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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2000
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-753
PENN VIRGINIA CORPORATION
One Radnor Corporate Center, Suite 200
100 Matsonford Road
Radnor, PA 19087
Registrant's telephone number, including area code: (610) 687-8900
Incorporated in I.R.S Employer Identification Number
VIRGINIA 23-1184320
Securities registered pursuant to section 12(b) of the Act: None
Securities Registered pursuant to Section 12(g) of the Act:
Title of Each Class Name of Exchange on which registered
Common Stock, $6.25 Par Value New York Stock Exchange
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 check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
The aggregate market value of the voting stock held by non-
affiliates of the Corporation at February 14, 2001 was
$280,018,348, based on the closing price of $32.90 per share. As
of that date, 8,511,196 shares of common stock were issued and
outstanding. The number of shareholders of record of the
registrant was 778 as of February 14, 2001.
DOCUMENTS INCORPORATED BY REFERENCE:
Part Into
Which Incorporated
(1) Proxy Statement for Stockholder Meeting on May 1, 2001 PartIII
Penn Virginia Corporation and Subsidiaries
Part I
1.Business
2.Properties
3.Legal Proceedings
4.Submission of Matters to a Vote of Security Holders
Part II
5.Market for the Company's Common Stock and Related Stockholder Matters
6.Selected Financial Data
7.Management's Discussion and Analysis of Financial Condition and Results
of Operations
8.Financial Statements and Supplementary Data
9.Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
Part III
10. Directors and Executive Officers of the Registrant
11. Executive Compensation
12. Security Ownership of Certain Beneficial Owners and Management
13. Certain Relationships and Related Transactions
Part IV
14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
Part 1
ITEM 1 - BUSINESS
General
Penn Virginia Corporation ("Penn Virginia" or the "Company") is
a Virginia corporation founded in 1882. The Company is engaged in
the exploration, development and production of oil and natural
gas and the collection of royalties and overriding royalty
interests on various oil and gas properties as well as the
leasing of coal mineral rights and the collection of related
royalties.
Penn Virginia explores for, develops and produces crude oil,
condensate and natural gas in the eastern and southern portions
of the United States. The Company had proved reserves of 71,000
barrels of oil and condensate and 174 billion cubic feet of
natural gas at December 31, 2000.
The Company owned mineral rights to 480 million tons of
mineable and merchantable coal reserves located in central
Appalachia at December 31, 2000. Its coal reserves include both
surface and underground mineable seams. The reserves are
generally high quality, low-sulfur bituminous coal and are leased
to various operators.
Financial Information
The Company operates in two primary business segments: (1) oil
and gas and (2) coal royalty and land management. Financial
information concerning the Company's business segments can be
found in Note 15 (Segment Information) of the Notes to the
Consolidated Financial Statements of Penn Virginia Corporation
which is included in this report.
Oil and Gas
Overview
Penn Virginia's oil and gas properties are located in the
eastern and southern portions of the United States. At December
31, 2000, the Company had 175 Bcfe of proved reserves (174 Bcf of
natural gas) including 132 Bcfe of working interests and 43 Bcfe
of royalty interests.
Oil and Gas Production
During 2000, 31,000 barrels of oil and condensate and 11,645
MMcf of natural gas, net to the Company's interest, were produced
compared with 32,000 barrels and 8,679 MMcf in 1999. Average
prices received by the Company were $26.84 and $14.47 per barrel
and $3.95 and $2.46 per Mcf for oil and gas in 2000 and 1999,
respectively.
Exploration and Development
The Company drilled 109 gross (79.1 net) wells in 2000 of which
100 gross (76.2 net) were development and nine gross (2.9 net)
were exploratory. A total of five gross (1.3 net) exploratory
wells were non-productive and three gross (1.4 net) wells are
under evaluation. The Company is still evaluating the unproved
properties associated with the December 1999 purchase of a 20
percent working interest in a Texas onshore gulf coast
exploration project. The project covers 35,000 acres and
evidences Penn Virginia's strategy to expand and diversify its
oil and gas operations outside of the eastern United States
through strategic acquisitions, drilling and exploration.
Gathering
Penn Virginia transports its natural gas to market on various
gathering and transmission pipeline systems owned primarily by
third parties. The Company's natural gas was gathered
principally by Dominion Energy, Inc. "Dominion" (formerly
Consolidated Natural Gas) and Columbia Natural Resources "CNR".
These two primary providers gathered 35 percent and 38 percent of
the Company's natural gas for 2000 and 1999, respectively.
Interruptible gathering rates have increased over the years as
pipelines have implemented the mandatory unbundling of gathering
services (Federal Energy Regulatory Commission Order 636) from
other transportation services. Dominion's interruptible
gathering rates were 19.4 cents per MMbtu for 2000 and, effective
January 1, 2001, were changed to a 9.3 percent volumetric
retainage. CNR's interruptible gathering rate was 32 cents per
MMbtu in 2000; however, the Company does not expect to incur any
gathering expense from CNR in 2001 as a result of the divestiture
of non-strategic oil and gas properties in December 2000.
Transportation
The majority of Penn Virginia's natural gas production is
transported to market primarily on three major transmission
systems. Columbia Gas Transmission, Dominion and Duke
transported 45 percent, 30 percent and 19 percent, respectively,
of the Company's 2000 natural gas production. The volume
transported by Columbia Gas Transmission is expected to decrease
in 2001 due to the divestiture of non-strategic oil and gas
properties in December 2000. Production could be adversely
affected by shutdowns of the pipelines for maintenance or
replacement as pipeline flexibility is limited.
Marketing
Penn Virginia generally sells its natural gas using the spot
market and short-term fixed price physical contracts. From time
to time, the Company enters into commodity derivative contracts
or fixed price physical contracts to mitigate the risk associated
with the volatility of natural gas prices.
Natural gas pricing was extremely volatile in 2000. In April
and May of 2000, the Company entered into several physical
contracts that totaled 9,289 MMcf per day for the remainder of
2000. The volumes under contract accounted for 20 percent of
Penn Virginia's 2000 production at a price of $3.39 per Mcf. The
Company has one contract remaining that expires in March 2001
covering 18 percent of anticipated first quarter production at
$3.12 per Mcf.
In January 2001, the Company hedged 13 percent of its
anticipated production for the second and third quarters of 2001
through a basis hedge and a costless collar with a floor of $4.95
per Mcf and a ceiling of $7.16 per Mcf. Additionally, basis
hedges covering an additional 11 percent of anticipated
production for the same periods were executed. Gains and losses
from hedging activities are included in natural gas revenues when
the hedged production occurs. The Company recognized a loss of
$0.4 million in 1999 and $0.7 million in 1998 on hedging
activities with no gain or loss recognized in 2000. Effective
January 1, 2001, the Company will account for its derivative
activities in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 133, as amended by SFAS 137 and SFAS 138.
See Note 2 (New Accounting Standards) in the financial
statements.
Coal Royalty and Land Management Operations
Overview
Penn Virginia owned 163,000 acres of coal- and timber-bearing
land in central Appalachia at December 31, 2000. The Company
earns coal royalty revenue, based on long-term lease agreements,
from 19 coal mining operators. Coal royalty revenue is based on a
minimum annual payment, a minimum dollar royalty per ton and/or a
percentage of the coal's selling price. The Company does not
operate coal mines.
The Company's timber assets consist of various hardwoods,
primarily red oak, white oak, yellow poplar and black cherry.
Penn Virginia owns an estimated 177 million board feet of
standing saw timber. The Company's timber inventory only
includes timber that can be harvested and is greater than 12
inches in diameter.
Coal Production
Lessees mined 12.5 million tons of coal from Penn Virginia's
properties in 2000 and paid an average royalty of $1.94 per ton,
compared with 8.6 million tons mined in 1999 at an average
royalty of $2.07 per ton.
At December 31, 2000, the Company's mineable and merchantable
coal reserves in central Appalachia were estimated at 480 million
tons. At December 31, 2000, the Company's central Appalachia
properties had 19 operators actively mining a total of 31
separate lease locations.
Timber Production
The Company sold 8.5 MMbf in 2000 for an average price of $257
per Mbf, compared with 9.0 MMbf at an average price of $206 per
Mbf in 1999. Timber is harvested in advance of lessee mining to
prevent loss of the resource. Timber is sold in competitive bid
sales involving individual parcels and also on a contract basis,
whereby Penn Virginia pays independent contractors to harvest
timber while the Company directly markets the product.
Corporate and Other
Investments
The Company holds available-for-sale securities, primarily in
Norfolk Southern Corporation. The Company's 3,307,200 common
shares of Norfolk Southern Corporation (NYSE symbol: NSC)
generated dividends of $2.6 million in 2000, 1999 and 1998. Penn
Virginia received a quarterly dividend of $0.20 per share in
2000, 1999 and 1998; however, in January 2001, Norfolk Southern
Corporation reduced its quarterly dividend to $0.06 per share.
The fair value of the Company's equity portfolio at December 31,
2000 was $44.1 million compared with $67.8 million at December
31, 1999. See Note 4 (Investments and Dividend Income) of the
Notes to the Consolidated Financial Statements for additional
information.
Risks Associated with Business Activities
General
Government Regulations
Each of Penn Virginia's businesses is subject to extensive
rules and regulations promulgated by various federal, state and
local government agencies. Failure to comply with such rules and
regulations can result in substantial penalties. The regulatory
burden increases the Company's cost of doing business and affects
its profitability. Although the Company believes it is in
material compliance with all rules, regulations and laws, there
can be no assurance that new interpretations of existing rules,
regulations and laws will not adversely affect the Company's
business and operations.
Competition
The energy industry is highly competitive. Many of the
Company's competitors are large, well-established companies with
substantially larger operating staffs, greater capital resources
and established long-term strategic positions.
Oil and Gas
Prices
Penn Virginia's revenues, profitability and future rate of
growth are highly dependent on the prevailing prices for oil and
gas, which are affected by numerous factors that are generally
beyond the Company's control. Crude oil prices are generally
determined by global supply and demand. Natural gas prices are
influenced by national and regional supply and demand. A
substantial or extended decline in the prices of oil or gas could
have a material adverse effect on the Company's revenues,
profitability and cash flow and could, under certain
circumstances, result in an impairment of the Company's oil and
gas properties.
In April and May of 2000, the Company entered into several
physical contracts that totaled 9,289 MMcf per day for the
remainder of 2000. The volumes under contract accounted for 20
percent of Penn Virginia's 2000 production at a price of $3.39
per Mcf. The Company has one contract remaining that expires in
March 2001 covering 18 percent of anticipated first quarter
production at $3.12 per Mcf.
In January 2001, the Company hedged 13 percent of its
anticipated production for the second and third quarters of 2001
through a basis swap and a costless collar with a floor of $4.95
per Mcf and a ceiling of $7.16 per Mcf. Additionally, basis
swaps covering an additional 11 percent of anticipated production
for the same periods were executed. Gains and losses from
hedging activities are included in natural gas revenues when the
hedged production occurs. The Company recognized a loss of $0.4
million in 1999 and $0.7 million in 1998 on hedging activities
with no gain or loss recognized in 2000. Effective January 1,
2001, the Company will account for its derivative activities in
accordance with Statement of Financial Accounting Standards
("SFAS") No. 133, as amended by SFAS 137 and SFAS 138. See Note
2 (New Accounting Standards) in the financial statements.
Exploratory Drilling
Both development and exploratory drilling involve risks.
However, exploratory drilling involves greater risks of dry holes
or failure to find commercial quantities of hydrocarbons than
does development drilling. The Company anticipates the number of
exploratory prospects drilled in the short and long-term may
increase, compared with historical amounts. Consequently, it is
likely that the Company will experience increased levels of
exploration expense in 2001 and beyond.
Transportation
The majority of Penn Virginia's natural gas production is
transported to market primarily on three major transmission
systems. Columbia Gas Transmission, Dominion and Duke
transported 45 percent, 30 percent and 19 percent, respectively,
of the Company's 2000 natural gas production. The volume
transported by Columbia Gas Transmission is expected to decrease
in 2001 due to the divestiture of non-strategic oil and gas
properties in December 2000. Production could be adversely
affected by shutdowns of the pipelines for maintenance or
replacement as pipeline flexibility is limited.
Coal Royalty and Land Management
Operating Risks
Penn Virginia's coal royalty stream is impacted by several
factors, which the Company generally cannot control. The number
of tons mined annually is determined by an operator's mining
efficiency, labor availability, geologic conditions, access to
capital, ability to market coal and ability to arrange reliable
transportation to the end-user. Coal emissions are regulated by
various federal and state agencies which affect the quality of
coal that can be burned within compliance guidelines.
Corporate and Other
Investments
The value of the Company's investment portfolio is subject to
market price fluctuations.
Employees
Penn Virginia had 68 employees at December 31, 2000. The
Company considers its relations with its employees to be good.
Executive Officers of the Company
Below is a list of executive officers of the Company
including their ages and positions held. Each officer is elected
annually by the Board of Directors and serves at the pleasure of
the Board of Directors.
Office
NAME Age Office Held Since
A. James Dearlove 53 President and
Chief Executive Officer 1996
James O.Idiaquez 53 Executive Vice President
and Chief Financial Officer 2000
Keith D. Horton 47 Executive Vice President 2000
H. Baird Whitehead 50 Executive Vice President 2001
Nancy M. Snyder 48 Vice President, General Counsel
and Secretary 1997
Ann N. Horton 42 Vice President and
Principal Accounting Officer 1995
A. James Dearlove - Mr. Dearlove is the President and Chief
Executive Officer. He has served in various capacities with the
Company since 1977 including Vice President, Senior Vice
President and, most recently, President since 1994. Mr. Dearlove
was elected to the Company's Board of Directors effective
February 6, 1996. He was appointed Chief Executive Officer in May
1996. He also serves as director of the Powell River Project and
the National Council of Coal Lessors.
James O. Idiaquez - Mr. Idiaquez is an Executive Vice President
and Chief Financial Officer. He was appointed to these positions
in December 2000. He previously served as Vice President-
Corporate Development for the Company from October 1998 to
December 2000. From 1978 to 1998, Mr. Idiaquez served in various
management capacities, including corporate planning and
acquisitions and divestitures, with The Louisiana Land &
Exploration Company and Burlington Resources, Inc.
Keith D. Horton - Mr. Horton serves as President of the
Company's coal and land management subsidiary and has served as
an executive officer for the Company since 1996. He was
appointed Executive Vice President in December 2000. He has
served in various capacities with the Company since 1981 and was
elected to the Company's Board of Directors on December 6, 2000.
Mr. Horton serves as a director of the Virginia Mining
Association, Powell River Project, Virginia Coal Council and the
Central Appalachian Section of the Society of Mining Engineers.
H. Baird Whitehead - Mr. Whitehead is an Executive Vice
President. He joined the Company in January 2001. He serves as
President of the Company's oil and gas subsidiary. Previously he
was employed for the past 20 years at Cabot Oil & Gas Corporation
in various management positions, most recently as Senior Vice
President.
Nancy M. Snyder - Ms. Snyder has served as Corporate Secretary
and General Counsel since joining the Company in 1997. She was
appointed as a Vice President of the Company in December 2000.
Previously, Ms. Snyder was in private and firm practices in the
areas of general corporate and securities law.
Ann N. Horton - Mrs. Horton has served as Principal Accounting
Officer and Controller of the Company since 1995. She was
appointed as a Vice President of the Company in December 2000.
She has served in various capacities with the Company and its
subsidiaries since 1981.
The following terms have the meanings indicated below when used
in this report.
Bbl - means a standard barrel of 42 U.S. gallons liquid volume
Bcf - means one billion cubic feet
Bcfe - means one billion cubic feet equivalent with one barrel
of oil or condensate converted to six thousand cubic feet
of natural gas based on the estimated relative energy content
Gross - acre or well means an acre or well in which a working
interest is owned
Mbbl - means one thousand barrels
Mbf - means one thousand board feet
Mcf - means one thousand cubic feet
MMbf - means one million board feet
MMbtu - means one million British thermal units
MMcf - means one million cubic feet
Net - acres or wells is determined by multiplying the gross acres
or wells by the owned working interest in those gross acres
or wells.
Proved
Reserves - means those estimated quantities of crude oil, condensate
and natural gas that geological and engineering data
demonstrate with reasonable certainty to be recoverable
in future years from known oil and gas reservoirs under
existing economic and operating conditions
ITEM 2 - PROPERTIES
Facilities
Penn Virginia Corporation is headquartered in Radnor,
Pennsylvania with additional offices in Duffield, Virginia;
Charleston, West Virginia; and Houston, Texas. The Company
believes its leased properties are adequate for current needs.
Title to Properties
Penn Virginia believes it has satisfactory title to all of its
properties in accordance with standards generally accepted in the
oil and gas and coal royalty and land management industries.
As is customary in the oil and gas industry, the Company makes
only a cursory review of title to farmout acreage and to
undeveloped oil and gas leases upon execution of any contracts.
Prior to the commencement of drilling operations, a thorough
title examination is conducted and curative work is performed
with respect to significant defects. To the extent title
opinions or other investigations reflect defects, Penn Virginia
cures such title defects. If the Company was unable to remedy or
cure any title defect of a nature such that it would not be
prudent to commence drilling operations on a property, the
Company could suffer a loss of its investment in the property.
Prior to completing an acquisition of producing oil and gas
leases, the Company obtains title opinions on all material
leases. Penn Virginia's oil and gas properties are subject to
customary royalty interests, liens for current taxes and other
burdens that the Company believes do not materially interfere
with the use or affect the value of such properties.
Of the 163,000 acres of coal and timber bearing land, Penn
Virginia owns 70 percent in fee and 30 percent in mineral.
Additionally, the Company leases over 25,000 acres of coal andtimber
bearing land from third parties.
Oil and Gas
Production and Pricing
The following table sets forth production, sales prices and
production costs with respect to the Company's properties for the
years ended December 31, 2000, 1999 and 1998.
2000 1999 1998
Production
Oil and condensate (Mbbls) 31 32 30
Natural gas (MMcf) 11,645 8,679 8,056
Average sales price
Oil and condensate ($/Bbl) $26.84 $14.47 $11.17
Natural gas ($/Mcf) 3.95 2.46 2.54
Production cost
Lease operating expense per Mcfe $0.38 $0.46 $0.46
Lease production taxes per Mcfe 0.24 0.25 0.28
Total production cost per Mcfe $0.62 $0.71 $0.74
Hedging Summary
Natural gas prices ($/Mcf):
Actual price received for production $3.95 $2.50 $2.61
Effect of derivative hedging activities - (.04) (.07)
Average price $3.95 $2.46 $2.54
Proved Reserves
Penn Virginia had proved reserves of 71,000 barrels of crude oil
and condensate and 174 Bcf of natural gas at December 31, 2000. The
present value of the estimated future cash flows discounted at 10 percent
(Pre-tax SEC PV10 Value) at December 31, 2000 was $644 million.
At December 31, 2000, the Company had 150 gross (74 net) proved undeveloped
drilling locations.
Natural Pre-tax
Oil and Natural Gas SEC PV10
Condensate Gas Equivalents Value
(Mbbls) (Bcf) (Bcfe) ($MM)
2000
Developed 71 146 147 $540
Undeveloped - 28 28 104
Total 71 174 175 $644
1999
Developed 326 138 140 $116
Undeveloped 33 47 47 20
Total 359 185 187 $136
1998
Developed 313 118 120 $ 73
Undeveloped 28 46 46 8
Total 341 164 166 $ 81
The standardized measure of discounted future net cash flows,
which represents the present value of future net revenues after
income taxes discounted at ten percent, was $467 million, $119
million and $76 million at December 31, 2000, 1999 and 1998,
respectively. The year-end weighted average prices used to
determine proved reserves at December 31, 2000, 1999 and 1998
were ($/Bbl) $23.31, $21.78 and $9.70, respectively, for oil and
condensate and ($/Mcf) $9.91, $2.69 and $2.14, respectively, for
natural gas. Natural gas prices have declined significantly
since December 31, 2000. If the average price received for 2000
($26.84 per Bbl and $3.95 per Mcf) had been used to calculate the
standardized measure at December 31, 2000, the pre-tax discounted
future net cash flows would have been $235 million. For
information on the changes in standardized measure of discounted
future net cash flows, see "Note 17. Supplementary Information
on Oil and Gas Producing Activities (Unaudited)" in "Item 8. -
Financial Statements and Supplementary Data."
In accordance with the Securities and Exchange Commission's
guidelines, the engineers' estimates of future net revenues from
the Company's properties and the pre-tax SEC PV10 value thereof
are made using oil and natural gas sales prices in effect at the
date of such estimates. The prices are held constant throughout
the life of the properties except where such guidelines permit
alternate treatment, including the use of fixed and determinable
contractual price escalations. Net proved oil and gas reserves
for the three years ended December 31, 2000 were estimated by
Wright and Company, Inc. Prices for oil and gas are subject to
substantial seasonal fluctuations and prices for each are subject
to substantial fluctuations as a result of numerous other
factors. See "Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Proved reserves are the estimated quantities of natural gas and
condensate that geological and engineering data demonstrate with
reasonable certainty to be recoverable in future years from known
reservoirs under existing economic and operating conditions.
Proved developed reserves are proved reserves that can be
expected to be recovered through existing wells with existing
equipment and operating methods. There are numerous
uncertainties inherent in estimating quantities of proved
reserves and in projecting future rates of production and timing
of development expenditures, including many factors beyond the
control of the Company. Reserve engineering is a subjective
process of estimating underground accumulations of oil and
natural gas that cannot be measured in an exact manner, and the
accuracy of any reserve estimate is a function of the quality of
available data and of engineering and geological interpretation
and judgement. The quantities of oil and natural gas that are
ultimately recovered, production and operating costs, the amount
of timing of future development expenditures and future oil and
natural gas sales prices may all differ from those assumed in
these estimates. Therefore, the pre-tax SEC PV10 value amounts
shown above should not be construed as the current market value
of the estimated oil and natural gas reserves attributable to the
Company's properties. The information set forth in the foregoing
tables includes revisions of certain volumetric reserve estimates
attributable to proved properties included in the preceding
year's estimates. Such revisions are the result of additional
information from subsequent completions and production history
from the properties involved or the result of a decrease (or
increase) in the projected economic life of such properties
resulting from changes in production prices.
Acreage
The following table sets forth the Company's developed and
undeveloped acreage at December 31, 2000. The Company's acreage
is located in the eastern and southern portions of the United
States.
Gross Acreage Net Acreage
(in thousands)
Developed 752 624
Undeveloped 112 47
Total 864 671
Wells Drilled
The following table sets forth the gross and net number of
exploratory and development wells drilled during the last three
years. The number of wells drilled means the number of wells spud
at any time during the respective year. Net wells equal the
number of gross wells multiplied by Penn Virginia's working
interest in each of the gross wells. Productive wells represent
either wells which were producing or which were capable of
commercial production.
2000 1999 1998
Development Gross Net Gross Net Gross Net
Productive 99 75.3 61 38.1 56 37.0
Non-productive 1 0.9 2 2.0 3 3.0
100 76.2 63 40.1 59 40.0
Exploratory
Productive 1 0.2 16 9.2 15 8.1
Non-productive 5 1.3 3 1.5 3 1.5
Under evaluation 3 1.4 - - - -
9 2.9 19 10.7 18 9.6
Total 109 79.1 82 50.8 77 49.6
Productive Wells
The number of productive oil and gas wells in which Penn
Virginia had a working interest at December 31, 2000 is set forth
below. Productive wells are producing wells or wells capable of
commercial production.
Operated Wells Non-Operated Wells Total
Gross Net Gross Net Gross Net
Natural gas 476 445 380 51 856 496
In addition to the above working interest wells, Penn Virginia owns
royalty interests in 1,783 gross wells.
Coal Royalty and Land Management
Penn Virginia's coal reserves and timber assets at December 31, 2000
covered 188,000 acres, including fee and leased acreage,in central
Appalachia. The coal reserves are in various surface and underground seams.
Penn Virginia's mineable and merchantable coal reserves are
estimated at 480 million tons as of December 31, 2000. Mineable
and merchantable coal reserves means coal that is economically
mineable using existing equipment and methods under federal and
state laws now in effect. Reserve estimates are adjusted annually
for production, unmineable areas, acquisitions and sales of coal
in place. The majority of the Company's reserves are high in
energy content, low in sulfur and suitable for either the steam
or metallurgical markets.
The amount of coal a lessee can profitably mine at any given
time is subject to several factors and may be substantially
different from "mineable and merchantable reserves." Included
among the factors that influence profitability are the existing
market price, coal quality and operating costs.
The Company's timber assets consist of various hardwoods,
primarily red oak, white oak, yellow poplar and black cherry. At
December 31, 2000, the Company owned an estimated 177 million
board feet of standing saw timber.
Coal Reserves
The following table sets forth the coal reserves that are owned
and leased by the Company. The reserves are estimated internally
by the Company's engineers.
2000 1999 1998
(in million tons)
Beginning of year 488.4 384.7 379.8
Production (12.5) (8.6) (5.3)
Additions, deletions,
revisions 4.1 112.3 10.2
End of year 480.0 488.4 384.7
ITEM 3 - LEGAL PROCEEDINGS
The Company is involved in various legal proceedings arising in
the ordinary course of business. While the ultimate results of
these cannot be predicted with certainty, Company management
believes these claims will not have a material effect on the
Company's financial position, liquidity or operations.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders
during the fourth quarter of 2000.
PART II
ITEM 5 - MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
Common Stock Market Prices And Dividends
High and low closing stock prices and dividends for the last two years were:
2000 1999
Cash Cash
Sales Price Dividends Sales Price Dividends
High Low Paid High Low Paid
Quarter Ended:
March 31 $18.12 $15.81 $0.225 $20.75 $16.69 $0.225
June 30 $26.88 $16.38 $0.225 $21.69 $17.31 $0.225
September 30 $28.94 $21.50 $0.225 $23.06 $20.50 $0.225
December 31 $33.19 $25.56 $0.225 $21.00 $16.13 $0.225
The Company's common stock is traded on the New York Stock Exchange
under the symbol PVA.
ITEM 6 - SELECTED FINANCIAL DATA
Five Year Selected Financial Data
Year Ended December 31, 2000 1999 1998 1997 1996
(in thousands except per share data)
Revenues (a) $81,203 $47,417 $38,252 $39,421 $34,104
Operating Income 40,841 20,435 10,201 16,745 13,194
Net Income (b) 39,265 14,504 9,591 16,018 13,040
Per Common share:
Net income, basic $4.76 $1.73 $1.15 $1.93 $1.51
Net income, diluted $4.69 1.71 1.13 1.88 1.50
Dividends paid $0.90 $0.90 $0.90 $0.90 $0.90
Weighted average shares 8,241 8,406 8,310 8,302 8,694
outstanding, basic
Weighted average shares 8,371 8,480 8,463 8,500 8,694
outstanding, diluted
Total assets $268,766 $274,011 $256,931 $247,230 $229,514
Long-term debt $47,500 $ 78,475 $37,967 $31,903 $21,233
Shareholders'equity $171,162 $154,343 $170,259 $163,704 $160,211
(a) Certain reclassifications have been made to conform to the current
year presentation.
(b) Net income in 2000 included a $23.9 million ($14.2 million after tax)
gain on the sale of certain oil and gas properties.
SUMMARIZED QUARTERLY FINANCIAL DATA
Quarterly financial data for 2000 and 1999 were as follows:
2000 1999
Quarters Ended Quarters Ended
(in thousands, except per share data)
Mar31 June30 Sept30 Dec31(b) Mar31 June30 Sept30 Dec 31
Revenues (c) $16,574 $19,277 $21,359 $23,993 $9,561 $10,515 $12,393 $14,948
Operating
Income 8,273 10,223 11,454 10,891 3,835 4,042 5,430 7,128
Net income $5,343 $6,182 $7,202 $20,538 $2,915 $3,165 3,945 $4,479
Net income per share (a)
Basic $ 0.65 $0.75 $0.88 $2.46 $0.35 $0.38 $0.47 0.53
Diluted $ 0.65 $0.74 $0.85 $2.38 $0.35 $0.37 $0.46 0.53
Weighted average shares outstanding:
Basic 8,222 8,193 8,213 8,353 8,371 8,410 8,423 8,423
Diluted 8,222 8,325 8,473 8,622 8,448 8,490 8,532 8,445
(a) The sum of the quarters may not equal the total of the
respective year's net income per share due to changes in the
weighted average shares outstanding throughout the year.
(b) Net income for fourth quarter of 2000 included a $23.9
million ($14.2 million after tax) gain on the sale of certain oil
and gas properties.
(c) Certain reclassifications have been made to conform to the
current year presentation.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following review of operations and financial condition of
Penn Virginia Corporation and subsidiaries should be read in
conjunction with the Consolidated Financial Statements and Notes
thereto.
Overview
Penn Virginia's net income for 2000 was $39.3 million or $4.69
per share (diluted) with operating income of $40.8 million and
revenues of $81.2 million. The comparable 1999 results were net
income of $14.5 million or $1.71 per share (diluted), operating
income of $20.4 million and revenues of $47.4 million. The
results for 2000 reflected the sale of non-strategic natural gas
properties located primarily in Kentucky and West Virginia.
Excluding the $23.9 million ($14.2 million after tax) gain on the
sale, net income would have been $25.1 million for 2000, a 73
percent increase over 1999. The 2000 increases were a direct
result of an increase in price the Company received for its
natural gas production and an increase in production attributable
to the acquisition of certain natural gas properties in
Mississippi, West Virginia and Kentucky as well as higher levels
of coal royalties.
Management is committed to expanding its natural gas operations
over the next several years through a combination of exploitation
and exploration of existing properties and acquisitions of new
properties. During 2000, the Company acquired natural gas
properties in West Virginia and eastern Kentucky at a cost of
$34.7 million. At December 31, 2000, the properties had proved
reserves of approximately 33 billion cubic feet (Bcf) in addition
to significant drilling potential. The Company continued to
develop the property it acquired in July 1999 in Mississippi for
$13.7 million by drilling 41 gross wells (37.7 net) in 2000. The
acquisition, which was 99 percent natural gas, added 23.3 Bcfe in
proved reserves and provided numerous future drilling locations.
The Company drilled seven gross (1.4 net) exploratory wells in a
Texas onshore gulf coast exploration project, of which one gross
(0.2 net) well was successful, four gross (0.8 net) wells were
non-productive and two gross (0.4 net) wells are under
evaluation. The Company is still evaluating the unproved
properties associated with the 20 percent working interest in the
project.
Historically, Penn Virginia has focused most of its operations
in the eastern United States and particularly in Appalachia.
However, the Company believes continued growth opportunities,
especially in oil and natural gas, will be enhanced by a presence
outside the Appalachian Basin.
The Company continued its ambitious drilling program in 2000 by
drilling 109 gross (79.1 net) wells. In 2000, Penn Virginia
produced a record 11.8 Bcfe of oil and natural gas, which was a
33 percent increase over 1999.
Penn Virginia participates in the coal industry exclusively
through its royalty ownership. The Company leases the rights to
mine its coal reserves to various operators who pay a minimum
annual payment, a minimum dollar royalty per ton and/or a
percentage of the sales price. Since the Company does not mine
the coal, the coal royalty and land management segment has
relatively high margins. Coal royalty and land management
segment revenues increased $9.8 million, or 45 percent, to an all-
time high of $31.9 million in 2000. The increase was
attributable to acquisitions, enhanced production from lessees
due to the completion of the unit train loadout facility and
start-up operations from other lessees. The Company continues to
diversify its coal customer base by adding additional lessees and
by searching for additional coal reserve acquisition
opportunities.
The Company had its first full year of usage for the $5.2
million state-of-the-art coal loadout facility in Virginia
completed in April 1999. The facility accommodates 100 rail car
unit trains which can be loaded in approximately four hours, thus
generating substantial savings for the Company's lessees. The
loadout is primarily utilized by the Company's lessees and
provides them a competitive advantage by reducing delivery costs
to their principal customers. The loadout facility transshipped
2.5 million tons in 2000, generating $1.9 million in fees.
Additionally, the loadout facility has accelerated the cash flow
received by the Company, primarily due to increased production
from lessees. Other infrastructure projects are underway or
being evaluated.
In September 1999, Penn Virginia completed a $30 million
acquisition which included over 90 million tons of high quality
coal reserves, as well as oil and gas leases, timber assets, a
short line railroad and a coal loading dock on the Kanawha River.
The acquisition covers over 24,000 acres and complements the
existing asset base of the Company's Coal River Properties in
West Virginia.
At December 31, 2000, the Company owned 3,307,200 shares of
Norfolk Southern common stock, which decreased in price from
$20.50 per share at December 31, 1999 to $13.31 per share,
reducing the value of the investment by $23.7 million, or $15.4
million after tax. Penn Virginia received a quarterly dividend
of $0.20 per share in 2000, 1999 and 1998; however, in January
2001, Norfolk Southern Corporation reduced its quarterly dividend
to $0.06 per share.
Results of Operations
Consolidated Net Income
Penn Virginia's 2000 net income was $39.3 million, compared
with $14.5 million in 1999 and $9.6 million in 1998. Revenues for
2000 were $81.2 million, a 71 percent increase over 1999 and a
112 percent increase over 1998. Significant factors for the
increase in 2000 include (a) increased natural gas production
resulting from an acquisition in May 2000, (b) a substantial
increase the average price received for natural gas and (c)
higher levels of coal royalties and fees received in connection
with the coal loading facility. In addition, a gain of $23.9
million ($14.2 million after tax) was recognized in December 2000
for the sale of mature oil and gas properties located primarily
in Kentucky and West Virginia. The increase in net income for
1999 was a direct result of increased production of natural gas
and higher levels of coal royalties. Net income for 1998
included a non-cash charge relating to impairments of certain oil
and gas properties of $4.6 million ($3.7 million after tax)
primarily due to a decline in commodity prices and a
restructuring charge of $0.6 million ($0.4 million after tax).
Net income includes a gain of approximately $23.9 million
($14.2 million after tax) on the sale of non-strategic oil and
gas properties in December 2000.
Selected Financial Data
2000 1999 1998
(in millions, except share data)
Revenues $81.2 $47.4 $38.3
Operating costs and expenses 40.4 27.0 28.1
Operating income 40.8 20.4 10.2
Net income 39.3 14.5 9.6
Earnings per share, basic 4.76 1.73 1.15
Earnings per share, diluted 4.69 1.71 1.13
Certain reclassifications have been made to conform to the
current year presentation.
Oil and Gas Segment
The oil and gas segment explores for, develops and produces
crude oil and natural gas in the eastern and southern portions of
the United States. The Company also owns mineral rights to oil
and gas reserves.
Selected Financial and Operating Data
2000 1999 1998
(in thousands, except as noted)
Revenues
Oil and condensate $ 832 $ 463 $ 335
Natural gas 46,019 21,384 20,482
Other 656 1,095 289
Total Revenues 47,507 22,942 21,106
Expenses
Lease operating expenses 4,562 4,090 3,761
Exploration expenses 5,080 1,699 488
Taxes other than income 2,809 2,165 2,343
General and administrative 2,656 2,148 3,153
Cash Operating Expenses 15,107 10,102 9,745
Depreciation, depletion
and amortization 9,883 6,951 6,460
Impairment of properties - - 4,641
Total Operating Expenses 24,990 17,053 20,846
Operating Income $22,517 $5,889 $ 260
Production
Oil and condensate (MBbls) 31 32 30
Natural gas (MMcf) 11,645 8,679 8,056
Prices
Oil and condensate ($/Bbl) $26.84 $14.47 $11.17
Natural gas ($/Mcf) 3.95 2.46 2.54
Production cost
Operating cost per Mcfe $0.38 $0.46 $0.46
Production taxes per Mcfe 0.24 0.25 0.28
Total production cost per Mcfe $0.62 $0.71 $0.74
Hedging Summary
Natural gas prices ($/Mcf):
Actual price received for
production $3.95 $2.50 $2.61
Effect of derivative hedging
activities - (.04) (.07)
Average price $3.95 $ 2.46 $2.54
Year Ended December 31, 2000 Compared to Year Ended December 31,1999
Revenues. Oil and gas revenues increased $24.6 million to $47.5
million in 2000 from 1999 primarily due to a $24.6 million
increase in natural gas sales.
Natural gas sales increased 115 percent to a record $46.0
million due to a 34 percent increase in production coupled with a
61 percent increase in the average price received per Mcf. The
Company's $34.7 million acquisition of mineral interests in May
2000 represents 1,111 MMcf of the 2,966 MMcf increase in natural
gas production. The development of Penn Virginia's $13.7 million
acquisition in July 1999 accounted for 1,511 of the increase with
the remainder attributable to drilling success in Appalachia.
Natural gas prices were extremely volatile in 2000. In April
and May of 2000, the Company entered into several physical
contracts that totaled 9,289 MMcf per day for the remainder of
2000. The volumes under contract accounted for 20 percent of
Penn Virginia's 2000 production at a price of $3.39 per Mcf. The
Company had one contract remaining that expires in March 2001
covering 18 percent of anticipated first quarter production at
$3.12 per Mcf.
The Company, from time to time, hedges the price received for
market-sensitive production through the use of swaps with
purchased options. Gains and losses from hedging activities are
included in natural gas revenues when the hedged production
occurs. The Company recognized a loss of $0.4 million in 1999
and $0.7 million in 1998 on hedging activities with no gain or
loss recognized in 2000. Effective January 1, 2001, the Company
will account for its derivative activities in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 133, as
amended by SFAS No. 137 and SFAS No. 138. See Note 2 (New
Accounting Standards) in the financial statements.
Operating expenses. Production costs, consisting of lease
operating expense and taxes other than income, increased from
$6.3 million in 1999 to $7.4 million in 2000. Production costs
decreased from $0.71 per Mcfe in 1999 to $0.62 per Mcfe in 2000.
A decrease, on a Mcfe basis, of $0.06 resulted from the Company's
May 2000 acquisition of royalty interest for $34.7 million. The
remainder of the decrease is attributable to the low operating
costs associated with the increased production from the Company's
1999 acquired properties in Mississippi. These decreases, on a
Mcfe basis, were offset by an increase in severance taxes related
to increased average prices received in 2000.
Exploration expenses increased from $1.7 million in 1999 to
$5.1 million in 2000. The $5.1 million in 2000 consists of $1.7
million in seismic expenditures, charges relating to five gross
(1.3 net) nonproductive, exploratory wells and unproved leasehold
costs. Penn Virginia's increased seismic expenditures for the
year, compared with $0.3 million in 1999, represents a continued
effort to establish the Company's balanced exploratory program.
General and administrative ("G&A") expenses increased to $2.7
million in 2000 from $2.1 million in 1999; however, G&A expenses
decreased to $0.22 per Mcfe in 2000 from $0.24 Mcfe in 1999. The
decrease of $0.02 per Mcfe is attributable to increased
production from acquisitions and an accelerated drilling program,
offset by additional staffing necessary to accomplish those
objectives.
Oil and gas depreciation, depletion and amortization increased
to $9.9 million, or $0.84 per Mcfe, in 2000 from $7.0 million, or
$0.78 per Mcfe, in 1999. The increase is primarily to the
Company's acquisitions in July 1999 and May 2000.
Other non-operating income. Gain on the sale of properties
includes $23.9 million ($14.2 million after tax) related to the
sale of mature oil and gas properties located primarily in
Kentucky and West Virginia. Proceeds from the December 2000 sale
totaled $54.3 million, after closing adjustments.
Year Ended December 31, 1999 Compared to Year Ended December 31,
1998
Revenues. Oil and gas revenues increased $1.9 million, or nine
percent, from 1998 to 1999 primarily due to a $0.8 million
increase in natural gas sales and a $0.8 million increase in
other income. Natural gas production increased eight percent,
offset by a three percent decrease in average price per Mcf. The
production increase is a result of an acquisition in Mississippi
and the Company's 1999 drilling program. Other operating income
increased $0.8 million primarily due to $0.4 million received for
the final settlement of a 1995 contract dispute and $0.2 million
for reimbursement of lost production caused by third party
pipeline damages.
Operating expenses. Production costs, consisting of lease
operating expense and taxes other than income, increased from
$6.1 million in 1998 to $6.3 million in 1999. On a Mcfe basis,
production costs decreased from $0.74 per Mcfe in 1998 to $0.71
per Mcfe in 1999. The decrease on a Mcfe basis resulted from
less tax being paid due to the relocation of the offices of the
oil and gas segment.
Exploration expenses increased from $0.5 million in 1998 to
$1.7 million in 1999. The increase is attributable to charges
relating to seven gross (3.5 net) nonproductive, exploratory
wells and preliminary field costs incurred in 1999.
Additionally, the Company's exploration program included $0.3
million in seismic expenditures.
General and administrative expenses decreased from $3.2 million
in 1998 to $2.1 million in 1999. The decrease primarily relates
to the Company's 1998 plan to reduce administrative and
operational overhead costs in its oil and gas subsidiary. In
connection with the plan, the Company recorded a pre-tax charge
to general and administrative expense totaling $0.6 million in
1998 related to severance costs for six employees and a lease
cancellation penalty. The Company completed its restructuring
plan in August 1999. There were no adjustments to the liability
recorded in 1998 that resulted in an adjustment to net income in
1999.
Oil and gas depreciation, depletion and amortization increased
to $7.0 million in 1999 but remained relatively constant on a
unit basis at $0.79 per Mcfe in 1999, compared with $6.4 million,
or $0.78 per Mcfe, in 1998.
Impairment of oil and gas properties. In accordance with SFAS
No. 121, the Company reviews its oil and gas properties for
impairment whenever events and circumstances indicate a decline
in the recoverability of their carrying value. In the fourth
quarter of 1998, the Company estimated the expected future cash
flows of its oil and gas properties and compared such future cash
flows to the carrying amount of the oil and gas properties to
determine if the carrying amount was recoverable. For those oil
and gas properties which the carrying amount exceeded the
estimated undiscounted future cash flows, an impairment was
determined to exist; thus, the Company adjusted the carrying
amount of the respective oil and gas properties to their fair
value as determined by discounting their estimated future cash
flows. The factors used to determine fair value included, but
were not limited to, estimates of proved reserves, future
commodity pricing, future production estimates, anticipated
capital expenditures and a discount rate commensurate with a risk-
adjusted rate of return. As a result, the Company recognized a
noncash pre-tax charge of $4.6 million ($3.7 million after tax)
related to its oil and gas properties in the fourth quarter of
1998.
Coal Royalty and Land Management Segment
The coal and land segment includes Penn Virginia's mineral
rights to coal reserves, its timber assets and its land assets.
Selected Financial and Operating Data
2000 1999 1998
(in thousands, except as noted)
Revenues
Coal royalties $24,308 $17,836 $10,774
Timber 2,388 1,948 1,711
Other 4,355 2,046 2,014
Total Revenues 31,051 21,830 14,499
Expenses
Operating costs 3,066 784 276
Exploration expenses 394 268 549
Taxes other than income 663 506 352
General and administrative 3,047 2,623 2,184
Cash Operating Expenses 7,170 4,181 3,361
Depreciation, depletion and
amortization 2,047 1,269 589
Total Operating Expenses 9,217 5,450 3,950
Operating Income $21,834 $16,380 $10,549
Production
Royalty coal tons produced
by lessees (thousands) 12,536 8,603 5,278
Timber sales (Mbf) 8,545 9,020 7,981
Prices
Royalty per ton $1.94 $2.07 $2.04
Timber sales price per Mbf $ 257 $ 206 $ 198
Certain reclassifications have been made to conform to the current year
presentation.
Year Ended December 31, 2000 Compared to Year Ended December 31, 1999
Revenues. Coal royalty and land management segment revenues
were $31.1 million in 2000 and $21.8 million in 1999,
representing a 42 percent increase.
Coal royalties increased $6.5 million in 2000 primarily due to
a $30 million acquisition in September 1999 and increased
production from additional lessees. Coal royalties from the
acquisition were $1.5 million higher in 2000 because the Company
included a full year of operations in 2000 versus three months in
1999. The remainder of the increase was attributable to a full
year of operation for the Company's unit train loadout,
infrastructure additions by two lessees, four additional mines
added by lessees and increased production from numerous lessees
due to improved conditions in the coal industry.
Timber revenues increased $440,000, or 23 percent, to $2.4
million in 2000; however, timber harvested decreased from 9,020
Mbf in 1999 to 8,545 in 2000. The average price received by the
Company increased from $206 per Mbf in 1999 to $257 per Mbf in
2000. These variances are justified by the harvesting of Penn
Virginia's higher quality hardwoods in 2000.
Other operating income increased to $4.4 million in 2000
compared with $2.0 million in 1999. Rail car rental, dock rental
and various land rentals related to the acquisition in September
1999 accounted for $1.2 million of the increase. Additionally,
$603,000 of the increase was attributable to Penn Virginia's unit
train loadout facility which had a full year of operation in 2000
versus nine months in 1999. The remainder of the increase is
primarily due to $589,000 of additional lease forfeitures
received in 2000. Lease forfeitures are recognized as revenue by
the Company when lessees fail to meet their minimum required coal
production for a specified time period; consequently, their non-
recoupable minimums would be forfeited and recognized as income
by the Company.
Expenses. Total operating expenses for the coal royalty and
land management segment increased 69 percent to $9.2 million from
$5.5 million in 1999.
Operating expenses increased from $784,000 in 1999 to $3.1
million in 2000. The September 1999 coal royalty acquisition
accounted for $2.2 million of the 2000 increase due to (a) $1.4
million in additional lease expense relating to newly acquired
coal reserves, (b) increased expense of $573,000 attributable to
the leasing of rail cars, and (c) continuing environmental
maintenance of $213,000 to comply with governmental agency
requirements.
Exploration expenses increased $126,000 due to additional core
drilling and evaluation of samples primarily relating to Penn
Virginia's 1999 acquired coal properties.
Taxes other than income increased $157,000, or 31 percent, to
$663,000 for 2000 due to property taxes associated with the
September 1999 acquisition.
General and administrative expenses, on a per ton basis,
decreased to $0.24 in 2000 versus $0.30 in 1999. The decrease is
primarily attributable to increased production offset by
additional staffing needs resulting from the September 1999 coal
royalty acquisition.
Depreciation, depletion and amortization increased from $1.3
million, or $0.15 per ton, in 1999 to $2.0 million, or $0.16 per
ton, in 2000. The slight increase, on a per ton basis, is due to
the Company's September 1999 acquisition of coal reserves in West
Virginia.
Other non-operating income. Gain on the sale of property was
$897,000 in 2000 primarily due to the sale of a small block of
coal reserves in eastern Kentucky.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Revenues. Coal royalty and land management segment revenues
increased 51 percent to $21.8 million in 1999 compared with $14.5
million in 1998. The $7.5 million increase in 1999 was
attributable to enhanced production from existing lessees due to
the completion of the unit train loadout, start-up operations for
some lessees and acquisitions.
Operating expenses. The coal royalty and land management
segment's operating expenses increased $1.5 million, or 37
percent, to $5.5 million, compared with $4.0 million in 1998.
Operating expenses increased $0.5 million primarily due to
additional lease expense relating to the September 1999 coal
royalty acquisition. Exploration expenses decreased $0.3 million
to $0.2 million in 1999 primarily due to increased 1998 costs
incurred to maintain a mine on a terminated lease. General and
administrative expenses increased $0.4 million in 1999 due to
legal fees incurred by the Company to pursue the potential
recovery of coal reserves and the addition of three additional
employees in the Charleston, West Virginia office relating to the
Company's September 1999 acquisition. Depreciation, depletion
and amortization increased from $0.6 million to $1.3 million.
The increase is attributable to an increase in coal royalty tons
produced by existing lessees, the Company's September 1999
acquisition of coal reserves in West Virginia and the unit train
loadout's first year of operation.
Corporate and Other
Dividends. Dividend income of $2.6 million in 2000 remained
constant, compared with $2.6 million in 1999 and 1998. However,
in January 2001, Norfolk Southern Corporation reduced its
quarterly dividend from $0.20 per share to $0.06 per share. Penn
Virginia's holdings primarily consist of 3,307,200 shares of
Norfolk Southern Corporation.
Reserves
Oil and Gas Reserves
Penn Virginia's total proved reserves at year-end 2000 were
174.6 Bcfe, compared with 187.4 Bcfe at 1999 year- end. The
decrease is attributable to the sale of mature oil and gas
properties, partially offset by acquisitions and extensions,
discoveries and other additions. Proved developed reserves
increased 6.1 Bcfe, or four percent, to 146.4 Bcfe. At year-end
2000, proved developed reserves comprised 84 percent of the
Company's total proved reserves, compared with 75 percent at year-
end 1999. The Company has 74 net proved undeveloped drilling
locations at year-end 2000, compared with 139 locations at year-
end 1999. The Company acquired 35.9 Bcfe of proved oil and gas
reserves, primarily consisting of royalty interest, during 2000
for $36.0 million. In December 2000, the Company received $54.3
million, after closing adjustments, for the sale of mature oil
and gas properties in Kentucky and West Virginia, which contained
66.6 Bcfe of proved oil and gas reserves.
Penn Virginia's comparative reserve replacement measures are as
follows:
2000 1999
Finding and development cost (a)
Current year $ 0.82 $ 2.17
Three year weighted average 1.56 4.03
Reserve replacement cost (b)
Current year $ 0.92 $ 0.96
Three year weighted average 1.08 1.51
Reserve replacement percentage (c)
Current year 556 % 342 %
Three year weighted average 332 % 152 %
Finding and development cost, reserve replacement cost and
reserve replacement percentage are not measures presented in
accordance with generally accepted accounting principles ("GAAP")
and are not intended to be used in lieu of GAAP presentation.
These measures are commonly used by financial statement users as
a measurement to determine the performance of a Company's oil and
gas activities.
(a) Finding and development cost is calculated by dividing
1) costs incurred in certain oil and gas activities less proved
property acquisitions, by 2) reserve extensions, discoveries and
other additions and revisions.
(b) Reserve replacement cost is calculated by dividing 1) costs
incurred in certain oil and gas activities, including
acquisitions, by 2) reserve purchases, extensions, discoveries
and other additions and revisions.
(c) Reserve replacement percentage is calculated by dividing 1)
reserve purchases, revisions, extensions, discoveries and other
additions, by 2) oil and gas production.
Mineable and Merchantable Coal Reserves
Penn Virginia's mineable and merchantable coal reserves were
480 million tons at December 31, 2000, compared with 488 million
tons in 1999. The Company collected royalties for 12.5 million
tons in 2000. Mineable and merchantable coal reserves means coal
that is economically mineable using existing equipment and
methods under federal and state laws now in effect.
Market Risk
Marketable Equity Securities. At December 31, 2000, the
Company's marketable equity securities, consisting primarily of
Norfolk Southern Corporation common stock, were recorded at their
fair value of $44.1 million, including net unrealized gains of
$41.2 million. The closing stock price for Norfolk Southern
Corporation was $13.31 and $20.50 per share at December 31, 2000
and 1999, respectively. At February 1, 2000, the closing price
for Norfolk Southern Corporation was $16.55. The fair value of
the Company's marketable equity securities is significantly
affected by market price fluctuations. See Note 4 of the Notes
to Consolidated Financial Statements.
Interest Rate Risk. The carrying value of Penn Virginia's debt
approximates fair value. At December 31, 2000, the Company had
$47.5 million of long-term debt represented by an unsecured
revolving credit facility (the "Revolver"). The Revolver matures
in June 2003 and is governed by a borrowing base calculation that
is redetermined semi-annually. The Company has the option to
elect interest at (i) Libor plus a Eurodollar margin ranging from
100 to 150 basis points, based on the percentage of the borrowing
base outstanding or (ii) the greater of the prime rate or federal
funds rate plus 50 basis points. As a result, the Company's 2001
interest costs will fluctuate based on short-term interest rates
relating to the Revolver.
Price Risk Management. Penn Virginia's price risk program
permits the utilization of fixed-price contracts and financial
instruments (such as futures, forward and option contracts and
swaps) to mitigate the price risks associated with fluctuations
in natural gas prices as they relate to the Company's anticipated
production. These contracts and/or financial instruments are
designated as hedges and accounted for on the accrual basis with
gains and losses being recognized based on the type of contract
and exposure being hedged. Realized gains and losses on natural
gas financial instruments designated as hedges of anticipated
transactions are treated as deferred charges or credits, as
applicable, on the balance sheet until recognized. Through
December 31, 2000, net gains and losses on such financial
instruments, including accrued gains or losses upon maturity or
termination of the contract, are recognized in operating income
concurrently with the hedged transaction. Effective January 1,
2001, the Company accounts for its derivative activities in
accordance with Statement of Financial Accounting Standards
("SFAS") No. 133, as amended by SFAS No. 137 and SFAS No. 138.
See Note 2 (New Accounting Standards) in the financial
statements.
SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138,
alters the reporting by companies that use derivative
instruments. The new rule, which went into effect January 1,
2001, requires companies to recognize derivatives as assets or
liabilities in their balance sheets and to measure them at "fair
value." Penn Virginia, from time to time, hedges in the form of
"costless collars." The options establish a price "collar"
around the gas. The hedging strategy is costless because the
purchase of the "put" options to sell gas at the floor price was
offset by the sale of the "call" option on Penn Virginia gas at
the ceiling price. If the price of gas falls, Penn Virginia's
expected revenue stream from producing properties also declines;
however, the value of the "put" option increases. In accounting
for cash flow hedges under SFAS No. 133, part of the change in
option value would be reported as an operating gain or loss in
Penn Virginia's quarterly income statement (the gain or loss will
be reversed in future quarters as the true value of the option
diminishes to zero at the expiration date.) Consequently, if the
price of gas (and Penn Virginia's expected revenue stream) rises,
the cost to unwind the call option increases, creating an
operating loss. As a result, the Company's earnings could
experience increased volatility over the term of the costless
collar.
Natural gas pricing was extremely volatile in 2000. In April
and May of 2000, the Company entered into several physical
contracts that totaling 9,289 MMcf per day for the remainder of
2000. The volumes under contract accounted for 20 percent of
Penn Virginia's 2000 production at a price of $3.39 per Mcf. The
Company had one contract remaining that expires in March 2001
covering 18 percent of anticipated first quarter production at
$3.12 per Mcf. This physical contract is not considered to be a
derivative instrument under SFAS No. 133, as amended, as such
contracts qualify for the normal purchase and sale exception.
In January 2001, the Company hedged 13 percent of its
anticipated production for the second and third quarters of 2001
through a basis swap and a costless collar with a floor of $4.95
per Mcf and a ceiling of $7.16 per Mcf. Additionally, basis
swaps covering an additional 11 percent of anticipated production
for the same periods were executed.
Capital Resources and Liquidity
Cash flows from Operating Activities
Funding for the Company's activities has historically been
provided by operating cash flows and bank borrowings. Net cash
provided from operating activities was $41.7 million in 2000,
compared with $25.1 million in 1999 and $19.4 million in 1998.
The Company's consolidated cash balance remained constant at $0.7
million in 2000 and 1999.
Cash flows from Investing Activities
The Company used $3.3 million in investing activities in 2000,
compared with $58.7 million in 1999 and $18.3 million in 1998.
Capital expenditures, including acquisitions and noncash items,
totaled $59.4 million, compared with $60.7 million in 1999 and
$23.6 million in 1998. Capital expenditures in 2000 were
partially offset from the sale of certain oil and gas properties
totaling $55.2 million after closing adjustments. The following
table sets forth capital expenditures, including acquisitions and
noncash items, made by the Company during the periods indicated.
Year ended December 31,
2000 1999 1998
Oil and gas (in thousands)
Acquisitions $36,916 $16,620 $3,557
Development 18,317 9,189 8,527
Exploration 3,200 2,587 1,534
Support equipment and
facilities 244 209 171
Coal royalty and land management
Lease acquisitions - 30,094 6,260
Support equipment and facilities 485 1,861 3,532
Other 281 91 42
Total capital expenditures $59,443 $60,651 $23,623
The Company drilled 75.3 net successful development wells, 0.2
net successful exploratory wells and 2.6 net non-productive wells
in 2000, compared with 38.1 net successful development wells, 9.2
net successful exploratory wells and 2.0 net non-productive wells
in 1999.
Management is committed to expanding its natural gas operations
over the next several years through a combination of
exploitation, exploration and acquisition of new properties.
During 2000, the Company acquired proved natural gas properties
in Appalachia at a cost of $36.0 million, including a $34.7
million acquisition of royalty interests in West Virginia and
eastern Kentucky. The properties had proved reserves of 35.9 Bcfe
at December 31, 2000 in addition to significant drilling
potential. The Company continued to develop the property it
acquired in July 1999 in Mississippi by drilling 41 gross wells
(37.7 net) in 2000. The acquisition, which was 99 percent
natural gas, added 23.3 Bcfe in proved reserves and provided
numerous future drilling locations. The Company drilled seven
gross (1.4 net) exploratory wells in a Texas onshore gulf coast
exploration project, of which one gross (0.2 net) well was
successful, four gross (0.8 net) wells were non-productive and
two gross (0.4 net) wells are under evaluation. The Company is
still evaluating the unproved properties associated with the 20
percent working interest in the project.
Capital expenditures for 2001, before lease and proved property
acquisitions, are expected to be $43 to $50 million including $41
to $47 million for the oil and gas segment and $2 to $3 million
for the coal royalty and land management segment. In addition,
Penn Virginia plans to invest an additional $2 to $3 million in
seismic. The Company plans to drill approximately 180 to 200
gross (120 to 140 net) wells. Management continually reviews the
Company's drilling expenditures and may increase, decrease or
reallocate amounts based on industry conditions. Management
believes its cash flow from operations, portfolio of investments
and sources of debt financing are sufficient to fund its 2001
planned capital expenditure program.
In September 1999, the Company completed an acquisition which
included over 90 million tons of high quality coal reserves as
well as oil and gas leases, timber assets, a short line railroad
and a coal loading dock on the Kanawha River in West Virginia.
The $30 million acquisition complements the Company's existing
Coal River Properties located on the inland river system in West
Virginia. The Company continues to diversify its coal customer
base by adding additional lessees and by searching for additional
coal reserve acquisition opportunities.
Cash flows from Financing Activities
Net cash provided (used) by financing activities was $(38.4)
million in 2000, compared with $34.0 million in 1999 and $(1.7)
million in 1998.
Penn Virginia has a $150 million unsecured revolving credit
facility (the "Revolver") with a final maturity of June 2003.
The Revolver contains financial covenants requiring the Company
to maintain certain levels of net worth, debt-to-capitalization
and dividend limitation restrictions, among other requirements.
The outstanding balance on the Revolver was $47.5 million and
$77.7 million at December 31, 2000 and 1999, respectively.
Management believes its portfolio of investments and sources of
funding are sufficient to meet short and long-term liquidity
needs not funded by cash flows from operations.
Other
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133, as amended by SFAS No. 137 and SFAS
No. 138, establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments
embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires an entity
to recognize all derivatives as either assets or liabilities in
the statement of financial position and measure those instruments
at fair value. If certain conditions are met, a derivative may
be specifically designated as (a) a hedge of the exposure to
changes in the fair value of a recognized asset or liability or
an unrecognized firm commitment, (b) a hedge of the exposure to
changes in the fair value of the exposure to variable cash flows
of a forecasted transaction, or (c) a hedge of the foreign
currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available-for-sale security, or
a foreign currency denominated forecasted transaction. Special
accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the
Company's statement of income. The adoption of SFAS No. 133 on
January 1, 2001 did not have a material impact on the Company's
financial position or results of operations.
In December 1999, the Securities and Exchange Commission
("SEC") issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements' ("SAB No. 101"). SAB No.
101, as amended, summarizes the SEC's views in applying generally
accepted accounting principles to revenue recognition in
financial statements. The adoption of SAB No. 101 on October 1,
2000 did not have a material effect on the Company's financial
position or results of operations.
Environmental Matters
Penn Virginia's operating segments are subject to various
environmental hazards. Several federal, state and local laws,
regulations and rules govern the environmental aspects of the
Company's business. Noncompliance with these laws, regulations
and rules can result in substantial penalties or other
liabilities. The Company does not believe its environmental risks
are materially different from those of comparable companies or
that cost of compliance will have a material adverse effect on
profitability, capital expenditures, cash flows or competitive
position. There is no assurance that changes in or additions to
laws, regulations or rules regarding the protection of the
environment will not have such an impact. The Company believes
it is materially in compliance with environmental laws,
regulations and rules.
In conjunction with the leasing of property to coal operators,
all environmental and reclamation liabilities are the
responsibility of the lessees. The Company evaluates the
financial capability of each lessee prior to the leasing of
property.
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
within the meaning of Section 21E of the Securities Exchange Act
of 1934, as amended, and Section 27A of the Securities Act of
1933, as amended. In addition, Penn Virginia 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, drilling and
exploration programs, expected commencement dates of coal mining
or oil and gas production, projected quantities of future oil and
gas production by Penn Virginia, projected quantities of future
coal production by the Company's lessees producing coal from
reserves leased from Penn Virginia, costs and expenditures as
well as projected demand or supply for coal and oil and gas,
which will affect sales levels, prices and royalties realized by
Penn Virginia.
These forward-looking statements are made based upon
management's current plans, expectations, estimates, assumptions
and beliefs concerning future events impacting Penn Virginia and
therefore involve a number of risks and uncertainties. Penn
Virginia 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 Penn Virginia to differ
include, but are not necessarily limited to: the cost of finding
and successfully developing oil and gas reserves; the cost of
finding new coal reserves; the ability to acquire new oil and gas
and coal reserves on satisfactory terms; the price for which such
reserves can be sold; the volatility of commodity prices for oil
and gas and coal; the risks associated with having or not having
price risk management programs; Penn Virginia's ability to lease
new and existing coal reserves; the ability of Penn Virginia's
lessees to produce sufficient quantities of coal on an economic
basis from Penn Virginia's reserves; the ability of lessees to
obtain favorable contracts for coal produced from Penn Virginia
reserves; Penn Virginia's ability to obtain adequate pipeline
transportation capacity for its oil and gas production;
competition among producers in the coal and oil and gas
industries generally and in the Appalachian Basin in particular;
the extent to which the amount and quality of actual production
differs from estimated mineable and merchantable coal reserves
and proved oil and gas reserves; unanticipated geological
problems; availability of required materials and equipment; the
occurrence of unusual weather or operating conditions including
force majeure or events; the failure of equipment or processes to
operate in accordance with specifications or expectations; delays
in anticipated start-up dates; environmental risks affecting the
drilling and producing of oil and gas wells or the mining of coal
reserves; the timing of receipt of necessary governmental
permits; 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; 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 of coal reserves, joint venture partners and
purchasers of reserves in transactions financed by Penn Virginia,
including their ability to satisfy their royalty, environmental,
reclamation and other obligations to Penn Virginia and others;
changes in financial market conditions; changes in the market
prices or value of the marketable securities owned by Penn
Virginia, including the price of Norfolk Southern common stock
and other risk factors detailed in Penn Virginia's Securities and
Exchange commission filings. Many of such factors are beyond Penn
Virginia's ability to control or predict. Readers are cautioned
not to put undue reliance on forward-looking statements.
While Penn Virginia periodically reassesses material trends and
uncertainties affecting Penn Virginia'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 Penn
Virginia's quarterly, annual or other reports filed with the
Securities and Exchange Commission, Penn Virginia does not intend
to review or update any particular forward-looking statement,
whether as a result of new information, future events or
otherwise.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PENN VIRGINIA CORPORATION
February 14, 2001 By: /s/ James O. Idiaquez
(James O. Idiaquez, Vice President
and Chief Financial Officer)
February 14, 2001 By: /s/ Ann N. Horton
(Ann N. Horton, Vice President
and Principal Accounting Officer)
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
/s/ Robert Garrett Chairman of the Board February 20, 2001
(Robert Garrett) and Director
/s/ Richard A. Bachmann Director February 20, 2001
(Richard A. Bachmann)
/s/ Lennox K. Black Director February 20, 2001
(Lennox K. Black)
/s/ John D. Cadigan Director February 20, 2001
(John D. Cadigan)
/s/ A. James Dearlove Director and February 14, 2001
(A. James Dearlove) Chief Executive Officer
/s/ Keith D. Horton Director and February 20, 2001
(Keith D. Horton) Executive Vice President
/s/ Peter B. Lilly Director February 14, 2001
(Peter B. Lilly)
/s/ Marsha R. Perelman Director February 14, 2001
(Marsha R. Perelman)
/s/ Joe T. Rye Director February 14, 2001
(Joe T. Rye)
/s/ John A. H. Shober Director February 20, 2001
(John A. H. Shober)
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Penn Virginia Corporation and Subsidiaries
Index to Financial Section
Management's Report on Financial Information 31
Reports of Independent Public Accountants 32
Financial Statements and Supplementary Data 33
Management's Report on Financial Information
Management of Penn Virginia Corporation is responsible for the
preparation and integrity of the financial information included
in this annual report. The financial statements have been
prepared in accordance with generally accepted accounting
principles, which involve the use of estimates and judgments
where appropriate.
The corporation has a system of internal accounting controls
designed to provide reasonable assurance that assets are
safeguarded against loss or unauthorized use and to produce the
records necessary for the preparation of financial information.
The system of internal control is supported by the selection and
training of qualified personnel, the delegation of management
authority and responsibility, and dissemination of policies and
procedures. There are limits inherent in all systems of internal
control based on the recognition that the costs of such systems
should be related to the benefits to be derived. We believe the
corporation's systems provide this appropriate balance.
The corporation's independent public accountants, Arthur
Andersen LLP, have developed an understanding of our accounting
and financial controls and have conducted such tests as they
consider necessary to support their opinion on the financial
statements. Their report contains an independent, informed
judgment as to the corporation's reported results of operations
and financial position.
The Board of Directors pursues its oversight role for the
financial statements through the Audit Committee, which consists
solely of outside directors. The Audit Committee meets regularly
with management, the internal auditor and Arthur Andersen LLP,
jointly and separately, to review management's process of
implementation and maintenance of internal controls, and auditing
and financial reporting matters. The independent and internal
auditors have unrestricted access to the Audit Committee.
A. James Dearlove James O. Idiaquez
President and Executive Vice President and
Chief Executive Officer Chief Financial Officer
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Penn Virginia Corporation:
We have audited the accompanying consolidated balance sheets of
Penn Virginia Corporation (a Virginia corporation) and
subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of income, shareholders' equity and cash
flows for each of the three years in the period ended December
31, 2000. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Penn Virginia Corporation and subsidiaries as of December 31,
2000 and 1999, and the results of their operations and their cash
flows for each of the three years in the period ended December
31, 2000, in conformity with accounting principles generally
accepted in the United States.
ARTHUR ANDERSEN LLP
Houston, Texas
February 9, 2001
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share data)
Year Ended December 31,
2000 1999 1998
Revenues
Oil and condensate $ 832 $ 463 $ 335
Natural gas 46,019 21,384 20,482
Coal royalties 24,308 17,836 10,774
Timber 2,388 1,948 1,711
Dividends 2,646 2,646 2,646
Other 5,010 3,140 2,304
81,203 47,417 38,252
Expenses
Lease operating expenses 7,629 4,873 4,037
Exploration expenses 5,660 2,146 1,189
Taxes other than income 3,648 2,795 2,788
General and administrative 11,398 8,775 8,234
Impairment of oil and gas
properties - - 4,641
Depreciation, depletion and
amortization 12,027 8,393 7,162
40,362 26,982 28,051
Operating Income 40,841 20,435 10,201
Other income (expense)
Interest expense (7,878) (3,298) (2,017)
Interest income 1,458 1,354 3,421
Gain on the sale of properties 24,795 280 65
Other 14 63 283
Income from operations before
income taxes 59,230 18,834 11,953
Income tax expense 19,965 4,330 2,362
Net Income $ 39,265 $14,504 $9,591
Net income per share, basic $4.76 $1.73 $1.15
Net income per share, diluted $4.69 $1.71 $1.13
Weighted average shares
outstanding, basic 8,241 8,406 8,310
Weighted average shares
outstanding, diluted 8,371 8,480 8,463
The accompanying notes are an integral part of these consolidated
financial statements.
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31,
2000 1999
Assets
Current assets
Cash and cash equivalents $ 735 $ 657
Accounts receivable 12,926 6,880
Current portion of long-term notes
receivable 981 816
Current deferred income taxes - 155
Other 652 813
Total current assets 15,294 9,321
Investments 44,080 67,816
Long-term notes receivable 2,427 3,518
Property and Equipment
Oil and gas properties
(successful efforts method) 174,504 185,048
Other property and equipment 83,534 82,772
258,038 267,820
Less: Accumulated depreciation,
depletion and amortization 52,922 76,553
Net property and equipment 205,116 191,267
Other assets 1,849 2,089
Total assets $ 268,766 $274,011
Liabilities and Shareholders' Equity
Current liabilities
Current maturities of long-term debt $ 740 $ 34
Accounts payable 2,609 1,570
Accrued liabilities 7,154 5,470
Current deferred income taxes 136 -
Taxes on income 7,296 -
Total current liabilities 17,935 7,074
Other liabilities 5,486 5,854
Deferred income taxes 26,683 28,265
Long-term debt 47,500 78,475
Commitments and contingencies (Note 16)
Shareholders' equity
Preferred stock of $100 par value-
Authorized 100,000 shares; none issued - -
Common stock of $6.25 par value -
16,000,000 shares authorized;
8,921,866 shares issued 55,762 55,762
Paid-in capital 8,100 8,096
Retained earnings 92,718 60,860
Accumulated other comprehensive income 26,606 42,017
183,186 166,735
Less: 524,108 shares in 2000 and
498,238 in 1999 of common
stock held in treasury, at cost 10,974 11,142
Unearned compensation - ESOP 1,050 1,250
Total shareholders' equity 171,162 154,343
Total liabilities and
shareholders' equity $268,766 $ 274,011
The accompanying notes are an integral part of these consolidated
financial statements.
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands, except share data)
Accumulated
Other
Shares Common Paid-in Retained Comprehensive
Outstanding Stock Capital Earnings Income
Balance at 12/31/97 8,274,326 $ 55,634 $8,431 $51,813 $63,500
Dividends paid
($0.90 per share) - - - (7,480) -
Stock issued as
compensation 5,357 - 26 - -
Exercise of stock
options 87,133 128 (114) - -
Allocation of ESOP shares - - 98 - -
Net income - - - 9,591 -
Other comprehensive income,
net of tax - - - - 2,485
Balance at 12/31/98 8,366,816 55,762 8,441 53,924 65,985
Dividends paid
($0.90 per share) - - - (7,568) -
Stock issued as
compensation 7,878 - (13) - -
Exercise of stock options 48,934 - (365) - -
Allocation of ESOP shares - - 33 - -
Net income - - - 14,504 -
Other comprehensive loss,
net of tax - - - - (23,968)
Balance at 12/31/99 8,423,628 55,762 8,096 60,860 42,017
Dividends paid
($0.90 per share) - - - (7,407) -
Purchase of treasury
stock (363,430) - - - -
Stock issued as
compensation 11,163 - - - -
Exercise of stock
options 326,397 - (63) - -
Allocation of ESOP shares - - 67 - -
Net income - - - 39,265 -
Other comprehensive loss,
net of tax - - - - (15,411)
Balance at 12/31/2000 8,397,758 $55,762 $8,100 $92,718 $26,606
Continued from above table
Unearned Total
Treasury Compensation Stockholders' Comprehensive
Stock ESOP Equity Income (Loss)
Balance at 12/31/97 $(14,024) $(1,650) $163,704 $19,077
Dividends paid ($0.90/share) - - (7,480)
Stock issued as compensation 120 - 146
Exercise of stock options 1,501 - 1,515
Allocation of ESOP shares - 200 298
Net income - - 9,591 $ 9,951
Other comprehensive income,
net of tax _ _ 2,485 2,485
Balance at 12/31/98 (12,403) (1,450) 170,259 12,076
Dividends paid ($0.90/share) - - (7,568)
Stock issued as compensation 176 - 163
Exercise of stock options 1,085 - 720
Allocation of ESOP shares - 200 233
Net income - - 14,504 $14,504
Other comprehensive loss,
net of tax - - (23,968) (23,968)
Balance at 12/31/99 (11,142) (1,250) 154,343 $ (9,464)
Dividends paid ($0.90/share) - - (7,407)
Purchase of treasury stock (6,761) - (6,761)
Stock issued as compensation 226 - 226
Exercise of stock options 6,703 - 6,640
Allocation of ESOP shares _ 200 267
Net income - - 39,265 $ 39,265
Other comprehensive loss,
net of tax - - (15,411) (15,411)
Balance at 12/31/2000 $(10,974) $ (1,050) $171,162 $ 23,854
The accompanying notes are an integral part of these consolidated
financial statements
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Year ended December 31,
2000 1999 1998
Cash flows from operating activities:
Net income $39,265 $14,504 $9,591
Adjustments to reconcile net income to net
cash provided (used) by operating activities:
Depreciation, depletion and amortization 12,027 8,393 7,162
Impairment of oil and gas properties - - 4,641
Gain on the sale of property and equipment (24,795) (280) (65)
Deferred income taxes 7,006 2,805 923
Tax benefit from stock option exercises 1,049 86 170
Dry hole and unproved leasehold expense 3,154 1,115 58
Other 140 (1,284) (2,753)
37,846 25,339 19,727
Changes in operating assets and liabilities:
Accounts receivable (6,046) (1,198) 1,721
Other current assets 161 (133) (136)
Accounts payable and accrued liabilities 2,723 604 (1,277)
Taxes on income 7,296 (576) 432
Other assets and liabilities (240) 1,105 (1,060)
Net cash flows provided by operating
activities 41,740 25,141 19,407
Cash flows from investing activities:
Proceeds from the sale of securities - - 17
Proceeds from the sale of property & equipment 55,208 299 79
Payments received on long-term notes receivable 926 1,670 2,253
Proved properties acquired (35,999) (13,921) (3,351)
Lease acquisitions (788) (32,793) (3,512)
Capital expenditures (22,656) (13,937 (13,806)
Net cash flows used in investing activities (3,309) (58,682) (18,320)
Cash flows from financing activities:
Dividends paid (7,407) (7,568) (7,480)
Proceeds from borrowings 33,240 44,500 9,100
Repayment of borrowings (63,509) (3,990) (5,100)
Purchases of treasury stock (6,761) - -
Issuance of stock 6,084 1,031 1,787
Net cash flows provided by (used in)
financing activities (38,353) 33,973 (1,693)
Net increase (decrease) in cash and
cash equivalents 78 432 (606)
Cash and cash equivalents-beginning of year 657 225 831
Cash and cash equivalents - end of year $ 735 $657 $ 225
Supplemental disclosures:
Cash paid during the year for:
Interest $8,304 $2,980 $2,065
Income taxes $4,614 $2,100 $1,100
Noncash investing activities:
Note receivable for sale of property
and equipment $ - $ 1,255 $ - Note
receivable exchanged for:
Other property and equipment $ - $ - $2,954
Other liabilities $ - $ - $1,296
The accompanying notes are an integral part of these consolidated financial
statements.
PENN VIRGINIA CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Nature of Operations
Penn Virginia Corporation ("Penn Virginia" or the "Company")
explores for, develops and produces crude oil, condensate and
natural gas in the eastern and southern portions of the United
States.
The Company owns land and mineral rights to mineable and
merchantable coal reserves and timber located in central
Appalachia. The coal reserves are leased to various operators
who mine and market the coal. Penn Virginia collects royalties
based on the lessee's production and sale of reserves. Timber is
sold in competitive bid sales involving individual parcels and
also on a contract basis, where Penn Virginia pays independent
contractors to harvest timber while the Company directly markets
the product.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include the accounts of
Penn Virginia Corporation and all wholly-owned subsidiaries. The
Company owns and operates its undivided oil and gas properties
and manages its coal reserves through its wholly-owned
subsidiaries. The Company accounts for its undivided interest in
oil and gas properties using the proportionate consolidation
method, whereby the Company's share of assets, liabilities,
revenues and expenses is included in the appropriate
classification in the financial statements. Intercompany
balances and transactions have been eliminated in consolidation.
In the opinion of management, all adjustments have been reflected
that are necessary for a fair presentation of the consolidated
financial statements. Certain amounts have been reclassified to
conform to the current year's presentation.
New Accounting Standards
In June 1998, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No.
133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133, as amended by SFAS No. 137 and SFAS
No. 138, establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments
embedded in other contracts, (collectively referred to as
derivatives) and for hedging activities. It requires an entity
to recognize all derivatives as either assets or liabilities in
the statement of financial position and measure those instruments
at fair value. If certain conditions are met, a derivative may
be specifically designated as (a) a hedge of the exposure to
changes in the fair value of a recognized asset or liability or
an unrecognized firm commitment, (b) a hedge of the exposure to
changes in the fair value of the exposure to variable cash flows
of a forecasted transaction, or (c) a hedge of the foreign
currency exposure of a net investment in a foreign operation, an
unrecognized firm commitment, an available-for-sale security, or
a foreign currency denominated forecasted transaction. Special
accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the
Company's statement of income. The adoption of SFAS No. 133 on
January 1, 2001 did not have a material impact on the Company's
financial position or results of operations.
In December 1999, the Securities and Exchange Commission
("SEC") issued Staff Accounting Bulletin No. 101, "Revenue
Recognition in Financial Statements' ("SAB No. 101"). SAB No.
101, as amended, summarizes the SEC's views in applying generally
accepted accounting principles to revenue recognition in
financial statements. The adoption of SAB No. 101 on October 1,
2000 did not have a material effect on the Company's financial
position or results of operations.
Use of Estimates
Preparation of the accompanying consolidated financial
statements in conformity with accounting principles generally
accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities in the consolidated financial statements
and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Cash and Cash equivalents
The Company considers all highly liquid investments purchased
with an original maturity of three months or less to be cash
equivalents.
Investments
Investments consist of publicly traded equity securities. The
Company classifies its equity securities as available-for-sale.
Available-for-sale securities are recorded at fair value based
upon market quotations. Unrealized holding gains and losses, net
of the related tax effect, on available-for-sale securities are
excluded from earnings and are reported as a separate component
of stockholders' equity until realized. A decline in the market
value of any available-for-sale security below cost that is
deemed other than temporary, is charged to earnings in the period
it occurs resulting in the establishment of a new cost basis for
the security. Dividend income is recognized when earned.
Realized gains and losses for securities classified as available-
for-sale are included in earnings and are derived using the
specific identification method for determining the cost of
securities sold.
Notes Receivable
Notes receivable are recorded at cost, adjusted for amortization
of discounts. Discounts are amortized over the life of the notes
receivable using the effective interest rate method.
Oil and Gas Properties
The Company uses the successful efforts method of accounting for
its oil and gas operations. Under this method of accounting,
costs to acquire mineral interests in oil and gas properties, to
drill and equip development wells including development dry
holes, and to drill and equip exploratory wells that find proved
reserves are capitalized. Capitalized costs of producing oil and
gas fields are amortized using the unit-of-production method
based on estimates of proved oil and gas reserves on a field-by-
field basis. Oil and gas reserve quantities represent estimates
only and there are numerous uncertainties inherent in the
estimation process. Actual future production may be materially
different from amounts estimated and such differences could
materially affect future amortization of proved properties.
Estimated costs (net of salvage value) of plugging and abandoning
oil and gas wells are reported as additional depreciation and
depletion expense using the units-of-production method.
The costs of unproved leaseholds are capitalized pending the
results of exploration efforts. Unproved leasehold costs are
assessed periodically, on a property-by-property basis, and a
loss is recognized to the extent, if any, the cost of the
property has been impaired. As unproved leaseholds are determined
to be productive, the related costs are transferred to proved
leaseholds. Exploratory costs including exploratory dry holes,
annual delay rental and geological and geophysical costs are
charged to expense when incurred.
Other Property and Equipment
Other property and equipment is carried at cost and includes
expenditures for additions and improvements, which substantially
increase the productive lives of existing assets. Maintenance
and repair costs are expensed as incurred. Depreciation of
property and equipment is generally computed using the straight-
line method over their estimated useful lives, varying from 3
years to 20 years. Coal in place is depleted at a rate based
upon the cost of the mineral properties and estimated mineable
and merchantable tonnage therein. When an asset is retired or
sold, its cost and related accumulated depreciation are removed
from the accounts. The difference between undepreciated cost and
proceeds from disposition is recorded as gain or loss.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets to be held and used,
including proved oil and gas properties accounted for using the
successful efforts method of accounting, whenever events or
circumstances indicate that the carrying value of those assets
may not be recoverable. An impairment loss must be recognized
when the carrying amount of an asset exceeds the sum of the
undiscounted estimated future cash flows. In this circumstance,
the Company would recognize an impairment loss equal to the
difference between the carrying value and the fair value of the
asset. Fair value is estimated to be the present value of
expected future net cash flows from proved reserves, utilizing a
risk-adjusted rate of return.
Concentration of Credit Risk
Substantially all of the Company's accounts receivable at
December 31, 2000 result from oil and gas sales and joint
interest billings to third party companies in the oil and gas
industry. This concentration of customers and joint interest
owners may impact the Company's overall credit risk, either
positively or negatively, in that these entities may be similarly
affected by changes in economic or other conditions. In
determining whether or not to require collateral from a customer
or joint interest owner, the Company analyzes the entity's net
worth, cash flows, earnings and credit ratings. Receivables are
generally not collateralized. Historical credit losses incurred
by the Company on receivables have not been significant.
Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash
equivalents, marketable securities, accounts receivable, notes
receivables, accounts payable and long-term debt. The carrying
values of cash, marketable securities, accounts receivables and
payables, and long-term debt approximate fair value. See Note 5
for a discussion of notes receivable.
Price Risk Management Activities
The Company, from time to time, enters into derivative financial
instruments to mitigate its exposure to natural gas price
volatility. The derivative financial instruments, which are
placed with a major financial institution the Company believes is
a minimum credit risk, take the form of swaps with purchased
options. Through December 31, 2000, the derivative financial
instruments were designated as hedges and realized gains and
losses from the Company's price risk management activities were
recognized in natural gas revenues when the associated production
occurs. Effective January 1, 2001, any derivative financial
instruments will be accounted for in accordance with SFAS 133, as
amended by SFAS 137 and SFAS 138.
The fair value of open derivative financial instruments is
determined by comparing the New York Mercantile Exchange forward
prices at year-end with the appropriate location differential
adjustment to the contractual prices designated in the derivative
financial instruments. The Company had no outstanding derivative
financial instruments at December 31, 2000 or 1999. The fair
value of the Company's open derivative contracts at December 31,
1998 was $0.1 million.
Revenues
Oil and Gas
Natural gas revenues generally are recorded using the
entitlement method in which the Company recognizes its ownership
interest in natural gas production as revenue. Each working
interest owner in a well generally has the right to a specific
percentage of production, although actual production sold may
differ from an ownership percentage. Using entitlement
accounting, a receivable is recorded when under-production occurs
and deferred revenue is recognized when over-production occurs.
Coal Royalties
Coal royalty income is recognized on the basis of tons sold by
the Company's lessees and the corresponding revenue from those
sales. All coal leases are based on minimum annual payment, a
minimum dollar royalty per ton and/or a percentage of the gross
sales price.
Timber
Timber is sold in competitive bid sales involving individual
parcels and also on a contract basis, whereby Penn Virginia pays
independent contractors to harvest timber while the Company
directly markets the product. Timber income is recognized when
the timber has been sold.
Income Tax
The Company accounts for income taxes in accordance with the
provisions of SFAS No. 109, "Accounting for Income Taxes." This
statement requires a company to recognize deferred tax
liabilities and assets for the expected future tax consequences
of events that have been recognized in a company's financial
statements or tax returns. Using this method, deferred tax
liabilities and assets are determined based on the difference
between the financial statement carrying amounts and tax bases of
assets and liabilities using enacted tax rates.
3. Acquisitions and Dispositions
In May 2000, Penn Virginia successfully completed the purchase
of proved natural gas reserves in West Virginia and Kentucky for
$34.7 million, after closing adjustments. Additionally, in
September 1999, the Company completed the purchase of fee mineral
and lease rights for coal reserves and related assets in West
Virginia for $30 million. Both acquisitions were funded by
borrowings from the Company's revolving credit facility (the
"Revolver") and accounted for at fair value. The operations have
been included in the Company's statement of income as of the
closing date. The following unaudited pro forma results of
operations have been prepared as though the acquisitions had
been completed on January 1, 1999. The unaudited pro forma
results of operations for the years ended December 31, 2000 and
1999 are as follows (in thousands, except share data):
2000 1999
(Unaudited)
Revenues $83,546 $56,290
Netincome $39,729 $15,229
Net income per share,
diluted $ 4.75 $1.80
In December 2000, the Company sold oil and gas properties
located in Kentucky and West Virginia. Proceeds from the sale
totaled $54.3 million, after closing adjustments, and the Company
recognized a gain of $23.9 million ($14.2 million after tax.)
4. Investments and Dividend Income
The cost, gross unrealized holding gains and fair value of
available-for-sale securities were as follows (in thousands):
Gross
Unrealized
Holding Fair
At December 31, 2000 Cost Gains Value
Available-for-sale
Norfolk Southern Corporation $2,839 $41,188 $44,027
Other - 53 53
$ 2,839 $41,241 $44,080
At December 31, 1999
Available-for-sale
Norfolk Southern Corporation $2,839 $64,959 $67,798
Other - 18 18
$ 2,839 $64,977 $67,816
The Company owned 3,307,200 shares of Norfolk Southern
Corporation stock at December 31, 2000. Dividend income from the
Company's investment in Norfolk Southern Corporation was $2.6
million for each of the three years ended December 31, 2000, 1999
and 1998. The closing stock price for Norfolk Southern
Corporation was $13.31 and $20.50 per share at December 31, 2000
and 1999, respectively.
5. Notes Receivable
The Company's notes receivable are collateralized by property
and equipment. During 1999, the Company received a $1.3 million
note receivable for a portion of the proceeds relating to a
property and equipment sale.
Maturities of notes receivable are as follows (in thousands):
December 31,
2000 1999
Current $ 981 $ 816
Due after one year through five years 2,427 2,876
Thereafter - 642
$ 3,408 $4,334
The fair value of the Company's notes receivable at December 31,
2000 and 1999 was $6.1 million and $6.9 million, respectively.
6. Property and Equipment
Property and equipment includes (in thousands):
December 31,
2000 1999
Oil and gas properties $174,504 $185,048
Other property and equipment:
Land 1,809 1,813
Timber 188 188
Coal properties 72,952 73,081
Other equipment 8,585 7,690
258,038 267,820
Less: Accumulated depreciation and
depletion (52,922) (76,553)
Net property and equipment $205,116 $191,267
In accordance with SFAS No. 121, the Company reviews its proved
oil and gas properties and other long-lived assets for impairment
whenever events and circumstances indicate a decline in the
recoverability of their carrying value. In the fourth quarter of
1998, the Company estimated the expected future cash flows of its
oil and gas properties and compared such future cash flows to the
carrying amount of the oil and gas properties to determine if the
carrying amount was recoverable. For certain oil and gas
properties, the carrying amount exceeded the estimated
undiscounted future cash flows; thus, the Company adjusted the
carrying amount of the respective oil and gas properties to their
fair value as determined by discounting their estimated future
cash flows. The factors used to determine fair value included,
but were not limited to, estimates of proved reserves, future
commodity pricing, future production estimates, anticipated
capital expenditures and a discount rate commensurate with the
Company's internal rate of return on its oil and gas properties.
As a result, the Company recognized a noncash pre-tax charge of
$4.6 million ($3.7 million after tax) related to its oil and gas
properties in the fourth quarter of 1998. There were no
impairments of oil and gas properties or other long-lived assets
in 2000 or 1999.
7. Long-Term Debt
Long-term debt consists of the following (in thousands):
December 31,
2000 1999
Revolving credit, variable rate of 8.1%
at December 31, 2000, due in 2003 $47,500 $77,650
Line of credit 740 -
Other - 859
48,240 78,509
Less: current maturities (740) (34)
Total long-term debt $47,500 $78,475
The aggregate maturities applicable to outstanding debt at
December 31, 2000 are $0.7 million in 2001 and $47.5 million in
2003.
Revolving Credit Facility
The Company has an unsecured revolving credit facility (the
"Revolver") with a group of major U.S. banks. In 2000, the
Revolver was increased from $120 million to $150 million. The
Revolver is governed by a borrowing base calculation and will be
redetermined semi-annually. The Company has the option to elect
interest at (i) Libor plus a Eurodollar margin ranging from 100
to 150 basis points, based on the percentage of the borrowing
base outstanding or (ii) the greater of the prime rate or federal
funds rate plus 50 basis points. The Revolver allows for
issuance of letters of credit which are limited to no more than
$10 million. The financial covenants require the Company to
maintain levels of net worth, debt-to-capitalization and dividend
limitation restrictions. The Company is currently in compliance
with all of its covenants.
Line of Credit
The Company has a $5 million line of credit with a financial
institution due in December 2001, renewable annually. The
Company has an option to elect either a fixed rate LIBOR loan,
floating rate LIBOR loan or base rate loan.
8. Accrued Liabilities
Accrued expenses are summarized as follows (in thousands):
December 31,
2000 1999
Post employment benefits $ 317 $ 343
Compensation 1,421 715
Accrued oil and gas royalties 2,027 752
Taxes other than income 1,013 878
Gas imbalances 1,310 570
Accrued drilling costs 197 1,086
Other 869 1,126
$ 7,154 $5,470
9. Income Taxes
The provision for income taxes from continuing operations is
comprised of the following (in thousands):
Year ended December 31,
2000 1999 1998
Current income taxes
Federal $10,463 $1,525 $1,341
State 2,496 - 98
Total current 12,959 1,525 1,439
Deferred income taxes
Federal 6,951 2,426 901
State 55 379 22
Total deferred 7,006 2,805 923
Total income tax expense $19,965 $ 4,330 $ 2,362
The difference between the taxes computed by applying the
statutory tax rate to income from operations before income taxes
and the Company's reported income tax expense is as follows (in
thousands):
Year ended December 31,
2000 1999 1998
Computed at federal statutory tax rate $20,731 $6,592 $4,150
State income taxes, net of federal
income tax benefit 1,658 246 78
Dividends received deduction (648) (648) (648)
Non-conventional fuel source credit (1,570) (1,471) (1,525)
Percentage depletion (234) (414) (350)
Other, net 28 25 657
Total income tax expense $19,965 $4,330 $2,362
The principal components of the Company's net deferred income
tax liability is as follows (in thousands):
December 31,
2000 1999
Deferred tax assets:
Other long-term liabilities $1,908 $1,936
Alternative minimum tax credits 2,258 7,329
State tax loss carryforwards 925 938
Other 560 565
Total deferred tax assets 5,651 10,768
Deferred tax liabilities:
Notes receivable (891) (1,169)
Investments (14,437) (22,745)
Oil and gas properties (14,789) (12,012)
Other property and equipment (2,142) (1,823)
Other (211) (1,129)
Total deferred tax liabilities (32,470) (38,878)
Net deferred tax liability (26,819) (28,110)
Less: Net current deferred income tax asset
(liability) (136) 155
Net non-current deferred tax liability $(26,683) $(28,265)
As of December 31, 2000, the Company had available for federal
income tax purposes, alternative minimum tax credits of
approximately $2.3 million which can be carried forward
indefinitely as a credit. The Company has various state tax loss
carryforwards of $11.5 million which, if unused, will expire from
2009 to 2020.
10.Pension Plans and Other Post-retirement Benefits
The Company and its wholly-owned subsidiaries provided a
noncontributory, defined benefit pension plan, which was frozen
in 1996, and early retirement programs (the "Plans") for eligible
employees. Benefits were based on the employee's average annual
compensation and years of service.
The Company sponsors a defined benefit post-retirement plan that
covers employees hired prior to January 1, 1991 who retire from
active service. The plan provides medical benefits for the
retirees and dependents and life insurance for the retirees. The
medical coverage is noncontributory for retirees who retired
prior to January 1, 1991 and may be contributory for retirees who
retire after December 31, 1990.
A reconciliation of the changes in the benefit obligations and
fair value of assets for the two years ended December 31, 2000
and 1999 and a statement of the funded status at December 31,
2000 and 1999 is as follows (in thousands):
Pension Post-retirement
2000 1999 2000 1999
Reconciliation of benefit obligation:
Obligation - beginning of year $10,612 $11,701 $2,936 $3,112
Service cost 43 80 11 14
Interest cost 763 749 209 206
Benefits paid (1,087) (1,083) (324) (366)
Actuarial (gain) loss 113 (754) 21 (129)
Other 23 (81) - 99
Obligation - end of year 10,467 10,612 2,853 2,936
Reconciliation of fair value of plan assets:
Fair value - beginning of year 10,594 10,468 1,578 1,698
Actual return on plan assets 223 982 (301) 221
Employer contributions 259 271 25 26
Participant contributions - - 5 8
Benefit payments (1,087) (1,083) (324) (366)
Administrative expenses (48) (44) (8) (9)
Fair value - end of year 9,941 10,594 975 1,578
Funded status:
Funded status - end of year (526) (18) (1,878) (1,358)
Unrecognized transition obligation 23 26 - -
Unrecognized prior service cost 48 55 86 92
Unrecognized (gain) loss (308) (1,189) 118 (249)
Net amount recognized $(763) $(1,126) $(1,674) $(1,515)
The following table provides the amounts recognized in the
statements of financial position at December 31, 2000 and 1999
(in thousands):
Pension Post-retirement
2000 1999 2000 1999
Accrued benefit liability $(1,199) $(1,542) $(1,674) $(1,515)
Other long-term assets 71 81 - -
Accumulated other comprehensive
income 365 335 - -
Obligation - end of year $(763) $(1,126) $(1,674) $(1,515)
The following table provides the components of net periodic
benefit cost for the plans for the two years ended December 31,
2000 and 1999 (in thousands):
Pension Post-retirement
2000 1999 2000 1999
Service cost $ 43 $80 $11 $14
Interest cost 763 749 209 206
Expected return on plan
assets (963) (949) (42) (47)
Amortization of prior
service cost 6 6 6 7
Amortization of transitional
obligation 3 4 - -
Recognized actuarial
(gain) loss (21) 13 - -
Net periodic benefit cost $ (169) $ (97) $184 $ 180
The assumptions used in the measurement of the Company's benefit
obligation were as follows:
Pension Post-retirement
2000 1999 2000 1999
Discount rate 7.50% 7.50% 7.50% 7.50 %
Expected return on plan assets 9.50 9.50 3.00 3.00
Since the benefits accrued under the defined benefit plan were
frozen in 1996, it is not necessary to assume a rate of
compensation increase. For measurement purposes, a 7.5 percent
annual rate increase in the per capita cost of covered health
care benefits was assumed for 2000. The rate is assumed to
decrease gradually to 5.5 percent for 2004 and remain at that
level thereafter.
Assumed health care cost trend rates have a significant effect
on the amounts reported for post-retirement benefits. A one
percent change in assumed health care cost trend rates would have
the following effects for 2000 (in thousands):
One percent One percent
increase decrease
Effect on total of service and
interest cost components $ 9 $ (8)
Effect on post-retirement
benefit obligation 126 (114)
11. Other Liabilities
Other liabilities are summarized in the following table (in
thousands):
December 31,
2000 1999
Post-retirement health care $1,497 $1,312
Deferred income 2,749 2,793
Pension 1,059 1,402
Other 181 347
$ 5,486 $5,854
12. Earnings Per Share
The following is a reconciliation of the numerators and
denominators used in the calculation of basic and diluted
earnings per share ("EPS") for net income for the three years
ended December 31, 2000 (in thousands, except share data.)
2000 1999 1998
Net income $39,265 $14,504 $9,591
Weighted average shares, basic 8,241 8,406 8,310
Dilutive securities:
Stock options 130 74 153
Weighted average shares, diluted 8,371 8,480 8,463
Net income per share, basic $ 4.76 $ 1.73 $ 1.15
Net income per share, diluted $ 4.69 $ 1.71 $ 1.13
Antidilutive stock options are precluded from the computation
of diluted EPS; however, such options could potentially dilute
basic EPS in the future.
13.Stock Option and Stock Ownership Plans
Stock Option Plans
The Company has several stock option plans (collectively known
as the "Stock Option Plans") which allow incentive and
nonqualified stock options to be granted to key employees and
officers of the Company and nonqualified stock options to be
granted to directors of the Company. Options granted under the
Stock Option Plans may be exercised at any time after one year
and prior to ten years following the grant, subject to special
rules that apply in the event of death, retirement and/or
termination of an optionee. The exercise price of all options
granted under the Stock Option Plans is at the fair market value
of the Company's stock on the date of the grant.
The following table summarizes information with respect to the
common stock options awarded under the Stock Option Plans and
grants described above.
2000 1999 1998
Shares Weighted Shares Weighted Shares Weightd
Under Avg.Exercise Under Avg.Exercise Under Avg.Exercise
Options Price Options Price Options Price
Outstanding,
Beginning of
year 1,014,500 $18.74 1,002,800 $18.65 1,036,500 $18.19
Granted 46,300 $16.65 91,800 $20.27 80,600 $25.06
Exercised 326,397 $17.13 49,000 $16.44 96,901 $18.53
Cancelled 9,000 $18.99 31,100 $23.84 17,399 $21.56
Outstanding,
End of year 725,403 $19.38 1,014,500 $18.74 1,002,800 $18.65
Weighted average of fair
value of options granted
during the year $5.02 $6.02 $8.50
The following table summarizes certain information regarding
stock options outstanding at December 31, 2000:
Options Outstanding Options Exercisable
Range of Number Weighted Avg. Weighted Number Weighted
Exercise Outstanding Remaining Avg. Exercisable Avg.
Price at Contractual Exercise at Exercise
12/31/00 Life Price 12/31/00 Price
$15 to $19 382,203 6.5 $16.78 343,403 $16.61
$20 to $24 298,100 6.4 $21.59 298,100 $21.92
$25 to $30 45,100 6.9 $26.77 45,100 $26.77
The Company applies the intrinsic value method for reporting
compensation expense pursuant to Accounting Principles Board
Opinion No. 25 "Accounting for Stock Issued to Employees" to its
stock-based compensation plans. Had compensation expense for
the Company's stock-based compensation plans been determined in
accordance with the fair value method pursuant to SFAS No. 123
"Accounting for Stock-Based Compensation", the Company's pro
forma net income and earnings per share would have been as
follows:
2000 1999 1998
Net Income (in thousands) $39,092 $14,111 $ 9,022
Earnings per share, basic $ 4.74 $ 1.68 $ 1.09
Earnings per share, diluted $ 4.67 $ 1.66 $ 1.07
The fair value of the options granted during 2000 is estimated
on the date of grant using the Black-Scholes option-pricing model
with the following assumptions: a) dividend yield of 5.2 percent
to 5.4 percent, b) expected volatility of 37.0 percent, c) risk-
free interest rate of 6.9 percent to 7.0 percent and d) expected
life of eight years.
The fair value of the options granted during 1999 is estimated
on the date of grant using the Black-Scholes option-pricing model
with the following assumptions: a) dividend yield of 4.4 percent
to 4.6 percent, b) expected volatility of 38.6 percent, c) risk-
free interest rate of 4.8 percent to 4.9 percent and d) expected
life of eight years.
The fair value of the options granted during 1998 is estimated
on the date of grant using the Black-Scholes option-pricing model
with the following assumptions: a) dividend yield of 3.4 percent
to 4.2 percent, b) expected volatility of 37.7 percent to 38.8
percent, c) risk-free interest rate of 4.7 percent to 5.7 percent
and d) expected life of eight years.
The effects of applying SFAS No. 123 in this pro forma
disclosure are not indicative of future amounts.
Employees' Stock Ownership Plan
In 1996, the Board of Directors extended the Employees' Stock
Ownership Plan ("ESOP"). All employees with one year of service
are participants. The ESOP is designed to enable employees of the
Company to accumulate stock ownership. While there are no
employee contributions, participants receive an allocation of
stock which has been contributed by the Company. Compensation
costs are reported when such shares are released to employees.
The ESOP borrowed $2.0 million from the Company in 1996 and used
the proceeds to purchase treasury stock. Under the terms of the
ESOP, the Company will make annual contributions over a 10-year
period. At December 31, 2000, the unearned portion of the ESOP
approximately ($1.1 million) was recorded as a contra-equity
account entitled "Unearned Compensation-ESOP."
Shareholder Rights Plan
In February 1998, the Board of Directors adopted a Shareholder
Rights Plan designed to prevent an acquirer from gaining control
of the Company without offering a fair price to all shareholders.
Each Right entitles the holder to purchase from the Company one
one-thousandth of a share of Series A Junior Participating
Preferred Stock, $100 par value, at a price of $100 subject to
adjustment. The Rights are not exercisable or transferable apart
from the common stock until ten days after a person or affiliated
group has acquired fifteen percent or more, or makes a tender
offer for fifteen percent or more, of the Company's common stock.
Each Right will entitle the holder, under certain circumstances
(such as a merger, acquisition of fifteen percent or more of
common stock of the Company by the acquiring person or sale of
fifty percent or more of the Company's assets or earning power),
to acquire at half the value, either common stock of the Company,
a combination of cash, other property, or common stock or other
securities of the Company, or common stock of the acquiring
person. Any such event would also result in any Rights owned
beneficially by the acquiring person or its affiliates becoming
null and void. The Rights expire in February 2008 and are
redeemable at any time until ten days following the time an
acquiring person acquires fifteen percent or more of the
Company's common stock at $0.001 per Right.
14. Accumulated Other Comprehensive Income
Comprehensive income represents certain changes in equity
during the reporting period, including net income and other
comprehensive income, which includes, but is not limited to,
unrealized gains from marketable securities and minimum pension
liability adjustments. Reclassification adjustments represent
gains or losses from investments realized in net income for each
respective year. For the three years ended December 31, 2000,
the components of accumulated other comprehensive income are as
follows (in thousands):
Accumulated
Net unrealized Minimum other
holding gain - pension comprehensive
investments liability income
Balance at December 31, 1997 $63,728 $ (228) $63,500
Unrealized holding gain,
net of tax of $1,383 2,568 - 2,568
Reclassification adjustment,
net of tax of $5 (9) - (9)
Pension plan adjustment,
net of tax of $40 - (74) (74)
Balance at December 31, 1998 66,287 (302) 65,985
Unrealized holding gain,
net of tax of $12,951 (24,052) - (24,052)
Pension plan adjustment,
net of tax of $46 - 84 84
Balance at December 31, 1999 42,235 (218) 42,017
Unrealized holding loss,
net of tax of $8,308 (15,429) - (15,429)
Pension plan adjustment,
net of tax of $10 - 18 18
Balance at December 31, 2000 $ 26,806 $(200) $26,606
15. Segment Information
Penn Virginia's operations are classified into two operating segments:
Oil and Gas - crude oil and natural gas exploration,development
and production.
Coal Royalty and Land Management - the leasing of mineral
rights and subsequent collection of royalties and the
development and harvesting of timber.
Coal Royalty
and Land Corporate
Oil and Gas Management and Other Consolidated
(in thousands)
December 31, 2000
Revenues $47,507 $31,051 $2,645 $81,203
Operating income (loss) 22,517 21,834 (3,510) 40,841
Total assets 142,613 80,923 45,230 268,766
Depreciation, depletion
and amortization 9,883 2,047 97 12,027
Capital expenditures 58,677 485 281 59,443
Coal Royalty
and Land Corporate
Oil and Gas Management and Other Consolidated
(in thousands)
December 31, 1999
Revenues $22,942 $21,830 $2,645 $47,417
Operating income (loss) 5,889 16,380 (1,834) 20,435
Total assets 120,954 83,975 69,082 274,011
Depreciation, depletion
and amortization 6,951 1,269 173 8,393
Capital expenditures 28,605 31,955 91 60,651
December 31, 1998
Revenues $21,106 $14,499 $2,647 $38,252
Operating income (loss) 260 10,549 (608) 10,201
Total assets 102,698 63,424 90,809 256,931
Depreciation, depletion
and amortization 6,460 589 113 7,162
Capital expenditures 13,789 9,792 42 23,623
Revenues for the oil and gas segment in 2000 include a $23.9 million
gain on a property sale.
Operating income is total revenue less operating expenses.
Operating income does not include certain other income items,
gain (loss) on sale of securities, unallocated general corporate
expenses, interest expense and income taxes. Identifiable assets
are those assets used in the Company's operations in each
segment. Corporate assets are principally cash and marketable
securities.
For the year ended December 31, 2000, two customers of the oil
and gas segment accounted for $13.6 million, or 13 percent, and
$10.5 million, or 10 percent, respectively, of the Company's
consolidated net revenues. For the year ended December 31, 1999,
two customers of the oil and gas segment accounted for $9.6
million, or 20 percent, and $6.9 million, or 13 percent,
respectively, of the Company's consolidated net revenues.
16. Commitments and Contingencies
Rental Commitments
Minimum rental commitments under all non-cancelable operating
leases, primarily real estate, in effect at December 31, 2000
were as follows (in thousands):
Year ending December 31,
2001 $ 454
2002 420
2003 346
2004 246
2005 77
Total minimum payments $ 1,543
Legal
The Company 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, Company management believes these claims will not have
a material effect on the Company's financial position, liquidity
or operations.
17. Supplementary Information on Oil and Gas Producing
Activities (Unaudited)
The following supplementary information regarding the oil and
gas producing activities of Penn Virginia is presented in
accordance with the requirements of the Securities and Exchange
Commission (SEC) and SFAS No. 69 "Disclosures about Oil and Gas
Producing Activities". The amounts shown include Penn Virginia's
net working and royalty interests in all of its oil and gas
operations.
Capitalized Costs Relating to Oil and Gas Producing Activities
Year Ended December 31,
2000 1999 1998
(in thousands)
Proved properties $64,107 $41,084 $35,842
Unproved properties 2,425 3,959 1,408
Wells, equipment and facilities 105,283 137,176 117,688
Support equipment 2,689 2,829 2,620
174,504 185,048 157,558
Accumulated depreciation and depletion (43,720) (69,495) (62,545)
Net capitalized costs $ 130,784 $ 115,553 $ 95,013
Costs Incurred in Certain Oil and Gas Activities
Year Ended December 31,
2000 1999 1998
(in thousands)
Proved property acquisition costs $35,999 $14,069 $3,351
Unproved property acquisition costs 917 2,551 206
Exploration costs 5,125 3,171 2,022
Development costs and other 18,561 9,398 8,698
Total costs incurred $ 60,602 $29,189 $14,277
Results of Operations for Oil and Gas Producing Activities
The following schedule includes results solely from the
production and sale of oil and gas and a noncash charge for
property impairments. It excludes general and administrative
expenses and gains or losses on property dispositions. The income
tax expense is calculated by applying the statutory tax rates to
the revenues after deducting costs, which include depletion
allowances and giving effect to oil and gas related permanent
differences and tax credits.
Year Ended December 31,
2000 1999 1998
(in thousands)
Revenues $46,851 $21,847 $20,817
Production costs 7,097 5,092 4,746
Exploration costs 5,080 1,699 488
Depreciation and depletion 9,883 6,951 6,460
Impairment of oil and gas properties - - 4,641
24,791 8,105 4,482
Income tax expense 8,354 1,864 1,062
Results of operations $ 16,437 $ 6,241 $ 3,420
Oil and Gas Reserves
The following schedule presents the estimated oil and gas
reserves owned by Penn Virginia. This information includes Penn
Virginia's royalty and net working interest share of the reserves
in oil and gas properties. Net proved oil and gas reserves for
the three years ended December 31, 2000 were estimated by Wright
and Company, Inc. All reserves are located in the United States.
There are many uncertainties inherent in estimating proved
reserve quantities, and projecting future production rates and
the timing of future development expenditures. In addition,
reserve estimates of new discoveries are more imprecise than
those of properties with a production history. Accordingly, these
estimates are subject to change as additional information becomes
available. Proved oil and gas reserves are the estimated
quantities of crude oil, condensate and natural gas that
geological and engineering data demonstrate with reasonable
certainty to be recoverable in future years from known reservoirs
under existing economic and operating conditions at the end of
the respective years. Proved developed oil and gas reserves are
those reserves expected to be recovered through existing
equipment and operating methods.
Net quantities of proved reserves and proved developed reserves
during the periods indicated are set forth in the tables below:
Proved Developed and Undeveloped Oil and
Reserves Condensate Natural Gas
(MBbls) (MMcf) MMcfe
December 31, 1997 424 171,562 174,106
Revisions of previous estimates (53) (11,978) (12,296)
Extensions, discoveries and - 7,885 7,885
other additions
Production (30) (8,056) (8,236)
Purchase of reserves - 4,495 4,495
Sale of reserves in place - (35) (35)
December 31, 1998 341 163,873 165,919
Revisions of previous estimates 31 2,106 2,292
Extensions, discoveries and - 4,661 4,661
other additions
Production (32) (8,679) (8,871)
Purchase of reserves 19 23,237 23,351
December 31, 1999 359 185,198 187,352
Revisions of previous estimates 107 (1,893) (1,251)
Extensions, discoveries and 19 30,987 31,101
other additions
Production (31) (11,645) (11,831)
Purchase of reserves 11 35,879 35,945
Sale of reserves in place (394) (64,279) (66,643)
December 31, 2000 71 174,247 174,673
Proved Developed Reserves:
December 31, 1998 313 118,146 120,024
December 31, 1999 326 138,283 140,239
December 31, 2000 71 145,930 146,356
The following table sets forth the standardized measure of the
discounted future net cash flows attributable to the Company's
proved oil and gas reserves. Future cash inflows were computed by
applying year-end prices of oil and gas to the estimated future
production of proved oil and gas reserves. Natural gas prices
were escalated only where existing contracts contained fixed and
determinable escalation clauses. Contractually provided natural
gas prices in excess of estimated market clearing prices were
used in computing the future cash inflows only if the Company
expects to continue to receive higher prices under legally
enforceable contract terms. Future prices actually received may
materially differ from current prices or the prices used in the
standardized measure.
Future production and development costs represent the estimated
future expenditures (based on current costs) to be incurred in
developing and producing the proved reserves, assuming
continuation of existing economic conditions. Future income tax
expenses were computed by applying statutory income tax rates to
the difference between pre-tax net cash flows relating to the
Company's proved oil and gas reserves and the tax basis of proved
oil and gas properties. In addition, the effects of statutory
depletion in excess of tax basis, available net operating loss
carryforwards and alternative minimum tax credits were used in
computing future income tax expense. The resulting annual net
cash inflows were then discounted using a 10 percent annual rate.
December 31,
2000 1999 1998
(in thousands)
Future cash inflows $1,727,923 $505,685 $354,567
Future production costs 205,385 151,220 123,007
Future development costs 19,981 30,431 26,128
Future net cash flows before income tax 1,502,557 324,034 205,432
Future income tax expense 422,485 58,068 28,031
Future net cash flows 1,080,072 265,966 177,401
10% annual discount for estimated
timing of cash flows 612,679 146,703 101,737
Standardized measure of discounted
future net cash flows $467,393 $119,263 $75,664
Changes in Standardized Measure of Discounted Future Net Cash Flows
Year Ended December 31,
2000 1999 1998
(in thousands)
Sales of oil and gas,
net of production costs $(39,754) $(16,755) $(16,071)
Net changes in prices and production costs 313,355 32,111 (57,646)
Extensions, discoveries & other additions 123,223 4,090 4,906
Development costs incurred during the period 16,001 5,330 5,289
Revisions of previous quantity estimates (4,604) 1,709 (6,735)
Purchase of minerals-in-place 121,979 20,438 2,896
Sale of minerals-in-place (41,456) - (26)
Accretion of discount 13,628 8,116 14,059
Net change in income taxes (159,220) (11,526) 12,006
Other changes 4,978 86 (2,109)
Net increase (decrease) 348,130 43,599 (43,431)
Beginning of year 119,263 75,664 119,095
End of year $ 467,393 $ 119,263 75,664
As required by SFAS No. 69, "Disclosures about Oil and Gas
Producing Activities," changes in standardized measure relating
to sales of reserves are calculated using prices in effect as of
the beginning of the period and changes in standardized measure
relating to purchases of reserves are calculated using prices in
effect at the end of the period. Accordingly, the changes in
standardized measure for purchases and sales of reserves
reflected above do not necessarily represent the economic reality
of such transactions. See the disclosure of "Costs incurred in
Certain Oil and Gas Activities" and the statements of cash flows
in the financial statements.
Natural gas prices have declined significantly since December
31, 2000; consequently, the discounted future net cash flows
would be significantly reduced if the standardized measure was
calculated in the first quarter of 2001.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEMS 10, 11, 12 AND 13 - DIRECTORS AND EXECUTIVE OFFICERS OF THE
COMPANY, EXECUTIVE OFFICERS OF THE COMPANY, EXECUTIVE
COMPENSATION, SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT, AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except for information concerning executive officers of the
Company included as an unnumbered item in Part 1, in accordance
with General Instruction G(3), reference is hereby made to the
Company's definitive proxy statement to be filed within 120 days
after the end of the fiscal year covered by this report.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements
1. Financial Statements - The financial statements
filed herewith are listed in the Index to Financial
Statements on page 30 of this report.
2. All schedules are omitted because they are not required,
inapplicable or the information is included in the consolidated
financial statements or the notes thereto.
3. Exhibits
(3.1) Articles of Incorporation of the Company
(incorporated by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1999).
(3.2) Articles of Amendment of Articles of Incorporation of
the Company (incorporated by reference to Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1999).
(3.3) Amended bylaws of the Company.
(4) Rights Agreement dated as of February 11, 1998
between Penn Virginia Corporation and American Stock
Transfer & Trust Company, as Agent (incorporated by
reference to Exhibit 1.1 to the Company's Registration
Statement on Form 8-A filed with Securities and
Exchange Commission on February 20, 1998. (Commission
File No. 0-753)).
(10.1) Amended and restated Credit Agreement dated July 30,
1999, as amended by that certain First Amendment Agreement dated
as of May 31, 2000, among Penn Virginia Corporation and Chase
Manhattan Bank (formerly known as Chase Bank of Texas National
Association), as Agent (the "Agent") and First Union National
Bank, First National Bank of Chicago, PNC Bank National
Association and Royal Bank of Canada (collectively, the "Banks").
(10.2) New Bank Agreement dated as of November 30, 2000 among
Penn Virginia Corporation and the Banks.
(10.3) Penn Virginia Corporation and Affiliated
Companies Employees' Stock Ownership Plan, as amended
(incorporated by reference to Exhibit 19 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1986 (Commission File No. 0-753)).
(10.4) Penn Virginia Corporation and Affiliated
Companies' Employees' Retirement/Savings Plan
(incorporated by reference to Exhibit 18(b) to the
Company's Registration Statement on Form S-8 filed with
the Securities and Exchange Commission on May 13, 1991
(Registration No. 33-40430)).
(10.5) The Company has adopted a policy concerning
severance benefits for certain senior officers of the
Company. The description of such policy is incorporated
herein by reference to the description of such policy
contained in the Company's definitive Proxy Statement
dated March 27, 2001.
(10.6) Penn Virginia Corporation 1994 Stock Option
Plan, as amended (incorporated by reference to Exhibit
10.5 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1999).
(10.7) Penn Virginia Corporation 1995 Directors'
Stock Option Plan, as amended.
(10.8) Penn Virginia Corporation 1999 Employee Stock
Incentive Plan (incorporated by reference to Exhibit
10.7 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1999).
(21) Subsidiaries of the Company.
(23.1) Consent of Arthur Andersen LLP.
(b) Reports on Form 8-K
On January 12, 2001, Penn Virginia Corporation
filed a report on Form 8-K. The report involved a
divestiture on December 29, 2000 and was filed under
"Item 2. Acquisition or Disoposition of Assets."
EXHIBIT 3.3
AMENDED BYLAWS OF PENN VIRGINIA
ARTICLE 1 SHAREHOLDERS
Section 1. Meetings.
A. Annual Meeting. Unless otherwise fixed by the board
of directors the annual meeting of shareholders for the election
of directors and for other business shall be held on the first
Tuesday of May in each year or, if that day is a legal holiday,
on the first subsequent business day.
B. Special Meetings. Special meetings of the
shareholders may be called at any time by the chief executive
officer, or a majority of the board of directors.
C. Place. Meetings of the shareholders shall be held at
such place in Philadelphia, Pennsylvania or elsewhere, as may be
fixed by the board of directors in the notice of meeting.
D. Adjournments. A Public Announcement of an adjournment of
an annual or special meeting shall not commence a new time period
for the giving of shareholder notices provided herein. For
purposes of these Bylaws, "Public Announcement" includes without
limitation (i) a press release reported by the Dow Jones News,
Associated Press or a comparable national news service, or (ii) a
document filed with the Securities and Exchange Commission.
E. Organization. The Chairman of the Board of Directors,
or, in the absence of the Chairman of the Board of Directors,
such other officer or board member as the Board of Directors may
designate, shall preside at each meeting of shareholders and may
adjourn the meeting from time to time. The Secretary or an
Assistant Secretary shall act as secretary of the meeting and
keep a record of the proceedings thereof. The Board of Directors
of the Company shall be entitled to make such rules or
regulations for the conduct of meetings of shareholders as it
shall deem necessary, appropriate or convenient. Subject to such
rules and regulations of the Board of Directors, if any, the
chairman of the meeting shall have the right and authority to
prescribe such rules, regulations and procedures, and to do all
such acts as, in the judgement of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting,
including without limitation, establishing an agenda or order of
business for the meeting, establishing rules and procedures for
maintaining order at the meeting and the safety of those present,
limiting the participation in such meeting to shareholders of
record of the Company and their duly authorized and constituted
proxies, and such other persons as the chairman shall permit,
restricting entry to the meeting after the time fixed for the
commencement thereof, limiting the time allotted to questions or
comments by participants, and regulating the opening and closing
of the polls for balloting on matters which are to be voted on by
ballot. Unless, and to the extent, determined by the Board of
Directors or the chairman of the meeting, meetings of
shareholders shall not be required to be held in accordance with
the rules of parliamentary procedure.
Section 2. Notice.
Written notice of the time and place of all meetings of
shareholders and of the purpose of each special meeting of
shareholders shall be given to each shareholder entitled to vote
thereat at least ten days before the date of the meeting, unless
a greater period of notice is required by law in a particular
case.
Section 3. Voting.
A. Voting Rights. Except as otherwise provided herein, or
in the Articles of Incorporation, or by law, every shareholder
shall have the right at every shareholders' meeting to one vote
for every share standing in his name on the books of the Company
which is entitled to vote at such meeting. Every shareholder may
vote either in person or by proxy.
B. Election of Directors. At each annual meeting the
shareholders shall elect at least seven but not more than ten
directors who shall constitute the entire Board.
C. Nomination of Directors. Nominations for the election of
directors may be made by the Board of Directors or by any
shareholder (a "Nominator") entitled to vote in the election of
directors. Such nominations, other than those made by the Board
of Directors, shall be made in writing pursuant to timely notice
delivered to or mailed and received by the Secretary of the
Company as set forth in this Section 3C. To be timely in
connection with an annual meeting of shareholders, a Nominator's
notice, setting forth the name and address of the person to be
nominated, shall be delivered to or mailed and received at the
principal executive offices of the Company not less than 90 days
nor more than 180 days prior to the earlier of the date of the
meeting or the corresponding date on which the immediately
preceding year's annual meeting of shareholders was held;
provided, however, that with respect to the annual meeting of
shareholders to be held in 1998, notice by the shareholder to be
timely must be delivered not later than the tenth day following
the day on which Public Announcement of the date of such meeting
is first made by the Company. To be timely in connection with
any election of a director at a special meeting of the
shareholders, a Nominator's notice, setting forth the name and
address of the person to be nominated, shall be delivered to or
mailed and received at the principal executive offices of the
Company not later than the close of business on the tenth day
following the day on which notice of the date of the meeting was
mailed or Public Announcement of such meeting was made, whichever
first occurs. At such time, the Nominator shall also submit
written evidence, reasonably satisfactory to the Secretary of the
Company, that the Nominator is a shareholder of the Company and
shall identify in writing (i) the name and address of the
Nominator, (ii) the number of shares of each class of capital
stock of the Company of which the Nominator is the beneficial
owner, (iii) the name and address of each of the persons, if any,
with whom the Nominator is acting in concert and (iv) the number
of shares of capital stock of which each such person with whom
the Nominator is acting in concert is the beneficial owner
pursuant to which the nomination or nominations are to be made.
At such time, the Nominator shall also submit in writing (i) the
information with respect to each such proposed nominee that would
be required to be provided in a proxy statement prepared in
accordance with Regulation 14A under the Securities Exchange Act
of 1934, as amended, and (ii) a notarized affidavit executed by
each such proposed nominee to the effect that, if elected as a
member of the Board of Directors, he will serve and that he is
eligible for election as a member of the Board of Directors.
Within 30 days (or such shorter time period that may exist prior
to the date of the meeting) after the Nominator has submitted the
aforesaid items to the Secretary of the Company, the Secretary of
the Company shall determine whether the evidence of the
Nominator's status as a shareholder submitted by the Nominator is
reasonably satisfactory and shall notify the Nominator in writing
of such determination. If the Secretary of the Company finds
that such evidence is not reasonably satisfactory, or if the
Nominator fails to submit the requisite information in the form
or within the time indicated, such nomination shall be
ineffective for the election at the meeting at which such person
is proposed to be nominated. The presiding person at each
meeting of shareholders shall, if the facts warrant, determine
and declare at the meeting that a nomination was not made in
accordance with the procedures prescribed by these Bylaws, and if
he should so determine and so declare, the nomination shall be
disregarded. The requirements of this Section 3C shall be in
addition to any other requirements imposed by these Bylaws, by
the Company's Articles of Incorporation or by law and in no event
shall the periods specified herein be in derogation of other time
periods required by law.
Section 4. Quorom
The presence, in person or by proxy, of the holders of a majority
of the outstanding shares of stock of the Company entitled to
vote at a meeting shall constitute a quorum. If a quorum is not
present, no business shall be transacted except to adjourn to a
future time.
Section 5. Shareholder Proposals.
No proposal by a shareholder may be voted upon at a meeting of
shareholders unless the proposing shareholder shall have delivered
or mailed in a timely manner (as set forth herein) and in writing
to the Secretary of the Company (A) notice of such proposal, (B)
the text of the proposed alteration, amendment or repeal, if such
proposal relates to a proposed change to the Company's Articles of
Incorporation or Bylaws, (C) evidence reasonably satisfactory to
the Secretary of the Company of such shareholder's status as such
and of the number of shares of each class of capital stock of the
Company of which such shareholder is the beneficial owner, (D) a
list of the names and addresses of other beneficial owners of
shares of the capital stock of the Company, if any, with whom such
shareholder is acting in concert, and the number of shares of each
class of capital stock of the Company beneficially owned by each
such beneficial owner and (E) an opinion of counsel, which counsel
and the form and substance of which opinion shall be reasonably
satisfactory to the Board of Directors of the Company, to the
effect that the Articles of Incorporation or Bylaws resulting from
the adoption of such proposal would not be in conflict with the
laws of the Commonwealth of Virginia if such proposal relates to a
proposed change to the Company's Articles of Incorporation or
Bylaws. To be timely in connection with an annual meeting of
shareholders, a shareholder's notice and other aforesaid items
shall be delivered to or mailed and received at the principal
executive offices of the Company not less than 90 nor more than
180 days prior to the earlier of the date of the meeting or the
corresponding date on which the immediately preceding year's
annual meeting of shareholders was held; provided, however, that
with respect to the annual meeting of shareholders to be held in
1998, notice by the shareholder to be timely must be delivered not
later than the tenth day following the day on which Public
Announcement of the date of such meeting is first made by the
Company. To be timely in connection with the voting on any such
proposal at a special meeting of the shareholders, a shareholder's
notice and other aforesaid items shall be delivered to or mailed
and received at the principal executive offices of the Company not
later than the close of business on the tenth day following the
day on which such notice of date of the meeting was mailed or
Public Announcement was made whichever first occurs. Within 30
days (or such shorter period that may exist prior to the date of
the meeting) after such shareholder shall have submitted the
aforesaid items to the Secretary of the Company, the Secretary
shall determine whether the items to be ruled upon by the
Secretary are reasonably satisfactory and shall notify such
shareholder in writing of such determination. If such shareholder
fails to submit a required item in the form or within the time
indicated, or if the Secretary determines that the items to be
ruled upon by the Secretary are not reasonably satisfactory, then
such proposal by such shareholder may not be voted upon by the
shareholders of the Company at such meeting of shareholders. The
presiding person at each meeting of shareholders shall, if the
facts warrant, determine and declare at the meeting that a
proposal was not made in accordance with the procedures prescribed
by these Bylaws, and if he should so determine and so declare the
proposal shall be disregarded. The requirements of this Section 5
shall be in addition to any other requirements imposed by these
Bylaws, by the Company's Articles of Incorporation or by law and
in no event shall the periods specified herein be in derogation of
other time periods required by law.
ARTICLE 2 DIRECTORS
Section 1. Term of Office.
Each director elected at an annual meeting of the shareholders
shall hold office until the next annual meeting, unless properly
removed or disqualified, and until such further time as his
successor is elected and has qualified.
Section 2. Powers.
The business of the Company shall be managed by the board of
directors which shall have all powers conferred by law and these
bylaws. The board of directors shall elect, remove or suspend
officers, determine their duties and compensations, and require
security in such amounts as it may deem proper.
Section 3. Meetings.
A. Regular Meetings. Regular meetings shall be held at
such times as the board shall designate by resolution. Notice of
regular meetings need not be given.
B. Special Meetings. Special meetings of the board may be
called at any time by the chief executive officer and shall be
called by him upon the written request of one-third of the
directors. Written notice of the time, place and the general
nature of the business to be transacted at each special meeting
shall be given to each director at least three days before such
meeting.
C. Place. Meetings of the board of directors shall be
held at such place as the board may designate or as may be
designated in the notice calling the meeting.
Section 4. Quorum.
A majority of the number of directors in office immediately
before the meeting begins shall constitute a quorum for the
transaction of business at any meeting and, except as provided in
Article VII, the acts of a majority of the directors present at
any meeting at which a quorum is present shall be the acts of the
board of directors.
Section 5. Vacancies.
Vacancies in the board of directors shall be filled by vote of a
majority of the remaining members of the board though less than a
quorum. Such election shall be for the balance of the unexpired
term or until a successor is duly elected by the shareholders and
has qualified.
ARTICLE 3 BOARD COMMITTEES
Section 1. Executive Committee.
The board of directors by resolution of a majority of the number
of directors then in office may designate three or more directors
to constitute an executive committee, which, to the extent
provided in such resolution, shall have and may exercise all the
authority of the board of directors except to approve an
amendment of the Company's articles of incorporation or a plan of
merger or consolidation. If an executive committee is so
designated it will elect one of its members to be its chairman.
Section 2. Compensation and Benefits Committee.
The board of directors by resolution of a majority of the number
of directors then in office may designate three or more outside
directors to constitute a compensation and benefits committee,
which shall have such power and authority as may be provided in
such resolution.
Section 3. Other Committees.
The board of directors by resolution of a majority of the number
of directors then in office may create or disband other
committees, as deemed to be proper.
ARTICLE 4 OFFICERS
Section 1. Election.
At its first meeting after each annual meeting of the
shareholders, the board of directors shall elect a president,
treasurer and secretary, and such other officers as it deems
advisable. Any two or more offices may be held by the same
person except the offices of president and secretary.
Section 2. Chairman and President.
A. Chairman. The chairman shall preside at all meetings
of the board and of the shareholders. If so designated by the
board of directors, the chairman shall be the chief executive
officer.
B. President. The president shall be either the chief
executive officer or the chief operating officer of the Company,
as designated by the board of directors. The president shall
have such duties as the board of directors and the chairman of
the Company shall prescribe.
Section 3. Other Officers.
The duties of the other officers shall be those usually related
to their offices, except as otherwise prescribed by resolution of
the board of directors.
Section 4. General.
In the absence of the chairman and president, the person who has
served longest as vice president or any other officer designated
by the board shall exercise the powers and perform the duties of
the chief executive officer or chief operating officer or both.
The chief executive officer or any officer or employee authorized
by him may appoint, remove or suspend agents or employees of the
Company and may determine their duties and compensation.
ARTICLE 5 INDEMNIFICATION
Section 1. Right to Indemnification.
Subject to Section 3, the Company shall indemnify any person who
was or is a party or threatened to be a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and whether formal or
informal, and whether or not by or in the right of the
corporation, by reason of the fact that he is or was a director or
officer of the Company, or, while a director or officer of the
Company, is or was serving at the request of the Company as a
director, officer, partner, trustee, administrator, employee or
agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, for expenses (including
attorney's fees), judgments, fines, penalties, including any
excise tax assessed with respect to an employee benefit plan, and
amounts paid in settlement actually and reasonably incurred by him
in connection with such action, suit or proceeding, to the fullest
extent and manner permitted by the Virginia Corporation Law as the
same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the
Company to provide broader indemnification rights than permitted
prior to such amendment).
Section 2. Advance of Expenses.
Subject to Section 3, expenses incurred by a director or officer
of the Company in defending a civil or criminal action, suit or
proceeding shall be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director or officer to repay
such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Company.
Section 3. Procedure for Determining Permissibility.
The procedure for determining the permissibility of
indemnification pursuant to Article 5 (including the advance of
expenses), shall be that set forth in Section 13.1-701.B of the
Virginia Corporation Law, provided that, if there has been a
change in control of the Company between the time of the action
or failure to act giving rise to the claim for indemnification
and such claim, then at the option of the person seeking
indemnification, the permissibility of indemnification shall be
determined by special legal counsel selected jointly by the
Company and the person seeking indemnification. The reasonable
expenses of any director or officer in prosecuting a successful
claim for indemnification, and the fees and expenses of any
special legal counsel engaged to determine permissibility of
indemnification, shall be borne by the Company.
Section 4. Contractual Obligation; Inuring of Benefit.
The obligations of the Company to indemnify a person under this
Article V, including the obligation to advance expenses, shall be
considered contractual obligations of the Company to such person,
subject only to the determination of permissibility as set forth
in the preceding Section, and no modification or repeal of any
provision of this Article V shall affect, to the detriment of
such person, the obligations of the Company in connection with a
claim based on any act or failure to act occurring before such
modification or repeal. The obligations of the Company to
indemnify a person under this Article V, including the obligation
to advance expenses, shall inure to the benefit of the heirs,
executors and administrators of such person.
Section 5. Insurance and Other Indemnification.
The board of directors of the Company shall have the power but
shall not be obliged to (a) purchase and maintain, at the Company
expense, insurance on behalf of the Company and its director,
officers, employees and agents against liabilities asserted
against any of them, including the Company's obligations to
indemnify and advance expenses, to the extent that power to do so
is not prohibited by applicable law, and (b) give other
indemnification to the extent not prohibited by applicable law.
ARTICLE 6 CERTIFICATES OF STOCK
Section 1. Share Certificates.
Every shareholder of record shall be entitled to a share
certificate representing the shares held by him. Every share
certificate shall bear the corporate seal and the signature of
the president or a vice president and the secretary or an
assistant secretary or treasurer of the Company.
Section 2. Transfers.
Shares of stock of the Company shall be transferable on the books
of the Company only by the registered holder or by duly authorized
attorney. A transfer shall be made only upon surrender of the
share certificate. Any restrictions which are deemed to be
imposed on the transfer of the Company's securities by the
Shareholder Rights Agreement dated as of February 11, 1998 between
the Company and American Stock Transfer & Trust Company, as it may
be amended from time to time, or by any successor or replacement
rights plan or agreement, are hereby authorized.
ARTICLE 7 AMENDMENTS
These bylaws may be changed at any regular or special meeting of
the board of directors by the vote of a majority of the number of
directors in office immediately before the meeting or at any
annual or special meeting of shareholders by the vote of the
shareholders entitled to vote as required by law. Notice of any
such meeting of shareholders shall set forth the proposed change
or a summary thereof.
EXHIBIT 10.2
FIRST AMENDMENT AGREEMENT
This First Amendment Agreement dated as of May 31, 2000
(this "Amendment") is among Penn Virginia Corporation, a Virginia
corporation ("Borrower"), the Subsidiaries of the Borrower, the
lenders listed on the signature pages hereto ("Banks"), and Chase
Bank of Texas, National Association, a national banking
association, as Agent. Reference is made to the Amended and
Restated Credit Agreement dated as of July 30, 1999 among the
Borrower, the Banks and the Agent (the "Agreement"). In
consideration of the mutual covenants contained herein, the
Borrower, the Banks and the Agent agree as set forth herein.
1. Amendments to the Agreement.
1.1 Definitions. (a) The definitions of Consolidated
Tangible Net Worth and Total Commitment in Section 1.1 of the
Agreement are hereby amended to read as follows:
"Consolidated Tangible Net Worth" shall mean, with
respect to the Borrower and its Restricted Subsidiaries, at any
time, the Consolidated Equity of the Borrower, at such time, less
the Borrower's Consolidated Intangible Assets with a value of
greater than $1,000,000 at such time; provided that, the
calculation of Consolidated Tangible Net Worth shall not give
effect to any unrealized gain or loss recognized under GAAP after
the date of the First Amendment Agreement attributable to Capital
Stock owned by the Borrower, including but not limited to Norfolk
Common Stock. For purposes of this definition, "Intangible
Assets" shall mean the amount (to the extent reflected in
determining Consolidated Equity) of all unamortized debt discount
and expense, unamortized deferred charges, good will, patents,
trademarks, service marks, trade names, copyrights and
organization expenses.
"Total Commitment" shall mean the amount listed as the
"Total Commitment" on Schedule 1.1, as the same may be reduced
from time to time pursuant to Section 2.9.
(b) The following definitions are hereby added to
Section 1.1 of the Agreement in the appropriate alphabetical
order:
"Capital Stock" means, with respect to any Person, any
and all shares, interests, participations or other equivalents
(however designated, whether voting or nonvoting) of capital
stock, partnership interests (whether general or limited),
company interests, membership interests or other ownership
interests in or issued by such Person.
"First Amendment" means the First Amendment Agreement
dated as of May 31, 2000 among the Borrower, the Banks party
thereto, and the Agent.
1.2 Section 3.5. Section 3.5 of the Agreement is
hereby amended to read as follows:
SECTION 3.5. Interim Total Borrowing Base. During the
period from the date of the First Amendment through and including
November 30, 2000, the Total Borrowing Base is $135,000,000
unless redetermined in accordance with Section 3.4. The
determination of the Total Borrowing Base for Borrowing Base
Periods starting after November 30, 2000 shall be governed by
Article III.
1.3 Section 7.2(c). The Agreement is hereby amended
by adding after Section 7.2(b) the following Section 7.2(c):
(c) The Borrower and its Subsidiaries may purchase any
Capital Stock of the Borrower if the aggregate of such purchases
made from the date of the First Amendment is less than $500,000
and if, at the time such purchase is made, (i) no payment of
principal, interest, fees or other amount required hereunder or
under the Loan Documents has become due and has not been paid,
(ii) no Default or Event of Default (other than as described in
clause (i) of this proviso) has occurred, is continuing and has
not been waived by the Majority Banks (or if required under
Section 10.1, all of the Banks) has occurred or would occur as a
result of the making of such purchase, (iii) no Borrowing Base
Deficiency exists or is reasonably expected to exist as of the
next Determination Date, and (iv) after giving effect to the
proposed purchase, the Borrower is in compliance with covenants
contained in Section 7.15 as of (and as if the most recently
ended Fiscal Quarter of the Borrower had ended on) the date such
purchase is made.
1.4 Section 8.1(c). Section 8.1(c) of the Agreement
is hereby amended to read as follows:
(c) The Borrower or any Subsidiary of the Borrower
shall fail to perform or observe any term, covenant or agreement
contained in Section 6.1(c), 6,1(d)(ii), 6.11 or Article VII,
other than Section 7.15(a) or 7.15(b), of this Credit Agreement;
or
1.5 Schedule 1.1. Schedule 1.1 of the Agreement is
hereby replaced with the Schedule 1.1 attached to this Amendment.
2. Miscellaneous.
2.1 Amendments, Etc. No amendment or waiver of this
Amendment or consent to any departure by the Borrower therefrom
is effective unless completed in accordance with Section 10.1 of
the Agreement.
2.2 Governing Law. This Amendment and the Agreement
as amended hereby are governed by and construed in accordance
with the laws of the State of Texas.
2.3 Preservation. Except as modified by this
Amendment, all of the terms, provisions, covenants, warranties
and agreements of the Agreement (including, without limitation,
its exhibits and schedules thereto) or any of the other documents
executed in connection with the Agreement remain in full force
and effect. Unless otherwise defined herein, capitalized terms
that are defined in the Agreement are used herein as therein
defined.
2.4 Execution in Counterparts. This Amendment may be
executed in any number of counterparts which are deemed to be an
original and all of which taken together constitute one and the
same agreement.
2.5 Bank Credit Decision. Each Bank acknowledges that
it has, independently and without reliance upon the Agent or any
other Bank and based on documents and information it deems
appropriate, made its own credit analysis and decision to enter
into this Amendment and to agree to the various matters set forth
herein and will continue to make its own credit decisions in
taking or not taking action under the Agreement as amended
hereby.
2.6 Representations. The Borrower and each Subsidiary
of the Borrower represent and warrant to the Agent and the Banks
that:
(i) The representations and warranties in Article V of
the Agreement and, in all material respects, in
each of the other Loan Documents to which the
Borrower or such Subsidiary is a party, are true
and correct on and as of the date hereof as though
made on and as of the date hereof, and
(ii) No event or state of affairs which could
reasonably be expected to result in a Material
Adverse Effect has occurred since the fiscal year
end of the Fiscal Year for which audited financial
statements conforming to the requirements of
Section 6.1(b) of the Agreement have been
delivered to the Banks pursuant to Section 6.1(b).
(iii) No event has occurred and is continuing which
constitutes a Default or an Event of Default.
(iv) No new material litigation (other than Existing
Litigation) is pending or, to the best knowledge
of the Borrower after due inquiry, threatened
against the Borrower or any Subsidiary and no
material adverse development has occurred in any
Existing Litigation.
2.7 Authority, etc. The Borrower represents and
warrants to the Agent and the Banks that (i) the Borrower and
each of its Subsidiaries is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction
of its formation, (ii) the execution, delivery and performance of
this Amendment by the Borrower and its Subsidiaries are within
the power and authority of the Borrower and its Subsidiaries and
have been duly authorized by all necessary action and the
performance of the Agreement, as amended hereby, by the Borrower
is within the power and authority of the Borrower and has been
duly authorized by all necessary action, (iii) the execution,
delivery and performance of the Amendment by the Borrower and its
Subsidiaries and the performance of the Agreement, as amended
hereby, by the Borrower do not contravene (A) the Borrower's or
any of its Subsidiaries' certificate of incorporation or bylaws
or similar formation or organizational documents, (B) any order,
writ, injunction or decree, or (C) law or any agreement binding
on or affecting the Borrower or any Subsidiary of the Borrower,
and will not result in or require the creation or imposition of
any Lien prohibited by the Agreement, (iv) this Amendment has
been duly executed and delivered by the Borrower and its
Subsidiaries, (v) this Amendment and the Agreement, as amended
hereby, are legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with its terms and
this Amendment is the legal, valid and binding obligation of each
Subsidiary, enforceable against each Subsidiary in accordance
with its terms, except, in each case, as such enforceability may
be limited by any applicable bankruptcy, reorganization,
insolvency, moratorium or similar law affecting creditors' rights
generally, and (v) no authorization, consent, license or approval
of, or other action by, and no notice to or filing with, any
governmental authority, regulatory body or other Person is
required for the due execution, delivery and performance of this
Amendment or the performance of the Agreement, as amended hereby.
2.8 Default. Without limiting any other event which
may constitute an Event of Default, in the event any
representation or warranty set forth herein shall be incorrect or
misleading in any material respect when made, such event shall
constitute an "Event of Default" under the Agreement, as amended
hereby.
2.9 Effectiveness. This Amendment will become
effective as of May 31, 2000 subject to the following conditions
precedent:
(a) The Agent shall have received, duly authorized,
executed and delivered by each Person that is shown to be a party
thereto, in form and substance satisfactory to the Banks, each of
the following:
(i) this Amendment and a Note payable to the order of
Royal Bank of Canada in the amount of $30,000,000
and substantially in the form of Exhibit D to the
Agreement;
(ii) a certificate of the Secretary or Assistant
Secretary of the Borrower, dated the date of this
Amendment, certifying (x) that attached thereto
are copies of the documents generally described in
(y) below which were delivered in connection with
the Agreement and that such documents are in full
force and effect, are true and correct, and are
the only such documents relating to the subject
matter set forth therein, or (y) as to (aa) the
adoption and continuing effect of resolutions of
the board of directors of the Borrower authorizing
the transactions contemplated hereby and by the
Agreement; (bb) no amendments, modifications,
changes or alterations to, or revocation, repeal
or supersession of (A) the Articles of
Incorporation of the Borrower and (B) the Bylaws
of the Borrower, and (cc) the incumbency of all
officers of the Borrower who will execute or have
executed any document or instrument required to be
delivered hereunder, containing the signature of
same;
(iii) a certificate of the Secretary or Assistant
Secretary of each Subsidiary Guarantor, dated the
date of this Amendment and certifying (x) that
attached thereto are copies of the documents
described in (y) below which were delivered in
connection with the Agreement and that such
documents are in full force and effect, are true
and correct, and are the only such documents
relating to the subject matter set forth therein,
or (y) as to (aa) the adoption and continuing
effect of resolutions of the board of directors of
such Subsidiary Guarantor authorizing the
transactions contemplated hereby and by the
Agreement; (bb) no amendments, modifications,
changes or alterations to, or revocation, repeal
or supersession of (A) the Articles (or
Certificate, as the case may be) of Incorporation
of such Subsidiary Guarantor and (B) the Bylaws of
such Subsidiary Guarantor and (cc) the incumbency
of all officers of such Subsidiary Guarantor who
will execute or have executed any document or
instrument required to be delivered hereunder,
containing the signature of same;
(iv) with respect to the Borrower, a certificate
of existence and good standing from the Secretary
of State of the State of Virginia dated no more
than 5 days prior to the date of this Amendment;
(v) an opinion of the Borrower's Counsel in form and
substance satisfactory to the Majority Banks;
(vi) such information regarding the Borrowing Base
Assets as the Agent or any Bank may reasonably
request;
(vii) such financial information, regarding the
Borrower or any of its Subsidiaries as the Agent
or any Bank may reasonably request. All of such
financial statements and financial information
shall be satisfactory to the Banks;
(viii) for its account and for the account of each
Bank, as applicable, all fees and expenses due and
payable on or before the Effective Date and
invoiced to the Borrower in writing prior to the
Effective Date;
(ix) a Federal Reserve Form U-1, as the case may be,
with respect to the Commitment of Royal Bank of
Canada; and
(x) such other certificates, opinions, documents and
instruments relating to the transactions
contemplated hereby as may have been reasonably
requested by the Agent or any Bank.
(b) payment of all fees and expenses due and payable
under the Agreement or any other agreements executed in
connection therewith.
(c) Such other conditions precedent which the Agent
may reasonably have requested or required.
2.10 Consent. Each of the Subsidiaries hereby (a)
consents to and agrees to the terms of this Amendment,
(b) agrees that (i) none of its obligations and none of the
Banks' or the Agent's rights and remedies with respect to the
undersigned is released, impaired or affected thereby, (ii) no
guaranty agreement provided by the undersigned is released,
impaired or affected thereby or by the foregoing, and (iii) this
consent shall not be construed as requiring the consent or
agreement of the undersigned in any circumstance, (c) ratifies
and confirms all provisions of all Loan Documents executed by the
undersigned and all documents pertaining thereto or referred to
therein, and (d) agrees that none of its obligations, none of the
Banks' or the Agent's rights and remedies and no guaranty
agreement would be released, impaired or affected if the
undersigned had not executed this consent.
2.11 FINAL AGREEMENT OF THE PARTIES. THIS AMENDMENT
(INCLUDING THE SCHEDULE HERETO), THE AGREEMENT, THE NOTES AND THE
OTHER LOAN DOCUMENTS TO WHICH THE BORROWER OR ANY OF ITS
SUBSIDIARIES AS A PARTY CONSTITUTE A "LOAN AGREEMENT" AS DEFINED
IN SECTION 26.02(A) OF THE TEXAS BUSINESS AND COMMERCE CODE, AND
REPRESENT THE FINAL AGREEMENT OF THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT
ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO ORAL AGREEMENTS
BETWEEN THE PARTIES.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION,
as a Bank and as Agent
By:_________________________________________
Name:
Title:
FIRST UNION NATIONAL BANK, as a Bank and
as Syndication Agent
By:_________________________________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO, as a
Bank and as Documentation Agent
By:_________________________________________
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By:_________________________________________
Name:
Title:
BORROWER:
PENN VIRGINIA CORPORATION
By:________________________________________
Name:______________________________________
Title:______________________________________
SUBSIDIARIES:
PENN VIRGINIA COAL COMPANY
By:________________________________________
Name:
Title:
PENN VIRGINIA HOLDING CORP.
By:________________________________________
Name:
Title:
PENN VIRGINIA OIL & GAS CORPORATION
By: ________________________________________
Name:
Title:
PENN VIRGINIA EQUITIES CORPORATION
By: ________________________________________
Name:
Title:
SCHEDULE 1.1
Bank Name and Address
Amount of Commitment
Chase Bank of Texas, National Association $30,000,000
600 Travis St., CTH-20-86
Houston, Texas 77002
Attention: Robert C. Mertensotto
Vice President
Telephone No.: (713) 216-4147
Telecopy No.: (713) 216-4117
First Union National Bank $ 30,000,000
c/o First Union Corporation
1001 Fannin Street, Suite 2255
Houston, Texas 77002
Attention: Russell Clingman
Telephone No.: (713) 346-2716
Telecoy No.: (713) 650-6354
Bank One/First Chicago Capital Markets, Inc. $ 30,000,000
One First National Plaza, MS 0362
Chicago, Illinois 60670-0362
Attention: Jim Gummell
Telephone No.: (312) 732-5785
Telecopy No.: (312) 732-3055
PNC Bank, N.A. $ 30,000,000
One PNC Plaza
249 Fifth Avenue
Mail Stop PI-POPP-03-3
Pittsburgh, Pennsylvania 15222
Attention: Andy Mitrey
Telephone No.: (412) 762-9064
Telecopy No.: (412) 762-2571
___________________
$ 30,000,000
Address: ___________________
___________________________
Attention:___________________
Telephone No.: ______________
Telecopy No.:_______________
Total Commitment $150,000,000
EXHIBIT 10.7
PENN VIRGINIA CORPORATION
Amended and Restated 1995 Directors' Stock Option Plan
1. Purpose.
The purposes of the Plan are to attract and retain the
services of experienced and knowledgeable directors and to
encourage eligible directors of Penn Virginia Corporation to
acquire a proprietary and vested interest in the growth and
performance of the Company, thus enhancing the value of the
Company for the benefit of its shareholders.
2. Definitions.
As used in the Plan, the following terms shall have the
meanings set forth below:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as
amended.
(c) "Common Stock" means the common stock, par value $6.25
per share, of the Company.
(d) "Company" means Penn Virginia Corporation.
(e) "Eligible Director" means each director of the Company.
(f) "Exchange Act" means the Securities Exchange Act of
1934, as amended.
(g) "Fair Market Value" means with respect to the Common
Stock on any given date the closing stock market price for a
Share (as reported by the New York Stock Exchange, any other
exchange on which the Shares are listed or any other recognized
stock quotation service), or in the event that there shall be no
closing stock price on such date, the closing stock price on the
date nearest preceding such date.
(h) "Grant Date" means the date on which an Option or Share
is granted.
(i) "Option" means any right granted to an Optionee allowing
such Optionee to purchase Shares at such price or prices and
during such period or periods as are set forth in the Plan. All
Options shall be non-qualified options.
(j) "Option Agreement" means a written instrument evidencing
an Option granted hereunder and signed by an authorized
representative of the Company and the Optionee.
(k) "Optionee" means an Eligible Director who receives an
Option under the Plan.
(l) "Shares" means shares of Common Stock.
3. Administration.
Subject to the terms of the Plan, the Board shall have the
power to interpret the provisions and supervise the
administration of the Plan.
4. Shares Subject to the Plan.
(a) Total Number. Subject to adjustment as provided in this
Section, the total number of Shares which may be granted or as to
which Options may be granted under the Plan shall be 200,000
Shares. Any Shares issued pursuant to a grant of Shares or
pursuant to Options granted hereunder may consist, in whole or in
part, of authorized and unissued Shares or treasury Shares.
(b) Reduction in Number of Shares Available.
(i) The grant of an Option shall reduce the number of
Shares which may be granted or as to which Options may be granted
by the number of Shares subject to such Option.
(ii) Any Shares issued by the Company through the
assumption or substitution of outstanding grants of
an acquired company shall not reduce the Shares available for
grants under the Plan.
(c) Increase in Number of Shares Available. The lapse,
expiration, cancellation, or other termination of an Option that
has not been fully exercised shall increase the number of Shares
as to which Options may be granted by the number of Shares that
have not been issued upon exercise of such Option.
(d) Other Adjustments. The total number and kind of Shares
available under the Plan, the number and kind of Shares subject
to outstanding Options, and the exercise price for such Options
shall be appropriately adjusted by the Board for:
(i) any increase or decrease in the number of outstanding
Shares resulting from a stock dividend, subdivision,
combination of Shares, reclassification, or other change in
corporate structure or capitalization affecting the Shares.
(ii) any conversion of the Shares into or exchange of the
Shares for other shares as a result of any merger or
consolidation (including a sale of assets), or
(iii) any other event such that an adjustment is made
reasonably necessary to maintain the proportionate interest
of the Optionee.
5. Grant of Shares and Options.
On February 8, 1995, or, with respect to any person who was
not an Eligible Director on such date, on the date such person
becomes an Eligible Director, each Eligible Director shall be
granted an Option to acquire 10,000 Shares. Thereafter, on the
first business day of each year from 1996 through 2002,
inclusive, each Eligible Director on such date shall be granted
an Option to acquire an additional 200 Shares. In addition,
except as otherwise agreed, effective on and after October 25,
2000 through the termination of the Plan each Eligible Director
shall receive 1,000 Shares issuable on the date of the Company's
annual meeting; $2,500 payable quarterly, at the Eligible
Director's option, either in cash or Shares; and $1,000 in
meeting fees ($1,250 for the committee chairman) for each Board
and committee meeting attended by the Eligible Director which
shall be paid, at the Eligible Director's option, in cash or
Shares.
6. General Terms Regarding Option Grants.
The following provisions shall apply to each Option:
(a) Option Price. The purchase price per Share purchasable
under an Option shall be 100% of the Fair Market Value of a Share
on the Grant Date.
(b) Option Period. Each Option granted shall expire 10 years
from its Grant Date, and shall be subject to earlier termination
as hereinafter provided.
(c) Service Period. Each Option granted under the Plan shall
become exercisable by the Optionee only after the completion of
one year of Board service immediately following the Grant Date.
Exercise of any or all previously granted Options shall not be
required.
(d) Transfer and Exercise. No Option shall be transferable
by the Optionee except by will or the laws of descent and
distribution. In the event of the death of an Optionee, the
Option, if otherwise exercisable by the Optionee at the time of
such death, may be exercised within six months after such
Optionee's death by the person to whom such right has passed by
will or the laws of descent and distribution.
(e) Method of Exercise. Any Option may be exercised, after
the completion of one year of Board service following the Grant
Date, by the Optionee in whole or in part at such time or times
and by such methods as the Board may specify, including by
Cashless Exercise (as defined in Section 9(f)). The applicable
Option Agreement may provide that the Optionee may make payment
of the Option price in cash, Shares, or such other consideration
as the Board may specify, or any combination thereof, having a
Fair Market Value on the exercise date equal to the total Option
price.
(f) Issuance of Certificates; Payment of Cash. Only whole
Shares shall be issuable upon exercise of Options. Any right to
a fractional Share shall be satisfied in cash. Upon payment to
the Company of the Option price, the Company shall deliver to the
Optionee a certificate for the number of whole Shares and a check
for the Fair Market Value on the date of exercise of the
fractional share to which the Optionee is entitled.
7. Change in Control.
(a) Effect of Change in Control. Notwithstanding anything in
the Plan to the contrary, other than the initial shareholder
approval requirement set forth in Section 10, and subject to any
applicable pooling-of-interest accounting rules, in the event of
a Change in Control of the Company, the Options granted under
Section 5 shall vest and become immediately exercisable;
provided, however, that at least six months shall elapse from the
Grant Date of an Option to the date of disposition of any Shares
issued upon exercise of such Option. In the event of a Change in
Control of the Company as defined in Section 7(b)(iii), the
Company may provide in any agreement with respect to such merger
or consolidation that the surviving corporation shall grant
options to the Optionees to acquire shares in such corporation
with respect to which the excess of the fair market value of the
share of such corporation immediately after the consummation of
such merger or consolidation over the option price shall not be
less than the excess of the Fair Market Value of the Shares over
the Option price of Options, immediately prior to the
consummation of such merger or consolidation.
(b) Definition. For purposes of the Plan, a "Change in
Control of the Company" shall be deemed to have occurred if:
(i) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act), other than a trustee of other
fiduciary holding securities under an employee benefit plan
of the Company or any company owned, directly or indirectly,
by the shareholders of the Company in substantially the same
proportions as their ownership of stock of the Company,
becomes, after the effective date of the Plan, the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company representing 25% or more of the combined voting power
of the Company's then outstanding securities;
(ii) during any period of two consecutive years (not
including any period prior to the effective date of the
Plan), individuals who at the beginning of such period
constitute the Board and any new director (other than a
director designated by a person who has entered into an
agreement with the Company to effect a transaction described
in any of clauses (i), (iii) and (iv) of this Section 7(b))
whose election by the Board or whose nomination for election
by the Company's shareholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office
who either were directors at the beginning of the period or
whose election or nomination for election was previously so
approved, cease for any reason (other than retirement) to
constitute at least a majority thereof;
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation,
other than a merger or consolidation that would result in the
voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of
the surviving entity) at least 75% of the combined voting
power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation; or
(iv) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially
all of the Company's assets.
8. Amendments and Termination.
(a) Board Authority. The Board may amend, alter, or
terminate the Plan, but no amendment, alteration, or termination
shall be made (i) that would impair or adversely affect the
rights of an Optionee under an Option theretofore granted,
without the Optionee's consent, or (ii) without the approval of
the shareholders if such approval is necessary to comply with any
tax or regulatory requirement, including for these purposes any
approval requirement that is a prerequisite for exemptive relief
from Section 16(b) of the Exchange Act, or if the proposed
alteration or amendment would increase the aggregate number of
Shares that may be issued pursuant to the Plan (other than
pursuant to Section 4 (d) hereof); provided, however that no
provision of the Plan that (i) permits Eligible Directors to
receive Options, (ii) states the amount or price of Options to be
granted to Eligible Directors, (iii) specifies the timing of
grants of Options to Eligible Directors, or (iv) sets forth a
formula that determines the amount, price or timing of grants of
Options to Eligible Directors, shall be amended more frequently
than once every six months, other than to comport with changes in
the Code, the Employee Retirement Income Security Act of 1974, as
amended, or the rules thereunder.
(b) Prior Shareholder and Optionee Approval. Anything herein
to the contrary notwithstanding, in the event that amendments to
the Plan are required in order that the Plan or any other stock-
based compensation plan of the Company comply with the
requirements of Rule 16b-3 issued under the Exchange Act, as
amended from time to time, or any successor rule promulgated by
the Securities and Exchange Commission related to the treatment
of benefit and compensation plans under Section 16 of the
Exchange Act, the Board is authorized to make such amendments
without the consent of Optionees or the shareholders of the
Company.
9. General Provisions.
(a) Compliance with Regulations. All certificates for Shares
issued and delivered under the Plan pursuant to a grant of Shares
or pursuant to the exercise of any Option shall be subject to
such stock transfer orders and other restrictions as the Board
may deem advisable under the rules, regulations, and other
requirements of the Securities and Exchange Commission, any stock
exchange upon which the Shares are then listed, and any
applicable federal or state securities law, and the Board may
cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions. The Company
shall not be required to issue or deliver any Shares under the
Plan prior to the completion of any registration or qualification
of such Shares under any federal or state law, or under any
ruling or regulation of any governmental body or national
securities exchange, that the Board in its sole discretion shall
deem to be necessary or appropriate.
(b) Other Plans. Nothing contained in the Plan shall prevent
the Board from adopting other or additional compensation
arrangements, subject to shareholder approval if such approval is
required by applicable law or the rules of any stock exchange on
which the Common Stock is then listed; and such arrangements may
be either generally applicable or applicable only in specific
cases.
(c) Withholding of Taxes. Each Optionee shall pay to the
Company, upon the Company's request, all amounts necessary to
satisfy the Company's federal, state and local tax withholding
obligations, if any, with respect to the grant or exercise of any
Option.
(d) Conformity With Law. If any provision of the Plan is or
becomes or is deemed invalid, illegal, or unenforceable in any
jurisdiction, or would disqualify the Plan or any Option under
any law deemed applicable by the Board, such provision shall be
construed or deemed amended in such jurisdiction to conform to
applicable laws or if it cannot be construed or deemed amended
without, in the determination of the Board, materially altering
the intent of the Plan, it shall be stricken and the remainder of
the Plan shall remain in full force and effect.
(e) Insufficient Shares. In the event there are insufficient
Shares remaining to satisfy all of the Share or Option grants
under Section 5 made on the same day, such grants shall be
reduced pro-rata.
(f) An Optionee may exercise and pay for Shares purchased
upon the exercise of an Option through the use of a brokerage
firm to make payment to the Company of the option price and any
taxes required by law to be withheld upon exercise of the Option
either from the proceeds of a loan to the Optionee from the
brokerage firm or from the proceeds of the sale of Shares issued
pursuant to the exercise of the Option, and upon receipt of such
payment the Company shall deliver the shares issuable under the
Option exercised to such brokerage firm (a "Cashless Exercise").
Notwithstanding anything stated to the contrary in the Plan, the
date of exercise of a Cashless Exercise shall be the date on
which the broker executes the sale of exercised Shares or, if no
sale is made, the date the broker receives the exercise loan
notice from the Optionee to pay the Company for the exercised
Shares.
10. Effective Date and Termination.
The Plan shall become effective upon approval by the Company's
shareholders and, with respect to new grants, shall terminate on
the second business day of 2002. With respect to outstanding
Options, the Plan shall terminate on the date on which all
outstanding Options have expired or terminated. The Board shall
submit the Plan to the shareholders of the Company for their
approval at the 1995 annual meeting of shareholders unless such
shareholders' approval shall have been obtained prior to such
meeting. Any Option granted before the approval of the Plan by
the shareholders of the Company shall be expressly conditioned
upon, and any Option shall not be exercisable until, such
approval on or prior to the date of the 1995 annual meeting of
such shareholders. If such shareholder approval is not received
at or before the 1995 annual meeting, the Board shall have the
right to terminate the Plan, in which case all Options granted
under the Plan shall expire.
EXHIBIT 21
PENN VIRGINIA CORPORATION
SUBSIDIARIES OF REGISTRANT
NAME PERCENTAGES STATE
Penn Virginia Holding Corp. 100% Delaware
Penn Virginia Coal Company 100% Virginia
Penn Virginia Equities Corporation 100% Delaware
Penn Virginia Oil & Gas Corporation 100% Virginia
Penn Virginia Energy Co. 100% Virginia
Concord Land Company 100% Delaware
Kanawha Rail Corp. 100% Virginia
Paragon Coal Corporation 100% Virginia
Savannah Land Company 100% Delaware
EXHIBIT 23.1
As independent public accountants, we hereby consent to the
incorporation of our report dated February 9, 2001, included in
the Annual Report of Penn Virginia Corporation on Form 10-K for
the year ended December 31, 2000, into Penn Virginia
Corporation's previously filed Registration Statements Nos. 33-
49438, 33-96465, 33-59651 and 33-96463 on Form S-8.
ARTHUR ANDERSEN LLP
Houston, Texas
February 21, 2001