SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the period ended June 30, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
PENN VIRGINIA CORPORATION
(Exact name of registrant as specified in its
charter)
Virginia 23-1184320
(State or other jurisdiction of (I.R.S.
Employer
incorporation or organization)
Identification No.)
100 MATSONFORD ROAD SUITE 200
RADNOR, PA 19087
(Address of principal executive offices) (Zip Code)
(610) 687-8900
(Registrant's telephone number, including
area code)
(Former name, former address and former fiscal year, if changed
since last report.)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X
No
Number of shares of common stock of registrant
outstanding at August 2, 2000: 8,191,281
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME - unaudited
(in thousands, except share amounts)
<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues:
Natural gas $ 10,374 $ 4,498 $ 17,463 $ 8,880
Oil and condensate 236 110 421 165
Coal royalties 5,657 4,242 11,303 7,974
Timber 727 292 1,175 506
Dividends 662 661 1,323 1,323
Gain on sale of property - - 98 -
Other income 910 634 2,926 1,098
Total revenues 18,566 10,437 34,709 19,946
Expenses:
Operating expenses 1,167 1,079 2,341 2,003
Exploration expenses 871 589 1,395 674
Taxes other than income 956 623 1,869 1,323
General and
administrative 2,446 2,145 5,042 4,147
Depreciation, depletion,
amortization 2,903 1,959 5,468 3,922
Total expenses 8,343 6,395 16,115 12,069
Operating Income 10,223 4,042 18,594 7,877
Other (Income) Expense:
Interest expense 1,765 508 3,264 1,071
Other income (352) (356) (708) (721)
Income before
income tax 8,810 3,890 16,038 7,527
Income tax expense 2,628 725 4,513 1,447
Net Income $ 6,182 $ 3,165 $ 11,525 $ 6,080
Net Income per share, basic 0.75 0.38 1.41 0.72
Net Income per share, diluted 0.74 0.37 1.40 0.72
Weighted average shares
outstanding 8,193 8,410 8,147 8,391
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
June 30, December 31,
2000 1999
(unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ - $ 657
Accounts receivable 9,474 6,880
Current portion of long-term
notes receivable 83 816
Current deferred income taxes 155 155
Other 627 813
Total current assets 11,092 9,321
Investments 49,212 67,816
Long-term notes receivable 3,039 3,518
Oil and gas properties; wells and
equipment, using the
successful efforts
method of accounting 230,022 185,048
Other property, plant and equipment 83,511 82,772
Less: Accumulated depreciation,
depletion and amortization (81,795) (76,553)
Total property, plant
and equipment 231,738 191,267
Other assets 1,867 2,089
Total assets $296,948 $274,011
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
June 30, December 31, 2000 1999
(unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current installments on long-term debt $ 34 $ 34
Accounts payable 1,655 1,570
Accrued expenses 5,797 5,470
Income taxes payable 1,447 -
Short-term debt 2,547 -
Total current liabilities 11,480 7,074
Other liabilities 5,445 5,854
Deferred income taxes 23,019 28,265
Long-term debt 110,958 78,475
Total liabilities 150,902 119,668
Commitments and contingencies - -
Shareholders' equity
Preferred stock of $100 par value-
100,000 shares authorized; none issued - -
Common stock of $6.25 par value -
16,000,000 shares authorized;
8,921,864 shares issued 55,762 55,762
Other paid-in capital 7,951 8,096
Retained earnings 68,711 60,860
Accumulated other comprehensive income 29,924 42,017
162,348 166,735
Less: Treasury stock, at cost -
747,812 shares in 1999
and 498,236 in 1999 15,152 11,142
Unearned compensation - ESOP 1,150 1,250
Total shareholders' equity 146,046 154,343
Total liabilities and shareholders' equity $296,948 $ 274,011
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated financial statements.
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS-unaudited
(in thousands)
<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Cash flow from operating
activities:
Net Income $ 6,182 $ 3,165 $ 11,525 $ 6,080
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion,
and amortization 2,903 1,959 5,468 3,922
Gain on sale of property,
plant and equipment - - (98) -
Deferred income taxes 708 (106) 1,266 237
Dry hole expense 402 120 409 120
Other (307) (326) (630) (655)
Changes in operating assets and
liabilities:
Current assets (2,733) (2,149) (2,409) 829
Current liabilities 1,179 671 1,859 (2,144)
Other assets 87 3 165 5
Other liabilities 188 (96) (409) 491
Net Cash provided by
operating activities 8,609 3,241 17,146 8,885
Cash flows from investing
activities:
Proceeds from notes receivable 583 418 1,143 835
Proceeds from sale of
fixed assets 7 - 107 -
Capital expenditures (43,349) (3,200) (46,350) (4,835)
Net Cash used in investing
activities (42,759) (2,782) (45,100) (4,000)
Cash flows from financing
activities:
Dividends paid (1,830) (1,895) (3,678) (3,778)
Debt borrowings (repayments) 35,036 288 35,030 (2,287)
Purchase of treasury stock - - (5,056) -
Issuance of stock 944 771 1,001 1,068
Net Cash used in
financing activities 34,150 (836) 27,297 $(4,997)
Net increase (decrease) in cash
and cash equivalents $ - $ (377) $ (657) $ (112)
Cash and cash equivalents-beginning - 490 657 225
Cash and cash equivalents-ending $ - $ 113 $ - $ 113
Supplemental disclosures of
cash flow information:
Interest paid $ 1,333 $ 480 $ 2,935 $ 1,065
Income taxes paid 1,800 1,000 1,800 1,600
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements.
PENN VIRGINIA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(1) ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements of
Penn Virginia Corporation and its subsidiaries (the "Company")
have been prepared in accordance with accounting principals
generally accepted in the United States for interim financial
reporting and Securities and Exchange Commission regulations.
These statements involve the use of estimates and judgments where
appropriate. In the opinion of management, all adjustments,
consisting of normal recurring accruals, considered necessary for
a fair presentation have been included. These financial
statements should be read in conjunction with the Company's
consolidated financial statements and footnotes included in the
Company's December 31, 1999 annual report on Form 10-K.
Operating results for the six months ended June 30, 2000 are not
necessarily indicative of the results that may be expected for
the year ended December 31, 2000.
(2) SECURITIES
The cost, gross unrealized holding gains or losses and market
value for available-for-sale securities at June 30, 2000 were as
follows (in thousands):
<TABLE>
Gross Unrealized Market
Cost Holding Gain Value
<S> <C> <C> <C>
Available-for-Sale:
Norfolk Southern Corporation $ 2,839 $ 46,356 $ 49,195
Other - 17 17
$ 2,839 $ 46,373 $ 49,212
</TABLE>
(3) LEGAL
The Company is involved in various legal proceedings arising in
the ordinary course of business. While the ultimate results of
these cannot be predicted with certainty, Company management
believes these claims will not have a material effect on the
Company's financial position, liquidity or operations.
(4) EARNINGS PER SHARE
The following is a reconciliation of the numerators and
denominators used in the calculation of basic and diluted
earnings per share ("EPS") for income from continuing operations
at June 30, 2000 and 1999.
<TABLE>
Three Months Ended Three Months Ended
June 30, 2000 June 30, 1999
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
(in thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Basic EPS:
Income from
continuing
operations $ 6,182 8,193 $ 0.75 $ 3,165 8,410 $ 0.38
Dilutive
Securities:
Stock options - 132 - 80
Diluted EPS:
Income from
continuing
operations $ 6,182 8,325 $ 0.74 $ 3,165 8,490 $ 0.37
Six Months Ended Six Months Ended
June 30, 2000 June 30, 1999
Income Shares Per Share Income Shares Per Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
(in thousands except per share amounts)
Basic EPS:
Income from
continuing
operations $ 11,525 8,147 $ 1.41 $ 6,080 8,391 $ 0.72
Dilutive
Securities:
Stock options - 61 - 78
Diluted EPS:
Income from
continuing
operations $ 11,525 8,208 $ 1.40 $ 6,080 8,469 $ 0.72
</TABLE>
(5) COMPREHENSIVE INCOME
Comprehensive income represents all changes in equity during the
reporting period, including net income and charges directly to
equity, which are excluded from net income. For the three and six
month periods ended June 30, 2000 and 1999, the components of
comprehensive income are as follows:
<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
(in thousands)
<S> <C> <C> <C> <C>
Net income $ 6,182 $ 3,165 $ 11,525 $ 6,080
Unrealized holding gains
(losses), net of
tax of $722, $4,341,
$(6,511), and $(1,809),
respectively 1,340 8,061 (12,093) (3,359)
Comprehensive income (loss) $ 7,522 $ 11,226 $ (568) $ 2,721
</TABLE>
(6) SEGMENT INFORMATION
Penn Virginia's operations are classified into two operating
segments:
Oil and Gas - crude oil and natural gas exploration,
development and production.
Coal Royalty and Land Management - the leasing of
mineral rights and subsequent collection of royalties and
the development and harvesting of timber.
<TABLE>
Coal Royalty
and Land Corporate
Oil and Gas Management and Other Consolidated
(in thousands)
<S> <C> <C> <C> <C>
For the six months
ended June 30, 2000
Revenues $ 18,205 $ 15,182 $ 1,322 $ 34,709
Operating income (loss) 7,863 12,121 (1,390) 18,594
Other income and expense,
net 2,556
For the six months
ended June 30, 1999
Revenues $ 9,494 $ 9,129 $ 1,323 $ 19,946
Operating income (loss) 1,671 7,083 (877) 7,877
Other income and expense,
net 350
Identifiable assets
June 30, 2000 165,690 81,856 49,402 296,948
December 31, 1999 120,954 83,975 69,082 274,011
</TABLE>
Operating income is total revenue less operating expenses.
Operating income does not include certain other income items,
gain (loss) on sale of securities, unallocated general corporate
expenses, interest expense and income taxes. Identifiable assets
are those assets used in the Company's operations in each
segment. Corporate assets are principally cash and marketable
securities.
(7) ACQUISITIONS
In May 2000, Penn Virginia successfully completed the purchase
of over 35 Bcf of proved natural gas reserves in West Virginia,
Virginia and Kentucky for $35.0 million. In September 1999, the
Company acquired fee mineral and lease rights for coal reserves
and related assets in West Virginia. Both acquisitions were
funded by borrowings from the Company's revolving credit facility
(the "Revolver") and accounted for at fair value. The operations
have been included in the Company's statement of income as of the
closing date. The following unaudited pro forma results of
operations have been prepared as though the aforementioned
acquisitions had been completed on January 1, 1999. The unaudited
pro forma results of operations consist of the following as of
June 30 (in thousands, except share data):
<TABLE>
Three Months Six Months
Ended June 30, 1999 Ended June 30, 2000
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues $ 19,640 $ 12,958 $ 37,052 $ 24,708
Net income $ 6,475 $ 3,337 $ 11,989 $ 6,587
Net income per share, diluted $ 0.78 $ 0.39 $ 1.46 $ 0.78
</TABLE>
The summarized pro forma information has been prepared for
comparative purposes only.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company operates in two business segments: oil and gas, and
coal royalty and land management. The oil and gas segment
explores for, develops and produces crude oil and natural gas in
the eastern and southern portions of the United States. The coal
royalty and land management segment includes Penn Virginia's
mineral rights to coal reserves, its timber assets and land
assets. The Company earns coal royalty revenue, based on long-
term lease agreements with several coal mining operators which
generally require royalty payments to Penn Virginia based on a
minimum annual payment, a minimum dollar royalty per ton and/or
percentage of the coal's selling price. The Company does not
operate coal mines.
On May 31, 2000, the Company successfully completed the purchase
certain oil and gas mineral rights in West Virginia, Virginia and
Kentucky for $35.0 million. The acquisition was funded by
borrowings from the Company's revolving credit facility and
estimated proved reserves, net to the Company's interests, exceed
35 Bcfe.
Results of Operations - Second quarters of 2000 and 1999
Compared.
Penn Virginia reported 2000 second quarter earnings of $6.2
million, or $0.74 per share (diluted), compared with $3.2
million, or $0.37 per share (diluted), for the second quarter of
1999. On a consolidated basis, revenues increased $8.1 million in
the second quarter of 2000 primarily from increases in natural
gas revenues and coal royalty revenues. Expenses on a
consolidated basis were $1.9 million higher in the first half of
2000 than the 1999 comparable period.
Results of Operations - Six months of 2000 and 1999 Compared.
Penn Virginia reported 2000 six months earnings of $11.5 million,
or $1.40 per share (diluted), compared with $6.1 million, or
$0.72 per share (diluted), for the same period of 1999. On a
consolidated basis, revenues increased $14.8 million, primarily
from increases in natural gas revenues and coal royalty revenues.
Expenses on a consolidated basis were $4.0 million higher than
the 1999 comparable period.
Selected operating and financial data by segment is presented
below.
Oil and Gas
Operating income for the oil and gas segment was $5.3 million and
$7.9 million for the three and six months ended June 30, 2000,
compared with $0.8 million and $1.7 million for the respective
periods in 1999. Operational and financial data for the
Company's oil and gas segment for the 2000 and 1999 three and six
months ended June 30 is summarized in the following tables:
Operations Summary
<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Production
Natural gas (MMcf) 2,835 2,043 5,332 4,082
Oil and condensate (MBbls) 10 9 17 16
Production, MMcfe 2,895 2,097 5,434 4,178
Average Realized Prices
Natural gas ($/Mcf) $ 3.66 $ 2.20 $ 3.28 $ 2.18
Oil and condensate ($/Bbl) 23.70 12.59 24.76 10.55
Average Costs (per MMcfe)
Lease operating $ 0.36 $ 0.50 $ 0.39 $ 0.47
Exploration expenses 0.26 0.20 0.22 0.11
Taxes other than income 0.27 0.22 0.26 0.25
General and administrative 0.21 0.25 0.22 0.25
Depreciation, depletion
and amortization 0.82 0.79 0.81 0.79
Total costs $ 1.92 $ 1.96 $ 1.90 $ 1.87
</TABLE>
In the first half of 2000, over 85 percent of Penn Virginia's
natural gas production was sold at market prices. Currently, the
Company has fixed price term contracts totaling 9,300 Mcf per day
which began in April and May of 2000 and expire in December 2000
and March 2001 at an average of $3.39 per Mcf. The Company
anticipates these fixed price term contracts should account for
approximately one-fourth of remaining 2000 production. The
Company will, when circumstances warrant, hedge the price
received for market-sensitive production through the use of swaps
with purchased options. If applicable, gains and losses from
hedging activities are included in natural gas revenues when the
hedged production occurs. Currently, the Company is not involved
in any such hedging activities; however, the Company recognized a
$0.2 million hedging loss and a $0.1 million hedginig gain for
the three and six months ended June 30, 1999, respectively. The
following table shows the effect of hedging activities on the
Company's working interest natural gas prices:
Hedging Summary
<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Natural gas prices ($/Mcf):
Actual price received
for production $ 3.66 $ 2.28 $ 3.28 $ 2.16
Effect of hedging activities - (0.08) - 0.02
Average price $ 3.66 $ 2.20 $ 3.28 $ 2.18
</TABLE>
Financial Summary
<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
(in thousands)
<S> <C> <C> <C> <C>
Revenues:
Natural gas sales $ 10,374 $ 4,498 $ 17,463 $ 8,880
Oil and condensate 236 110 421 165
Other income 187 310 321 449
Total revenues $ 10,797 $ 4,918 $ 18,205 $ 9,494
Expenses:
Operating expenses $ 1,039 $ 1,045 $ 2,102 $ 1,952
Exploration expenses 762 424 1,180 448
Taxes other than income 775 468 1,426 1,031
General and administrative 605 524 1,215 1,063
Depreciation and depletion 2,361 1,655 4,419 3,329
Total expenses 5,542 4,116 10,342 7,823
Operating Income $ 5,255 $ 802 $ 7,863 $ 1,671
</TABLE>
Results of Operations - Oil and Gas Segment
Revenues. Revenues increased $5.9 million, or 120 percent, to
$10.8 million in the second quarter of 2000, compared with $4.9
million for the same period of 1999. Revenue for the first half
of 2000 increased $8.7 million, or 92 percent, to $18.2 million
from the comparable 1999 amount. These increases were a direct
result of increased natural gas production and prices.
Natural gas sales increased $5.9 million, or 131 percent, in the
second quarter of 2000 and $8.6 million, or 97 percent for the
six months ended June 30, 2000, compared with 1999 amounts.
Natural gas production for the second quarter of 2000 increased
39 percent over the comparable 1999 period while the average
price received increased 66 percent to $3.66 per thousand cubic
feet (Mcf) for the same periods. Natural gas production for the
first half of 2000 increased 31 percent over the comparable 1999
period while the average price received increased 50 percent to
$3.28 per Mcf for the same periods.
Oil and condensate revenues increased to $236,000 and $421,000
for the three and six months ended June 30, 2000 from $110,000
and $165,000 for the comparable periods in 1999. These
fluctuations are attributable to the volatility in average prices
received. While volumes remained relatively constant, prices
increased 88 percent to $23.70 in the second quarter of 2000 and
increased 135 percent to $24.76 for the six months ended June 30,
2000, compared with the respective 1999 amounts.
Expenses. Expenses for the oil and gas segment increased to $5.5
million and $10.3 million for the three and six months ended June
30, 2000, respectively, compared with $4.1 million and $7.8
million for the same periods in 1999.
Lease operating expenses decreased to $0.36 and $0.39, on a Mcfe
basis, for the three and six months ended June 30, 2000 from
$0.50 and $0.47 for the same periods in 1999. The decrease was
due to lower operating costs associated with the Company's
Mississippi properties, the Company's recent $35.0 million
acquisition of royalty gas, and to several repair and maintenance
projects performed in June 1999.
Exploration expenses increased to $762,000 and $1.2 million for
the three and six months ended June 30, 2000 from $424,000 and
$448,000 for the same periods in 1999. These increases are a
result of seismic expenditures and two gross (0.4 net)
nonproductive, exploratory wells associated with the Company's
Texas onshore gulf coast exploration project.
Taxes other than income increased 66 percent to $775,000 in the
second quarter of 2000, compared with $468,000 in the same period
of 1999. For the six months ended June 30, 2000, taxes other
than income increased 38 percent, to $1.4 million, from the
comparable 1999 amount. On a Mcfe basis, taxes other than income
has remained relatively constant at $0.26 for the first six
months of 2000, compared with $0.25 for the same 1999 period.
General and administrative expenses increased 15 percent to
$605,000 in the second quarter of 2000, compared with $524,000 in
the same period of 1999. For the six months ended June 30, 1999,
general and administrative expenses increased 14 percent, to $1.2
million, from the comparable 1999 amount. On a Mcfe basis,
general and administrative expenses decreased to $0.22 for the
first half of 2000 versus $0.25 for the comparable 1999 period.
The Company has increased its oil and gas technical and
administrative staff in conjunction with planned increases in oil
and gas development activity.
Depreciation and depletion increased to $2.3 million and $4.4
million for the three and six months ended June 30, 2000,
compared with $1.7 million and $3.3 million for the same periods
in 1999. Depreciation and depletion, on a Mcfe basis, remained
relatively constant at $0.81 for the six months ended June 30,
2000, compared with $0.79 for the same period in 1999.
Coal Royalty and Land Management
Operating income for the coal segment was $12.1 million for the
six months of 2000 and $7.1 million for the comparable period of
1999. The coal segment's operational and financial data for the
2000 and 1999 second quarter and six month period is summarized
in the following tables:
Operations Summary
<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Production
Coal tons (000's) 3,221 2,043 6,216 3,749
Timber (Mbf) 3,134 1,577 4,992 2,691
Average Realized Prices
Coal royalties ($/ton) $ 1.76 $ 2.08 $ 1.82 $ 2.13
Timber ($/Mbf) 218 178 217 175
</TABLE>
Financial Summary
<TABLE>
Three Months Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
(in thousands)
<S> <C> <C> <C> <C>
Revenues:
Coal royalties $ 5,657 $ 4,242 $ 11,303 $ 7,974
Timber sales 727 292 1,175 506
Gain on sale of property - - 98 -
Other income 725 322 2,606 649
Total revenues 7,109 4,856 15,182 9,129
Expenses:
Operating expenses $ 128 $ 34 $ 239 $ 51
Exploration expenses 93 21 151 65
Taxes other than income 155 109 330 214
General and administrative 624 601 1,314 1,183
Depreciation and depletion 531 273 1,027 533
Total expenses 1,531 1,038 3,061 2,046
Operating Income $ 5,578 $ 3,818 $ 12,121 $ 7,083
</TABLE>
Results of Operations - Coal Royalty and Land Management
Segment
Revenues. Revenues increased 45 percent to $7.1 million in the
second quarter of 2000 and 67 percent to $15.2 million for the
first six months of 2000, compared with $4.9 million and $9.1
million for the same periods in 1999.
Coal royalties increased $1.4 million to $5.7 million in the
second quarter of 2000 and $3.3 million to $11.3 million for the
first six months of 2000, compared with the same periods in 1999.
These increases are attributable to enhanced production from
existing lessees due to the completion of the Company's unit
train loadout facility as well as the September 1999 acquisition
of coal reserves in West Virginia.
Timber sales increased $435,000 to $727,000 in the second quarter
of 2000 and $669,000 to $1.2 million for the first six months of
2000, compared with the same periods in 1999. This increase was
primarily related to the timing of the Company's parcel timber
sales and a substantial increase in the average realized price
received.
Other income increased $403,000 in the second quarter of 2000
and $2.0 million for the first six months of 2000, as compared
with the same periods in 1999. These increases are largely due
to the receipt of $1.0 in forfeited minimums received from the
Company's lessees and $1.1 million received from the use of the
unit train loadout facility by third parties in the first half of
2000, compared with $263,000 in the same period of 1999.
Expenses. Expenses increased 47 percent to $1.5 million in the
second quarter of 2000 and 50 percent to $3.1 million for the
first six months of 1999, compared with the same periods in 1999.
Operating expenses increased $93,000 to $128,000 in the second
quarter of 2000 and increased $188,000 to $239,000 for the first
six months of 2000, compared with 1999 amounts. The increase is
a result of costs associated with the maintenance and
preservation of the Company's surface acreage.
Exploration expenses increased to $93,000 and $151,000 for the
three and six month periods ended June 30, 2000 from $21,000 and
$65,000 for the comparable periods in 1999. The increase is a
result of the timing of the startup of the Company's coal core
drilling program.
Taxes other than income increased 42 percent to $155,000 in the
second quarter of 2000 and increased 54 percent to $330,000 for
the first six months of 2000, compared with $109,000 and $214,000
for the same periods in 1999. On a per ton basis, taxes other
than income remained fairly constant at $0.05 in the first half
of 2000 versus $.06 during the comparable 1999 period.
General and administrative expenses increased four percent to
$624,000 in the second quarter of 2000 and increased eight
percent to $1.3 million for the first six months of 2000,
compared with $601,000 and $1.2 million for the same periods in
1999. The variance is attributable to personnel additions in the
last half of 1999, partially offset by higher legal fees in the
first half of 1999 to pursue the potential recoverability of coal
reserves.
Depreciation and depletion increased to $531,000 and $1.0 million
for the three and six month periods ended June 30, 2000 from
$273,000 and $533,000 for the comparable periods in 1999.
Depreciation and depletion, on a per ton basis, was $0.16 and
$0.17 for the three and six months periods ended June 30, 2000,
compared with $0.13 and $0.14 for the respective periods in 1999.
The depletion rate, on a per ton basis, increased due to the
1999 completion of the unit train loadout facility and the
Company's $30 million acquisition in the last half of 1999.
Capital Resources and Liquidity.
Net Cash Provided by Operating Activities.
Funding for the Company's business activities has historically
been provided by operating cash flows and bank borrowings. Net
cash provided by operating activities was $17.1 million in the
first six months of 2000, compared with $8.9 million in the first
six months of 1999. The Company's consolidated long-term
borrowings increased from $78.5 million at December 31, 1999 to
$111.0 million at June 30, 2000.
Net Cash Used in Investing Activities.
Net cash used in investing activities totaled $45.1 million and
$4.0 million for the first six months of 2000 and 1999,
respectively. In the first six months of 2000, capital
expenditures totaled $46.4 million compared with $4.8 million in
the first six months of 1999. Oil and gas acquisitions and
development activities were the primary uses of funds. The
capital expenditures, including acquisitions, made by the Company
for the first six months of 2000 and 1999 are as follows:
<TABLE>
Six Months
Ended June 30,
2000 1999
(in thousands)
<S> <C> <C>
Oil and Gas
Acquisitions $ 35,879 $ 192
Development 7,658 2,487
Exploration 2,037 288
Support equipment 34 42
Coal Royalty and Land Management
Acquisitions 111 344
Support equipment and facilities 406 1,447
Other 225 35
Total capital expenditures $ 46,350 $ 4,835
</TABLE>
In the oil and gas segment, the Company had capital expenditures
totaling $45.6 million in the first six months of 2000. Penn
Virginia acquired over 35 Bcf of proved natural gas reserves in
West Virginia, Virginia and Kentucky in May 2000. The $35.0
million acquisition of royalty interest also includes numerous
working interest exploratory opportunities which the Company
expects to test and evaluate over the coming months. In the
first half of 2000, the Company drilled 43 gross (35.2 net)
development wells and nine gross (6.0 net) exploratory wells,
which included two gross (0.4 net) non-productive wells. Due to
the recent increases in market prices for natural gas, the
Company increased its 2000 capital expenditure budget to drill an
additional 20 net development wells for a total of 80 net
development wells. The Company still expects to drill
approximately 10 to 20 net exploratory wells during 2000.
The Company also holds an investment in Norfolk Southern common
stock which had a gross unrealized holding gain of $46.4 million
at June 30, 2000.
Net Cash Used in Financing Activities.
Net cash provided by financing activities totaled $27.3 million
for the first six months of 2000. Penn Virginia paid $3.7
million of dividends in the first half of 2000 and used $5.1
million to repurchase 300,000 shares of treasury stock. The
Company also borrowed $35.0 million to finance a second quarter
oil and gas acquisition. Penn Virginia has a $135 million
unsecured revolving credit facility (the "Revolver") with a final
maturity of June 2003. The Revolver bears interest at LIBOR or
the base rate at the option of the Company plus a percentage
based on the percentage of the borrowing base outstanding. The
outstanding balance on the Revolver was $110.1 million at June
30, 2000. Management believes its portfolio of investments and
sources of funding are sufficient to meet short- and long-term
liquidity needs not funded by cash flows from operations.
Other
Accounting for Derivative Instruments and Hedging Activities.
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133") which was subsequently amended by SFAS
No. 138 in June 2000. The statements establish accounting and
reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, (collectively
referred to as derivatives) and for hedging activities. It
requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and
measure those instruments at fair value.
In June 1999, FASB issued SFAS No. 137 which deferred the
effective date of SFAS No. 133 for all fiscal quarters of all
fiscal years beginning after June 15, 2000. Given its low levels
of derivative activity, the Company does not expect adoption to
have a significant impact on the Company's financial position,
results of operations or liquidity.
Forward-Looking Statements.
Statements included in this report which are not historical facts
(including any statements concerning plans and objectives of
management for future operations or economic performance, or
assumptions related thereto) are forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act
of 1934, as amended, and Section 27A of the Securities Act of
1933, as amended. In addition, Penn Virginia and its
representatives may from time to time make other oral or written
statements which are also forward-looking statements.
Such forward-looking statements include, among other things,
statements regarding development activities, capital
expenditures, acquisitions and dispositions, drilling and
exploration programs, expected commencement dates of coal mining
or oil and gas production, projected quantities of future oil and
gas production by Penn Virginia, projected quantities of future
coal production by the Company's lessees producing coal from
reserves leased from Penn Virginia, costs and expenditures as
well as projected demand or supply for coal and oil and gas,
which will affect sales levels, prices and royalties realized by
Penn Virginia.
These forward-looking statements are made based upon management's
current plans, expectations, estimates, assumptions and beliefs
concerning future events impacting Penn Virginia and therefore
involve a number of risks and uncertainties. Penn Virginia
cautions that forward-looking statements are not guarantees and
that actual results could differ materially from those expressed
or implied in the forward-looking statements.
Important factors that could cause the actual results of
operations or financial condition of Penn Virginia to differ
include, but are not necessarily limited to: the cost of finding
and successfully developing oil and gas reserves; the cost of
finding new coal reserves; the ability to acquire new oil and gas
and coal reserves on satisfactory terms; the price for which such
reserves can be sold; the volatility of commodity prices for oil
and gas and coal; the risks associated with having or not having
price risk management programs; Penn Virginia's ability to lease
new and existing coal reserves; the ability of Penn Virginia's
lessees to produce sufficient quantities of coal on an economic
basis from Penn Virginia's reserves; the ability of lessees to
obtain favorable contracts for coal produced from Penn Virginia
reserves; Penn Virginia's ability to obtain adequate pipeline
transportation capacity for its oil and gas production;
competition among producers in the coal and oil and gas
industries generally and in the Appalachian Basin in particular;
the extent to which the amount and quality of actual production
differs from estimated recoverable coal reserves and proved oil
and gas reserves; unanticipated geological problems; availability
of required materials and equipment; the occurrence of unusual
weather or operating conditions including force majeure or
events; the failure of equipment or processes to operate in
accordance with specifications or expectations; delays in
anticipated start-up dates; environmental risks affecting the
drilling and producing of oil and gas wells or the mining of coal
reserves; the timing of receipt of necessary governmental
permits; labor relations and costs; accidents; changes in
governmental regulation or enforcement practices, especially with
respect to environmental, health and safety matters, including
with respect to emissions levels applicable to coal-burning power
generators; risks and uncertainties relating to general domestic
and international economic (including inflation and interest
rates) and political conditions; the experience and financial
condition of lessees of coal reserves, joint venture partners and
purchasers of reserves in transactions financed by Penn Virginia,
including their ability to satisfy their royalty, environmental,
reclamation and other obligations to Penn Virginia and others;
changes in financial market conditions; changes in the market
prices or value of the marketable securities owned by Penn
Virginia, including the price of Norfolk Southern common stock
and other risk factors detailed in Penn Virginia's Securities and
Exchange commission filings. Many of such factors are beyond
Penn Virginia's ability to control or predict. Readers are
cautioned not to put undue reliance on forward-looking
statements.
While Penn Virginia periodically reassesses material trends and
uncertainties affecting Penn Virginia's results of operations and
financial condition in connection with the preparation of
Management's Discussion and Analysis of Results of Operations and
Financial Condition and certain other sections contained in Penn
Virginia's quarterly, annual or other reports filed with the
Securities and Exchange Commission, Penn Virginia does not intend
to publicly review or update any particular forward-looking
statement, whether as a result of new information, future events
or otherwise.
PART II Other information
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(27) Financial Data Schedule, filed herewith.
(b) Reports on Form 8-K
No reports on Form 8-K were filed for the quarter ended
June 30, 2000.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly
authorized.
PENN VIRGINIA CORPORATION
Date: August 11, 2000 By: /s/Steven W. Tholen
Steven W. Tholen, Vice
President and Chief
Financial Officer
Date: August 11, 2000 By: /s/ Ann N. Horton
Ann N. Horton, Controller and
Principal Accounting Officer
PENN VIRGINIA CORPORATION
INDEX
PAGE
PART I Financial Information:
Item 1. Financial Statements
Condensed Consolidated Statements of Income for the three 2
and six months ended June 30, 2000 and 1999
Condensed Consolidated Balance Sheets as of June 30, 2000 and 3
December 31, 1999
Condensed Consolidated Statements of Cash Flows for the three 5
and six months ended June 30, 2000 and 1999
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition 9
and Results of Operations
PART II Other Information
Item 6. Exhibits and Reports on Form 8-K 19
Article 5 of Regulation S-X
