Penn Virginia Resource Partners L.P. (PVR) reported second quarter adjusted earnings of 32 cents per unit, missing the Zacks Consensus Estimate by 4 cents. Adjusted earnings for the quarter were also short of 34 cents earned in the year-ago quarter, a fallout of the merger with Penn Virginia GP Holdings L.P. that increased the company’s unit count massively.
On a GAAP basis, earnings of Penn Virginia Resource for the second quarter of 2011 were 50 cents per unit compared with 30 cents recorded in the year-ago period. GAAP earnings in the quarter included non-cash derivative charges for the period.
Total Revenue
Quarterly revenues at Penn Virginia Resource came in at $310.3 million, above the Zacks Consensus Estimate of $258 million. Revenues in the quarter also recorded a swift rise of 63.8% from $189.4 million reported in the year-ago period, driven by increased contribution from the Natural Gas Midstream as well as the Coal and Natural Resource Management segments.
Segmental Results
Coal and Natural Resource Management Segment: Revenue from this segment improved 27% year over year to $51.5 million, mainly due to increased production and higher coal royalties. The coal royalty revenues rose 27.8% from the year-ago period to $44.6 million or $4.40 per ton.
In the second quarter, coal royalty tons were 10.1 million tons compared to 8.9 million tons last year. The Middle Fork assets acquired in January 2011 contributed $2.8 million to the increase in coal royalties as well as 0.5 million tons to the increase in coal production.
Natural Gas Midstream Segment: Revenue from this segment in the second quarter was $258.8 million versus $148.9 million in the year-ago period, implying a whopping growth of 73.8%. System throughput volumes during the quarter increased 43.8% to 460 million cubic feet per day (MMcf/d), from 320 MMcf/d in the year-ago quarter, as a result of additional volumes from new business in the Panhandle systems and the Marcellus Shale region.
Operational Update
Total operating expenses of Penn Virginia Resource in the quarter were $267.1 million versus $165.7 million in the year-ago period, implying a growth of 61.2%. This increase mainly stemmed from an 80% spike in cost of gas purchased, 37.9% surge in operating expenses and a 18.6% increase in depreciation, depletion and amortization, slightly offset by a 22.6% decrease in general and administrative expenses.
Despite the increase in operating expenses, Penn Virginia Resource saw an 82.3% growth in operating income, recording $43.2 million in the reported quarter versus $23.7 million in the same period last year. Interest expenses of Penn Virginia Resource were $12.4 million versus $8.9 million in the year ago quarter.
Other Developments
During the second quarter, Penn Virginia Resource successfully acquired the Antelope Hills processing plant and related midstream assets, as well as the Oatesville Reserve coal assets in the Illinois Basin. Also, the partnership initiated its second phase of construction for the Lycoming gathering system in the Marcellus Shale. Going forward, the partnership expects these strategic assets to contribute to the ongoing growth of PVR Partners.
Financial Update
Penn Virginia Resource continues to manage its financial position well, ending the second quarter with $418.4 million remaining under its revolving credit facility and with cash and cash equivalents of $10.6 million.
Penn Virginia Resource spent $38.9 million on internal growth projects during the second quarter of 2011, including $20.1 million in the Marcellus Shale. In addition, Penn Virginia spent about $14.6 million for acquisitions in the Coal and Natural Resource segment and $12.2 million for acquisitions in the Midstream Natural Gas segment.
Cash Distribution
Penn Virginia Resource declared a quarterly cash distribution of 49 cents per unit payable on August 12, 2011 to unitholders of record as of August 8, 2011. The distribution equates to an annualized rate of $1.96 per unit, and represents a 2.1% increase over the prior quarter and a 4.3% increase over the second quarter of 2010.
Guidance
Based on Penn Virginia Resource’s solid performance in the first half of 2011 and current outlook, the partnership updated its financial guidance for 2011. Penn Virginia Resource now expects EBITDA in the $240 – $260 million range. Distributable cash flow for full-year 2011 is expected in the range of $145 – $160 million.
Furthermore, Penn Virginia anticipates investing around $180 – $200 million for internal growth capital during 2011, including approximately $120 – $130 million in the Marcellus Shale.
Our View
Radnor, Pennsylvania-based Penn Virginia Resource 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 Basin and San Juan Basin. The partnership primarily competes with CONSOL Energy Inc. (CNX) and Alliance Resource Partners L.P. (ARLP).
Penn Virginia Resource currently has a short-term Zacks #2 Rank (Buy rating). We maintain our long-term Neutral recommendation on the stock.
CONSOL ENERGY (CNX): Free Stock Analysis Report
PENN VA RESRC (PVR): Free Stock Analysis Report
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment