PVR Partners Announces Second Quarter Results And Increases Quarterly Distribution

Jul 25, 2012, 08:05 ET from Penn Virginia Resource Partners, L.P.

RADNOR, Pa., July 25, 2012 /PRNewswire/ -- Penn Virginia Resource Partners, L.P. (NYSE: PVR) ("PVR") today reported financial and operational results for the three months ended June 30, 2012.  In addition, PVR announced an increase in its quarterly distribution to $0.53 per unit.

(Logo:  http://photos.prnewswire.com/prnh/20110224/PH54022LOGO )

Second Quarter Results

Second quarter 2012 highlights and results, with comparisons to second quarter 2011 results, included the following:

  • Adjusted EBITDA of $57.0 million as compared to $64.8 million.
  • Distributable cash flow ("DCF") of $26.1 million as compared to $34.1 million.
  • Adjusted net income of $9.6 million as compared to $23.0 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 Penn Virginia Resource GP, LLC, the general partner of PVR, declared a quarterly distribution of $0.53 per unit payable in cash on August 14, 2012 to common unitholders of record at the close of business on August 6, 2012.  This distribution equates to an annualized rate of $2.12 per unit, and represents a 1.9% increase over the prior quarter distribution and an 8.2% increase over the second quarter of 2011.

Management Comment

"We closed the previously announced acquisition of Chief Gathering LLC on May 17, 2012, and with the addition of these assets, we have begun to report separate results for the Midcontinent and Eastern segments of the midstream business.  We believe this change will enhance the understanding of our business segments," said Bill Shea, President and CEO of PVR's general partner.

"Our second quarter results were negatively impacted by a very challenging coal market, low NGL prices and the migration to lower-margin fee-based contracts in the Midcontinent segment," continued Mr. Shea.  "However, the growth of our midstream business has continued in the second quarter with the closing of the Chief Gathering acquisition, the commencement of construction on Phase III and the Canton Lateral on our Lycoming County, Pennsylvania gas trunkline and water line, and completion of the second 60 million cubic feet per day expansion of our Antelope Hills facility.  Phase III and the Canton Lateral are expected to be in service in the fourth quarter to gather gas for an affiliate of Southwestern Energy Company and a subsidiary of Royal Dutch Shell.  The new Wyoming County, Pennsylvania gas trunkline, acquired in the Chief acquisition, is also expected to be operational in the fourth quarter, servicing affiliates of Chief Oil & Gas LLC and Chesapeake Energy Corporation, among others.  The completion of the Antelope Hills expansion enables PVR to process all of its volumes in the Panhandle region, as well as additional third-party volumes.

"Based on our confidence in the expected cash flows from these and other attractive growth midstream projects, we have increased our quarterly distribution to $0.53 per unit," concluded Mr. Shea.

Eastern Midstream Segment

The eastern natural gas midstream segment reported second quarter 2012 results, with comparisons to second quarter 2011 results, as follows:

  • Adjusted EBITDA of $17.7 million as compared to $5.2 million, primarily due to the continued development of internal growth projects and the acquisition of Chief Gathering LLC.
  • Quarterly natural gas midstream system average throughput volumes of 344 million cubic feet per day ("MMcfd"), as compared to 38 MMcfd.  The volume growth reflects the expansion of business on PVR's Lycoming and Wyoming systems, as well as the acquisition of Chief Gathering.

Midcontinent Midstream Segment

The midcontinent natural gas midstream segment reported second quarter 2012 results, with comparisons to second quarter 2011 results, as follows:

  • Adjusted EBITDA of $12.7 million as compared to $17.4 million, primarily due to low NGL prices and the migration to lower-margin fee-based contracts.
  • Quarterly natural gas midstream system average throughput volumes of 453 MMcfd, as compared to 422 MMcfd.

Coal and Natural Resource Management Segment

The coal and natural resource management segment reported second quarter 2012 results, with comparisons to second quarter 2011 results, as follows:

  • Adjusted EBITDA of $26.7 million as compared to $42.3 million, primarily due to decreased coal production and pricing.
  • Coal royalty tons of 7.8 million tons, as compared to 10.1 million tons.
  • Coal royalties revenue of $29.2 million, or $3.76 per ton, as compared to $44.6 million, or $4.40 per ton.

Capital Investment and Resources

We invested approximately $129.0 million on internal growth projects during the second quarter of 2012, including $106.9 million in the Eastern Midstream Segment.

As of June 30, 2012, we had borrowings of $432.0 million under our $1.0 billion revolving credit facility with remaining borrowing capacity thereunder of $560.1 million.

Financial Guidance for 2012 and 2013

Current guidance for full year 2012 results has been updated to reflect the acquisition of the Chief Gathering business, the sale of the Crossroads system, the Lycoming Phase III expansion and other recently announced capital investments to support additional agreements with natural gas producers, revised assumptions for the impact of lower commodity prices and lower expected coal production.  PVR now anticipates 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.

We expect the challenges in the coal business to continue in 2013, as well as a slow recovery of NGL prices.  We also expect that the completion of several internal growth projects in the Eastern Midstream segment will partially offset these issues.  Accordingly, we are revising our 2013 guidance range of $480-$540 million for total Adjusted EBITDA to $415-$480 million.

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.

Second Quarter 2012 Financial and Operational Results Conference Call

A conference call and webcast, during which management will discuss second quarter 2012 financial and operational results, is scheduled for Wednesday, July 25, 2012 at 10:00 a.m. ET.  Prepared remarks by William H. Shea, Jr., Chief Executive Officer, and other members of company management 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 at http://www.videonewswire.com/event.asp?id=88074, or by logging on using the link posted on our website, www.pvrpartners.com.  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 August 2 by dialing 877-344-7529 (international: 412-317-0088) and using conference playback number 10015935.

******

Penn Virginia Resource 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 to successfully complete the construction and development of Chief's midstream systems, to integrate the business of Chief with ours and to 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.

  

PENN VIRGINIA RESOURCE PARTNERS, L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - unaudited

(in thousands, except per unit data)

Three Months Ended

Six Months Ended

June 30,

June 30,

2012

2011

2012

2011

Revenues

     Natural gas 

$          63,127

$          112,229

$         137,754

$     204,207

     Natural gas liquids

102,130

136,048

219,924

244,890

     Gathering and transportation

21,404

8,630

35,259

14,091

     Coal royalties

29,231

44,578

62,390

83,569

     Other

7,020

8,837

14,002

17,092

Total revenues

222,912

310,322

469,329

563,849

Expenses

     Cost of gas purchased

140,833

219,278

306,297

389,533

     Operating

14,040

14,242

29,943

27,315

     General and administrative

10,999

11,975

23,043

22,945

     Acquisition related costs

14,049

-

14,049

-

     Impairments

-

-

124,845

-

     Depreciation, depletion and amortization

28,456

21,650

52,309

42,894

Total expenses

208,377

267,145

550,486

482,687

Operating income (loss)

14,535

43,177

(81,157)

81,162

Other income (expense)

     Interest expense

(15,511)

(12,428)

(25,328)

(23,278)

     Derivatives

8,676

4,782

3,725

(14,979)

     Interest income and other

109

127

225

264

Net income (loss) 

7,809

35,658

(102,535)

43,169

Net loss (income) attributable to noncontrolling interests

-

-

-

664

Net income (loss) attributable to Penn Virginia Resource Partners', L.P.

$            7,809

$            35,658

$        (102,535)

$       43,833

Basic earnings per common unit (1)

$            (0.07)

$                0.50

$              (1.39)

$           0.74

Diluted earnings per common unit (1)

$            (0.07)

$                0.50

$              (1.39)

$           0.74

Weighted average number of common units outstanding, basic

83,786

71,176

81,543

58,864

Weighted average number of common units outstanding, diluted 

88,902

71,176

84,101

58,864

 

  (1) On May 17, 2012, the Partnership issued Class B Units and Special Units at a price that was lower than the market price of the common units into which they are convertible. This discount is treated as a non-cash distribution for purposes of calculating earnings per unit and is reflected in the basic and diluted net income (loss) per unit using the effective yield method over the period the Class B Units and Special Units are expected to be outstanding.

Other data:

Daily throughput volumes (MMcfd) - Eastern Midstream

344

38

277

38

Daily throughput volumes (MMcfd) - Midcontinent Midstream

453

422

448

402

Coal royalty tons (in thousands)

7,776

10,125

15,881

20,022

 

PENN VIRGINIA RESOURCE PARTNERS, L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS - unaudited

(in thousands)

June 30,

December 31,

2012

2011

Assets

     Cash and cash equivalents

$            8,975

$              8,640

     Accounts receivable

83,816

101,340

     Assets held for sale

35,064

-

     Other current assets

6,254

5,640

         Total current assets

134,109

115,620

     Property, plant and equipment, net

1,680,994

1,282,297

     Other long-term assets

866,473

196,075

          Total assets

$     2,681,576

$       1,593,992

Liabilities and Partners' Capital

     Accounts payable and accrued liabilities

$        138,487

$          124,082

     Liabilities related to assets held for sale

3,260

-

     Deferred income

3,851

3,416

     Derivative liabilities

2,440

12,042

         Total current liabilities

148,038

139,540

     Other long-term liabilities

32,419

31,748

     Senior notes 8.25%

900,000

300,000

     Revolving credit facility

432,000

541,000

     Partners' capital

1,169,119

581,704

          Total liabilities and partners' capital

$     2,681,576

$       1,593,992

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - unaudited

(in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

2012

2011

2012

2011

Cash flows from operating activities

     Net income (loss)

$            7,809

$            35,658

$        (102,535)

$       43,169

     Adjustments to reconcile net income to

          net cash provided by operating activities:

     Depreciation, depletion and amortization

28,456

21,650

52,309

42,894

     Impairments

-

-

124,845

-

     Commodity derivative contracts:

     Total derivative losses included in net income

(8,676)

(4,782)

(3,725)

14,979

     Cash payments to settle derivatives for the period

(3,605)

(7,920)

(7,246)

(12,778)

     Non-cash interest expense

1,579

2,655

2,628

3,695

     Non-cash unit-based compensation

1,519

1,018

3,557

1,839

     Equity earnings, net of distributions received

186

(1,343)

(555)

1,817

     Other

(51)

(635)

(698)

(782)

     Changes in operating assets and liabilities

(3,742)

(8,758)

62

(2,482)

Net cash provided by operating activities

23,475

37,543

68,642

92,351

Cash flows from investing activities

Acquisitions, net of cash acquired

(850,747)

(26,824)

(850,943)

(122,040)

Additions to property, plant and equipment

(99,621)

(37,345)

(174,994)

(74,796)

Other

(4,770)

1,204

(11,060)

2,211

Net cash used in investing activities

(955,138)

(62,965)

(1,036,997)

(194,625)

Cash flows from financing activities

Net proceeds from equity offerings

577,962

-

577,962

-

Proceeds from issuance of senior notes

600,000

-

600,000

-

Distributions to partners

(41,265)

(34,176)

(81,683)

(64,809)

Proceeds from (repayments of) borrowings, net

(185,000)

65,000

(109,000)

172,000

Cash paid for debt issuance costs

(18,589)

(3,675)

(18,589)

(3,675)

Cash paid for merger

-

(5,600)

-

(6,604)

Net cash provided by financing activities

933,108

21,549

968,690

96,912

Net increase (decrease) in cash and cash equivalents

1,445

(3,873)

335

(5,362)

Cash and cash equivalents - beginning of period

7,530

14,475

8,640

15,964

Cash and cash equivalents - end of period

$            8,975

$            10,602

$             8,975

$       10,602

PENN VIRGINIA RESOURCE PARTNERS, L.P.

CERTAIN NON-GAAP FINANCIAL MEASURES - unaudited

(in thousands)

Three Months Ended

Six Months Ended

June 30,

June 30,

Guidance Range

2012

2011

2012

2011

Full Year 2012

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

Segment Adjusted EBITDA (a):

Eastern Midstream

$      17,659

$        5,173

$      27,620

$        7,957

$    87,000

$    93,000

Midcontinent Midstream

12,684

17,392

25,007

37,039

58,000

62,000

Coal and Natural Resource Management

26,697

42,262

57,419

79,060

100,000

105,000

Total segment adjusted EBITDA

$      57,040

$      64,827

$    110,046

$    124,056

$  245,000

$  260,000

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

Depreciation, depletion and amortization

(28,456)

(21,650)

(52,309)

(42,894)

Impairments

-

-

(124,845)

-

Acquisition related costs

(14,049)

-

(14,049)

-

Interest expense

(15,511)

(12,428)

(25,328)

(23,278)

Derivatives

8,676

4,782

3,725

(14,979)

Other

109

127

225

264

Net income (loss)

$        7,809

$      35,658

$  (102,535)

$      43,169

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

Net income (loss)

$        7,809

$      35,658

$  (102,535)

$      43,169

$  (55,000)

$  (60,000)

Depreciation, depletion and amortization

28,456

21,650

52,309

42,894

123,000

132,000

Impairment

-

-

124,845

-

125,000

125,000

Gain on sale of assets

-

-

-

-

(33,000)

(30,000)

Acquisition related costs

14,049

-

14,049

-

14,000

14,000

Derivative contracts:

  Derivative losses included in net income

(8,676)

(4,782)

(3,725)

14,979

(1,000)

5,000

  Cash payments to settle derivatives for the period

(3,605)

(7,920)

(7,246)

(12,778)

(10,000)

(13,000)

Equity earnings from joint ventures, net of distributions

186

(1,343)

(555)

1,817

(1,000)

1,000

Maintenance capital expenditures

(5,351)

(2,469)

(8,448)

(5,648)

(15,000)

(17,000)

Replacement capital expenditures

(6,725)

(6,725)

(13,450)

(13,450)

(27,000)

(27,000)

Distributable cash flow (b)

$      26,143

$      34,069

$      55,244

$      70,983

$  120,000

$  130,000

Distribution to Partners:

Total cash distribution paid during the period

$      41,265

$      34,176

$      81,683

$      64,809

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

Net income (loss)

$        7,809

$      35,658

$  (102,535)

$      43,169

Impairments

-

-

124,845

-

Acquisition related costs

14,049

-

14,049

-

Adjustments for derivatives:

Derivative losses included in net income

(8,676)

(4,782)

(3,725)

14,979

Cash payments to settle derivatives for the period

(3,605)

(7,920)

(7,246)

(12,778)

Net income, as adjusted (c)

$        9,577

$      22,956

$      25,388

$      45,370

Guidance Range

Reconciliation of Non-GAAP "Adjusted EBITDA" to GAAP "Operating income":

Full Year 2013

Segment Adjusted EBITDA:

Eastern Midstream

$  250,000

$  275,000

Midcontinent Midstream

75,000

95,000

Coal and Natural Resource Management

90,000

110,000

Total segment adjusted EBITDA

415,000

480,000

Adjustments to reconcile total segment Adjusted EBITDA to Operating income

Depreciation, depletion and amortization

(174,000)

(194,000)

Operating income

$  241,000

$  286,000

 

(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.  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, 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 of impairments, one-time charges related to acquisitions 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.

PENN VIRGINIA RESOURCE PARTNERS, L.P.

QUARTERLY SEGMENT INFORMATION - unaudited

(in thousands)

Eastern Midstream

Three Months Ended

Six Months Ended

June 30,

June 30,

2012

2011

2012

2011

Revenues

     Gathering and transportation

$          19,640

$            5,835

$         30,951

$           8,855

     Other

1,484

-

1,646

-

        Total revenues

21,124

5,835

32,597

8,855

Expenses

     Operating 

1,189

27

2,087

263

     General and administrative

2,276

635

2,890

635

     Acquisition related costs

14,049

-

14,049

-

     Depreciation, depletion and amortization

8,394

811

10,455

1,164

       Total expenses

25,908

1,473

29,481

2,062

Operating income (loss) 

$          (4,784)

$            4,362

$           3,116

$           6,793

Midcontinent Midstream

Three Months Ended

Six Months Ended

June 30,

June 30,

2012

2011

2012

2011

Revenues

     Natural gas

$          63,127

$        112,229

$       137,754

$       204,207

     Natural gas liquids

102,130

136,048

219,924

244,890

     Gathering and transportation

1,764

2,795

4,308

5,236

     Other

928

1,870

1,545

3,688

        Total revenues

167,949

252,942

363,531

458,021

Expenses

     Cost of gas purchased

140,833

219,278

306,297

389,533

     Operating 

9,251

10,366

20,478

19,519

     General and administrative

5,181

5,906

11,749

11,930

     Impairments

-

-

124,845

-

     Depreciation, depletion and amortization

11,700

11,753

25,307

23,324

       Total expenses

166,965

247,303

488,676

444,306

Operating income (loss) 

$               984

$            5,639

$      (125,145)

$         13,715

Coal and Natural Resource Management

Three Months Ended

Six Months Ended

June 30,

June 30,

2012

2011

2012

2011

Revenues

     Coal royalties

$          29,231

$          44,578

$         62,390

$         83,569

     Coal services

1,391

2,278

2,630

4,588

     Timber

1,354

1,268

2,873

2,377

     Oil and gas royalties

505

989

1,188

1,782

     Other

1,358

2,432

4,120

4,657

        Total revenues

33,839

51,545

73,201

96,973

Expenses

     Operating 

3,600

3,849

7,378

7,533

     General and administrative

3,542

5,434

8,404

10,380

     Depreciation, depletion and amortization

8,362

9,086

16,547

18,406

       Total expenses

15,504

18,369

32,329

36,319

Operating income (loss) 

$          18,335

$          33,176

$         40,872

$         60,654

PENN VIRGINIA RESOURCE PARTNERS, L.P.

DERIVATIVE CONTRACT SUMMARY - unaudited

As of June 30, 2012

Average Volume Per Day

Swap

Weighted Average Price

Price

Put (a)

Call (b)

NGL - natural gasoline collar

 (gallons) 

(per gallon)

Third quarter 2012 through fourth quarter 2012

54,000

$1.75

$2.02

Crude swap

 (barrels) 

(per barrel)

Third quarter 2012 through fourth quarter 2012

600

$88.62

Natural gas purchase swap

 (MMBtu) 

(MMBtu)

Third quarter 2012 through 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 $0.4 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 $4.0 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 Penn Virginia Resource Partners, L.P.



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