PENN VIRGINIA CORP - FORM 8-K - EX-99.2 - UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF PENN VIRGINI - February 3, 2010

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8-K - CURRENT REPORT - PENN VIRGINIA CORPv172772_8k.htm
EX-2.2 - PURCHASE AND SALE AGREEMENT DATED DECEMBER 23, 2009 BY AND BETWEEN HILCORP ENER - PENN VIRGINIA CORPv172772_ex2-2.htm
EX-99.1 - PENN VIRGINIA CORPORATION PRESS RELEASE DATED FEBRUARY 1, 2010. - PENN VIRGINIA CORPv172772_ex99-1.htm
EX-2.1 - PURCHASE AND SALE AGREEMENT DATED DECEMBER 23, 2009 BY AND BETWEEN PENN VIRGINI - PENN VIRGINIA CORPv172772_ex2-1.htm
 
Exhibit 99.2

PENN VIRGINIA CORPORATION AND SUBSIDIARIES
TRANSACTION DESCRIPTION FOR THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On January 29, 2010, Penn Virginia Oil & Gas, L.P. (“PVOG LP”), an indirect wholly owned subsidiary of Penn Virginia Corporation (the “Company”), completed the previously announced sale of all of PVOG LP’s Gulf Coast oil and gas assets to Hilcorp Energy I, L.P. (“Hilcorp”) for $38.0 million in cash (the “GC Transaction”).  The oil and gas assets subject to the GC Transaction are located in south Louisiana and south Texas in Calcasieu, Cameron, Iberia, Plaquemines, St. Martin, St. Mary and Terrebonne Parishes, Louisiana and Calhoun, Edwards, Goliad, Hildago, Jefferson, Kleburg, Liberty, Live Oak, Matagorda, Nueces and Sutton Counties, Texas.
 
Simultaneously with the closing of the GC Transaction, Penn Virginia Oil & Gas Corporation (“PVOG Corp”), another indirect wholly owned subsidiary of the Company, completed its previously announced purchase of certain of Hilcorp’s oil and gas assets located in the Gwinville Field in Jefferson Davis County, Mississippi for $6.0 million in cash (the “MS Transaction” and together with the GC Transaction, the “Transactions”).  The fair value of these assets was $8.2 million.
 
The Transactions provide for certain adjustments to the respective purchase prices based upon the collection of revenues and the payment of expenses that took place after the effective date of October 1, 2009 and prior to the closing date of January 29, 2010.  These adjustments are reflected in the pro forma condensed consolidated financial statements.
 
The following unaudited pro forma condensed consolidated financial statements and explanatory notes present the financial statements of the Company assuming the Transactions occurred as of September 30, 2009 with respect to the balance sheet and as of January 1, 2008 with respect to the statements of income for the nine months ended September 30, 2009 and the year ended December 31, 2008.
 

 PENN VIRGINIA CORPORATION AND SUBSIDIARIES
 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands)
  
   
As of September 30, 2009
  
         
Pro Forma
          
   
Historical
    
Adjustments
      
Pro Forma
  
Assets
                    
Current assets
                    
Cash and cash equivalents
   $ 105,034     $ 25,452  
 (a)
   $ 130,486  
Accounts receivable, net of allowance for doubtful accounts
     100,454       -         100,454  
Assets held for sale
     47,107       (44,700 )
 (b)
     2,407  
Other current assets
     40,888       -         40,888  
Total current assets
     293,483       (19,248 )       274,235  
Property and equipment, net
     2,372,323       8,200  
 (c)
     2,380,523  
Other assets
     235,463       -         235,463  
Total assets
   $ 2,901,269     $ (11,048 )     $ 2,890,221  
                           
Liabilities and shareholders’ equity
                          
Current liabilities
   $ 145,356     $ -       $ 145,356  
Deferred income taxes
     217,820       -         217,820  
Long-term debt of Penn Virginia Resource Partners, L.P.
     628,100       -         628,100  
Senior notes
     291,432       -         291,432  
Convertible notes
     204,935       -         204,935  
Other liabilities
     51,014       -         51,014  
Total liabilities
     1,538,657       -         1,538,657  
Shareholders’ equity:
                          
Common stock
     265       -         265  
Paid-in capital
     704,147       -         704,147  
Retained earnings
     327,076       (11,048 )
 (d)
     316,028  
Deferred compensation obligation
     2,282       -         2,282  
Accumulated other comprehensive loss
     (1,598 )     -         (1,598 )
Treasury stock
     (2,791 )     -         (2,791 )
Total Penn Virginia Corporation shareholders’ equity
     1,029,381       (11,048 )       1,018,333  
Noncontrolling interests of subsidiaries
     333,231       -         333,231  
Total shareholders’ equity
     1,362,612       (11,048 )       1,351,564  
Total liabilities and shareholders’ equity
   $ 2,901,269     $ (11,048 )     $ 2,890,221  
 

 PENN VIRGINIA CORPORATION AND SUBSIDIARIES
 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
 (in thousand except per share data)
   
For the Nine Months Ended September 30, 2009
  
   
Historical
    
Pro Forma Adjustments
      
Pro Forma
  
Revenues
                            
 Natural gas, crude oil and natural gas liquids (NGLs)
   $ 171,270     $ (23,707 )
 (e)
   $ 1,036  
 (g)
   $ 148,599  
 Natural gas midstream
     289,123       -         -         289,123  
 Coal royalties
     90,448       -         -         90,448  
 Other
     27,399       817  
 (e)
     -         28,216  
Total revenues
     578,240       (22,890 )       1,036         556,386  
                                     
Expenses
                                    
 Cost of midstream gas purchased
     228,579       -         -         228,579  
 Operating
     66,517       (5,359 )
 (e)
     542  
 (g)
     61,700  
 Exploration
     54,901       (6,479 )
 (e)
     -         48,422  
 Taxes other than income
     16,656       (2,078 )
 (e)
     72  
 (g)
     14,650  
 General and administrative
     58,787       -         -         58,787  
 Depreciation, depletion and amortization
     173,160       (16,848 )
 (e)
     897  
 (g)
     157,209  
 Impairments and loss on sale of assets
     98,427       (87,890 )
 (e)
     -         10,537  
Total expenses
     697,027       (118,654 )       1,511         579,884  
                                     
Operating income (loss)
     (118,787 )     95,764         (475 )       (23,498 )
                                     
Other income (expense)
                                    
 Interest expense
     (50,332 )     -         -         (50,332 )
 Derivatives
     8,478       -         -         8,478  
 Other
     2,274       -         -         2,274  
                                     
Income (loss) before income taxes and noncontrolling interests
     (158,367 )     95,764         (475 )       (63,078 )
Income tax benefit (expense)
     69,587       (35,433 )
 (f)
     176  
 (f)
     34,330  
                                     
Net income (loss)
     (88,780 )     60,331         (299 )       (28,748 )
 Less net income attributable to noncontrolling interests
     (20,512 )     -         -         (20,512 )
                                     
Income (loss) attributable to Penn Virginia Corporation
   $ (109,292 )   $ 60,331       $ (299 )     $ (49,260 )
                                     
Earnings (loss) per share - basic and diluted:
                                    
Earnings (loss) per share attributable to Penn Virginia Corporation
                              
Basic
   $ (2.52 )                       $ (1.14 )
Diluted
   $ (2.52 )                       $ (1.14 )
                                     
 Weighted average shares outstanding, basic
     43,324                           43,324  
 Weighted average shares outstanding, diluted
     43,324                           43,324  
 

 PENN VIRGINIA CORPORATION AND SUBSIDIARIES
 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
 (in thousands except per share data)
   
For the Year Ended December 31, 2008
  
   
Historical
    
Pro Forma Adjustments
      
Pro Forma
  
Revenues
                            
Natural gas, crude oil and natural gas liquids (NGLs)
   $ 436,622     $ (70,350 )
 (e)
   $ 4,820  
 (g)
   $ 371,092  
Natural gas midstream
     589,783       -         -         589,783  
Coal royalties
     122,834       -         -         122,834  
Other
     71,612       423  
 (e)
     -         72,035  
Total revenues
     1,220,851       (69,927 )       4,820         1,155,744  
                                     
Expenses
                                    
Cost of midstream gas purchased
     484,621       -         -         484,621  
Operating
     89,891       (7,890 )
 (e)
     401  
 (g)
     82,402  
Exploration
     42,436       (4,383 )
 (e)
     -         38,053  
Taxes other than income
     28,586       (3,734 )
 (e)
     316  
 (g)
     25,168  
General and administrative
     74,494       (118 )
 (e)
     -         74,376  
Depreciation, depletion and amortization
     192,236       (23,401 )
 (e)
     1,770  
 (g)
     170,605  
Impairments
     51,764       -         -         51,764  
Total expenses
     964,028       (39,526 )       2,487         926,989  
                                     
Operating income (loss)
     256,823       (30,401 )       2,333         228,755  
                                     
Other income (expense)
                                    
Interest expense
     (49,299 )     -         -         (49,299 )
Derivatives
     46,582       -         -         46,582  
Other
     (666 )     -         -         (666 )
                                     
Income (loss) before income taxes and noncontrolling interests
     253,440       (30,401 )       2,333         225,372  
Income tax expense
     (71,920 )     11,248  
 (f)
     (863 )
 (f)
     (61,535 )
                                     
Net income (loss)
     181,520       (19,153 )       1,470         163,837  
Less net income attributable to noncontrolling interests
     (60,436 )     -         -         (60,436 )
                                     
Income (loss) attributable to Penn Virginia Corporation
   $ 121,084     $ (19,153 )     $ 1,470       $ 103,401  
                                     
Earnings (loss) per share - basic and diluted:
                                    
Earnings (loss) per share attributable to Penn Virginia Corporation
                              
Basic
   $ 2.89                         $ 2.48  
Diluted
   $ 2.87                         $ 2.46  
                                  -  
Weighted average shares outstanding, basic
     41,760                           41,760  
Weighted average shares outstanding, diluted
     42,031                           42,031  
 

PENN VIRGINIA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.
Basis of Presentation
 
The accompanying unaudited pro forma condensed consolidated financial statements and explanatory notes present the financial statements of Penn Virginia Corporation and subsidiaries (the “Company) assuming the Transactions, as described in the Description of Transaction preceding these pro forma financial statements, occurred as of September 30, 2009 with respect to the balance sheet and as of January 1, 2008 with respect to the statements of income for the nine months ended September 30, 2009 and the year ended December 31, 2008.
 
The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and do not purport to represent what the financial position or results of operations of the Company would have been had the Transactions occurred on the dates noted above, or to project the financial position or results of operations of the Company for any future periods.  The pro forma adjustments are based on available information and certain assumptions that management believes are reasonable.  The pro forma adjustments are directly attributable to the Transactions and are expected to have a continuing impact on the results of operations of the Company.  In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma financial statements have been made.
 
The following are descriptions of the columns included in the accompanying unaudited pro forma condensed consolidated financial statements:
 
Historical – Represents the historical condensed consolidated balance sheet of the Company as of September 30, 3009 and the historical condensed consolidated statements of income of the Company for the nine months ended September 30, 2009 and the year ended December 31, 2008.  Certain amounts in the historical condensed consolidated financial statements have been reclassified to conform to the 2009 financial statement presentation.
 
Pro Forma Adjustments – Represents the adjustments to the historical condensed consolidated financial statements required to derive the pro forma financial position of the Company as of September 30, 2009, assuming the Transactions occurred as of September 30, 2009 and the pro forma results of operations of the Company for the nine months ended September 30, 2009 and the year ended December 31, 2008, assuming the Transactions occurred as of January 1, 2008.
 
2.
Pro Forma Adjustments
 
Condensed Consolidated Balance Sheet
 
(a)
To record (i) the cash proceeds ($32.0 million) of the Transactions, minus (ii) the transaction fees and other related closing costs ($0.9 million) related to the Transactions, minus (iii) the estimated revenues ($9.5 million) net of recoverable expenses ($3.7 million) attributable to the disposed Gulf Coast assets for the period after the effective date and prior to the closing date, plus (iv) the estimated revenues ($0.3 million) net of recoverable expenses ($0.2 million) attributable to the acquired Mississippi assets for the period after the effective date and prior to the closing date.
 
 
(b)
To eliminate the value of the disposed Gulf Coast assets that were classified as “held for sale” as of September 30, 2009.
(c)
To record the fair value of the acquired Mississippi assets.
(d)
To record a loss on the sale of the Gulf Coast assets due to a decrease in fair value from the estimated fair value as of September 30, 2009.
  
Condensed Consolidated Statements of Income
  
(e)
To eliminate the revenues and direct operating expenses associated with the Gulf Coast assets.
(f)
To adjust income tax expense for the effects of the pro forma adjustments at statutory rates.
(g)
To provide for the revenues and direct operating expenses associated with the Mississippi assets.

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