PVR PVG Penn Virginia Resources Sept 2009 Presentation

8/14/2019 PVR PVG Penn Virginia Resources Sept 2009 Presentation

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2009 Master Limited PartnershipInvestor Conference (NAPTP)

September 2009

NYSE: PVRwww.pvresource.com

NYSE: PVGwww.pvgpholdings.com


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Penn Virginia Group -

PVR

PVR51.8 MM Units Outstanding

Coal and Natural Res. Mgmt./

Natural Gas Midstream

Public Unitholders32.2 MM PVR

Common Units

Public Unitholders19.0 MM PVG

Common Units1

PVA and Affiliates20.1 MM PVG Common Units1

Oil and Gas E&P

PVG and Affiliates19.6 MM PVR Common Units

100% of IDRs

51% L.P. 49% L.P.

37% L.P.

2% G.P. 61% L.P.

1 Reflects full exercise of underwriters option to purchase additional PVG secondary units from PVA.


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Key Investment Highlights

High Quality AssetBase

Geographically andOperationally Diverse

Proven Track Recordof Growth

Proven Management,

Solid Balance Sheetand Attractive Yield

Diversified business with multiple growth platforms

Coal: 827 MM tons of proven and probable reserves primarily located inAppalachia and the Illinois Basin

Midstream: gathering and processing principally in the Mid-Continent

Coal fundamentals remain solid despite weakened economy

Midstream volumes are up over 2008 and frac spreads are rebounding

Above-market 2009 hedges help protect against weak frac spreads

Aggregate 88% increase in distributions since IPO (8.2% CAGR)

Since IPO, PVR has completed numerous acquisitions totaling >$900 MM

Upcoming CAPEX will focus on high rate-of-return projects & acquisitions

Experienced and proven senior management team

Solid financial position and liquidity Attractive yield

Stable Cash Flowsand DistributionCoverage

Coal business is a royalty business, not an operating business

Coal cash flow protected by lessees long-term contracts

Midstreams volatility is mitigated by contract mix and hedging program

LTM cash flow coverage of 1.1x provides further support to distributions


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Historical growth fueled by strong marginsand acquisitions

Recent acquisitions completed inmidstream, coal and timber

Organic growth largely in midstream in2009

Attractive acquisition opportunities exist,but PVR will be prudent

Numerous acquisitions totaling >$900 MMcompleted since IPO

Net coal reserves have grown by 68% since12/31/01

Gross

coal reserves have grown by 109%since 12/31/01

Midstream throughput volumes haveincreased by nearly 160% since 1Q06

Adjusted EBITDA(1)

1 Adjusted EBITDA is a non-GAAP financial measure. See Adjusted EBITDA reconciliation in the back of this presentation.

$-

$40

$80

$120

$160

$200

2004 2005 2006 2007 2008 LTM

6/30/09

($MM)

191%

Grow

th(27%

CAGR)

Coal & NRM Midstream

$59

$103

$123

$146

$172 $172

Excellent Track Record of Growth


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$1.88 $1.88 $1.88 $1.88$1.84

$1.60$1.60

$1.50

$1.40$1.40

$1.80

$1.13

$1.24$1.30 $1.30

$1.64$1.68

$1.72$1.76

$0.00

$0.50

$1.00

$1.50

$2.00

4Q04

1Q05

2Q05

3Q05

4Q05

1Q06

2Q06

3Q06

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

($)

PVR Distributable Cash Flow(1)

1 Distributable Cash Flow is a non-GAAP financial measure. See Distributable Cash Flow reconciliation in the back of this presentation.

PVR Annualized Distribution / L.P. Unit

$53

$87

$102

$121

$130 $129

$-

$35

$70

$105

$140

2004 2005 2006 2007 2008 LTM

6/30/09

($MM)

67%Growth(11

%CAGR)

118%Gro

wth(22%

CAGR)

PVR has increased or maintained its distribution in every quarter since the IPO inOctober 2001

Solid DCF and Distribution Growth -

PVR


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Current Yield

13.7%

12.5%12.2%

11.8% 11.8%

11.1%

10.4% 10.3%

9.4%

8.7% 8.6%

0%

2%

4%

6%

8%

10%

12%

14%

16%

Peer 1 PVR Peer 2 Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10

Attractive Yield Relative to Peer

PVR1

1

Reflects unit prices as of Sept. 11, 2009 and latest annualized quarterly distribution; peers include ARLP, CPNO, DPM, GEL, MMLP, MWE, NGLS, NRGY, NRP and RGNC


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Maintain current distribution and target certain distribution coverage levels

Maintain and/or enhance liquidity and capital structure strength

Live within cash flow

Review non-core assets

Maintain and grow Coal and Natural Resource Management business

Pursue prudent/strategic acquisitions Manage and grow Natural Gas Midstream business

Continue to monitor contract mix and employ risk management program

Grow organically and through bolt-on acquisitions

PVRs Objectives

PVRs strategy continues to be focused on maintaining and growingdistributable cash flow over time

However, given current market conditions, PVR has re-ordered its objectives

Strategic Objectives -

PVR


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Location of Coal ReservesOperational Information

1 Adjusted EBITDA is a non-GAAP financial measure. See Adjusted EBITDA reconciliation in the back of this presentation.

Northern

Appalachia

(3% Reserves)

Illinois Basin

(20% Reserves)

San Juan Basin

(5% Reserves)

Central

Appalachia

(71% Reserves)

Strategically located in Central andNorthern Appalachia, the Illinois Basinand the San Juan Basin

Easy access to multiple coal end users

Control 827MM tons of coal reserveslocated on 495,000 acres as ofDecember 31, 2008

89% steam coal; 11% met coal

LTM 6/30/09 lessee production of 34.7MMtons

Operate coal preparation and loading

facilities in KY, VA & WV Own 243,000 acres of forestland in KY,

VA & WV

Segment contributed 77% of PVRs LTM

6/30/09 Adjusted EBITDA(1)

High Quality Asset Base

Coal / NRM


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Upside Participation, Low Downside Risk

Coal royalty business not a coal mining operation

Structure allows upside participation and high margins, with low downside risk

No direct exposure to mine operating costs and risks, maintenance capex requirements

or mine reclamation costs

Timber and oil & gas royalty interests utilize similar non-operated approach

Coal / NRM Generates Stable Cash Flows

Characteristics Coal Royalty (PVR) Coal Operator

Operating Margins High Variable

Cash Flow Stability High Variable

Reinvestment Requirements Low High

Social Costs (e.g., benefits, black-lung) Low High

Reclamation Exposure Low High


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Coal prices have decreased from recordlevels, due primarily to a global recession

Exports have slowed due to slowing

economies overseas, as well as reduced

power and steel demand since late 2008

Uncertain economic outlook, alternative

fuels (e.g. natural gas) and efficiency gains

are offset by economic reality (i.e., coal is

a low-cost fuel)

PVRs royalty revenue is expected to remain

stable through 2009 despite lower spot

market prices

~75% of lessee production is price sensitive;

most lessee sales contracts are 1-3 yearduration, resulting in less volatility than

spot prices

Remaining lessee production carries a fixed

royalty rate with an annual escalator

U.S. Electric Power Generation by Fuel Type(1)

1

Annual Energy Outlook 2009 (April 2009), Energy Information Administration (EIA).2 Source: EIA (week ended 7/31/09).

Historical Spot Market Coal Prices(2)

$0

$40

$80

$120

$160

1/1/07 6/7/07 11/11/07 4/16/08 9/20/08 2/24/09 7/31/09

($/ton)

CAPP NAPP ILB PRB Uinta

-

700

1,400

2,100

2,800

1980 1990 2000 2010 2020 2030

(bn Kwh)

Coal Petroleum Natural Gas Nuclear Renew able

Coal Environment Outlook


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Location of Midstream Assets(1)Operational Information

Panhandle(260 MMcfd / two plants and 1,648

miles of gathering pipelines)

Arkoma(78 miles of

gathering pipelines)

Crescent(40 MMcfd plant and 1,698 miles

of gathering pipelines)

Hamlin(20 MMcfd plant and 506 miles

of gathering pipelines)

Crossroads(80 MMcfd plant)

Thunder Creek

(25% interest in gatheringsystem J.V.)

NTGG(131 miles of

Gathering pipelines)

Over 4,000 miles of pipelines and sixprocessing facilities with 400 MMcfd ofcapacity (1)

Assets are located in prolific naturalgas basins with long-lived reserves

Focused on growing segment throughorganic growth and small acquisitions

Increased total processing capacity by~33% in 2009 through Anadarko basin

acquisition (Sweetwater) and 40 MMcfd

expansion to Beaver/Spearman complex

Acquired a 25% J.V. interest in Thunder

Creek (Powder River Basin) (04/08)

60 MMcfd Spearman and 80 MMcfd

Crossroads gas processing facilities began

operations in 1H08

Segment contributed 23% of PVRs LTM

6/30/09 Adjusted EBITDA(2)1

Pro forma the acquisition of assets from Atlas Pipeline Partners, L.P. and 40 MMcfd expansion at the Beaver/Spearman complex.2 Adjusted EBITDA is a non-GAAP financial measure. See Adjusted EBITDA reconciliation in the back of this presentation.

High Quality Asset Base

Midstream


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Midstream throughput volumes have grown since inception in 2005, with additional increases in 2008 as aresult of the Spearman and Crossroads plants and in 2009 due to the acquisition of Sweetwater and theexpansion at Spearman

Volatility mitigated by contract mix and risk management program

56% and 45% of expected 2009 and 2010 price-sensitive volumes are hedged (% based on 2Q09 volumes)

2Q09 Volumes by Contract TypeHedge PositionsFrac spread hedges

NGL/WTI hedge

Natural gasoline collar (remainder of 2009)

> 42,000 gal/d @ $2.35 x $3.04/gal

Crude oil collar (2010) > 42,000 gal/d @ $68 x $80/Bbl

Natural gas hedge (short position)

Natural gas swap (remainder of 2009)

> 6,000 MMBtu/d @ $9.67/MMBtu

Natural gas swap (2010)

> 5,000 MMBtu/d @ $5.82/MMBtuPercent-of-proceeds hedges

WTI hedge

Crude oil 3-way collar

(remainder of 2009)

>1,000 Bbl/d @ $90 x $119/Bbl

Lower put of $70 (not a knockout)

Crude oil collar (2010) >750 Bbl/d @ $70 x $81.25/Bbl

Keep-

whole

22%

POP

54%

Fee-

based24%

Midstream: Volume Growth / Hedges


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Unconventional Gas Production Growth(1)

During 2H08, NGL prices fell faster than naturalgas prices due to excess storage, weakeconomic conditions and lower oil prices

During 1H09, NGL prices increased due toreduced supply while natural gas prices fell dueto increased supply

NGLs and oil may benefit from an economicrecovery and a decline in the value of the U.S.dollar

Natural gas over-supply is expected to persist

due to record storage and reduced industrialdemand

Level of natural gas drilling activity andshut-in production is the primary concern formidstream

The oil-to-natural gas price ratio is well aboveits 10-yr. average in 2009

Processing margins have increased due to thehigher ratio

Higher oil and NGL prices have been

accompanied by weaker gas prices

Oil-to-Natural Gas Price Ratio(1)

1 Annual Energy Outlook 2009; Energy Information Administration.

-

3

6

9

12

1990 1995 2000 2005 2010 2015 2020 2025 2030

(Tcf)

L48 Onshore Conventional L48 Onshore UnconventionalL48 Associated / Dissolved L48 OffshoreAlaska

Unconventional gas drivesfuture production growth

x

5x

10x

15x

20x

25x

Feb-99 Aug-00 Feb-02 Aug-03 Feb-05 Aug-06 Feb-08 Aug-09

($/bbl $/MMBtu)

10-Year Average$/bbl Cushing WTI / $/MMBtu HHUB

Midstream Fundamentals


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Penn Virginia Group -

PVG

PVR51.8 MM Units Outstanding

Coal and Natural Res. Mgmt./Natural Gas Midstream

Public Unitholders32.2 MM PVR

Common Units

Public Unitholders19.0 MM PVG

Common Units1

PVA and Affiliates20.1 MM PVG Common Units1

Oil and Gas E&P

PVG and Affiliates19.6 MM PVR Common Units

100% of IDRs

51% L.P. 49% L.P.

37% L.P.

2% G.P. 61% L.P.

1 Reflects full exercise of underwriters option to purchase additional PVG secondary units from PVA.


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$1.52$1.52$1.44

$1.28

$1.36

$0.96

$1.04

$1.12

$1.20

$1.52 $1.52

$0.00

$0.40

$0.80

$1.20

$1.60

4Q06

1Q07

2Q07

3Q07

4Q07

1Q08

2Q08

3Q08

4Q08

1Q09

2Q09

($)

PVG Annualized Distribution / L.P. Unit

58%Growth(18%CAGR)

PVG has increased or maintained its distribution in every quarter since IPO inDecember 2006

Solid Distribution Growth -

PVG


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G.P. Interest

$-

$20

$40

$60

$80

$1.70 $1.76 $1.82 $1.88 $1.94 $2.00

1 PVRs 2Q09 annualized distribution is $1.88 per unit.

($MM)

L.P. Interest IDRs

$50

$54$59

$63

$67

Hypothetical Distributions to PVG

$72

PVRs G.P. entered the 50%IDR tier in 3Q06

PVGs annualized distributions

from PVR (based on PVRs2Q09 annualizeddistribution(1)) are $63 million

PVG distributed $59 million,or $1.52 per unit, at its 2Q09annualized distribution level

Distributions to G.P. interest /

IDRs represented ~40% oftotal distributions received byPVG at PVRs 2Q09 annualizeddistribution level

2Q09 AnnualizedDistribution

PVR Annualized Distribution per L.P. Unit

PVGs Leverage to PVR Growth


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Conclusion

K I Hi hli h


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Geographically and operationally diverse with strategically located,

long-lived coal and natural resource assets and a midstream platform

with attractive growth opportunities

Relatively stable cash flows and distribution coverage through coal

royalty structure, contract mix and risk management program related to

midstream operations

Attractive yield; solid financial position and liquidity; 8.2% distribution

CAGR since IPO

Successful track record of accretive acquisitions and organic growth

projects

Key Investment Highlights


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Appendix

Fi i l C diti PVR


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1

Pro forma the acquisition of assets from Atlas Pipeline Partners, L.P. The adjusted EBITDA statistic does not include any benefit from the acquisition however, the credit statistics are burdenedwith the incremental leverage and financing costs associated with the transaction. Assumes 2.5% interest on incremental leverage.

2 Adjusted EBITDA is a non-GAAP financial measure - see Adjusted EBITDA reconciliation.

($ in millions) Year Ended December 31, As of 6/30/09

2007 2008 As Reported Pro Forma(1)

Balance Sheet Data

Revolver borrowings $347.7 $568.1 $597.1 $619.7

Senior unsecured notes 64.0 - - -Partners' capital 371.3 530.7 493.0 493.0

Total capitalization $783.0 $1,098.8 $1,090.1 $1,112.7

Credit Statistics

Debt / Total capitalization 53% 52% 55% 56%Adjusted EBITDA(2) $146.1 $172.2 $172.1 $172.1Debt / Adjusted EBITDA 2.8 x 3.3 x 3.5 x 3.6 x

Cash interest paid $15.9 $23.3 $24.9 $25.5Adjusted EBITDA / Cash interest paid 9.2 x 7.4 x 6.9 x 6.8 x

Revolver Availability

Revolver capacity $450.0 $700.0 $800.0 $800.0

Outstanding borrowings and letters of credit (349.3) (569.7) (598.7) (621.3)Revolver availability $100.7 $130.3 $201.3 $178.7

Financial Condition -

PVR

Oth P C i PVR1


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Debt-to-EBITDA (2Q09)

1.5x

3.2x3.6x 3.8x

3.9x4.2x

5.9x6.2x

7.0x 7.0x

9.9x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

Peer 1 Peer 2 Peer 3 PVR Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10

Debt-to-Ent. Value

26.8%

32.1%

38.8%

41.8%44.0%

45.4% 45.7% 45.9%48.2% 49.3%

52.9%

0%

10%

20%

30%

40%

50%

60%

Peer 1 Peer 2 Peer 3 Peer 4 PVR Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10

CFFO-to-Distributions (2Q09)

2.2x

1.9x

1.4x1.4x

1.3x1.2x

1.2x 1.1x 1.0x

0.9x

0.6x

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

Peer 1 Peer 2 Peer 3 Peer 4 PVR Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10

Ent. Value-to-EBITDA (2Q09)

5.6x

7.9x8.6x 8.6x

10.0x10.8x 11.8x

12.9x

14.1x 14.6x

23.6x

0.0x

5.0x

10.0x

15.0x

20.0x

25.0x

Peer 1 Peer 2 PVR Peer 3 Peer 4 Peer 5 Peer 6 Peer 7 Peer 8 Peer 9 Peer 10

Other Peer Comparisons -

PVR1

1

Reflects market data as of Sept. 11, 2009 and financial data for the quarter ended June 30, 2009; peers include ARLP, CPNO, DPM, GEL, MMLP, MWE, NGLS, NRGY, NRP and RGNC

Adjusted EBITDA Reconciliation PVR


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($ in millions)

Year Ended December 31, LTM

2004 2005 2006 2007 2008 6/30/09

Net Income $34.3 $51.2 $73.9 $56.6 $104.5 $83.3

DD&A 18.6 30.6 37.5 41.5 58.2 67.9Impairments - - - - 31.8 31.8

Interest (income) expense, net 6.2 12.9 17.6 15.5 27.6 29.5EBITDA $59.2 $94.7 $129.1 $113.7 $222.0 $212.5

Impact of derivatives in operating income - (1.0) 2.0 4.6 5.5 4.2Impact of derivatives included in other income - 14.0 11.3 45.6 (16.8) (29.8)Cash payments to settle derivatives - (4.8) (19.4) (17.8) (38.5) (14.8)

Adjusted EBITDA $59.2 $103.0 $122.8 $146.1 $172.2 $172.1

Adjusted EBITDA - Coal & NRM $59.2 $79.6 $93.8 $91.5 $127.1 $132.5Adjusted EBITDA - Midstream - $23.3 $29.0 $54.6 $45.1 $39.6

Adjusted EBITDA Reconciliation -

PVR

Distributable Cash Flow Reconciliation PVR


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($ in millions)

Year Ended December 31, LTM

2004 2005 2006 2007 2008 6/30/09

Net Income $34.3 $51.2 $73.9 $56.6 $104.5 $83.3

DD&A 18.6 30.6 37.5 41.5 58.2 67.9

Impairments - - - - 31.8 31.8

Impact of derivatives in operating income - (1.0) 2.0 4.6 5.5 4.2Impact of derivatives included in other income - 14.0 11.3 45.6 (16.8) (29.8)Cash payments to settle derivatives - (4.8) (19.4) (17.8) (38.5) (14.8)Equity earnings from joint ventures (0.4) (1.1) (1.3) (1.8) (4.2) (5.4)Cash distributions from joint ventures 1.0 2.4 2.6 1.5 4.0 4.1Non-cash cost of gas purchased - - 4.6 - - -Maintenance CAPEX (0.1) (4.6) (9.5) (9.8) (14.5) (12.1)

Distributable Cash Flow $53.4 $86.7 $101.6 $120.5 $129.9 $129.2

Distributable Cash Flow Reconciliation -

PVR

Documents

PVR PVG Penn Virginia Resources Sept 2009 Presentation