Penn Virginia Resource Partners L.P. (PVR - Analyst Report) reported fourth quarter and full-year 2010 results and provided its financial outlook for 2011. Penn Virginia’s adjusted fourth-quarter earnings were 26 cents per unit, 5 cents below both the Zacks Consensus estimate of 31 cents and 7 cents below the year-ago earnings of 33 cents.
Penn Virginia’s full-year 2010 earnings of 83 cents substantially lagged the Zacks Consensus Estimate of $1.17 but outperformed the year-ago earnings of 76 cents by 9.2%.
Penn Virginia Resource’s total operating revenue of $245.4 million for the fourth quarter of 2010 came in above the Zacks Consensus Estimate of $223 million. Revenue in the quarter also improved 25.9% from $194.9 million reported in the year-ago period, driven by higher revenue contribution from its Natural Gas Midstream and Coal and Natural Resource Management segments.
Full-year 2010 revenue of $864.1 million also outperformed the Zacks Consensus Estimate of $836 million and was 31.6% above last year’s revenue of $656.7 million.
Coal and Natural Resource Management Segment: Revenues at this segment improved 7% year over year to $34.1 million, mainly due to higher coal royalty revenue. The rise in coal royalty revenue in the quarter resulted from a 4.7% increase in coal royalty tons sold and a 2.5% improvement in the price realized per ton sold.
Coal royalty tons sold for the year 2010 totaled 34.5 million (up 0.6%year on year) with coal royalties per ton of $3.78 (up 7.7%), resulting in segment revenue of $138.2 million, an increase of 8.1% year over year. The increase in total coal royalty tons sold combined with overall higher rates per ton led to this rise in revenue.
Natural Gas Midstream Segment: Revenue from this segment in the fourth quarter of 2010 was $204.8 million versus $155.9 million in the year-ago period, implying a growth of 31.4%. System throughput volumes during the quarter increased 31.2% from last year to 36.6 billion cubic feet (Bcf) as a result of additional volumes on the Crossroads and Panhandle systems and new business in the Marcellus shale region.
Full-year segment revenue increased 39% year on year to $702.2 million with system throughput of 129.7 Bcf, which rose 6.9% from the year-ago volumes.
Penn Virginia Resource continues to manage its financial position well, ending the year with $440.4 million remaining under its revolving credit facility and cash and cash equivalents of $10.7 million.
Cash from operating activities for the fourth quarter of 2010 summed $36.9 million, full-year operating cash flow reached $183.7 million. Distributable cash flow (DCF) for the quarter was $44.1 million with full-year DCF totaling $145.8 million.
Penn Virginia Resource spent roughly $96 million for internal growth projects in 2010, out of which $49.5 million was spent in the Marcellus Shale and $28 million for acquisitions in the coal and natural resource segment.
The board of directors of the general partner of Penn Virginia Resource has declared a quarterly cash distribution of 47 cents per unit, payable on February 14, 2011, to unit holders of record as on February 7, 2011. The distribution equates to an annualized rate of $1.88 per unit.
For 2011, Penn Virginia Resource expects EBITDA to come in at $230 million. Distributable cash flow for the year is expected to be $140 million, net of maintenance and replacement capital of $41 million. The company said the $41 million maintenance and replacement capital will comprise $14 million in maintenance and $27 million of replacement capital for the year.
Penn Virginia Resource expects to invest approximately $140 million in internal growth capital in 2011 including $120 million in the Marcellus Shale.
Radnor, Pennsylvania-based Penn Virginia Resource manages coal and natural resource properties as well as natural gas gathering and processing businesses. The partnership’s coal properties are located in Central and Northern Appalachia, Illinois and San Juan Basins.
Penn Virginia Resources currently has a short-term Zacks #3 Rank (Hold). However, we maintain our long-term Underperform recommendation on the stock. Nevertheless, the partnership stands at par with its closest peer Cloud Peak Energy Inc. (CLD -Snapshot Report), on the basis of short term rank.