-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TGIrhGfa5rbtJ/O2T+AkVHF+nv9YbUNz0OJ69/b8r6cek1cgqmoc6KQW4hKi0myQ hqTctRSAo6wPDu9MoIrT/g== 0000893220-97-000993.txt : 19970520 0000893220-97-000993.hdr.sgml : 19970520 ACCESSION NUMBER: 0000893220-97-000993 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PENN VIRGINIA CORP CENTRAL INDEX KEY: 0000077159 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 231184320 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00753 FILM NUMBER: 97609166 BUSINESS ADDRESS: STREET 1: 100 MATSONFORD ROAD SUITE 200 STREET 2: ONE RADNOR CORPORATE CENTER CITY: RADNOR STATE: PA ZIP: 19087 BUSINESS PHONE: 6106878900 MAIL ADDRESS: STREET 1: 800 BELLEVUE 200 S BROAD ST CITY: PHILADELPHIA STATE: PA ZIP: 19102 FORMER COMPANY: FORMER CONFORMED NAME: VIRGINIA COAL & IRON CO DATE OF NAME CHANGE: 19670501 10-Q 1 FORM 10-Q PENN VIRGINIA CORPORATION 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 - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Virginia 23-1184320 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 MATSONFORD ROAD SUITE 200 RADNOR, PA 19807 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (610) 687-8900 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - -------------------------------------------------------------------------------- (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 2 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
3 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. 1 4 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. 2 5 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. 3 6 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. 4 7 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 5 8 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. 6 9 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 ====== ======
7 10 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. 8 11 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 ========= ==========
9 12 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 10 13 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 11 14 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. 12 15 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 13 16 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: ---------------------------------- Steven Tholen, Vice President, CFO Principal Financial Officer Date: May 15, 1997 By: ---------------------------------- Ann Horton, Controller 14 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1997 MAR-31-1997 1,806 0 5,839 0 233 9,068 181,226 57,595 232,793 7,843 0 0 0 27,817 124,644 232,793 6,053 10,241 832 832 3,946 0 473 5,985 1,263 4,726 0 0 0 4,726 1.10 1.10
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