Exhibit 99.1
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
TRANSACTION DESCRIPTION FOR THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
On June 7, 2010, certain indirect wholly owned subsidiaries of Penn Virginia Corporation (the “Company”) sold 8,827,429 common units representing its 22.6% limited partner interests in Penn Virginia GP Holdings, L.P. (“PVG”) in a secondary public offering for proceeds of approximately $139 million, net of offering costs (the “Offering”). In a related transaction also occurring on June 7, 2010, the Company disposed of a wholly-owned subsidiary that held the sole non-economic general partner interest in PVG and thereby relinquished control of PVG (the “GP Disposition” and together with the Offering, the “PVG Transaction”). The PVG Transaction represents the final portion of the divestiture of the Company’s interests in PVG. The Company will recognize a gain on the disposition of its interests in PVG resulting from the PVG Transaction and will deconsolidate the financial position and results of operations of PVG from its consolidated financial statements.
The following unaudited pro forma condensed consolidated financial statements and accompanying notes present the financial statements of the Company assuming the PVG Transaction occurred as of March 31, 2010 with respect to the balance sheet and as of January 1, 2007 with respect to the statements of income for the three months ended March 31, 2010 and the years ended December 31, 2009, 2008 and 2007.
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
As of March 31, 2010 | ||||||||||||
Historical | Pro Forma Adjustments | Pro Forma | ||||||||||
Assets | ||||||||||||
Current assets | ||||||||||||
Cash and cash equivalents | $ | 279,220 | $ | 111,151 | (a) | $ | 390,371 | |||||
Other current assets | 175,838 | (73,095 | )(b) | 102,743 | ||||||||
Total current assets | 455,058 | 38,056 | 493,114 | |||||||||
Property and equipment, net | 2,388,649 | (866,279 | )(c) | 1,522,370 | ||||||||
Other assets | 236,274 | (205,999 | )(c) | 30,275 | ||||||||
Total assets | $ | 3,079,981 | $ | (1,034,222 | ) | $ | 2,045,759 | |||||
Liabilities and shareholders’ equity | ||||||||||||
Current liabilities | $ | 255,582 | $ | (57,480 | )(d) | $ | 198,102 | |||||
Long-term debt of Penn Virginia Resource Partners, L.P. | 618,100 | (618,100 | )(c) | — | ||||||||
Long-term debt of Penn Virginia Corporation | 500,537 | — | 500,537 | |||||||||
Other liabilities | 336,012 | (27,371 | )(c) | 308,641 | ||||||||
Total liabilities | 1,710,231 | (702,951 | ) | 1,007,280 | ||||||||
Shareholders’ equity: | ||||||||||||
Common stock and additional paid-in capital | 659,415 | — | 659,415 | |||||||||
Retained earnings | 330,205 | 50,896 | (e) | 381,101 | ||||||||
Other | (2,037 | ) | — | (2,037 | ) | |||||||
Total Penn Virginia Corporation shareholders’ equity | 987,583 | 50,896 | 1,038,479 | |||||||||
Noncontrolling interests of subsidiaries | 382,167 | (382,167 | )(e) | — | ||||||||
Total shareholders’ equity | 1,369,750 | (331,271 | ) | 1,038,479 | ||||||||
Total liabilities and shareholders’ equity | $ | 3,079,981 | $ | (1,034,222 | ) | $ | 2,045,759 | |||||
See accompanying notes to unaudited pro forma condensed consolidated financial statements
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
For the Three Months Ended March 31, 2010 | ||||||||||||
Historical | Pro Forma Adjustments | Pro Forma | ||||||||||
Revenues | ||||||||||||
Natural gas, crude oil and natural gas liquids (NGLs) | $ | 66,700 | $ | — | $ | 66,700 | ||||||
Natural gas midstream | 151,764 | (151,764 | )(f) | — | ||||||||
Coal royalties | 28,226 | (28,226 | )(f) | — | ||||||||
Other | 8,821 | (7,643 | )(f) | 1,178 | ||||||||
Total revenues | 255,511 | (187,633 | ) | 67,878 | ||||||||
Expenses | ||||||||||||
Cost of midstream gas purchased | 123,660 | (123,660 | )(f) | — | ||||||||
Operating | 20,521 | (8,553 | )(f) | 11,968 | ||||||||
Exploration | 6,029 | — | 6,029 | |||||||||
Taxes other than income | 6,848 | (1,518 | )(f) | 5,330 | ||||||||
General and administrative | 23,291 | (9,326 | )(f) | 13,965 | ||||||||
Depreciation, depletion and amortization | 47,574 | (17,545 | )(f) | 30,029 | ||||||||
Loss on sale of assets | 465 | — | 465 | |||||||||
Total expenses | 228,388 | (160,602 | ) | 67,786 | ||||||||
Operating income | 27,123 | (27,031 | ) | 92 | ||||||||
Other income (expense) | ||||||||||||
Interest expense | (19,506 | ) | 5,835 | (f) | (13,671 | ) | ||||||
Derivatives and other | 23,882 | 7,241 | (f) | 31,123 | ||||||||
Income before income taxes and noncontrolling interests | 31,499 | (13,955 | ) | 17,544 | ||||||||
Income tax expense | (8,559 | ) | 1,781 | (g) | (6,778 | ) | ||||||
Net income | 22,940 | (12,174 | ) | 10,766 | ||||||||
Less net income attributable to noncontrolling interests | (9,346 | ) | 9,346 | (h) | — | |||||||
Income attributable to Penn Virginia Corporation | $ | 13,594 | $ | (2,828 | ) | $ | 10,766 | |||||
Earnings per share - basic and diluted: | ||||||||||||
Basic | $ | 0.30 | $ | 0.24 | ||||||||
Diluted | $ | 0.30 | $ | 0.24 | ||||||||
Weighted average shares outstanding, basic | 45,465 | 45,465 | ||||||||||
Weighted average shares outstanding, diluted | 45,761 | 45,761 |
See accompanying notes to unaudited pro forma condensed consolidated financial statements
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
For the Year Ended December 31, 2009 | ||||||||||||
Historical | Pro Forma Adjustments | Pro Forma | ||||||||||
Revenues | ||||||||||||
Natural gas, crude oil and natural gas liquids (NGLs) | $ | 228,659 | $ | — | $ | 228,659 | ||||||
Natural gas midstream | 428,016 | (428,016 | )(f) | — | ||||||||
Coal royalties | 120,435 | (120,435 | )(f) | — | ||||||||
Other | 38,027 | (31,480 | )(f) | 6,547 | ||||||||
Total revenues | 815,137 | (579,931 | ) | 235,206 | ||||||||
Expenses | ||||||||||||
Cost of midstream gas purchased | 333,854 | (333,854 | )(f) | — | ||||||||
Operating | 86,766 | (31,067 | )(f) | 55,699 | ||||||||
Exploration | 57,754 | — | 57,754 | |||||||||
Taxes other than income | 22,073 | (4,794 | )(f) | 17,279 | ||||||||
General and administrative | 80,000 | (32,545 | )(f) | 47,455 | ||||||||
Depreciation, depletion and amortization | 223,367 | (69,016 | )(f) | 154,351 | ||||||||
Impairments and loss on sale of assets | 109,525 | (1,511 | )(f) | 108,014 | ||||||||
Total expenses | 913,339 | (472,787 | ) | 440,552 | ||||||||
Operating loss | (98,202 | ) | (107,144 | ) | (205,346 | ) | ||||||
Other income (expense) | ||||||||||||
Interest expense | (68,884 | ) | 24,653 | (f) | (44,231 | ) | ||||||
Derivatives and other | 14,466 | 18,361 | (f) | 32,827 | ||||||||
Loss before income taxes and noncontrolling interests | (152,620 | ) | (64,130 | ) | (216,750 | ) | ||||||
Income tax benefit | 75,252 | 10,642 | (g) | 85,894 | ||||||||
Net loss | (77,368 | ) | (53,488 | ) | (130,856 | ) | ||||||
Less net income attributable to noncontrolling interests | (37,275 | ) | 37,275 | (h) | — | |||||||
Loss attributable to Penn Virginia Corporation | $ | (114,643 | ) | $ | (16,213 | ) | $ | (130,856 | ) | |||
Loss per share - basic and diluted: | ||||||||||||
Basic | $ | (2.62 | ) | $ | (2.99 | ) | ||||||
Diluted | $ | (2.62 | ) | $ | (2.99 | ) | ||||||
Weighted average shares outstanding, basic | 43,811 | 43,811 | ||||||||||
Weighted average shares outstanding, diluted | 43,811 | 43,811 |
See accompanying notes to unaudited pro forma condensed consolidated financial statements
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
For the Year Ended December 31, 2008 | ||||||||||||
Historical | Pro Forma Adjustments | Pro Forma | ||||||||||
Revenues | ||||||||||||
Natural gas, crude oil and natural gas liquids (NGLs) | $ | 436,622 | $ | — | $ | 436,622 | ||||||
Natural gas midstream | 589,783 | (589,783 | )(f) | — | ||||||||
Coal royalties | 122,834 | (122,834 | )(f) | — | ||||||||
Other | 71,612 | (38,744 | )(f) | 32,868 | ||||||||
Total revenues | 1,220,851 | (751,361 | ) | 469,490 | ||||||||
Expenses | ||||||||||||
Cost of midstream gas purchased | 484,621 | (484,621 | )(f) | — | ||||||||
Operating | 89,891 | (30,367 | )(f) | 59,524 | ||||||||
Exploration | 42,436 | — | 42,436 | |||||||||
Taxes other than income | 28,586 | (4,258 | )(f) | 24,328 | ||||||||
General and administrative | 74,494 | (28,976 | )(f) | 45,518 | ||||||||
Depreciation, depletion and amortization | 192,236 | (56,549 | )(f) | 135,687 | ||||||||
Impairments | 51,764 | (31,801 | )(f) | 19,963 | ||||||||
Total expenses | 964,028 | (636,572 | ) | 327,456 | ||||||||
Operating income | 256,823 | (114,789 | ) | 142,034 | ||||||||
Other income (expense) | ||||||||||||
Interest expense | (49,299 | ) | 24,672 | (f) | (24,627 | ) | ||||||
Derivatives and other | 45,916 | (14,098 | )(f) | 31,818 | ||||||||
Income before income taxes and noncontrolling interests | 253,440 | (104,215 | ) | 149,225 | ||||||||
Income tax expense | (71,920 | ) | 16,314 | (g) | (55,606 | ) | ||||||
Net income | 181,520 | (87,901 | ) | 93,619 | ||||||||
Less net income attributable to noncontrolling interests | (60,436 | ) | 60,436 | (h) | — | |||||||
Income attributable to Penn Virginia Corporation | $ | 121,084 | $ | (27,465 | ) | $ | 93,619 | |||||
Earnings per share - basic and diluted: | ||||||||||||
Basic | $ | 2.89 | $ | 2.24 | ||||||||
Diluted | $ | 2.87 | $ | 2.23 | ||||||||
Weighted average shares outstanding, basic | 41,760 | 41,760 | ||||||||||
Weighted average shares outstanding, diluted | 42,031 | 42,031 |
See accompanying notes to unaudited pro forma condensed consolidated financial statements
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(in thousands, except per share data)
For the Year Ended December 31, 2007 | ||||||||||||
Historical | Pro Forma Adjustments | Pro Forma | ||||||||||
Revenues | ||||||||||||
Natural gas, crude oil and natural gas liquids (NGLs) | $ | 290,286 | $ | — | $ | 290,286 | ||||||
Natural gas midstream | 433,174 | (433,174 | )(f) | — | ||||||||
Coal royalties | 94,140 | (94,140 | )(f) | — | ||||||||
Other | 35,350 | (22,131 | )(f) | 13,219 | ||||||||
Total revenues | 852,950 | (549,445 | ) | 303,505 | ||||||||
Expenses | ||||||||||||
Cost of midstream gas purchased | 343,293 | (343,293 | )(f) | — | ||||||||
Operating | 67,610 | (20,964 | )(f) | 46,646 | ||||||||
Exploration | 28,608 | — | 28,608 | |||||||||
Taxes other than income | 21,723 | (3,040 | )(f) | 18,683 | ||||||||
General and administrative | 66,983 | (25,393 | )(f) | 41,590 | ||||||||
Depreciation, depletion and amortization | 129,523 | (41,512 | )(f) | 88,011 | ||||||||
Impairments | 2,586 | — | 2,586 | |||||||||
Total expenses | 660,326 | (434,202 | ) | 226,124 | ||||||||
Operating income | 192,624 | (115,243 | ) | 77,381 | ||||||||
Other income (expense) | ||||||||||||
Interest expense | (37,851 | ) | 17,338 | (f) | (20,513 | ) | ||||||
Derivatives and other | (43,631 | ) | 43,329 | (f) | (302 | ) | ||||||
Income before income taxes and noncontrolling interests | 111,142 | (54,576 | ) | 56,566 | ||||||||
Income tax expense | (30,332 | ) | 9,103 | (g) | (21,229 | ) | ||||||
Net income | 80,810 | (45,473 | ) | 35,337 | ||||||||
Less net income attributable to noncontrolling interests | (30,319 | ) | 30,319 | (h) | — | |||||||
Income attributable to Penn Virginia Corporation | $ | 50,491 | $ | (15,154 | ) | $ | 35,337 | |||||
Earnings per share - basic and diluted: | ||||||||||||
Basic | $ | 1.32 | $ | 0.93 | ||||||||
Diluted | $ | 1.31 | $ | 0.92 | ||||||||
Weighted average shares outstanding, basic | 38,061 | 38,061 | ||||||||||
Weighted average shares outstanding, diluted | 38,358 | 38,358 |
See accompanying notes to unaudited pro forma condensed consolidated financial statements
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
1. | Basis of Presentation |
The accompanying unaudited pro forma condensed consolidated financial statements and explanatory notes present the financial statements of Penn Virginia Corporation and subsidiaries (the “Company”) assuming the PVG Transaction, as described in the Transaction Description preceding these pro forma financial statements, occurred as of March 31, 2010 with respect to the balance sheet and as of January 1, 2007 with respect to the statements of income for the three months ended March 31, 2010 and the years ended December 31, 2009, 2008 and 2007.
The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and do not purport to represent what the financial position or results of operations of the Company would have been had the PVG Transaction occurred on the dates noted above, or to project the financial position or results of operations of the Company for any future periods. The pro forma adjustments are based on available information and certain assumptions that management believes are reasonable. The pro forma adjustments are directly attributable to the PVG Transaction and are expected to have a continuing impact on the results of operations of the Company. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma financial statements have been made.
The unaudited pro forma condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes included in its Annual Report on Form 10-K for the year ended December 31, 2009 and its Quarterly Report on Form 10-Q for the three months ended March 31, 2010.
The following are descriptions of the columns included in the accompanying unaudited pro forma condensed consolidated financial statements:
Historical – Represents the historical condensed consolidated balance sheet of the Company as of March 31, 2010 and the historical condensed consolidated statements of income of the Company for the three months ended March 31, 2010 and the years ended December 31, 2009, 2008 and 2007.
Pro Forma Adjustments – Represents the adjustments to the historical condensed consolidated financial statements required to derive the pro forma financial position of the Company as of March 31, 2010, assuming the PVG Transaction occurred as of March 31, 2010 and the pro forma results of operations of the Company for the three months ended March 31, 2010 and the years ended December 31, 2009, 2008 and 2007, assuming the PVG Transaction occurred as of January 1, 2007.
2. | Pro Forma Adjustments |
Condensed Consolidated Balance Sheet
(a) | To record $139,120 of net cash proceeds received from the PVG Transaction (see (e) below) less $27,969 of cash balances attributable to PVG to be eliminated in connection with the related deconsolidation of PVG. |
(b) | To eliminate other current assets attributable to PVG and to convert $5,073 of intercompany accounts receivable from PVG to trade accounts receivable in connection with the deconsolidation of PVG. |
(c) | To eliminate the assets and liabilities attributable to PVG in connection with the deconsolidation of PVG. |
(d) | To (i) record an income tax liability of $27,405 payable in connection with the gain on the PVG Transaction (see (e) below), (ii) convert $625 of intercompany accounts payable to PVG to trade accounts payable and (iii) eliminate $85,510 of current liabilities attributable to PVG in connection with the deconsolidation of PVG. |
(e) | To record the gain on the PVG Transaction, net of taxes, as provided below, including the elimination of noncontrolling interests in PVG. |
Cash proceeds, net of offering costs (8,827,429 units x $15.76 per unit) | $ | 139,120 | ||
Carrying value of noncontrolling interests in PVG | 382,167 | |||
$ | 521,287 | |||
Carrying value of PVG assets and liabilities | (442,986 | ) | ||
Gain on disposition of PVG, before income taxes | $ | 78,301 | ||
Tax at statutory rate of 35% | (27,405 | ) | ||
Net gain on disposition of PVG | $ | 50,896 | ||
Condensed Consolidated Statements of Income
(f) | To eliminate the revenues and expenses attributable to the results of operations of PVG in connection with the deconsolidation of PVG. |
(g) | To eliminate the income taxes attributable to the results of operations of PVG, net of noncontrolling interests, at the effective rates in effect for the historical periods. As the Company owned less than 100% of PVG during the historical periods, the effective tax rates were based on the Company’s consolidated pre-tax income less noncontrolling interests attributable to PVG. |
(h) | To eliminate the deduction for net income attributable to noncontrolling interests which is associated with the noncontrolling interests in PVG. |