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Penn Virginia Corporation Announces Results for Third Quarter of 2005; Reports Record Cash Flow

Posted on: Wednesday, 2 November 2005, 18:01 CST

Penn Virginia Corporation (NYSE:PVA) today reported results for the third quarter of 2005, including quarterly net income of $20.0 million, or $1.07 per diluted share, compared to $6.4 million, or $0.35 per diluted share, for the third quarter of 2004. Net cash provided by operating activities was a record $63.8 million, a 53 percent increase over $41.6 million reported for the third quarter of 2004 and 19 percent higher than the previous record of $53.8 million established in the second quarter of 2005. Operating cash flow, a non-GAAP measure, was a record $66.5 million, a 75 percent increase over the third quarter of 2004, and 24 percent higher than the previous record established in 2005's second quarter. The increases in net income and cash flow were primarily due to increased natural gas revenues as a result of higher prices and production volumes and increased contributions from the coal and new natural gas midstream segments. In addition to those factors, net income for the third quarter of 2005 increased by $0.8 million, or $0.04 per diluted share, due to a non-cash, unrealized gain on derivatives, adjusted for minority interest and taxes, resulting from the ineffectiveness of open commodity price hedges related to the natural gas midstream business of Penn Virginia Resource Partners, L.P. (NYSE:PVR).

In the first nine months of 2005, PVA reported net income of $34.7 million, or $1.85 per diluted share, compared to $28.7 million, or $1.55 per diluted share, for the first nine months of 2004. Net cash provided by operating activities was $148.5 million for the first nine months of 2005, a 48 percent increase over $100.2 million reported for the same period of 2004. Operating cash flow, a non-GAAP measure, was $163.1 million for the first nine months of 2005, or 50 percent above $108.7 million reported for the same period of 2004.

Oil and Gas Segment Review

Oil and gas production for the third quarter of 2005 was 6.9 billion cubic feet equivalent (Bcfe), a 23 percent increase from 5.6 Bcfe in the third quarter of 2004. See the Company's October 26, 2005 news release for a more detailed discussion of third quarter 2005 drilling and production operations for the oil and gas segment. Oil and gas operating income for the third quarter of 2005 was a record $27.0 million, compared to $9.4 million reported for the same quarter of 2004. Primary reasons for the quarter-to-quarter increase in operating income are discussed below.

Total revenues in the oil and gas segment increased by 75 percent to $57.8 million from $33.0 million in the third quarter of 2004, due primarily to the following:

-- Increased realized prices for natural gas accounted for

approximately two-thirds of the revenues increase. The average

realized sales price for natural gas in the third quarter of

2005, which represented approximately 94 percent of the

Company's production for the quarter, was $8.35 per thousand

cubic feet (Mcf), an increase of 43 percent from $5.85 per Mcf

realized in the third quarter of 2004.

-- Increased natural gas production accounted for the remaining

one-third of the revenue increase. The 23 percent production

increase from 5.6 Bcfe in the third quarter of 2004 to 6.9

Bcfe in the third quarter of 2005 was due primarily to new

production in 2005 from increased drilling, including the

horizontal coalbed methane (CBM) project in Appalachia, the

Cotton Valley play in east Texas and north Louisiana, and the

Selma Chalk development play in Mississippi. Furthermore, the

Company's Appalachian production in 2005 was not subject to

the curtailment experienced during 2004.

-- These increases were partially offset by the first quarter

2005 sale of certain non-strategic oil and gas properties in

west Texas, production shut-ins along the Gulf Coast as a

result of hurricanes Katrina and Rita, and normal field

decline.

Total oil and gas segment expenses were $30.8 million compared to $23.6 million in the third quarter of 2004. The 31 percent increase was primarily related to:

-- An increase in operating expenses, to $4.6 million in the

third quarter of 2005 from $3.3 million in the third quarter

of 2005. The increase was primarily due to additional

compressor rentals at fields with increased production and

increased water disposal costs.

-- An increase in taxes other than income, to $3.4 million in the

third quarter of 2005 from $2.3 million in the third quarter

of 2005, primarily due to higher severance taxes as a result

of increased production and higher gas prices. This increase

was partially offset by tax refunds.

-- An impairment charge in the third quarter of 2005 of $3.5

million related to a change in estimate of the reserve base of

a field in south Texas.

-- An increase in depreciation, depletion and amortization (DD&A)

expense, to $11.4 million in the third quarter of 2005 from

$8.3 million in the third quarter of 2004. The increase was

the result of the 23 percent quarter-to-quarter production

increase and higher average depletion rates. The DD&A rate

increased to $1.66 per Mcfe produced in the third quarter of

2005 from $1.47 per Mcfe produced in the third 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.

-- The above increases in oil and gas segment expenses were

partially offset by a decrease in exploration expenses, to

$6.0 million in the third quarter of 2005 from $7.5 million in

the third quarter of 2004.

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

Third quarter 2005 operating income in the coal operating segment was a record $16.6 million, or 58 percent higher than the $10.5 million reported in the third quarter of 2004. Primary reasons for the improved operating results were as follows:

-- Coal royalty revenues were a record $22.7 million in the third

quarter of 2005, a 26 percent increase over $18.0 million in

the third quarter of 2004, due primarily to a higher average

royalty per ton. The average royalty per ton was $2.67 in the

third quarter of 2005, an 18 percent increase over the average

royalty of $2.26 in the third quarter of 2004. This 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 increased to 8.5 million tons

in the third quarter of 2005 from 8.0 million tons in the same

quarter of 2004, primarily due to production from newly

acquired properties in the western Kentucky portion of the

Illinois basin.

-- Other revenues increased to $3.2 million in the third quarter

of 2005 from $1.4 million in the third quarter of 2004. The

increase was primarily due to increased coal services revenues

and additional transportation-related fees and overriding oil

and gas royalty interest revenues as a result of an April 2005

acquisition in Appalachia.

-- Non-cash DD&A expense increased to $5.3 million in the third

quarter of 2005 from $4.8 million in the same quarter of last

year, primarily as a result of higher production.

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

Third quarter 2005 operating income in the natural gas midstream segment acquired in March 2005 from Cantera Gas Resources, LLC (the "Cantera Acquisition") was $5.9 million, consisting of the following:

-- Natural gas midstream revenues were $103.9 million and

included revenues from the sale of residue gas, natural gas

liquids and condensate, and from gathering and transportation

fees. Inlet volumes at the midstream segment's gas processing

plants and gathering systems were approximately 11.6 billion

cubic feet during the third quarter, or approximately 126

million cubic feet per day.

-- Cost of gas purchased of $89.6 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 $14.2 million, or $1.23 per

thousand cubic feet of plant inlet gas.

-- Operating costs directly associated with the operations of the

natural gas midstream segment were $2.7 million for the third

quarter of 2005.

-- DD&A expense of $3.9 million for the third quarter of 2005

included $1.2 million of amortization of intangible costs and

$2.7 million of depreciation on property, plant and equipment

related to the Cantera Acquisition.

Partnership Distributions and Conversion of Subordinated Units

PVR will pay a quarterly cash distribution covering the period July 1 through September 30, 2005 in the amount of $0.65 per unit, or an annualized rate of $2.60 per unit, on November 14, 2005 to unit holders of record as of November 3, 2005.

Penn Virginia Corporation is the general partner of PVR and it owns approximately 2.1 million common units and approximately 5.7 million subordinated units. In accordance with the terms of PVR's partnership agreement, approximately 1.9 million of the subordinated units will convert to common units upon payment of the quarterly cash distribution in November 2005. The remaining 3.8 million subordinated units are expected to convert to common units in November 2006 provided minimum quarterly distributions are paid and other conditions are met.

Capital Resources

As of September 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 September 30, 2005 were $257.9 million, including $8.1 million of senior unsecured notes classified as current portion of long-term debt. Interest expense increased to $4.2 million in the third quarter of 2005 from $1.7 million for the same quarter of 2004, primarily as a result of interest on increased borrowings related to PVR's acquisition of its midstream business segment and coal property acquisitions in 2005.

Management Comment

A. James Dearlove, Penn Virginia President and CEO, said, "Strong commodity prices and the success of our growth strategy in all of our businesses resulted in record cash flows during the third quarter of 2005.

"In the Company's oil and gas segment, prices realized during the third quarter of 2005 were at company-record levels, and were the largest single factor in our increased operating income and cash flows. In addition, our large development projects, especially the horizontal CBM project in Appalachia, the Cotton Valley play in east Texas, and the Selma Chalk program in Mississippi, fueled our production growth over the last year. During the fourth quarter of 2005, we expect oil and gas segment capital spending to be $50 to $55 million, with the majority for the completion of our development and exploratory drilling program and for lease acquisitions, both in our core areas and to expand into other prospective plays.

"In PVR's coal segment, coal royalty revenues increased 13 percent from the second quarter of 2005 to the third quarter, driven primarily by royalties from the Illinois basin property acquired in July 2005 and an increase in royalties from a longwall mine on a subleased property in West Virginia. The strong pricing in the coal market is expected to result in record levels of revenues and operating income in this segment for 2005.

"PVR's natural gas midstream gathering and processing segment has continued to outperform our acquisition model through its first seven months of operations as part of PVR. Third quarter 2005 plant and gathering system inlet volumes remained steady at 126 million cubic feet per day and the strong commodity pricing environment resulted in an increase in gross processing margin from $1.10 per Mcf of inlet volume in 2005's second quarter to $1.23 per Mcf in the third quarter."

Guidance Update for 2005

See the 2005 Guidance Table included in this release for guidance estimates for the fourth 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

As announced in our October 7, 2005, press release, a conference call and webcast, at which management will discuss third quarter 2005 results and the outlook for the remainder of 2005, is scheduled for Thursday, November 3, 2005, at 3:00 p.m. EST. 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 November 4, 2005, at 11:59 p.m. EST by dialing 1-877-660-6853 and using replay passcodes: account number 286 and conference number 172571. An on-demand replay of the call will also be available at the Company's website 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.

Forward-looking statements: Penn Virginia Corporation is including the following cautionary statement to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of, the Company. With the exception of historical matters, any matters discussed are forward-looking and, therefore, involve risks and uncertainties that could cause actual results to differ materially from projected results. 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 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 supply 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. Except as required by applicable securities laws, the Company does not intend to update its forward-looking statements. PENN VIRGINIA CORPORATION OPERATIONS SUMMARY Three Months Ended Nine Months Ended September 30, September 30, ----------------- ----------------- 2005 2004 2005 2004 -------- -------- -------- -------- Production Natural gas (MMcf) 6,473 5,052 18,826 16,105 Oil and condensate (Mbbl) 69 97 230 307 Total oil, condensate and natural gas production (MMcfe) 6,887 5,634 20,206 17,947 Coal royalty tons (thousands) 8,531 7,971 22,496 23,865 Inlet volumes (MMcf) 11,567 - 26,963 - Prices and margin Natural gas ($/Mcf) $ 8.35 $ 5.85 $ 7.28 $ 5.96 Oil and condensate ($/Bbl) $ 48.83 $ 34.55 $ 44.03 $ 32.15 Coal royalties ($/ton) $ 2.67 $ 2.26 $ 2.71 $ 2.20 Midstream processing margin ($/Mcf) $ 1.23 $ - $ 1.16 $ - CONSOLIDATED STATEMENTS OF EARNINGS - unaudited (in thousands, except per share data) Three Months Ended Nine Months Ended September 30, September 30, ----------------- ----------------- 2005 2004 2005 2004 -------- -------- -------- -------- Revenues Natural gas $ 54,071 $ 29,530 $137,011 $ 95,938 Oil and condensate 3,369 3,351 10,128 9,869 Natural gas midstream 103,861 - 217,134 - Coal royalties 22,739 18,018 60,921 52,395 Other 4,129 1,842 10,929 4,734 -------- -------- -------- -------- Total revenues 188,169 52,741 436,123 162,936 -------- -------- -------- -------- Expenses Cost of gas purchased 89,622 - 185,833 - Operating 9,141 5,236 22,642 15,549 Exploration 5,960 7,508 31,550 14,903 Taxes other than income 4,080 2,682 11,481 8,176 General and administrative 8,369 6,643 23,876 18,074 Impairment of oil and gas properties 3,488 - 3,488 - Depreciation, depletion and amortization 20,701 13,179 56,324 40,722 -------- -------- -------- -------- Total expenses 141,361 35,248 335,194 97,424 -------- -------- -------- -------- Operating income 46,808 17,493 100,929 65,512 Other income (expense) Interest expense (4,195) (1,719) (11,070) (4,573) Interest and other income 276 274 971 806 Unrealized gain (loss) on derivatives 3,578 - (11,186) - -------- -------- -------- -------- Income from operations before minority interest and income taxes 46,467 16,048 79,644 61,745 Minority interest 13,684 5,073 22,274 14,271 Income tax expense 12,793 4,541 22,693 18,818 -------- -------- -------- -------- Net income $ 19,990 $ 6,434 $ 34,677 $ 28,656 ======== ======== ======== ======== Per share data Net income per share, basic $ 1.08 $ 0.35 $ 1.87 $ 1.57 ======== ======== ======== ======== Net income per share, diluted $ 1.07 $ 0.35 $ 1.85 $ 1.55 ======== ======== ======== ======== Weighted average shares outstanding, basic 18,560 18,357 18,524 18,268 Weighted average shares outstanding, diluted 18,760 18,574 18,707 18,452 PENN VIRGINIA CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands) September 30, December 31, 2005 2004 ------------- ------------- (unaudited) Assets Current assets $ 169,313 $ 84,239 Net property and equipment 960,598 665,488 Equity investments 26,395 27,881 Goodwill 8,066 - Intangibles, net 37,183 - Derivative assets 9,256 225 Other assets 6,244 5,502 ------------- ------------- Total assets $ 1,217,055 $ 783,335 ============= ============= Liabilities and Shareholders' Equity Current liabilities $ 166,599 $ 41,775 Long-term debt 89,000 76,000 Long-term debt of Penn Virginia Resource Partners, L.P. 249,798 112,926 Other liabilities and deferred taxes 136,758 116,883 Minority interest in Penn Virginia Resource Partners, L.P. 321,229 182,891 Shareholders' equity 253,671 252,860 ------------- ------------- Total liabilities and shareholders' equity $ 1,217,055 $ 783,335 ============= ============= CONSOLIDATED STATEMENTS OF CASH FLOWS - unaudited (in thousands) Three Months Ended Nine Months Ended September 30, September 30, ------------------- ------------------- 2005 2004 2005 2004 --------- --------- --------- --------- Operating Activities Net income $ 19,990 $ 6,434 $ 34,677 $ 28,656 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 20,701 13,179 56,324 40,722 Unrealized loss (gain) on derivatives, net of settlements (5,462) - 7,461 - Impairment of oil and gas properties 3,488 - 3,488 - Minority interest 13,684 5,073 22,274 14,271 Deferred income taxes 6,750 6,350 10,793 13,314 Dry hole and unproved leasehold expense 2,733 6,676 21,649 9,322 Other 4,575 243 6,464 2,379 --------- --------- --------- --------- Operating cash flow (see attached table "Reconciliation of Certain Non-GAAP Financial Measures") 66,459 37,955 163,130 108,664 Changes in operating assets and liabilities (2,618) 3,640 (14,623) (8,470) --------- --------- --------- --------- Net cash provided by operating activities 63,841 41,595 148,507 100,194 --------- --------- --------- --------- Investing Activities Proceeds from sale of properties 6,624 610 17,375 1,025 Additions to property and equipment (51,938) (38,302) (129,898) (87,931) Acquisitions, net of cash acquired (67,492) (28,442) (290,169) (28,442) Other - 190 - 398 --------- --------- --------- --------- Net cash used in investing activities (112,806) (65,944) (402,692) (114,950) --------- --------- --------- --------- Financing Activities Dividends paid (2,087) (2,065) (6,250) (6,176) Distributions paid to minority interest holders (8,491) (5,556) (22,247) (16,335) Proceeds from issuance of PVR partners' capital 39 - 126,475 - Net proceeds from (repayments of) PVA borrowings - 10,000 13,000 9,000 Net proceeds from (repayments of) PVR borrowings 54,200 27,000 140,200 26,000 Payments for debt issuance costs (346) - (2,385) - Issuance of stock 1,370 40 1,927 3,843 --------- --------- --------- --------- Net cash provided by (used in) financing activities 44,685 29,419 250,720 16,332 --------- --------- --------- --------- Net increase (decrease) in cash and cash equivalents (4,280) 5,070 (3,465) 1,576 Cash and cash equivalents- beginning balance 26,286 14,514 25,471 18,008 --------- --------- --------- --------- Cash and cash equivalents- ending balance $ 22,006 $ 19,584 $ 22,006 $ 19,584 ========= ========= ========= ========= PENN VIRGINIA CORPORATION QUARTER SEGMENT INFORMATION - unaudited (Dollars in thousands except where noted) Oil and Gas Coal -------------------- -------- Amount (per Mcfe)* -------- ---------- Three months ended September 30, 2005 Production Oil, condensate and gas (MMcfe) 6,887 Natural gas (MMcf) 6,473 Crude oil and condensate (Mbbl) 69 Coal royalty tons (thousands of tons) 8,531 Inlet volumes (MMcf) Revenues Natural gas $ 54,071 $ 8.35 $ - Oil and condensate 3,369 48.83 - Natural gas midstream - - Coal royalties - 22,739 Other 405 3,184 -------- ---------- -------- Total revenues 57,845 8.40 25,923 -------- ---------- -------- Expenses Cost of gas purchased - - - Operating 4,553 0.66 1,931 Exploration 5,960 0.87 - Taxes other than income 3,424 0.50 219 General and administrative 1,966 0.29 1,917 Impairment of oil and gas properties 3,488 0.51 - Depreciation, depletion and amortization 11,433 1.66 5,257 -------- ---------- -------- Total expenses 30,824 4.49 9,324 -------- ---------- -------- Operating income (loss) $ 27,021 $ 3.91 $ 16,599 -------- ---------- -------- Additions to property and equipment and acquisitions, net of cash acquired (2) $ 34,808 $ 81,339 Natural Gas All Midstream (1) Other Consolidated ------------------- ------- ------------ Amount (per Mcf) -------- --------- Three months ended September 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) 11,567 Revenues Natural gas $ - $ - $ 54,071 Oil and condensate - - 3,369 Natural gas midstream 103,861 - 103,861 Coal royalties - - 22,739 Other 430 110 4,129 -------- ------- ------------ Total revenues 104,291 $ 9.02 110 188,169 -------- ------- ------------ Expenses Cost of gas purchased 89,622 7.75 - 89,622 Operating 2,657 0.23 - 9,141 Exploration - - - 5,960 Taxes other than income 340 0.03 97 4,080 General and administrative 1,873 0.16 2,613 8,369 Impairment of oil and gas properties - - - 3,488 Depreciation, depletion and amortization 3,902 0.34 109 20,701 -------- --------- ------- ------------ Total expenses 98,394 8.51 2,819 141,361 -------- --------- ------- ------------ Operating income (loss) $ 5,897 $ 0.51 $(2,709) $ 46,808 -------- --------- ------- ------------ Additions to property and equipment and acquisitions, net of cash acquired (2) $ 4,344 $ 85 $ 120,576 Oil and Gas Coal -------------------- -------- Amount (per Mcfe)* -------- ---------- Three months ended September 30, 2004 Production Oil, condensate and gas (MMcfe) 5,634 Natural gas (MMcf) 5,052 Crude oil and condensate (Mbbl) 97 Coal royalty tons (thousands of tons) 7,971 Revenues Natural gas $ 29,530 $ 5.85 $ - Oil and condensate 3,351 34.55 - Natural gas midstream - - Coal royalties - 18,018 Other 134 1,379 -------- ---------- -------- Total revenues 33,015 5.86 19,397 -------- ---------- -------- Expenses Cost of gas purchased - - - Operating 3,309 0.59 1,777 Exploration 7,508 1.33 - Taxes other than income 2,349 0.42 239 General and administrative 2,110 0.37 2,077 Depreciation, depletion and amortization 8,307 1.47 4,764 -------- ---------- -------- Total expenses 23,583 4.18 8,857 -------- ---------- -------- Operating income (loss) $ 9,432 $ 1.68 $ 10,540 -------- ---------- -------- Additions to property and equipment and acquisitions, net of cash acquired $ 38,195 $ 72 Natural Gas All Midstream (1) Other Consolidated ------------------- -------- ------------ Amount (per Mcf) -------- --------- Three months ended September 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 $ - $ - $ 29,530 Oil and condensate - - 3,351 Natural gas midstream - - - Coal royalties - - 18,018 Other - 329 1,842 -------- -------- ------------ Total revenues - $ - 329 52,741 -------- -------- ------------ Expenses Cost of gas purchased - - - - Operating - - 150 5,236 Exploration - - 7,508 Taxes other than income - - 94 2,682 General and administrative - - 2,456 6,643 Depreciation, depletion and amortization - - 108 13,179 -------- --------- -------- ------------ Total expenses - - 2,808 35,248 -------- --------- -------- ------------ Operating income (loss) $ - $ - $ (2,479)$ 17,493 -------- --------- -------- ------------ Additions to property and equipment and acquisitions, net of cash acquired $ - $ 35 $ 38,302 * 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) Natural Gas Midstream segment acquired in March 2005. (2) Coal segment includes noncash expenditures of $14.4 million. PENN VIRGINIA CORPORATION YEAR TO DATE SEGMENT INFORMATION - unaudited (Dollars in thousands except where noted) Oil and Gas Coal -------------------- -------- Amount (per Mcfe)* -------- ---------- Nine months ended September 30, 2005 Production Oil, condensate and gas (MMcfe) 20,206 Natural gas (MMcf) 18,826 Crude oil and condensate (Mbbl) 230 Coal royalty tons (thousands of tons) 22,496 Inlet volumes (MMcf) Revenues Natural gas $137,011 $ 7.28 $ - Oil and condensate 10,128 44.03 - Natural gas midstream - - Coal royalties - 60,921 Other 581 8,507 -------- ---------- -------- Total revenues 147,720 7.31 69,428 -------- ---------- -------- Expenses Cost of gas purchased - - - Operating 11,629 0.58 4,104 Exploration 31,550 1.56 - Taxes other than income 9,484 0.47 727 General and administrative 6,249 0.31 5,962 Impairment of oil and gas properties 3,488 0.17 - Depreciation, depletion and amortization 33,777 1.67 13,440 -------- ---------- -------- Total expenses 96,177 4.76 24,233 -------- ---------- -------- Operating Income $ 51,543 $ 2.55 $ 45,195 -------- ---------- -------- Additions to property and equipment and acquisitions, net of cash acquired (2) $120,133 $110,370 Natural Gas All Midstream (1) Other Consolidated ------------------- ------- ------------ Amount (per Mcf) -------- --------- Nine months ended September 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) 26,963 Revenues Natural gas $ - $ - $ 137,011 Oil and condensate - - 10,128 Natural gas midstream 217,134 - 217,134 Coal royalties - - 60,921 Other 1,196 645 10,929 -------- ------- ------------ Total revenues 218,330 $ 8.10 645 436,123 -------- ------- ------------ Expenses Cost of gas purchased 185,833 6.89 - 185,833 Operating 6,626 0.25 283 22,642 Exploration - - - 31,550 Taxes other than income 930 0.03 340 11,481 General and administrative 4,107 0.15 7,558 23,876 Impairment of oil and gas properties - - - 3,488 Depreciation, depletion and amortization 8,797 0.33 310 56,324 -------- --------- ------- ------------ Total expenses 206,293 7.65 8,491 335,194 -------- --------- ------- ------------ Operating Income $ 12,037 $ 0.45 $(7,846) $ 100,929 -------- --------- ------- ------------ Additions to property and equipment and acquisitions, net of cash acquired (2) $203,810 $ 150 $ 434,463 Oil and Gas Coal -------------------- -------- Amount (per Mcfe)* -------- ---------- Nine months ended September 30, 2004 Production Oil and gas (MMcfe) 17,947 Natural gas (MMcf) 16,105 Crude oil (Mbbl) 307 Coal royalty tons (thousands of tons) 23,865 Revenues Natural gas $ 95,938 $ 5.96 $ - Oil and condensate 9,869 32.15 - Natural gas midstream - - Coal royalties - 52,395 Other 207 3,697 -------- ---------- -------- Total revenues 106,014 5.91 56,092 -------- ---------- -------- Expenses Cost of gas purchased - - - Operating 9,525 0.53 5,574 Exploration 14,903 0.83 - Taxes other than income 7,308 0.41 753 General and administrative 5,727 0.32 6,036 Depreciation, depletion and amortization 26,015 1.45 14,385 -------- ---------- -------- Total expenses 63,478 3.54 26,748 -------- ---------- -------- Operating Income $ 42,536 $ 2.37 $ 29,344 -------- ---------- -------- Additions to property and equipment and acquisitions, net of cash acquired (3) $ 86,888 $ 1,999 Natural Gas All Midstream (1) Other Consolidated ------------------- ------- ------------ Amount (per Mcf) -------- --------- Nine months ended September 30, 2004 Production Oil and gas (MMcfe) Natural gas (MMcf) Crude oil (Mbbl) Coal royalty tons (thousands of tons) Revenues Natural gas $ - $ - $ 95,938 Oil and condensate - - 9,869 Natural gas midstream - - - Coal royalties - - 52,395 Other - 830 4,734 -------- ------- ------------ Total revenues - $ - 830 162,936 -------- ------- ------------ Expenses Cost of gas purchased - - - - Operating - - 450 15,549 Exploration - - - 14,903 Taxes other than income - - 115 8,176 General and administrative - - 6,311 18,074 Depreciation, depletion and amortization - - 322 40,722 -------- --------- ------- ------------ Total expenses - - 7,198 97,424 -------- --------- ------- ------------ Operating Income $ - $ - $(6,368) $ 65,512 -------- --------- ------- ------------ Additions to property and equipment and acquisitions, net of cash acquired (3) $ - $ 104 $ 88,991 * 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) Natural Gas Midstream segment acquired in March 2005. (2) Coal segment includes noncash expenditures of $14.4 million. (3) 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 Nine Months Ended September 30, September 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 $63,841 $41,595 $148,507 $100,194 Adjustments: Changes in operating assets and liabilities 2,618 (3,640) 14,623 8,470 --------- --------- --------- --------- Operating cash flow (see Note 1 below) $66,459 $37,955 $163,130 $108,664 ========= ========= ========= ========= Reconciliation of GAAP "Additions to property and equipment" to Non-GAAP "Capital expenditures" ------------------------------- Additions to property and equipment $51,938 $38,302 $129,898 $87,931 Acquisitions, net of cash acquired 67,492 28,442 290,169 28,442 Seismic expenditures 797 551 6,876 5,098 Delay rentals and other expenditures 2,226 281 2,817 454 Noncash lease acquisitions 14,396 - 14,396 1,060 Cash paid in third quarter for second quarter additions (13,250) - - - Sale of lease rights (6,625) - (6,625) - Less: Capitalized interest (1,118) (546) (2,425) (1,397) Add: Change in noncash well accruals 1,619 106 739 3,038 --------- --------- --------- --------- Capital expenditures (see Note 2 below) $117,475 $67,136 $435,845 $124,626 ========= ========= ========= =========

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 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 fourth quarter and full year 2005. Actual ------------------------------ First Second Third YTD Quarter Quarter Quarter 2005 2005 2005 2005 ------- ------- ------- ------ Oil & Gas Segment: -------------------------------------- Production: Natural gas (Bcf) - See Note a 6.0 6.4 6.5 18.8 Crude oil and condensate (Mbbl) - See Note b 85 76 69 230 Equivalent production (Bcfe) 6.4 6.9 6.9 20.2 Equivalent daily production (MMcfe) 71.2 75.8 75.0 74.0 Expenses: Direct expenses $ 7.8 9.7 9.9 27.4 Exploration $ 7.7 17.9 6.0 31.6 Depreciation, depletion and amortization ($ per Mcfe) $ 1.66 1.69 1.66 1.67 Capital Expenditures: Development drilling $ 24.6 23.8 28.4 76.8 Exploratory drilling $ 7.3 3.4 3.0 13.7 Pipeline, gathering, facilities $ 3.6 1.1 (0.8) 3.9 Seismic $ 4.9 1.2 0.8 6.9 Lease acquisition, field projects and other $ 4.2 15.7 0.3 20.2 Total Oil & Gas Capital Expenditures $ 44.6 45.2 31.7 121.5 Coal Segment: -------------------------------------- Coal royalty tons (millions) 6.7 7.3 8.5 22.5 Revenues: Average royalty per ton $ 2.69 2.78 2.67 2.71 Other $ 1.7 3.6 3.2 8.5 Expenses: Direct expenses $ 3.6 3.1 4.1 10.8 Depreciation, depletion and amortization $ 3.9 4.3 5.3 13.4 Capital Expenditures: Coal segment acquisitions $ 9.3 15.4 80.8 105.5 Coal segment other expenditures $ - 4.3 0.6 4.9 Total Coal Capital Expenditures $ 9.3 19.7 81.4 110.4 Natural Gas Midstream Segment: see Note c -------------------------------------- Inlet volumes (MMcf per day) - see Note d 126 126 126 126 Expenses: Direct expenses $ 1.3 5.5 4.9 11.7 Depreciation, depletion and amortization $ 1.2 3.7 3.9 8.8 Capital Expenditures: Midstream segment acquisitions, net of cash acquired $ 195.7 2.3 1.1 199.1 Midstream segment other expenditures $ 0.3 1.3 3.1 4.7 Total Midstream Capital Expenditures $ 196.0 3.6 4.2 203.8 Corporate and Other: -------------------------------------- General and administrative expense $ 2.1 2.8 2.6 7.6 Interest expense: PVA average long-term debt outstanding $ 75.3 83.3 92.8 83.8 PVA net interest rate 4.7% 5.3% 5.9% 5.3% Percentage capitalized - see Note e 75% 66% 81% 72% PVR average long-term debt outstanding $ 134.8 205.3 248.2 195.2 PVR net interest rate assumed 5.0% 5.5% 5.8% 5.8% Minority interest in PVR - see Note f $ (1.7) 10.2 15.9 24.5 Income tax rate - see Note g 41% 39% 39% 40% Other capital expenditures $ - 0.1 0.1 0.2 Guidance --------------------------------- Fourth Quarter Full Year 2005 2005 ---------------- ---------------- Oil & Gas Segment: ------------------------------------ Production: Natural gas (Bcf) - See Note a 6.1 - 6.7 24.9 - 25.5 Crude oil and condensate (Mbbl) - See Note b 55 - 60 285 - 290 Equivalent production (Bcfe) 6.5 - 7.0 26.6 - 27.2 Equivalent daily production (MMcfe) 70.2 - 76.4 73.0 - 74.5 Expenses: Direct expenses 12.5 - 13.9 39.9 - 41.3 Exploration 7.5 - 8.3 39.1 - 39.9 Depreciation, depletion and amortization ($ per Mcfe) 1.58 - 1.68 1.64 - 1.68 Capital Expenditures: Development drilling 29.3 - 32.4 106.1 - 109.2 Exploratory drilling 5.9 - 6.5 19.6 - 20.2 Pipeline, gathering, facilities 2.9 - 3.2 6.8 - 7.1 Seismic 1.1 - 1.2 8.0 - 8.1 Lease acquisition, field projects and other 10.7 - 11.9 30.9 - 32.1 Total Oil & Gas Capital Expenditures 50.0 - 55.3 171.5 - 176.8 Coal Segment: ------------------------------------ Coal royalty tons (millions) 7.2 - 7.9 29.7 - 30.4 Revenues: Average royalty per ton 2.50 - 2.60 2.65 - 2.70 Other 3.7 - 4.0 12.2 - 12.5 Expenses: Direct expenses 3.0 - 3.3 13.8 - 14.1 Depreciation, depletion and amortization 4.4 - 4.8 17.8 - 18.2 Capital Expenditures: Coal segment acquisitions - - - 105.5 - 105.5 Coal segment other expenditures 4.7 - 5.7 9.6 - 10.6 Total Coal Capital Expenditures 4.7 - 5.7 115.1 - 116.1 Natural Gas Midstream Segment: see Note c ------------------------------------ Inlet volumes (MMcf per day) - see Note d 120 - 130 124 - 127 Expenses: Direct expenses 4.5 - 5.0 16.2 - 16.7 Depreciation, depletion and amortization 3.5 - 3.9 12.3 - 12.7 Capital Expenditures: Midstream segment acquisitions, net of cash acquired - - - 199.1 - 199.1 Midstream segment other expenditures 1.6 - 2.3 6.3 - 7.0 Total Midstream Capital Expenditures 1.6 - 2.3 205.4 - 206.1 Corporate and Other: ------------------------------------ General and administrative expense 2.4 - 2.6 10.0 - 10.2 Interest expense: PVA average long-term debt outstanding 83.5 - 92.2 79.6 - 87.9 PVA net interest rate 5.5% 5.4% Percentage capitalized - see Note e 55% - 70% 55% - 70% PVR average long-term debt outstanding 252.8 - 263.2 202.8 - 211.1 PVR net interest rate assumed 6.5% 6.5% Minority interest in PVR - see see Note f see Note f Note f Income tax rate - see Note g 39% 39% Other capital expenditures 0.2 - 0.4 0.4 - 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 as of 9/30/05 are summarized below: Weighted Average Price per Mmbtu --------------------- Average Collars Mmbtu --------------------- Per Day Floor Ceiling ----------- ------------ -------- Fourth Quarter 2005 32,315 $6.09 $9.23 First Quarter 2006 31,344 $6.66 $10.64 Second Quarter 2006 18,330 $5.82 $10.27 Third Quarter 2006 12,000 $6.83 $10.28 Fourth Quarter 2006 10,011 $7.46 $12.78 First Quarter 2007 5,000 $9.00 $18.60 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 as of 9/30/05 are summarized below: Weighted Average Price per Bbl --------------------- Average Collars Bbbls --------------------- Per Day Floor Ceiling ----------- ------------ -------- 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 as of 9/30/05 are summarized below: Average Weighted Volume Average Per Day Price ----------- ------------ Ethane Swaps (gallons) (per gallon) ------------ Fourth 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) ------------- Fourth 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) --------------- Fourth 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) ----------------- Fourth 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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