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Penn Virginia Corporation Announces Results for Second Quarter of 2005; Reports Record Cash Flow and Production

Posted on: Wednesday, 3 August 2005, 18:00 CDT

Penn Virginia Corporation (NYSE:PVA) today reported results for the second quarter of 2005, including record quarterly net cash provided by operating activities of $53.8 million, a 58 percent increase over the second quarter of 2004, and record operating cash flow, a non-GAAP measure, of $53.5 million, a 46 percent increase over the second quarter of 2004. Net income was $7.6 million, or $0.41 per diluted share, for the second quarter of 2005, compared to $12.1 million, or $0.65 per diluted share, for the second quarter of 2004. Net income for this year's second quarter compared to the second quarter of 2004 was adversely affected by $16.1 million of additional exploration expense, primarily related to the write off of unproved property and drilling costs in connection with an unsuccessful exploratory well in south Texas.

In the first six months of 2005, PVA reported net cash provided by operating activities of $84.7 million, a 45 percent increase over the same period of 2004. Operating cash flow, a non-GAAP measure, was $96.7 million for the first half of 2005, or 37 percent above the first half of 2004. Net income for the 2005 period was $14.7 million, or $0.79 per diluted share, compared to $22.2 million, or $1.21 per diluted share, for the first six months of 2004.

Oil and Gas Segment Review

Oil and gas production for the second quarter of 2005 was a quarterly record 6.9 billion cubic feet equivalent (Bcfe), a 17 percent increase from 5.9 Bcfe in the second quarter of 2004. See the Company's July 28, 2005 news release for a more detailed discussion of second quarter 2005 drilling and production operations for the oil and gas segment. Oil and gas segment operating income for the second quarter of 2005 was $8.9 million, down 51 percent from the $18.0 million reported for the same quarter of 2004. Primary reasons for the quarter-to-quarter change in operating income for the segment were as follows: -- Total oil and gas segment revenues increased by 35 percent to $48.1 million from $35.5 million in the second quarter of 2004. Increased oil and gas production accounted for approximately half of the revenue increase. The production increase was due primarily to the benefit of new production in 2005 from drilling, including the horizontal coalbed methane (CBM) project in Appalachia and the Cotton Valley play in east Texas and north Louisiana, offset in part by the first quarter 2005 sale of oil and gas properties in West Texas and normal field decline. Increased realized prices for natural gas and oil accounted for the other half of the revenue increase. The average realized sale price for natural gas in the second quarter of 2005, which represented approximately 93 percent of the Company's production for the quarter, was $6.94 per thousand cubic feet (Mcf), an increase of 13 percent from $6.13 per Mcf realized in the second quarter of 2004. Realized oil and condensate prices increased 37 percent quarter to quarter, from $32.23 per barrel to $44.03 per barrel. -- Total oil and gas segment expenses were $39.3 million compared to $17.5 million in the second quarter of 2004. The increase was primarily related to: -- An increase in exploration expenses, to $17.9 million in the second quarter of 2005 from $1.8 million in the second quarter of 2004. The increase was primarily due to expensing approximately $1.6 million of drilling costs incurred through the second quarter of 2005 and $11.5 million of previously unevaluated unproved leasehold costs incurred in 2001, related to an unsuccessful exploratory well in south Texas. -- An increase in DD&A expense, to $11.7 million in the second quarter of 2005 from $8.4 million in the second quarter of 2004. The increase was the result of the 17 percent quarter-to-quarter production increase and higher average depletion rates. The DD&A rate increased to $1.69 per Mcfe produced in the second quarter of 2005 from $1.44 per Mcfe produced in the second quarter of 2004. The DD&A rate increase was primarily due to a greater percentage of production coming from relatively higher cost CBM wells and wells in the Company's east Texas Cotton Valley development drilling joint venture, combined with depreciation on new pipeline infrastructure placed in service during the fourth quarter of 2004.

Coal Segment Review (Penn Virginia Resource Partners, L.P. - NYSE:PVR)

Second quarter 2005 operating income in the coal segment was a record $16.3 million, or 70 percent higher than the $9.6 million reported in the second quarter of 2004. The primary reasons for the improved operating results were as follows: -- Coal royalty revenues were a record $20.1 million in the second quarter of 2005, a 15 percent increase over $17.5 million in the second quarter of 2004, due primarily to higher royalties per ton. Average coal royalty per ton was a record $2.78 in the second quarter of 2005, a 26 percent increase over average royalties per ton of $2.21 in the second quarter of 2004. The increase was primarily due to stronger market conditions for coal resulting in higher prices and a greater percentage of production from certain price-sensitive leases. Coal production from PVR properties decreased to 7.3 million tons in the second quarter of 2005 from 7.9 million tons in the same quarter of 2004, primarily due to reduced production at a longwall mine on a lower margin subleased portion of the Coal River property. -- Other revenues increased to $3.6 million in the second quarter of 2005 from $1.2 million in the second quarter of 2004. The increase was primarily due to a $1.5 million sale during the quarter of a bankruptcy claim, which had been held against a former lessee and from $0.5 million of equity earnings from the coal handling joint venture acquired in July 2004. -- Operating expenses decreased by 45 percent to $1.1 million in the second quarter of 2005 from $2.0 million in the second quarter of 2004 due to decreased production on a portion of the Coal River property subleased from a third party. -- DD&A expense decreased to $4.3 million in the second quarter of 2005 from $4.9 million in the same quarter of last year, primarily as a result of lower production.

Natural Gas Midstream Segment Review (Penn Virginia Resource Partners, L.P. - NYSE:PVR)

Second quarter 2005 operating income in the natural gas midstream segment acquired in March 2005 from Cantera Gas Resources, LLC (the "Cantera Acquisition") was $4.1 million, consisting of the following: -- Natural gas midstream revenues were $87.0 million and included revenues from the sale of residue gas, natural gas liquids and condensate and gathering and transportation fees. Inlet volumes at the midstream segment's three gas processing plants and gathering systems were in line with expectations at approximately 11.5 billion cubic feet during the second quarter, or approximately 126 million cubic feet per day. -- Cost of gas purchased of $74.4 million consisted of amounts payable to third-party producers for gas purchased under percentage of proceeds and keep-whole contracts. Gross processing margin, consisting of midstream revenues minus the cost of gas purchased, was $12.6 million, or $1.10 per thousand cubic feet of inlet gas. -- Operating costs directly associated with the operations of the natural gas midstream segment were $3.2 million for the second quarter of 2005. -- Depreciation and amortization expense of $3.7 million for the second quarter of 2005 included $1.2 million of amortization of intangible costs and $2.5 million of depreciation on property, plant and equipment related to the Cantera Acquisition.

Partnership Distributions

On July 22, 2005, PVR announced a $0.03 per unit increase in its quarterly distribution to $0.65, or $2.60 per unit on an annualized basis. The distribution covers the period April 1 through June 30, 2005, and is payable August 12, 2005 to unitholders of record August 2, 2005. The new rate is a 20 percent increase in the quarterly distribution over the distribution paid by PVR for the second quarter of 2004. Penn Virginia Corporation is the general partner of PVR and it owns approximately 7.8 million common and subordinated units in the Partnership.

Capital Resources

As of June 30, 2005, Penn Virginia had borrowed $89 million under its $150 million credit facility, which is expandable to $200 million at the Company's option. PVR's outstanding borrowings as of June 30, 2005 were $203.7 million, including $6.4 million of senior unsecured notes classified as current portion of long-term debt. Interest expense increased to $3.5 million in the second quarter of 2005 from $1.5 million for the same quarter of 2004, primarily as a result of interest on increased borrowings related to the Cantera Acquisition.

Management Comment

A. James Dearlove, Penn Virginia President and CEO, said, "During the second quarter of 2005, the combination of record oil and gas production and continued strong commodity prices in all of our business segments allowed us to set new Company records for cash flow. In addition, we continued to benefit from our growth strategy, particularly in both the coal and midstream segments of PVR.

"In the Company's oil and gas segment, our large development projects, including the horizontal CBM project in Appalachia, the Cotton Valley play in east Texas, and the Selma Chalk program in Mississippi, have been the primary reason for our production growth over the last year. Our second quarter earnings were reduced by approximately $13 million before taxes, due to the write off of unproved property and drilling costs of an exploratory well we drilled in our south Texas Richard King field. However, approximately $11.5 million of this amount was for cost incurred when we acquired the field in 2001, with no impact on 2005 cash flow. Over the second half of 2005, we expect oil and gas segment capital spending to be $76 to $82 million, with the majority being used to complete our development and exploratory drilling program.

"During the second quarter of 2005, PVR's coal segment continued to benefit from the strong market for coal. In the first seven months of 2005, the Partnership continued to execute its growth strategy, completing four acquisitions which added 160 million tons of coal reserves. One of these acquisitions was a recently announced addition of 95 million tons in the western Kentucky portion of the Illinois basin, which we believe is becoming an increasingly important source of coal supply. In addition to geographic diversification, these acquisitions provide PVR with organic expansion opportunities for both coal royalties and coal services.

"Operationally, PVR Midstream, PVR's natural gas midstream gathering and processing segment, has performed better than expected through its first four months of operations as part of PVR. Plant and gathering system inlet volumes are being aided by robust drilling activity around our gathering and processing facilities in Texas and Oklahoma, and processing margins have been better than expected. The Partnership is on schedule with the integration of the midstream-related accounting and information technology systems. PVR Midstream's operating and commercial staff has identified a number of new opportunities to expand and improve operations in its core areas."

Guidance Update for 2005

See the 2005 Guidance Table included in this release for guidance estimates for the third quarter and full year 2005. These estimates, including capital expenditure plans, are meant to provide guidance only and are subject to revision as PVA's operating environment changes.

Conference Call

A conference call and webcast, at which management will discuss second quarter 2005 results and the outlook for the remainder of 2005, is scheduled for Thursday, August 4, 2005, at 3:00 p.m. EDT. 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, or 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 August 5, 2005, at 11:59 p.m. EDT by dialing 1-877-660-6853 and using replay passcodes: account number 286 and conference number 146913. 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. PVA is also the general partner and the largest unit holder in Penn Virginia Resource Partners, L.P. (NYSE:PVR), which manages coal properties and related assets and operates a midstream natural gas gathering and processing business. PVA is headquartered in Radnor, PA. For more information about PVA, visit the Company's website at www.pennvirginia.com.

Certain statements contained herein that are not descriptions of historical facts are "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Because such statements include risks, uncertainties and contingencies, actual results may differ materially from those expressed or implied by such forward-looking statements. 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; projected cash flows generated from PVR's new natural gas midstream business; costs and expenditures; market factors, including energy prices generally and, specifically, the relative prices of crude oil, natural gas, coal and NGLs; projected demand for oil, natural gas, coal and NGLs, projected supplies of oil, natural gas, coal and NGLs; lessee and customer 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 distributions realized by the Company and PVR. Additional information concerning these and other factors can be found in the Company's and PVR's press releases and public periodic filings with the Securities and Exchange Commission, including each of the Company's and PVR's Annual Reports on Form 10-K for the year ended December 31, 2004, filed on March 11, 2005 and March 1, 2005, respectively, and subsequently filed interim reports. Many of the factors that will determine the Company's and PVR's future results are beyond the ability of management to control or predict. Readers should not place undue reliance on forward-looking statements, which reflect management's views only as of the date hereof. The Company and PVR 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. PENN VIRGINIA CORPORATION OPERATIONS SUMMARY Three Months Ended Six Months Ended June 30, June 30, ----------------- ----------------- 2005 2004 2005 2004 -------- -------- -------- -------- Production Natural gas (MMcf) 6,438 5,294 12,353 11,053 Oil and condensate (Mbbl) 76 94 161 210 Total oil, condensate and natural gas production (MMcfe) 6,894 5,858 13,319 12,313 Coal royalty tons (thousands) 7,250 7,941 13,965 15,894 Inlet volumes (MMcf) 11,489 - 15,396 - Prices and margin Natural gas ($/Mcf) $ 6.94 $ 6.13 $ 6.71 $ 6.01 Oil and condensate ($/Bbl) $ 44.03 $ 32.23 $ 41.98 $ 31.04 Coal royalties ($/ton) $ 2.78 $ 2.21 $ 2.73 $ 2.16 Midstream processing margin ($/Mcf) $ 1.10 $ - $ 1.11 $ - CONSOLIDATED STATEMENTS OF EARNINGS - unaudited (in thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, ----------------- ----------------- 2005 2004 2005 2004 -------- -------- -------- -------- Revenues Natural gas $44,680 $32,444 $82,940 $66,408 Oil and condensate 3,346 3,030 6,759 6,518 Natural gas midstream 86,995 - 113,273 - Coal royalties 20,129 17,517 38,182 34,377 Other 4,594 1,578 6,800 2,892 -------- -------- -------- -------- Total revenues 159,744 54,569 247,954 110,195 -------- -------- -------- -------- Expenses Cost of gas purchased 74,374 - 96,211 - Operating 8,402 5,469 13,501 10,313 Exploration 17,931 1,835 25,590 7,395 Taxes other than income 4,054 2,464 7,401 5,494 General and administrative 8,787 5,749 15,507 11,431 Depreciation, depletion and amortization 19,779 13,387 35,623 27,543 -------- -------- -------- -------- Total expenses 133,327 28,904 193,833 62,176 -------- -------- -------- -------- Operating income 26,417 25,665 54,121 48,019 Other income (expense) Interest expense (3,497) (1,464) (6,875) (2,854) Interest and other income 376 258 695 532 Unrealized loss on derivatives (447) - (14,764) - -------- -------- -------- -------- Income from operations before minority interest and income taxes 22,849 24,459 33,177 45,697 Minority interest 10,246 4,695 8,590 9,198 Income tax expense 4,956 7,684 9,900 14,277 -------- -------- -------- -------- Net income $ 7,647 $12,080 $14,687 $22,222 ======== ======== ======== ======== Per share data Net income per share, basic $ 0.41 $ 0.66 $ 0.79 $ 1.22 ======== ======== ======== ======== Net income per share, diluted $ 0.41 $ 0.65 $ 0.79 $ 1.21 ======== ======== ======== ======== Weighted average shares outstanding, basic 18,517 18,293 18,503 18,230 Weighted average shares outstanding, diluted 18,719 18,479 18,706 18,396 PENN VIRGINIA CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands) June 30, Dec. 31, 2005 2004 ---------- -------- (unaudited) Assets Current assets $ 121,691 $ 84,239 Net property and equipment 872,542 665,488 Equity investments 28,485 27,881 Goodwill 6,931 - Intangibles, net 38,413 - Other assets 8,928 5,727 ---------- -------- Total assets $1,076,990 $783,335 ========== ======== Liabilities and Shareholders' Equity Current liabilities $ 96,325 $ 41,775 Long-term debt 89,000 76,000 Long-term debt of Penn Virginia Resource Partners, L.P. 197,250 112,926 Other liabilities and deferred taxes 128,878 116,883 Minority interest in Penn Virginia Resource Partners, L.P. 305,515 182,891 Shareholders' equity 260,022 252,860 ---------- -------- Total liabilities and shareholders' equity $1,076,990 $783,335 ========== ======== CONSOLIDATED STATEMENTS OF CASH FLOWS - unaudited (in thousands) Three Months Ended Six Months Ended June 30, June 30, ------------------- ------------------ 2005 2004 2005 2004 ---------- -------- --------- -------- Operating Activities Net income $ 7,647 $ 12,080 $ 14,687 $ 22,222 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 19,779 13,387 35,623 27,543 Unrealized loss (gain) on derivatives, net of settlements (1,394) - 12,923 - Minority interest 10,246 4,695 8,590 9,198 Deferred income taxes 500 4,423 4,043 6,964 Dry hole and unproved leasehold expense 16,477 964 18,916 2,646 Other 289 1,086 1,889 2,136 ---------- -------- --------- -------- Operating cash flow (see attached table "Reconciliation of Certain Non-GAAP Financial Measures") 53,544 36,635 96,671 70,709 Changes in operating assets and liabilities 271 (2,580) (12,005) (12,110) ---------- -------- --------- -------- Net cash provided by operating activities 53,815 34,055 84,666 58,599 ---------- -------- --------- -------- Investing Activities Proceeds from sale of properties 985 37 10,751 415 Additions to property and equipment (40,374) (34,114) (77,960) (49,629) Acquisitions, net of cash acquired (17,693) - (222,677) - Other - 58 - 208 ---------- -------- --------- -------- Net cash used in investing activities (57,082) (34,019) (289,886) (49,006) ---------- -------- --------- -------- Financing Activities Dividends paid (2,082) (2,060) (4,163) (4,111) Distributions paid to minority interest holders (7,968) (5,351) (13,756) (10,779) Proceeds from issuance of PVR partners' capital 1,251 - 126,436 - Net proceeds from (repayments of) PVA borrowings 11,000 8,000 13,000 (1,000) Net proceeds from (repayments of) PVR borrowings 5,700 (1,000) 86,000 (1,000) Payments for debt issuance costs - - (2,039) - Issuance of stock 60 1,863 557 3,803 ---------- -------- --------- -------- Net cash provided by (used in) financing activities 7,961 1,452 206,035 (13,087) ---------- -------- --------- -------- Net increase (decrease) in cash and cash equivalents 4,694 1,488 815 (3,494) Cash and cash equivalents- beginning balance 21,592 13,026 25,471 18,008 ---------- -------- --------- -------- Cash and cash equivalents- ending balance $ 26,286 $ 14,514 $ 26,286 $ 14,514 ========== ======== ========= ======== PENN VIRGINIA CORPORATION QUARTER SEGMENT INFORMATION - unaudited (Dollars in thousands except where noted) Oil and Gas Coal ----------------------- ---------- Amount (per Mcfe)* ----------- ----------- Three months ended June 30, 2005 Production Oil, condensate and gas (MMcfe) 6,894 Natural gas (MMcf) 6,438 Crude oil and condensate (Mbbl) 76 Coal royalty tons (thousands of tons) 7,250 Inlet volumes (MMcf) Revenues Natural gas $ 44,680 $ 6.94 $ - Oil and condensate 3,346 44.03 - Natural gas midstream - - Coal royalties - 20,129 Other 103 3,564 ----------- ----------- ---------- Total revenues 48,129 6.98 23,693 ----------- ----------- ---------- Expenses Cost of gas purchased - - - Operating 3,954 0.57 1,141 Exploration 17,931 2.60 - Taxes other than income 3,246 0.47 230 General and administrative 2,450 0.36 1,692 Depreciation, depletion and amortization 11,676 1.69 4,328 ----------- ----------- ---------- Total expenses 39,257 5.69 7,391 ----------- ----------- ---------- Operating income (loss) $ 8,872 $ 1.29 $ 16,302 Additions to property and equipment and acquisitions, net of cash acquired (1) $ 48,036 $ 19,659 Oil and Gas Coal ----------------------- ---------- Amount (per Mcfe)* ----------- ----------- Three months ended June 30, 2004 Production Oil, condensate and gas (MMcfe) 5,858 Natural gas (MMcf) 5,294 Crude oil and condensate (Mbbl) 94 Coal royalty tons (thousands of tons) 7,941 Revenues Natural gas $ 32,444 $ 6.13 $ - Oil and condensate 3,030 32.23 - Natural gas midstream - - Coal royalties - 17,517 Other 44 1,215 ----------- ----------- ---------- Total revenues 35,518 6.06 18,732 ----------- ----------- ---------- Expenses Cost of gas purchased - - - Operating 3,271 0.56 2,048 Exploration 1,835 0.31 - Taxes other than income 2,147 0.37 230 General and administrative 1,823 0.31 1,986 Depreciation, depletion and amortization 8,426 1.44 4,852 ----------- ----------- ---------- Total expenses 17,502 2.99 9,116 ----------- ----------- ---------- Operating income (loss) $ 18,016 $ 3.07 $ 9,616 Additions to property and equipment and acquisitions, net of cash acquired $ 33,614 $ 463 Natural Gas Midstream ------------- (per All Amount Mcf) Other Consolidated ------- ----- ------- ------------ Three months ended June 30, 2005 Production Oil, condensate and gas (MMcfe) Natural gas (MMcf) Crude oil and condensate (Mbbl) Coal royalty tons (thousands of tons) Inlet volumes (MMcf) 11,489 Revenues Natural gas $ - $ - $ 44,680 Oil and condensate - - 3,346 Natural gas midstream 86,995 - 86,995 Coal royalties - - 20,129 Other 666 261 4,594 ------- ------- ------------ Total revenues 87,661 $7.63 261 159,744 ------- ------- ------------ Expenses Cost of gas purchased 74,374 6.47 - 74,374 Operating 3,174 0.28 133 8,402 Exploration - - - 17,931 Taxes other than income 486 0.04 92 4,054 General and administrative 1,822 0.16 2,823 8,787 Depreciation, depletion and amortization 3,671 0.32 104 19,779 ------- ----- ------- ------------ Total expenses 83,527 7.27 3,152 133,327 ------- ----- ------- ------------ Operating income (loss) $ 4,134 $0.36 $(2,891)$ 26,417 Additions to property and equipment and acquisitions, net of cash acquired (1) $ 3,565 $ 57 $ 71,317 Natural Gas Midstream ------------- (per All Amount Mcf) Other Consolidated ------- ----- ------- ------------ Three months ended June 30, 2004 Production Oil, condensate and gas (MMcfe) Natural gas (MMcf) Crude oil and condensate (Mbbl) Coal royalty tons (thousands of tons) Revenues Natural gas $ - $ - $ 32,444 Oil and condensate - - 3,030 Natural gas midstream - - - Coal royalties - - 17,517 Other - 319 1,578 ------- ------- ------------ Total revenues - $ - 319 54,569 ------- ------- ------------ Expenses Cost of gas purchased - - - - Operating - - 150 5,469 Exploration - - 1,835 Taxes other than income - - 87 2,464 General and administrative - - 1,940 5,749 Depreciation, depletion and amortization - - 109 13,387 ------- ----- ------- ------------ Total expenses - - 2,286 28,904 ------- ----- ------- ------------ Operating income (loss) $ - $ - $(1,967)$ 25,665 Additions to property and equipment and acquisitions, net of cash acquired $ - $ 37 $ 34,114 * Natural gas revenues are shown per Mcf, oil and gas condensate revenues are shown per Bbl, and all other amounts are shown per Mcfe. (1) Oil and gas segment includes noncash expenditures of $13.2 million. PENN VIRGINIA CORPORATION YEAR TO DATE SEGMENT INFORMATION - unaudited (Dollars in thousands except where noted) Oil and Gas Coal ----------------- -------- Amount (per Mcfe)* -------- -------- Six months ended June 30, 2005 Production Oil, condensate and gas (MMcfe) 13,319 Natural gas (MMcf) 12,353 Crude oil and condensate (Mbbl) 161 Coal royalty tons (thousands of tons) 13,965 Inlet volumes (MMcf) Revenues Natural gas $82,940 $ 6.71 $ - Oil and condensate 6,759 41.98 - Natural gas midstream - - Coal royalties - 38,182 Other 176 5,323 -------- -------- -------- Total revenues 89,875 6.75 43,505 -------- -------- -------- Expenses Cost of gas purchased - - - Operating 7,076 0.53 2,173 Exploration 25,590 1.92 - Taxes other than income 6,060 0.45 508 General and administrative 4,283 0.32 4,045 Depreciation, depletion and amortization 22,344 1.68 8,183 -------- -------- -------- Total expenses 65,353 4.90 14,909 -------- -------- -------- Operating Income $24,522 $ 1.85 $28,596 Additions to property and equipment and acquisitions, net of cash acquired (1) $85,325 $29,031 Natural Gas Midstream ------------------ Amount (per Mcf) All Other Consolidated --------- -------- --------- ------------ Six months ended June 30, 2005 Production Oil, condensate and gas (MMcfe) Natural gas (MMcf) Crude oil and condensate (Mbbl) Coal royalty tons (thousands of tons) Inlet volumes (MMcf) 15,396 Revenues Natural gas $ - $ - $ 82,940 Oil and condensate - - 6,759 Natural gas midstream 113,273 - 113,273 Coal royalties - - 38,182 Other 766 535 6,800 --------- --------- ------------ Total revenues 114,039 $ 7.41 535 247,954 --------- --------- ------------ Expenses Cost of gas purchased 96,211 6.25 - 96,211 Operating 3,969 0.26 283 13,501 Exploration - - - 25,590 Taxes other than income 590 0.04 243 7,401 General and administrative 2,234 0.14 4,945 15,507 Depreciation, depletion and amortization 4,895 0.32 201 35,623 --------- -------- --------- ------------ Total expenses 107,899 7.01 5,672 193,833 --------- -------- --------- ------------ Operating Income $ 6,140 $ 0.40 $ (5,137) $ 54,121 Additions to property and equipment and acquisitions, net of cash acquired (1) $199,466 $ 65 $ 313,887 Oil and Gas Coal ----------------- -------- Amount (per Mcfe)* -------- -------- Six months ended June 30, 2004 Production Oil and gas (MMcfe) 12,313 Natural gas (MMcf) 11,053 Crude oil (Mbbl) 210 Coal royalty tons (thousands of tons) 15,894 Revenues Natural gas $66,408 $ 6.01 $ - Oil and condensate 6,518 31.04 - Natural gas midstream - - Coal royalties - 34,377 Other 73 2,318 -------- -------- -------- Total revenues 72,999 5.93 36,695 -------- -------- -------- Expenses Cost of gas purchased - - - Operating 6,216 0.50 3,797 Exploration 7,395 0.60 - Taxes other than income 4,959 0.40 514 General and administrative 3,617 0.29 3,959 Depreciation, depletion and amortization 17,708 1.44 9,621 -------- -------- -------- Total expenses 39,895 3.23 17,891 -------- -------- -------- Operating Income $33,104 $ 2.70 $18,804 Additions to property and equipment and acquisitions, net of cash acquired (2) $48,693 $ 1,927 Natural Gas Midstream ------------------ Amount (per Mcf) All Other Consolidated --------- -------- --------- ------------ Six months ended June 30, 2004 Production Oil and gas (MMcfe) Natural gas (MMcf) Crude oil (Mbbl) Coal royalty tons (thousands of tons) Revenues Natural gas $ - $ - $ 66,408 Oil and condensate - - 6,518 Natural gas midstream - - - Coal royalties - - 34,377 Other - 501 2,892 --------- --------- ------------ Total revenues - $ - 501 110,195 --------- --------- ------------ Expenses Cost of gas purchased - - - - Operating - - 300 10,313 Exploration - - - 7,395 Taxes other than income - - 21 5,494 General and administrative - - 3,855 11,431 Depreciation, depletion and amortization - - 214 27,543 --------- -------- --------- ------------ Total expenses - - 4,390 62,176 --------- -------- --------- ------------ Operating Income $ - $ - $ (3,889) $ 48,019 Additions to property and equipment and acquisitions, net of cash acquired (2) $ - $ 69 $ 50,689 * Natural gas revenues are shown per Mcf, oil and gas condensate revenues are shown per Bbl, and all other amounts are shown per Mcfe. (1) Oil and gas segment includes noncash expenditures of $13.2 million. (2) Coal segment includes noncash expenditures of $1.1 million. PENN VIRGINIA CORPORATION RECONCILIATION OF CERTAIN NON-GAAP FINANCIAL MEASURES - unaudited (in thousands) Three Months Ended Six Months Ended June 30, June 30, ----------------- ------------------ 2005 2004 2005 2004 -------- -------- --------- -------- Reconciliation of GAAP "Net cash provided by operating activities" to Non-GAAP "Operating cash flow" --------------------------------- Net cash provided by operating activities $53,815 $34,055 $ 84,666 $58,599 Adjustments: Changes in operating assets and liabilities (271) 2,580 12,005 12,110 -------- -------- --------- -------- Operating cash flow (see Note 1 below) $53,544 $36,635 $ 96,671 $70,709 ======== ======== ========= ======== Reconciliation of GAAP "Additions to property and equipment" to Non-GAAP "Capital expenditures" --------------------------------- Additions to property and equipment $40,374 $34,114 $ 77,960 $49,629 Acquisitions, net of cash acquired 17,693 - 222,677 - Seismic expenditures 1,177 752 6,079 4,547 Delay rentals and other expenditures 276 90 591 173 Noncash lease acquisitions 13,250 - 13,250 1,060 Less: Capitalized interest (687) (409) (1,307) (851) Add: Change in noncash well accruals (3,591) 1,245 (880) 2,926 -------- -------- --------- -------- Capital expenditures (see Note 2 below) $68,492 $35,792 $318,370 $57,484 ======== ======== ========= ========

Note 1 - 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.

Note 2 - Capital expenditures represents amounts cash additions to property and equipment, plus cash paid for acquisitions, plus seismic expenditures, delay rentals and other expenditures, and non-cash well accruals, minus capitalized interest. Management believes capital expenditures provide useful information regarding the Company's capital program as a supplement to cash additions to property and equipment. 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 third quarter and full year 2005. Actual Guidance --------------------- ---------------------------- First Second Quarter Quarter YTD Third Quarter Full Year 2005 2005 2005 2005 2005 ------- ------- ---- ------------- --------- Oil & Gas Segment: --------- Production: Natural gas (Bcf) - See Note a 6.0 6.4 12.4 6.2 - 6.5 24.7 - 25.7 Crude oil and condensate (Mbbl) - See Note b 85 76 161 67 - 70 296 - 303 Equivalent production (Bcfe) 6.4 6.9 13.3 6.6 - 6.9 26.5 - 27.5 Equivalent daily production (MMcfe) 71.2 75.8 73.5 71.7 - 74.8 72.5 - 75.5 Expenses: Direct expenses $7.8 9.7 17.4 8.7 - 9.6 36.1 - 38.1 Exploration $7.7 17.9 25.6 5.5 - 6.1 35.3 - 36.4 Depreciation, depletion and amortization ($ per Mcfe) $1.66 1.69 1.68 1.69 - 1.79 1.66 - 1.76 Capital Expenditures: Development drilling $24.6 23.8 48.4 41.1 - 43.7 107.0 - 110.8 Exploratory drilling $7.3 3.4 10.7 4.5 - 4.8 17.0 - 17.6 Pipeline, gathering, facilities $3.6 1.1 4.7 2.6 - 2.7 9.0 - 9.4 Seismic $4.9 1.2 6.1 0.9 - 1.1 7.8 - 8.0 Lease acquisition, field projects and other $4.2 15.7 19.9 0.8 - 0.9 25.0 - 26.3 Total Oil & Gas Capital Expenditures $44.6 45.2 89.8 49.9 - 53.2 165.8 - 172.1 Coal Segment: ------------- Coal royalty tons (millions) 6.7 7.3 14.0 8.0 - 8.6 28.9 - 31.0 Revenues: Average royalty per ton $2.69 2.78 2.73 2.46 - 2.65 2.57 - 2.71 Other $1.7 3.6 5.3 2.4 - 2.7 10.4 - 11.5 Expenses: Direct expenses $3.6 3.1 6.7 3.5 - 3.9 13.0 - 14.3 Depreciation, depletion and amortization $3.9 4.3 8.2 5.3 - 5.8 18.0 - 19.9 Capital Expenditures: Coal segment acquisitions $9.3 15.4 24.7 74.8 - 77.9 98.6 - 102.6 Coal segment other expenditures $- 4.3 4.3 - - 3.8 9.3 - 14.3 Total Coal Capital Expenditures $9.3 19.7 29.0 74.8 - 81.6 107.9 - 116.9 Natural Gas Midstream Segment: see Note c ----------- Inlet volumes (MMcf per day) - see Note d 126 126 126 120 - 130 120 - 130 Expenses: Direct expenses $1.3 5.5 6.8 3.9 - 4.3 14.2 - 15.7 Depreciation, depletion and amortization $1.2 3.7 4.9 3.5 - 3.9 11.6 - 12.9 Capital Expenditures: Midstream segment acquisitions, net of cash acquired $195.7 2.3 198.0 - - - 198.0 - 200.0 Midstream segment other expenditures $0.3 1.3 1.6 2.1 - 2.4 5.4 - 6.0 Total Midstream Capital Expenditures $196.0 3.6 199.6 2.1 - 2.4 203.4 - 206.0 Corporate and Other: ------------- General and administrative expense $2.1 2.8 4.9 2.0 - 2.2 8.6 - 9.5 Interest expense: PVA average long-term debt outstanding $75.3 83.3 79.4 90.9 - 100.4 80.9 - 89.4 PVA net interest rate 5% 5.3% 5.0% 5.0% 5.0% Percentage capitalized - see Note e 75% 66% 70% 55% - 70% 55% - 70% PVR average long-term debt outstanding $134.8 205.3 170.1 228.2 - 237.5 204.4 - 212.8 PVR net interest rate assumed 5.0% 5.5% 5.3% 6% 6% Minority interest in PVR - see Note f $(1.7) 10.2 8.6 see Note f see Note f Income tax rate - see Note g 41% 39% 40% 39% 39% Other capital expenditures $- 0.1 0.1 0.2 - 0.3 0.5 - 0.6 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 oil and gas segment's natural gas hedging positions are summarized below: Weighted Average Price per Mmbtu ---------------- Average Collars Mmbtu ---------------- Per Day Floor Ceiling -------- -------- ------- Third Quarter 2005 30,000 $5.60 $7.59 Fourth Quarter 2005 29,000 $5.76 $8.68 First Quarter 2006 20,689 $5.73 $9.41 Second Quarter 2006 11,648 $5.14 $10.04 Third Quarter 2006 4,000 $6.50 $9.32 Fourth Quarter 2006 4,000 $6.50 $9.32 The costless collar natural gas prices per Mmbtu per quarter include the effects of basis differentials, if any, that may be hedged. b - The oil and gas segment's oil hedging positions are summarized below: Weighted Average Price per Bbl ---------------- Average Collars Bbbls ---------------- Per Day Floor Ceiling -------- -------- ------- Third Quarter 2005 200 $42.00 $47.75 Fourth Quarter 2005 200 $42.00 $47.75 First Quarter 2006 (Jan and Feb only) 200 $42.00 $47.75 c - Actual results and full year guidance include the natural gas midstream segment from the date of the Cantera Acquisition in March 2005. d - The natural gas midstream segment's natural gas liquids, natural gas and oil hedging positions are summarized below: Average Weighted Volume Average Per Day Price -------- --------- Ethane Swaps (gallons) (per gallon) ------------ Third Quarter 2005 - Fourth Quarter 2006 68,800 $0.4770 First Quarter 2007 - Fourth Quarter 2007 34,440 $0.5050 First Quarter 2008 - Fourth Quarter 2008 34,440 $0.4700 Propane Swaps (gallons) (per gallon) ------------- Third Quarter 2005 - Fourth Quarter 2006 52,080 $0.7060 First Quarter 2007 - Fourth Quarter 2007 26,040 $0.7550 First Quarter 2008 - Fourth Quarter 2008 26,040 $0.7175 Crude Oil Swaps (Bbls) (per Bbl) --------------- Third Quarter 2005 - Fourth Quarter 2006 1,100 $44.45 First Quarter 2007 - Fourth Quarter 2007 560 $50.80 First Quarter 2008 - Fourth Quarter 2008 560 $49.27 Natural Gas Swaps (Mmbtu) (per Mmbtu) ----------------- Third Quarter 2005 - Fourth Quarter 2006 7,500 $7.05 First Quarter 2007 - Fourth Quarter 2008 4,000 $6.97 e - 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. f - Penn Virginia owns 39 percent of Penn Virginia Resource Partners, L.P. (PVR). Minority interest reflects the remaining 61 percent owned by parties other than Penn Virginia. g - 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.

Source: Business Wire

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