PVR Partners Announces Third Quarter Results and Increases Quarterly Distribution

Oct 24, 2012, 08:30 ET from PVR Partners, L.P.

RADNOR, Pa., Oct. 24, 2012 /PRNewswire/ -- PVR Partners, L.P. (NYSE: PVR) ("PVR") today reported financial and operational results for the three months ended September 30, 2012.  In addition, PVR announced an increase in its quarterly distribution to $0.54 per unit.

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Third Quarter Results

Third quarter 2012 highlights and results, with comparisons to third quarter 2011 results, included the following:

  • Adjusted EBITDA of $61.2 million as compared to $60.0 million.
  • Distributable cash flow ("DCF") of $29.9 million as compared to $36.1 million.
  • Adjusted net income of $7.7 million as compared to $20.5 million.

Adjusted EBITDA, distributable cash flow, and adjusted net income are not Generally Accepted Accounting Principles ("GAAP") measures.  Definitions and reconciliations of these non-GAAP measures to GAAP reporting measures appear in the financial tables which follow.

Quarterly Distribution

The Board of Directors of PVR GP, LLC, the general partner of PVR, declared a quarterly distribution of $0.54 per unit payable in cash on November 14, 2012 to common unitholders of record at the close of business on November 7, 2012.  This distribution equates to an annualized rate of $2.16 per unit, and represents a 1.9% increase over the prior quarter distribution and an 8.0% increase over the third quarter of 2011.

Management Comment

"While our operating results continue to be impacted by very challenging coal markets and low NGL prices in the Midcontinent Midstream Segment, the solid growth of our Eastern Midstream business continued during the third quarter," said Bill Shea, President and CEO of PVR's general partner.  "The strong volume gains and operating results of our Eastern Midstream Segment reflect the growing positive impacts of the acquisition of Chief Gathering and the continuing build out of our Lycoming system and other internal growth projects in the Marcellus.  With the recent start of operation of our new Wyoming County Pipeline, we expect continued strong growth in the Eastern Midstream Segment during the fourth quarter."

Eastern Midstream Segment

The Eastern Midstream Segment reported third quarter 2012 results, with comparisons to third quarter 2011 results, as follows:

  • Adjusted EBITDA of $21.4 million as compared to $6.6 million, primarily due to the continued development of internal growth projects and the acquisition of Chief Gathering LLC.
  • Quarterly average throughput volumes of 456 million cubic feet per day ("MMcfd"), as compared to 63 MMcfd.  The volume growth reflects the expansion of business on PVR's existing Lycoming and Wyoming systems, as well as the acquisition of Chief Gathering.

Midcontinent Midstream Segment

The Midcontinent Midstream Segment reported third quarter 2012 results, with comparisons to third quarter 2011 results, as follows:

  • Adjusted EBITDA of $13.0 million as compared to $14.1 million, primarily due to low NGL prices, the migration to lower-margin fee-based contracts, and the sale of our Crossroads system.
  • Quarterly average throughput volumes of 410 MMcfd, as compared to 441 MMcfd.  Third quarter 2011 volumes include approximately 48 MMcfd attributable to the Crossroads system that was sold on July 3, 2012.

Coal and Natural Resource Management Segment

The Coal and Natural Resource Management Segment reported third quarter 2012 results, with comparisons to third quarter 2011 results, as follows:

  • Adjusted EBITDA of $26.8 million as compared to $39.4 million, primarily due to decreased coal production and pricing.
  • Coal royalty tons of 7.7 million tons, as compared to 9.5 million tons.
  • Coal royalties revenue of $28.8 million, or $3.73 per ton, as compared to $41.0 million, or $4.32 per ton.

Capital Investment and Resources

We invested approximately $150.0 million on internal growth projects during the third quarter of 2012, including $130.6 million in the Eastern Midstream Segment.  We now expect 2012 internal growth capital to total approximately $485 million.

As of September 30, 2012, we had borrowings of $535.0 million under our $1.0 billion revolving credit facility with remaining borrowing capacity thereunder of $457.1 million.

Expansion Projects Update

As previously reported, the Wyoming County Pipeline began full commercial operation at the end of the third quarter.  Current volumes on the Wyoming County Pipeline are approximately 325 MMcfd.  Construction continues to progress on Phase III and the Canton Lateral on our Lycoming County, Pennsylvania gas trunkline and water line, and these projects are expected to be in service by the end of the fourth quarter to gather gas for an affiliate of Southwestern Energy Company and a subsidiary of Royal Dutch Shell.  Construction of the first phase of the new gathering system in Lycoming County to service the acreage dedications of Inflection Energy has also begun and is proceeding on schedule.

Financial Guidance for 2012

PVR's financial guidance for full year 2012 Adjusted EBITDA in the range of $245 - $260 million and full year 2012 distributable cash flow, net of maintenance and replacement capital, in the range of $120 - $130 million is unchanged from guidance provided with the second quarter results in July.  PVR's financial guidance is based on numerous assumptions about future events and conditions and, therefore, could vary materially from actual results.  These estimates, including capital expenditure plans, are meant to provide guidance only and are subject to revision for acquisitions or operating environment changes.  Adjusted EBITDA and distributable cash flow are non-GAAP measures; reconciliations of these non-GAAP measures to GAAP reporting measures appear in the financial tables which follow.

Third Quarter 2012 Financial and Operational Results Conference Call

A conference call and webcast, during which management will discuss third quarter 2012 financial and operational results, is scheduled for Wednesday, October 24, 2012 at 11:00 a.m. EDT.  Prepared remarks by William H. Shea, Jr., President and Chief Executive Officer, and other members of company management will be followed by a question and answer period.  Interested parties may listen via webcast at http://www.videonewswire.com/event.asp?id=89879 or by logging on using the link posted on our website, www.pvrpartners.com.  Participants who would like to ask questions may join the conference via phone by dialing 800-860-2442 (international 412-858-4600) five to ten minutes before the scheduled start of the conference call (reference the PVR Partners call).  An on-demand replay of the webcast will be available on our website shortly after the conclusion of the call.  A telephonic replay of the call will be available through October 30 by dialing 877-344-7529 (international: 412-317-0088) and using conference playback number 10019447.

******

PVR Partners, L.P. (NYSE: PVR) is a publicly traded limited partnership which owns and operates a network of natural gas midstream pipelines and processing plants, and owns and manages coal and natural resource properties.  Our midstream assets, located principally in Texas, Oklahoma and Pennsylvania, provide gathering, transportation, compression, processing, dehydration and related services to natural gas producers.  Our coal and natural resource properties, located in the Appalachian, Illinois and San Juan basins, are leased to experienced operators in exchange for royalty payments.  More information about PVR is available on our website at www.pvrpartners.com.

******

This release is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b).  Brokers and nominees should treat one hundred percent (100.0%) of the Partnership's distributions to non-U.S. investors as being attributable to income that is effectively connected with a United States trade or business.  Accordingly, the Partnership's distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate.

******

This press release includes "forward-looking statements" within the meaning of federal securities laws. All statements, other than statements of historical facts, included in this release that address activities, events or developments that the Partnership expects, believes or anticipates will or may occur in the future are forward-looking statements.  These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties, factors and risks, many of which are outside the Partnership's ability to control or predict, which could cause results to differ materially from those expected by management. Such risks and uncertainties include, but are not limited to, regulatory, economic and market conditions, our ability realize the anticipated benefits from the acquisition of Chief, the timing and success of business development efforts and other uncertainties.  Additional information concerning these and other factors can be found in our press releases and public periodic filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2011 and most recently filed Quarterly Reports on Form 10-Q.  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.

 

PVR PARTNERS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - unaudited

(in thousands, except per unit data)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

Revenues

     Natural gas 

$          78,026

$          120,240

$         215,780

$     324,447

     Natural gas liquids

96,237

129,389

316,161

374,279

     Gathering and transportation

27,229

10,081

62,488

24,172

     Coal royalties

28,760

40,977

91,150

124,546

     Gain on sale of plant

31,292

-

31,292

-

     Other

7,303

7,665

21,305

24,757

Total revenues

268,847

308,352

738,176

872,201

Expenses

     Cost of gas purchased

147,246

223,762

453,543

613,295

     Operating

17,587

15,797

47,530

43,112

     General and administrative

11,531

8,755

34,574

31,700

     Acquisition related costs

-

-

14,049

-

     Impairments

-

-

124,845

-

     Depreciation, depletion and amortization

31,992

22,463

84,301

65,357

Total expenses

208,356

270,777

758,842

753,464

Operating income (loss)

60,491

37,575

(20,666)

118,737

Other income (expense)

     Interest expense

(20,288)

(10,528)

(45,616)

(33,806)

     Derivatives

(1,524)

8,690

2,201

(6,289)

     Interest income and other

104

120

329

384

Net income (loss) 

38,783

35,857

(63,752)

79,026

Net loss (income) attributable to noncontrolling interests (pre-merger)

-

-

-

664

Net income (loss) attributable to PVR Partners', L.P.

$          38,783

$            35,857

$          (63,752)

$       79,690

Earnings per common unit, basic and diluted

$              0.16

$                0.50

$              (1.14)

$           1.26

Weighted average number of common units outstanding, basic and diluted

88,366

71,197

83,834

63,019

Weighted average number of Class B units outstanding

21,620

10,770

Weighted average number of Special units outstanding

10,346

5,173

Other data:

Daily throughput volumes (MMcfd) - Eastern Midstream

456

63

337

47

Daily throughput volumes (MMcfd) - Midcontinent Midstream

410

441

435

415

Coal royalty tons (in thousands)

7,703

9,479

23,584

29,501

 

 

 

PVR PARTNERS, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS - unaudited

(in thousands)

September 30,

December 31,

2012

2011

Assets

     Cash and cash equivalents

$          10,127

$              8,640

     Accounts receivable

97,443

101,340

     Other current assets

5,314

5,640

         Total current assets

112,884

115,620

     Property, plant and equipment, net

1,822,010

1,282,297

     Other long-term assets

854,140

196,075

          Total assets

$     2,789,034

$       1,593,992

Liabilities and Partners' Capital

     Accounts payable and accrued liabilities

$        152,754

$          124,082

     Deferred income

3,963

3,416

     Derivative liabilities

1,787

12,042

         Total current liabilities

158,504

139,540

     Other long-term liabilities

33,933

31,748

     Senior notes 

900,000

300,000

     Revolving credit facility

535,000

541,000

     Partners' capital

1,161,597

581,704

          Total liabilities and partners' capital

$     2,789,034

$       1,593,992

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - unaudited

(in thousands)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

Cash flows from operating activities

     Net income (loss)

$          38,783

$            35,857

$          (63,752)

$       79,026

     Adjustments to reconcile net income to

          net cash provided by operating activities:

     Gain on sale of plant

(31,292)

-

(31,292)

-

     Depreciation, depletion and amortization

31,992

22,463

84,301

65,357

     Impairments

-

-

124,845

-

     Commodity derivative contracts:

     Total derivative losses included in net income

1,524

(8,690)

(2,201)

6,289

     Cash payments to settle derivatives for the period

(1,332)

(6,699)

(8,578)

(19,477)

     Non-cash interest expense

1,589

1,040

4,217

4,735

     Non-cash unit-based compensation

1,086

966

4,643

2,805

     Equity earnings, net of distributions received

697

2,818

142

4,635

     Other

(231)

(127)

(929)

(909)

     Changes in operating assets and liabilities

23,334

2,329

23,396

(153)

Net cash provided by operating activities

66,150

49,957

134,792

142,308

Cash flows from investing activities

Acquisitions, net of cash acquired

787

(95)

(850,156)

(122,135)

Additions to property, plant and equipment

(173,455)

(67,000)

(348,449)

(141,796)

Proceeds for sale of plant

62,271

-

62,271

-

Other

(9,932)

347

(20,992)

2,558

Net cash used in investing activities

(120,329)

(66,748)

(1,157,326)

(261,373)

Cash flows from financing activities

Net proceeds from equity offerings

(219)

-

577,743

-

Proceeds from issuance of senior notes

-

-

600,000

-

Distributions to partners

(46,833)

(34,887)

(128,516)

(99,696)

Proceeds from (repayments of) borrowings, net

103,000

55,000

(6,000)

227,000

Cash paid for debt issuance costs

(617)

-

(19,206)

(3,675)

Cash paid for merger

-

(16)

-

(6,620)

Net cash provided by financing activities

55,331

20,097

1,024,021

117,009

Net increase (decrease) in cash and cash equivalents

1,152

3,306

1,487

(2,056)

Cash and cash equivalents - beginning of period

8,975

10,602

8,640

15,964

Cash and cash equivalents - end of period

$          10,127

$            13,908

$           10,127

$       13,908

 

 

 

 

PVR PARTNERS, L.P.

CERTAIN NON-GAAP FINANCIAL MEASURES - unaudited

(in thousands)

Three Months Ended

Nine Months Ended

September 30,

September 30,

Guidance Range

2012

2011

2012

2011

Full Year 2012

Reconciliation of Non-GAAP "Segment Adjusted EBITDA" to GAAP "Net income (loss)":

Segment Adjusted EBITDA (a):

Eastern Midstream

$      21,440

$        6,583

$      49,060

$      14,547

$    87,000

$    93,000

Midcontinent Midstream

12,994

14,052

38,001

51,084

58,000

62,000

Coal and Natural Resource Management

26,757

39,403

84,176

118,463

100,000

105,000

Total segment adjusted EBITDA

$      61,191

$      60,038

$    171,237

$    184,094

$  245,000

$  260,000

Adjustments to reconcile total Segment Adjusted EBITDA to Net income (loss)

Depreciation, depletion and amortization

(31,992)

(22,463)

(84,301)

(65,357)

Impairments

-

-

(124,845)

-

Acquisition related costs

-

-

(14,049)

-

Gain on sale of plant

31,292

-

31,292

-

Interest expense

(20,288)

(10,528)

(45,616)

(33,806)

Derivatives

(1,524)

8,690

2,201

(6,289)

Other

104

120

329

384

Net income (loss)

$      38,783

$      35,857

$    (63,752)

$      79,026

Reconciliation of GAAP "Net income (loss)" to Non-GAAP "Distributable cash flow":

Net income (loss)

$      38,783

$      35,857

$    (63,752)

$      79,026

$  (45,000)

$  (42,000)

Depreciation, depletion and amortization

31,992

22,463

84,301

65,357

115,000

118,000

Impairment

-

-

124,845

-

125,000

125,000

Acquisition related costs

-

-

14,049

-

14,000

14,000

Gain on sale of plant

(31,292)

-

(31,292)

-

(31,300)

(31,300)

Derivative contracts:

  Derivative losses included in net income

1,524

(8,690)

(2,201)

6,289

(2,000)

(1,000)

  Cash payments to settle derivatives for the period

(1,332)

(6,699)

(8,578)

(19,477)

(11,000)

(10,000)

Equity earnings from joint ventures, net of distributions

697

2,818

142

4,635

(500)

500

Maintenance capital expenditures

(3,749)

(2,884)

(12,197)

(8,532)

(17,200)

(16,200)

Replacement capital expenditures

(6,725)

(6,725)

(20,175)

(20,175)

(27,000)

(27,000)

Distributable cash flow (b)

$      29,898

$      36,140

$      85,142

$    107,123

$  120,000

$  130,000

Distribution to Partners:

Total cash distribution paid during the period

$      46,833

$      34,887

$    128,516

$      99,696

Reconciliation of GAAP "Net income (loss)" to Non-GAAP "Net income as adjusted":

Net income (loss)

$      38,783

$      35,857

$    (63,752)

$      79,026

Impairments

-

-

124,845

-

Acquisition related costs

-

-

14,049

-

Gain on sale of plant

(31,292)

-

(31,292)

-

Adjustments for derivatives:

Derivative losses included in net income

1,524

(8,690)

(2,201)

6,289

Cash payments to settle derivatives for the period

(1,332)

(6,699)

(8,578)

(19,477)

Net income, as adjusted (c)

$        7,683

$      20,468

$      33,071

$      65,838

(a) Adjusted EBITDA, or earnings before interest, tax and depreciation, depletion and amortization ("DD&A"), represents operating income plus DD&A, plus impairments, plus acquisition related costs, minus gains on sale of plant. We believe EBITDA or a version of Adjusted EBITDA is commonly used by investors and professional research analysts in the valuation, comparison, rating and investment recommendations of companies in the natural gas midstream and coal industries. We use this information for comparative purposes within the industry. EBITDA 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.

(b) Distributable cash flow represents net income plus DD&A, plus impairments, plus acquisition related costs, minus gain on sale of plant, plus (minus) derivative losses (gains) included in net income, plus (minus) cash received (paid) for derivative settlements, minus equity earnings in joint ventures, plus cash distributions from joint ventures, minus maintenance capital expenditures, minus replacement capital expenditures. Distributable cash flow is also the quantitative standard used by investors and professional research analysts in the valuation, comparison, rating and investment recommendations of publicly traded partnerships. Distributable cash flow is presented because we believe it is a useful adjunct to net cash provided by operating activities under GAAP. Distributable cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities, as an indicator of cash flows, as a measure of liquidity or as an alternative to net income.

(c) Net income, as adjusted, represents net income adjusted to exclude the effects impairments, one-time charges related to acquisitions, gains on sale of plant, and non-cash changes in the fair value of derivatives. We believe this presentation is commonly used by investors and professional research analysts in the valuation, comparison, rating and investment recommendations of companies in the natural gas midstream industry. We use this information for comparative purposes within the industry. Net income, as adjusted, is not a measure of financial performance under GAAP and should not be considered as a measure of liquidity or as an alternative to net income.

 

 

PVR PARTNERS, L.P.

QUARTERLY SEGMENT INFORMATION - unaudited

(in thousands)

Eastern Midstream

Three Months Ended

Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

Revenues

     Gathering and transportation

$          25,759

$            7,720

$         56,710

$         16,582

     Other

1,041

-

2,687

-

        Total revenues

26,800

7,720

59,397

16,582

Expenses

     Operating 

2,124

635

4,211

898

     General and administrative

3,236

502

6,126

1,137

     Acquisition related costs

-

-

14,049

-

     Depreciation, depletion and amortization

11,867

987

22,322

2,151

       Total expenses

17,227

2,124

46,708

4,186

Operating income

$            9,573

$            5,596

$         12,689

$         12,396

Midcontinent Midstream

Three Months Ended

Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

Revenues

     Natural gas

$          78,026

$        120,240

$       215,780

$       324,447

     Natural gas liquids

96,237

129,389

316,161

374,279

     Gathering and transportation

1,470

2,361

5,778

7,590

     Gain on sale of plant

31,292

-

31,292

-

     Other

497

1,186

2,042

4,874

        Total revenues

207,522

253,176

571,053

711,190

Expenses

     Cost of gas purchased

147,246

223,762

453,543

613,295

     Operating 

11,164

10,880

31,642

30,399

     General and administrative

4,826

4,482

16,575

16,412

     Impairments

-

-

124,845

-

     Depreciation, depletion and amortization

11,913

11,904

37,220

35,228

       Total expenses

175,149

251,028

663,825

695,334

Operating income (loss) 

$          32,373

$            2,148

$        (92,772)

$         15,856

Coal and Natural Resource Management

Three Months Ended

Nine Months Ended

September 30,

September 30,

2012

2011

2012

2011

Revenues

     Coal royalties

$          28,760

$          40,977

$         91,150

$       124,546

     Coal services

1,953

2,151

4,583

6,739

     Timber

1,411

1,457

4,284

3,834

     Oil and gas royalties

977

1,234

2,165

3,016

     Other

1,424

1,637

5,544

6,294

        Total revenues

34,525

47,456

107,726

144,429

Expenses

     Operating 

4,299

4,282

11,677

11,815

     General and administrative

3,469

3,771

11,873

14,151

     Depreciation, depletion and amortization

8,212

9,572

24,759

27,978

       Total expenses

15,980

17,625

48,309

53,944

Operating income

$          18,545

$          29,831

$         59,417

$         90,485

 

 

 

PVR PARTNERS, L.P.

DERIVATIVE CONTRACT SUMMARY - unaudited

As of September 30, 2012

Average

Volume Per

Day

Swap

Weighted Average Price

Price

Put (a)

Call (b)

NGL - natural gasoline collar

 (gallons) 

(per gallon)

Fourth quarter 2012

54,000

$1.75

$2.02

Crude swap

 (barrels) 

(per barrel)

Fourth quarter 2012

600

$88.62

Natural gas purchase swap

 (MMBtu) 

(MMBtu)

Fourth quarter 2012

4,000

$5.195

We estimate that, excluding the effects of derivative positions described above, for every $1.00 per MMBtu increase or decrease in the natural gas price, our natural gas midstream gross margin and operating income (loss) for the remainder of 2012 would increase or decrease by $0.1 million. In addition, we estimate that for every $5.00 per barrel increase or decrease in the crude oil price, our natural gas midstream gross margin and operating income (loss) for the remainder of 2012 would increase or decrease by $2.0 million. This assumes that natural gas prices, crude oil prices and inlet volumes remain constant at anticipated levels. These estimated changes in our gross margin and operating income (loss) exclude potential cash receipts or payments in settling these derivative positions.

(a) - Purchased put/floor.

(b) - Sold call/ceiling.

 

 

Contact:

Stephen R. Milbourne

Director - Investor Relations

Phone: 610-975-8204

E-Mail: invest@pvrpartners.com

 

SOURCE PVR Partners, L.P.



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