Penn Virginia Gains but Misses – Analyst Blog

Penn Virginia Resource Partners L.P. (PVR) posted adjusted net income of 28 cents per unit, below the Zacks Consensus Estimate of 37 cents. However, results are above the 26 cents posted a year ago. The improvement in quarterly results was due to an increase in natural gas gross margin for PVR Midstream segment due to higher fractionation spreads, increase in distribution and decrease in other capital expenditure.

 

Total revenue in the quarter increased 32% year over year to $206.5 million, driven by increased revenue from its Midstream segment.

 

Coal and Natural Resource Management segment’s revenue, net of coal royalties expense, decreased 13% to $32.1 million in the quarter, primarily due to lower coal royalties revenue and a decrease in other revenues resulting from lower minimum rental forfeiture income. Coal royalties revenue, net of coal royalties expense decreased 9% in the quarter.

 

Natural Gas Midstream (PVR Midstream) segment revenue increased 45% year over year to $170.6 million in the first quarter. Quarterly System throughput volumes decreased 14% to 27.7 billion cubic feet (Bcf) from 32.3 Bcf last year. Adjusted Midstream gross margin was $29.6 million ($1.07 per Mcf), up 44% from $20.6 million ($0.64 per Mcf) last year.

 

Penn Virginia continues to manage its financial position well, ending the year with $180.3 million remaining under its revolving credit facility and $17.5 million of cash and equivalents. This provides the company with adequate capital to support modest growth opportunities.

 

In April 2010, Penn issued $300 million of 8.25% senior unsecured notes due in 2018, reducing revolving debt to $325.5 million and increasing remaining borrowing capacity to $472.9 million. Interest expense increased from $5.6 million in the first quarter of 2009 to $5.8 million in the first quarter of 2010 due to an increase in the amortization of debt issuance costs.

 

For 2010, the partnership has guided coal royalty tons to be in the range of 31.0 to 32.0 million tons, with average coal royalties per ton, net of coal royalty expense to be in the range of $3.15 to $3.25. Other revenue for 2010 is expected to be in the $21.0 to $22.0 million range. System throughput volumes are expected to be in the range of 350 to 360 million cubic feet (MMcf) per day.

 

For 2010, capital expenditure for the Coal and Natural Resource Management segment is expected to be approximately $6.0 to $7.5 million. Capital expenditure for the Natural Gas Midstream segment is expected to be in the $101.0 to $108.0 million range.