reserves and recoverable coal reserves; PVR's ability to generate sufficient cash from its businesses to maintain and pay the quarterly distribution to its general partner and its unitholders; the experience and financial condition of PVR's coal lessees and natural gas midstream customers, including the lessees' ability to satisfy their royalty, environmental, reclamation and other obligations to PVR and others; operating risks, including unanticipated geological problems, incidental to our business and to PVR's coal or natural gas midstream business; PVR's 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; PVR's ability to retain existing or acquire new natural gas midstream customers and coal lessees; the ability of PVR's lessees to produce sufficient quantities of coal on an economic basis from PVR's 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 oil and natural gas production, of PVR's lessees' mining operations and related coal infrastructure projects and new processing plants in PVR's natural gas midstream business; environmental risks affecting the drilling and producing of oil and gas wells, the mining of coal reserves or the production, gathering and processing of natural gas; the timing of receipt of necessary governmental permits by us and by PVR or PVR's 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; 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); and PVG's ability to generate sufficient cash from its interests in PVR to maintain and pay the quarterly distribution to its general partner and its unitholders.
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 CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS - unaudited
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Revenues
Natural gas $101,911 $ 65,310 $295,636 $193,961
Crude oil 13,764 6,299 37,442 14,985
Natural gas liquids
(NGLs) 10,481 1,290 18,887 3,458
Natural gas midstream 184,914 100,370 494,260 310,095
Coal royalties 33,308 24,426 88,911 73,455
Gain on the sale of
property and equipment 31,279 12,312 31,335 12,436
Other 9,955 5,751 28,690 16,036
--------- --------- --------- ---------
Total revenues 385,612 215,758 995,161 624,426
--------- --------- --------- ---------
Expenses
Cost of midstream gas
purchased 155,564 76,192 408,247 251,000
Operating 23,437 17,602 66,653 47,557
Exploration 8,346 12,873 19,765 23,610
Taxes other than income 7,671 5,156 23,325 15,995
General and
administrative
(excluding equity-based
compensation) 16,211 15,109 49,299 42,616
Equity-based compensation
- (a) 2,078 1,330 5,707 3,923
Impairment of oil and gas
properties - 2,405 - 2,405
Depreciation, depletion
and amortization 49,978 33,207 133,481 89,823
--------- --------- --------- ---------
Total expenses 263,285 163,874 706,477 476,929
--------- --------- --------- ---------
Operating income 122,327 51,884 288,684 147,497
Other income (expense)
Interest expense (11,938) (10,843) (31,600) (25,878)
Other (4,088) 576 (782) 2,536
Derivatives 125,132 (4,455) (4,387) (22,068)
--------- --------- --------- ---------
Income before minority
interest and income taxes 231,433 37,162 251,915 102,087
Minority interest 28,276 9,135 52,252 27,659
Income tax expense 79,419 10,913 75,792 29,033
--------- --------- --------- ---------
Net income $123,738 $ 17,114 $123,871 $ 45,395
========= ========= ========= =========
Per share data:
Net income per share, basic $ 2.95 $ 0.45 $ 2.96 $ 1.20
========= ========= ========= =========
Net income per share, diluted
- (b) $ 2.90 $ 0.45 $ 2.94 $ 1.19
========= ========= ========= =========
Weighted average shares
outstanding, basic 41,881 37,898 41,715 37,748
Weighted average shares
outstanding, diluted 42,544 38,213 42,028 38,045
----------------------------------------------------------------------
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Production
Natural gas (MMcf) 10,046 10,407 29,869 27,872
Crude oil (MBbls) 117 87 331 240
NGLs (MBbls) 157 29 300 96
Total natural gas, crude
oil and NGL production
(MMcfe) 11,690 11,102 33,655 29,888
Prices
Natural gas ($ per Mcf) $ 10.14 $ 6.28 $ 9.90 $ 6.96
Crude oil ($ per Bbl) $ 117.64 $ 72.40 $ 113.12 $ 62.44
NGLs ($ per Bbl) $ 66.76 $ 44.48 $ 62.96 $ 36.02
(a) - Our equity-based compensation expense includes our stock option expense and the amortization of restricted stock and units in accordance with SFAS No. 123(R), Share-Based Payment.
(b) - Diluted EPS net income per share includes an adjustment to net income for the dilutive effect of PVR's net income allocated to PVR units that we own and have awarded under PVR's long-term incentive compensation plan.
PENN VIRGINIA CORPORATION
CONSOLIDATED BALANCE SHEETS - unaudited
(in thousands)
September 30, December 31,
2008 2007
------------- ------------
Assets
Current assets $ 251,173 $ 244,072
Net property and equipment 2,399,454 1,899,014
Other assets 259,994 110,375
------------- ------------
Total assets $ 2,910,621 $ 2,253,461
============= ============
Liabilities and shareholders' equity
Current liabilities $ 285,490 $ 261,899
Long-term debt of PVA 410,000 352,000
Long-term debt of PVR 558,100 399,153
Other liabilities and deferred taxes 327,075 251,149
Minority interests of subsidiaries 309,191 179,162
Shareholders' equity 1,020,765 810,098
------------- ------------
Total liabilities and
shareholders' equity $ 2,910,621 $ 2,253,461
============= ============
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 $ 123,738 $ 17,114 $ 123,871 $ 45,395
Adjustments to
reconcile net income
to net cash provided
by operating
activities:
Depreciation,
depletion and
amortization 49,978 33,207 133,481 89,823
Derivative contracts:
Total derivative
losses (gains) (123,628) 6,053 8,516 25,569
Cash settlements of
derivatives (19,755) 586 (46,740) 2,281
Deferred income taxes 62,050 9,218 61,545 21,902
Minority interest 28,276 9,135 52,252 27,659
Gain on sale of
property and
equipment (31,279) (12,312) (31,335) (12,436)
Impairment of oil and
gas properties - 2,405 - 2,405
Dry hole and unproved
leasehold expense 5,520 11,991 14,992 20,707
Other 2,622 1,523 1,504 2,918
--------- --------- --------- ---------
Operating cash flow
(see attached table
"Certain Non-GAAP
Financial Measures") 97,522 78,920 318,086 226,223
Changes in operating
assets and
liabilities (5,727) (2,736) (41,399) (17,242)
--------- --------- --------- ---------
Net cash provided
by operating
activities 91,795 76,184 276,687 208,981
--------- --------- --------- ---------
Cash flows from investing
activities
Acquisitions (162,078) (162,794) (278,185) (239,018)
Additions to property
and equipment (162,857) (109,685) (392,031) (308,987)
Other 33,215 29,142 33,954 29,385
--------- --------- --------- ---------
Net cash used in
investing
activities (291,720) (243,337) (636,262) (518,620)
--------- --------- --------- ---------
Cash flows from financing
activities
Dividends paid (2,351) (2,130) (7,037) (6,370)
Distributions paid to
minority interest
holders (17,917) (12,937) (45,829) (36,402)
Borrowings from bank
indebtedness 46,431 - 46,431 -
Net proceeds from
(repayments of) PVA
borrowings (25,000) 86,000 58,000 193,500
Net proceeds from PVR
borrowings 176,600 89,000 146,000 146,000
Net proceeds from
issuance of PVR
partners' capital - - 138,015 -
Other (2,311) (188) 8,475 7,376
--------- --------- --------- ---------
Net cash provided
by financing
activities 175,452 159,745 344,055 304,104
--------- --------- --------- ---------
Net decrease in cash and
cash equivalents (24,473) (7,408) (15,520) (5,535)
Cash and cash equivalents
- beginning of period 43,480 22,211 34,527 20,338
--------- --------- --------- ---------
Cash and cash equivalents
- end of period $ 19,007 $ 14,803 $ 19,007 $ 14,803
========= ========= ========= =========
PENN VIRGINIA CORPORATION
QUARTERLY SEGMENT INFORMATION - unaudited
(in thousands except where noted)
Coal and
Natural
Resource
Oil and Gas Management
---------------------- -------------
(per
Amount Mcfe)(a)
---------- -----------
Three Months Ended September 30,
2008
Production
Total natural gas, crude oil and
NGLs (MMcfe) 11,690
Natural gas (MMcf) 10,046
Crude oil (MBbls) 117
NGLs (MBbls) 157
Coal royalty tons (thousands of
tons) 8,496
Midstream system throughput
volumes (MMcf)
Revenues
Natural gas $ 101,911 $ 10.14 $ -
Crude Oil 13,764 117.64 -
NGL 10,481 66.76 -
Natural gas midstream - -
Coal royalties - 33,308
Gain on the sale of property
and equipment 30,509 770
Other 60 7,582
---------- ----------- -------------
Total revenues 156,725 13.41 41,660
---------- ----------- -------------
Expenses
Cost of midstream gas
purchased - - -
Operating expense 15,067 1.29 2,877
Exploration 8,346 0.71 -
Taxes other than income 6,537 0.56 373
General and administrative 5,122 0.44 3,321
Depreciation, depletion and
amortization 32,665 2.79 8,794
---------- ----------- -------------
Total expenses 67,737 5.79 15,365
---------- ----------- -------------
Operating income (loss) $ 88,988 $ 7.62 $ 26,295
---------- ----------- -------------
Additions to property and
equipment and acquisitions $ 213,572 $ 497
Natural
Gas Eliminations
Midstream and Other Consolidated
---------- ------------ ------------
Three Months Ended September 30,
2008
Production
Total natural gas, crude oil and
NGLs (MMcfe)
Natural gas (MMcf)
Crude oil (MBbls)
NGLs (MBbls)
Coal royalty tons (thousands of
tons)
Midstream system throughput
volumes (MMcf) 27,744
Revenues
Natural gas $ - $ - $ 101,911
Crude Oil - - 13,764
NGL - - 10,481
Natural gas midstream 241,282 (56,368) 184,914
Coal royalties - - 33,308
Gain on the sale of property
and equipment - - 31,279
Other 2,334 (21) 9,955
---------- ------------ ------------
Total revenues 243,616 (56,389) 385,612
---------- ------------ ------------
Expenses
Cost of midstream gas
purchased 211,262 (55,698) 155,564
Operating expense 6,164 (671) 23,437
Exploration - - 8,346
Taxes other than income 596 165 7,671
General and administrative 3,757 6,089 18,289
Depreciation, depletion and
amortization 8,109 410 49,978
---------- ------------ ------------
Total expenses 229,888 (49,705) 263,285
---------- ------------ ------------
Operating income (loss) $ 13,728 $ (6,684) $ 122,327
---------- ------------ ------------
Additions to property and
equipment and acquisitions $ 172,356 $ (61,490) $ 324,935
Coal and
Natural
Resource
Oil and Gas Management
---------------------- -------------
(per
Amount Mcfe)(a)
---------- -----------
Three Months Ended September 30,
2007
Production
Total natural gas, crude oil and
NGLs (MMcfe) 11,102
Natural gas (MMcf) 10,407
Crude oil (MBbls) 87
NGLs (MBbls) 29
Coal royalty tons (thousands of
tons) 8,842
Midstream system throughput
volumes (MMcf)
Revenues
Natural gas $ 65,310 $ 6.28 $ -
Crude Oil 6,299 72.40 -
NGL 1,290 44.48 -
Natural gas midstream - -
Coal royalties - 24,426
Gain on the sale of property
and equipment 12,312 -
Other 120 3,990
---------- ----------- -------------
Total revenues 85,331 7.69 28,416
---------- ----------- -------------
Expenses
Cost of midstream gas
purchased - - -
Operating expense 12,247 1.10 1,999
Exploration 12,873 1.16 -
Taxes other than income 4,380 0.39 242
General and administrative 4,124 0.37 2,630
Impairment of oil and gas
properties 2,405 0.22 -
Depreciation, depletion and
amortization 22,152 2.00 5,833
---------- ----------- -------------
Total expenses 58,181 5.24 10,704
---------- ----------- -------------
Operating income (loss) $ 27,150 $ 2.45 $ 17,712
---------- ----------- -------------
Additions to property and
equipment and acquisitions $ 166,500 $ 93,449
Natural
Gas Eliminations
Midstream and Other Consolidated
---------- ------------ ------------
Three Months Ended September 30,
2007
Production
Total natural gas, crude oil and
NGLs (MMcfe)
Natural gas (MMcf)
Crude oil (MBbls)
NGLs (MBbls)
Coal royalty tons (thousands of
tons)
Midstream system throughput
volumes (MMcf) 17,844
Revenues
Natural gas $ - $ - $ 65,310
Crude Oil - 6,299
NGL - 1,290
Natural gas midstream 100,370 - 100,370
Coal royalties - - 24,426
Gain on the sale of property
and equipment - - 12,312
Other 1,418 223 5,751
---------- ------------ ------------
Total revenues 101,788 223 215,758
---------- ------------ ------------
Expenses
Cost of midstream gas
purchased 76,192 - 76,192
Operating expense 3,225 131 17,602
Exploration - - 12,873
Taxes other than income 424 110 5,156
General and administrative 3,076 6,609 16,439
Impairment of oil and gas
properties - - 2,405
Depreciation, depletion and
amortization 4,812 410 33,207
---------- ------------ ------------
Total expenses 87,729 7,260 163,874
---------- ------------ ------------
Operating income (loss) $ 14,059 $ (7,037) $ 51,884
---------- ------------ ------------
Additions to property and
equipment and acquisitions $ 10,755 $ 1,775 $ 272,479
(a) - Natural gas revenues are shown per Mcf, crude oil and NGL
revenues are shown per Bbl, and all other amounts are shown per Mcfe.
PENN VIRGINIA CORPORATION
YEAR-TO-DATE SEGMENT INFORMATION - unaudited
(in thousands except where noted)
Coal and
Natural
Resource
Oil and Gas Management
----------------------- ------------
(per
Amount Mcfe)(a)
----------- -----------
Nine Months Ended September 30,
2008
Production
Total natural gas, crude oil and
NGLs (MMcfe) 33,655
Natural gas (MMcf) 29,869
Crude oil (MBbls) 331
NGLs (MBbls) 300
Coal royalty tons (thousands of
tons) 24,975
Midstream system throughput
volumes (MMcf)
Revenues
Natural gas $ 295,636 $ 9.90 $ -
Crude Oil 37,442 113.12 -
NGLs 18,887 62.96 -
Natural gas midstream - -
Coal royalties - 88,911
Gain on the sale of property
and equipment 30,543 792
Other 883 21,307
----------- ----------- ------------
Total revenues 383,391 11.39 111,010
----------- ----------- ------------
Expenses
Cost of midstream gas
purchased - - -
Operating expense 43,370 1.29 9,522
Exploration 19,765 0.59 -
Taxes other than income 19,480 0.58 1,115
General and administrative 14,869 0.44 9,780
Depreciation, depletion and
amortization 90,849 2.70 22,733
----------- ----------- ------------
Total expenses 188,333 5.60 43,150
----------- ----------- ------------
Operating income (loss) $ 195,058 $ 5.79 $ 67,860
----------- ----------- ------------
Additions to property and
equipment and acquisitions $ 422,974 $ 25,186
Natural
Gas Eliminations
Midstream and Other Consolidated
---------- ------------ ------------
Nine Months Ended September 30,
2008
Production
Total natural gas, crude oil and
NGLs (MMcfe)
Natural gas (MMcf)
Crude oil (MBbls)
NGLs (MBbls)
Coal royalty tons (thousands of
tons)
Midstream system throughput
volumes (MMcf) 68,915
Revenues
Natural gas $ - $ - $ 295,636
Crude Oil - - 37,442
NGLs - - 18,887
Natural gas midstream 601,127 (106,867) 494,260
Coal royalties - - 88,911
Gain on the sale of property
and equipment - - 31,335
Other 6,458 42 28,690
---------- ------------ ------------
Total revenues 607,585 (106,825) 995,161
---------- ------------ ------------
Expenses
Cost of midstream gas
purchased 513,778 (105,531) 408,247
Operating expense 15,031 (1,270) 66,653
Exploration - - 19,765
Taxes other than income 1,902 828 23,325
General and administrative 10,559 19,798 55,006
Depreciation, depletion and
amortization 18,589 1,310 133,481
---------- ------------ ------------
Total expenses 559,859 (84,865) 706,477
---------- ------------ ------------
Operating income (loss) $ 47,726 $ (21,960) $ 288,684
---------- ------------ ------------
Additions to property and
equipment and acquisitions $ 282,747 $ (60,691) $ 670,216
Coal and
Natural
Resource
Oil and Gas Management
----------------------- ------------
(per
Amount Mcfe)(a)
----------- -----------
Nine Months Ended September 30,
2007
Production
Total natural gas, crude oil and
NGLs (MMcfe) 29,888
Natural gas (MMcf) 27,872
Crude oil (MBbls) 240
NGLs (MBbls) 96
Coal royalty tons (thousands of
tons) 25,186
Midstream system throughput
volumes (MMcf)
Revenues
Natural gas $ 193,961 $ 6.96 $ -
Crude oil 14,985 62.44 -
NGL 3,458 36.02 -
Natural gas midstream - -
Coal royalties - 73,455
Gain on the sale of property
and equipment 12,239 197
Other 868 11,658
----------- ----------- ------------
Total revenues 225,511 7.55 85,310
----------- ----------- ------------
Expenses
Cost of midstream gas
purchased - - -
Operating expense 31,190 1.04 6,668
Exploration 23,610 0.79 -
Taxes other than income 13,249 0.44 832
General and administrative 11,026 0.37 7,989
Impairment of oil and gas
properties 2,405 0.08 -
Depreciation, depletion and
amortization 58,628 1.96 16,643
----------- ----------- ------------
Total expenses 140,108 4.68 32,132
----------- ----------- ------------
Operating income (loss) $ 85,403 $ 2.87 $ 53,178
----------- ----------- ------------
Additions to property and
equipment and acquisitions $ 367,558 $ 146,915
Natural
Gas Eliminations
Midstream and Other Consolidated
---------- ------------ ------------
Nine Months Ended September 30,
2007
Production
Total natural gas, crude oil and
NGLs (MMcfe)
Natural gas (MMcf)
Crude oil (MBbls)
NGLs (MBbls)
Coal royalty tons (thousands of
tons)
Midstream system throughput
volumes (MMcf) 50,763
Revenues
Natural gas $ - $ - $ 193,961
Crude oil - - 14,985
NGL - - 3,458
Natural gas midstream 310,095 - 310,095
Coal royalties - - 73,455
Gain on the sale of property
and equipment - 12,436
Other 3,143 367 16,036
---------- ------------ ------------
Total revenues 313,238 367 624,426
---------- ------------ ------------
Expenses
Cost of midstream gas
purchased 251,000 - 251,000
Operating expense 9,567 132 47,557
Exploration - - 23,610
Taxes other than income 1,280 634 15,995
General and administrative 9,119 18,405 46,539
Impairment of oil and gas
properties - - 2,405
Depreciation, depletion and
amortization 13,957 595 89,823
---------- ------------ ------------
Total expenses 284,923 19,766 476,929
---------- ------------ ------------
Operating income (loss) $ 28,315 $ (19,399) $ 147,497
---------- ------------ ------------
Additions to property and
equipment and acquisitions $ 28,619 $ 4,913 $ 548,005
(a) - Natural gas revenues are shown per Mcf, crude oil and NGL
revenues are shown per Bbl, and all other amounts are shown per Mcfe.
PENN VIRGINIA CORPORATION
CERTAIN NON-GAAP FINANCIAL MEASURES - unaudited
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -------------------
2008 2007 2008 2007
---------- -------- --------- ---------
Reconciliation of GAAP "Net
cash provided by operating
activities" to Non-GAAP
"Operating cash flow"
------------------------------
Net cash provided by operating
activities $ 91,795 $76,184 $276,687 $208,981
Adjustments:
Changes in operating assets
and liabilities 5,727 2,736 41,399 17,242
---------- -------- --------- ---------
Operating cash flow (a) $ 97,522 $78,920 $318,086 $226,223
========== ======== ========= =========
Reconciliation of GAAP "Net
income" to Non-GAAP "Net
income as adjusted"
------------------------------
Net income as reported $ 123,738 $17,114 $123,871 $ 45,395
Adjustments for derivatives:
Derivative losses included
in operating income 1,504 1,597 4,129 3,500
Derivative losses (gains)
included in other income (125,132) 4,456 4,387 22,069
Cash settlements of
derivatives (19,755) 586 (46,740) 2,281
Impact of adjustments on
minority interest (b) 16,755 (4,115) 13,649 (8,801)
Impact of adjustments on
income tax expense (c) 49,139 (968) 9,339 (7,429)
---------- -------- --------- ---------
$ 46,249 $18,670 $108,635 $ 57,015
Less: Portion of subsidiary
net income allocated to
undistributed share-based
compensation awards (219) (60) (418) (170)
---------- -------- --------- ---------
Net income as adjusted (d) $ 46,030 $18,610 $108,217 $ 56,845
========== ======== ========= =========
Net income as adjusted per
share, diluted $ 1.08 $ 0.49 $ 2.57 $ 1.49
(a) - Operating cash flow represents net cash provided by operating activities before changes in operating assets and liabilities. Management believes that operating cash flow is widely accepted as a financial indicator of an energy company's ability to generate cash which is used to internally fund investing activities, service debt and pay dividends. Operating cash flow is widely used by investors and professional research analysts in the valuation, comparison, rating and investment recommendations of companies within the energy industry. Operating cash flow is presented because management believes it is a useful adjunct to net cash provided by operating activities under GAAP. Operating 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) - Minority interest for the three months ended September 30, 2008 and 2007 has been adjusted for the effect of incentive distribution rights and reflects the minority interest percentage of net income recognized for the nine months ended September 30, 2008 and 2007.
(c) - The impact of these adjustments on PVA's income tax expense reflects its effective tax rate of 38.0%.
(d) - Net income as adjusted represents net income adjusted to exclude the effects of non-cash changes in the fair value of derivatives and the effect of PVR's net income allocated to PVR units that we own and have awarded under PVR's long-term incentive compensation plan. Management believes this presentation is widely used by investors and professional research analysts in the valuation, comparison, rating and investment recommendations of companies within the oil and gas exploration and production industry, as well as companies within the natural gas midstream industry. Management uses this information for comparative purposes within these industries. 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.
PENN VIRGINIA CORPORATION
CONVERSION TO NON-GAAP EQUITY METHOD - unaudited
(in thousands)
Reconciliation of GAAP "Income Statements As Reported" to Non-GAAP
"Income Statements As Adjusted" (a):
----------------------------------------------------------------------
Three Months Ended September 30
2008
-------------------------------
As As
Reported Adjustments Adjusted
--------- ----------- ---------
Revenues
Natural gas $101,911 $ - $101,911
Crude oil 13,764 - 13,764
NGLs 10,481 - 10,481
Natural gas midstream 184,914 (184,914) -
Coal royalties 33,308 (33,308) -
Gain on the sale of property and
equipment 31,279 (770) 30,509
Other 9,955 (9,916) 39
--------- ----------- ---------
Total revenues 385,612 (228,908) 156,704
--------- ----------- ---------
Expenses
Cost of midstream gas purchased 155,564 (155,564) -
Operating 23,437 (8,371) 15,066
Exploration 8,346 - 8,346
Taxes other than income 7,671 (969) 6,702
General and administrative 18,289 (7,618) 10,671
Impairment of oil and gas
properties - - -
Depreciation, depletion and
amortization 49,978 (16,903) 33,075
--------- ----------- ---------
Total expenses 263,285 (189,425) 73,860
--------- ----------- ---------
Operating income 122,327 (39,483) 82,844
Other income (expense)
Interest expense (11,938) 7,060 (4,878)
Derivatives 125,132 (15,742) 109,390
Equity earnings in PVG and PVR - 15,771 15,771
Other (4,088) 4,118 30
--------- ----------- ---------
Income before minority interest and
income taxes 231,433 (28,276) 203,157
Minority interest 28,276 (28,276) -
Income tax expense 79,419 - 79,419
--------- ----------- ---------
Net income $123,738 $ - $123,738
========= =========== =========
Three Months Ended September 30
2007
-------------------------------
As As
Reported Adjustments Adjusted
--------- ----------- ---------
Revenues
Natural gas $ 65,310 $ - $65,310
Crude oil 6,299 - 6,299
NGLs 1,290 - 1,290
Natural gas midstream 100,370 (100,370) -
Coal royalties 24,426 (24,426) -
Gain on the sale of property and
equipment 12,312 - 12,312
Other 5,751 (5,408) 343
--------- ----------- ---------
Total revenues 215,758 (130,204) 85,554
--------- ----------- ---------
Expenses
Cost of midstream gas purchased 76,192 (76,192) -
Operating 17,602 (5,224) 12,378
Exploration 12,873 - 12,873
Taxes other than income 5,156 (666) 4,490
General and administrative 16,439 (5,980) 10,459
Impairment of oil and gas
properties 2,405 - 2,405
Depreciation, depletion and
amortization 33,207 (10,645) 22,562
--------- ----------- ---------
Total expenses 163,874 (98,707) 65,167
--------- ----------- ---------
Operating income 51,884 (31,497) 20,387
Other income (expense)
Interest expense (10,843) 4,678 (6,165)
Derivatives (4,455) 10,730 6,275
Equity earnings in PVG and PVR - 7,380 7,380
Other 576 (426) 150
--------- ----------- ---------
Income before minority interest and
income taxes 37,162 (9,135) 28,027
Minority interest 9,135 (9,135) -
Income tax expense 10,913 - 10,913
--------- ----------- ---------
Net income $ 17,114 $ - $17,114
========= =========== =========
Nine Months Ended September 30,
2008
-------------------------------
As As
Reported Adjustments Adjusted
--------- ----------- ---------
Revenues
Natural gas $295,636 $ - $295,636
Crude oil 37,442 - 37,442
NGLs 18,887 - 18,887
Natural gas midstream 494,260 (494,260) -
Coal royalties 88,911 (88,911) -
Gain on the sale of property and
equipment 31,335 (792) 30,543
Other 28,690 (27,765) 925
--------- ----------- ---------
Total revenues 995,161 (611,728) 383,433
--------- ----------- ---------
Expenses
Cost of midstream gas purchased 408,247 (408,247) -
Operating 66,653 (23,217) 43,436
Exploration 19,765 - 19,765
Taxes other than income 23,325 (3,017) 20,308
General and administrative 55,006 (22,057) 32,949
Impairment of oil and gas
properties - - -
Depreciation, depletion and
amortization 133,481 (41,322) 92,159
--------- ----------- ---------
Total expenses 706,477 (497,860) 208,617
--------- ----------- ---------
Operating income 288,684 (113,868) 174,816
Other income (expense)
Interest expense (31,600) 17,366 (14,234)
Derivatives (4,387) 6,424 2,037
Equity earnings in PVG and PVR - 34,754 34,754
Other (782) 3,072 2,290
--------- ----------- ---------
Income before minority interest and
income taxes 251,915 (52,252) 199,663
Minority interest 52,252 (52,252) -
Income tax expense 75,792 - 75,792
--------- ----------- ---------
Net income $123,871 $ - $123,871
========= =========== =========
Nine Months Ended September 30
2007
-------------------------------
As As
Reported Adjustments Adjusted
--------- ----------- ---------
Revenues
Natural gas $193,961 $ - $193,961
Crude oil 14,985 - 14,985
NGLs 3,458 - 3,458
Natural gas midstream 310,095 (310,095) -
Coal royalties 73,455 (73,455) -
Gain on the sale of property and
equipment 12,436 (197) 12,239
Other 16,036 (14,801) 1,235
--------- ----------- ---------
Total revenues 624,426 (398,548) 225,878
--------- ----------- ---------
Expenses
Cost of midstream gas purchased 251,000 (251,000) -
Operating 47,557 (16,235) 31,322
Exploration 23,610 - 23,610
Taxes other than income 15,995 (2,116) 13,879
General and administrative 46,539 (18,686) 27,853
Impairment of oil and gas
properties 2,405 - 2,405
Depreciation, depletion and
amortization 89,823 (30,600) 59,223
--------- ----------- ---------
Total expenses 476,929 (318,637) 158,292
--------- ----------- ---------
Operating income 147,497 (79,911) 67,586
Other income (expense)
Interest expense (25,878) 11,842 (14,036)
Derivatives (22,068) 20,927 (1,141)
Equity earnings in PVG and PVR - 20,728 20,728
Other 2,536 (1,245) 1,291
--------- ----------- ---------
Income before minority interest and
income taxes 102,087 (27,659) 74,428
Minority interest 27,659 (27,659) -
Income tax expense 29,033 - 29,033
--------- ----------- ---------
Net income $ 45,395 $ - $ 45,395
========= =========== =========
(a) - Equity method income statements represent consolidated income statements, minus 100% of PVG's consolidated results of operations, plus minority interest which represents the portion of PVG's consolidated results of operations that we do not own. PVA's management believes equity method income statements provide useful information to allow the public to more easily discern PVG's effect on PVA's operations.
PENN VIRGINIA CORPORATION
CONVERSION TO NON-GAAP EQUITY METHOD - unaudited (continued)
(in thousands)
Reconciliation of GAAP "Balance Sheet As Reported" to Non-GAAP
"Balance Sheet As Adjusted" (a):
----------------------------------------------------------------------
September 30 2008
------------------------------------
As Reported Adjustments As Adjusted
----------- ------------ -----------
Assets
Current assets $ 251,173 $ (120,653) $ 130,520
Net property and equipment 2,399,454 (884,737) 1,514,717
Equity investment in PVG and
PVR - 228,615 228,615
Other assets 259,994 (242,046) 17,948
----------- ------------ -----------
Total assets $2,910,621 $(1,018,821) $1,891,800
=========== ============ ===========
Liabilities and shareholders'
equity
Current liabilities $ 285,490 $ (116,981) $ 168,509
Long-term debt of PVA 410,000 - 410,000
Long-term debt of PVR 558,100 (558,100) -
Other liabilities and
deferred taxes 327,075 (34,549) 292,526
Minority interests of
subsidiaries 309,191 (309,191) -
Shareholders' equity 1,020,765 - 1,020,765
----------- ------------ -----------
Total liabilities and
shareholders' equity $2,910,621 $(1,018,821) $1,891,800
=========== ============ ===========
December 31, 2007
------------------------------------
As Reported Adjustments As Adjusted
------------ ----------- -----------
Assets
Current assets $ 244,072 $ (114,707) $ 129,365
Net property and equipment 1,899,014 (731,282) 1,167,732
Equity investment in PVG and
PVR - 202,297 202,297
Other assets 110,375 (96,262) 14,113
------------ ----------- -----------
Total assets $ 2,253,461 $ (739,954) $1,513,507
============ =========== ===========
Liabilities and shareholders'
equity
Current liabilities $ 261,899 $ (133,918) $ 127,981
Long-term debt of PVA 352,000 - 352,000
Long-term debt of PVR 399,153 (399,153) -
Other liabilities and
deferred taxes 251,149 (27,721) 223,428
Minority interests of
subsidiaries 179,162 (179,162) -
Shareholders' equity 810,098 - 810,098
------------ ----------- -----------
Total liabilities and
shareholders' equity $ 2,253,461 $ (739,954) $1,513,507
============ =========== ===========
Reconciliation of GAAP "Statement of Cash Flows As Reported" to Non-
GAAP "Statement of Cash Flows As Adjusted" (b):
----------------------------------------------------------------------
Three Months Ended September 30
2008
---------------------------------
As As
Reported Adjustments Adjusted
---------- ----------- ----------
Cash flows from operating activities
Net income $ 123,738 $ - $ 123,738
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation, depletion and
amortization 49,978 (16,903) 33,075
Derivative contracts:
Total derivative losses
(gains) (123,628) 14,239 (109,389)
Cash settlements of
derivatives (19,755) 14,054 (5,701)
Minority interest 28,276 (28,276) -
Investment in PVG and PVR - (15,771) (15,771)
Gain on the sale of property
and equipment (31,279) - (31,279)
Impairment of oil and gas
properties - - -
Cash distributions from PVG and
PVR - 10,967 10,967
Other 70,192 1,130 71,322
---------- ----------- ----------
Operating cash flow 97,522 (20,560) 76,962
Changes in operating assets and
liabilities (5,727) 10,853 5,126
---------- ----------- ----------
Net cash provided by (used
in) operating activities 91,795 (9,707) 82,088
---------- ----------- ----------
Cash flows from investing activities
Acquisitions (162,078) 156,791 (5,287)
Additions to property and
equipment (162,857) 16,062 (146,795)
Other 33,215 (982) 32,233
---------- ----------- ----------
Net cash provided by (used
in) investing activities (291,720) 171,871 (119,849)
---------- ----------- ----------
Cash flows from financing activities
Dividends paid (2,351) - (2,351)
Distributions paid to minority
interest holders (17,917) 17,917 -
Borrowings from bank
indebtedness 46,431 - 46,431
Net proceeds from (repayments
of) PVA borrowings (25,000) - (25,000)
Net proceeds from (repayments
of) PVR borrowings 176,600 (176,600) -
Other (2,311) 3,454 1,143
---------- ----------- ----------
Net cash provided by (used
in) financing activities 175,452 (155,229) 20,223
---------- ----------- ----------
Net increase (decrease) in cash and
cash equivalents (24,473) 6,935 (17,538)
Cash and cash equivalents-beginning
balance 43,480 (25,942) 17,538
---------- ----------- ----------
Cash and cash equivalents-ending
balance $ 19,007 $ (19,007) $ -
========== =========== ==========
Three Months Ended September 30
2007
---------------------------------
As As
Reported Adjustments Adjusted
---------- ----------- ----------
Cash flows from operating activities
Net income $ 17,114 $ - $ 17,114
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation, depletion and
amortization 33,207 (10,645) 22,562
Derivative contracts:
Total derivative losses
(gains) 6,053 (12,034) (5,981)
Cash settlements of
derivatives 586 4,702 5,288
Minority interest 9,135 (9,135) -
Investment in PVG and PVR - (7,380) (7,380)
Gain on the sale of property
and equipment (12,312) - (12,312)
Impairment of oil and gas
properties 2,405 - 2,405
Cash distributions from PVG and
PVR - 9,142 9,142
Other 22,732 89 22,821
---------- ----------- ----------
Operating cash flow 78,920 (25,261) 53,659
Changes in operating assets and
liabilities (2,736) 5,366 2,630
---------- ----------- ----------
Net cash provided by (used
in) operating activities 76,184 (19,895) 56,289
---------- ----------- ----------
Cash flows from investing activities
Acquisitions (162,794) 93,423 (69,371)
Additions to property and
equipment (109,685) 10,781 (98,904)
Other 29,142 - 29,142
---------- ----------- ----------
Net cash provided by (used
in) investing activities (243,337) 104,204 (139,133)
---------- ----------- ----------
Cash flows from financing activities
Dividends paid (2,130) - (2,130)
Distributions paid to minority
interest holders (12,937) 12,937 -
Borrowings from bank
indebtedness - - -
Net proceeds from (repayments
of) PVA borrowings 86,000 - 86,000
Net proceeds from (repayments
of) PVR borrowings 89,000 (89,000) -
Other (188) - (188)
---------- ----------- ----------
Net cash provided by (used
in) financing activities 159,745 (76,063) 83,682
---------- ----------- ----------
Net increase (decrease) in cash and
cash equivalents (7,408) 8,246 838
Cash and cash equivalents-beginning
balance 22,211 (22,211) -
---------- ----------- ----------
Cash and cash equivalents-ending
balance $ 14,803 $ (13,965) $ 838
========== =========== ==========
Nine Months Ended September 30
2008
---------------------------------
As As
Reported Adjustments Adjusted
---------- ----------- ----------
Cash flows from operating activities
Net income $ 123,871 $ - $ 123,871
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation, depletion and
amortization 133,481 (41,322) 92,159
Derivative contracts:
Total derivative losses
(gains) 8,516 (10,552) (2,036)
Cash settlements of
derivatives (46,740) 33,279 (13,461)
Minority interest 52,252 (52,252) -
Investment in PVG and PVR - (34,754) (34,754)
Gain on the sale of property
and equipment (31,335) - (31,335)
Impairment of oil and gas
properties - - -
Cash distributions from PVG and
PVR - 32,447 32,447
Other 78,041 1,209 79,250
---------- ----------- ----------
Operating cash flow 318,086 (71,945) 246,141
Changes in operating assets and
liabilities (41,399) 11,277 (30,122)
---------- ----------- ----------
Net cash provided by
operating activities 276,687 (60,668) 216,019
---------- ----------- ----------
Cash flows from investing activities
Acquisitions (278,185) 253,031 (25,154)
Additions to property and
equipment (392,031) 54,902 (337,129)
Other 33,954 (1,657) 32,297
---------- ----------- ----------
Net cash used in investing
activities (636,262) 306,276 (329,986)
---------- ----------- ----------
Cash flows from financing activities
Dividends paid (7,037) - (7,037)
Distributions paid to minority
interest holders (45,829) 45,829 -
Borrowings from bank
indebtedness 46,431 46,431
Net proceeds from PVA
borrowings 58,000 - 58,000
Net proceeds from (repayments
of) PVR borrowings 146,000 (146,000) -
Net proceeds from issuance of
PVR partners' capital 138,015 (138,015) -
Other 8,475 4,074 12,549
---------- ----------- ----------
Net cash provided by
financing activities 344,055 (234,112) 109,943
---------- ----------- ----------
Net increase (decrease) in cash and
cash equivalents (15,520) 11,496 (4,024)
Cash and cash equivalents-beginning
balance 34,527 (30,503) 4,024
---------- ----------- ----------
Cash and cash equivalents-ending
balance $ 19,007 $ (19,007) $ -
========== =========== ==========
Nine Months Ended September 30
2007
---------------------------------
As As
Reported Adjustments Adjusted
---------- ----------- ----------
Cash flows from operating activities
Net income $ 45,395 $ - $ 45,395
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation, depletion and
amortization 89,823 (30,600) 59,223
Derivative contracts:
Total derivative losses
(gains) 25,569 (24,359) 1,210
Cash settlements of
derivatives 2,281 8,963 11,244
Minority interest 27,659 (27,659) -
Investment in PVG and PVR - (20,728) (20,728)
Gain on the sale of property
and equipment (12,436) - (12,436)
Impairment of oil and gas
properties 2,405 - 2,405
Cash distributions from PVG and
PVR - 20,051 20,051
Other 45,526 837 46,363
---------- ----------- ----------
Operating cash flow 226,222 (73,495) 152,727
Changes in operating assets and
liabilities (17,241) 8,338 (8,903)
---------- ----------- ----------
Net cash provided by
operating activities 208,981 (65,157) 143,824
---------- ----------- ----------
Cash flows from investing activities
Acquisitions (239,018) 145,879 (93,139)
Additions to property and
equipment (308,987) 29,655 (279,332)
Other 29,385 (197) 29,188
---------- ----------- ----------
Net cash used in investing
activities (518,620) 175,337 (343,283)
---------- ----------- ----------
Cash flows from financing activities
Dividends paid (6,370) - (6,370)
Distributions paid to minority
interest holders (36,402) 36,402 -
Borrowings from bank
indebtedness - - -
Net proceeds from PVA
borrowings 193,500 - 193,500
Net proceeds from (repayments
of) PVR borrowings 146,000 (146,000) -
Net proceeds from issuance of
PVR partners' capital - - -
Other 7,376 (860) 6,516
---------- ----------- ----------
Net cash provided by
financing activities 304,104 (110,458) 193,646
---------- ----------- ----------
Net increase (decrease) in cash and
cash equivalents (5,535) (278) (5,813)
Cash and cash equivalents-beginning
balance 20,338 (13,687) 6,651
---------- ----------- ----------
Cash and cash equivalents-ending
balance $ 14,803 $ (13,965) $ 838
========== =========== ==========
(a) - Equity method balance sheets represent consolidated balance sheets, minus 100% of PVG's consolidated balance sheets, excluding minority interest which represents the portion of PVG's consolidated balance sheet that PVA does not own and including other adjustments to eliminate inter-company transactions. PVA's management believes equity method balance sheets provide useful information to allow the public to more easily discern PVG's effect on PVA's assets, liabilities and shareholders' equity.
(b) - Equity method statements of cash flows represent consolidated statements of cash flows, minus 100% of PVG's consolidated statements of cash flows, excluding minority interest which represents the portion of PVG's consolidated results of operations that PVA does not own and including other adjustments to eliminate inter-company transactions. PVA's management believes equity method statements of cash flows provide useful information to allow the public to more easily discern PVG's effect on PVA's cash flows.
PENN VIRGINIA CORPORATION
GUIDANCE TABLE - unaudited
(dollars in millions except where noted)
PVA is providing the following guidance regarding financial and
operational expectations for 2008.
Actual
---------------------------------
First Second Third
Quarter Quarter Quarter YTD Full-Year
2008 2008 2008 2008 2008 Guidance
-------- -------- -------- ------ ---------------
Oil & Gas Segment:
-------------------
Production:
Natural gas
(Bcf) (a) 9.7 10.1 10.0 29.8 41.0 - 41.7
Crude oil
(MBbls) 95 119 117 331.0 500.0 - 525.0
NGLs (MBbls) 34 109 157 300.0 425.0 - 450.0
Equivalent
production
(Bcfe) 10.6 11.4 11.7 33.7 46.5 - 47.5
Equivalent
daily
production
(MMcfe per
day) 115.6 125.7 127.2 123.0 127.0 - 129.8
Expenses:
Cash operating
expenses ($
per Mcfe) $ 2.34 2.30 2.29 2.31 2.20 - 2.30
Exploration $ 4.8 6.7 8.3 19.8 26.0 - 28.0
Depreciation,
depletion and
amortization
($ per Mcfe) $ 2.53 2.76 2.79 2.70 2.70 - 2.80
Capital
expenditures:
Development
drilling $ 79.1 96.1 145.6 320.8 420.0 - 425.0
Exploratory
drilling $ 5.4 6.1 6.6 18.1 28.0 - 36.0
Pipeline,
gathering,
facilities $ 4.9 8.8 14.3 28.0 45.0 - 50.0
Seismic $ 0.7 0.3 1.7 2.7 8.0 - 9.0
Lease
acquisition,
field projects
and other $ 4.6 15.1 67.7 87.4 89.0 - 90.0
Total
segment
capital
expenditures $ 94.7 126.4 235.9 457.0 590.0 - 610.0
Coal and Natural
Resource Segment
(PVR):
-------------------
Coal royalty tons
(millions) 7.7 8.8 8.5 25.0 33.0 - 33.5
Revenues:
Average coal
royalties per
ton $ 3.14 3.58 3.92 3.56 3.55 - 3.65
Other $ 6.3 7.4 8.4 22.1 27.0 - 28.0
Expenses:
Cash operating
expenses $ 6.3 7.5 6.6 20.4 25.5 - 26.5
Depreciation,
depletion and
amortization $ 6.4 7.5 8.8 22.7 30.0 - 31.0
Capital
expenditures:
Expansion and
acquisitions $ 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
(PVR):
-------------------
System throughput
volumes (MMcf
per day) (b) 190 262 302 252 270 - 280
Expenses:
Cash operating
expenses $ 8.1 8.9 10.5 27.5 37.0 - 39.0
Depreciation,
depletion and
amortization $ 5.1 5.4 8.1 18.6 24.0 - 25.5
Capital
expenditures:
Expansion and
acquisitions $ 16.4 86.3 196.6 299.3 325.0 - 335.0
Maintenance
capital
expenditures $ 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
Corporate and
Other:
-------------------
General and
administrative
expense - PVA
(c) $ 5.9 6.6 5.6 18.1 24.0 - 25.0
General and
administrative
expense - PVG
(c) $ 0.6 0.6 0.5 1.7 2.3 - 2.5
Interest expense:
PVA average
long-term debt
outstanding $374.5 417.5 424.3 402.4 430.0 - 440.0
PVA interest
rate 5.0% 4.1% 4.1% 4.3% 4.3% - 4.5%
Percentage
capitalized
(d) 11.0% 11.4% 10.7% 11.1% 10.5% - 11.5%
PVR average
long-term debt
outstanding $412.5 411.8 510.1 454.3 485.0 - 495.0
PVR interest
rate assumed 5.3% 4.4% 4.5% 4.6% 4.6% - 4.8%
Minority interest
in PVG and PVR $ 20.0 3.9 28.3 52.2 (e)
Income tax rate 44% 64% 39% 38% (f)
Cash
distributions
received from
PVG and PVR $ 10.4 10.9 10.9 32.2 (g)
Other capital
expenditures $ 0.3 0.2 0.7 1.2 1.0 1.5
These estimates are meant to provide guidance only and are subject to
change as PVA's and PVR's operating environments change.
See Notes on subsequent pages.
PENN VIRGINIA CORPORATION
GUIDANCE TABLE - unaudited - (continued)
(dollars in millions except where noted)
Notes to Guidance Table:
----------------------------------------------------------------------
(a) The following table shows PVA's current derivative positions for
natural gas production in the oil and gas segment as of September
30, 2008:
Weighted Average Price
------------------------------
Average Volume Additional Put
Per Day Option Floor Ceiling
-------------- -------------- ------- -------
Natural gas costless (in MMBtu) (per MMBtu)
collars
Fourth quarter 2008 (1) 10,000 $ 7.50 $ 9.10
Natural gas three-way (in MMBtu) (per MMBtu)
collars (2)
Fourth quarter 2008 67,500 $ 5.89 $ 8.55 $ 11.26
First quarter 2009 65,000 $ 6.00 $ 8.67 $ 11.68
Second quarter 2009 40,000 $ 6.38 $ 8.75 $ 10.79
Third quarter 2009 40,000 $ 6.38 $ 8.75 $ 10.79
Fourth quarter 2009 30,000 $ 6.83 $ 9.50 $ 13.60
First quarter 2010 30,000 $ 6.83 $ 9.50 $ 13.60
Natural gas basis swaps (in MMBtu) (per MMBtu)
Fourth quarter 2008 15,000 $ 0.39
Crude oil three-way (in barrels) (per barrel)
collars (2)
Fourth quarter 2008 500 $ 80.00 $110.00 $179.00
First quarter 2009 500 $ 80.00 $110.00 $179.00
Second quarter 2009 500 $ 80.00 $110.00 $179.00
Third quarter 2009 500 $ 80.00 $110.00 $179.00
Fourth quarter 2009 500 $ 80.00 $110.00 $179.00
Management estimates that, excluding the derivative positions described above, for every $1.00 per MMBtu increase or decrease in the natural gas price, oil and gas segment operating income for the last three months of 2008 would increase or decrease by approximately $11.6 million. In addition, management estimates that for every $5.00 per barrel increase or decrease in the oil price, oil and gas segment operating income would increase or decrease by approximately $1.3 million. This assumes that crude oil prices, natural gas prices and inlet volumes remain constant at forecasted levels. These estimated changes in oil and gas segment operating income exclude the potential cash receipts or payments in settling these derivative positions. (1) This position expires in October 2008. (2) 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 the Company will receive for the contracted commodity volumes. The purchased put establishes the minimum price that the Company 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.
PENN VIRGINIA CORPORATION
GUIDANCE TABLE - unaudited - (continued)
(dollars in millions except where noted)
(b) The costless collar natural gas prices per MMBtu per quarter
include the effects of basis differentials, if any. The following
table shows current derivative positions for natural gas
production in PVR's natural gas midstream segment as of September
30, 2008:
Weighted Average Price - Collars
--------------------------------
Average Weighted
Volume Per Average Additional Put
Day Price Option Put Call
------------ --------- ---------------- ------- -------
Frac spread (in MMBtu) (per
MMBtu)
Fourth quarter
2008 7,824 $ 5.02
Ethane sale (in gallons) (per
swap gallon)
Fourth quarter
2008 34,440 $ 0.4700
Propane sale (in gallons) (per
swaps gallon)
Fourth quarter
2008 26,040 $ 0.7175
Crude oil sale (in barrels) (per
swaps barrel)
Fourth quarter
2008 560 $ 49.27
Natural (in gallons) (per gallon)
gasoline
collar
Fourth quarter
2008 6,300 $1.4800 $1.6465
Crude oil (in barrels) (per barrel)
collar
Fourth quarter
2008 400 $ 65.00 $ 75.25
Natural gas (in MMBtu) (per
sale swaps MMBtu)
Fourth quarter
2008 4,000 $ 6.97
Crude oil (in barrels) (per barrel)
three-way
collar (1)
First quarter
2009 through
fourth
quarter 2009 1,000 $ 70.00 $ 90.00 $119.25
Frac spread (in MMBtu) (per MMBtu)
collar
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.
(1) 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 PVA or PVR will receive for the contracted
commodity volumes. The purchased put establishes the minimum
price that PVA or 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.
(c) Year-to-date 2008 results and full-year 2008 guidance reflect
increased incentive compensation costs in general and
administrative expense.
(d) PVA capitalizes a portion of interest expense incurred to
recognize the carrying cost of certain unproved properties as
required by GAAP.
(e) PVA controls the general partner of PVG and owns a 77 percent
limited partner interest in PVG. PVG's operating results are
included in PVA's consolidated financial statements and minority
interest reflected the 23 percent of PVG owned by parties other
than PVA.
(f) Deferred federal and state income taxes are expected to comprise
approximately 65% to 75% of PVA's income tax expense for the full
year.
(g) 2008 amounts received are dependent primarily upon distributions
paid by PVG.
Source: Penn Virginia Corporation
Released November 5, 2008