Penn Virginia Corporation (PVA) Q2 2012 Results Earnings Call August 2, 2012 10:00 AM ET Executives Baird Whitehead – President and CEO Nancy Snyder – Chief Administrative Officer Steve Hartman – Chief Financial Officer John Brooks – Senior Vice President and Regional Manager, Gulf Coast Operations Jim Dean – Vice President, Corporate Development Analysts JB Jouve – RBC Capital Markets Jason Freuchtel – SunTrust David Snow – Energy Equities Inc. Adam Leight – RBC Capital Markets Sean Sneeden – Oppenheimer Ray Deacon – Brean Murray Biju Perincheril – Jefferies Eric Seeve – Golden Tree Steven Karpel – Credit Suisse Richard Tullis – Capital One Southcoast Welles Fitzpatrick – Johnson Rice Presentation Operator
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» Penn Virginia Corporation Q2 2008 Earnings Call Transcript
The second quarter continued a trend of solid financial results, with increasing cash flows from our growing oil and liquids production and decreasing operating expenses, helping offset declines in our gas production and natural gas prices.Before we get into the details of the quarter, I wanted to touch on a number of recent developments which in addition to a strong first half of the year, are significant for Penn Virginia and consistent with our strategy and continuing to grow the oily part of our portfolio. We did close on $100 million sale of our Appalachian assets. This was a very good price with a very attractive cash flow multiple. At the same time, we retained or will retain our Granite Wash assets, which still have a high component of liquids production and has -- also has an inventory of economic drilling locations that we will continue to exploit. We have discontinued our dividend of approximately $10 million a year and both of these steps have helped improve our liquidity. And therefore, will help our capital expenditure program in the future. We have had excellent early results from our Lavaca County Eagle Ford program, which has provided us an exciting addition to our oily drilling inventory and therefore, liquid reserve base. We also have continued to experience solid reserve -- results from our initial acreage position in Gonzales County with our development drilling programs and in spite of selling our Appalachian assets, which were all dry gas, we do continue to retain our key gas reserves, which includes East Texas, Mississippi and the Granite Wash, which we consider will be essential modest recovery in natural gas prices. For the second quarter we reported increases in product revenues, EBITDAX and cash flows relative to previous year’s quarter, primarily due to 161% increase in oil production, which is again attributable to the ongoing solid results of our Eagle Ford drilling program.
Product revenues of $76.2 million were up 4% over the second quarter of 2011, as our realizations increased 15% from $6.24 per Mcfe to $7.16 per Mcfe.Oil and liquids revenues by itself were $65.9 million or 86% of our total product revenues this quarter, an increase of 90% over the second quarter 2011, due to the increase -- 161% increase in oil production and to a much lesser extent, a 4% increase in oil prices. Adjusted EBITDAX of $60 million was up 20% over the second quarter of 2011. By the way, this is our fourth consecutive quarter of adjusted EBITDAX at or above $60 million. The improvement in EBITDAX was attributable not only to the 4% increase in product revenues, but also to a 17% decrease in direct operating expenses is a result of our continued focus on controlling costs. These direct operating expenses decreased to $2.24 per Mcfe from $2.47 per Mcfe in the second quarter of last year, despite the 30% decrease in pro forma natural gas production. With the sale of Appalachia, we will continue to make progress on bringing these operating expenses down, since Appalachian by itself, especially Horizontal CBM had a high operating cost component. Our gross operating margin per Mcfe remained strong, increasing 30% from $3.78 per Mcfe to $4.92 per Mcfe in the second quarter of 2012, again due to our shift toward oil and natural gas -- or natural gas liquids, as well as lower operating costs. Cash flow from operating activities increased 31% from $34.3 million in the second quarter of 2011 to $45 million in this year’s second quarter. During the first half of 2012, our cash flows from operating activities was -- almost $116 million, compared to only $64 million in the first half of 2011, an increase of 82%.
Adjusted loss was $10.8 million and adjusted earnings per share was negative $0.23, which includes the cash impact of derivatives and exclude charges for any impairments, restructuring costs and other non-recurring items. This is an improvement of $0.03 over the second quarter of 2011 and is due primarily to the increase on our gross operating margin.Read the rest of this transcript for free on seekingalpha.com