PVR Partners Misses 2Q Earnings Est.

Zacks

PVR Partners L.P. (PVR) reported second-quarter 2013 pro forma earnings per unit of 5 cents, missing the Zacks Consensus Estimate by 8 cents and year-ago quarter by 6 cents due to rise in interest expenses and higher units outstanding.

On a GAAP basis, the partnership’s earnings per unit were 6 cents. A penny difference between GAAP and pro forma earnings was due to a combined effect of a derivative loss and cash receipts from derivatives settlement.

Second Quarter Operational Update

PVR Partners posted revenues of $273.5 million, surpassing the Zacks Consensus Estimate by $11.5 million. Revenues increased 22.7% year over year primarily due to a strong contribution from the natural gas business, and improvement in collection of trunkline and gathering fees.

Total expenses increased 16.8% year over year to $243.5 million primarily due to a rise in cost of gas purchased, general and administrative expenses, operating costs, and depreciation expenses.

PVR Partners’ adjusted earnings before interest, tax, depreciation and amortization (:EBITDA) increased 33.5% year over year to $76.1 million.

Segmental Highlights

Eastern Midstream Segment: Revenues surged 115.2% year over year to nearly $45.4 million primarily due to a 160% year-over-year increase in average throughput volumes to 1.3 billion cubic feet per day (Bcfd) owing to steady development in existing systems and impact of the Chief Gathering LLC-acquisition.

Midcontinent Midstream Segment: Revenues from this segment witnessed a rise of 18% year over year to $197.9 million. The increase was primarily due to a 63.4% year-over-year increase in natural gas revenues.

Coal and Natural Resource Management Segment: This division posted revenues of nearly $30.2 million, down 10.7% year over year primarily due to a decline in coal royalty volumes, and lower coal production and pricing.

Financial Condition

PVR Partners’ cash and cash equivalents as of Jun 30, 2013, were $14 million, down from $14.7 million as of Dec 31, 2012.

Net cash flow from operating activities during second-quarter 2013 was $25.6 million, higher than $23.8 million in the year-ago comparable period.

During the quarter, PVR Partners invested $110.9 million in its internal growth projects, including an investment of $97.5 million at the Eastern Midstream Segment.

Guidance

PVR Partners projects adjusted EBITDA in the band of $160–$185 million for the Eastern Midstream Segment, $60–$70 million for the Midcontinent Midstream Segment and $75–$85 million for the Coal and Natural Resource Management Segment.

The partnership expects its total average daily Eastern Midstream throughput volumes to be in the range of 1.6 to 1.8 Bcfd at the end of 2013.

PVR Partners provided its full-year 2013 maintenance capital spending in the band of $13–$15 million and maintained internal growth capital in the range of $350–$400 million.

Other Company Releases

DCP Midstream Partners LP (DPM) is slated to release its second-quarter earnings on Aug 6. The Zacks Consensus Estimate is 40 cents.

Oiltanking Partners L.P. (OILT) is slated to release its second-quarter earnings on Aug 7. The Zacks Consensus Estimate is 47 cents.

SemGroup Corporation (SEMG) is slated to release its second-quarter earnings on Aug 8. The Zacks Consensus Estimate is 48 cents.

Our Take

It is evident from the PVR Partners’ forthcoming capital spending program that it will continue to set up and expand numerous projects in the Marcellus, Utica, Cline and Mississippian Lime. The partnership completed the Wyoming County trunkline project and new Lycoming gathering system, and installed 65 new well connections in the Eastern Midstream and Midcontinent Midstream segments. In addition, PVR Partners is in the middle of several projects, including a new trunkline and gathering system in the Utica shale. We believe these projects will boost PVR Partners’ presence in the region as well as improve its future performance.

However, over-dependence on third party service-providers for receiving and supplying natural gas and natural gas liquids to the customers, and over-reliance on a limited group of customers are our major concerns.

Radnor, Pa.-based PVR Partners owns and operates a string of natural gas midstream pipeline systems and processing plants and is also involved in the management of coal as well as natural gas properties. The partnership currently has a Zacks Rank #3 (Hold).

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Read the Full Research Report on OILT

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