PENN VIRGINIA RESOURCE PARTNERS L P - 10-Q Quarterly Report

UNITED STATES
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 quarterly period ended June 30, 2004

Or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from______________	to ___________________


Commission File Number 1-16735

PENN VIRGINIA RESOURCE PARTNERS, L.P.
(Exact Name of Registrant as Specified in Its Charter)

Delaware	23-3087517
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

THREE RADNOR CORPORATE CENTER, SUITE 230
100 MATSONFORD ROAD
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

Indicate by a check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
	Yes	X	No

As of August 2, 2004, 10,424,681 common and 7,649,880 subordinated limited partner units were outstanding.

PENN VIRGINIA RESOURCE PARTNERS, L.P.

INDEX

PART I. Financial Information	PAGE

Item 1. Financial Statements

Consolidated Statements of Income for the Three and Six Months Ended June 30, 2004 and 2003	3

Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003	4

Consolidated Statements of Cash Flows for the Three and Six Months Ended June 30, 2004 and 2003	5

Notes to Consolidated Financial Statements	6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	10

Item 3. Quantitative and Qualitative Disclosures about Market Risk	20

Item 4. Controls and Procedures	22

PART II. Other Information Item 6. Exhibits and Reports on Form 8-K	23

PART I. Financial
Information

Item 1. Financial
Statements

                                                          PENN VIRGINIA RESOURCE PARTNERS, L.P.


CONSOLIDATED STATEMENTS OF INCOME - Unaudited

                                                                      (in thousands, except per unit data)

	Three Months		Six Months
	Ended June 30,		Ended June 30,
	2004	2003	2004	2003
Revenues
Coal royalties	$ 17,517	$ 12,247	$ 34,377	$ 23,698
Coal services	942	546	1,726	1,039
Timber	142	193	295	749
Minimum rentals	-	210	-	815
Other	131	85	297	221
Total revenues	8,732	13,281	36,695	26,522


Operating costs and expenses
Royalties	1,794	403	3,411	730
Operating	254	492	386	1,005
Taxes other than income	230	293	514	589
General and administrative	1,986	1,727	3,959	3,538
Depreciation, depletion and amortization	4,852	4,150	9,621	8,368
Total operating costs and expenses	9,116	7,065	17,891	14,230

Operating income	9,616	6,216	18,804	12,292

Other income (expense)
Interest expense	(1,403)	(1,371)	(2,732)	(2,156)
Interest income	256	314	524	644
Income before cumulative effect of change in accounting principle	8,469	5,159	16,596	10,780
Cumulative effect of change in accounting principle	-	-	-	(107)
Net income	$ 8,469	$ 5,159	$ 16,596	$ 10,673


General partner's interest in net income	$ 169	$ 103	$ 332	$ 213
Limited partner's interest in net income	$ 8,300	$ 5,056	$ 16,264	$ 10,460

Basic and diluted net income per limited partner unit, common and subordinated:
Income before cumulative effect of change in accounting principle	$ 0.46	$ 0.28	$ 0.90	$ 0.60
Cumulative effect of change in accounting principle	-	-	-	(0.01)
Net income per limited partner unit	$ 0.46	$ 0.28	$ 0.90	$ 0.59

Weighted average number of units outstanding:
Common	10,425	10,292	10,416	10,210
Subordinated	7,650	7,650	7,650	7,650

The accompanying notes are an integral part of
these consolidated financial statements.

                                               PENN VIRGINIA RESOURCE PARTNERS, L.P.

CONSOLIDATED BALANCE SHEETS


(in thousands)

	June 30,	December 31,
ASSETS	2004	2003
Current assets:	(unaudited)
Cash and cash equivalents	$ 14,438	$ 9,066
Accounts receivable	8,643	6,909
Other	961	767
Total current assets	24,042	16,742

Property and equipment	271,859	269,966
Less: Accumulated depreciation, depletion and amortization	41,378	31,820
Total property and equipment	230,481	238,146

Debt issuance costs	1,813	2,065
Prepaid minimums, net and other	2,386	2,939

Total assets	$ 258,722	$ 259,892

LIABILITIES AND PARTNERS' CAPITAL
Current liabilities:
Accounts payable	$ 984	$ 965
Accrued liabilities	2,906	2,910
Current portion of long-term debt	3,000	1,500
Deferred income	1,254	1,610
Total current liabilities	8,144	6,985

Deferred income	7,825	6,028
Other liabilities	3,358	2,793
Long-term debt	87,208	90,286

Commitments and contingencies

Partners' capital	152,187	153,800

Total liabilities and partners' capital	$ 258,722	$ 259,892

The accompanying
notes are an integral part of these consolidated financial statements.

                                  PENN VIRGINIA RESOURCE PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS - Unaudited


(in thousands)

	Three Months		Six Months
	Ended June 30,		Ended June 30,
	2004	2003	2004	2003
Cash flow from operating activities
Net income	$ 8,469	$ 5,159	$ 16,596	$ 10,673
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, and amortization	4,852	4,150	9,621	8,368
Gain on sale of property and equipment	(24)	(5)	(27)	(5)
Noncash interest expense	126	154	252	274
Cumulative effect of change in accounting principle	-	-	-	107
Changes in operating assets and liabilities	2,439	1,468	(309)	(48)
Net cash provided by operating activities	15,862	10,926	26,133	19,369

Cash flow from investing activities
Payments received on long-term note receivable	182	124	348	245
Proceeds from sale of property and equipment	24	5	27	50
Capital expenditures	(463)	(177)	(867)	(1,446)
Net cash used in investing activities	(257)	(48)	(492)	(1,151)

Cash flow from financing activities
Payments for debt issuance costs	-	-	-	(1,419)
Repayments of borrowings	(1,000)	-	(1,000)	(88,387)
Proceeds from borrowings	-	-	-	90,000
Proceeds from issuance of units	-	-	-	278
Distributions paid	(9,593)	(9,576)	(19,269)	(17,584)
Net cash used in financing activities	(10,593)	(9,576)	(20,269)	(17,112)

Net increase in cash and cash equivalents	5,012	1,302	5,372	1,106
Cash and cash equivalents - beginning of period	9,426	9,424	9,066	9,620
Cash and cash equivalents - end of period	$ 14,438	$ 10,726	$ 14,438	$ 10,726

Supplemental disclosures of cash flow information
Cash paid for interest	$ 189	$ 11	$ 2,704	$ 627
Noncash investing and financing activities
Issuance of partners' capital for acquisition	$ -	$ 4,969	$ 1,060	$ 4,969

The
accompanying notes are an integral part of these consolidated financial
statements.

5

PENN VIRGINIA RESOURCE PARTNERS, L.P.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS - Unaudited

June 30, 2004

1. ORGANIZATION

Penn Virginia Resource Partners, L.P. (the
"Partnership"), through its wholly owned subsidiary, Penn Virginia
Operating Co., LLC, is engaged principally in the coal land management
business. The Partnership does not operate
any mines. Instead, it enters into
leases with various third-party operators which give those operators the right
to mine coal reserves on the Partnership's land in exchange for royalty
payments. The Partnership also provides fee-based
infrastructure facilities to some of its lessees and third parties to generate
coal services revenues. These facilities include coal loading facilities,
preparation plants and, most recently, coal handling facilities located at
end-user industrial plants (See Note 11).
The Partnership also sells timber growing on its land.

The general partner of the Partnership is Penn
Virginia Resource GP, LLC, a wholly owned subsidiary of Penn Virginia
Corporation ("Penn Virginia").

2.
BASIS OF PRESENTATION

The accompanying
unaudited consolidated and combined financial statements include the accounts
of Penn Virginia Resource Partners, L.P. and all wholly-owned
subsidiaries. The financial statements
have been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial reporting and Securities
and Exchange Commission ("SEC") 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 Partnership's
consolidated financial statements and footnotes included in the Partnership's
Annual Report on Form 10-K for the year ended December 31, 2003. Accounting polices are consistent with those
described in the Partnership's Annual Report on Form 10-K for the year ended
December 31, 2003, except as discussed below.
Please refer to such Form 10-K for a further discussion of those
policies. Operating results for
the six months ended June 30, 2004 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2004. Certain
reclassifications have been made to conform to the current period's
presentation.

3. ASSET RETIREMENT OBLIGATION

Effective
January 1, 2003, the Partnership adopted Statement of Financial Accounting
Standards ("SFAS") No. 143, Accounting
for Asset Retirement Obligations, which addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. The Standard applies to legal obligations associated with the
retirement of long-lived assets that result from the acquisition, construction,
development or normal use of such assets.

The
fair value of a liability for an asset retirement obligation is recognized in
the period in which it is incurred if a reasonable estimate of fair value can
be made. The fair value of the
liability is also added to the carrying amount of the associated asset and is
depreciated over the life of the asset.
The liability is accreted through charges to accretion expense, which
are recorded as additional depreciation, depletion and amortization. If the obligation is settled for other than
the carrying amount of the liability, a gain or loss on settlement will be
recognized.

Below
is a reconciliation of the beginning and ending aggregate carrying amount of the
Partnership's asset retirement obligations as of June 30, 2004 (in thousands).

Balance, January 1, 2004	$ 666
Accretion expense	28
Balance, June 30, 2004	$ 694

4. HEDGING ACTIVITIES

In connection with its senior unsecured notes, the Partnership entered
into an interest rate swap agreement with a notional amount of $30 million to
hedge a portion of the fair value of those notes which mature over a ten-year
period. This swap was designated as a
fair value hedge and has been reflected as a decrease of long-term debt of approximately $1.3 million as of June 30, 2004, with a corresponding increase
in other liabilities. Under the terms
of the interest rate swap agreement, the counterparty pays the Partnership a
fixed annual rate of 5.77 percent on a total notional amount of $30
million, and the Partnership pays the
counterparty a variable rate equal to the floating interest rate which is based
on the six month London Interbank Offering Rate plus 2.36 percent.

5. COMMITMENTS AND CONTINGENCIES

The Partnership is involved, from
time to time, in various legal proceedings arising in the ordinary course of
business. While the ultimate results of these proceedings cannot be predicted
with certainty, Partnership management believes these claims will not have a
material effect on the Partnership's financial position, liquidity or
operations.

Environmental Compliance

The operations of the
Partnership's lessees are subject to environmental laws and regulations adopted
by various governmental authorities in the jurisdictions in which these
operations are conducted. The terms of the Partnership's coal property leases
impose liability for all environmental and reclamation liabilities arising
under those laws and regulations on the relevant lessees. The lessees are
bonded and have indemnified the Partnership against any and all future
environmental liabilities. The Partnership regularly visits coal properties
under lease to monitor lessee compliance with environmental laws and
regulations and to review mine activities. Management believes that the
Partnership's lessees will be able to comply with existing regulations and does
not expect any material impact on the Partnership's financial condition or results
of operations.

As of June 30, 2004, the
Partnership had some reclamation bonding requirements with respect to certain
of its unleased and inactive properties.
As of June 30, 2004, the Partnership's environmental liabilities totaled
$1.6 million, which represents the Partnership's best estimate of these
liabilities as of that date. Given the
uncertainty of when the reclamation area will meet regulatory standards, a
change in this estimate could occur in the future.

Mine Health and Safety Laws

There are numerous mine health
and safety laws and regulations applicable to the coal mining industry. However, since the Partnership does not
operate any mines and does not employ any coal miners, it is not subject to such laws and
regulations. Accordingly, no related
liabilities are accrued.

6. NET INCOME PER UNIT

Basic and diluted net income per unit
is determined by dividing net income, after deducting the general partner's two
percent interest, by the weighted average number of outstanding common units and
subordinated units. At June 30, 2004, there were no
dilutive units outstanding.

7. RELATED PARTY TRANSACTION

Penn Virginia
charges the Partnership for certain corporate administrative expenses, which
are allocable to its subsidiaries. When allocating general corporate expenses,
consideration is given to property and equipment, payroll and general corporate
overhead. Any direct costs are paid by the Partnership. Total corporate
administrative expenses charged to the Partnership totaled $0.4 million and
$0.3 million for the three months ended June 30, 2004 and 2003, respectively,
and $0.7 and $0.6 million for the six months ended June 30, 2004 and 2003,
respectively. These costs are reflected
in general and administrative expenses in the accompanying consolidated
statements of income. Management believes the allocation methodologies used are
reasonable.

8. DISTRIBUTIONS

The Partnership makes quarterly cash
distributions of its available cash, generally defined as consolidated cash
receipts less consolidated cash disbursements and cash reserves
established by the general partner at its sole discretion. According to the Partnership Agreement, the
general partner receives incremental incentive cash distributions if cash distributions
exceed certain target thresholds as follows:

                                                                                                                                      General

Quarterly cash
distribution per unit:                                                                               Unitholders               Partner

        First target - up to $0.55 per unit                                                                              98%                         2%

        Second target - above $0.55 per unit
up to $0.65 per unit                                         85%                        15%

        Third target - above $0.65 per unit up
to $0.75 per unit                                            75%                        25%

        Thereafter - above $0.75 per unit                                                                           50%                        50%

To
date, the Partnership has not paid any incentive cash distributions to the
general partner. The following table reflects the allocation of total cash
distributions paid during the six months ended June 30, 2004 (in thousands,
except per unit information):

          Limited partner units                                                                                                                    $     18,884

         General partner ownership interest                                                                                                            385


Total cash distributions                                                                                                              $
19,269

Total cash distributions paid per unit
$ 0.52

In May 2004, the Partnership
distributed $0.52 per unit for the three months ended March 31, 2004, or four
percent above its minimum quarterly distribution of $0.50 per unit. In July 2004, the Partnership announced a
$0.02 per unit increase in its quarterly distribution to $0.54 for the three
months ended June 30, 2004, or $2.16 per unit on an annualized basis. The distribution will be paid on August 13,
2004, to unitholders of record on August 4, 2004. As a result, distributions to partners will increase by approximately
$0.4 million in the third quarter of 2004 and in future quarters as approved by
the board of directors of the general partner.

9. SEGMENT
INFORMATION

Segment
information has been prepared in accordance with SFAS No. 131, Disclosure
about Segments of an Enterprise and Related Information. Under SFAS No. 131, operating segments are
defined as components of an enterprise about which separate financial
information is available and is evaluated regularly by the chief operating
decision maker, or decision-making group, in assessing performance. The Partnership's chief operating
decision-making group consists of the Chief Executive Officer and other senior
officials. This group routinely reviews
and makes operating and resource allocation decisions among the Partnership's
coal royalty operations, coal services operations, and timber operations. Accordingly, the Partnership's reportable
segments are as follows:

Coal
Royalty

The coal royalty
segment includes management of the Partnership's coal located in the
Appalachian region of the United States and New Mexico.

Coal
Services

As of June 30,
2004, the Partnership's coal services segment consisted primarily of fee-based infrastructure facilities leased to certain
lessees to generate additional coal services revenues.

Timber

The
Partnership's timber segment consists of the selling of standing timber on the
Partnership's properties.

The following is a summary of certain financial information
relating to the Partnership's segments:

	Coal Royalty	Coal Services	Timber	Consolidated
	(in thousands)
For the Three Months Ended June 30, 2004:
Revenues	$ 17,648	$ 942	$ 142	$ 18,732
Operating costs and expenses	3,848	245	171	4,264
Depreciation, depletion and amortization	4,253	599	-	4,852
Operating income (loss)	$ 9,547	$ 98	$ (29)	$ 9,616
Interest expense, net				(1,147)
Net income				$ 8,469


For the Three Months Ended June 30, 2003:
Revenues	$ 12,542	$ 546	$ 193	$ 13,281
Operating costs and expenses	2,072	683	160	2,915
Depreciation, depletion and amortization	3,898	251	1	4,150
Operating income (loss)	$ 6,572	$ (388)	$ 32	$ 6,216
Interest expense, net				(1,057)
Net income				$ 5,159

	Coal Royalty	Coal Services	Timber	Consolidated
	(in thousands)
For the Six Months Ended June 30, 2004:
Revenues	$ 34,674	$ 1,726	$ 295	$ 36,695
Operating costs and expenses	7,354	579	337	8,270
Depreciation, depletion and amortization	8,451	1,169	1	9,621
Operating income (loss)	$ 18,869	$ (22)	$ (43)	$ 18,804
Interest expense, net				(2,208)
Net income				$ 16,596

For the Six Months Ended June 30, 2003:
Revenues	$ 24,734	$ 1,039	$ 749	$ 26,522
Operating costs and expenses	4,213	1,335	314	5,862
Depreciation, depletion and amortization	7,863	501	4	8,368
Operating income (loss)	$ 12,658	$ (797)	$ 431	$ 12,292
Interest expense, net				(1,512)
Cumulative effect of change in accounting principle				(107)
Net income				$ 10,673

10.
RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 141, Business
Combinations, and SFAS No. 142, Goodwill
and Other Intangible Assets, under which the Partnership classified its
leased coal mineral rights as intangible assets. In April 2004, the FASB issued a FASB Staff
Position ("FSP") that amends certain sections of SFAS No. 141 and No.
142 relating to the characterization of coal mineral rights. The FSP is effective for the first reporting
period beginning after April 29, 2004.
As allowed by the FSP, the Partnership early adopted the FSP in April
2004 and, accordingly, reclassified its leased coal mineral rights back to
tangible property. The Partnership discontinued straight-line amortization
upon adoption and will deplete its coal mineral rights using the
units-of-production method on a prospective basis. The amount capitalized related to mineral
rights represents its fair value at the time such right was acquired, less
accumulated amortization. Pursuant to
the FSP, for comparative presentation purposes, $4.9 million was reclassified
from other noncurrent assets to net property and equipment as of December 31,
2003 on the accompanying consolidated balance sheet.

11.
SUBSEQUENT EVENT

In
July 2004, the Partnership acquired from affiliates of Massey Energy Company a
50 percent interest in a joint venture formed to own and operate end-user coal
handling facilities. The purchase
price was approximately $28.5 million and was funded through the Partnership's
credit facility. The equity method will
be used to account for the investment in the joint venture, which had existing
operations as of July 1, 2004, the effective date of the acquisition.

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations

The following review of the financial
condition and results of operations of Penn Virginia Resource Partners, L.P.
(the "Partnership", "we", "our" or
"us") should be read in conjunction with the Consolidated Financial
Statements and Notes thereto.

Overview

We are a Delaware limited
partnership formed by Penn Virginia Corporation ("Penn Virginia") in
2001 to primarily engage in the business of managing coal properties and
related assets in the United States. Penn Virginia contributed its coal
properties and related assets to the Partnership and effective with the closing
of our initial public offering in October 2001, our common units began trading
publicly on the New York Stock Exchange.

Both
in our current limited partnership form and in our previous corporate form, we
have managed coal properties since 1882.
We currently conduct operations in three business segments: coal royalty, coal services and timber. For the six months ended June 30, 2004, 94
percent of our revenues were attributable to our coal royalty operations, five
percent of our revenues were attributable to our coal services operations and
one percent of our revenues were attributable to our timber operations.

Our coal reserves, coal infrastructure and timber
assets are located on the following six properties:

* the Wise property, located in Wise and Lee
Counties, Virginia, and Letcher and Harlan Counties, Kentucky;

* the Coal River property, located in Boone,
Fayette, Kanawha, Lincoln and Raleigh Counties, West Virginia;

* the New Mexico property, located in McKinley
County, New Mexico;

* the Northern Appalachia property, located in
Barbour, Harrison, Lewis, Monongalia and Upshur Counties, West Virginia;

* the Spruce Laurel property, located in Boone
and Logan Counties, West Virginia; and

* the
Buchanan property, located in Buchanan County, Virginia.

In our coal royalty operations,
we enter into long-term leases with experienced, third-party mine operators,
giving them the right to mine our coal reserves in exchange for royalty
payments. We do not operate any mines. For the six months ended June 30,
2004, our lessees produced 15.9 million tons of coal from our properties and
paid us coal royalty revenues of $34.4 million. Approximately 78 percent of our coal
royalty revenues for the first half of 2004 and 68 percent of our first half
2003 coal royalty revenues were based on the higher of a percentage of the
gross sales price or a fixed price per ton of coal sold, with pre-established
minimum monthly or annual rental payments.
The remainder of our coal royalty revenues for the respective periods
were derived from fixed royalty rate leases, which escalate annually, with
pre-established minimum monthly payments.
In managing our properties, we actively work with our lessees to develop
efficient methods to exploit our reserves and to maximize production from our
properties. We also derive
revenues from minimum rental payments. Minimum rental payments are initially
deferred and are recognized as minimum rental revenues when our lessees fail to
meet specified production levels for certain predetermined periods. The recoupment period on most of our leases generally ranges from one to three
years. For the six months ended June
30, 2004, we did not recognize any minimum rental revenues.

In addition to our coal royalty revenues, we also generate
coal services revenues from fees we charge to our lessees for the use of our
coal preparation and transportation facilities. These facilities provide
efficient methods to enhance lessee production levels and exploit our
reserves. The coal service
facility we purchased in November 2002 on our West Coal River property in West
Virginia began operations in the third quarter of 2003. In January 2004, we completed construction
of a coal loadout facility for another lessee in West Virginia (see "Bull
Creek Loadout Facility" below).
Through June 30, 2004, we have invested a total of $4.4 million in the
facility's construction. Our coal
services revenues totaled $1.7 million for the six months ended June 30,
2004. In July 2004, we entered into a
joint venture with affiliates of Massey Energy Company and expanded our coal
services business to provide coal handling facilities to end-user industrial
plants.

We also
earn revenues from the sale of standing timber on our properties. The timber revenues we receive are dependent
on harvest levels and the species and quality of timber harvested. Our harvest
levels in any given year will depend upon a number of factors, including
anticipated mining activity, timber maturation and market conditions. Any
timber, which would otherwise be removed due to lessee mining operations, is
harvested in advance to prevent loss of the resource. For the six months ended
June 30, 2004, we sold 1.4 million board feet of timber for $0.3 million.

The revenues and profitability of
our coal royalty operations are largely dependent on the production of coal
from our reserves by our lessees. The
coal royalty revenues we receive are affected by changes in coal prices and our
lessees' supply contracts and, to a lesser extent, by fluctuations in the spot
market prices for coal. The prevailing price for coal depends on a number of
factors, including demand, the price and availability of alternative fuels,
overall economic conditions and governmental regulations.

Royalty expenses that we incur in
our coal business consist primarily of lease payments on property which we
lease from third parties and sublease to our lessees. Our lease payment obligations vary based on the production from
our subleased properties. With respect to the properties that we lease, we are
granted mining rights in exchange for per ton royalty payments. We also incur
costs related to lease administration and property maintenance as well as
technical and support personnel.

Economic and Industry Factors

The United States relies
significantly on coal as a primary fuel source. Coal is used as a fuel source for about half of domestic
electricity generation and represents approximately 85 percent of fossil fuel
reserves in the United States. As
environmental progress continues, we are optimistic that coal will continue to
play a vital role in the generation of electricity. Many of our lessees have favorable transportation options to
their customers, which are mostly major utilities.

During the first half of 2004, coal supply in central Appalachia
was constrained due to shortages of skilled labor and railcars. Notwithstanding
those constraints, general
coal market conditions were very strong over that period,
particularly in central Appalachia where most of our properties are located,
and demand for coal increased. We benefited from those
conditions in the form of increased coal tonnage mined from our properties and
higher prices received by our lessees during the first half of 2004, which in
turn resulted in higher royalty revenues to us. We
expect these general market conditions to persist through the remainder of
2004. However, we expect our results for the second half of 2004 to be
somewhat lower than the first half of the year due to the expected interruption
in production associated with the relocation of two longwall mining operations.

We are not an operating company
and do not employ any coal miners.
There are several key distinctions between our coal royalty business and
a coal operating business which include:

        *      higher operating margins due to no risk in
variable mining costs;

        *      more cash flow stability because we have a
diversified lessee base;

        *      no social obligations under the numerous
mine health and safety laws and regulations applicable to the coal mining
industry; and

        *      no significant exposure to reclamation
obligations because our lessees assume, and post performance bonds for, those
obligations.

Our lessees are obligated to conduct mining operations in
compliance with all applicable federal, state and local laws and regulations.
Because of extensive and comprehensive regulatory requirements, violations
during mining operations are not unusual in the industry and, notwithstanding
compliance efforts, we do not believe violations by our lessees can be
eliminated completely. None of our lessees' violations to date, or the monetary
penalties assessed, have had a material adverse effect on us or, to our
knowledge, on our lessees. We do not currently expect that future compliance
will have a material adverse effect on us.

While it is not possible to quantify the
costs of compliance by our lessees with all applicable federal and state laws,
those costs have been and are expected to continue to be significant. The
lessees post performance bonds pursuant to federal and state mining laws and
regulations for the estimated costs of reclamation and mine closings, including
the cost of treating mine water discharge when necessary. We do not accrue for
such costs because our lessees are contractually liable for all costs relating
to their mining operations, including the costs of reclamation and mine
closure. Compliance with these laws has substantially increased the cost of
coal mining for all domestic coal producers.

In addition, the utility industry, which
is the most significant end-user of coal, is subject to extensive regulation
regarding the environmental impact of its power generation activities which
could affect demand for our lessees' coal. The possibility exists that new
legislation or regulations may be adopted which may have a significant impact
on the mining operations of our lessees or their customers' ability to use coal
and may require us, our lessees or their customers to change operations
significantly or incur substantial costs.

Opportunities, Challenges and Risks

Our
revenues and profitability will be adversely affected in the future if we are
unable to replace or increase our reserves through acquisitions. Our management continues to focus on
acquisitions of assets and energy sources necessary to meet the requirements of
diverse markets and environmental regulations.
Personnel was added in 2003 to evaluate coal reserves, coal industry-related infrastructure
and the acquisition of oil and gas mid-stream assets, such as oil and gas
gathering, processing and transportation facilities. We continue to review a
number of potential acquisition opportunities in that sector as well as other
appropriate assets.

As the economic growth of the
United States and the world continues and the need for clean, environmentally
friendly energy increases, additional output from conventional energy sources
will be essential. Coal represents the
vast majority of energy resources in the United States, and it continues to be
substantially more economical than other fossil fuel alternatives. Although coal generates about half of the
nation's electricity, coal combustion emits sulfur dioxide, nitrous oxides and
carbon dioxide, all of which are considered pollutants. The challenge to the industry is to continue
to reduce these emissions while keeping coal as the fuel of choice.

Acquisitions and Investments in Coal Facilities

Capital expenditures, including noncash
items, were as follows:

	Six Months Ended June 30,
	2004	2003
	(in thousands)
Acquisitions of coal reserves	$ 1,132	$ 6,229
Coal services and land management additions	763	110
Other property and equipment expenditures	32	76
Total capital expenditures	$1,927	$ 6,415

Coal Handling
Joint Venture

In July 2004, we acquired from affiliates
of Massey Energy Company a 50 percent interest in a joint venture formed to own
and operate end-user coal handling facilities.
The purchase price was approximately $28.5 million and was funded
through the Partnership's credit facility.

The joint venture owns coal handling
facilities which store and manage coal for three industrial coal consumers in
the chemical, paper and lime production industries located in Tennessee,
Virginia and Kentucky, respectively. A
combination of fixed monthly fees and per ton throughput fees are paid by those
consumers under long-term leases expiring between 2007 and 2019. PVR expects to receive cash distributions
from the joint venture of approximately $3.5 to $4.0 million per year over the
next several years.

Peabody Acquisition

In February 2004, we released 51,000
units, which had been held in escrow since December 2002, to affiliates of
Peabody Energy Corporation. In exchange
for the units, we received additional reserves on our Northern Appalachia
properties.

Bull Creek Loadout Facility

In January 2004, we completed the
construction of a new coal loadout facility for one of our lessees on our Coal
River property in West Virginia. The
$4.4 million loadout facility is designed for the high-speed loading of 150-car
unit trains and became operational on February 1, 2004. We expect this facility to generate revenues
of approximately $0.6 million in 2004.

Critical
Accounting Policies and Estimates

Depletion.
Coal properties are depleted on an area-by-area basis at a rate based on
the cost of the mineral properties and the number of tons of estimated proven
and probable coal reserves contained therein.
In 2001, we estimated proven and probable coal reserves with the
assistance of third-party mining consultants and involved the use of estimation
techniques and recoverability assumptions.
As a result of the independent reserve audit conducted in 2001 in
connection with our initial public offering, we recorded a downward revision of
our coal reserves, resulting from differences in general reserve criteria
utilized by our independent engineer and the site or operator specific criteria
utilized by us. Consequently, we
increased our depletion rates on a prospective basis. Subsequent to 2001, proven and probable reserves have been estimated
internally by our geologists. Our
estimates of coal reserves are updated periodically and may result in
adjustments to coal reserves and depletion rates that are recognized
prospectively. The Partnership
estimates its timber inventory using statistical information and data obtained
from physical measurements, site maps, photo-types and other information
gathering techniques. These estimates are updated annually and may result in
adjustments of timber volumes and depletion rates, which are recognized
prospectively.

Coal Royalty Revenues. Coal royalty revenues are recognized on
the basis of tons of coal sold by our lessees and the corresponding revenues
from those sales. Since we are not the
mine operator, we do not have access to actual production and revenues
information until approximately 30 days following the month of production. Therefore, our financial results
include estimated revenues and accounts receivable for this 30-day period. Any differences between the actual amounts
ultimately received and the original estimates are recorded in the period they
become finalized.

Results of Operations

Three Months Ended June 30, 2004 Compared With Three Months Ended June
30, 2003.

The following
table sets forth our revenues, operating expenses and operating statistics for
the three months ended June 30, 2004 compared with the same period in 2003.

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	Three Months Ended June 30,		Percentage
	2004 2003		Change
Financial Highlights	(in thousands)
Revenues
Coal royalties	$ 17,517	$ 12,247	43%
Coal services	942	546	73%
Timber	142	193	(26%)
Minimum rentals	-	210	-
Other	131	85	54%
Total revenues	18,732	13,281	41%

Operating costs and expenses
Royalties	1,794	403	345%
Operating	254	492	(48%)
Taxes other than income	230	293	(22%)
General and administrative	1,986	1,727	15%
Depreciation, depletion and amortization	4,852	4,150	17%
Total operating costs and expenses	9,116	7,065	29%

Operating income	9,616	6,216	55%

Interest expense, net	(1,147)	(1,057)	9%

Net income	$ 8,469	$ 5,159	64%

Operating Statistics

Royalty coal tons produced by lessees (tons in thousands)	7,941	6,600	20%
Average royalty per ton ($/ton)	$ 2.21	$ 1.86	19%

Revenues. Our revenues in the second
quarter of 2004 were $18.7 million compared with $13.3 million for the same
period in 2003, an increase of $5.4 million, or 41 percent. The increase in revenues primarily related
to increased coal royalties received from our lessees.

Coal royalty
revenues for the three months ended June 30, 2004 were $17.5 million compared
with $12.2 million for the same period in 2003, an increase of $5.3 million, or
43 percent. Production by our lessees
increased by 1.3 million tons, or 20 percent, to 7.9 million tons in the second
quarter of 2004 from 6.6 million tons in the second quarter of 2003. Average royalties per ton increased to $2.21
in the second quarter of 2004 from $1.86 in the comparable 2003 period. The
increase in the average royalties per ton was primarily due to stronger market
conditions for coal resulting in higher prices for coal sold by our lessees and
increased production from two lessees with higher royalty rates, offset by
decreased production from our New Mexico property. At the property level, these variances were primarily due to the
following factors:

* Production on the
Coal River property increased by 1.3 million tons and revenues increased by
$3.3 million. One lessee, which
utilizes longwall mining, began mining on one of our subleased properties from
an adjacent property during the first quarter of 2004, which resulted in an
additional 0.7 million tons of coal production, or $1.4 million in revenues in
the second quarter of 2004. The
addition of a mine operator and a new mine by another of our lessees
contributed approximately 0.3 million tons of coal production, or $1.2 million
of revenue. The commencement of operations
in July 2003 on our West Coal River property contributed an additional 0.2
million tons, or $0.4 million of revenue.
Increased demand also fueled a coal sales price increase in the region,
which in turn resulted in a five percent increase in our average gross royalty
per ton on the Coal River property, from $2.41 per ton in the second quarter of
2003 to $2.53 per ton in the second quarter of 2004.

* Production on the
Wise property increased by 0.1 million tons, and revenues increased $1.3
million. The revenue increase was
primarily due to increased coal sales prices fueled by a stronger demand in the
region, resulting in higher price realizations by our lessees. This caused the average gross royalty per
ton to increase 20 percent from $2.27 per ton in the second quarter of 2003 to
$2.73 per ton in the second quarter of 2004.

* Production on the
Spruce Laurel property increased by 0.1 million tons and revenues increased by
$0.4 million. The revenue increase was
primarily due to increased coal sales prices fueled by a stronger demand in the
region. The higher royalty rates
received from our lessees resulted in a 27 percent increase in the average
gross royalty per ton on the Spruce Laurel property, from $1.98 per ton in the
second quarter of 2003 to $2.52 per ton in the second quarter of 2004.

* These increases were offset, in part, by a
decline in production from our New Mexico property, which was caused by a
decrease in our lessee's market share.

Coal services revenues were $0.9
million for the three months ended June 30, 2004 compared with $0.5 million for
the three months ended June 30, 2003, an increase of $0.4 million, or 73
percent. The increase was primarily the
result of start-up operations at our West Coal River and Bull Creek facilities
in July 2003 and February 2004, respectively.

Minimum
rental revenues decreased to zero for the three months ended June 30, 2004 from
$0.2 million in the comparable period of 2003.
All lessees met or exceeded their minimum obligations during the second
quarter of 2004.

Operating Costs and Expenses. Our aggregate operating costs and
expenses for the second quarter of 2004 were $9.1 million, compared with $7.1
million for the same period in 2003, an increase of $2.0 million, or 29
percent. The increase in operating costs and expenses primarily related to
increases in royalty expenses and depreciation, depletion and amortization.

Royalty
expenses were $1.8 million for the three months ended June 30, 2004 compared
with $0.4 million for the three months ended June 30, 2003, an increase of $1.4
million. This increase was the result
of an increase in production by lessees on subleased properties, primarily on
our Coal River property. Production on
these subleased properties increased to 1.0 million tons in the second quarter
of 2004 from 0.2 million tons in the second quarter of 2003, representing a 0.8
million ton increase.

Operating expenses decreased by 48 percent, to $0.3 million in the second
quarter of 2004, compared with $0.5 million in the same period of 2003. We incurred expenses of $0.2 million in the
second quarter of 2003 to maintain idled mines on our West Coal River property,
which is part of our Coal River property.
These costs were assumed by a new lessee in May 2003.

General and
administrative expenses increased $0.3 million, or 15 percent, to $2.0 million
in the second quarter of 2004, from $1.7 million in the same period of 2003.
The increase was primarily attributable to increased consulting fees used to
evaluate acquisition opportunities and increased payroll due to the addition of
employees.

Depreciation, depletion and
amortization for the three months ended June 30, 2004 was $4.9 million compared
with $4.2 million for the same period of 2003, an increase of $0.7 million or
17 percent. This increase was a result
of increased production by several of our lessees over the comparable periods
and depreciation on our West Coal River and Bull Creek facilities which began
start-up operations in July 2003 and February 2004, respectively. These increases were partially offset by a
decline in production from our New Mexico property which has a higher cost
basis.

Six Months Ended June 30, 2004 Compared With Six Months Ended June 30,
2003.

The following
table sets forth our revenues, operating expenses and operating statistics for
the six months ended June 30, 2004 compared with the same period in 2003.

	Six Months Ended June 30,		Percentage
	2004 2003		Change
	(in thousands)
Financial Highlights

Revenues
Coal royalties	$ 34,377	$ 23,698	45%
Coal services	1,726	1,039	66%
Timber	295	749	(61%)
Minimum rentals	-	815	-
Other	297	221	34%
Total revenues	36,695	26,522	38%

Operating costs and expenses
Royalties	3,411	730	367%
Operating	386	1,005	(62%)
Taxes other than income	514	589	(13%)
General and administrative	3,959	3,538	12%
Depreciation, depletion and amortization	9,621	8,368	15%
Total operating costs and expenses	17,891	14,230	26%

Operating income	18,804	12,292	53%

Interest expense, net	(2,208)	(1,512)	46%
	16,596	10,780	54%
Cumulative effect of change in accounting principle	-	(107)	-

Net Income	$ 16,596	$ 10,673	55%

Operating Statistics

Royalty coal tons produced by lessees (tons in thousands)	15,894	13,023	22%
Average royalty per ton ($/ton)	$ 2.16	$ 1.82	19%

Revenues. Our revenues in the first half
of 2004 were $36.7 million compared with $26.5 million for the same period in
2003, an increase of $10.2 million, or 38 percent. The increase in revenues primarily related to increased coal
royalties received from our lessees.

Coal royalty revenues for the
six months ended June 30, 2004 were $34.4 million compared with $23.7 million
for the same period in 2003, an increase of $10.7 million, or 45 percent. Production by our lessees increased by 2.9
million tons, or 22 percent, to 15.9 million tons in the first half of 2004
from 13.0 million tons in the first half of 2003. Average royalties per ton increased to $2.16 in the first half of
2004 from $1.82 in the comparable 2003 period.
The increase in the average royalties per ton was primarily due to
stronger market conditions for coal resulting in higher prices for coal sold by
our lessees and increased production from two lessees with higher royalty
rates, offset by decreased production from our New Mexico property. At the property level, these variances were
primarily due to the following factors:

* Production on the
Coal River property increased by 2.7 million tons and revenues increased by
$7.1 million. One lessee, which
utilizes longwall mining, began mining on one of our subleased properties from
an adjacent property during the first quarter of 2004, which resulted in an
additional 1.8 million tons of coal production, or $4.0 million in revenues in
the first half of 2004. The addition of
a mine operator and a new mine by another of our lessees contributed
approximately 0.5 million tons of coal production, or $1.9 million of
revenue. The commencement of operations
in July 2003 on our West Coal River property also contributed an additional 0.3
million tons, or $0.7 million of revenue.
Increased demand also fueled a coal sales price increase in the region,
which in turn resulted in an eight percent increase in our average gross
royalty per ton on the Coal River property, from $2.34 per ton in the first
half of 2003 to $2.52 per ton in the first half of 2004.

* Production on the
Wise property increased by 0.5 million tons and revenues increased by $2.7
million, of which approximately $1.6 million related to the average royalty
rate received from our lessees.
Increased coal prices fueled by stronger demand in the region resulted
in higher price realizations by our lessees.
This caused a 16 percent increase in the average gross royalty per ton
from $2.25 per ton in the first half of 2003 to $2.60 per ton in the first half
of 2004. Production increased primarily
due to additional mining equipment being added by two of our lessees.

*
Production on the Spruce Laurel property increased by 0.2 million tons and
revenues increased by $0.9 million. The revenue increase was primarily the result of increased
coal sales prices fueled by stronger demand in the region . The higher royalty rates received from our
lessees resulted in a 31 percent increase in the average gross royalty per ton on
the Spruce Laurel property, from $1.90 per ton in the first half of 2003 to
$2.49 per ton in the first half of 2004.

* These increases
were offset, in part, by a decline in production from our New Mexico property,
which was caused by a decrease in our lessee's market share.

Coal services
revenues were $1.7 million for the six months ended June 30, 2004 compared with
$1.0 million for the six months ended June 30, 2003, an increase of $0.7
million, or 66 percent. This increase
was primarily the result of start-up operations at our West Coal River and Bull
Creek facilities in July 2003 and February 2004, respectively.

Timber
revenues decreased to $0.3 million for the six months ended June 30, 2004
compared with $0.7 million in the first half of 2003, a decrease of $0.4
million, or 61 percent. The decrease
was due to the timing of a parcel sale of our standing timber in 2003 and poor
weather conditions in the second quarter of 2004.

Minimum
rental revenues decreased to zero for the six months ended June 30, 2004 from
$0.8 million in the comparable period of 2003.
All lessees met their minimum obligations during the first six months of
2004. The $0.8 million recognized in the
first half of 2003 primarily related to four leases. Each of these leases was assigned
to a new lessee approved by us. The
leases were amended at the time of assignment to allow the new lessees
additional time to offset actual production against minimum rental payments.

Operating Costs and Expenses. Our aggregate operating costs and
expenses for the first half of 2004 were $17.9 million, compared with $14.2
million for the same period in 2003, an increase of $3.7 million, or 26
percent. The increase in operating costs and expenses primarily related to
increases in royalty expenses, general and administrative expenses and
depreciation, depletion and amortization, offset by a decrease in operating
expenses.

Royalty
expenses were $3.4 million for the six months ended June 30, 2004 compared with
$0.7 million for the six months ended June 30, 2003, an increase of $2.7
million. This increase was the result
of an increase in production by lessees on subleased properties, primarily on
our Coal River property. Production on
these subleased properties increased to 2.3 million tons in the first half of
2004 from 0.4 million tons in the first half of 2003, representing a 1.9
million ton increase.

Operating expenses decreased by 62 percent, to $0.4 million in the first
half of 2004 compared with $1.0 million in the same period of 2003. We incurred expenses of $0.6 million in the
first half of 2003 to maintain idled mines on our West Coal River property,
which is part of our Coal River property.
These costs were assumed by a new lessee in May 2003.

General and administrative
expenses increased $0.5 million, or 12 percent, to $4.0 million in the first
half of 2004, from $3.5 million in the same period of 2003. Approximately $0.2
million was attributable to costs related to a secondary public offering for
the sale of common units held by an affiliate of Peabody Energy
Corporation. The remainder is primarily
attributable to increased consulting fees used to evaluate acquisition
opportunities and increased payroll due to the addition of employees.

Depreciation,
depletion and amortization for the six months ended June 30, 2004 was $9.6
million compared with $8.4 million for the same period of 2003, an increase of
$1.2 million, or 15 percent. This
increase was a result of increased production by several of our lessees over
the comparable periods and depreciation on our West Coal River and Bull Creek
facilities which began start-up operations in July 2003 and February 2004,
respectively. These increases were
partially offset by a decline in production from our New Mexico property which
has a higher cost basis.

Interest Expense. Interest expense, net of interest income, was
$2.2 million for the six months ended June 30, 2004 compared with $1.5 million
for the same period in 2003, an increase of $0.7 million, or 46 percent. The
increase was primarily due to our closing in March 2003 of a private placement
of $90 million ten-year senior unsecured notes payable (the "Notes"),
which bear interest at a fixed rate of 5.77 percent. Prior to the private placement, the $90 million was included on
our revolving credit facility, which bears interest at a generally lower rate
based on the Eurodollar rate plus an applicable margin which ranges from 1.25
to 2.25 percent.

Liquidity and
Capital Resources

Since the Partnership's inception in
2001, cash generated from operations and our borrowing capacity, supplemented
with the issuance of new common units, have been sufficient to meet our
scheduled distributions, working capital requirements and capital expenditures.
Our primary cash requirements consist of distributions to our general partner
and unitholders, normal operating and administrative expenses, interest and
principal payments on our long-term debt capital investment in fee-based coal
handling facilities and acquisitions of new assets or businesses.

Cash Flows. Net cash provided by
operating activities was $26.1 million in the first half of 2004 compared with
$19.4 million in first half of 2003. The increase was largely due to increased
production by our lessees and higher average gross royalties per ton.

Net cash used in investing activities
was $0.5 million in the first half of 2004 compared with $1.2 million in first
half of 2003. Cash used in investing activities for the six months ended June
30, 2004 primarily related to the completion of a new coal loading facility on
our Coal River property in West Virginia and two smaller infrastructure
projects. Net cash used in investing
activities for the six months ended June 30, 2003 primarily related to additional
expenditures to complete the close of an acquisition in December 2002.

Net cash used in financing activities
was $20.3 million in the first half of 2004 compared with $17.1 million in
first half of 2003. Distributions to partners increased to $19.3 million for
the first six months of 2004 from $17.6 million in the same period of
2003. Changes in borrowings and debt
issuance costs accounted for the remainder of the increase.

In July 2004, we announced a $0.02 per
unit increase in our quarterly distribution payable August 13, 2004 to unitholders
of record August 4, 2004, to $0.54 or $2.16 per unit on an annualized
basis. This will increase distributions
to partners by approximately $0.4 million in the third quarter of 2004 and in
future quarters as approved by the board of directors of our general partner.

Long-Term Debt. As of June 30, 2004, we
had outstanding borrowings of $90.2 million, consisting of $1.5 million
borrowed under our revolving credit facility and $90.0
million of the Notes, partially offset by $1.3 million fair value of the
interest rate swap described below.
The current portion of the Notes as of June 30, 2004 was $3.0 million.

Hedging Activities. In March 2003, we entered into an interest rate
swap agreement with a notional amount of $30 million, to hedge a portion of the
fair value of the Notes. This swap is designated as a fair value hedge and has
been reflected as a decrease in long-term debt of $1.3 million as of June 30,
2004, with a corresponding increase in
other liabilities. Under the terms of the interest rate swap agreement,
the counterparty pays us a fixed annual rate of 5.77 percent on a total
notional amount of $30 million, and we pay the counterparty a variable rate
equal to the floating interest rate, which is determined semi-annually and is
based on the six month London Interbank Offering Rate ("LIBOR") plus
2.36 percent.

Investment in Joint Venture. In July
2004, we acquired from affiliates of Massey Energy Company a 50 percent
interest in a joint venture formed to own and operate end-user coal handling
facilities. The purchase price was
approximately $28.5 million and was funded through the Partnership's credit
facility. The joint venture owns coal handling facilities which store and
manage coal for three industrial coal consumers in the chemical, paper and lime
production industries located in Tennessee, Virginia and Kentucky. A combination of fixed monthly fees and per
ton throughput fees are paid by those consumers under long term leases expiring
between 2007 and 2019. We expect to
receive cash distributions from the joint venture of approximately $3.5 to $4.0
million per year over the next several years.

Future
Capital Needs and Commitments.
For the remainder of 2004, we anticipate making additional capital
expenditures, excluding acquisitions, of approximately $0.1 million for coal
services related projects and other property and equipment. Part of our strategy is to make acquisitions
which increase cash available for distribution to our unitholders. Our ability
to make these acquisitions in the future will depend in part on the
availability of debt financing and on our ability to periodically use equity
financing through the issuance of new units. Since completing a large
acquisition in late 2002, our ability to incur additional debt has been restricted
due to limitations in our debt instruments.
After considering the effect of the Massey Energy Company joint venture,
which we funded in July 2004, we have approximately $17.4 million of borrowing
capacity available under our revolving credit facility. This limitation may necessitate the issuance
of new units, as opposed to using debt, to provide a large part of the funding
for acquisitions in the future.

We believe that we will continue to have adequate
liquidity to fund future recurring operating and investing activities. Short-term cash requirements, such as
operating expenses and quarterly distributions to our general partner and
unitholders, are expected to be funded through operating cash flows. Long-term cash requirements for asset acquisitions
are expected to be funded by several sources, including cash flows from
operating activities, borrowings under credit facilities and the issuance of
additional equity and debt securities.
Our ability to complete future debt and equity offerings will depend on
various factors, including prevailing market conditions, interest rates and our
financial condition and credit rating at the time.

Environmental

Surface Mining Valley Fills.
Over the course of the last several years, opponents of surface mining
have filed three lawsuits challenging the legality of permits authorizing the
construction of valley fills for the disposal of coal mining overburden under
federal and state laws applicable to surface mining activities. Although two of these challenges were
successful in the United States District Court for the Southern District of
West Virginia (the "District Court"), the United States Court of
Appeals for the Fourth Circuit
overturned both of those decisions in Bragg v. Robertson in 2001 and in Kentuckians
For The Commonwealth v. Rivenburgh in 2003.

A ruling on July 8, 2004, which
was made by the District Court in connection with a third lawsuit, may impair
our lessees' ability to obtain permits that are needed to conduct surface
mining operations. In this case, Ohio
Valley Environmental Coalition v. Bulen, the District Court determined that the
Army Corps of Engineers (the "Corps") violated the Clean Water Act
and other federal statutes when it issued Nationwide Permit 21
("NWP21"). Section 404 of the
Clean Water Act authorizes the Corps to issue general permits to allow parties
to construct in navigable waters surface impoundments, valley fills and other
structures that are needed for surface mining without having to obtain an
individual Section 404 permit.

The District Court's order
prohibits the Corps from issuing any new permits under NWP21 in areas subject
to the District Court's jurisdiction, which are a number of counties in West
Virginia. The ruling only voided such
permits where work has not yet commenced, and the decision thus leaves some
ambiguity about its potential applicability to permits that have already been
issued under NWP 21 where the work has already begun. Unless this decision is overturned on appeal, companies seeking to
construct surface mining impoundments or valley fills in navigable waters in
the areas covered by this decision will need to apply for and obtain individual
permits under Section 404 of the Clean Water Act. Obtaining individual Section 404 permits for surface mining
activities is likely to substantially increase both the time for and the costs
of our lessees obtaining permits. These
increased permitting costs, and any delay or inability to obtain Section 404
permits, could impair our lessees' ability to produce coal and adversely affect
our coal royalty revenues.

Mine Health and Safety Laws. The operations of our lessees are subject to stringent health and safety standards that have
been imposed by federal legislation since the adoption of the Mine Health and
Safety Act of 1969. The Mine Health and Safety Act of 1969 resulted in
increased operating costs and reduced productivity. The Mine Safety and Health
Act of 1977, which significantly expanded the enforcement of health and safety
standards of the Mine Health and Safety Act of 1969, imposes comprehensive
health and safety standards on all mining operations. In addition, as part of
the Mine Health and Safety Acts of 1969 and 1977, the Black Lung Acts require
payments of benefits by all businesses conducting current mining operations to
coal miners with black lung and to some beneficiaries of a miner who dies from
this disease.

Environmental Compliance. The operations of
our lessees are subject to environmental laws and regulations adopted by various
governmental authorities in the jurisdictions in which these operations are
conducted. The terms of the Partnership's coal property leases impose liability
for all environmental and reclamation liabilities arising under those laws and
regulations on the relevant lessees. The lessees are bonded and have
indemnified the Partnership against any and all future environmental
liabilities. The Partnership regularly visits coal properties under lease to
monitor lessee compliance with environmental laws and regulations and to review
mining activities. Management believes that the Partnership's lessees will be
able to comply with existing regulations and does not expect any material
impact on the Partnership's financial condition or results of operations.

We have
some reclamation bonding requirements with respect to certain of our unleased
and inactive properties. As of June 30,
2004, the Partnership's environmental liabilities totaled $1.6 million. Given the uncertainty of when the
reclamation area will meet regulatory standards, a change in this estimate
could occur in the future.

Recent Accounting Pronouncements

In June 2001, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 141, Business
Combinations and SFAS No. 142, Goodwill
and Other Intangible Assets, under which the Partnership classified its
leased coal mineral rights as intangible assets. In April 2004, the FASB issued a FASB Staff
Position ("FSP") that amends certain sections of SFAS No. 141 and No.
142 relating to the characterization of coal mineral rights. The FSP is effective for the first reporting
period beginning after April 29, 2004.
As allowed by the FSP, the Partnership early adopted the FSP in April
2004 and, accordingly, reclassified its leased coal mineral rights back to
tangible property. The Partnership discontinued straight-line amortization
upon adoption and will deplete its coal mineral rights using the
units-of-production method on a prospective basis. The amount capitalized related to mineral
rights represents its fair value at the time such right was acquired, less
accumulated amortization. Pursuant to
the FSP, for comparative presentation purposes, $4.9 million was reclassified
from other noncurrent assets to property and equipment as of December 31, 2003
on the accompanying consolidated balance sheet.

Item 3. Quantitative and Qualitative Disclosures
about Market Risk

Market risk is the risk of
loss arising from adverse changes in market rates and prices. The principal
market risks to which we are exposed are interest rate risk and coal price
risks.

We are also
indirectly exposed to the credit risk of our lessees. If our lessees become financially insolvent, our lessees may not
be able to continue operating or meeting their minimum lease payment
obligations. As a result, our coal
royalty revenues could decrease due to lower production volumes.

As of June 30, 2004, $90 million of our
borrowings were financed with debt which has a fixed interest rate throughout
its term. In connection with this
financing, we executed an interest rate derivative transaction to effectively convert
the interest rate on one-third of the amount financed from a fixed rate of 5.77
percent to a floating rate of LIBOR plus 2.36 percent. The interest rate swap has been accounted
for as a fair value hedge in compliance with SFAS No. 133, Accounting
for Derivative Instruments and Hedging Activities, as amended by SFAS No.
137 and SFAS No. 138.

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. In addition, the
Partnership 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,
expected commencement dates of coal mining, projected quantities of future coal
production by the Partnership's lessees, costs and expenditures as well as
projected demand or supply for coal and coal handling joint venture operations,
which will affect sales levels, prices, royalties and distributions realized by
the Partnership.

These forward-looking statements are made
based upon management's current plans, expectations, estimates, assumptions and beliefs concerning future
events impacting the Partnership and, therefore, involve a number of risks and
uncertainties. The Partnership 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 the Partnership to differ materially from those expressed or
implied in the forward-looking statements include, but are not necessarily
limited to:

*    the
ability to acquire new coal reserves on satisfactory terms;

*    the
price for which such reserves can be sold;

*    the
volatility of commodity prices for coal;

*    the
ability to lease new and existing coal reserves;

*    the
ability of lessees to produce sufficient quantities of coal on an economic
basis from the Partnership's reserves;

*    the
ability of lessees to obtain favorable contracts for coal produced from the
Partnership's reserves;

*    competition
among producers in the coal industry generally;

*    the
extent to which the amount and quality of actual production differs from
estimated recoverable proved coal reserves;

*    unanticipated
geological problems;

*    availability
of required materials and equipment;

*    the
occurrence of unusual weather or operating conditions including force majeure
events;

*    the
failure of equipment or processes to
operate in accordance with specifications or expectations;

*    delays
in anticipated start-up dates of lessees' mining operations and related coal
infrastructure projects;

*    environmental
risks affecting the mining of coal reserves;

*    the
timing of receipt of necessary governmental permits by the Partnership's
lessees;

*    the
risks associated with having or not having price risk management programs;

*    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;

*    uncertainties
relating to the outcome of litigation regarding permitting of the disposal of
coal overburden;

*    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, including their ability to satisfy
their royalty, environmental, reclamation and other obligations to

      the
Partnership and others;

*    coal
handling joint venture operations;

*    changes
in financial market conditions; and

*    other
risk factors as detailed in the Partnership's Securities and Exchange
Commission filings on Annual Report on Form 10-K.

Many
of such factors are beyond the Partnership's ability to control or predict.
Readers are cautioned not to put undue reliance on forward-looking statements.

While
the Partnership periodically reassesses material trends and uncertainties
affecting the Partnership'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 the Partnership's quarterly, annual or other reports filed with
the Securities and Exchange Commission, the Partnership does not undertake any
obligation to review or update any particular forward-looking statement,
whether as a result of new information, future events or otherwise.

Item 4. Controls and Procedures

(a) Disclosure of Controls and Procedures.

The Partnership, under the supervision,
and with the participation, of its management, including its principal executive
officer and principal financial officer, performed an evaluation of the design
and operation of the Partnership's disclosure controls and procedures (as
defined Exchange Act Rules 13a-15(e) and 15(d)-15(e)) as of the end of the
period covered by this report. Based on
that evaluation, the general partner's principal executive officer and
principal financial officer concluded that such disclosure controls and
procedures are effective to ensure that material information relating to the
Partnership, including its consolidated subsidiaries, is accumulated and
communicated to the Partnership's management and made known to the principal
executive officer and principal financial officer, particularly during the
period for which this periodic report was being prepared.

(b) Changes in Internal Control
Over Financial Reporting.

No changes were made in the
Partnership's internal control over financial reporting during our last fiscal
quarter that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.

PART II. Other Information

Items 1, 2, 3, 4 and 5 are not applicable and have been omitted.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

10.1 Fourth
Amendment to Credit Agreement dated as of July 1, 2004 among Penn Virginia
Operating Co., LLC, PNC Bank, National Association, as

agent, and the other
financial institutions party thereto.

10.2
Purchase and Sale Agreement by and among A. T. Massey Coal
Company, Inc., Marten County Coal Corporation, Tennessee Consolidated Coal

                 Co.,
Tennessee Energy Corp. and Road Fork Development Company, Inc. and Loadout LLC
and Penn Virginia Resource Partners, L. P. dated as of

                 July 1, 2004
(incorporated by reference to Registrant's Report on Form 8-K filed on July 20,
2004).

12 Statement
of Computation of Ratio of Earnings to Fixed Charges Calculation.

31.1 Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

31.2 Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.

32.1 Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

32.2 Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

(b)
Reports on Form 8-K

On July 20, 2004, the Partnership furnished a
Fork 8-K announcing the acquisition from affiliates of Massey Energy Company or
a 50 percent interest in a joint venture formed to own and operate end-user coal
handling facilities. The purchase price was approximately $28.5 million
and was funded through the Partnership's credit facility.

On May 6, 2004, the Partnership
furnished Form 8-K announcing its financial results for the three months ended
March 31, 2004.

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 RESOURCE PARTNERS, L.P.

Date:	August 5, 2004	By:	/s/ Frank A. Pici
			Frank A. Pici, Vice President and
			Chief Financial Officer


Date:	August 5, 2004	By:	/s/ Forrest W. McNair
			Forrest W. McNair, Vice President and Controller

Mine Health and Safety Laws

Acquisitions and Investments in Coal Facilities

Forward-Looking Statements

Forward-Looking
Statements