1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended March 31, 1997
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
------------------- --------------------
Commission File Number 0-753
PENN VIRGINIA CORPORATION
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(Exact name of registrant as specified in its charter)
Virginia 23-1184320
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 MATSONFORD ROAD SUITE 200
RADNOR, PA 19807
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(Address of principal executive offices) (Zip Code)
(610) 687-8900
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Number of shares of common stock of registrant
outstanding at May 7, 1997: 4,136,926
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PENN VIRGINIA CORPORATION
INDEX
PAGE
PART I Financial Information:
Item 1. Financial Statements
Condensed Consolidated Statements of Income for the three 1
months ended March 31, 1997 and 1996
Condensed Consolidated Balance Sheets as of March 31, 1997 and 2
December 31, 1996
Condensed Consolidated Statements of Cash Flows for the three 4
months ended March 31, 1997 and 1996
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition 6
and Results of Operations
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K 13
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PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three Months
Ended March 31,
-----------------------
1997 1996
-------- -------
(UNAUDITED)
REVENUES:
Timber $ 206 $ 74
Oil and condensate 227 167
Natural gas 5,620 5,362
Coal royalties 2,645 1,719
Natural gas royalties 520 546
Dividends 662 617
Other income 361 385
-------- -------
TOTAL REVENUES $ 10,241 $ 8,870
EXPENSES:
Operating expenses $ 832 $ 726
Exploration expenses 138 81
Taxes other than income 691 647
General and administrative 1,614 1,695
Depreciation, depletion, amortization 1,503 1,626
-------- -------
TOTAL EXPENSES $ 4,778 $ 4,775
OPERATING INCOME $ 5,463 $ 4,095
OTHER (INCOME) EXPENSE:
Interest expense $ 473 $ 274
Gain on sale of property (7) (17)
Other income (992) (809)
-------- -------
Income before income tax $ 5,989 $ 4,647
Income tax expense 1,263 390
-------- -------
NET INCOME $ 4,726 $ 4,257
======== =======
NET INCOME PER SHARE, PRIMARY 1.10 1.00
======== =======
WEIGHTED AVERAGE SHARES OUTSTANDING (IN THOUSANDS) 4,310 4,265
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
March 31, December 31,
--------- ---------
1997 1996
--------- ---------
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,806 $ 1,893
Accounts receivable 4,417 4,856
Current portion of long-term notes receivable 1,422 1,512
Current deferred income taxes 776 766
Recoverable income taxes 199 871
Inventories 233 218
Prepaid expenses 215 210
--------- ---------
TOTAL CURRENT ASSETS 9,068 10,336
--------- ---------
Investments 93,987 97,368
Long-term notes receivable 5,312 5,720
Oil and gas properties; wells and equipment, using the
successful efforts method of accounting 139,034 138,184
Other property, plant and equipment 42,192 33,218
Less: Accumulated depreciation, depletion and amortization (57,595) (56,110)
--------- ---------
TOTAL PROPERTY, PLANT AND EQUIPMENT 123,631 115,292
--------- ---------
Intangible assets, net of amortization 512 498
Other assets 283 300
TOTAL ASSETS $ 232,793 $ 229,514
========= =========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
March 31, December 31,
-------------- -------------
1997 1996
-------------- -------------
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current installments on long-term debt $ 2,025 $ 2,025
Accounts payable 1,408 1,812
Accrued expenses 4,030 5,543
Deferred liabilities 279 279
Taxes on income 101 8
-------------- -------------
TOTAL CURRENT LIABILITIES 7,843 9,667
-------------- -------------
Other liabilities 5,336 5,366
Deferred income taxes 32,255 32,859
Long-term debt 34,723 21,233
Minority interest 175 178
-------------- -------------
TOTAL LIABILITIES 80,332 69,303
-------------- -------------
Commitments and contingencies - -
SHAREHOLDERS' EQUITY
Preferred stock of $100 par value-
authorized 100,000 shares; none issued
Common stock of $6.25 par value-
authorized 8,000,000 shares, issued 4,450,717
shares and 4,450,717 shares in 1997 and 1996, respectively 27,817 27,817
Other paid in capital 36,154 36,138
Retained earnings 46,106 43,240
-------------- -------------
110,077 107,195
Less: 319,423 shares in 1997 and 109,477 in 1996
of common stock held in treasury, at cost 14,286 5,575
Pension liability 774 774
Unearned compensation - ESOP 1,800 1,850
Add: Net unrealized investment holding gain 59,244 61,215
-------------- -------------
TOTAL SHAREHOLDERS' EQUITY 152,461 160,211
-------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 232,793 $ 229,514
============== =============
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS
(DOLLARS IN THOUSANDS)
Three Months
Ended March 31,
-----------------------
1997 1996
-------- -------
(UNAUDITED)
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income $ 4,726 $ 4,257
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, and amortization 1,503 1,626
Gain on sale of property, plant and equipment (7) (17)
Deferred income taxes 457 (709)
Other (702) (517)
Decrease in current assets 420 510
Increase (Decrease) in current liabilities (1,152) 19
(Increase) Decrease in other assets (15) 1
Increase (Decrease) in other liabilities (30) 358
Decrease in minority interest (4) (4)
-------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 5,196 $ 5,524
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the sale of securities $ 350 $ --
Proceeds from notes 1,230 1,348
Proceeds from sale of fixed assets 26 20
Capital expenditures (9,855) (73)
-------- -------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES $ (8,249) $ 1,295
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid $ (1,859) $(1,918)
Proceeds from long-term debt borrowings 16,013 0
Repayment of long-term debt principal (2,542) (3,950)
Purchase of treasury stock (8,662) 0
Issuance of stock 16 323
-------- -------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES $ 2,966 $(5,545)
-------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ (87) $ 1,274
CASH AND CASH EQUIVALENTS-BEGINNING BALANCE 1,893 2,993
-------- -------
CASH AND CASH EQUIVALENTS-ENDING BALANCE $ 1,806 $ 4,267
======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid to date for:
Interest $ 412 $ 123
Income taxes 198 833
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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PENN VIRGINIA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(1) ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements of Penn
Virginia Corporation and its subsidiaries (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
reporting and SEC regulations. These statements involve the use of estimates and
judgments where appropriate. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. These financial statements should be read in
conjunction with the Company's consolidated financial statements and footnotes
included in the Company's December 31, 1996 annual report on Form 10-K.
Operating results for the three months ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997.
(2) SECURITIES
The cost, gross unrealized holding gains or losses and market value for
available-for-sale securities at March 31, 1997 were as follows:
Gross Unrealized Market
Cost Holding Gain (loss) Value
-------------- -------------- ------------
Available-for-sale:
Norfolk Southern Corporation $ 2,839 $ 91,141 $ 93,980
Blue Diamond Coal Company 3 4 7
-------------- -------------- ------------
$ 2,842 $ 91,145 $ 93,987
(3) ACQUISITIONS
In January 1997, the Company acquired a property in Virginia consisting
of 6,500 acres and the mining rights to an additional 13,100 acres. The property
contains an estimated 10.5 million recoverable tons of high quality
metallurgical and steam coal. Production from the property is ongoing at an
annual rate of approximately 1.2 million tons. The purchase price of this
property was approximately $7.0 million.
In February 1997, Penn Virginia acquired approximately 7.5 million tons
of recoverable coal on approximately 4,700 acres adjacent to the Company's
Kentucky properties. The coal is high quality, low sulfur coal suitable for the
steam market. Production from the property is anticipated to begin in 1998. The
purchase price of this property was approximately $1.9 million.
(4) LEGAL
The Company is involved in various legal proceedings arising in the
ordinary course of business. While the ultimate results of these cannot be
predicted with certainty, Company management believes these claims will not have
a material effect on the Company's financial position, liquidity or operations.
(5) INCOME TAXES
The Company accounts for income taxes using the Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes." SFAS No. 109
utilizes the liability method and deferred taxes are determined based on the
estimated future tax effects of differences between the financial statement and
tax bases of assets
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and liabilities given the provisions of the enacted tax laws.
Income taxes for the interim periods have been provided using the
estimated annualized effective tax rate.
(6) EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share" which establishes new standards for computing and presenting earnings per
share. The provisions of the statement are effective for fiscal years ending
after December 15, 1997. If the provisions of SFAS No. 128 had been adopted in
the first quarter of 1997 and 1996, basic and diluted earnings per share would
not have been materially different from primary and fully diluted earnings per
share, respectively, as calculated in accordance with Accounting Principles
Board Opinion No. 15 "Earnings per Share."
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Penn Virginia reported 1997 first quarter earnings of $4.7 million or
$1.10 per share compared with $4.3 million or $1.00 per share for the first
quarter of 1996. On a consolidated basis, revenues increased $1.4 million,
primarily as a result of production increases in the coal segment and price
increases in the oil and gas segment. Operating expenses for the first quarter
of 1997 remained flat compared with the first quarter of 1996. Interest expense
increased from $0.3 million in the first quarter of 1996 to $0.5 million in the
first quarter of 1997 as a result of increases in bank borrowings under the
credit facility for first quarter primarily due to the completion of two coal
acquisitions and the purchase of treasury stock. Income taxes increased from
$0.4 million in the first quarter of 1996 to $1.3 million in the first quarter
of 1997 due to an increase of income before income tax and a change in the
Company's estimated annual effective tax rate from approximately 8 percent in
1996 to 21 percent in 1997.
In the first quarter of 1997 Penn Virginia sold 750,000 shares of
Westmoreland Coal Company Stock. The sale had no significant effect on 1997
earnings as the Company impaired its investment in Westmoreland stock in 1996.
The Company operates in two business segments: coal and oil and gas. The
coal segment includes Penn Virginia's mineral rights to coal reserves, its
timber assets and land assets. The oil and gas segment explores for, develops
and produces crude oil and natural gas in western Virginia, southern West
Virginia and eastern Kentucky. The Company also owns mineral rights to oil and
gas reserves. Selected operating and financial data by segment is presented
below.
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OIL AND GAS
Operating income for the oil and gas segment was $2.9 million for the first
quarter of 1997 compared with $3.0 million for the first quarter of 1996.
Operational and financial data for the Company's oil and gas segment for the
1997 and 1996 first quarter is summarized in the following tables:
OPERATIONS SUMMARY
Three Months
Ended March 31,
----------------------------------
1997 1996
PRODUCTION ----------- ---------
Natural gas (MMcf)-Working Interest 1,735 1,697
Natural gas (MMcf)-Royalty Interest 146 166
Oil and condensate (MBbls) 11 10
Production, MMcfe 1,947 1,923
AVERAGE REALIZED PRICES
Natural gas ($/Mcf)- Working Interest $ 3.24 $ 3.16
Natural gas ($/Mcf)- Royalty Interest 3.56 3.29
Oil and condensate ($/Bbl) 20.64 16.70
AVERAGE COSTS (PER MMCFE)
Lease operating $ 0.40 $ 0.36
Exploration expenses 0.04 0.03
Taxes other than on income 0.33 0.28
General and administrative 0.33 0.30
Depreciation, depletion and amortization 0.70 0.83
FINANCIAL SUMMARY
Three Months
Ended March 31,
1997 1996
------- ------
(Dollars in thousands)
(UNAUDITED)
REVENUES:
Natural gas sales $ 5,620 $ 5,362
Oil and gas royalties 520 546
Oil and condensate 227 167
Other income 76 350
------ ------
TOTAL REVENUES $ 6,443 $ 6,425
====== ======
EXPENSES:
Operating expenses $ 787 $ 700
Exploration expenses 84 61
Taxes other than income 636 542
General and administrative 636 581
Depreciation and depletion 1,360 1,587
------ ------
TOTAL EXPENSES 3,503 3,471
------ ------
OPERATING INCOME $ 2,940 $ 2,954
====== ======
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NATURAL GAS SALES. Natural gas sales increased $0.3 million (5 percent) in the
first quarter of 1997 compared with the same period of 1996. Natural gas prices
reflected a modest increase in the first quarter of 1997 compared with the first
quarter of 1996. The average price received by the Company for its working
interest gas was $3.24 per thousand cubic feet (Mcf) compared with $3.16 per Mcf
for the same period of 1996. Gas volume was slightly up in the first quarter of
1997 compared with the first quarter of 1996.
OIL AND CONDENSATE SALES. Oil sales increased $60,000 (36 percent) in the first
quarter of 1997 compared with the same period of 1996. Prices per barrel were
higher, averaging $20.64 per barrel (Bbl) for 1997 compared with $16.70 per Bbl
for 1996. As shown on the table above, production was up slightly for the first
quarter of 1997 compared with the first quarter of 1996.
OIL AND GAS ROYALTIES. Oil and gas royalties decreased $26,000 (5 percent) in
the first quarter of 1997 compared with the same period of 1996. This variance
resulted from a decrease in volume of 20 million cubic feet (MMcf) offset by an
upturn in average prices from $3.29 per Mcf in the first quarter 1996 to $3.56
per Mcf in the first quarter 1997.
OTHER INCOME. Other income decreased $274,000 (78 percent) in the first quarter
of 1997 compared with the same period of 1996. In the first quarter of 1996
financial results, the Company had recognized an additional $189,000 related to
the Company's natural gas contract claim settlement against Columbia Gas
Transmission Company. This settlement was disclosed in 1995.
OPERATING EXPENSES. Operating expenses for the first quarter of 1997 were
$787,000, which is an increase of $87,000 (12 percent) compared with the first
quarter of 1996. On an MMcfe basis, operating expenses increased slightly from
$0.36 cents in 1996 to $0.40 cents in 1997. This increase is largely a result of
increased gathering rates on the Columbia and CNG gas systems.
EXPLORATION EXPENSES. Exploration expenses for the first quarter of 1997 were
$84,000 compared with $61,000 in the first quarter of 1996. This 38 percent
increase is a result of increased geological evaluations on certain properties.
TAXES OTHER THAN ON INCOME. Taxes other than on income increased $94,000 (17
percent) in the first quarter of 1997 compared to the same period in 1996.
Severance and ad valorem taxes represented a portion of the increase, which is a
function of the increase in the sales revenue received for the Company's natural
gas and oil. Additional payroll taxes related to increased salaries also
contributed to the variance. Another factor was an increase in business
franchise tax accruals for West Virginia and Tennessee.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
$55,000 (9 percent) in the first quarter of 1997 compared with the same period
in 1996. Salary increases and related employee benefits were the primary factors
related to the increase.
DEPRECIATION AND DEPLETION. Depreciation and depletion expense decreased
$227,000 (14 percent) from $1,587,000 in the first quarter of 1996 to $1,360,000
in the first quarter 1997. Increases in reserve estimates at December 31, 1996
have resulted in favorable declines in depletion rates in various fields. The
rate decreased from $0.83 per MMcfe in the first quarter of 1996 to $0.70 per
MMcfe in the first quarter of 1997.
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COAL
Operating income for the coal segment was $2.6 million for the first quarter of
1997 compared with $1.4 million for the first quarter of 1996. Operational and
financial data for the Company's coal segment for the 1997 and 1996 first
quarter is summarized in the following tables:
OPERATIONS SUMMARY
Three Months
Ended March 31,
--------------------------------
1997 1996
PRODUCTION ---------- -----------
Timber (Mbf) 829 465
Coal tons (000's) 1,173 790
AVERAGE REALIZED PRICES
Timber ($/Mbf) $ 220 $ 142
Coal royalties ($/ton) 2.25 2.18
AVERAGE COSTS (PER TON)
Lease operating $ 0.04 $ 0.03
Exploration expenses 0.05 0.02
Taxes other than on income 0.01 0.09
General and administrative 0.29 0.40
Depreciation, depletion and amortization 0.10 0.04
FINANCIAL SUMMARY
Three Months
Ended March 31,
--------------------------------
1997 1996
--------- ------------
(Dollars in thousands)
(UNAUDITED)
REVENUES:
Coal royalties $ 2,645 $ 1,719
Timber sales 206 74
Other income 285 35
--------- ---------
TOTAL REVENUES 3,136 1,828
--------- ---------
EXPENSES:
Operating expenses 44 26
Exploration expenses 54 20
Taxes other than income 11 71
General and administrative 345 315
Depreciation and depletion 118 31
--------- ---------
TOTAL EXPENSES 572 463
--------- ---------
OPERATING INCOME $ 2,564 $ 1,365
========= ==========
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COAL ROYALTIES. Coal royalties increased $0.9 million (54 percent) in the first
quarter of 1997 compared with the same period in 1996. This increase is
primarily due to the gradual restoration of the Virginia property to its former
levels of production and production from the Company's Buchanan property
acquired in January, 1997. The average realization per ton increased from $2.18
in the first quarter of 1996 to $2.25 in the first quarter of 1997.
TIMBER SALES. Timber sales increased $132,000 (178 percent) in the first quarter
of 1997 compared with the same period of 1996. Volume sold increased to 829 Mbf
in the first quarter of 1997 compared with 465 Mbf in the first quarter of 1996
primarily due to timber harvested from the Company's Bull Creek property
acquired in July, 1996. The average realized prices also increased from $142 per
Mbf in the first quarter of 1996 to $220 per Mbf in the first quarter of 1997.
OTHER INCOME. Other income increased $0.2 million (714 percent) for the first
quarter of 1997 compared with the first quarter of 1996. This increase is
primarily related to bonuses paid by new lessees to secure leases on the
Company's Virginia coal properties.
OPERATING EXPENSES. Operating expenses increased $18,000 (69 percent) from
$26,000 in the first quarter of 1996 to $44,000 in the first quarter of 1997 due
to a change in the method of selling timber. The Company has contracted the
harvesting of some of its timber and has negotiated the sale of timber products
directly with the mill. This sales method has the effect of increasing both the
reserve per Mbf and the operating costs.
EXPLORATION EXPENSES. Exploration expenses increased $34,000 (170 percent) from
$20,000 in the first quarter of 1996 to $54,000 in the first quarter of 1997.
This increase resulted from an earlier start of the Company's coal core drilling
program due to milder winter weather conditions.
TAXES OTHER THAN INCOME. Taxes other than on income decreased $60,000 (85
percent) from $71,000 in the first quarter of 1996 to $11,000 in the first
quarter of 1997. This decrease is a result of adjustments to property tax
accruals. Without the accrual adjustment, property taxes would have been
$65,000.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
$30,000 (10 percent) in the first quarter of 1997 compared with the same period
of 1996. These increases are primarily related to salary increases and related
employee benefits.
DEPRECIATION AND DEPLETION. Depreciation and depletion increased $87,000 (281
percent) from $31,000 in the first quarter of 1996 to $118,000 in the first
quarter of 1997. The depletion rate per ton increased from $0.04 to $0.10. This
increase was due to the production of higher cost reserves due, in part, to
amounts paid to the Westmoreland Coal Company for the relinquishment of coal
reserves and production from the Buchanan coal property acquired in January,
1997.
CAPITAL EXPENDITURES, CAPITAL RESOURCES AND LIQUIDITY
CAPITAL EXPENDITURES.
In the first quarter of 1997, capital expenditures totaled $9,855,000 compared
with $73,000 in the first quarter of 1996. The Company successfully completed
two coal reserve acquisitions in the first quarter of 1997. In January, a
transaction was completed for a property in Virginia. The Company acquired 10.5
million tons of high quality metallurgical coal reserves which have been leased
to an operator and which are actively being mined and sold under contract by the
operator. The purchase price was approximately $7.0 million. In February, the
Company acquired 7.5 million tons of coal contiguous to its existing Virginia
reserves for approximately $1.9 million. The reserves have been leased to an
operator. The Company expects the operator to begin production in 1998.
The remainder of the capital expenditures have been in the oil and gas segment,
as drilling of the budgeted development and exploration wells is underway. At
the end of the first quarter of 1997, approximately $0.9 million
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had been spent in this segment to begin the drilling and completion of 7.5 net
development and 2.5 net exploratory wells. The Company expects to drill over 60
wells in 1997, with approximately 15 to 20 wells in exploratory areas.
CAPITAL RESOURCES AND LIQUIDITY.
Net cash provided by operating activities was $5.2 million in the first quarter
of 1997 compared with $5.5 million in the first quarter of 1996. The Company's
borrowings increased from $23.2 million the end of 1996 to $36.7 million at
March 31, 1997. This combination provided the Company with the cash necessary to
complete two coal acquisitions in January and February, pay a quarterly dividend
of $0.45 per share and also to acquire $8.7 million (210,308 shares) of treasury
stock. The Company purchased the 210,308 shares when Interkohle
Beteiligungsgesellschaft mbH (VEBA) sold its approximate twenty percent holding
of Penn Virginia's outstanding common stock. The VEBA shares were broadly
distributed to various financial institutions and mutual funds. The Board of
Directors and senior management also participated in the purchase.
The Company has entered into three fixed-price term contracts with respect to a
portion of its natural gas production to limit exposure to price fluctuations.
Presently, the Company has sold approximately 13,000 net Mcf per day at a
weighted average price in excess of $2.50 per Mcf. These physical sales cover
various periods from February 1997 to December 1997. Additionally, the Company
entered into a natural gas derivative transaction in April. The financial
instruments executed provide a price floor to limit downside price risk and a
market participation price that allows the Company to receive the benefit of a
price upturn. The financial transaction is for 5,000 MMBtu per day with a floor
of approximately $2.10 per MMBtu and market re-opener at $2.48 per MMBtu with a
term from May 1997 through October 1999.
FORWARD-LOOKING STATEMENTS.
Statements included in this report which are not historical facts (including any
statements concerning plans and objectives of management for future operations
or economic performance, or assumptions related thereto) are forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and Section 27A of the Securities Act of 1933, as amended. In
addition, Penn Virginia and its representatives may from time to time make other
oral or written statements which are also forward-looking statements.
Such forward-looking statements include, among other things, statements
regarding development activities, capital expenditures, acquisitions and
dispositions, drilling and exploration programs, expected commencement dates of
coal mining or oil and gas production, projected quantities of future oil and
gas production by Penn Virginia, projected quantities of future coal production
by the Company's lessees producing coal from reserves leased from Penn Virginia,
costs and expenditures as well as projected demand or supply for coal and oil
and gas, which will affect sales levels, prices and royalties realized by Penn
Virginia.
These forward-looking statements are made based upon management's
current plans, expectations, estimates, assumptions and beliefs concerning
future events impacting Penn Virginia and therefore involve a number of risks
and uncertainties. Penn Virginia cautions that forward-looking statements are
not guarantees and that actual results could differ materially from those
expressed or implied in the forward-looking statements.
Important factors that could cause the actual results of operations or
financial condition of Penn Virginia to differ include, but are not necessarily
limited to: the cost of finding and successfully developing oil and gas
reserves; the cost of finding new coal reserves; the ability to acquire new oil
and gas and coal reserves on satisfactory terms; the price for which such
reserves can be sold; the volatility of commodity prices for oil and gas and
coal; the risks associated with having or not having price risk management
programs; Penn Virginia's ability to lease new and existing coal reserves; the
ability of Penn Virginia's lessees to produce sufficient quantities of coal on
an economic basis from Penn Virginia's reserves; the ability of lessees to
obtain favorable contracts for coal produced from Penn Virginia reserves; Penn
Virginia's ability to obtain adequate pipeline transportation capacity for its
oil and gas production; competition among producers in the coal and oil and gas
industries generally and in the Appalachian Basin in particular; the extent to
which the amount and quality of actual production differs from estimated
recoverable coal reserves and proved oil and gas reserves; unanticipated
geological problems; availability of required materials and equipment; the
occurrence of unusual weather or operating conditions including force
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majeure or events; the failure of equipment or processes to operate in
accordance with specifications or expectations; delays in anticipated start-up
dates; environmental risks affecting the drilling and producing of oil and gas
wells or the mining of coal reserves; the timing of receipt of necessary
governmental permits; labor relations and costs; 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; risks and uncertainties
relating to general domestic and international economic (including inflation and
interest rates) and political conditions; the experience and financial condition
of lessees of coal reserves, joint venture partners and purchasers of reserves
in transactions financed by Penn Virginia, including their ability to satisfy
their royalty, environmental, reclamation and other obligations to Penn Virginia
and others; changes in financial market conditions; changes in the market prices
or value of the marketable securities owned by Penn Virginia, including the
price of Norfolk Southern common stock and other risk factors detailed in Penn
Virginia's Securities and Exchange commission filings. Many of such factors are
beyond Penn Virginia's ability to control or predict. Readers are cautioned not
to put undue reliance on forward-looking statements.
While Penn Virginia periodically reassesses material trends and
uncertainties affecting Penn Virginia's results of operations and financial
condition in connection with the preparation of Management's Discussion and
Analysis of Results of Operations and Financial Condition and certain other
sections contained in Penn Virginia's quarterly, annual or other reports filed
with the Securities and Exchange Commission, Penn Virginia does not intend to
publicly review or update any particular forward-looking statement, whether as a
result of new information, future events or otherwise.
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PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the quarter ended March 31, 1997
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
PENN VIRGINIA CORPORATION
Date: May 15, 1997 By:
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Steven Tholen, Vice President, CFO
Principal Financial Officer
Date: May 15, 1997 By:
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Ann Horton, Controller
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