Penn Virginia Resource Partners, L.P. Announces Fourth Quarter and Full-Year 2010 Results

RADNOR, Pa., Feb. 9, 2011 /PRNewswire/ -- Penn Virginia Resource Partners, L.P. (NYSE: PVR) today reported financial and operational results for the three months and the full-year ended December 31, 2010, and provided financial guidance for 2011.

Fourth Quarter Results

Fourth quarter 2010 highlights and results, with comparisons to fourth quarter 2009 results, included the following:

• EBITDA of $62.1 million as compared to $56.9 million.
• Distributable cash flow ("DCF") of $44.1 million as compared to $48.3 million.  The $4.2 million, or nine percent, decline in DCF was primarily due to a $4.1 million increase in interest expense due to the $300.0 million long-term debt offering completed in April 2010, a $2.6 million increase in maintenance capital expenditures, and a $2.5 million increase in cash payments to settle derivatives.
• Net income for the fourth quarter was $19.8 million, or $0.26 per limited partner unit, as compared to $23.6 million or $0.33 per limited partner unit in 2009.
• The fourth quarter of 2010 included revenue of $5.5 million from a firm transportation annual settlement in our natural gas midstream segment as compared with $4.4 million of firm settlement revenues in the prior year quarter.

 

For the fourth quarter of 2010, derivatives expense was $11.0 million, as compared to $7.7 million in the prior year quarter.  Cash settlements of derivatives included in these amounts resulted in net cash payments of $3.6 million during the fourth quarter of 2010 related to commodity and interest rate derivatives, as compared to $1.1 million of net cash payments in the prior year quarter.  

Cash Distribution

As previously announced on January 25, 2011, PVR will pay a quarterly cash distribution of $0.47 per unit on February 14, 2011 to unitholders of record as of February 7, 2011.  The distribution represents an annualized rate of $1.88 per unit.

Coal and Natural Resource Management Segment Review

The coal and natural resource management segment reported fourth quarter results, with comparisons to fourth quarter 2009 results as follows:

• Coal royalty tons of 8.9 million tons, as compared to 8.5 million tons.
• Coal royalties revenue of $32.3 million, or $3.64 per ton, as compared to $30.0 million, or $3.55 per ton.

 

During the fourth quarter of 2010, operating income for the coal and natural resource management segment increased by $0.6 million, or three percent, to $21.6 million from $21.0 million in the prior year quarter.  Total revenues increased by $1.9 million, or five percent, to $37.9 million from $36.0 million in the prior year quarter primarily due to higher coal royalties revenues.  The increase in average coal royalties from the prior year quarter was attributable to higher coal prices.

Natural Gas Midstream Segment Review

The natural gas midstream segment reported fourth quarter results, with comparisons to fourth quarter 2009 results, as follows:

• Quarterly natural gas midstream system throughput volumes of 36.6 billion cubic feet ("Bcf"), or an average 398 million cubic feet ("MMcf") per day, as compared to 27.9 Bcf, or an average 303 MMcf per day; volume growth came primarily from additional activity on the Crossroads and Panhandle systems and new business in the Marcellus Shale region.
• Midstream gross margin of $42.1 million, or $1.15 per thousand cubic feet ("Mcf"), as compared to $34.5 million, or $1.23 per Mcf.
• Midstream gross margin, including the cash impact of midstream derivatives, of $40.5 million, or $1.11 per Mcf, as compared to $35.9 million, or $1.29 per Mcf.

 

Adjusted for the cash impact of commodity derivatives, midstream gross margin increased by $4.6 million primarily due to a 31% increase in volumes, partially offset by a migration to lower-risk percentage-of-proceeds contracts from gas purchase/keep-whole arrangements. (See the Derivative Contract Summary Table included in this release for details of derivative positions as of December 31, 2010.)

Full-Year 2010 Results

PVR reported results for the full-year ended December 31, 2010 including:

• Coal royalty tons of 34.5 million with average coal royalties per ton of $3.78, as compared to 34.3 million with average coal royalties per ton of $3.51 for the full-year 2009.
• Natural gas midstream system throughput of 129.7 Bcf, or an average of 355 MMcf per day, as compared to 121.3 Bcf last year or 332 MMcf per day.  Midstream gross margin for 2010 was $0.96 per Mcf ($0.94 adjusted for the cash impact of derivatives), as compared to $0.81 per Mcf ($0.90 adjusted for the cash impact of derivatives) last year.
• Operating income of $125.9 million, as compared with $108.3 million last year. (2010 results included an approximate $5.6 million charge due to the acceleration of equity award vesting related to the separation from Penn Virginia Corporation; 2009 results included a $1.5 million goodwill impairment charge).

 

DCF for the full year was $145.8 million, as compared to $151.7 million in 2009.  Net income was $68.5 million, or $0.83 per limited partner unit, as compared to $65.2 million, or $0.76 per limited partner unit, in 2009.  EBITDA for the full year 2010 was $201.8 million as compared with $180.0 million in 2009.

Management Comment

"PVR continued its solid operating performance during the fourth quarter and for 2010 overall," said Bill Shea, CEO of PVR's general partner.  "Total coal royalty tons increased in 2010 which, combined with overall higher coal royalty rates per ton, resulted in higher coal royalty revenues.  The recently completed acquisition of additional Central Appalachian reserves is expected to generate additional growth in our coal and natural resources segment in 2011 and future years.  Our natural gas midstream segment volumes continued to grow in 2010.  Construction on our previously announced pipeline project in the Marcellus Shale, which is anchored with a long-term contract with Range Resources, continued to move ahead during the fourth quarter, and we expect service on the first segment of that system to begin later this month," Mr. Shea said.

Capital Investment and Resources

PVR spent approximately $96 million in 2010 on internal growth projects, including $49.5 million in the Marcellus Shale.  In addition, during 2010 PVR closed on approximately $28 million in acquisitions in the coal and natural resource segment.  During 2011, PVR expects to invest approximately $140 million in internal growth capital in 2011 including $120 million in the Marcellus Shale.

As of December 31, 2010, PVR had borrowings of $408.0 million under its $850.0 million revolving credit facility and $10.7 million of cash and cash equivalents, with remaining borrowing capacity of $440.4 million under the revolving credit facility.

Financial Guidance for 2011

PVR currently expects to generate 2011 EBITDA of $230 million and DCF of $140 million. The DCF is net of maintenance and replacement capital of $41 million, comprised of $14 million in maintenance and $27 million of replacement capital for the year.

Previously, we calculated DCF without deducting replacement capital.  With respect to the guidance for the full-year 2011 we have deducted, and going forward we intend to deduct, replacement capital, as well as maintenance capital expenditures, in determining DCF.  If we had deducted $24 million in replacement capital (amount is before approximately $3 million in additional replacement capital related to the recently completed Begley coal acquisition) from DCF for the years ended December 31, 2010 and 2009, our DCF for the years ended December 31, 2010 and 2009 would have been $121.8 million and $127.7 million, respectively.

EBITDA, or earnings before interest, taxes, depletion and amortization, and DCF are non-GAAP measures.  Please refer to appended tables for definitions and calculation methodologies. These estimates, including capital expenditure plans, are meant to provide guidance only and are subject to revision as our operating environment changes.  The guidance for 2011 is based on numerous assumptions about future events and conditions and, therefore, could vary materially from actual results.

Fourth Quarter 2010 Financial and Operational Results Conference Call

A joint conference call and webcast for PVR and Penn Virginia GP Holdings, L.P. (NYSE: PVG), during which management will discuss fourth quarter 2010 financial and operational results, is scheduled for Thursday, February 10, 2011 at 11:00 a.m. ET.  Prepared remarks by William H. Shea, Jr., Chief Executive Officer of PVR's general partner, will be followed by a question and answer period.  Interested parties may participate 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 Penn Virginia Resource Partners call), or listen via webcast by logging on to http://www.videonewswire.com/event.asp?id=75971 or the links posted on our website, www.pvresource.com, or PVG's website, www.pvgpholdings.com, at least 15 minutes prior to the scheduled start of the call to download and install any necessary audio software.  An on-demand replay of the conference call will be available on both websites shortly after the conclusion of the call.  A telephonic replay of the call will be available through February 17 by dialing 877-344-7529 (international: 412-317-0088) and using conference playback number 447680.

PVR and PVG have filed a joint proxy statement/prospectus and other documents with the SEC in relation to their proposed merger. Investors are urged to read these documents carefully because they contain important information regarding PVR, PVG, and the transaction. A definitive joint proxy statement/prospectus and joint proxy statement/prospectus supplement has been sent to unitholders of PVR and PVG seeking their approvals as contemplated by the Merger Agreement. Investors may obtain a free copy of the joint proxy statement/prospectus, joint proxy statement/prospectus supplement and other documents containing information about PVR and PVG, without charge, at the SEC's website at www.sec.gov. Copies of the joint proxy statement/prospectus and the SEC filings incorporated by reference in the joint proxy statement/prospectus may also be obtained free of charge by contacting Investor Relations at (610) 975-8204 or [email protected] or by accessing www.pvresource.com or www.pvgpholdings.com.

PVR, PVG, and the officers and directors of the general partner of each partnership may be deemed to be participants in the solicitation of proxies from their security holders. Information about these entities and persons can be found in PVR's and PVG's Annual Reports on Form 10-K for the year ended December 31, 2009. Additional information about such entities and persons may also be obtained from the joint proxy statement/prospectus.

Penn Virginia Resource Partners, L.P. (NYSE: PVR) is a publicly traded limited partnership which owns and manages coal and natural resource properties and related assets, and owns and operates midstream natural gas gathering and processing businesses.  We own approximately  900 million tons of proven coal reserves in Northern and Central Appalachia, and the Illinois and San Juan Basins; our midstream natural gas assets are located principally in Texas, Oklahoma and Pennsylvania and include more than 4,200 miles of natural gas gathering pipelines and 6 processing systems with approximately 400 million cubic feet per day of capacity. For more information about PVR, visit our website at www.pvresource.com.

Certain statements contained herein that are not descriptions of historical facts are "forward-looking" statements within the meaning of federal securities laws.  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 and coal; our ability to access external sources of capital; any impairment writedowns of our assets; the relationship between natural gas, NGL and coal prices; the projected demand for and supply of natural gas, NGLs and coal; competition among producers in the coal industry generally and among natural gas midstream companies; the extent to which the amount and quality of actual production of our coal differs from estimated recoverable coal reserves; our ability to generate sufficient cash from our businesses to maintain and pay the quarterly distribution to our general partner and our unitholders; the experience and financial condition of our coal lessees and natural gas midstream customers, including our lessees' ability to satisfy their royalty, environmental, reclamation and other obligations to us and others; operating risks, including unanticipated geological problems, incidental to our coal and natural resource management or natural gas midstream businesses; our ability to acquire new coal reserves or natural gas midstream assets and new sources of natural gas supply and connections to fourth-party pipelines on satisfactory terms; our ability to retain existing or acquire new natural gas midstream customers and coal lessees; the ability of our lessees to produce sufficient quantities of coal on an economic basis from our reserves and obtain favorable contracts for such production; the occurrence of unusual weather or operating conditions including force majeure events; delays in anticipated start-up dates of our lessees' mining operations and related coal infrastructure projects and new processing plants in our natural gas midstream business; environmental risks affecting the mining of coal reserves or the production, gathering and processing of natural gas; the timing of receipt of necessary governmental permits by us or our lessees; hedging results; accidents; changes in governmental regulation or enforcement practices, especially with respect to environmental, health and safety matters, including with respect to emissions levels applicable to coal-burning power generators; uncertainties relating to the outcome of current and future litigation regarding mine permitting; 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); our ability to complete our previously announced merger; and other risks set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009 and our most recent Quarterly Reports on Form 10-Q.

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, 2009 and our most recent Quarterly Reports on Form 10-Q.  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.

SOURCE Penn Virginia Resource Partners, L.P.