Exhibit 99
Penn Virginia Corporation
Three Radnor Corporate Center, Suite 300, 100 Matsonford Road, Radnor, PA 19087
FOR IMMEDIATE RELEASE
Contact:Frank A. Pici, Executive Vice President and Chief Financial Officer
Ph: (610) 687-8900 Fax: (610) 687-3688 E-Mail: invest@pennvirginia.com
PENN VIRGINIA CORPORATION ANNOUNCES
RECORD 2005 RESULTS AND 2006 GUIDANCE
REPORTS RECORD NET INCOME AND CASH FLOW
RADNOR, PA (Businesswire) February 8, 2006 – Penn Virginia Corporation (NYSE: PVA) today reported record annual net income of $62.1 million, or $3.31 per diluted share for 2005, compared to $33.4 million, or $1.81 per diluted share, for 2004. Net cash provided by operating activities was a record $230.7 million for 2005, a 58 percent increase over $146.4 million reported for 2004. Operating cash flow, a non-GAAP measure, was also a record $241.6 million for 2005, or 55 percent above $156.0 million reported for 2004. The increases in net income and cash flow were primarily due to increased natural gas revenues as a result of higher commodity prices and production volumes, and increased contributions from the Company’s ownership in Penn Virginia Resource Partners, L.P. (NYSE:PVR), which is reported under the coal and natural gas midstream segments below. The increase in 2005 net income was reduced by increased interest expense and by non-cash unrealized losses on derivatives. A reconciliation of non-GAAP financials measures appears in the financial tables later in this release.
For the fourth quarter of 2005, operating income was a record $60.3 million and quarterly net income was a record $27.4 million, or $1.46 per diluted share, compared to fourth quarter 2004 operating income of $15.3 million and net income of $4.7 million, or $0.25 per diluted share. Net cash provided by operating activities was a record $81.8 million, a 77 percent increase over $46.2 million reported for the fourth quarter of 2004 and 28 percent higher than the previous record of $63.8 million established in the third quarter of 2005. Operating cash flow, a non-GAAP measure, was a record $74.7 million, a 58 percent increase over the fourth quarter of 2004, and 12 percent higher than the previous record established in 2005’s third quarter. As was the case with the full-year results for 2005, the increases in the fourth quarter 2005 results were primarily due to increased natural gas revenues caused by higher commodity prices and production volumes and increased contributions from the Company’s ownership in PVR, which is reported under the coal and natural gas midstream segments below. The increase in fourth quarter 2005 net income was reduced by increased interest expense and by non-cash unrealized losses on derivatives.
Management Comment
A. James Dearlove, Penn Virginia President and CEO, said, “The success of our growth strategy in all of our businesses and record commodity prices resulted in record-setting performance for the fourth quarter and full-year 2005.
“Our increased operating income and cash flows were the direct result of our record oil and natural gas production levels and price realizations. We intend to continue to exploit our expertise in unconventional plays, therefore approximately 75 percent of our $208 million oil and gas capital expenditures budget for 2006 is devoted to our large, core development projects in Appalachian horizontal coalbed methane (HCBM), the Cotton Valley play in east Texas, and the Mississippi Selma Chalk. Our exploration spending will be spread among projects in south Louisiana, the Williston Basin and various promising ideas involving shale, CBM and tight sands. The goal of our exploration program is to identify meaningful resource plays to supplement our core areas.
“In addition to the strong performance and high commodity prices in our oil and gas business, the Company also benefited from its 39 percent ownership in and control of PVR. As the owner of PVR’s general partner and 7.8 million PVR units, the Company received $21.2 million in cash distributions from PVR during 2005, a 23 percent increase over the $17.3 million received in 2004. PVR announced an eight percent distribution increase in January 2006. During 2005 we also began to realize the benefit from the incentive distribution rights (IDRs) we own as the general partner of PVR, which provide increasing cash flows to the Company as distributions to PVR unitholders increase.
“As we discuss in this release, both the coal and natural gas midstream segments of PVR achieved excellent results in 2005. The acquisition of the natural gas midstream business in March 2005 provided PVR with a significant new growth platform, which we have begun to expand. In addition, PVR was able to complete four coal reserve acquisitions which exposed it for the first time to Illinois Basin coal, strengthened its position in central Appalachia and added to its inventory of infrastructure projects. PVR expects additional growth from both segments in 2006 and beyond.”
Oil and Gas Segment Review
See the Company’s February 3, 2006, news release for a more detailed discussion of fourth quarter 2005 drilling and production operations for the oil and gas segment.
Oil and gas operating income for 2005 was a record $95.6 million, compared to $49.9 million reported for 2004. Total oil and gas revenues increased by 50 percent to $226.8 million from $151.7 million in 2004. Higher realized prices for natural gas accounted for approximately 70 percent of the revenues increase. The average realized sales price for natural gas in 2005, which represented approximately 93 percent of the Company’s equivalent production for the year, was $8.31 per thousand cubic feet (Mcf), an increase of 33 percent from $6.27 per Mcf realized in 2004. A 16 percent increase in natural gas production, from 22.1 billion cubic feet (Bcf) in 2004 to 25.6 Bcf in 2005, accounted for the remaining 30 percent of the revenue increase.
Total oil and gas segment expenses increased 29 percent to $131.2 million in 2005 compared to $101.8 million in 2004, primarily due to the following:
| • | Operating expenses increased to $17.3 million, or $0.63 per thousand cubic feet equivalent (Mcfe) produced, in 2005 from $13.9 million, or $0.57 per Mcfe produced, in 2004. The increase was primarily due to additional compressor rental expenses in fields with increased production, downhole maintenance charges associated with HCBM wells in Appalachia and Selma Chalk wells in Mississippi, and increased water disposal charges. |
| • | Exploration expense increased to $40.9 million in 2005 from $26.1 million in 2004. The increase was primarily due to higher unproved leasehold write-offs and dry hole costs for an unsuccessful exploratory well in south Texas. |
| • | Impairment charges in 2005 of $4.8 million related to proved reserve revisions for two fields in Texas. |
| • | Depreciation, depletion and amortization (DD&A) expense increased to $45.7 million, or $1.67 per Mcfe produced, in 2005 from $35.9 million, or $1.47 per Mcfe produced, in 2004. The increase was the result of the production increase, which came from relatively higher cost HCBM and Cotton Valley wells, and general price inflation for equipment, services and tubulars used for drilling and development. |
Oil and gas operating income for the fourth quarter of 2005 was a record $44.1 million, compared to $7.4 million reported for the same quarter of 2004. Total revenues in the oil and gas segment increased by 73 percent to $79.1 million from $45.7 million in the fourth quarter of 2004. Increased realized prices for natural gas accounted for approximately 83 percent of the revenue increase. The average realized sales price for natural gas in the fourth quarter of 2005 was $11.22 per thousand cubic feet (Mcf), an increase of 58 percent from $7.11 per Mcf realized in the fourth quarter of 2004. A 12 percent increase in natural gas production, from 6.0 Bcfe in the fourth quarter of 2004 to 6.7 Bcfe in the fourth quarter of 2005, accounted for the remaining 17 percent of the revenue increase.
Total oil and gas segment expenses decreased nine percent to $35.0 million in the fourth quarter of 2005 compared to $38.3 million in the fourth quarter of 2004, due primarily to lower exploration expense and without a loss on assets held for sale as occurred in the fourth quarter of 2004, partially offset by higher operating expenses and DD&A.
| • | Operating expenses increased to $5.7 million, or $0.79 per Mcfe produced, in the fourth quarter of 2005 from $4.4 million, or $0.68 per Mcfe produced, in the fourth quarter of 2004. The increase was primarily due to additional compressor rental expenses in fields with increased production and downhole maintenance charges associated with HCBM wells in Appalachia and Selma Chalk wells in Mississippi. |
| • | DD&A expense increased to $12.0 million, or $1.67 per Mcfe produced, in the fourth quarter of 2005 from $9.9 million, or $1.52 per Mcfe produced, in the fourth quarter of 2004. The increase was the result of the production increase, which came from relatively higher cost HCBM and Cotton Valley wells, and general price inflation for equipment, services and tubulars used for drilling and development. |
Coal Segment Review (Penn Virginia Resource Partners, L.P. – NYSE: PVR)
Full-year 2005 operating income in the coal segment was a record $62.0 million, or 53 percent higher than the $40.5 million reported in 2004. Revenues increased to $95.8 million in 2005 from $75.6 million in 2004, mainly as a result of increased coal royalty revenues, which increased to $82.7 million in 2005 over $69.6 million in 2004. Higher coal prices were the primary reason for increased average royalty per ton, up 23 percent to $2.74 in 2005 from $2.23 in 2004. Coal production from PVR properties decreased to 30.2 million tons in 2005 from 31.2 million tons in 2004, primarily due to reduced production from a lessee’s longwall mining operation which moved off of one of PVR’s subleased central Appalachian properties, and reduced production from PVR’s property in New Mexico. The production decreases were partially offset by production from newly acquired properties in the western Kentucky portion of the Illinois Basin. Other
revenues also increased to $13.0 million in 2005 from $6.0 million in 2004, primarily due to increased equity earnings from a coal handling joint venture, additional coal handling and coal transportation-related fees, oil and gas royalty revenues resulting from 2005 acquisitions and revenue from a one-time sale of a bankruptcy claim.
Expenses decreased from $35.1 million in 2004 to $33.8 million in 2005, due primarily to lower operating expenses and DD&A resulting from lower coal production, offset in part by higher general and administrative expenses resulting from higher payroll and compliance-related expenses.
Fourth quarter 2005 operating income in the coal segment was $16.8 million, or 50 percent higher than the $11.2 million reported in the fourth quarter of 2004. The primary reason for the improved operating income was increased revenues resulting from higher coal production, including the new Illinois Basin property, a 19 percent increase in the average royalty per ton and an increase in other revenues from 2005 acquisitions, offset in part by higher payroll-related general and administrative expenses.
Natural Gas Midstream Segment Review (Penn Virginia Resource Partners, L.P. – NYSE: PVR)
Ten-month and fourth quarter 2005 operating income in the natural gas midstream segment acquired in March 2005 from Cantera Gas Resources, LLC (the “Cantera Acquisition”) was $14.9 million and $2.9 million. Inlet volumes at the midstream segment’s gas processing plants and gathering systems were approximately 38.9 billion cubic feet (Bcf), or approximately 127 million cubic feet (MMcf) per day, for the ten months in 2005 and 11.9 Bcf, or approximately 129 MMcf per day, during the fourth quarter. Gross processing margin, consisting of midstream revenues minus the cost of gas purchased, was $43.1 million, or $1.11 per Mcf of plant inlet gas, for the 10 months in 2005 and $12.0 million, or $1.01 per Mcf, during the fourth quarter. Expenses other than cost of gas purchased were $30.1 million for the 10 months and $9.6 million for the fourth quarter.
Partnership Distributions and Conversion of Subordinated Units
PVR recently announced that it will pay a quarterly cash distribution covering the period October 1 through December 31, 2005 in the amount of $0.70 per unit, or an annualized rate of $2.80 per unit, on February 14, 2005, to unit holders of record as of February 3, 2006. This represents an eight percent increase over the distribution of $0.65 per unit, or an annualized rate of $2.60, for the third quarter of 2005 and a 24 percent increase over the distribution for the fourth quarter of 2004.
Penn Virginia Corporation is the general partner of PVR and it owns approximately 7.8 million common and subordinated PVR units. In accordance with the terms of PVR’s partnership agreement, approximately 1.9 million subordinated units converted to common units in November 2005. After this conversion, PVA owned approximately 3.9 million common PVR units; the remaining 3.8 million subordinated units are expected to convert to common units in November 2006 provided minimum quarterly distributions are paid and other conditions are met.
Capital Resources and Impact of Derivatives
As of December 31, 2005, Penn Virginia had borrowed $79 million under its
revolving credit facility compared to $76 million at the end of 2004. In December 2005, Penn Virginia amended the credit facility to increase the commitment from $150 million to $200 million, increase the borrowing base from $200 million to $300 million, extend the maturity date from December 2007 to December 2010 and attain a more favorable interest rate. PVR’s outstanding borrowings as of December 31, 2005 were $255.0 million, including $8.1 million of senior unsecured notes classified as current portion of long-term debt, up from $117.7 million as of December 31, 2004. The increase in outstanding borrowings was due to the Cantera Acquisition and coal property acquisitions completed in 2005. Primarily due to increased PVR borrowings and loan placement fees, interest expense increased from $3.1 million in the fourth quarter of 2004 to $4.2 million in the fourth quarter of 2005 and from $7.7 million in 2004 to $15.3 million for full-year 2005.
Net income for the fourth quarter and full-year 2005 decreased by $1.2 million and $3.8 million due to non-cash unrealized losses on derivatives, adjusted for minority interest and taxes. The unrealized losses on derivatives for the fourth quarter resulted from the ineffectiveness of open commodity price hedges related to the oil and gas segment and the natural gas midstream business of PVR, and an adjustment in the midstream segment related to a basis swap that follows mark-to-market accounting. As discussed in previous announcements, also affecting the full-year results was a $13.9 million pre-tax charge recorded during the first quarter of 2005 for mark-to-market adjustments on certain derivative agreements related to the Cantera Acquisition, which represented the majority of the unrealized losses on derivatives recorded by the Company during the first three quarters of 2005.
Guidance for 2006
See the Guidance Table included in this release for guidance estimates for 2006. These estimates, including capital expenditure plans, are meant to provide guidance only and are subject to revision as PVA’s operating environment changes.
Conference Call
A conference call and webcast, at which management will discuss fourth quarter 2005 results and the outlook for 2006, is scheduled for Thursday, February 9, 2006, at 3:00 p.m. EST. Prepared remarks by A. James Dearlove, President and Chief Executive Officer, will be followed by a question and answer period. Investors and analysts may participate via phone by dialing 1-877-407-9205 five to ten minutes before the scheduled start of the conference call, or via Internet webcast by logging on to the Company’s 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 telephone replay of the call will be available until February 10, 2006, at 11:59 p.m. EST by dialing 1-877-660-6853 and using replay passcodes: account number 286 and conference number 189330. An on-demand replay of the call will also be available at the Company’s website beginning shortly after the call.
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Penn Virginia Corporation (NYSE: PVA) is an energy company engaged in the exploration, acquisition, development and production of crude oil and natural gas. PVA is also the general partner and the largest unit holder in Penn Virginia Resource Partners, L.P. (NYSE: PVR), which manages
coal properties and related assets and operates a midstream natural gas gathering and processing business. PVA is headquartered in Radnor, PA. For more information about PVA, visit the Company’s website at www.pennvirginia.com.
Forward-looking statements: Penn Virginia Corporation is including the following cautionary statement to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of, the Company. With the exception of historical matters, any matters discussed are forward-looking and, therefore, involve risks and uncertainties that could cause actual results to differ materially from projected results. These risks, uncertainties and contingencies include, but are not limited to, the following: development activities, capital expenditures, acquisitions and dispositions, drilling and exploration programs, expected commencement dates of oil and natural gas production, projected quantities of future oil and natural gas production, expected commencement dates and projected quantities of future coal production and cash flows generated by lessees producing coal from reserves leased from PVR, projected cash flows generated from PVR’s natural gas midstream business; costs and expenditures, market factors, including energy prices generally and, specifically, the relative prices of crude oil, natural gas, coal and NGLs; projected demand for oil, natural gas, coal and NGLs, projected supply of oil, natural gas, coal and NGLs, lessee and customer delays or defaults in making payments and coal handling joint venture operations, all of which will affect revenue levels, prices, royalties, minimum rental payments and distributions realized by the Company and PVR. Additional information concerning these and other factors can be found in the Company’s and PVR’s press releases and public periodic filings with the Securities and Exchange Commission, including each of the Company’s and PVR’s Annual Reports on Form 10-K for the year ended December 31, 2004, filed on March 11, 2005 and March 1, 2005, respectively, and subsequently filed interim reports. Except as required by applicable securities laws, the Company does not intend to update its forward-looking statements.
PENN VIRGINIA CORPORATION
OPERATIONS SUMMARY
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
Production | ||||||||||||||||
Natural gas (MMcf) | 6,724 | 5,974 | 25,550 | 22,079 | ||||||||||||
Oil and condensate (Mbbl) | 72 | 89 | 302 | 396 | ||||||||||||
Total oil, condensate and natural gas production (MMcfe) | 7,156 | 6,508 | 27,362 | 24,455 | ||||||||||||
Coal royalty tons (thousands) | 7,731 | 7,316 | 30,227 | 31,181 | ||||||||||||
Inlet volumes (MMcf) | 11,912 | — | 38,875 | — | ||||||||||||
Prices and margin | ||||||||||||||||
Natural gas ($/Mcf) | $ | 11.22 | $ | 7.11 | $ | 8.31 | $ | 6.27 | ||||||||
Oil and condensate ($/Bbl) | $ | 50.89 | $ | 39.27 | $ | 45.67 | $ | 33.75 | ||||||||
Coal royalties ($/ton) | $ | 2.82 | $ | 2.36 | $ | 2.74 | $ | 2.23 | ||||||||
Midstream processing margin ($/Mcf) | $ | 1.01 | $ | — | $ | 1.11 | $ | — | ||||||||
| CONSOLIDATED STATEMENTS OF EARNINGS - unaudited | ||||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
Revenues | ||||||||||||||||
Natural gas | $ | 75,416 | $ | 42,484 | $ | 212,427 | $ | 138,422 | ||||||||
Oil and condensate | 3,664 | 3,495 | 13,792 | 13,364 | ||||||||||||
Natural gas midstream | 133,650 | — | 347,000 | — | ||||||||||||
Coal royalties | 21,804 | 17,248 | 82,725 | 69,643 | ||||||||||||
Other | 5,105 | 2,262 | 16,263 | 6,996 | ||||||||||||
Total revenues | 239,639 | 65,489 | 672,207 | 228,425 | ||||||||||||
Expenses | ||||||||||||||||
Cost of gas purchased | 121,633 | — | 303,912 | — | ||||||||||||
Operating | 10,043 | 6,224 | 32,685 | 21,773 | ||||||||||||
Exploration | 9,367 | 11,155 | 40,917 | 26,058 | ||||||||||||
Taxes other than income | 4,524 | 2,304 | 16,005 | 10,480 | ||||||||||||
General and administrative | 11,830 | 8,096 | 35,706 | 26,170 | ||||||||||||
Impairment of oil and gas properties | 1,297 | 655 | 4,785 | 655 | ||||||||||||
Loss on assets held for sale | — | 7,541 | — | 7,541 | ||||||||||||
Depreciation, depletion and amortization | 20,613 | 14,230 | 76,937 | 54,952 | ||||||||||||
Total expenses | 179,307 | 50,205 | 510,947 | 147,629 | ||||||||||||
Operating income | 60,332 | 15,284 | 161,260 | 80,796 | ||||||||||||
Other income (expense) | ||||||||||||||||
Interest expense | (4,248 | ) | (3,099 | ) | (15,318 | ) | (7,672 | ) | ||||||||
Interest and other income | 360 | 295 | 1,332 | 1,101 | ||||||||||||
Unrealized gain (loss) on derivatives | (3,699 | ) | — | (14,885 | ) | — | ||||||||||
Income from operations before minority interest and income taxes | 52,745 | 12,480 | 132,389 | 74,225 | ||||||||||||
Minority interest | 7,423 | 4,752 | 29,697 | 19,023 | ||||||||||||
Income tax expense | 17,922 | 3,029 | 40,615 | 21,847 | ||||||||||||
Net income | $ | 27,400 | $ | 4,699 | $ | 62,077 | $ | 33,355 | ||||||||
Per share data | ||||||||||||||||
Net income per share, basic | $ | 1.47 | $ | 0.26 | $ | 3.35 | $ | 1.82 | ||||||||
Net income per share, diluted | $ | 1.46 | $ | 0.25 | $ | 3.31 | $ | 1.81 | ||||||||
Weighted average shares outstanding, basic | 18,613 | 18,414 | 18,546 | 18,306 | ||||||||||||
Weighted average shares outstanding, diluted | 18,818 | 18,610 | 18,732 | 18,467 | ||||||||||||
PENN VIRGINIA CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands)
| December 31, 2005 | December 31, 2004 | |||||
| (unaudited) | ||||||
Assets | ||||||
Current assets | $ | 177,116 | $ | 84,239 | ||
Net property and equipment | 984,288 | 665,488 | ||||
Equity investments | 26,672 | 27,881 | ||||
Goodwill | 7,718 | — | ||||
Intangibles, net | 38,051 | — | ||||
Other assets | 15,451 | 5,727 | ||||
Total assets | $ | 1,249,296 | $ | 783,335 | ||
Liabilities and Shareholders’ Equity | ||||||
Current liabilities | $ | 151,931 | $ | 41,775 | ||
Long-term debt | 79,000 | 76,000 | ||||
Long-term debt of Penn Virginia Resource Partners, L.P. | 246,846 | 112,926 | ||||
Other liabilities and deferred taxes | 148,138 | 116,883 | ||||
Minority interest in Penn Virginia Resource Partners, L.P. | 312,832 | 182,891 | ||||
Shareholders’ equity | 310,549 | 252,860 | ||||
Total liabilities and shareholders’ equity | $ | 1,249,296 | $ | 783,335 | ||
CONSOLIDATED STATEMENTS OF CASH FLOWS - unaudited
(in thousands)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
Operating Activities | ||||||||||||||||
Net income | $ | 27,400 | $ | 4,699 | $ | 62,077 | $ | 33,355 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Depreciation, depletion and amortization | 20,613 | 14,230 | 76,937 | 54,952 | ||||||||||||
Unrealized loss on derivatives | 3,699 | — | 14,885 | — | ||||||||||||
Impairment of oil and gas properties | 1,297 | 655 | 4,785 | 655 | ||||||||||||
Minority interest | 7,423 | 4,752 | 29,697 | 19,023 | ||||||||||||
Loss on assets held for sale | — | 7,541 | — | 7,541 | ||||||||||||
Deferred income taxes | 6,701 | 5,911 | 17,494 | 19,225 | ||||||||||||
Dry hole and unproved leasehold expense | 5,815 | 6,688 | 27,464 | 16,010 | ||||||||||||
Other | 1,797 | 2,850 | 8,261 | 5,229 | ||||||||||||
Operating cash flow (see attached table “Reconciliation of Certain Non-GAAP Financial Measures”) | 74,745 | 47,326 | 241,600 | 155,990 | ||||||||||||
Changes in operating assets and liabilities | 7,035 | (1,155 | ) | (10,885 | ) | (9,625 | ) | |||||||||
Net cash provided by operating activities | 81,780 | 46,171 | 230,715 | 146,365 | ||||||||||||
Investing Activities | ||||||||||||||||
Proceeds from sale of properties | 10 | 534 | 17,385 | 1,559 | ||||||||||||
Additions to property and equipment | (53,586 | ) | (37,310 | ) | (183,314 | ) | (125,241 | ) | ||||||||
Acquisitions, net of cash acquired | (551 | ) | — | (291,318 | ) | (28,442 | ) | |||||||||
Other | — | 369 | — | 767 | ||||||||||||
Net cash used in investing activities | (54,127 | ) | (36,407 | ) | (457,247 | ) | (151,357 | ) | ||||||||
Financing Activities | ||||||||||||||||
Dividends paid | (2,091 | ) | (2,072 | ) | (8,341 | ) | (8,248 | ) | ||||||||
Distributions paid to minority interest holders | (8,490 | ) | (5,557 | ) | (30,737 | ) | (21,892 | ) | ||||||||
Proceeds from issuance of PVR partners’ capital | (19 | ) | — | 126,456 | — | |||||||||||
Net proceeds from (repayments of) PVA borrowings | (10,000 | ) | 3,000 | 3,000 | 12,000 | |||||||||||
Net proceeds from (repayments of) PVR borrowings | (3,000 | ) | — | 137,200 | 26,000 | |||||||||||
Payments for debt issuance costs | (450 | ) | (1,234 | ) | (2,835 | ) | (1,234 | ) | ||||||||
Issuance of stock | 304 | 1,986 | 2,231 | 5,829 | ||||||||||||
Net cash provided by (used in) financing activities | (23,746 | ) | (3,877 | ) | 226,974 | 12,455 | ||||||||||
Net increase (decrease) in cash and cash equivalents | 3,907 | 5,887 | 442 | 7,463 | ||||||||||||
Cash and cash equivalents-beginning balance | 22,006 | 19,584 | 25,471 | 18,008 | ||||||||||||
Cash and cash equivalents-ending balance | $ | 25,913 | $ | 25,471 | $ | 25,913 | $ | 25,471 | ||||||||
PENN VIRGINIA CORPORATION
QUARTER SEGMENT INFORMATION - unaudited
(Dollars in thousands except where noted)
| Oil and Gas | Coal | Natural Gas Midstream (1) | All Other | Consolidated | |||||||||||||||||||
| Three months ended December 31, 2005 | Amount | (per Mcfe) * | Amount | (per Mcf) | |||||||||||||||||||
Production | |||||||||||||||||||||||
Oil, condensate and gas (MMcfe) | 7,156 | ||||||||||||||||||||||
Natural gas (MMcf) | 6,724 | ||||||||||||||||||||||
Crude oil and condensate (Mbbl) | 72 | ||||||||||||||||||||||
Coal royalty tons (thousands of tons) | 7,731 | ||||||||||||||||||||||
Inlet volumes (MMcf) | 11,912 | ||||||||||||||||||||||
Revenues | |||||||||||||||||||||||
Natural gas | $ | 75,416 | $ | 11.22 | $ | — | $ | — | $ | — | $ | 75,416 | |||||||||||
Oil and condensate | 3,664 | 50.89 | — | — | — | 3,664 | |||||||||||||||||
Natural gas midstream | — | — | 133,650 | — | 133,650 | ||||||||||||||||||
Coal royalties | — | 21,804 | — | — | 21,804 | ||||||||||||||||||
Other | 19 | 4,522 | 511 | 53 | 5,105 | ||||||||||||||||||
Total revenues | 79,099 | 11.05 | 26,326 | 134,161 | $ | 11.26 | 53 | 239,639 | |||||||||||||||
Expenses | |||||||||||||||||||||||
Cost of gas purchased | — | — | — | 121,633 | 10.21 | — | 121,633 | ||||||||||||||||
Operating | 5,671 | 0.79 | 1,651 | 2,721 | 0.23 | — | 10,043 | ||||||||||||||||
Exploration | 9,367 | 1.31 | — | — | — | — | 9,367 | ||||||||||||||||
Taxes other than income | 3,704 | 0.52 | 402 | 338 | 0.03 | 80 | 4,524 | ||||||||||||||||
General and administrative | 3,015 | 0.42 | 3,025 | 2,625 | 0.22 | 3,165 | 11,830 | ||||||||||||||||
Impairment of oil and gas properties | 1,297 | 0.18 | — | — | — | — | 1,297 | ||||||||||||||||
Depreciation, depletion and amortization | 11,953 | 1.67 | 4,450 | 3,941 | 0.33 | 269 | 20,613 | ||||||||||||||||
Total expenses | 35,007 | 4.89 | 9,528 | 131,258 | 11.02 | 3,514 | 179,307 | ||||||||||||||||
Operating income (loss) | $ | 44,092 | $ | 6.16 | $ | 16,798 | $ | 2,903 | $ | 0.24 | $ | (3,461 | ) | $ | 60,332 | ||||||||
Additions to property and equipment and acquisitions, net of cash acquired | $ | 49,237 | $ | 1,699 | $ | 3,001 | $ | 200 | $ | 54,137 | |||||||||||||
| Oil and Gas | Coal | Natural Gas Midstream (1) | All Other | Consolidated | |||||||||||||||||||
| Three months ended December 31, 2004 | Amount | (per Mcfe) * | Amount | (per Mcf) | |||||||||||||||||||
Production | |||||||||||||||||||||||
Oil, condensate and gas (MMcfe) | 6,508 | ||||||||||||||||||||||
Natural gas (MMcf) | 5,974 | ||||||||||||||||||||||
Crude oil and condensate (Mbbl) | 89 | ||||||||||||||||||||||
Coal royalty tons (thousands of tons) | 7,316 | ||||||||||||||||||||||
Revenues | |||||||||||||||||||||||
Natural gas | $ | 42,484 | $ | 7.11 | $ | — | $ | — | $ | — | $ | 42,484 | |||||||||||
Oil and condensate | 3,495 | 39.27 | — | — | — | 3,495 | |||||||||||||||||
Coal royalties | — | 17,248 | — | — | 17,248 | ||||||||||||||||||
Other | (321 | ) | 2,290 | — | 293 | 2,262 | |||||||||||||||||
Total revenues | 45,658 | 7.02 | 19,538 | — | $ | — | 293 | 65,489 | |||||||||||||||
Expenses | |||||||||||||||||||||||
Operating | 4,424 | 0.68 | 1,650 | — | — | 150 | 6,224 | ||||||||||||||||
Exploration | 11,155 | 1.71 | — | — | — | 11,155 | |||||||||||||||||
Taxes other than income | 2,017 | 0.31 | 195 | — | — | 92 | 2,304 | ||||||||||||||||
General and administrative | 2,609 | 0.40 | 2,271 | — | — | 3,216 | 8,096 | ||||||||||||||||
Impairment of oil and gas properties | 655 | 0.10 | — | — | — | — | 655 | ||||||||||||||||
Loss on assets held for sale | 7,541 | 1.16 | — | — | — | — | 7,541 | ||||||||||||||||
Depreciation, depletion and amortization | 9,871 | 1.52 | 4,247 | — | — | 112 | 14,230 | ||||||||||||||||
Total expenses | 38,272 | 5.88 | 8,363 | — | — | 3,570 | 50,205 | ||||||||||||||||
Operating income (loss) | $ | 7,386 | $ | 1.14 | $ | 11,175 | $ | — | $ | — | $ | (3,277 | ) | $ | 15,284 | ||||||||
Additions to property and equipment and acquisitions, net of cash acquired | $ | 37,089 | $ | 149 | $ | — | $ | 72 | $ | 37,310 | |||||||||||||
| * | Natural gas revenues are shown per Mcf, oil and gas condensate revenues are shown per Bbl, and all other amounts are shown per Mcfe. |
| (1) | Natural Gas Midstream segment acquired in March 2005. |
PENN VIRGINIA CORPORATION
FULL YEAR SEGMENT INFORMATION - unaudited
(Dollars in thousands except where noted)
| Oil and Gas | Coal | Natural Gas Midstream (1) | All Other | Consolidated | ||||||||||||||||||
| Year ended December 31, 2005 | Amount | (per Mcfe)* | Amount | (per Mcf) | ||||||||||||||||||
Production | ||||||||||||||||||||||
Oil, condensate and gas (MMcfe) | 27,362 | |||||||||||||||||||||
Natural gas (MMcf) | 25,550 | |||||||||||||||||||||
Crude oil and condensate (Mbbl) | 302 | |||||||||||||||||||||
Coal royalty tons (thousands of tons) | 30,227 | |||||||||||||||||||||
Inlet volumes (MMcf) | 38,875 | |||||||||||||||||||||
Revenues | ||||||||||||||||||||||
Natural gas | $ | 212,427 | $ | 8.31 | $ | — | $ | — | $ | — | $ | 212,427 | ||||||||||
Oil and condensate | 13,792 | 45.67 | — | — | — | 13,792 | ||||||||||||||||
Natural gas midstream | — | — | 347,000 | — | 347,000 | |||||||||||||||||
Coal royalties | — | 82,725 | — | — | 82,725 | |||||||||||||||||
Other | 600 | 13,030 | 1,936 | 697 | 16,263 | |||||||||||||||||
Total revenues | 226,819 | 8.29 | 95,755 | 348,936 | $ | 8.98 | 697 | 672,207 | ||||||||||||||
Expenses | ||||||||||||||||||||||
Cost of gas purchased | — | — | — | 303,912 | 7.82 | — | 303,912 | |||||||||||||||
Operating | 17,300 | 0.63 | 5,755 | 9,347 | 0.24 | 283 | 32,685 | |||||||||||||||
Exploration | 40,917 | 1.50 | — | — | — | — | 40,917 | |||||||||||||||
Taxes other than income | 13,188 | 0.48 | 1,129 | 1,268 | 0.03 | 420 | 16,005 | |||||||||||||||
General and administrative | 9,264 | 0.34 | 8,987 | 6,732 | 0.17 | 10,723 | 35,706 | |||||||||||||||
Impairment of oil and gas properties | 4,785 | 0.17 | — | — | — | — | 4,785 | |||||||||||||||
Depreciation, depletion and amortization | 45,730 | 1.67 | 17,890 | 12,738 | 0.33 | 579 | 76,937 | |||||||||||||||
Total expenses | 131,184 | 4.79 | 33,761 | 333,997 | 8.59 | 12,005 | 510,947 | |||||||||||||||
Operating Income | $ | 95,635 | $ | 3.50 | $ | 61,994 | $ | 14,939 | $ | 0.38 | $ | (11,308 | ) | $ | 161,260 | |||||||
Additions to property and equipment and acquisitions, net of cash acquired (2) | $ | 169,370 | $ | 112,497 | $ | 206,811 | $ | 350 | $ | 489,028 | ||||||||||||
| Oil and Gas | Coal | Natural Gas Midstream (1) | All Other | Consolidated | |||||||||||||||||||
| Year ended December 31, 2004 | Amount | (per Mcfe)* | Amount | (per Mcf) | |||||||||||||||||||
Production | |||||||||||||||||||||||
Oil and gas (MMcfe) | 24,455 | ||||||||||||||||||||||
Natural gas (MMcf) | 22,079 | ||||||||||||||||||||||
Crude oil (Mbbl) | 396 | ||||||||||||||||||||||
Coal royalty tons (thousands of tons) | 31,181 | ||||||||||||||||||||||
Revenues | |||||||||||||||||||||||
Natural gas | $ | 138,422 | $ | 6.27 | $ | — | $ | — | $ | — | $ | 138,422 | |||||||||||
Oil and condensate | 13,364 | 33.75 | — | — | — | 13,364 | |||||||||||||||||
Natural gas midstream | — | — | — | — | — | ||||||||||||||||||
Coal royalties | — | 69,643 | — | — | 69,643 | ||||||||||||||||||
Other | (114 | ) | 5,987 | — | 1,123 | 6,996 | |||||||||||||||||
Total revenues | 151,672 | 6.20 | 75,630 | — | $ | — | 1,123 | 228,425 | |||||||||||||||
Expenses | |||||||||||||||||||||||
Cost of gas purchased | — | — | — | — | — | — | — | ||||||||||||||||
Operating | 13,949 | 0.57 | 7,224 | — | — | 600 | 21,773 | ||||||||||||||||
Exploration | 26,058 | 1.07 | — | — | — | — | 26,058 | ||||||||||||||||
Taxes other than income | 9,325 | 0.38 | 948 | — | — | 207 | 10,480 | ||||||||||||||||
General and administrative | 8,336 | 0.34 | 8,307 | — | — | 9,527 | 26,170 | ||||||||||||||||
Impairment of oil and gas properties | 655 | 0.03 | — | — | — | — | 655 | ||||||||||||||||
Loss on assets held for sale | 7,541 | 0.31 | — | — | — | 7,541 | |||||||||||||||||
Depreciation, depletion and amortization | 35,886 | 1.47 | 18,632 | — | — | 434 | 54,952 | ||||||||||||||||
Total expenses | 101,750 | 4.17 | 35,111 | — | — | 10,768 | 147,629 | ||||||||||||||||
Operating Income | $ | 49,922 | $ | 2.03 | $ | 40,519 | $ | — | $ | — | $ | (9,645 | ) | $ | 80,796 | ||||||||
Additions to property and equipment and acquisitions, net of cash acquired (3) | $ | 123,977 | $ | 2,148 | $ | — | $ | 176 | $ | 126,301 | |||||||||||||
| * | Natural gas revenues are shown per Mcf, oil and gas condensate revenues are shown per Bbl, and all other amounts are shown per Mcfe. |
| (1) | Natural Gas Midstream segment acquired in March 2005. |
| (2) | Coal segment includes noncash expenditures of $14.4 million. |
| (3) | Coal segment includes noncash expenditures of $1.1 million. |
PENN VIRGINIA CORPORATION
RECONCILIATION OF CERTAIN NON-GAAP FINANCIAL MEASURES - unaudited
(in thousands)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
Reconciliation of GAAP “Net cash provided by operating activities” to Non-GAAP “Operating cash flow” | ||||||||||||||||
Net cash provided by operating activities | $ | 81,780 | $ | 46,171 | $ | 230,715 | $ | 146,365 | ||||||||
Adjustments: | ||||||||||||||||
Changes in operating assets and liabilities | (7,035 | ) | 1,155 | 10,885 | 9,625 | |||||||||||
Operating cash flow (see Note 1 below) | $ | 74,745 | $ | 47,326 | $ | 241,600 | $ | 155,990 | ||||||||
Reconciliation of GAAP “Additions to property and equipment” to Non-GAAP “Capital expenditures” | ||||||||||||||||
Additions to property and equipment | $ | 53,586 | $ | 37,310 | $ | 183,314 | $ | 125,241 | ||||||||
Acquisitions, net of cash acquired | 551 | — | 291,318 | 28,442 | ||||||||||||
Seismic expenditures | 960 | 4,097 | 7,836 | 9,195 | ||||||||||||
Delay rentals and other expenditures | 1,118 | 669 | 3,935 | 1,123 | ||||||||||||
Noncash lease acquisitions | — | — | 14,396 | 1,060 | ||||||||||||
Sale of lease rights | — | — | (6,625 | ) | — | |||||||||||
Less: Capitalized interest | (1,071 | ) | (610 | ) | (3,496 | ) | (2,007 | ) | ||||||||
Add: Change in noncash well accruals | (1,114 | ) | 138 | (375 | ) | 3,176 | ||||||||||
Capital expenditures (see Note 2 below) | $ | 54,030 | $ | 41,604 | $ | 490,303 | $ | 166,230 | ||||||||
Note 1 - Operating cash flow represents net cash provided by operating activities before changes in assets and liabilities. Operating cash flow is presented because management believes it is a useful adjunct to net cash provided by operating activities under accounting principles generally accepted in the United States (GAAP). Management believes that operating cash flow is widely accepted as a financial indicator of an oil and gas company’s ability to generate cash which is used to internally fund exploration and development activities, service debt and pay dividends. This measure is widely 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. 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, or as a measure of liquidity, or as an alternative to net income.
Note 2 - Capital expenditures represents cash additions to property and equipment, plus cash paid for acquisitions, plus seismic expenditures, delay rentals and other expenditures, and non-cash well accruals, minus capitalized interest. Management believes capital expenditures provide useful information regarding the Company's capital program as a supplement to cash additions to property and equipment.
PENN VIRGINIA CORPORATION
GUIDANCE TABLE
(Dollars in millions except where noted)
Penn Virginia Corporation is providing the following guidance regarding financial and operational expectations for 2006.
| Actual | ||||||||||||||||
| Fourth Quarter 2005 | YTD 2005 | 2006 Guidance | ||||||||||||||
Oil & Gas Segment: | ||||||||||||||||
Production: | ||||||||||||||||
Natural gas (Bcf) - See Note a | 6.7 | 25.6 | 27.0 | — | 28.8 | |||||||||||
Crude oil and condensate (Mbbl) - See Note b | 72 | 302 | 252 | — | 275 | |||||||||||
Equivalent production (Bcfe) | 7.1 | 27.4 | 28.5 | — | 30.5 | |||||||||||
Equivalent daily production (MMcfe) | 77.8 | 75.0 | 78.1 | — | 83.6 | |||||||||||
Expenses: | ||||||||||||||||
Direct expenses | $ | 12.4 | 39.8 | 43.0 | — | 47.0 | ||||||||||
Exploration | $ | 9.4 | 40.9 | 34.0 | — | 38.0 | ||||||||||
Depreciation, depletion and amortization ($ per Mcfe) | $ | 1.67 | 1.67 | 1.60 | — | 1.70 | ||||||||||
Capital Expenditures: | ||||||||||||||||
Development drilling | $ | 33.3 | 110.1 | 123.0 | — | 135.0 | ||||||||||
Exploratory drilling | $ | 3.6 | 17.3 | 33.0 | — | 36.0 | ||||||||||
Pipeline, gathering, facilities | $ | 1.2 | 5.1 | 20.0 | — | 22.0 | ||||||||||
Seismic | $ | 1.0 | 7.9 | 6.0 | — | 7.0 | ||||||||||
Lease acquisition, field projects and other | $ | 10.0 | 30.2 | 16.0 | — | 18.0 | ||||||||||
Total Oil & Gas Capital Expenditures | $ | 49.1 | 170.6 | 198.0 | — | 218.0 | ||||||||||
Coal Segment (PVR): | ||||||||||||||||
Coal royalty tons (millions) | 7.7 | 30.2 | 31.5 | — | 34.5 | |||||||||||
Revenues: | ||||||||||||||||
Average royalty per ton | $ | 2.82 | 2.74 | 2.65 | — | 2.75 | ||||||||||
Other | $ | 4.5 | 13.0 | 12.0 | — | 14.0 | ||||||||||
Expenses: | ||||||||||||||||
Direct expenses | $ | 5.1 | 15.9 | 15.0 | — | 17.0 | ||||||||||
Depreciation, depletion and amortization | $ | 4.5 | 17.9 | 21.0 | — | 23.0 | ||||||||||
Capital Expenditures: | ||||||||||||||||
Coal segment acquisitions | $ | 1.0 | 106.5 | N/A | ||||||||||||
Coal segment other expenditures | $ | 1.1 | 6.0 | 16.0 | — | 18.0 | ||||||||||
Total Coal Capital Expenditures | $ | 2.1 | 112.5 | |||||||||||||
Natural Gas Midstream Segment (PVR): see Note c | ||||||||||||||||
Inlet volumes (MMcf per day) - see Note d | 129 | 127 | 115 | — | 130 | |||||||||||
Expenses: | ||||||||||||||||
Direct expenses | $ | 5.7 | 17.3 | 19.0 | — | 22.0 | ||||||||||
Depreciation, depletion and amortization | $ | 3.9 | 12.7 | 14.0 | — | 16.0 | ||||||||||
Capital Expenditures: | ||||||||||||||||
Midstream segment acquisitions, net of cash acquired | $ | 0.1 | 199.2 | N/A | ||||||||||||
Midstream segment other expenditures | $ | 2.9 | 7.6 | 8.0 | — | 10.0 | ||||||||||
Total Midstream Capital Expenditures | $ | 3.0 | 206.8 | |||||||||||||
Corporate and Other: | ||||||||||||||||
General and administrative expense | $ | 3.2 | 10.7 | 10.0 | — | 12.0 | ||||||||||
Interest expense: | ||||||||||||||||
PVA average long-term debt outstanding | $ | 86.5 | 84.2 | 85.0 | — | 95.0 | ||||||||||
PVA interest rate | 6.4 | % | 5.6 | % | 5.8 | % | — | 6.3 | % | |||||||
Percentage capitalized - see Note e | 80 | % | 78 | % | 60 | % | — | 70 | % | |||||||
PVR average long-term debt outstanding | $ | 256.4 | 209.2 | 250.0 | — | 260.0 | ||||||||||
PVR interest rate assumed | 5.2 | % | 5.6 | % | 5.6 | % | — | 6.0 | % | |||||||
Minority interest in PVR - see Note f | $ | 7.4 | 29.7 | see Note f | ||||||||||||
Income tax rate - see Note g | 40 | % | 40 | % | 40 | % | ||||||||||
Other capital expenditures | $ | 0.2 | 0.4 | 3.0 | — | 4.0 | ||||||||||
These estimates are meant to provide guidance only and are subject to change as the operating environment of the Company changes.
See Notes on following page.
PENN VIRGINIA CORPORATION
GUIDANCE TABLE
(Dollars in millions except where noted)
Notes to Guidance Table:
a - The oil and gas segment’s natural gas hedging positions as of December 31, 2005, are summarized below:
Average Mmbtu Per Day | Weighted Average Price per Mmbtu | |||||||
| Collars | ||||||||
| Floor | Ceiling | |||||||
First Quarter 2006 | 36,344 | $ | 7.12 | $ | 12.07 | |||
Second Quarter 2006 | 28,330 | $ | 6.94 | $ | 11.81 | |||
Third Quarter 2006 | 22,000 | $ | 7.82 | $ | 12.25 | |||
Fourth Quarter 2006 | 20,011 | $ | 8.23 | $ | 15.32 | |||
First Quarter 2007 | 15,000 | $ | 9.00 | $ | 19.20 | |||
Second Quarter 2007 | 10,000 | $ | 7.00 | $ | 12.65 | |||
Third Quarter 2007 | 10,000 | $ | 7.00 | $ | 12.65 | |||
Fourth Quarter 2007 (October only) | 10,000 | $ | 7.00 | $ | 12.65 | |||
The costless collar natural gas prices per Mmbtu per quarter include the effects of basis differentials, if any, that may be hedged.
b - The oil and gas segment’s oil hedging positions as of December 31, 2005, are summarized below:
Average Bbls Per Day | Weighted Average Collars | |||||||
| Floor | Ceiling | |||||||
First Quarter 2006 (Jan and Feb only) | 200 | $ | 42.00 | $ | 47.75 | |||
c - Actual results include the natural gas midstream segment from the date of the Cantera Acquisition in March 2005.
d - The natural gas midstream segment’s ethane and propane (revenues), crude oil (revenues) and natural gas (cost of gas purchased) hedging positions as of December 31, 2005, are summarized below:
| Average Volume Per Day | Weighted Average Price | ||||||
Ethane Swaps | (gallons | ) | (per gallon | ) | |||
First Quarter 2006 - Fourth Quarter 2006 | 68,800 | $ | 0.4770 | ||||
First Quarter 2007 - Fourth Quarter 2007 | 34,440 | $ | 0.5050 | ||||
First Quarter 2008 - Fourth Quarter 2008 | 34,440 | $ | 0.4700 | ||||
Propane Swaps | (gallons | ) | (per gallon | ) | |||
First Quarter 2006 - Fourth Quarter 2006 | 52,080 | $ | 0.7060 | ||||
First Quarter 2007 - Fourth Quarter 2007 | 26,040 | $ | 0.7550 | ||||
First Quarter 2008 - Fourth Quarter 2008 | 26,040 | $ | 0.7175 | ||||
Crude Oil Swaps | (Bbls | ) | (per Bbl | ) | |||
First Quarter 2006 - Fourth Quarter 2006 | 1,100 | $ | 44.45 | ||||
First Quarter 2007 - Fourth Quarter 2007 | 560 | $ | 50.80 | ||||
First Quarter 2008 - Fourth Quarter 2008 | 560 | $ | 49.27 | ||||
Natural Gas Swaps | (Mmbtu | ) | (per Mmbtu | ) | |||
First Quarter 2006 - Fourth Quarter 2006 | 7,500 | $ | 7.05 | ||||
First Quarter 2007 - Fourth Quarter 2008 | 4,000 | $ | 6.97 | ||||
e - The Company capitalizes a portion of interest expense incurred to recognize the carrying cost of certain unproved properties as required by accounting principles generally accepted in the United States.
f - Penn Virginia owns 39 percent of Penn Virginia Resource Partners, L.P. (PVR). Minority interest reflects the remaining 61 percent owned by parties other than Penn Virginia.
g - Deferred federal and state income taxes are expected to comprise approximately 60% to 70% of the Company's income tax expense for the full year.