PVR Partners Announces Third Quarter Results and Increases Quarterly Distribution PR Newswire RADNOR, Pa., Oct. 24, 2012 RADNOR, Pa., Oct. 24, 2012 /PRNewswire/ --PVR Partners, L.P. (NYSE: PVR) ("PVR") today reported financial and operational results for the three months ended September 30, 2012. In addition, PVR announced an increase in its quarterly distribution to $0.54 per unit. (Logo: http://photos.prnewswire.com/prnh/20110224/PH54022LOGO ) Third Quarter Results Third quarter 2012 highlights and results, with comparisons to third quarter 2011 results, included the following: oAdjusted EBITDA of $61.2 million as compared to $60.0 million. oDistributable cash flow ("DCF") of $29.9 million as compared to $36.1 million. oAdjusted net income of $7.7 million as compared to $20.5 million. Adjusted EBITDA, distributable cash flow, and adjusted net income are not Generally Accepted Accounting Principles ("GAAP") measures. Definitions and reconciliations of these non-GAAP measures to GAAP reporting measures appear in the financial tables which follow. Quarterly Distribution The Board of Directors of PVR GP, LLC, the general partner of PVR, declared a quarterly distribution of $0.54 per unit payable in cash on November 14, 2012 to common unitholders of record at the close of business on November 7, 2012. This distribution equates to an annualized rate of $2.16 per unit, and represents a 1.9% increase over the prior quarter distribution and an 8.0% increase over the third quarter of 2011. Management Comment "While our operating results continue to be impacted by very challenging coal markets and low NGL prices in the Midcontinent Midstream Segment, the solid growth of our Eastern Midstream business continued during the third quarter," said Bill Shea, President and CEO of PVR's general partner. "The strong volume gains and operating results of our Eastern Midstream Segment reflect the growing positive impacts of the acquisition of Chief Gathering and the continuing build out of our Lycoming system and other internal growth projects in the Marcellus. With the recent start of operation of our new Wyoming County Pipeline, we expect continued strong growth in the Eastern Midstream Segment during the fourth quarter." Eastern Midstream Segment The Eastern Midstream Segment reported third quarter 2012 results, with comparisons to third quarter 2011 results, as follows: oAdjusted EBITDA of $21.4 million as compared to $6.6 million, primarily due to the continued development of internal growth projects and the acquisition of Chief Gathering LLC. oQuarterly average throughput volumes of 456 million cubic feet per day ("MMcfd"), as compared to 63 MMcfd. The volume growth reflects the expansion of business on PVR's existing Lycoming and Wyoming systems, as well as the acquisition of Chief Gathering. Midcontinent Midstream Segment The Midcontinent Midstream Segment reported third quarter 2012 results, with comparisons to third quarter 2011 results, as follows: oAdjusted EBITDA of $13.0 million as compared to $14.1 million, primarily due to low NGL prices, the migration to lower-margin fee-based contracts, and the sale of our Crossroads system. oQuarterly average throughput volumes of 410 MMcfd, as compared to 441 MMcfd. Third quarter 2011 volumes include approximately 48 MMcfd attributable to the Crossroads system that was sold on July 3, 2012. Coal and Natural Resource Management Segment The Coal and Natural Resource Management Segment reported third quarter 2012 results, with comparisons to third quarter 2011 results, as follows: oAdjusted EBITDA of $26.8 million as compared to $39.4 million, primarily due to decreased coal production and pricing. oCoal royalty tons of 7.7 million tons, as compared to 9.5 million tons. oCoal royalties revenue of $28.8 million, or $3.73 per ton, as compared to $41.0 million, or $4.32 per ton. Capital Investment and Resources We invested approximately $150.0 million on internal growth projects during the third quarter of 2012, including $130.6 million in the Eastern Midstream Segment. We now expect 2012 internal growth capital to total approximately $485 million. As of September 30, 2012, we had borrowings of $535.0 million under our $1.0 billion revolving credit facility with remaining borrowing capacity thereunder of $457.1 million. Expansion Projects Update As previously reported, the Wyoming County Pipeline began full commercial operation at the end of the third quarter. Current volumes on the Wyoming County Pipeline are approximately 325 MMcfd. Construction continues to progress on Phase III and the Canton Lateral on our Lycoming County, Pennsylvania gas trunkline and water line, and these projects are expected to be in service by the end of the fourth quarter to gather gas for an affiliate of Southwestern Energy Company and a subsidiary of Royal Dutch Shell. Construction of the first phase of the new gathering system in Lycoming County to service the acreage dedications of Inflection Energy has also begun and is proceeding on schedule. Financial Guidance for 2012 PVR's financial guidance for full year 2012 Adjusted EBITDA in the range of $245 - $260 million and full year 2012 distributable cash flow, net of maintenance and replacement capital, in the range of $120 - $130 million is unchanged from guidance provided with the second quarter results in July. PVR's financial guidance is based on numerous assumptions about future events and conditions and, therefore, could vary materially from actual results. These estimates, including capital expenditure plans, are meant to provide guidance only and are subject to revision for acquisitions or operating environment changes. Adjusted EBITDA and distributable cash flow are non-GAAP measures; reconciliations of these non-GAAP measures to GAAP reporting measures appear in the financial tables which follow. Third Quarter 2012 Financial and Operational Results Conference Call A conference call and webcast, during which management will discuss third quarter 2012 financial and operational results, is scheduled for Wednesday, October 24, 2012 at 11:00 a.m. EDT. Prepared remarks by William H. Shea, Jr., President and Chief Executive Officer, and other members of company management will be followed by a question and answer period. Interested parties may listen via webcast at http://www.videonewswire.com/event.asp?id=89879 or by logging on using the link posted on our website, www.pvrpartners.com. Participants who would like to ask questions may join the conference via phone by dialing 800-860-2442 (international 412-858-4600) five to ten minutes before the scheduled start of the conference call (reference the PVR Partners call). An on-demand replay of the webcast will be available on our website shortly after the conclusion of the call. A telephonic replay of the call will be available through October 30 by dialing 877-344-7529 (international: 412-317-0088) and using conference playback number 10019447. ****** PVR Partners, L.P. (NYSE: PVR) is a publicly traded limited partnership which owns and operates a network of natural gas midstream pipelines and processing plants, and owns and manages coal and natural resource properties. Our midstream assets, located principally in Texas, Oklahoma and Pennsylvania, provide gathering, transportation, compression, processing, dehydration and related services to natural gas producers. Our coal and natural resource properties, located in the Appalachian, Illinois and San Juan basins, are leased to experienced operators in exchange for royalty payments. More information about PVR is available on our website at www.pvrpartners.com. ****** This release is intended to be a qualified notice under Treasury Regulation Section 1.1446-4(b). Brokers and nominees should treat one hundred percent (100.0%) of the Partnership's distributions to non-U.S. investors as being attributable to income that is effectively connected with a United States trade or business. Accordingly, the Partnership's distributions to non-U.S. investors are subject to federal income tax withholding at the highest applicable effective tax rate. ****** This press release includes "forward-looking statements" within the meaning of federal securities laws. All statements, other than statements of historical facts, included in this release that address activities, events or developments that the Partnership expects, believes or anticipates will or may occur in the future are forward-looking statements. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties, factors and risks, many of which are outside the Partnership's ability to control or predict, which could cause results to differ materially from those expected by management. Such risks and uncertainties include, but are not limited to, regulatory, economic and market conditions, our ability realize the anticipated benefits from the acquisition of Chief, the timing and success of business development efforts and other uncertainties. Additional information concerning these and other factors can be found in our press releases and public periodic filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2011 and most recently filed Quarterly Reports on Form 10-Q. Readers should not place undue reliance on forward-looking statements, which reflect management's views only as of the date hereof. We undertake no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise. PVR PARTNERS, L.P. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - unaudited (in thousands, except per unit data) Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 Revenues Natural gas $ $ $ $ 78,026 120,240 215,780 324,447 Natural gas liquids 96,237 129,389 316,161 374,279 Gathering and 27,229 10,081 62,488 24,172 transportation Coal royalties 28,760 40,977 91,150 124,546 Gain on sale of plant 31,292 - 31,292 - Other 7,303 7,665 21,305 24,757 Total revenues 268,847 308,352 738,176 872,201 Expenses Cost of gas purchased 147,246 223,762 453,543 613,295 Operating 17,587 15,797 47,530 43,112 General and 11,531 8,755 34,574 31,700 administrative Acquisition related - - 14,049 - costs Impairments - - 124,845 - Depreciation, 31,992 22,463 84,301 65,357 depletion and amortization Total expenses 208,356 270,777 758,842 753,464 Operating income (loss) 60,491 37,575 (20,666) 118,737 Other income (expense) Interest expense (20,288) (10,528) (45,616) (33,806) Derivatives (1,524) 8,690 2,201 (6,289) Interest income and 104 120 329 384 other Net income (loss) 38,783 35,857 (63,752) 79,026 Net loss (income) attributable to - - - 664 noncontrolling interests (pre-merger) Net income (loss) $ $ $ $ attributable to PVR 38,783 35,857 (63,752) 79,690 Partners', L.P. Earnings per common unit, $ $ $ $ basic and diluted 0.16 0.50 (1.14) 1.26 Weighted average number of common units outstanding, 88,366 71,197 83,834 63,019 basic and diluted Weighted average number of 21,620 10,770 Class B units outstanding Weighted average number of 10,346 5,173 Special units outstanding Other data: Daily throughput volumes (MMcfd) - Eastern 456 63 337 47 Midstream Daily throughput volumes (MMcfd) - Midcontinent 410 441 435 415 Midstream Coal royalty tons (in 7,703 9,479 23,584 29,501 thousands) PVR PARTNERS, L.P. CONDENSED CONSOLIDATED BALANCE SHEETS - unaudited (in thousands) September 30, December 31, 2012 2011 Assets Cash and cash $ $ equivalents 10,127 8,640 Accounts receivable 97,443 101,340 Other current 5,314 5,640 assets Total current 112,884 115,620 assets Property, plant and 1,822,010 1,282,297 equipment, net Other long-term 854,140 196,075 assets Total assets $ $ 2,789,034 1,593,992 Liabilities and Partners' Capital Accounts payable $ $ and accrued liabilities 152,754 124,082 Deferred income 3,963 3,416 Derivative 1,787 12,042 liabilities Total current 158,504 139,540 liabilities Other long-term 33,933 31,748 liabilities Senior notes 900,000 300,000 Revolving credit 535,000 541,000 facility Partners' capital 1,161,597 581,704 Total $ $ liabilities and 2,789,034 1,593,992 partners' capital CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - unaudited (in thousands) Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 Cash flows from operating activities Net income (loss) $ $ $ $ 38,783 35,857 (63,752) 79,026 Adjustments to reconcile net income to net cash provided by operating activities: Gain on sale of (31,292) - (31,292) - plant Depreciation, depletion and 31,992 22,463 84,301 65,357 amortization Impairments - - 124,845 - Commodity derivative contracts: Total derivative losses included in net 1,524 (8,690) (2,201) 6,289 income Cash payments to settle derivatives for (1,332) (6,699) (8,578) (19,477) the period Non-cash interest 1,589 1,040 4,217 4,735 expense Non-cash unit-based 1,086 966 4,643 2,805 compensation Equity earnings, net of distributions 697 2,818 142 4,635 received Other (231) (127) (929) (909) Changes in operating assets and 23,334 2,329 23,396 (153) liabilities Net cash provided by 66,150 49,957 134,792 142,308 operating activities Cash flows from investing activities Acquisitions, net of 787 (95) (850,156) (122,135) cash acquired Additions to property, (173,455) (67,000) (348,449) (141,796) plant and equipment Proceeds for sale of 62,271 - 62,271 - plant Other (9,932) 347 (20,992) 2,558 Net cash used in (120,329) (66,748) (1,157,326) (261,373) investing activities Cash flows from financing activities Net proceeds from equity (219) - 577,743 - offerings Proceeds from issuance - - 600,000 - of senior notes Distributions to (46,833) (34,887) (128,516) (99,696) partners Proceeds from (repayments of) 103,000 55,000 (6,000) 227,000 borrowings, net Cash paid for debt (617) - (19,206) (3,675) issuance costs Cash paid for merger - (16) - (6,620) Net cash provided by 55,331 20,097 1,024,021 117,009 financing activities Net increase (decrease) in cash and cash 1,152 3,306 1,487 (2,056) equivalents Cash and cash equivalents - beginning 8,975 10,602 8,640 15,964 of period Cash and cash $ $ $ $ equivalents - end of 10,127 13,908 10,127 13,908 period PVR PARTNERS, L.P. CERTAIN NON-GAAP FINANCIAL MEASURES - unaudited (in thousands) Three Months Ended Nine Months Ended September 30, September 30, Guidance Range 2012 2011 2012 2011 Full Year 2012 Reconciliation of Non-GAAP "Segment Adjusted EBITDA" to GAAP "Net income (loss)": Segment Adjusted EBITDA (a): Eastern $ $ $ $ $ $ Midstream 21,440 6,583 49,060 14,547 87,000 93,000 Midcontinent 12,994 14,052 38,001 51,084 58,000 62,000 Midstream Coal and Natural 26,757 39,403 84,176 118,463 100,000 105,000 Resource Management Total segment $ $ $ $ $ $ adjusted EBITDA 61,191 60,038 171,237 184,094 245,000 260,000 Adjustments to reconcile total Segment Adjusted EBITDA to Net income (loss) Depreciation, depletion and (31,992) (22,463) (84,301) (65,357) amortization Impairments - - (124,845) - Acquisition - - (14,049) - related costs Gain on sale of 31,292 - 31,292 - plant Interest (20,288) (10,528) (45,616) (33,806) expense Derivatives (1,524) 8,690 2,201 (6,289) Other 104 120 329 384 Net income $ $ $ $ (loss) 38,783 35,857 (63,752) 79,026 Reconciliation of GAAP "Net income (loss)" to Non-GAAP "Distributable cash flow": Net income $ $ $ $ $ $ (loss) 38,783 35,857 (63,752) 79,026 (45,000) (42,000) Depreciation, depletion and 31,992 22,463 84,301 65,357 115,000 118,000 amortization Impairment - - 124,845 - 125,000 125,000 Acquisition - - 14,049 - 14,000 14,000 related costs Gain on sale of (31,292) - (31,292) - (31,300) (31,300) plant Derivative contracts: Derivative losses included 1,524 (8,690) (2,201) 6,289 (2,000) (1,000) in net income Cash payments to settle (1,332) (6,699) (8,578) (19,477) (11,000) (10,000) derivatives for the period Equity earnings from joint ventures, net 697 2,818 142 4,635 (500) 500 of distributions Maintenance capital (3,749) (2,884) (12,197) (8,532) (17,200) (16,200) expenditures Replacement capital (6,725) (6,725) (20,175) (20,175) (27,000) (27,000) expenditures Distributable $ $ $ $ $ $ cash flow (b) 29,898 36,140 85,142 107,123 120,000 130,000 Distribution to Partners: Total cash distribution $ $ $ $ paid during the 46,833 34,887 128,516 99,696 period Reconciliation of GAAP "Net income (loss)" to Non-GAAP "Net income as adjusted": Net income $ $ $ $ (loss) 38,783 35,857 (63,752) 79,026 Impairments - - 124,845 - Acquisition - - 14,049 - related costs Gain on sale of (31,292) - (31,292) - plant Adjustments for derivatives: Derivative losses included 1,524 (8,690) (2,201) 6,289 in net income Cash payments to settle (1,332) (6,699) (8,578) (19,477) derivatives for the period Net income, as $ $ $ $ adjusted (c) 7,683 20,468 33,071 65,838 (a) Adjusted EBITDA, or earnings before interest, tax and depreciation, depletion and amortization ("DD&A"), represents operating income plus DD&A, plus impairments, plus acquisition related costs, minus gains on sale of plant. We believe EBITDA or a version of Adjusted EBITDA is commonly used by investors and professional research analysts in the valuation, comparison, rating and investment recommendations of companies in the natural gas midstream and coal industries. We use this information for comparative purposes within the industry. EBITDA is not a measure of financial performance under GAAP and should not be considered as a measure of liquidity or as an alternative to net income. (b) Distributable cash flow represents net income plus DD&A, plus impairments, plus acquisition related costs, minus gain on sale of plant, plus (minus) derivative losses (gains) included in net income, plus (minus) cash received (paid) for derivative settlements, minus equity earnings in joint ventures, plus cash distributions from joint ventures, minus maintenance capital expenditures, minus replacement capital expenditures. Distributable cash flow is also the quantitative standard used by investors and professional research analysts in the valuation, comparison, rating and investment recommendations of publicly traded partnerships. Distributable cash flow is presented because we believe it is a useful adjunct to net cash provided by operating activities under GAAP. Distributable 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, as a measure of liquidity or as an alternative to net income. (c) Net income, as adjusted, represents net income adjusted to exclude the effects impairments, one-time charges related to acquisitions, gains on sale of plant, and non-cash changes in the fair value of derivatives. We believe this presentation is commonly used by investors and professional research analysts in the valuation, comparison, rating and investment recommendations of companies in the natural gas midstream industry. We use this information for comparative purposes within the industry. Net income, as adjusted, is not a measure of financial performance under GAAP and should not be considered as a measure of liquidity or as an alternative to net income. PVR PARTNERS, L.P. QUARTERLY SEGMENT INFORMATION - unaudited (in thousands) Eastern Midstream Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 Revenues Gathering and $ $ $ $ transportation 25,759 7,720 56,710 16,582 Other 1,041 - 2,687 - Total revenues 26,800 7,720 59,397 16,582 Expenses Operating 2,124 635 4,211 898 General and 3,236 502 6,126 1,137 administrative Acquisition related costs - - 14,049 - Depreciation, depletion 11,867 987 22,322 2,151 and amortization Total expenses 17,227 2,124 46,708 4,186 Operating income $ $ $ $ 9,573 5,596 12,689 12,396 Midcontinent Midstream Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 Revenues Natural gas $ $ $ $ 78,026 120,240 215,780 324,447 Natural gas liquids 96,237 129,389 316,161 374,279 Gathering and 1,470 2,361 5,778 7,590 transportation Gain on sale of plant 31,292 - 31,292 - Other 497 1,186 2,042 4,874 Total revenues 207,522 253,176 571,053 711,190 Expenses Cost of gas purchased 147,246 223,762 453,543 613,295 Operating 11,164 10,880 31,642 30,399 General and 4,826 4,482 16,575 16,412 administrative Impairments - - 124,845 - Depreciation, depletion 11,913 11,904 37,220 35,228 and amortization Total expenses 175,149 251,028 663,825 695,334 Operating income (loss) $ $ $ $ 32,373 2,148 (92,772) 15,856 Coal and Natural Resource Management Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 Revenues Coal royalties $ $ $ $ 28,760 40,977 91,150 124,546 Coal services 1,953 2,151 4,583 6,739 Timber 1,411 1,457 4,284 3,834 Oil and gas royalties 977 1,234 2,165 3,016 Other 1,424 1,637 5,544 6,294 Total revenues 34,525 47,456 107,726 144,429 Expenses Operating 4,299 4,282 11,677 11,815 General and 3,469 3,771 11,873 14,151 administrative Depreciation, depletion 8,212 9,572 24,759 27,978 and amortization Total expenses 15,980 17,625 48,309 53,944 Operating income $ $ $ $ 18,545 29,831 59,417 90,485 PVR PARTNERS, L.P. DERIVATIVE CONTRACT SUMMARY - unaudited As of September 30, 2012 Average Volume Per Swap Weighted Average Price Day Price Put (a) Call (b) NGL - natural (gallons) (per gallon) gasoline collar Fourth quarter 54,000 $1.75 $2.02 2012 Crude swap (barrels) (per barrel) Fourth quarter 600 $88.62 2012 Natural gas (MMBtu) (MMBtu) purchase swap Fourth quarter 4,000 $5.195 2012 We estimate that, excluding the effects of derivative positions described above, for every $1.00 per MMBtu increase or decrease in the natural gas price, our natural gas midstream gross margin and operating income (loss) for the remainder of 2012 would increase or decrease by $0.1 million. In addition, we estimate that for every $5.00 per barrel increase or decrease in the crude oil price, our natural gas midstream gross margin and operating income (loss) for the remainder of 2012 would increase or decrease by $2.0 million. This assumes that natural gas prices, crude oil prices and inlet volumes remain constant at anticipated levels. These estimated changes in our gross margin and operating income (loss) exclude potential cash receipts or payments in settling these derivative positions. (a) - Purchased put/floor. (b) - Sold call/ceiling. Contact: Stephen R. Milbourne Director - Investor Relations Phone: 610-975-8204 E-Mail: firstname.lastname@example.org SOURCE PVR Partners, L.P. Website: http://www.pvrpartners.com
PVR Partners Announces Third Quarter Results and Increases Quarterly Distribution
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