RADNOR, Pa.-- Penn Virginia Corporation (NYSE:PVA) today reported financial and operational results for the three months ended June 30, 2009 and provided an update of full-year 2009 guidance.
Second Quarter 2009 Highlights
Second quarter 2009 results, with comparisons to second quarter 2008 results, included the following:
-- Quarterly oil and gas production of 148.9 million cubic feet of natural gas equivalent (MMcfe) per day, or 13.6 billion cubic feet of natural gas equivalent (Bcfe), an 18 percent increase as compared to oil and gas production of 125.7 MMcfe per day, or 11.4 Bcfe; -- Operating cash flow, a non-GAAP (generally accepted accounting principles) measure, of $68.7 million as compared to record operating cash flow of $136.0 million in the prior year quarter; -- Adjusted net loss, a non-GAAP measure which excludes the effects of the non-cash change in derivatives fair value, drilling rig standby charges and impairments that affect comparability to the prior year period, of $6.0 million, or $0.14 per diluted share, as compared to record adjusted net income of $48.7 million, or $1.17 per diluted share, in the prior year quarter; and -- Net loss of $22.2 million, or $0.52 per diluted share, as compared to net loss of $4.5 million, or $0.11 per diluted share.
Reconciliations of non-GAAP financial measures to GAAP-based measures appear in the financial tables later in this release.
Management Comment
A. James Dearlove, President and Chief Executive Officer, said, "Although declines in commodity prices impacted our financial results, we are pleased with our second quarter 2009 operational results. As detailed in our July 27 operational update, weak natural gas prices have caused us to curtail our drilling activity substantially. However, as a result of strong performance from 2008 and early 2009 drilling in our Granite Wash, Lower Bossier (Haynesville) Shale and Selma Chalk core plays, our second quarter production levels were only two percent lower than the record production achieved in the first quarter of 2009. As a result of our strong second quarter and first half results, we have kept our production guidance unchanged, with slight year-over-year production growth in 2009.
"Our commodity price hedges provided cash flow protection, increasing second quarter effective price realizations from $3.49 per Mcf to $4.78 pre Mcf for natural gas and from $55.00 per barrel to $61.42 per barrel for oil. For the second half of 2009, we have hedged approximately 85 percent of our estimated natural gas production at average respective floor and ceiling prices of $6.42 and $7.79 per million British thermal units (MMBtu), and 70 percent of our estimated crude oil production at average floor and ceiling prices of approximately $80 and $120 per barrel. For 2010, we have hedged approximately 60 percent of our estimated natural gas production at average respective floor and ceiling prices of $6.09 and $8.19 per MMBtu, and 35 percent of our estimated crude oil production at average respective floor and ceiling prices of approximately $60 and $75 per barrel. In addition to the cash flow support our hedges have provided, our unit cash costs have continued to improve, including a 22 percent reduction from the prior year quarter and in line with the first quarter of 2009.
"During the second quarter of 2009, we raised approximately $365 million of capital, including $300 million of senior notes due 2016 and $65 million of common equity. As a result, we have substantially improved our financial liquidity, with almost $300 million of unused availability on our revolving credit facility. We are now positioned to exploit our ample inventory of drilling locations for growth in the coming years from both existing and new plays as natural gas prices improve.
"In addition to our core oil and gas exploration and production business segment, we own 77 percent of Penn Virginia GP Holdings, L.P. (NYSE:PVG) and PVG owns the general partner of Penn Virginia Resource Partners, L.P. (NYSE:PVR) and is PVR's largest limited partner unitholder. As the owner of the general partner and largest unitholder of PVG, we report our financial results on a consolidated basis with the financial results of PVG. At current distribution rates, our ownership of PVG and PVR provides approximately $46 million of annualized pre-tax cash flow to us, which we re-deploy into our oil and gas segment. In the second quarter of 2009, PVR's coal and natural resource management segment (PVR Coal & Natural Resource Management) reported relatively stable coal royalties revenue and contributions to cash flows, with one percent lower lessee coal production and slightly higher average net coal royalties per ton than the prior year quarter. During the second quarter, PVR's natural gas midstream segment (PVR Midstream) recorded throughput volumes 31 percent higher than the prior year quarter, while the midstream gross margin, adjusted for the cash impact of hedges, was two percent higher."
Oil and Gas Segment Review
Second quarter oil and gas production grew 18 percent to 148.9 MMcfe per day, or 13.6 Bcfe, from 125.7 MMcfe per day, or 11.4 Bcfe, in the second quarter of 2008, and was two percent lower than the quarterly record of 152.3 MMcfe per day, or 13.7 Bcfe in the first quarter of 2009. See our separate operational update news release dated July 27, 2009 for a more detailed discussion of second quarter 2009 drilling and production operations for the oil and gas segment.
During the second quarter of 2009, oil and gas segment operating income decreased by $100.4 million as compared to the prior year quarter to an operating loss of $30.7 million. The decrease was due to a $78.6 million, or 58 percent, decrease in revenues and a $21.8 million, or 34 percent, increase in total operating expenses. The decrease in revenues was due to sharp declines in realized commodity prices before considering support from related hedges - a 69 percent decrease in the natural gas price and a 55 percent decrease in the oil price - offset in part by an 18 percent increase in oil and gas production. The increase in operating expenses was primarily due to the production increase, $6.7 million of rig standby charges, $6.3 million of increased amortization of unproved properties included in exploration expense, a $8.3 million increase in depreciation, depletion and amortization (DD&A) expense and $3.3 million of impairments, offset in part by a $3.3 million decrease in taxes other than income as a result of the decrease in commodity prices.
In the second quarter of 2009, total oil and gas segment expenses, excluding the rig standby and impairment charges, increased by $10.2 million, or 16 percent, to $74.9 million, or $5.52 per Mcfe produced, from $64.6 million, or $5.65 per Mcfe produced, in the second quarter of 2008, as discussed below:
-- Second quarter 2009 cash operating expenses of $24.2 million, or $1.79 per Mcfe produced, were $2.1 million, or eight percent, lower than the $26.3 million, or $2.30 per Mcfe produced, in the second quarter of 2008. The decrease in unit cash operating expenses was primarily due to lower taxes other than income and lower lease operating expense, as discussed below: o Lease operating expense decreased to $1.09 per Mcfe from $1.23 per Mcfe primarily due to decreased overall service costs due to sharply lower commodity prices and reduced water disposal and other costs as compared to the prior year quarter; o Taxes other than income decreased to $0.28 per Mcfe from $0.62 per Mcfe primarily due to decreased severance taxes related to sharply lower commodity prices; and o Segment general and administrative (G&A) expense decreased to $0.42 per Mcfe as compared to $0.45 per Mcfe primarily due to the production increase.
-- Exploration expense, excluding drilling rig standby charges discussed below, increased to $10.7 million in the second quarter of 2009, as compared to $6.7 million in the prior year quarter, primarily due to $6.3 million of increased amortization of unproved properties related to higher leasehold acquisition costs in our East Texas, Mid-Continent and Gulf Coast regions. -- DD&A expense increased by $8.3 million, or 26 percent, to $39.9 million, or $2.94 per Mcfe, in the second quarter of 2009 from $31.6 million, or $2.76 per Mcfe, in the prior year quarter. The overall increase in DD&A expense was primarily due to the production increase, as well as the higher depletion rate per unit of production a result of higher drilling costs and leasehold acquisitions.
In the first quarter of 2009, we opted to defer the drilling of wells in several of our plays due to unfavorable economic conditions. As a result, we amended certain drilling rig contracts to delay commencement of drilling until January 2010. In the second quarter of 2009, we expensed approximately $6.7 million for lump sum delay fees, minimum daily standby fees and demobilization fees expected to be paid during the standby period. We will evaluate economic conditions through the remainder of 2009 to determine whether to continue to defer drilling. This decision could result in additional standby expense of up to approximately $8.0 million during the second half of 2009.
During the second quarter of 2009, we incurred approximately $3.3 million of impairments. These charges were primarily related to the write-down in value of certain field pipe inventories. In addition, during the second quarter we recorded a loss on the sale of assets of $1.6 million related to the sales of inventory and an oil and gas property.
Coal & Natural Resource Management and Natural Gas Midstream Segment Review (PVR and PVG)
As the owner of the general partner and largest unitholder of PVG, we report our 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. We believe 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. Financial and operational results and full-year 2009 guidance for each of PVR's 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 August 5, 2009. Please visit PVR's website, www.pvresource.com, under "For Investors" for a copy of the release.
Operating income for PVR Coal & Natural Resource Management decreased by $3.7 million, or 15 percent, to $20.3 million in the second quarter of 2009. The decrease was primarily due to a six percent decrease in revenues, net of coal royalties expense, primarily due to decreases in oil and gas royalties, timber and other revenues, as well as an increase in G&A expense. Coal royalties revenue, net of coal royalties expense, was relatively flat as compared to the prior year quarter. Operating income for PVR Midstream, adjusted for the cash impact of derivatives, decreased by $7.7 million from $12.1 million in the second quarter of 2008 to $4.4 million in the second quarter of 2009. This decrease was primarily due to lower other revenues and increased operating and G&A expenses, offset in part by a two percent increase in midstream gross margin, adjusted for the cash impact of derivatives. As of June 30, 2009, PVR had outstanding borrowings of $597.1 million under its $800 million revolving credit facility with unused availability of approximately $200 million.
As previously announced, on August 20, 2009, PVG will pay to unitholders of record as of August 3, 2009 a quarterly cash distribution of $0.38 per unit, or an annualized rate of $1.52 per unit, covering the period of April 1 through June 30, 2009. On an annualized basis, this represents a six percent increase over the annualized distribution of $1.44 per unit with respect to the same quarter of 2008 and is unchanged from the distribution paid with respect to each of the previous three quarters. As a result of PVG's distribution, we will receive a cash distribution of $11.4 million in the third quarter of 2009, which would be $45.7 million on an annualized basis.
Guidance for 2009
See the Guidance Table included in this release for guidance estimates for full-year 2009. These estimates, including capital expenditure plans, which were discussed in our July 27 operational update, are meant to provide guidance only and are subject to revision as our and PVR's operating environments change.
Second Quarter 2009 Financial and Operational Results Conference Call
A conference call and webcast, during which management will discuss second quarter 2009 financial and operational results, is scheduled for Thursday, August 6, 2009 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 our 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 August 20, 2009 at 11:59 p.m. ET by dialing 1-877-660-6853 and using the following replay pass codes: account #286, conference ID #327743. An on-demand replay of the conference call will be available at our website beginning shortly after the call.
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 U.S., including the East Texas, Mississippi, the Mid-Continent region, the Appalachian Basin and the Gulf Coast of Louisiana and Texas. We also own approximately 77 percent of PVG, the owner of the general partner and the largest unit holder of 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 access external sources of capital; uncertainties relating to the occurrence and success of capital-raising transactions, including securities offerings and asset sales; reductions in the borrowing base under our Revolver; our ability to develop and replace oil and gas reserves and the price for which such reserves can be acquired; any impairment writedowns of our reserves or assets; reductions in our anticipated capital expenditures; the relationship between natural gas, NGL, crude 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 differ 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); 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; uncertainties relating to our continued ownership of interests in PVG and PVR; and other risks set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.
Additional information concerning these and other factors can be found in our press releases and public periodic filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2008. 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 a 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 Six Months Ended June 30, June 30, 2009 2008 (a) 2009 2008 (a) Revenues Natural gas $ 39,830 $ 113,212 $ 92,651 $ 193,725 Crude oil 11,825 14,463 18,153 23,678 Natural gas liquids (NGLs) 4,336 6,538 7,706 8,406 Natural gas midstream 91,655 184,298 186,861 309,346 Coal royalties 29,997 31,641 60,627 55,603 Other 6,274 10,262 17,079 18,791 Total revenues 183,917 360,414 383,077 609,549 Expenses Cost of midstream gas 71,933 152,986 151,331 252,683 purchased Operating 22,648 22,214 45,350 43,216 Exploration 10,733 6,739 22,181 11,419 Exploration - drilling rig 6,739 - 16,603 - standby charges (b) Taxes other than income 4,930 8,259 11,362 15,654 General and administrative (excluding equity 16,565 16,987 31,659 33,088 compensation) Equity-based compensation 3,790 2,071 7,182 3,629 (c) Depreciation, depletion 58,218 44,934 115,291 83,503 and amortization Impairments 3,279 - 4,475 - Loss on sale of assets 1,599 - 1,599 - Total expenses 200,434 254,190 407,033 443,192 Operating income (loss) (16,517 ) 106,224 (23,956 ) 166,357 Other income (expense) Interest expense (15,046 ) (11,345 ) (27,548 ) (22,092 ) Derivatives 752 (103,618 ) 11,007 (129,519 ) Other 353 975 1,926 3,306 Income (loss) before income taxes and (30,458 ) (7,764 ) (38,571 ) 18,052 noncontrolling interests Income tax benefit 14,620 7,163 19,182 4,569 Net income (loss) $ (15,838 ) $ (601 ) $ (19,389 ) $ 22,621 Net income attributable to (6,345 ) (3,948 ) (10,003 ) (23,976 ) noncontrolling interests Net loss attributable to $ (22,183 ) $ (4,549 ) $ (29,392 ) $ (1,355 ) PVA Net income (loss) per share attributable to PVA common shareholders Basic $ (0.52 ) $ (0.11 ) $ (0.69 ) $ (0.03 ) Diluted (d) $ (0.52 ) $ (0.11 ) $ (0.69 ) $ (0.03 ) Weighted average shares 42,798 41,740 42,422 41,642 outstanding, basic Weighted average shares 42,798 41,740 42,422 41,642 outstanding, diluted Three Months Ended Six Months Ended June 30, June 30, 2009 2008 2009 2008 Production Natural gas (MMcf) 11,422 10,075 23,224 19,823 Crude oil (MBbls) 215 119 386 214 NGLs (MBbls) 140 109 287 143 Total natural gas, crude oil and NGL production 13,552 11,443 27,262 21,965 (MMcfe) Prices Natural gas ($ per Mcf) $ 3.49 $ 11.24 $ 3.99 $ 9.77 Crude oil ($ per Bbl) $ 55.00 $ 121.54 $ 47.03 $ 110.64 NGLs ($ per Bbl) $ 30.97 $ 59.98 $ 26.85 $ 58.78
(a) As a result of adopting FASB Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments that May be Settled in Cash upon Conversion (Including Partial Cash Settlement), we are required to present our results of operations retrospectively as if the standard had been in effect for all periods presented. (b) Drilling rig standby charges represent fees paid in connection with the deferral of drilling associated with contractually committed rigs and frac tank rentals. (c) Our equity-based compensation expense includes our stock option expense and the amortization of restricted stock and restricted stock units related to employee awards in accordance with SFAS No. 123(R), Share-Based Payment. (d) Net income per share attributable to PVA common shareholders, diluted includes an adjustment to net income for the dilutive effect of PVR's net income allocated to unvested PVR equity compensation awards that we hold until vesting.
PENN VIRGINIA CORPORATION CONSOLIDATED BALANCE SHEETS - unaudited (in thousands) June 30, December 31, 2009 2008 Assets Current assets $ 189,540 $ 263,518 Net property and 2,531,447 2,512,177 equipment Other assets 235,952 220,870 Total assets $ 2,956,939 $ 2,996,565 Liabilities and shareholders' equity Current liabilities $ 143,034 $ 247,594 Long-term debt of PVR 597,100 568,100 Revolving credit 70,000 332,000 facility Senior notes 291,115 - Convertible notes 203,217 199,896 Other liabilities and 305,610 312,645 deferred taxes PVA shareholders' 1,073,269 1,039,103 equity Noncontrolling 273,594 297,227 interests Total shareholders' 1,346,863 1,336,330 equity Total liabilities and $ 2,956,939 $ 2,996,565 shareholders' equity CONSOLIDATED STATEMENTS OF CASH FLOWS - unaudited (in thousands) Three Months Ended Six Months Ended June 30, June 30, 2009 2008 2009 2008 Cash flows from operating activities Net income (loss) $ (15,838 ) $ (601 ) $ (19,389 ) $ 22,621 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion and 58,218 44,934 115,291 83,503 amortization Impairments 3,279 - 4,475 - Derivative contracts: Total derivative 668 105,135 (9,133 ) 132,144 losses (gains) Cash receipts (payments) to settle 17,281 (18,032 ) 36,429 (26,985 ) derivatives Deferred income taxes (14,166 ) (3,589 ) (18,800 ) (1,447 ) Dry hole and unproved 9,379 5,919 19,883 9,472 leasehold expense Other 9,888 2,222 13,379 1,256 Operating cash flow (see attached table 68,709 135,988 142,135 220,564 "Certain Non-GAAP Financial Measures") Changes in operating (33,751 ) (17,248 ) (4,158 ) (35,672 ) assets and liabilities Net cash provided by 34,958 118,740 137,977 184,892 operating activities Cash flows from investing activities Acquisitions, net of (3,120 ) (111,367 ) (6,193 ) (116,107 ) cash acquired Additions to property (56,982 ) (120,512 ) (193,195 ) (229,174 ) and equipment Other 5,568 334 5,822 739 Net cash used in (54,534 ) (231,545 ) (193,566 ) (344,542 ) investing activities Cash flows from financing activities Dividends paid (2,370 ) (2,342 ) (4,719 ) (4,686 ) Distributions paid to noncontrolling (18,455 ) (14,172 ) (36,910 ) (27,912 ) interest holders Net proceeds from (repayments of) PVA (28,991 ) 29,000 29,009 83,000 borrowings Net proceeds from (repayments of) PVR 2,000 (32,600 ) 29,000 (30,600 ) borrowings Proceeds from equity 64,835 138,015 64,835 138,015 issuance Other (8,827 ) 5,504 (25,627 ) 10,786 Net cash provided by 8,192 123,405 55,588 168,603 financing activities Net increase (decrease) in cash and (11,384 ) 10,600 (1 ) 8,953 cash equivalents Cash and cash equivalents - 29,721 32,880 18,338 34,527 beginning of period Cash and cash equivalents - end of $ 18,337 $ 43,480 $ 18,337 $ 43,480 period
PENN VIRGINIA CORPORATION QUARTERLY SEGMENT INFORMATION - unaudited (in thousands except where noted) Three Months Coal and Natural Ended June 30, Oil and Gas Natural Gas Other Consolidated 2009 Resource Midstream Management Amount per Mcfe (a) Production Total natural gas, crude oil 13,552 and NGLs (MMcfe) Natural gas 11,422 (MMcf) Crude oil 215 (MBbls) NGLs (MBbls) 140 Coal royalty tons 8,739 (thousands of tons) Midstream system 31,342 throughput volumes (MMcf) Revenues Natural gas $ 39,830 $ 3.49 $ - $ - $ - $ 39,830 Crude Oil 11,825 55.00 - - - 11,825 NGLs 4,336 30.97 - - - 4,336 Natural gas - - 113,060 (21,405 ) 91,655 midstream Coal royalties - 29,997 - - 29,997 Other (212 ) 5,147 1,215 124 6,274 Total revenues 55,779 4.12 35,144 114,275 (21,281 ) 183,917 Expenses Cost of midstream gas - - - 92,154 (20,221 ) 71,933 purchased Operating 14,748 1.09 2,327 6,691 (1,118 ) 22,648 expense Exploration 10,733 0.79 - - - 10,733 Exploration - Drilling rig 6,739 0.50 - - - 6,739 standby charges Taxes other 3,744 0.28 300 680 206 4,930 than income General and 5,713 0.42 4,020 4,237 6,385 20,355 administrative Depreciation, depletion and 39,917 2.94 8,164 9,453 684 58,218 amortization Impairments 3,279 0.24 - - - 3,279 Loss on sale 1,599 0.12 - - - 1,599 of assets Total expenses 86,472 6.38 14,811 113,215 (14,064 ) 200,434 Operating $ (30,693 ) $ (2.26 ) $ 20,333 $ 1,060 $ (7,217 ) $ (16,517 ) income (loss) Additions to property and $ 39,240 $ 606 $ 15,208 $ 1,048 $ 56,102 equipment Three Months Coal and Natural Ended June 30, Oil and Gas Natural Gas Other Consolidated 2008 Resource Midstream Management Amount per Mcfe (a) Production Total natural gas, crude oil 11,443 and NGLs (MMcfe) Natural gas 10,075 (MMcf) Crude oil 119 (MBbls) NGLs (MBbls) 109 Coal royalty tons 8,839 (thousands of tons) Midstream system 23,884 throughput volumes (MMcf) Revenues Natural gas $ 113,212 $ 11.24 $ - $ - $ - $ 113,212 Crude oil 14,463 121.54 - - - 14,463 NGLs 6,538 59.98 - - - 6,538 Natural gas - - 234,797 (50,499 ) 184,298 midstream Coal royalties - 31,641 - - 31,641 Other 154 7,415 2,652 41 10,262 Total revenues 134,367 11.74 39,056 237,449 (50,458 ) 360,414 Expenses Cost of midstream gas - - - 202,819 (49,833 ) 152,986 purchased Operating 14,094 1.23 3,902 4,817 (599 ) 22,214 expense Exploration 6,739 0.59 - - - 6,739 Taxes other 7,085 0.62 371 605 198 8,259 than income General and 5,163 0.45 3,274 3,469 7,152 19,058 administrative Depreciation, depletion and 31,568 2.76 7,526 5,393 447 44,934 amortization Total expenses 64,649 5.65 15,073 217,103 (42,635 ) 254,190 Operating $ 69,718 $ 6.09 $ 23,983 $ 20,346 $ (7,823 ) $ 106,224 income (loss) Additions to property and $ 114,213 $ 24,641 $ 92,769 $ 256 $ 231,879 equipment
(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) Six Months Coal and Ended June 30, Oil and Gas Natural Natural Gas Other Consolidated 2009 Resource Midstream Management Amount per Mcfe (a) Production Total natural gas, crude oil 27,262 and NGLs (MMcfe) Natural gas 23,224 (MMcf) Crude oil 386 (MBbls) NGLs (MBbls) 287 Coal royalty tons 17,487 (thousands of tons) Midstream system 63,622 throughput volumes (MMcf) Revenues Natural gas $ 92,651 $ 3.99 $ - $ - $ - $ 92,651 Crude Oil 18,153 47.03 - - - 18,153 NGLs 7,706 26.85 - - - 7,706 Natural gas - - 230,439 (43,578 ) 186,861 midstream Coal royalties - 60,627 - - 60,627 Other 1,834 12,769 2,343 133 17,079 Total revenues 120,344 4.41 73,396 232,782 (43,445 ) 383,077 Expenses Cost of midstream gas - - - 192,774 (41,443 ) 151,331 purchased Operating 29,511 1.08 4,434 13,474 (2,069 ) 45,350 expense Exploration 22,181 0.81 - - - 22,181 Exploration - Drilling rig 16,603 0.61 - - - 16,603 standby charges Taxes other 8,570 0.31 725 1,478 589 11,362 than income General and 10,837 0.40 7,372 8,481 12,151 38,841 administrative Depreciation, depletion and 79,916 2.94 15,558 18,562 1,255 115,291 amortization Impairments 4,475 0.16 - - - 4,475 Loss on sale 1,599 0.06 - - - 1,599 of assets Total expenses 173,692 6.37 28,089 234,769 (29,517 ) 407,033 Operating $ (53,348 ) $ (1.96 ) $ 45,307 $ (1,987 ) $ (13,928 ) $ (23,956 ) income (loss) Additions to property and $ 159,814 $ 1,906 $ 32,214 $ 1,454 $ 195,388 equipment Six Months Coal and Ended June 30, Oil and Gas Natural Natural Gas Other Consolidated 2008 Resource Midstream Management Amount per Mcfe (a) Production Total natural gas, crude oil 21,965 and NGLs (MMcfe) Natural gas 19,823 (MMcf) Crude oil 214 (MBbls) NGLs (MBbls) 143 Coal royalty tons 16,479 (thousands of tons) Midstream system 41,171 throughput volumes (MMcf) Revenues Natural gas $ 193,725 $ 9.77 $ - $ - $ - $ 193,725 Crude oil 23,678 110.64 - - - 23,678 NGLs 8,406 58.78 - - - 8,406 Natural gas - - 359,845 (50,499 ) 309,346 midstream Coal royalties - 55,603 - - 55,603 Other 857 13,747 4,124 63 18,791 Total revenues 226,666 10.32 69,350 363,969 (50,436 ) 609,549 Expenses Cost of midstream gas - - - 302,516 (49,833 ) 252,683 purchased Operating 28,303 1.29 6,645 8,867 (599 ) 43,216 expense Exploration 11,419 0.52 - - - 11,419 Taxes other 12,943 0.59 742 1,306 663 15,654 than income General and 9,747 0.44 6,459 6,802 13,709 36,717 administrative Depreciation, depletion and 58,184 2.65 13,939 10,480 900 83,503 amortization Total expenses 120,596 5.49 27,785 329,971 (35,160 ) 443,192 Operating $ 106,070 $ 4.83 $ 41,565 $ 33,998 $ (15,276 ) $ 166,357 income (loss) Additions to property and $ 209,402 $ 24,689 $ 110,391 $ 799 $ 345,281 equipment
(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 Six Months Ended June 30, June 30, 2009 2008 2009 2008 Reconciliation of GAAP "Net cash provided by operating activities" to Non-GAAP "Operating cash flow" Net cash provided by $ 34,958 $ 118,740 $ 137,977 $ 184,892 operating activities Adjustments: Changes in operating assets 33,751 17,248 4,158 35,672 and liabilities Operating cash flow (a) $ 68,709 $ 135,988 $ 142,135 $ 220,564 Reconciliation of GAAP "Net income (loss) attributable to PVA" to Non-GAAP "Net income (loss) attributable to PVA as adjusted" Net loss attributable to PVA $ (22,183 ) $ (4,549 ) $ (29,392 ) $ (1,355 ) Adjustments for derivatives: Derivative losses included 668 105,135 (9,133 ) 132,144 in income Cash settlements of 17,281 (18,032 ) 36,429 (26,985 ) derivatives Adjustment for drilling rig 6,739 - 16,603 - standby charges Adjustment for impairments 3,279 - 4,475 - Adjustment for loss on sale 1,599 - 1,599 - of assets Impact of adjustments on (2,640 ) - (6,915 ) - noncontrolling interest Impact of adjustments on (10,753 ) (33,796 ) (17,004 ) (40,802 ) income tax expense $ (6,010 ) $ 48,758 $ (3,338 ) $ 63,002 Less: Portion of subsidiary net income allocated to undistributed share-based (11 ) (58 ) (24 ) (161 ) compensation awards, net of taxes Net income (loss) attributable to PVA as $ (6,021 ) $ 48,700 $ (3,362 ) $ 62,841 adjusted (b) Net income (loss) attributable to PVA as $ (0.14 ) $ 1.17 $ (0.08 ) $ 1.51 adjusted per share, diluted
(a) Operating cash flow represents net cash provided by operating activities before changes in operating assets and liabilities. We believe 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 we believe 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) Net income attributable to PVA as adjusted represents net income attributable to PVA adjusted to exclude the effects of non-cash changes in the fair value of derivatives, the effects of drilling rig stand-by charges, the effects of impairments, the effects of loss on the sale of assets and the effects of PVR's net income allocated to unvested PVR equity compensation awards that we hold until vesting. We believe this presentation is commonly 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. We use this information for comparative purposes within these industries. Net income attributable to PVA 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 attributable to PVA.
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 June 30, 2009 Three Months Ended June 30, 2008 As Reported Adjustments As Adjusted As Reported Adjustments As Adjusted Revenues Natural gas $ 39,830 $ - $ 39,830 $ 113,212 $ - $ 113,212 Crude oil 11,825 - 11,825 14,463 - 14,463 NGLs 4,336 - 4,336 6,538 - 6,538 Natural gas 91,655 (91,655 ) - 184,298 (184,298 ) - midstream Coal royalties 29,997 (29,997 ) - 31,641 (31,641 ) - Other 6,274 (6,362 ) (88 ) 10,262 (10,067 ) 195 Total revenues 183,917 (128,014 ) 55,903 360,414 (226,006 ) 134,408 Expenses Cost of midstream gas 71,933 (71,933 ) - 152,986 (152,986 ) - purchased Operating 22,648 (9,018 ) 13,630 22,214 (8,719 ) 13,495 Exploration 10,733 - 10,733 6,739 - 6,739 Exploration - drilling rig 6,739 - 6,739 - - - standby charges Taxes other 4,930 (980 ) 3,950 8,259 (976 ) 7,283 than income General and 20,355 (8,819 ) 11,536 19,058 (7,305 ) 11,753 administrative Depreciation, depletion and 58,218 (17,617 ) 40,601 44,934 (12,919 ) 32,015 amortization Impairments 3,279 - 3,279 - - - Loss on sale 1,599 - 1,599 - - - of assets Total expenses 200,434 (108,367 ) 92,067 254,190 (182,905 ) 71,285 Operating (16,517 ) (19,647 ) (36,164 ) 106,224 (43,101 ) 63,123 income (loss) Other income (expense) Interest (15,046 ) 6,365 (8,681 ) (11,345 ) 5,374 (5,971 ) expense Derivatives 752 2,034 2,786 (103,618 ) 29,942 (73,676 ) Equity earnings in - 5,250 5,250 - 4,513 4,513 PVG and PVR Other 353 (347 ) 6 975 (676 ) 299 Income (loss) before taxes and (30,458 ) (6,345 ) (36,803 ) (7,764 ) (3,948 ) (11,712 ) noncontrolling interests Income tax benefit 14,620 - 14,620 7,163 - 7,163 (expense) Net income (15,838 ) (6,345 ) (22,183 ) (601 ) (3,948 ) (4,549 ) (loss) Net income attributable to (6,345 ) 6,345 - (3,948 ) 3,948 - noncontrolling interests Net income (loss) $ (22,183 ) $ - $ (22,183 ) $ (4,549 ) $ - $ (4,549 ) attributable to PVA Six Months Ended June 30, 2009 Six Months Ended June 30, 2008 As Reported Adjustments As Adjusted As Reported Adjustments As Adjusted Revenues Natural gas $ 92,651 $ - $ 92,651 $ 193,725 $ - $ 193,725 Crude oil 18,153 - 18,153 23,678 - 23,678 NGLs 7,706 - 7,706 8,406 - 8,406 Natural gas 186,861 (186,861 ) - 309,346 (309,346 ) - midstream Coal royalties 60,627 (60,627 ) - 55,603 (55,603 ) - Other 17,079 (15,112 ) 1,967 18,791 (14,168 ) 4,623 Total revenues 383,077 (262,600 ) 120,477 609,549 (379,117 ) 230,432 Expenses Cost of midstream gas 151,331 (151,331 ) - 252,683 (252,683 ) - purchased Operating 45,350 (17,908 ) 27,442 43,216 (15,512 ) 27,704 Exploration 22,181 - 22,181 11,419 - 11,419 Exploration - drilling rig 16,603 - 16,603 - - - standby charges Taxes other 11,362 (2,203 ) 9,159 15,654 (2,048 ) 13,606 than income General and 38,841 (16,952 ) 21,889 36,717 (14,439 ) 22,278 administrative Depreciation, depletion and 115,291 (34,120 ) 81,171 83,503 (24,419 ) 59,084 amortization Impairments 4,475 - 4,475 - - - Loss on sale 1,599 - 1,599 - - - of assets Total expenses 407,033 (222,514 ) 184,519 443,192 (309,101 ) 134,091 Operating (23,956 ) (40,086 ) (64,042 ) 166,357 (70,016 ) 96,341 income (loss) Other income (expense) Interest (27,548 ) 11,981 (15,567 ) (22,092 ) 10,306 (11,786 ) expense Derivatives 11,007 9,195 20,202 (129,519 ) 22,166 (107,353 ) Equity earnings in - 9,583 9,583 - 14,614 14,614 PVG and PVR Other 1,926 (676 ) 1,250 3,306 (1,046 ) 2,260 Income (loss) before taxes and (38,571 ) (10,003 ) (48,574 ) 18,052 (23,976 ) (5,924 ) noncontrolling interests Income tax benefit 19,182 - 19,182 4,569 - 4,569 (expense) Net income (19,389 ) (10,003 ) (29,392 ) 22,621 (23,976 ) (1,355 ) (loss) Net income attributable to (10,003 ) 10,003 - (23,976 ) 23,976 - noncontrolling interests Net income (loss) $ (29,392 ) $ - $ (29,392 ) $ (1,355 ) $ - $ (1,355 ) attributable to PVA
(a) Equity method income statements represent consolidated income statements, minus 100% of PVG's consolidated results of operations, plus noncontrolling interests which represents the portion of PVG's consolidated results of operations that we do not own. We believe equity method income statements provide useful information to allow the public to more easily discern PVG's effect on our 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): June 30, 2009 December 31, 2008 As Reported Adjustments As Adjusted As Reported Adjustments As Adjusted Assets Current assets $ 189,540 $ (95,817 ) $ 93,723 $ 263,518 $ (126,299 ) $ 137,219 Net property and 2,531,447 (892,944 ) 1,638,503 2,512,177 (895,119 ) 1,617,058 equipment Equity investment in - 227,911 227,911 - 248,211 248,211 PVG and PVR Other assets 235,952 (211,126 ) 24,826 220,870 (206,256 ) 14,614 Total assets $ 2,956,939 $ (971,976 ) $ 1,984,963 $ 2,996,565 $ (979,463 ) $ 2,017,102 Liabilities and shareholders' equity Current liabilities $ 143,034 $ (74,187 ) $ 68,847 $ 247,594 $ (89,908 ) $ 157,686 Long-term debt 1,161,432 (597,100 ) 564,332 1,099,996 (568,100 ) 531,896 Other liabilities and 305,610 (27,095 ) 278,515 312,645 (24,228 ) 288,417 deferred taxes PVA shareholders' 1,073,269 - 1,073,269 1,039,103 - 1,039,103 equity Noncontrolling 273,594 (273,594 ) - 297,227 (297,227 ) - interest Total shareholders' 1,346,863 (273,594 ) 1,073,269 1,336,330 (297,227 ) 1,039,103 equity Total liabilities and $ 2,956,939 $ (971,976 ) $ 1,984,963 $ 2,996,565 $ (979,463 ) $ 2,017,102 shareholders' equity Reconciliation of GAAP "Statement of Cash Flows As Reported" to Non-GAAP "Statement of Cash Flows As Adjusted" (b): Three Months Ended June 30, 2009 Three Months Ended June 30, 2008 As Reported Adjustments As Adjusted As Reported Adjustments As Adjusted Cash flows from operating activities Net loss $ (15,838 ) $ - $ (15,838 ) $ (601 ) $ - $ (601 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation, depletion and 58,218 (17,617 ) 40,601 44,934 (12,919 ) 32,015 amortization Impairments 3,279 - 3,279 - - - Derivative contracts: Total derivative 668 (2,951 ) (2,283 ) 105,135 (31,459 ) 73,676 losses (gains) Cash receipts (payments) to settle 17,281 (1,613 ) 15,668 (18,032 ) 9,703 (8,329 ) derivatives Deferred income taxes (14,166 ) - (14,166 ) (3,589 ) - (3,589 ) Dry hole and unproved 9,379 - 9,379 5,919 - 5,919 leasehold expense Investment in PVG and - (12,780 ) (12,780 ) - (8,952 ) (8,952 ) PVR Cash distributions - 11,532 11,532 - 11,048 11,048 from PVG and PVG Other 9,888 (1,306 ) 8,582 2,222 (335 ) 1,887 Operating cash flow 68,709 (24,735 ) 43,974 135,988 (32,914 ) 103,074 Changes in operating assets and (33,751 ) (2,610 ) (36,361 ) (17,248 ) (500 ) (17,748 ) liabilities Net cash provided by (used in) operating 34,958 (27,345 ) 7,613 118,740 (33,414 ) 85,326 activities Net cash provided by (used in) investing (54,534 ) 15,507 (39,027 ) (231,545 ) 117,076 (114,469 ) activities Net cash provided by (used in) financing 8,192 16,455 24,647 123,405 (90,623 ) 32,782 activities Net increase (decrease) in cash (11,384 ) 4,617 (6,767 ) 10,600 (6,961 ) 3,639 and cash equivalents Cash and cash equivalents-beginning 29,721 (21,710 ) 8,011 32,880 (18,981 ) 13,899 balance Cash and cash equivalents-ending $ 18,337 $ (17,093 ) $ 1,244 $ 43,480 $ (25,942 ) $ 17,538 balance Six Months Ended June 30, 2009 Six Months Ended June 30, 2008 As Reported Adjustments As Adjusted As Reported Adjustments As Adjusted Cash flows from operating activities Net income (loss) $ (19,389 ) $ - $ (19,389 ) $ 22,621 $ - $ 22,621 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion and 115,291 (34,120 ) 81,171 83,503 (24,419 ) 59,084 amortization Impairments 4,475 - 4,475 - - - Derivative contracts: Total derivative (9,133 ) (10,566 ) (19,699 ) 132,144 (24,791 ) 107,353 losses (gains) Cash settlements of 36,429 (4,449 ) 31,980 (26,985 ) 19,225 (7,760 ) derivatives Deferred income taxes (18,800 ) - (18,800 ) (1,447 ) - (1,447 ) Dry hole and unproved 19,883 - 19,883 9,472 - 9,472 leasehold expense Investment in PVG and - (21,721 ) (21,721 ) - (42,959 ) (42,959 ) PVR Cash distributions - 23,064 23,064 - 21,480 21,480 from PVG and PVG Other 13,379 (31 ) 13,348 1,256 79 1,335 Operating cash flow 142,135 (47,823 ) 94,312 220,564 (51,385 ) 169,179 Changes in operating assets and (4,158 ) (1,648 ) (5,806 ) (35,672 ) 424 (35,248 ) liabilities Net cash provided by (used in) operating 137,977 (49,471 ) 88,506 184,892 (50,961 ) 133,931 activities Net cash provided by (used in) investing (193,566 ) 33,548 (160,018 ) (344,542 ) 134,405 (210,137 ) activities Net cash provided by (used in) financing 55,588 17,168 72,756 168,603 (78,883 ) 89,720 activities Net increase (decrease) in cash (1 ) 1,245 1,244 8,953 4,561 13,514 and cash equivalents Cash and cash equivalents-beginning 18,338 (18,338 ) - 34,527 (30,503 ) 4,024 balance Cash and cash equivalents-ending $ 18,337 $ (17,093 ) $ 1,244 $ 43,480 $ (25,942 ) $ 17,538 balance
(a) Equity method balance sheets represent consolidated balance sheets, minus 100% of PVG's consolidated balance sheets, excluding noncontrolling interest which represents the portion of PVG's consolidated balance sheet that we do not own and including other adjustments to eliminate inter-company transactions. We believe equity method balance sheets provide useful information to allow the public to more easily discern PVG's effect on our 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 noncontrolling interest which represents the portion of PVG's consolidated results of operations that we do not own and including other adjustments to eliminate inter-company transactions. We believe equity method statements of cash flows provide useful information to allow the public to more easily discern PVG's effect on our cash flows.
PENN VIRGINIA CORPORATION GUIDANCE TABLE - unaudited (dollars in millions except where noted) We are providing the following guidance regarding financial and operational expectations for full-year 2009. Actual First Quarter Second Quarter YTD Full-Year Oil & Gas Segment: 2009 2009 2009 2009 Guidance Production: Natural gas (Bcf) (a) 11.8 11.4 23.2 41.2 - 42.7 Crude oil (MBbls) 171 215 386 625 - 675 NGLs (MBbls) 147 140 287 515 - 540 Equivalent production 13.7 13.6 27.3 48.0 - 50.0 (Bcfe) Equivalent daily production (MMcfe per 152.3 149.5 150.8 131.5 - 137.0 day) Expenses: Cash operating expenses $ 1.80 1.79 1.80 1.85 - 1.95 ($ per Mcfe) Exploration $ 21.3 17.5 38.8 60.0 - 70.0 Depreciation, depletion and amortization ($ per $ 2.92 2.94 2.94 2.90 - 3.05 Mcfe) Impairments $ 1.2 3.3 4.5 4.5 - 4.5 Loss on sale of assets $ - 1.6 1.6 1.6 - 1.6 Capital expenditures: Development drilling $ 76.5 37.3 113.8 135.0 - 145.0 Exploratory drilling $ 1.5 - 1.5 2.0 - 4.0 Pipeline, gathering, $ 5.1 2.4 7.5 8.0 - 9.0 facilities Seismic $ 0.7 0.4 1.1 1.0 - 2.0 Lease acquisition, field projects and $ 1.8 2.8 4.6 19.0 - 20.0 other Total segment capital $ 85.6 42.9 128.5 165.0 - 180.0 expenditures Coal and Natural Resource Segment (PVR): Coal royalty tons 8.7 8.7 17.5 33.0 - 34.0 (millions) Revenues: Average coal royalties $ 3.50 3.43 3.47 3.30 - 3.40 per ton Average coal royalties per ton, net of coal $ 3.36 3.25 3.31 3.20 - 3.30 royalties expense Other $ 7.6 5.1 12.8 23.5 - 24.5 Expenses: Cash operating expenses $ 5.9 6.6 12.5 22.0 - 23.0 Depreciation, depletion $ 7.4 8.2 15.6 31.0 - 32.0 and amortization Capital expenditures: Expansion and $ 1.3 0.6 1.9 5.0 - 5.5 acquisitions Maintenance capital $ - - - 1.0 - 2.0 expenditures Total segment capital $ 1.3 0.6 1.9 6.0 - 7.5 expenditures Natural Gas Midstream Segment (PVR): System throughput volumes (MMcf per day) 359 344 352 350 - 360 (b) Expenses: Cash operating expenses $ 11.8 11.6 23.4 51.0 - 52.5 Depreciation, depletion $ 9.1 9.5 18.6 38.0 - 39.0 and amortization Capital expenditures: Expansion and $ 11.2 10.3 21.5 70.0 - 72.0 acquisitions Maintenance capital $ 3.3 1.4 4.7 11.5 - 13.0 expenditures Total segment capital $ 14.5 11.7 26.2 81.5 - 85.0 expenditures Corporate and Other: General and administrative expense $ 5.2 5.8 11.0 18.5 - 20.0 - PVA General and administrative expense $ 0.5 0.6 1.1 2.0 - 2.5 - PVG Interest expense: PVA end of period debt $ 591.5 564.3 564.3 outstanding PVA average interest 4.3 % 6.0 % 5.2 % rate PVR end of period debt $ 595.1 597.1 597.1 outstanding PVR average interest 3.9 % 4.2 % 4.0 % rate Income tax rate 38.8 % 39.7 % 39.5 % Cash distributions received from PVG and $ 11.5 11.6 23.1 PVR Other capital $ 0.6 0.9 1.5 1.0 - 2.0 expenditures
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 our current derivative positions for natural gas production in the oil and gas segment as of June 30, 2009: Weighted Average Price Average Additional Put Volume Per Option Floor Ceiling Day Natural gas costless (MMBtu) (per MMBtu) collars Third quarter 2009 15,000 $ 4.25 $ 5.70 Fourth quarter 2009 15,000 $ 4.25 $ 5.70 First quarter 2010 35,000 $ 4.96 $ 7.41 Second quarter 2010 30,000 $ 5.33 $ 8.02 Third quarter 2010 30,000 $ 5.33 $ 8.02 Fourth quarter 2010 50,000 $ 5.65 $ 8.77 First quarter 2011 50,000 $ 5.65 $ 8.77 Second quarter 2011 10,000 $ 6.00 $ 8.00 Third quarter 2011 10,000 $ 6.00 $ 8.00 Natural gas three-way (MMBtu) (per MMBtu) collars (1) 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 swaps (MMBtu) (per MMBtu) Third quarter 2009 40,000 $ 4.91 Fourth quarter 2009 40,000 $ 4.91 First quarter 2010 15,000 $ 6.19 Second quarter 2010 30,000 $ 6.17 Third quarter 2010 30,000 $ 6.17 Crude oil costless (barrels) (per barrel) collars First quarter 2010 500 $ 60.00 $ 74.75 Second quarter 2010 500 $ 60.00 $ 74.75 Third quarter 2010 500 $ 60.00 $ 74.75 Fourth quarter 2010 500 $ 60.00 $ 74.75 Crude oil three-way (barrels) (per barrel) collars (1) 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 Crude oil swaps (barrels) (per barrel) Third quarter 2009 500 $ 59.25 Fourth quarter 2009 500 $ 59.25
We estimate 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 remainder of 2009 would increase or decrease by approximately $17.4 million. In addition, we estimate that for every $5.00 per barrel increase or decrease in the crude oil price, oil and gas segment operating income for the remainder of 2009 would increase or decrease by approximately $1.8 million. This assumes that crude oil prices, natural gas prices and inlet volumes remain constant at anticipated 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 we will receive for the contracted commodity volumes. The purchased put establishes the minimum price that we 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) The costless collar natural gas prices per MMBtu per quarter include (b) 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 June 30, 2009: Weighted Average Price Collars Average Additional Volume Per Put Option Put Call Day Crude oil three-way collar (barrels) (per barrel) Third quarter 2009 through 1,000 $ 70.00 $ 90.00 $ 119.25 fourth quarter 2009 Frac spread collar (1) (MMBtu) (per MMBtu) Second quarter 2009 through 6,000 $ 9.09 $ 13.94 fourth quarter 2009 Crude oil collar (barrels) (per barrel) Third quarter 2010 through 750 $ 70.00 $ 81.25 fourth quarter 2010
We estimate that, excluding the derivative positions described above, for every $1.00 per MMBtu increase or decrease in the natural gas price, natural gas midstream gross margin and operating income for the remainder of 2009 would decrease or increase by approximately $2.5 million. In addition, we estimate that for every $5.00 per barrel increase or decrease in the crude oil price, natural gas midstream gross margin and operating income for the remainder of 2009 would increase or decrease by approximately $2.4 million. This assumes that crude oil prices, natural gas prices and inlet volumes remain constant at anticipated levels. These estimated changes in gross margin and operating income exclude potential cash receipts or payments in settling these derivative positions. (1) PVR's frac spread is the spread between the purchase price for the natural gas PVR purchases from producers and the sale price for the NGLs that PVR sells after processing. PVR hedges against the variability in its frac spread by entering into swap derivative contracts to sell NGLs forward at a predetermined swap price and to purchase an equivalent volume of natural gas forward on an MMBtu basis.
Source: Penn Virginia Corporation
Released August 5, 2009