RADNOR, Pa.-- Penn Virginia Corporation (NYSE:PVA) today reported financial and operational results for the three months ended September 30, 2009 and provided an update of full-year 2009 guidance.
Third Quarter 2009 Highlights
Third quarter 2009 results, with comparisons to third quarter 2008 results, included the following:
-- Quarterly oil and gas production of 134.9 million cubic feet of natural gas equivalent (MMcfe) per day, or 12.4 billion cubic feet of natural gas equivalent (Bcfe), a six percent increase as compared to oil and gas production of 127.1 MMcfe per day, or 11.7 Bcfe; -- Increased 2009 guidance for production to a range of 49.0 to 51.0 Bcfe, or six to nine percent higher than 2008, as a result of better than expected third quarter volumes; -- Operating cash flow, a non-GAAP (generally accepted accounting principles) measure, of $64.0 million as compared to operating cash flow of $97.5 million; -- Adjusted net loss, a non-GAAP measure which excludes the effects of the non-cash change in derivatives fair value, drilling rig standby charges, impairments and gains or losses that affect comparability to the prior year period, of $11.2 million, or $0.25 per diluted share, as compared to adjusted net income of $14.0 million, or $0.33 per diluted share; -- Net loss attributable to PVA of $79.9 million, or $1.76 per diluted share, as compared to net income of $123.0 million, or $2.88 per diluted share. The third quarter of 2009 included an $87.9 million non-cash impairment charge on non-core properties held for sale, while the third quarter of 2008 included $154.9 million of a non-cash change in derivatives fair value and gains on the sale of assets; and -- Subsequent to the end of the third quarter, we completed the syndication of a new 3-year senior secured revolving credit facility with an initial undrawn commitment of $300 million supported by a $420 million approved borrowing base, a 14 percent increase over the current $367 million borrowing base.
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 and a decision to sell non-core properties in the Gulf Coast region impacted our financial results, we are pleased with our third quarter 2009 operational results. As detailed in our separate operational update, third quarter production was better than anticipated and, accordingly, we have increased full year 2009 production guidance. In addition, due to the improved outlook for natural gas, recent positive results in our core plays and our improved financial liquidity, we have resumed operated drilling in the Lower Bossier (Haynesville) Shale and Granite Wash plays.
"During the third quarter of 2009, we raised approximately $118 million from the sale of PVG units. As a result, we have substantially improved our financial liquidity, with $300 million of unused availability on our revolving credit facility and over $90 million of cash on hand. Furthermore, we expect to complete the sale of non-core properties, primarily along the Texas and Louisiana Gulf Coast, during the fourth quarter of 2009 which will further augment our cash liquidity. The net effect of both transactions is very positive to our cash and liquidity situation and better positions our company for future growth as a more focused, resource play-driven exploration and production company.
"Our commodity price hedges provided cash flow protection, increasing third quarter effective price realizations from $3.45 per Mcf to $4.90 per Mcf for natural gas. For the fourth quarter of 2009, we have hedged approximately 82 percent of our estimated natural gas production at average respective floor and ceiling prices of $6.41 and $8.11 per million British thermal units (MMBtu), and 57 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, assuming flat production from the fourth quarter of 2009. In addition to the cash flow support our hedges have provided, our unit cash costs have continued to improve, including a 15 percent reduction from the prior year quarter and in line with the second quarter of 2009 in spite of the sequential production decline.
"In addition to our core oil and gas exploration and production business segment, we own 51 percent of Penn Virginia GP Holdings, L.P. (NYSE: PVG), which was reduced from 77 percent by our sale of PVG units during the third quarter. 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, which have not changed since the third quarter of 2008, our ownership of PVG and PVR provides approximately $30 million of annualized pre-tax cash flow to us, which we re-deploy into our oil and gas segment."
Oil and Gas Segment Review
Third quarter oil and gas production grew six percent to 134.9 MMcfe per day, or 12.4 Bcfe, from 127.1 MMcfe per day, or 11.7 Bcfe, in the third quarter of 2008, and was nine percent lower than 148.9 MMcfe per day, or 13.6 Bcfe in the second quarter of 2009. See our separate operational update news release dated October 30, 2009 for a more detailed discussion of operations for the oil and gas segment.
During the third quarter of 2009, oil and gas segment operating income decreased by $203.6 million as compared to the prior year quarter to an operating loss of $114.6 million. The decrease was due to a $92.4 million increase in impairments, a $101.0 million, or 64 percent, decrease in revenues, a $7.8 million, or 93 percent, increase in exploration expense and a $2.5 million, or four percent, increase in other operating expenses. The decrease in revenues was due to sharp declines in realized commodity prices before considering support from related hedges - a 66 percent decrease in the natural gas price, a 44 percent decrease in the oil price and a 55 percent decrease in the price of natural gas liquids (NGLs) - offset in part by the six percent increase in oil and gas production.
The $102.7 million increase in operating expenses was due to an $87.9 million non-cash impairment charge on assets held for sale pertaining to the Gulf Coast region, a $6.7 million increase in depreciation, depletion and amortization (DD&A) expense, a $4.5 million impairment charge primarily related to Bakken properties in North Dakota and $3.7 million of rig standby charges. These increases in operating expenses were partially offset by a $2.4 million decrease in production taxes due to lower commodity prices and a $1.8 decrease in lease operating expenses despite the production increase. The impairment charge on the Gulf Coast properties relates to a reduction in the carrying value of the assets to a level which is in line with the expected proceeds from their sale, expected during the fourth quarter.
In the third quarter of 2009, total oil and gas segment expenses, excluding the impairment and rig standby charges, increased by $6.6 million, or 11 percent, to $74.3 million, or $5.99 per Mcfe produced, from $67.7 million, or $5.79 per Mcfe produced, in the third quarter of 2008, as discussed below:
-- Third quarter 2009 cash operating expenses of $22.6 million, or $1.82 per Mcfe produced, were $4.1 million, or 15 percent, lower than the $26.7 million, or $2.29 per Mcfe produced, in the third 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 17 percent to $1.07 per Mcfe from $1.29 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 39 percent to $0.34 per Mcfe from $0.56 per Mcfe primarily due to decreased severance taxes related to sharply lower commodity prices; and o Segment general and administrative (G&A) expense decreased seven percent to $0.41 per Mcfe as compared to $0.44 per Mcfe primarily due to the production increase.
-- Exploration expense, excluding drilling rig standby charges discussed below, increased 49 percent to $12.4 million in the third quarter of 2009, as compared to $8.3 million in the prior year quarter, primarily due to 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 $6.7 million, or 20 percent, to $39.3 million, or $3.17 per Mcfe, in the third quarter of 2009 from $32.7 million, or $2.79 per Mcfe, in the prior year quarter. The overall increase in DD&A expense was primarily due to the production increase and a higher depletion rate per unit of production. The higher depletion rate was primarily due to (i) higher drilling costs on our new horizontal plays and (ii) commodity price and performance-related downward reserve revisions in the non-core Gulf Coast fields, expected to be sold during the fourth quarter of 2009, and on early-stage wells in the Lower Bossier (Haynesville) Shale play.
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 third quarter of 2009, we expensed approximately $3.7 million for lump sum delay fees, minimum daily standby fees and demobilization fees expected to be paid during the standby period. Continued deferral of the rigs could result in additional standby expense of $0.5 to $1.5 million during the fourth quarter of 2009.
During the third quarter of 2009, we incurred approximately $92.4 million of impairments. These charges were primarily related to the $87.9 million write-down in value of proved properties in our Gulf Coast region to a carrying value that is in line with the expected proceeds from the anticipated sale of these assets, expected during the fourth quarter of 2009.
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 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 November 4, 2009. Please visit PVR's website, www.pvresource.com, under "For Investors" for a copy of the release.
During the third quarter of 2009, we sold 10.0 million units of PVG to the public for net proceeds of $118.1 million. The net proceeds were used to repay the entire outstanding balance on our revolving credit facility and the remainder of approximately $68 million was held as cash. As a result, our position in PVG was reduced from 30.1 million units, or 77 percent, to 20.1 million units, or 51 percent.
As previously announced, on November 18, 2009, PVG will pay to unitholders of record as of November 6, 2009 a quarterly cash distribution of $0.38 per unit, or an annualized rate of $1.52 per unit, covering the period of July 1 through September 30, 2009. The distribution remains unchanged from the distribution paid with respect to each of the previous four quarters. As a result of PVG's distribution, we will receive a cash distribution of $7.6 million in the fourth quarter of 2009, or $30.5 million on an annualized basis.
Capital Resources, Credit Facility and Impact of Derivatives
We have completed the syndication of a new 3-year senior secured revolving credit facility with an initial undrawn commitment of $300 million supported by a $420 million approved borrowing base, a 14 percent increase over the current $367 million borrowing base. The new facility is provided by a syndicate of 12 banks, led by J.P. Morgan Securities Inc., with no individual bank holding more than ten percent of the total commitment. Pricing for the new credit facility will be unchanged from the existing facility. The credit facility will close subject to final document review by the bank group.
As of September 30, 2009, we had outstanding borrowings of $530.0 million ($496.4 million carrying value), consisting of $300 million ($291.4 million carrying value) of senior unsecured notes due 2016 and $230.0 million ($204.9 million carrying value) of convertible senior subordinated notes due 2012 and no borrowings against our revolving credit facility. The $32.0 million decrease in outstanding borrowings as compared to the $562.0 million at December 31, 2008 was primarily due to the repayment of revolver debt following a $64.9 million offering of PVA common shares in May 2009 and a $118.1 million offering of PVG common units in September 2009, as well as free cash flow during the third quarter of 2009, net of spending to fund our oil and gas capital expenditures during the first nine months of 2009. As of September 30, 2009, we had $300 million of unused availability on our revolving credit facility and over $90 million of cash on hand.
As of September 30, 2009, PVR had outstanding borrowings of $628.1 million under its $800 million revolving credit facility with remaining revolver borrowing capacity of $170.3 million. The $60.0 million increase in outstanding PVR borrowings as compared to $568.0 million outstanding as of December 31, 2008 was primarily due to PVR capital expenditures during the first nine months of 2009.
Consolidated interest expense increased from $13.2 million in the third quarter of 2008 to $22.8 million in the third quarter of 2009. The increase was due to a higher interest rate on the senior unsecured notes PVA issued in June 2009 and higher average level of outstanding borrowings during the third quarter of 2009 as compared to the prior year quarter.
Due to decreases in natural gas and crude oil prices experienced during the third quarter, the mark-to-market valuation of our and PVR's open hedging positions resulted in derivatives income of $2.5 million in the third quarter as compared to derivatives income of $125.1 million in the prior year quarter. Included in derivatives income for the third quarter of 2009 was $0.3 million of income related to our oil and gas segment and $2.8 million of expense related to PVR. Third quarter 2009 cash settlements of our oil and gas derivatives resulted in net cash receipts of $15.8 million, as compared to $5.7 million of net cash payments in the same quarter of 2008. PVR's third quarter 2009 cash settlements of commodity and interest rate derivatives result in net cash payments of $0.3 million, as compared to $14.1 million of net cash payments in the same quarter of 2008.
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 operational update, are meant to provide guidance only and are subject to revision as our and PVR's operating environments change.
Third Quarter 2009 Financial and Operational Results Conference Call
A conference call and webcast, during which management will discuss third quarter 2009 financial and operational results, is scheduled for Thursday, November 5, 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 1-866-630-9986 five to ten minutes before the scheduled start of the conference call and using the passcode 4836740, 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 will be available approximately two hours after the call for two weeks by dialing toll free 888-203-1112 (international: 719-457-0820) and using the replay code 4836740. In addition, an on-demand replay of the webcast will also be available for two weeks at PVG's or PVR's websites beginning 24 hours after the webcast.
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 and the Appalachian Basin. We also own approximately 51 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 write-downs 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; whether the sale of our Gulf Coast assets closes during the fourth quarter and at the anticipated price; operating risks, including unanticipated geological problems, incidental to our business and to PVR's coal or natural gas midstream businesses; 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 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 Nine Months Ended September 30, September 30, 2009 2008 (a) 2009 2008 (a) Revenues Natural gas $ 36,654 $ 101,911 $ 129,305 $ 295,636 Crude oil 13,259 13,764 31,412 37,442 Natural gas liquids (NGLs) 2,847 10,481 10,553 18,887 Natural gas midstream 102,262 184,914 289,123 494,260 Coal royalties 29,821 33,308 90,448 88,911 Gain on sale of property 1,945 31,279 1,918 31,335 and equipment Other 8,375 9,955 25,481 28,690 Total revenues 195,163 385,612 578,240 995,161 Expenses Cost of midstream gas 77,248 155,564 228,579 408,247 purchased Operating 21,167 23,437 66,517 66,653 Exploration 12,405 8,346 34,587 19,765 Exploration - drilling rig 3,712 - 20,314 - standby charges - (b) Taxes other than income 5,294 7,671 16,656 23,325 General and administrative (excluding equity 16,309 16,211 47,481 49,299 compensation) Equity-based compensation 3,637 2,078 11,306 5,707 - (c) Depreciation, depletion 57,869 49,978 173,160 133,481 and amortization Impairments on assets held 87,900 - 87,900 - for sale Impairments 4,453 - 8,928 - Loss on sale of assets - - 1,599 - Total expenses 289,994 263,285 697,027 706,477 Operating income (loss) (94,831 ) 122,327 (118,787 ) 288,684 Other income (expense) Interest expense (22,784 ) (13,221 ) (50,332 ) (35,313 ) Derivatives (2,529 ) 125,132 8,478 (4,387 ) Other 348 (4,088 ) 2,274 (782 ) Income (loss) before income taxes and (119,796 ) 230,150 (158,367 ) 248,202 noncontrolling interests Income tax benefit 50,405 (78,921 ) 69,587 (74,352 ) (expense) Net income (loss) $ (69,391 ) $ 151,229 $ (88,780 ) $ 173,850 Less net income attributable to (10,509 ) (28,276 ) (20,512 ) (52,252 ) noncontrolling interests Income (loss) attributable $ (79,900 ) $ 122,953 $ (109,292 ) $ 121,598 to PVA Income (loss) per share attributable to PVA Basic $ 1.76 $ 2.94 $ 2.52 $ 2.91 Diluted $ 1.76 $ 2.88 $ 2.52 $ 2.88 Weighted average shares 45,427 41,881 43,324 41,715 outstanding, basic Weighted average shares 45,427 42,544 43,324 42,028 outstanding, diluted Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Production Natural gas (MMcf) 10,634 10,046 33,858 29,869 Crude oil (MBbls) 202 117 588 331 NGLs (MBbls) 94 157 381 300 Total natural gas, crude oil and NGL production 12,410 11,690 39,672 33,655 (MMcfe) Prices Natural gas ($ per Mcf) $ 3.45 $ 10.14 $ 3.82 $ 9.90 Crude oil ($ per Bbl) $ 65.64 $ 117.64 $ 53.42 $ 113.12 NGLs ($ per Bbl) $ 30.29 $ 66.76 $ 27.70 $ 62.96
(a) As a result of adopting accounting guidance 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 accounting guidance of share-based payments.
PENN VIRGINIA CORPORATION CONSOLIDATED BALANCE SHEETS - unaudited (in thousands) September 30, December 31, 2009 2008 Assets Current assets $ 293,483 $ 263,518 Net property and equipment 2,372,323 2,512,177 Other assets 235,463 220,870 Total assets $ 2,901,269 $ 2,996,565 Liabilities and shareholders' equity Current liabilities $ 145,356 $ 247,594 Long-term debt of PVR 628,100 568,100 Revolving credit facility - 332,000 Senior notes 291,432 - Convertible notes 204,935 199,896 Other liabilities and deferred taxes 268,834 312,645 PVA shareholders' equity 1,029,381 1,039,103 Noncontrolling interests 333,231 297,227 Total shareholders' equity 1,362,612 1,336,330 Total liabilities and shareholders' equity $ 2,901,269 $ 2,996,565
CONSOLIDATED STATEMENTS OF CASH FLOWS - unaudited (in thousands) Three Months Ended Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Cash flows from operating activities Net income (loss) $ (69,391 ) $ 151,229 $ (88,780 ) $ 173,850 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion 57,869 49,978 173,160 133,481 and amortization Impairments 92,353 - 96,828 - Derivative contracts: Total derivative losses 6,312 (123,628 ) (2,821 ) 8,516 (gains) Cash receipts (payments) 15,507 (19,755 ) 51,936 (46,740 ) to settle derivatives Deferred income taxes (51,928 ) 61,552 (70,728 ) 60,105 Dry hole and unproved 10,593 5,520 30,476 14,992 leasehold expense Other 2,685 (27,374 ) 16,064 (26,118 ) Operating cash flow (see attached table "Certain Non-GAAP 64,000 97,522 206,135 318,086 Financial Measures") Changes in operating 20,046 (5,727 ) 15,888 (41,399 ) assets and liabilities Net cash provided by 84,046 91,795 222,023 276,687 operating activities Cash flows from investing activities Acquisitions (32,068 ) (162,078 ) (38,261 ) (278,185 ) Additions to property and (25,363 ) (162,857 ) (218,558 ) (392,031 ) equipment Other 2,876 33,215 8,698 33,954 Net cash used in (54,555 ) (291,720 ) (248,121 ) (636,262 ) investing activities Cash flows from financing activities Dividends paid (2,559 ) (2,351 ) (7,278 ) (7,037 ) Distributions paid to noncontrolling interest (18,455 ) (17,917 ) (55,365 ) (45,829 ) holders Proceeds from (repayments - 46,431 (7,542 ) 46,431 of) bank borrowings Net proceeds from (repayments of) PVA (70,000 ) (25,000 ) (332,000 ) 58,000 borrowings Net proceeds from PVR 31,000 176,600 60,000 146,000 borrowings Net proceeds from issuance of PVA senior - - 291,009 - notes Net proceeds from issuance of PVR partners' - - - 138,015 capital Net proceeds from sale of 118,080 - 118,080 - PVG units Net proceeds from - - 64,835 - issuance of PVA equity Other (860 ) (2,311 ) (18,945 ) 8,475 Net cash provided by 57,206 175,452 112,794 344,055 financing activities Net increase (decrease) in cash and cash 86,697 (24,473 ) 86,696 (15,520 ) equivalents Cash and cash equivalents 18,337 43,480 18,338 34,527 - beginning of period Cash and cash equivalents $ 105,034 $ 19,007 $ 105,034 $ 19,007 - end of period
PENN VIRGINIA CORPORATION QUARTERLY SEGMENT INFORMATION - unaudited (in thousands except where noted) Three Months Ended Oil and Gas September 30, Coal and 2009 Natural Natural Resource Gas Other Consolidated Management Midstream Amount per Mcfe (a) Production Total natural gas, crude oil 12,410 and NGLs (MMcfe) Natural gas 10,634 (MMcf) Crude oil 202 (MBbls) NGLs (MBbls) 94 Coal royalty tons 8,387 (thousands of tons) Midstream system 29,811 throughput volumes (MMcf) Revenues Natural gas $ 36,654 $ 3.45 $ - $ - $ - $ 36,654 Crude oil 13,259 65.64 - - - 13,259 NGLs 2,847 30.29 - - - 2,847 Natural gas - - 118,443 (16,181 ) 102,262 midstream Coal royalties - 29,821 - - 29,821 Gain on sale of property 1,945 - - - 1,945 and equipment Other 1,043 5,358 2,003 (29 ) 8,375 Total revenues 55,748 4.49 35,179 120,446 (16,210 ) 195,163 Expenses Cost of midstream gas - - 92,355 (15,107 ) 77,248 purchased Operating 13,277 1.07 2,146 6,884 (1,140 ) 21,167 expense Exploration 12,405 1.00 - - - 12,405 Exploration - drilling rig 3,712 0.30 - - - 3,712 standby charges Taxes other 4,186 0.34 421 584 103 5,294 than income General and 5,133 0.41 3,388 4,180 7,245 19,946 administrative Depreciation, depletion and 39,326 3.17 7,999 9,852 692 57,869 amortization Impairments on assets held 87,900 7.08 - - - 87,900 for sale Impairments 4,453 0.36 - - - 4,453 Total expenses 170,392 13.73 13,954 113,855 (8,207 ) 289,994 Operating $ (114,644 ) $ (9.24 ) $ 21,225 $ 6,591 $ (8,003 ) $ (94,831 ) income (loss) Additions to property and $ 18,059 $ 140 $ 39,031 $ 201 $ 57,431 equipment Three Months Ended Oil and Gas September 30, Coal and 2008 Natural Natural Resource Gas Other Consolidated Management Midstream Amount per Mcfe (a) Production Total natural gas, crude oil 11,690 and NGLs (MMcfe) Natural gas 10,046 (MMcf) Crude oil 117 (MBbls) NGLs (MBbls) 157 Coal royalty tons 8,496 (thousands of tons) Midstream system 27,744 throughput volumes (MMcf) Revenues Natural gas $ 101,911 $ 10.14 $ - $ - $ - $ 101,911 Crude oil 13,764 117.64 - - - 13,764 NGLs 10,481 66.76 - - - 10,481 Natural gas - - 241,282 (56,368 ) 184,914 midstream Coal royalties - 33,308 - - 33,308 Gain on sale of property 30,509 770 31,279 and equipment Other 60 7,582 2,334 (21 ) 9,955 Total revenues 156,725 13.41 41,660 243,616 (56,389 ) 385,612 Expenses Cost of midstream gas - - 211,262 (55,698 ) 155,564 purchased Operating 15,067 1.29 2,877 6,164 (671 ) 23,437 expense Exploration 8,346 0.71 - - - 8,346 Taxes other 6,537 0.56 373 596 165 7,671 than income General and 5,122 0.44 3,321 3,757 6,089 18,289 administrative Depreciation, depletion and 32,665 2.79 8,794 8,109 410 49,978 amortization Total expenses 67,737 5.79 15,365 229,888 (49,705 ) 263,285 Operating $ 88,988 $ 7.62 $ 26,295 $ 13,728 $ (6,684 ) $ 122,327 income (loss) Additions to property and $ 213,573 $ 497 $ 110,606 $ 259 $ 324,935 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) Nine Months Ended Oil and Gas Coal and September 30, Natural Natural 2009 Resource Gas Management Midstream Amount per Mcfe Other Consolidated (a) Production Total natural gas, crude oil 39,672 and NGLs (MMcfe) Natural gas 33,858 (MMcf) Crude oil 588 (MBbls) NGLs (MBbls) 381 Coal royalty tons 25,874 (thousands of tons) Midstream system 93,433 throughput volumes (MMcf) Revenues Natural gas $ 129,305 $ 3.82 $ - $ - $ - $ 129,305 Crude oil 31,412 53.42 - - - 31,412 NGLs 10,553 27.70 - - - 10,553 Natural gas - - 348,882 (59,759 ) 289,123 midstream Coal royalties - 90,448 - - 90,448 Gain on sale of property 1,918 - - - 1,918 and equipment Other 2,904 18,127 4,346 104 25,481 Total revenues 176,092 4.44 108,575 353,228 (59,655 ) 578,240 Expenses Cost of midstream gas - - 285,129 (56,550 ) 228,579 purchased Operating 42,788 1.08 6,580 20,358 (3,209 ) 66,517 expense Exploration 34,587 0.87 - - - 34,587 Exploration - drilling rig 20,314 0.51 - - - 20,314 standby charges Taxes other 12,756 0.32 1,146 2,062 692 16,656 than income General and 15,970 0.40 10,760 12,661 19,396 58,787 administrative Depreciation, depletion and 119,242 3.04 23,557 28,414 1,947 173,160 amortization Impairments on assets held 87,900 2.22 - - - 87,900 for sale Impairments 8,928 0.23 - - - 8,928 Other 1,599 0.04 - - - 1,599 Total expenses 344,084 8.67 42,043 348,624 (37,724 ) 697,027 Operating $ (167,992 ) $ (4.23 ) $ 66,532 $ 4,604 $ (21,931 ) $ (118,787 ) income (loss) Additions to property and $ 181,873 $ 2,046 $ 71,245 $ 1,655 $ 256,819 equipment Nine Months Ended Oil and Gas Coal and September 30, Natural Natural 2008 Resource Gas Management Midstream Amount per Mcfe Other Consolidated (a) Production Total natural gas, crude oil 33,655 and NGLs (MMcfe) Natural gas 29,869 (MMcf) Crude oil 331 (MBbls) NGLs (MBbls) 300 Coal royalty tons 24,975 (thousands of tons) Midstream system 68,915 throughput volumes (MMcf) Revenues Natural gas $ 295,636 $ 9.90 $ - $ - $ - $ 295,636 Crude oil 37,442 113.12 - - - 37,442 NGLs 18,887 62.96 - - - 18,887 Natural gas - - 601,127 (106,867 ) 494,260 midstream Coal royalties - 88,911 - - 88,911 Gain on sale of property 30,543 - - - 30,543 and equipment Other 883 22,099 6,458 42 29,482 Total revenues 383,391 11.39 111,010 607,585 (106,825 ) 995,161 Expenses Cost of midstream gas - - 513,778 (105,531 ) 408,247 purchased Operating 43,370 1.29 9,522 15,031 (1,270 ) 66,653 expense Exploration 19,765 0.59 - - - 19,765 Taxes other 19,480 0.58 1,115 1,902 828 23,325 than income General and 14,869 0.44 9,780 10,559 19,798 55,006 administrative Depreciation, depletion and 90,849 2.70 22,733 18,589 1,310 133,481 amortization Total expenses 188,333 5.60 43,150 559,859 (84,865 ) 706,477 Operating $ 195,058 $ 5.79 $ 67,860 $ 47,726 $ (21,960 ) $ 288,684 income (loss) Additions to property and $ 422,975 $ 25,186 $ 220,997 $ 1,058 $ 670,216 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 Nine Months Ended September 30, September 30, 2009 2008 2009 2008 Reconciliation of GAAP "Net cash provided by operating activities" to Non-GAAP "Operating cash flow" Net cash provided by $ 84,046 $ 91,795 $ 222,023 $ 276,687 operating activities Adjustments: Changes in operating (20,046 ) 5,727 (15,888 ) 41,399 assets and liabilities Operating cash flow (a) $ 64,000 $ 97,522 $ 206,135 $ 318,086 Reconciliation of GAAP "Net income (loss) attributable to PVA" to Non-GAAP "Net income (loss) attributable to PVA, as adjusted" Net income (loss) $ (79,900 ) $ 122,953 $ (109,292 ) $ 121,598 attributable to PVA Adjustments for derivatives: Derivative losses (gains) 6,312 (123,628 ) (2,821 ) 8,516 included in income Cash receipts (payments) 15,507 (19,755 ) 51,936 (46,740 ) to settle derivatives Adjustment for drilling 3,712 - 20,314 - rig standby charges Adjustment for impairments 92,353 - 96,828 - Adjustment for net gains (1,945 ) (31,279 ) (319 ) (31,335 ) on sale of assets Impact of adjustments on (2,579 ) 16,755 (9,494 ) 13,649 noncontrolling interests Impact of adjustments on (44,621 ) 49,139 (60,859 ) 9,339 income taxes $ (11,161 ) $ 14,185 $ (13,707 ) $ 75,027 Less: Portion of subsidiary net income (loss) allocated to (44 ) (219 ) (68 ) (418 ) undistributed share-based compensation awards, net of taxes Net income (loss) attributable to PVA, as $ (11,205 ) $ 13,966 $ (13,775 ) $ 74,609 adjusted (b) Net income (loss) attributable to PVA, as $ (0.25 ) $ 0.33 $ (0.32 ) $ 1.78 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 (loss) attributable to PVA, as adjusted, represents net income (loss) attributable to PVA adjusted to exclude the effects of non-cash changes in the fair value of derivatives, drilling rig standby charges, impairments, gains and losses on the sale of assets, and net income of PVR allocated to unvested PVR restricted units awarded as equity compensation 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 (loss) 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 September 30, 2009 Three Months Ended September 30, 2008 As Reported Adjustments As Adjusted As Reported Adjustments As Adjusted Revenues Natural gas $ 36,654 $ - $ 36,654 $ 101,911 $ - $ 101,911 Crude oil 13,259 - 13,259 13,764 - 13,764 NGLs 2,847 - 2,847 10,481 - 10,481 Natural gas 102,262 (102,262 ) - 184,914 (184,914 ) - midstream Coal royalties 29,821 (29,821 ) - 33,308 (33,308 ) - Other 10,320 (7,361 ) 2,959 41,234 (10,686 ) 30,548 Total revenues 195,163 (139,444 ) 55,719 385,612 (228,908 ) 156,704 Expenses Cost of midstream gas 77,248 (77,248 ) - 155,564 (155,564 ) - purchased Operating 21,167 (9,030 ) 12,137 23,437 (8,371 ) 15,066 Exploration 12,405 - 12,405 8,346 - 8,346 Exploration - drilling rig 3,712 - 3,712 - - - standby charges Taxes other 5,294 (1,005 ) 4,289 7,671 (969 ) 6,702 than income General and 19,946 (8,481 ) 11,465 18,289 (7,618 ) 10,671 administrative Depreciation, depletion and 57,869 (17,851 ) 40,018 49,978 (16,903 ) 33,075 amortization Impairments on properties 87,900 - 87,900 - - - held for sale Impairments 4,453 - 4,453 - - - Loss on sale - - - - - - of assets Total expenses 289,994 (113,615 ) 176,379 263,285 (189,425 ) 73,860 Operating (94,831 ) (25,829 ) (120,660 ) 122,327 (39,483 ) 82,844 income (loss) Other income (expense) Interest (22,784 ) 6,505 (16,279 ) (13,221 ) 7,060 (6,161 ) expense Derivatives (2,529 ) 2,810 281 125,132 (15,742 ) 109,390 Equity earnings in - 6,349 6,349 - 15,771 15,771 PVG and PVR Other 348 (344 ) 4 (4,088 ) 4,118 30 Income (loss) before taxes and (119,796 ) (10,509 ) (130,305 ) 230,150 (28,276 ) 201,874 noncontrolling interests Income tax benefit 50,405 - 50,405 (78,921 ) - (78,921 ) (expense) Net income (69,391 ) (10,509 ) (79,900 ) 151,229 (28,276 ) 122,953 (loss) Less net income attributable (10,509 ) 10,509 - (28,276 ) 28,276 - to noncontrolling interests Net income (loss) $ (79,900 ) $ - $ (79,900 ) $ 122,953 $ - $ 122,953 attributable to PVA Nine Months Ended September 30, 2009 Nine Months Ended September 30, 2008 As Reported Adjustments As Adjusted As Reported Adjustments As Adjusted Revenues Natural gas $ 129,305 $ - $ 129,305 $ 295,636 $ - $ 295,636 Crude oil 31,412 - 31,412 37,442 - 37,442 NGLs 10,553 - 10,553 18,887 - 18,887 Natural gas 289,123 (289,123 ) - 494,260 (494,260 ) - midstream Coal royalties 90,448 (90,448 ) - 88,911 (88,911 ) - Other 27,399 (22,473 ) 4,926 60,025 (28,557 ) 31,468 Total revenues 578,240 (402,044 ) 176,196 995,161 (611,728 ) 383,433 Expenses Cost of midstream gas 228,579 (228,579 ) - 408,247 (408,247 ) - purchased Operating 66,517 (26,938 ) 39,579 66,653 (23,217 ) 43,436 Exploration 34,587 - 34,587 19,765 - 19,765 Exploration - drilling rig 20,314 - 20,314 - - - standby charges Taxes other 16,656 (3,208 ) 13,448 23,325 (3,017 ) 20,308 than income General and 58,787 (25,433 ) 33,354 55,006 (22,057 ) 32,949 administrative Depreciation, depletion and 173,160 (51,971 ) 121,189 133,481 (41,322 ) 92,159 amortization Impairments on assets held 87,900 - 87,900 - - - for sale Impairments 8,928 - 8,928 - - - Loss on sale 1,599 - 1,599 - - - of assets Total expenses 697,027 (336,129 ) 360,898 706,477 (497,860 ) 208,617 Operating (118,787 ) (65,915 ) (184,702 ) 288,684 (113,868 ) 174,816 income (loss) Other income (expense) Interest (50,332 ) 18,486 (31,846 ) (35,313 ) 17,366 (17,947 ) expense Derivatives 8,478 12,005 20,483 (4,387 ) 6,424 2,037 Equity earnings in - 15,932 15,932 - 34,754 34,754 PVG and PVR Other 2,274 (1,020 ) 1,254 (782 ) 3,072 2,290 Income (loss) before taxes and (158,367 ) (20,512 ) (178,879 ) 248,202 (52,252 ) 195,950 noncontrolling interests Income tax benefit 69,587 - 69,587 (74,352 ) - (74,352 ) (expense) Net income (88,780 ) (20,512 ) (109,292 ) 173,850 (52,252 ) 121,598 (loss) Less net income attributable (20,512 ) 20,512 - (52,252 ) 52,252 - to noncontrolling interests Net income (loss) $ (109,292 ) $ - $ (109,292 ) $ 121,598 $ - $ 121,598 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): September 30, 2009 December 31, 2008 As Reported Adjustments As Adjusted As Reported Adjustments As Adjusted Assets Current assets $ 293,483 $ (92,843 ) $ 200,640 $ 263,518 $ (126,299 ) $ 137,219 Net property and 2,372,323 (909,994 ) 1,462,329 2,512,177 (895,119 ) 1,617,058 equipment Equity investment in - 158,276 158,276 - 248,211 248,211 PVG and PVR Other assets 235,463 (215,937 ) 19,526 220,870 (206,256 ) 14,614 Total assets $ 2,901,269 $ (1,060,498 ) $ 1,840,771 $ 2,996,565 $ (979,463 ) $ 2,017,102 Liabilities and shareholders' equity Current liabilities $ 145,356 $ (70,873 ) $ 74,483 $ 247,594 $ (89,908 ) $ 157,686 Long-term debt 1,124,467 (628,100 ) 496,367 1,099,996 (568,100 ) 531,896 Other liabilities and 268,834 (28,294 ) 240,540 312,645 (24,228 ) 288,417 deferred taxes - PVA shareholders' 1,029,381 - 1,029,381 1,039,103 - 1,039,103 equity Noncontrolling 333,231 (333,231 ) - 297,227 (297,227 ) - interests Total shareholders' 1,362,612 (333,231 ) 1,029,381 1,336,330 (297,227 ) 1,039,103 equity Total liabilities and $ 2,901,269 $ (1,060,498 ) $ 1,840,771 $ 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 September 30, 2009 Three Months Ended September 30, 2008 As Reported Adjustments As Adjusted As Reported Adjustments As Adjusted Cash flows from operating activities Net income (loss) $ (69,391 ) $ - $ (69,391 ) $ 151,229 $ - $ 151,229 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion and 57,869 (17,851 ) 40,018 49,978 (16,903 ) 33,075 amortization Impairments 92,353 - 92,353 - - - Derivative contracts: Total derivative 6,312 (3,668 ) 2,644 (123,628 ) 14,239 (109,389 ) losses (gains) Cash receipts (payments) to settle 15,507 314 15,821 (19,755 ) 14,054 (5,701 ) derivatives Deferred income taxes (51,928 ) (51,928 ) 61,552 - 61,552 Dry hole and unproved 10,593 - 10,593 5,520 - 5,520 leasehold expense Investment in PVG and - (18,470 ) (18,470 ) - (44,047 ) (44,047 ) PVR Cash distributions - 11,868 11,868 - 10,967 10,967 from PVG and PVR Other 2,685 (1,232 ) 1,453 (27,374 ) 1,130 (26,244 ) Operating cash flow 64,000 (29,039 ) 34,961 97,522 (20,560 ) 76,962 Changes in operating assets and 20,046 (1,892 ) 18,154 (5,727 ) 10,853 5,126 liabilities Net cash provided by 84,046 (30,931 ) 53,115 91,795 (9,707 ) 82,088 operating activities Net cash used in (54,555 ) 38,871 (15,684 ) (291,720 ) 171,871 (119,849 ) investing activities - Net cash provided by 57,206 (12,545 ) 44,661 175,452 (155,229 ) 20,223 financing activities Net increase (decrease) in cash 86,697 (4,605 ) 82,092 (24,473 ) 6,935 (17,538 ) and cash equivalents Cash and cash equivalents-beginning 18,337 (17,093 ) 1,244 43,480 (25,942 ) 17,538 balance Cash and cash equivalents-ending $ 105,034 $ (21,698 ) $ 83,336 $ 19,007 $ (19,007 ) $ - balance Nine Months Ended September 30, 2009 Nine Months Ended September 30, 2008 As Reported Adjustments As Adjusted As Reported Adjustments As Adjusted Cash flows from operating activities Net income (loss) $ (88,780 ) $ - $ (88,780 ) $ 173,850 $ - $ 173,850 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion and 173,160 (51,971 ) 121,189 133,481 (41,322 ) 92,159 amortization Impairments 96,828 - 96,828 - - - Derivative contracts: Total derivative (2,821 ) (14,234 ) (17,055 ) 8,516 (10,552 ) (2,036 ) losses (gains) Cash settlements of 51,936 (4,135 ) 47,801 (46,740 ) 33,279 (13,461 ) derivatives Deferred income taxes (70,728 ) - (70,728 ) 60,105 - 60,105 Dry hole and unproved 30,476 - 30,476 14,992 - 14,992 leasehold expense Investment in PVG and - (40,191 ) (40,191 ) - (87,006 ) (87,006 ) PVR Cash distributions - 34,932 34,932 - 32,447 32,447 from PVG and PVR Other 16,064 (1,263 ) 14,801 (26,118 ) 1,209 (24,909 ) Operating cash flow 206,135 (76,862 ) 129,273 318,086 (71,945 ) 246,141 Changes in operating assets and 15,888 (3,540 ) 12,348 (41,399 ) 11,277 (30,122 ) liabilities Net cash provided by 222,023 (80,402 ) 141,621 276,687 (60,668 ) 216,019 operating activities Net cash used in (248,121 ) 72,419 (175,702 ) (636,262 ) 306,276 (329,986 ) investing activities - Net cash provided by 112,794 4,623 117,417 344,055 (234,112 ) 109,943 financing activities Net increase (decrease) in cash 86,696 (3,360 ) 83,336 (15,520 ) 11,496 (4,024 ) and cash equivalents Cash and cash equivalents-beginning 18,338 (18,338 ) - 34,527 (30,503 ) 4,024 balance Cash and cash equivalents-ending $ 105,034 $ (21,698 ) $ 83,336 $ 19,007 $ (19,007 ) $ - balance
(a) Equity method balance sheets represent consolidated balance sheets, minus 100% of PVG's consolidated balance sheets, excluding noncontrolling interests 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 interests 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 Third Quarter YTD Full-Year Quarter Oil & Gas 2009 2009 2009 2009 2009 Guidance Segment: Production: Natural gas 11.8 11.4 10.6 33.8 42.2 - 43.5 (Bcf) - (a) Crude oil 171 215 202 588 740 - 760 (MBbls) - (a) NGLs (MBbls) 147 140 94 381 470 - 490 Equivalent production 13.7 13.6 12.4 39.7 49.5 - 51.0 (Bcfe) Equivalent daily production 152.3 149.5 134.9 145.3 135.5 - 139.7 (MMcfe per day) Expenses: Cash operating expenses ($ $ 1.80 1.79 1.82 1.80 1.85 - 1.90 per Mcfe) Exploration $ 21.3 17.5 16.1 54.9 63.0 - 66.0 Depreciation, depletion and $ 2.92 2.94 3.17 3.04 2.95 - 3.05 amortization ($ per Mcfe) Impairments $ 1.2 3.3 92.4 96.8 96.8 - 96.8 Loss on sale $ - 1.6 - 1.6 1.6 - 2.0 of assets Capital expenditures: Development $ 76.5 37.3 8.3 122.1 155.0 - 165.0 drilling Exploratory $ 1.5 - 0.7 2.2 4.0 - 4.5 drilling Pipeline, gathering, $ 5.1 2.4 0.9 8.4 9.0 - 10.0 facilities Seismic $ 0.7 0.4 0.1 1.2 2.0 - 2.2 Lease acquisition, $ 1.8 2.8 5.8 10.4 46.0 - 47.0 field projects and other Total segment capital $ 85.6 42.9 15.8 144.3 216.0 - 228.7 expenditures Coal and Natural Resource Segment (PVR): Coal royalty tons 8.7 8.7 8.4 25.8 33.0 - 34.0 (millions) Revenues: Average coal royalties per $ 3.50 3.43 3.56 3.50 3.35 - 3.45 ton Average coal royalties per ton, net of $ 3.36 3.25 3.37 3.33 3.25 - 3.35 coal royalties expense Other $ 7.6 5.1 5.4 18.1 23.0 - 24.0 Expenses: Cash operating $ 5.9 6.6 6.0 18.5 23.5 - 24.0 expenses Depreciation, depletion and $ 7.4 8.2 8.0 23.6 31.0 - 32.0 amortization Capital expenditures: Expansion and $ 1.3 0.6 0.1 2.0 2.0 - 3.0 acquisitions Other capital $ - - - - 0.5 - 1.0 expenditures Total segment capital $ 1.3 0.6 0.1 2.0 2.5 - 4.0 expenditures Natural Gas Midstream Segment (PVR): System throughput 359 344 324 342 330 - 340 volumes (MMcf per day) (b) Expenses: Cash operating $ 11.8 11.6 11.6 35.0 48.0 - 50.0 expenses Depreciation, depletion and $ 9.1 9.5 9.8 28.4 38.0 - 39.0 amortization Capital expenditures: Expansion and $ 11.2 10.3 34.0 55.5 65.0 - 70.0 acquisitions Maintenance capital $ 3.3 1.4 1.4 6.1 7.0 - 9.0 expenditures Total segment capital $ 14.5 11.7 35.4 61.6 72.0 - 79.0 expenditures Corporate and Other: General and administrative $ 5.2 5.8 6.4 17.4 23.0 - 24.0 expense - PVA General and administrative $ 0.5 0.6 0.9 2.0 2.4 - 2.8 expense - PVG Interest expense: PVA end of period debt $ 591.5 564.3 496.3 outstanding PVA average interest rate 4.3% 6.0% 9.8% (c) PVR end of period debt $ 595.1 597.1 628.1 outstanding PVR average 3.9% 4.2% 4.2% interest rate Income tax 38.8% 39.7% 38.7% 38.9% rate Cash distributions $ 11.5 11.6 11.5 34.6 received from PVG and PVR Other capital $ 0.6 0.9 0.2 1.7 2.0 - 2.5 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) Notes to Guidance Table: (a) The following table shows our current derivative positions in the oil and gas segment as of September 30, 2009: Weighted Average Price Average Volume Additional Floor Ceiling Per Day Put Option Natural Gas Costless (MMBtu) ($ per MMBtu) Collars 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 30,000 5.67 7.58 Third quarter 2011 30,000 5.67 7.58 Natural Gas Three-way (MMBtu) ($ per MMBtu) Collars 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) 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 Three-way (barrels) ($ per barrel) Collars (1) Fourth quarter 2009 500 80.00 110.00 179.00 Crude Oil Swaps (barrels) ($ per barrel) Fourth quarter 2009 500 59.25 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
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 $1.8 million. This assumes that crude oil prices, natural gas prices and inlet volumes remain constant at anticipated levels. These estimated changes in gross margin and operating income exclude potential cash receipts or payments in settling these derivative positions. (1) A three-way collar is a combination of options: a sold call, a purchased put and a sold put. The sold call establishes the maximum price that we will receive for the contracted commodity volumes. The purchased put establishes the minimum price that we will receive for the contracted volumes unless the market price for the commodity falls below the sold put strike price, at which point the minimum price equals the reference price (i.e., NYMEX) plus the excess of the purchased put strike price over the sold put strike price.
PENN VIRGINIA CORPORATION GUIDANCE TABLE - unaudited - (continued) The costless collar natural gas prices per MMBtu per quarter include the (b) effects of basis differentials, if any. The following table shows current derivative positions for natural gas production in PVR's natural gas midstream segment as of September 30, 2009: Weighted Average Price Average Volume Swap Additional Put Call Price Put Option Per Day Crude Oil Three-Way (barrels) ($ per barrel) Collar Fourth quarter 2009 1,000 70.00 90.00 119.25 Frac Spread Collar (MMBtu) ($ per MMBtu) (1) Fourth quarter 2009 6,000 9.09 13.94 Crude Oil Collar (barrels) ($ per barrel) First quarter 2010 through fourth 750 70.00 81.25 quarter 2010 Crude Oil Collar (barrels) ($ per barrel) First quarter 2010 through fourth 1,000 68.00 80.00 quarter 2010 Natural Gas Purchase (MMBtu) ($ per MMbtu) Swap First quarter 2010 through fourth 5,000 5.815 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. Third quarter 2009 average interest rate excludes effect of $2.4 million (c) reclassification from accumulated other comprehensive income related to interest rate swaps.
Source: Penn Virginia Corporation
Released November 4, 2009