EX-99 2 dex99.htm PRESS RELEASE Press Release

Exhibit 99

 

Penn Virginia Corporation

Three Radnor Corporate Center, Suite 230, 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 2004 THIRD QUARTER

RESULTS AND 2004 GUIDANCE UPDATE

 

RADNOR, PA (PR Newswire) November 3, 2004 – Penn Virginia Corporation (NYSE: PVA) today announced its results for the three months ended September 30, 2004. Net income was $6.4 million, or $0.35 per diluted share, for the third quarter of 2004, which represents a 19 percent increase over the $5.4 million, or $0.30 per diluted share, reported for last year’s third quarter. The higher earnings were primarily the result of higher prices for natural gas, crude oil and coal.

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
  
     2004
    2003
    %
Change
     2004
    2003
    %
Change
  

Revenues, in millions

    $ 52.7    $ 42.0    25 %   $ 162.9    $ 133.7    22 %

Net income (1), in millions

    $ 6.4    $ 5.4    19 %   $ 28.7    $ 22.3    29 %

Net income per share, diluted

    $ 0.35    $ 0.30    17 %   $ 1.55    $ 1.24    25 %

Net cash provided by operating activities, in millions

    $ 41.6    $ 22.9    82 %   $ 100.2    $ 70.9    41 %

Operating cash flow, non-GAAP (2), in millions

    $ 38.0    $ 27.9    36 %   $ 108.7    $ 82.3    32 %
(1) Included in net income for the nine months ended September 30, 2003 is a gain of $1.4 million, or $0.08 per diluted share, related to the adoption of Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations.”
(2) See attached table “Reconciliation of Certain Non-GAAP Financial Measures” for a reconciliation of operating cash flow to net cash provided by operating activities.

 

Oil and Gas Segment Review

 

See the Company’s October 27, 2004 news release for a more detailed discussion of operating results for the oil and gas segment. Oil and gas operating income for the third quarter of 2004 was $9.4 million, up three percent from the $9.1 million reported for the same quarter of 2003. Highlights of quarter-to-quarter comparisons are as follows:

 

• Oil and gas revenues increased by 14 percent to $33.0 million from $29.0 million in the third quarter of 2003. Increased crude oil and natural gas realized prices, partially offset by a decline in crude oil production, accounted for most of the $4.0 million increase. The average realized sale price for natural gas in the third quarter of 2004 was $5.85 per thousand cubic feet (Mcf), an increase of 19 percent from

$4.93 per Mcf realized in 2003’s corresponding period. PVA realized $34.55 per barrel for its oil production, up 39 percent from $24.87 per barrel in 2003’s third quarter. The Company produced 5.6 billion cubic feet of natural gas equivalent (Bcfe), a seven percent decrease from 6.0 Bcfe in the third quarter of 2003. The decrease was due primarily to pipeline curtailments reducing production in the Company’s Appalachian operating areas.

 

• Total oil and gas segment expenses increased by 18 percent to $23.6 million compared to $20.0 million in the third quarter of 2003. The increase was primarily related to higher exploration expenses.

 

  • Exploration expenses increased to $7.5 million in the third quarter of 2004 from $3.7 million in the third quarter of 2003 primarily due to higher dry hole costs resulting from drilling three unsuccessful exploratory wells in the Gulf Coast region.

 

  • Depreciation, depletion, and amortization (DD&A) expense decreased to $8.3 million in the third quarter of 2004 from $8.6 million in the third quarter of 2003. The lower DD&A expense was the result of lower production volumes, partially offset by higher average depletion rates. The DD&A rate increased to $1.47 per Mcfe produced in third quarter 2004 from $1.42 per Mcfe produced in 2003’s third quarter due to a greater percentage of production coming from relatively higher cost horizontal coalbed methane (CBM) and Gulf Coast wells.

 

Oil and gas segment capital expenditures for the third quarter of 2004 totaled $38.6 million including $28.8 million to drill 41 (21.8 net) development and exploration wells, $9.0 million for lease acquisition and field projects, and $0.8 million for the acquisition of seismic data and other. Oil and gas segment capital expenditures for 2004 are now expected to be between $125 and $130 million. See the Guidance Table included in this release for additional information regarding 2004 capital expenditures.

 

Coal Royalty and Land Management Segment Review (Penn Virginia Resource Partners, L.P. – NYSE: PVR)

 

Third quarter 2004 segment operating income was a record $10.5 million, or 64 percent higher than the $6.4 million reported in the third quarter of 2003. Primary reasons for the improved operating results were as follows:

 

• Coal royalty revenues were a record $18.0 million in the third quarter of 2004, a 50 percent increase over $12.0 million in the third quarter of 2003, due to increased tonnage mined on PVR’s properties and higher average royalties per ton. Coal production from PVR’s properties in the third quarter of 2004 was a record 8.0 million tons, a 29 percent increase over the 6.2 million tons produced in the third quarter of 2003. Significant increases in production from three leases on PVR’s Coal River property in West Virginia were the primary contributors. Average royalties per ton increased 18 percent to $2.26 in the third quarter of 2004 compared to $1.92 in the same quarter of 2003. The increase in average royalties per ton was primarily due to stronger market conditions for coal resulting in higher prices for coal sold by lessees and a greater percentage of production from certain price-sensitive leases.

 

• Other revenues increased to $1.4 million in the third quarter of 2004 compared to $0.9 million in the third quarter of 2003. The increase was primarily due to the start-up operations at two of PVR’s coal loading facilities in July 2003 and February 2004. Both facilities are located on PVR’s Coal River property.

• Operating expenses increased to $1.8 million in the third quarter of 2004 from $0.7 million in the third quarter of 2003, primarily as a result of increased production from certain properties subleased from third parties by PVR.

 

• DD&A expense increased to $4.8 million in the third quarter of 2004 from $3.7 million in the third quarter of 2003, primarily as a result of increased coal production.

 

Effective July 1, 2004, PVR acquired a 50 percent interest in a joint venture formed with Massey Energy Company (NYSE:MEE) to own and operate end-user coal handling facilities. The purchase price to PVR was $28.4 million and was funded through PVR’s credit facility.

 

PVR recently announced that it will pay a $0.54 per unit quarterly cash distribution (an annualized rate of $2.16) on November 12, 2004, to unit holders of record as of November 3, 2004.

 

Capital Resources

 

At September 30, 2004, Penn Virginia had borrowed $73 million under its $150 million credit facility, which is expandable to $200 million at the Company’s option. PVR’s outstanding borrowings as of September 30, 2004 were $117.9 million, including $4.8 million of senior unsecured notes classified as current portion of long-term debt. The Company’s ratio of net debt to net debt plus shareholders’ equity was 44 percent as of September 30, 2004, a slight increase from 42 percent at December 31, 2003. Including the minority interest in PVR as equity, the ratio as of September 30, 2004 was 30 percent compared to 28 percent at December 31, 2003.

 

Management Comment

 

Commenting on the quarter and the year to date, A. James Dearlove, Penn Virginia President and CEO, said “Both segments of Penn Virginia’s business have benefited from the current energy price environment. Through the third quarter oil and gas production is up only slightly over 2003 due primarily to the pipeline curtailments in the East, which ended November 1, and delays in drilling some of the wells in this year’s Gulf Coast program. However, as discussed elsewhere in this release, net income and cash flow for 2004 are well ahead of the same period in 2003. The horizontal CBM program, the Cotton Valley project in East Texas and the Mississippi development drilling effort all continue to produce very positive results. With the Appalachian curtailment behind us, we expect production to increase in the fourth quarter and as we enter 2005. Although we have drilled some dry holes in our exploration program this year, we remain very encouraged by our overall long term success, and especially by the number of prospects being generated as we evaluate the 3D seismic data purchased in 2003 and 2004.

 

Penn Virginia Resource Partners, PVR, is benefiting from the strong coal market conditions, particularly in the east. Our lessees are exceeding their estimated production levels which, coupled with the higher coal royalty realizations per ton, has resulted in record levels of revenue and operating income for PVR. As a result of the continued strength in the coal market, we have raised our guidance levels for coal production, revenues and royalties. The high prices of oil and natural gas as well as the difficulty of bringing large new supplies of coal quickly to market indicate that coal prices should stay strong in 2005. We continue to look for opportunities to grow PVR through accretive acquisitions of coal reserves and coal infrastructure projects, as evidenced by our recently announced joint venture with Massey Energy (NYSE: MEE), and we continue to evaluate midstream oil and gas opportunities.”

Guidance Update for 2004

 

See the 2004 Guidance Table included in this release for additional guidance estimates for the fourth quarter and full year 2004.

 

Conference Call

 

A conference call and webcast, at which management will discuss results and outlook for 2004, is scheduled for Thursday, November 4, 2004 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. You can also participate 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 November 5, 2004 at 11:59 p.m. EST by dialing 1-877-660-6853. Replay passcodes: Account number 1628 and Conference number 122045. An on-demand replay of the call will also be available at the Company’s website for 14 days beginning shortly after the call.

 

******

 

Penn Virginia Corporation (NYSE: PVA) is an energy company engaged in the exploration, acquisition, development and production of crude oil and natural gas. Through its ownership in Penn Virginia Resource Partners, L.P. (NYSE: PVR), PVA is also in the business of managing coal properties and related assets. 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, costs and expenditures, projected demand for oil and natural gas and coal, projected supply of oil and natural gas and coal, lessee 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 joint venture distributions realized by the Company and PVR. Additional information concerning these and other factors can be found in the Company’s press releases and public periodic filings with the Securities and Exchange Commission, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2003, filed on March 11, 2004, 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

September 30,

     Nine Months Ended
September 30,
  
     2004
     2003
     2004
     2003
  

Production

                                 

Natural gas (MMcf)

      5,052       4,728       16,105       14,516  

Oil and condensate (Mbbl)

      97       216       307       526  

Total oil and natural gas production (MMcfe)

      5,634       6,024       17,947       17,672  

Coal royalty tons (000)

      7,971       6,229       23,865       19,252  

Prices

                                 

Natural gas ($/Mcf)

    $ 5.85     $ 4.93     $ 5.96     $ 5.46  

Oil and condensate ($/Bbl)

    $ 34.55     $ 24.87     $ 32.15     $ 26.61  

Coal royalties ($/ton)

    $ 2.26     $ 1.92     $ 2.20     $ 1.85  

CONSOLIDATED STATEMENTS OF EARNINGS - unaudited

(in thousands, except per share data)

 

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
  
     2004
     2003
     2004
     2003
  

Revenues

                                 

Natural gas

    $ 29,530     $ 23,293     $ 95,938     $ 79,197  

Oil and condensate

      3,351       5,372       9,869       13,999  

Coal royalties

      18,018       11,960       52,395       35,658  

Coal services

      888       484       2,614       1,523  

Timber

      204       80       499       829  

Other

      750       832       1,621       2,534  
    
 
 
 

Total revenues

      52,741       42,021       162,936       133,740  
    
 
 
 

Expenses

                                 

Lease operating

      5,236       4,092       15,549       11,965  

Exploration

      7,508       3,752       14,903       11,714  

Taxes other than income

      2,682       2,854       8,176       8,922  

General and administrative

      6,643       6,302       18,074       18,140  

Depreciation, depletion and amortization

      13,179       12,265       40,722       36,623  
    
 
 
 

Total expenses

      35,248       29,265       97,424       87,364  
    
 
 
 

Operating Income

      17,493       12,756       65,512       46,376  

Other Income (Expense)

                                 

Interest expense

      (1,719 )     (1,380 )     (4,573 )     (3,837 )

Interest and other income

      274       301       806       951  
    
 
 
 

Income from operations before minority interest, income taxes and effect of change in accounting principle

      16,048       11,677       61,745       43,490  

Minority interest in Penn Virginia Resource Partners, L.P.

      5,073       2,936       14,271       8,778  

Income tax expense

      4,541       3,298       18,818       13,784  
    
 
 
 

Income from operations before cumulative effect of change in accounting principle

      6,434       5,443       28,656       20,928  

Cumulative effect of change in accounting principle

      —         —         —         1,363  
    
 
 
 

Net Income

    $ 6,434     $ 5,443     $ 28,656     $ 22,291  
    
 
 
 

Per Share Data

                                 

Income before cumulative effect of change in accounting principle, basic

    $ 0.35     $ 0.30     $ 1.57     $ 1.17  

Cumulative effect of change in accounting principle, basic

      —         —         —         0.08  
    
 
 
 

Net income per share, basic

    $ 0.35     $ 0.30     $ 1.57     $ 1.25  
    
 
 
 

Income before cumulative effect of change in accounting principle, diluted

    $ 0.35     $ 0.30     $ 1.55     $ 1.16  

Cumulative effect of change in accounting principle, diluted

      —         —         —         0.08  
    
 
 
 

Net income per share, diluted

    $ 0.35     $ 0.30     $ 1.55     $ 1.24  
    
 
 
 

Weighted average shares outstanding, basic

      18,357       17,992       18,268       17,948  

Weighted average shares outstanding, diluted

      18,574       18,138       18,452       18,064  

PENN VIRGINIA CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands)

 

     September 30,
2004
    December 31,
2003
     (unaudited)     

Assets

              

Current assets

    $ 56,797    $ 51,905

Net property and equipment

      667,116      625,803

Equity investment

      28,607      —  

Other assets

      5,068      6,025
    
  

Total assets

    $ 757,588    $ 683,733
    
  

Liabilities and Shareholders’ Equity

              

Current liabilities

    $ 35,597    $ 33,242

Long-term debt

      73,000      64,000

Long-term debt of Penn Virginia Resource Partners, L.P.

      113,093      90,286

Other liabilities and deferred taxes

      108,946      94,049

Minority interest in Penn Virginia Resource Partners, L.P.

      189,700      190,508

Shareholders’ equity

      237,252      211,648
    
  

Total liabilities and shareholders’ equity

    $ 757,588    $ 683,733
    
  

 

CONSOLIDATED STATEMENTS OF CASH FLOWS - unaudited

(in thousands)

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
  
     2004
     2003
     2004
     2003
  

Operating Activities

                                 

Net income

    $ 6,434     $ 5,443     $ 28,656     $ 22,291  

Adjustments to reconcile net income to net cash provided by operating activities:

                                 

Depreciation, depletion and amortization

      13,179       12,265       40,722       36,623  

Minority interest in Penn Virginia Resource Partners, L.P.

      5,073       2,936       14,271       8,778  

Cumulative effect of change in accounting principle

      —         —         —         (1,363 )

Deferred income taxes

      6,350       4,360       13,314       10,495  

Dry hole and leasehold amortization

      6,676       2,490       9,322       4,098  

Other

      243       408       2,379       1,363  
    
 
 
 

Operating cash flow (see attached table “Reconciliation of Certain Non-GAAP Financial Measures”)

      37,955       27,902       108,664       82,285  

Changes in operating assets and liabilities

      3,640       (4,967 )     (8,470 )     (11,381 )
    
 
 
 

Net cash provided by operating activities

      41,595       22,935       100,194       70,904  
    
 
 
 

Investing Activities

                                 

Additions to property and equipment

      (38,302 )     (22,976 )     (87,931 )     (98,083 )

Acquisitions

      (28,442 )     —         (28,442 )     —    

Other

      800       236       1,423       547  
    
 
 
 

Net cash used in investing activities

      (65,944 )     (22,740 )     (114,950 )     (97,536 )
    
 
 
 

Financing Activities

                                 

Dividends paid

      (2,065 )     (2,023 )     (6,176 )     (6,061 )

Distributions paid to minority interest holders

      (5,556 )     (5,313 )     (16,335 )     (14,566 )

Net proceeds from PVA borrowings

      10,000       4,633       9,000       41,948  

Net proceeds from PVR borrowings

      27,000       —         26,000       1,613  

Payments for debt issuance costs

      —         —         —         (1,419 )

Issuance of stock

      40       479       3,843       1,663  
    
 
 
 

Net cash provided by (used in) financing activities

      29,419       (2,224 )     16,332       23,178  
    
 
 
 

Net increase (decrease) in cash and cash equivalents

      5,070       (2,029 )     1,576       (3,454 )

Cash and cash equivalents-beginning balance

      14,514       11,916       18,008       13,341  
    
 
 
 

Cash and cash equivalents-ending balance

    $ 19,584     $ 9,887     $ 19,584     $ 9,887  
    
 
 
 

PENN VIRGINIA CORPORATION

THIRD QUARTER SEGMENT INFORMATION - unaudited

(Dollars in thousands except where noted)

 

         

Coal Royalty

and Land

Management

   

All
Other

    

Consolidated

     Oil and Gas
        
     Amount
    (per Mcfe) *
        

Three months ended September 30, 2004

                                    

Production

                                    

Oil and gas (MMcfe)

      5,634                             

Natural gas (MMcf)

      5,052                             

Crude oil (Mbbl)

      97                             

Coal royalty tons (thousands of tons)

                    7,971               

Revenues

                                    

Natural gas

    $ 29,530    $ 5.85    $ —      $ —       $ 29,530

Oil and condensate

      3,351      34.55      —        —         3,351

Coal royalties

      —               18,018      —         18,018

Coal services

      —               888      —         888

Timber

      —               204      —         204

Other

      134             287      329       750
    
  
  
  
 

Total revenues

      33,015      5.86      19,397      329       52,741
    
  
  
  
 

Expenses

                                    

Lease operating

      3,309      0.59      1,777      150       5,236

Exploration

      7,508      1.33      —        —         7,508

Taxes other than income

      2,349      0.42      239      94       2,682

General and administrative

      2,110      0.37      2,077      2,456       6,643

Depreciation, depletion and amortization

      8,307      1.47      4,764      108       13,179
    
  
  
  
 

Total expenses

      23,583      4.18      8,857      2,808       35,248
    
  
  
  
 

Operating Income

    $ 9,432    $ 1.68    $ 10,540    $ (2,479 )   $ 17,493

Additions to property and equipment

    $ 38,195           $ 72    $ 35     $ 38,302
         

Coal Royalty

and Land

Management

   

All
Other

    

Consolidated

     Oil and Gas
        
     Amount
    (per Mcfe) *
        

Three months ended September 30, 2003

                                    

Production

                                    

Oil and gas (MMcfe)

      6,024                             

Natural gas (MMcf)

      4,728                             

Crude oil (Mbbl)

      216                             

Coal royalty tons (thousands of tons)

                    6,229               

Revenues

                                    

Natural gas

    $ 23,293    $ 4.93    $ —      $ —       $ 23,293

Oil and condensate

      5,372      24.87      —        —         5,372

Coal royalties

      —               11,960      —         11,960

Coal services

      —               484      —         484

Timber

      —               80      —         80

Other

      370             288      174       832
    
  
  
  
 

Total revenues

      29,035      4.82      12,812      174       42,021
    
  
  
  
 

Expenses

                                    

Lease operating

      3,195      0.53      748      149       4,092

Exploration

      3,747      0.62      5      —         3,752

Taxes other than income

      2,364      0.39      389      101       2,854

General and administrative

      2,105      0.35      1,661      2,536       6,302

Depreciation, depletion and amortization

      8,572      1.42      3,659      34       12,265
    
  
  
  
 

Total expenses

      19,983      3.31      6,462      2,820       29,265
    
  
  
  
 

Operating Income

    $ 9,052    $ 1.51    $ 6,350    $ (2,646 )   $ 12,756

Additions to property and equipment

    $ 20,770           $ 1,991    $ 215     $ 22,976
* Natural gas revenues are shown per Mcf, oil and gas condensate revenues are shown per Bbl, and all other amounts are shown per Mcfe.

PENN VIRGINIA CORPORATION

YEAR TO DATE SEGMENT INFORMATION - unaudited

(Dollars in thousands except where noted)

 

         

Coal Royalty

and Land

Management

   

All
Other

    

Consolidated

     Oil and Gas
        
     Amount
    (per Mcfe) *
        

Nine months ended September 30, 2004

                                    

Production

                                    

Oil and gas (MMcfe)

      17,947                             

Natural gas (MMcf)

      16,105                             

Crude oil (Mbbl)

      307                             

Coal royalty tons (thousands of tons)

                    23,865               

Revenues

                                    

Natural gas

    $ 95,938    $ 5.96    $ —      $ —       $ 95,938

Oil and condensate

      9,869      32.15      —        —         9,869

Coal royalties

      —               52,395      —         52,395

Coal services

      —               2,614      —         2,614

Timber

      —               499      —         499

Other

      207             584      830       1,621
    
  
  
  
 

Total revenues

      106,014      5.91      56,092      830       162,936
    
  
  
  
 

Expenses

                                    

Lease operating

      9,525      0.53      5,574      450       15,549

Exploration

      14,903      0.83      —        —         14,903

Taxes other than income

      7,308      0.41      753      115       8,176

General and administrative

      5,727      0.32      6,036      6,311       18,074

Depreciation, depletion and amortization

      26,015      1.45      14,385      322       40,722
    
  
  
  
 

Total expenses

      63,478      3.54      26,748      7,198       97,424
    
  
  
  
 

Operating Income

    $ 42,536    $ 2.37    $ 29,344    $ (6,368 )   $ 65,512

Additions to property and equipment

    $ 86,888           $ 939    $ 104     $ 87,931
         

Coal Royalty

and Land

Management

   

All
Other

    

Consolidated

     Oil and Gas
        
     Amount
    (per Mcfe) *
        

Nine months ended September 30, 2003

                                    

Production

                                    

Oil and gas (MMcfe)

      17,672                             

Natural gas (MMcf)

      14,516                             

Crude oil (Mbbl)

      526                             

Coal royalty tons (thousands of tons)

                    19,252               

Revenues

                                    

Natural gas

    $ 79,197    $ 5.46    $ —      $ —       $ 79,197

Oil and condensate

      13,999      26.61      —        —         13,999

Coal royalties

      —               35,658      —         35,658

Coal services

      —               1,523      —         1,523

Timber

      —               829      —         829

Other

      595             1,324      615       2,534
    
  
  
  
 

Total revenues

      93,791      5.31      39,334      615       133,740
    
  
  
  
 

Expenses

                                    

Lease operating

      9,094      0.51      2,422      449       11,965

Exploration

      11,648      0.66      66      —         11,714

Taxes other than income

      7,446      0.42      978      498       8,922

General and administrative

      5,624      0.32      5,199      7,317       18,140

Depreciation, depletion and amortization

      24,493      1.39      12,027      103       36,623
    
  
  
  
 

Total expenses

      58,305      3.30      20,692      8,367       87,364
    
  
  
  
 

Operating Income

    $ 35,486    $ 2.01    $ 18,642    $ (7,752 )   $ 46,376

Additions to property and equipment

    $ 94,094           $ 3,437    $ 552     $ 98,083
* Natural gas revenues are shown per Mcf, oil and gas condensate revenues are shown per Bbl, and all other amounts are shown per Mcfe.

PENN VIRGINIA CORPORATION

RECONCILIATION OF CERTAIN NON-GAAP FINANCIAL MEASURES - unaudited

(in thousands)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
     2004
     2003
    2004
    2003

Reconciliation of GAAP “Net cash provided by operating activities” to Non-GAAP “Operating cash flow”

                             

Net cash provided by operating activities

    $ 41,595     $ 22,935    $ 100,194    $ 70,904

Adjustments:

                             

Changes in operating assets and liabilities

      (3,640 )     4,967      8,470      11,381
    
 
  
  

Operating cash flow

    $ 37,955     $ 27,902    $ 108,664    $ 82,285
    
 
  
  

 

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.

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 the fourth quarter and full year 2004.

 

     Actual
     Guidance
  
     First Quarter
2004
     Second Quarter
2004
     Third Quarter
2004
     Year to Date
2004
    

Fourth Quarter

2004

    

Full Year

2004

  

Oil & Gas Segment:

                                                                         

Production:

                                                                         

Natural gas production (Bcf) - See Note a

      5.8       5.3       5.1       16.1       6.0     -     6.8       22.1     -     22.9  

Oil production (Mbbl) - See Note b

      116       94       97       307       89     -     109       396     -     416  

Equivalent production (Bcfe)

      6.5       5.9       5.6       17.9       6.6     -     7.3       24.5     -     25.2  

Equivalent daily production (MMcfe)

      70.9       64.4       61.2       65.3       71.5     -     79.5       66.8     -     68.9  

Expenses:

                                                                         

Lease operating ($ per Mcfe)

    $ 0.46     $ 0.56     $ 0.59     $ 0.53     $ 0.51     -     0.55     $ 0.50     -     0.55  

Exploration ($ millions)

    $ 5.6     $ 1.8     $ 7.5       14.9     $ 8.1     -     10.5     $ 23.0     -     25.4  

Taxes other than income (% of oil & gas revenue)

      7.5 %     6.1 %     7.1 %     6.9 %     7.2 %   -     8.0 %     6.7 %   -     7.4 %

General and administrative ($ millions)

    $ 1.8     $ 1.8     $ 2.1     $ 5.7     $ 2.0     -     2.4     $ 7.7     -     8.1  

Depreciation, depletion and amortization ($ per Mcfe)

    $ 1.44     $ 1.44     $ 1.47     $ 1.45     $ 1.47     -     1.55     $ 1.43     -     1.51  

Coal Land Management Segment (PVR):

                                                                         

Coal royalty tons (millions)

      8.0       7.9       8.0       23.9       7.4     -     8.1       31.3     -     32.0  

Revenues:

                                                                         

Coal royalties

    $ 16.9     $ 17.5     $ 18.0     $ 52.4     $ 16.7     -     18.9     $ 69.1     -     71.3  

Coal services

    $ 0.8     $ 0.9     $ 0.9     $ 2.6     $ 0.7     -     0.9     $ 3.3     -     3.5  

Timber and other

    $ 0.3     $ 0.3     $ 0.5     $ 1.1     $ 0.9     -     1.2     $ 2.0     -     2.3  

Expenses:

                                                                         

Operating

    $ 1.7     $ 2.1     $ 1.8     $ 5.6     $ 1.3     -     1.9     $ 6.9     -     7.5  

Taxes other than income

    $ 0.3     $ 0.2     $ 0.2     $ 0.7     $ 0.2     -     0.4     $ 0.9     -     1.1  

General and administrative

    $ 2.0     $ 2.0     $ 2.1     $ 6.1     $ 1.8     -     2.0     $ 7.9     -     8.1  

Depreciation, depletion and amortization

    $ 4.8     $ 4.8     $ 4.8     $ 14.4     $ 4.5     -     4.9     $ 18.9     -     19.3  

Interest expense:

                                                                         

Average long-term debt outstanding

    $ 92.2     $ 91.3     $ 111.4     $ 99.8       $ 117.4       $ 103.1  

Net interest rate assumed

      4.6 %     5.0 %     5.0 %     4.8 %           6.0 %                 5.2 %      

Corporate and Other:

                                                                         

General and administrative

      1.9       1.9       2.5       6.3     $ 9.1     -     10.7     $ 15.4     -     17.0  

Interest expense:

                                                                         

Average long-term debt outstanding

    $ 61.0     $ 56.5     $ 67.5     $ 62.3     $ 63.0     -     73.0     $ 62.4     -     69.0  

Net interest rate assumed

      3 %     3 %     3 %     3 %           3 %                 3 %      

Percentage capitalized - see Note c

      100 %     100 %     100 %     100 %     90 %   -     100 %     90 %   -     100 %

Minority interest in PVR

                                      see Note d  

Income tax rate - see Note e

      39 %     39 %     41 %     40 %           40 %                 40 %      

Capital Expenditures:

                                                                         

Development drilling

    $ 11.8     $ 23.3     $ 20.8     $ 55.9     $ 10.7     -     13.3     $ 66.6     -     69.2  

Exploratory drilling

    $ 1.7     $ 2.3     $ 8.0     $ 12.0     $ 6.2     -     7.0     $ 18.2     -     19.0  

Seismic

    $ 3.9     $ 0.8     $ 0.6     $ 5.3     $ 4.1     -     4.5     $ 9.4     -     9.8  

Lease acquistion and field projects

    $ 2.8     $ 8.9     $ 9.0     $ 20.7     $ 10.1     -     11.3     $ 30.8     -     32.0  

Total Oil & Gas Capital Expenditures

    $ 20.2     $ 35.3     $ 38.4     $ 93.9     $ 31.1     -     36.1       125.0     -     130.0  

Coal land management projects

    $ 0.4     $ 0.5     $ 28.5     $ 29.4     $ 0.0     -     0.4     $ 29.4     -     29.8  

 

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 Company’s natural gas hedging positions are summarized below:

 

    

Average

Mmbtu

Per Day

    Weighted Average Price
per Mmbtu
        Swaps
    Collars
           Floor
    Ceiling

Fourth Quarter 2004

                          

Costless Collars

    19,837           $ 4.13    $ 6.54

Swaps

    1,234    $ 4.70              

First Quarter 2005

                          

Costless Collars

    21,656           $ 4.60    $ 7.12

Swaps (January only)

    1,100    $ 4.70              

Second Quarter 2005

                          

Costless Collars

    18,330           $ 4.87    $ 7.04

Third Quarter 2005

                          

Costless Collars

    18,000           $ 5.06    $ 7.12

Fourth Quarter 2005

                          

Costless Collars

    17,000           $ 5.29    $ 8.96

First Quarter 2006

                          

Costless Collars

    9,133           $ 5.55    $ 8.68

Second Quarter 2006

                          

Costless Collars (April only)

    5,000           $ 6.00    $ 8.19

 

The costless collar natural gas prices per Mmbtu per quarter include the effects of basis differentials, if any, that may be hedged.

 

b - The Company’s oil hedging positions are summarized below:

 

Swaps

    Average
Bbls
Per Day
   

Weighted
Average

Price per Bbl

Fourth Quarter 2004

    482    $ 30.41

First Quarter 2005 (January only)

    400    $ 30.13

 

c - 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.

d - Penn Virginia owns 44.5 percent of Penn Virginia Resource Partners, L.P. (PVR). Minority interest reflects the remaining 55.5 percent owned by parties other than Penn Virginia.

e - 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.