Our unaudited Condensed Consolidated Financial Statements include the accounts of Penn Virginia and all of our subsidiaries. Intercompany balances and transactions have been eliminated. Our Condensed Consolidated Financial Statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP"). Preparation of these statements involves 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 of our Condensed Consolidated Financial Statements have been included. Our Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and Notes included in our Annual Report on Form 10-K for the year ended December 31, 2012. Operating results for the three months ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013. Certain amounts for the 2012 period have been reclassified to conform to the current year presentation.

During the quarter ended March 31, 2013, we adopted Accounting Standards Update No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (“ASU 2013-02”). The disclosures required by ASU 2013-02 are included in Note 11. The adoption of ASU 2013-02 did not have a significant impact on our Condensed Consolidated Financial Statements and Notes.

Management has evaluated all activities of the Company, through the date upon which our Condensed Consolidated Financial Statements were issued, and concluded that, except for the transactions discussed below, no additional subsequent events have occurred that would require recognition in our Condensed Consolidated Financial Statements or disclosure in the Notes to the Condensed Consolidated Financial Statements.

Subsequent Events

The transactions described below occurred subsequent to the closing of our quarterly reporting period that ended on March 31, 2013 and will be recorded during the second quarter of 2013. Because these transactions are significant to us, we are providing disclosures required by U.S. GAAP.

On April 24, 2013 (the “Date of Acquisition”), we acquired producing properties and undeveloped leasehold interests in the Eagle Ford Shale play from Magnum Hunter Resources Corporation (“MHR”) for approximately $400 million (the “Acquisition”) consisting of approximately $360 million in cash and 10 million shares of our common stock (the “Shares”) with an effective date of January 1, 2013. See Note 11 for a description of the rights and obligations related to the Shares issued to MHR. The Acquisition includes approximately 40,600 gross (19,000 net) mineral acres located in Gonzales and Lavaca Counties, Texas in areas adjacent to our current position in both counties. The acquired assets also include working interests in 46 gross (22.1 net) producing wells. Based on MHR's third-party reserve engineering firm's year-end 2012 review of the acquired assets, proved reserves were approximately 12.0 million barrels of oil equivalent, 96 percent of which were oil and NGLs and 37 percent of which were proved developed.

We will account for the Acquisition by applying the acquisition method of accounting in the second quarter of 2012. The initial accounting for the Acquisition as presented below is based upon preliminary information and was not complete as of the date our Condensed Consolidated Financial Statements were issued. Accordingly, adjustments to the initial accounting for the acquired net assets will likely occur as we obtain additional information and complete a more detailed analysis regarding the facts and circumstances that existed as of the Date of Acquisition.

The following table represents the preliminary fair values of the net assets acquired at the Date of Acquisition:



Assets
Oil and gas properties - proved	$	247,709
Oil and gas properties - unproved	172,367
Other assets	15,100
	435,176
Liabilities
Accounts payable and accrued expenses	(31,000		)
Other liabilities	(1,500		)
	(32,500		)
Net asset acquired	$	402,676

The fair values of the net assets acquired were measured using valuation techniques that convert future cash flows to a single discounted amount. Significant inputs to valuation of oil and natural gas properties include estimates of: (i) reserves, (ii) future operating and development costs, (iii) future commodity prices, (iv) estimated future cash flows and (v) a market-based weighted-average cost of capital. Because many of these inputs are not observable, we have classified the initial fair value estimates as Level 3 inputs as that term is defined in U.S. GAAP.

The results of operations attributable to the Acquisition from the Date of Acquisition will be included in our Condensed Consolidated Financial Statements for the period ended June 30, 2013. The following table presents unaudited summary pro forma financial information for the year ended December 31, 2012 assuming the Acquisition occurred as of January 1, 2012. The pro forma financial information does not purport to represent what our results of operations would have been if the Acquisition had occurred as of this date or the results of operations for any future periods.



Total revenues	$	389,260
Net loss	$	(160,555	)
Loss per share - basic and diluted	$	(2.77	)

On April 11, 2013, we initiated a tender offer (the “Tender Offer”) for any and all of the total $300 million principal amount of our 10.375% Senior Notes due 2016 (the “2016 Senior Notes”). As of April 24, 2013, holders of approximately 58% of the $300 million total principal amount of the 2016 Senior Notes outstanding had tendered their 2016 Senior Notes. The total consideration payable for each $1,000 principal amount of those 2016 Senior Notes tendered by April 24, 2013, was $1,065.34, which included a consent payment of $30.00 per $1,000 principal amount of 2016 Senior Notes tendered. On April 25, 2013, we paid a total of approximately $191 million, including accrued interest of $6.5 million, for the 2016 Senior Notes tendered. On May 6, 2013, we made an irrevocable election to redeem (the "Redemption") on May 10, 2013 the remaining 42% of the 2016 Senior Notes outstanding in accordance with the 2016 Senior Notes indenture. We will pay a total of $1,061.31 per $1,000 principal amount of the 2016 Senior Notes in connection with the Redemption. We will recognize a loss on the extinguishment of debt of approximately $29 million in connection with the Tender Offer and the Redemption, which will be recorded in the second quarter of 2013.

On April 24, 2013, we completed a private placement of $775 million of 8.5% Senior Notes due 2020 Senior Notes (the “2020 Senior Notes”). The 2020 Senior Notes were priced at par and interest will be payable on June 15 and December 15 of each year. The 2020 Senior Notes are fully and unconditionally guaranteed by all of our material subsidiaries (the “Guarantor Subsidiaries”). Approximately $380 million of the net proceeds from the private placement, together with the Shares, were used to finance the Acquisition, including purchase price adjustments. The remaining net proceeds were used to pay down borrowings under the revolving credit facility (the “Revolver”) and to fund a portion of the Tender Offer and the Redemption.