Penn Virginia Resource Partners L.P. (PVR) reported fourth quarter 2011 pro forma earnings of 23 cents per limited partner unit, down 11.5% from the year-ago earnings of 26 cents per limited partner unit. The partnership’s quarterly earnings were below the Zacks Consensus Estimate of 33 cents.

Penn Virginia’s 2011 pro forma earnings were $1.45 per limited partner unit compared with 97 cents per limited partner unit reported in fiscal 2010. The reported earnings were in line with the Zacks Consensus Estimate.

Total Revenue

Penn Virginia’s total operating revenue of $287.8 million for the fourth quarter increased 17.3% from $245.4 million reported in the year-ago period, driven by higher average royalty rate per ton and increase in revenue of the Natural Gas Midstream segment attributable to higher volume generation from both Marcellus and Panhandle Systems. The reported quarter revenue was lower than the Zacks Consensus Estimate of $328.0 million.

The partnership’s total revenue for 2011 was $1,160.0 million versus $864.1 million in the prior fiscal year, reflecting a growth of 34.2% year over year. The revenue was below the Zacks Consensus Estimate of $1,197.0 million.

Segmental Results

Coal and Natural Resource Management Segment: Revenues at this segment improved 17% year over year to $44.5 million, primarily driven by higher average coal royalties per ton. The rise in coal royalty revenue in the quarter resulted from a 19% increase in coal royalty tons sold. The Middle Fork assets that were acquired in January 2011 contributed 0.3 million tons of coal production and $2.0 million in coal royalties to fourth quarter 2011 results.

Operating income for the Coal and Natural Resource Management segment increased 18% to $25.4 million from $21.6 million in the prior-year quarter.

Natural Gas Midstream Segment: Revenue from this segment in the fourth quarter was $242.3 million versus $204.8 million in the year-ago period, reflecting a growth of 18.3%. System throughput volumes, during the quarter, increased 49.4% from the comparable period last year to 595 million cubic feet (“MMcf”) per day. The increase was the result of new business on the Marcellus Systems where volume increased to 156 MMcf per day from 22 MMcf per day. There was an increase in volumes on the Panhandle System as well, to 341 MMcf per day from its earlier output of 245 MMcf per day.

Financial Update

Penn Virginia continues to manage its financial position well, ending the year with $459.0 million remaining under its revolving credit facility and cash and cash equivalents of $8.6 million.

Cash from operating activities for the December quarter added up to $48 million. Distributable cash flow (“DCF”) for the quarter was $36.7 million.

Penn Virginia spent roughly $106.4 million for internal growth projects in the quarter, including $49.5 million in the Marcellus Shale.

Cash Distribution

The Board of Directors of the general partner of Penn Virginia declared a quarterly cash distribution of 51 cents per unit, paid on February 13, 2012 to unit holders of record as of February 6, 2012. The distribution equates to an annualized rate of $2.04 per unit, representing a 2.0% increase from the prior quarter and an 8.5% increase from the fourth quarter of 2010.

Project Expansion Update

Marcellus System: The construction of both Phase II of Marcellus Lycoming System and the dehydration unit of Marcellus Wyoming System are expected to be complete in February 2012. As a result, average daily volumes from the Wyoming System will increase from approximately 120 MMcfd to approximately 154 MMcfd.

Panhandle System: The Phase I expansion of the Antelope Hills plant with a capacity of 60 MMcfd is expected to start operations in March 2012. The Phase II expansions with a volume of 60 MMcfd is expected to be completed by the middle of 2012.

Guidance

For 2012, Penn Virginia expects EBITDA to come in the range of $260 – $280 million. Distributable cash flow, replacement capital and net of maintenance for the year is expected to be in the $160 – $180 million range.

Penn Virginia expects to invest approximately $200-$250 million in internal growth capital in 2012, likely to be spent on well connections and capacity expansions on Marcellus and Panhandle Systems.

At the Peer

Penn Virginia Resource Partners’ peer, Peabody Energy Corporation (BTU), announced earnings of 98 cents per share for the fourth quarter of 2011, missing the Zacks Consensus Estimate of $1.31.

Peabody’s fourth quarter revenue was $2.25 billion versus $1.79 billion in the prior-year quarter. The reported revenue failed to surpass the Zacks Consensus Estimate of $2.31 billion.

Radnor, Pennsylvania-based Penn Virginia Resource Partners L.P. manages coal and natural resource properties as well as natural gas gathering and processing businesses. The partnership’s coal properties are located in Central and Northern Appalachia, Illinois and San Juan Basins.

Penn Virginia Resource Partners L.P. currently retains a Zacks #4 Rank (short-term Sell rating).

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