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

PENN VIRGINIA CORPORATION AND SUBSIDIARIES


SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)

[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the period ended March 31, 2003

or

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______________	to ___________________


Commission File Number 1-16735

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

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

THREE RADNOR CORPORATE CENTER, SUITE 230
100 MATSONFORD ROAD
RADNOR, PA 19087
(Address of Principal Executive Offices) (Zip Code)

(610) 687-8900
(Registrant's Telephone Number, Including Area Code)

ONE RADNOR CORPORATE CENTER, SUITE 200 100 MATSONFORD ROAD RADNOR, PA 19087
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report.)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of
the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

	Yes	X	No

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

As of May 1, 2003, 9,183,905 common units, 1,240,833 Class B common units and 7,649,880 subordinated units were outstanding.

PENN VIRGINIA RESOURCE PARTNERS, L.P.

INDEX

PART I Financial Information	PAGE

Item 1. Financial Statements

Consolidated Statements of Income for the Three Months Ended March 31, 2003 and 2002	3

Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002	4

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002	5

Notes to Consolidated Financial Statements	6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	11

Item 3. Quantitative and Qualitative Disclosures about Market Risk	19

Item 4. Controls and Procedures	20

PART II Other Information
Item 6. Exhibits and Reports on Form 8-K	21

Part I. Financial Information

Item 1. Financial Statements

PENN VIRGINIA RESOURCE PARTNERS, L.P.

CONSOLIDATED STATEMENTS OF INCOME - Unaudited

(in thousands, except per unit data)

	Three Months
	Ended March 31,
	2003	2002
Revenues:
Coal royalties	$ 11,451	$ 8,491
Coal services	493	411
Timber	556	582
Minimum rentals	605	870
Other	136	401
Total Revenues	13,241	10,755

Operating costs and expenses:
Operating expenses	840	885
Taxes other than income	296	161
General and administrative	1,811	1,547
Depreciation, depletion and amortization	4,218	895
Total Operating Cost and Expenses	7,165	3,488

Operating income	6,076	7,267

Other income (expense):
Interest expense	(785)	(383)
Interest income	330	548
Income before cumulative effect of change in accounting principle	5,621	7,432
Cumulative effect of change in accounting principle	(107)	-
Net income	$ 5,514	$ 7,432

General partner's interest in net income	$ 110	$ 149

Limited partners' interest in net income	$ 5,404	$ 7,283

Basic and diluted per limited partner unit:
Income before cumulative effect of a change in accounting principle, common	$ 0.31	$ 0.48
Cumulative effect of change in accounting principle, common	(0.01)	-
Net income per limited partner unit, common	$ 0.30	$ 0.48

Income before cumulative effect of a change in accounting principle, subordinated	$ 0.31	$ 0.48
Cumulative effect of change in accounting principle, subordinated	(0.01)	-
Net income per limited partner unit, subordinated	$ 0.30	$ 0.48

Weighted average number of units outstanding:
Common	10,127	7,650
Subordinated	7,650	7,650

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

PENN VIRGINIA RESOURCE PARTNERS, L.P.
CONSOLIDATED
BALANCE SHEETS

(in thousands)

	December 31,
ASSETS	2003	2002
Current assets	(unaudited)
Cash and cash equivalents	$ 9,424	$ 9,620
Accounts receivable	5,325	4,414
Current portion of long-term notes receivable	575	527
Other	26	11
Total current assets	15,350	14,572

Property and Equipment	263,827	263,321
Less: Accumulated depreciation and depletion	(19,498)	(15,253)
Total property and equipment	244,329	248,068

Debt issuance costs	1,742	443
Long-Term Notes Receivable	1,105	1,274
Prepaid Minimums and Other	2,304	2,218

Total assets	$ 264,830	$ 266,575

LIABILITIES AND PARTNERS' CAPITAL
Current liabilities
Accounts payable	$ 15	$ 175
Accounts payable - affiliate	453	1,732
Accrued liabilities	1,189	1,454
Deferred income	2,663	2,829
Total current liabilities	4,320	6,190

Deferred income	2,877	2,488
Other liabilities	4,896	4,478
Long-term debt	92,421	90,887

Commitments and contingencies

Partners' capital	160,316	162,532

Total liabilities and partners' capital	$ 264,830	$ 266,575

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

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PENN VIRGINIA RESOURCE PARTNERS, L.P.
CONSOLIDATED
STATEMENTS OF CASH FLOWS - Unaudited

(in thousands)

	Three Months
	Ended March 31,
	2003	2002
Cash flow from operating activities:
Net Income	$ 5,514	$ 7,432
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion, and amortization	4,218	895
Cumulative effect of change in accounting principle	107	-
Noncash interest expense	120	78
Net change in operating assets and liabilities	(1,516)	(365)
Net cash provided by operating activities	8,443	8,040

Cash flows from investing activities:
Payments received on long-term notes	121	110
Proceeds from sale of property and equipment	45	-
Coal reserve acquisitions	(1,254)	(80)
Coal and land management projects	(7)	(408)
Other property and equipment expenditures	(8)	(26)
Net cash used in investing activities	(1,103)	(404)

Cash flows from financing activities
Payments for debt issuance costs	(1,419)	-
Long-term debt borrowings of unsecured senior notes	90,000	-
Repayments of long-term debt	(88,387)	-
Distributions	(8,008)	(5,308)
Proceeds received from issuance of partners' capital	278	-
Net cash used in financing activities	(7,536)	(5,308)

Net increase in cash and cash equivalents	(196)	2,328
Cash and cash equivalents-beginning of period	9,620	8,335
Cash and cash equivalents-end of period	$ 9,424	$ 10,663

Supplemental disclosures of cash flow information:
Cash paid for interest	$ 616	$ 47

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

PENN VIRGINIA RESOURCE PARTNERS, L.P.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS - Unaudited
March 31, 2003

1. ORGANIZATION

Penn Virginia Resource
Partners, L.P. (the "Partnership"), through its wholly owned
subsidiary, Penn Virginia Operating Co., LLC, enters into leases with various
third-party operators which give those operators the right to mine coal reserves
on the Partnership's land in exchange for royalty payments. We do not
operate any mines. Instead, we enter into long-term leases with third party coal
mine operators for the right to mine coal reserves on our properties in exchange
for royalty payments. Generally, our lessees, other than those lessees (the
"Peabody Lessees") which are affiliates of Peabody Energy Corporation,
make payments to us based on the higher of a percentage of the gross sales price
or a fixed price per ton of coal they sell, with pre-established minimum monthly
or annual rental payments. The Peabody Lessees are required to make payments to
us based on fixed royalty rates per ton, which escalate annually. The Peabody
Lessees are also required to make minimum monthly rental payments. We also
generate coal services revenues by providing fee-based coal preparation and
transportation facilities to enhance the coal production of certain of our
lessees. We also generate timber revenues by selling timber growing on our
properties.

2. BASIS OF PRESENTATION

The accompanying
unaudited consolidated and combined financial statements include the accounts of
Penn Virginia Resource Partners, L.P. and all wholly-owned subsidiaries.
The financial statements have been prepared in accordance with accounting
principles generally accepted in the United States for interim financial
reporting and SEC regulations. These statements involve the use of estimates and
judgments where appropriate. In the opinion of management, all adjustments,
consisting of normal recurring accruals, considered necessary for a fair
presentation have been included. These financial statements should be read in
conjunction with the Partnership's consolidated financial statements and
footnotes included in the Partnership's December 31, 2002 Annual Report on Form
10-K. Operating results for the three months ended March 31, 2003 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2003. Certain reclassifications have been made to conform to
the current year presentation.

3. ACQUISITIONS

In December 2002, we announced
the formation of a strategic alliance with Peabody Energy Corporation
("Peabody"), the largest private sector coal company in the world.
Central to the transaction was the purchase and subsequent leaseback of
approximately 120 million tons of predominately low sulfur, low BTU coal
reserves located in New Mexico (80 million tons) and predominately high sulfur,
high BTU coal reserves in northern West Virginia (40 million tons) (the
"Peabody Acquisition"). The Peabody Acquisition, which included 8,800
mineral acres, was funded with $72.5 million in cash and the issuance by the
Partnership to Peabody of 1,522,325 common units and 1,240,833 class B common
units, a newly created series of units. Of the 1,240,833 class B common units
issued, 293,700 are currently being held in escrow pending (i) Peabody obtaining
approvals from the State of New Mexico regarding certain of the New Mexico
reserves we purchased and (ii) Peabody acquiring and transferring to us certain
of the West Virginia reserves we purchased. As a result of the escrowed class B
common units, approximately five million tons of coal reserves were excluded
from reserve totals, and 293,700 class B common units were excluded from units
issued, in the Partnership's financial statements for the period ended March 31,
2003.

4. ASSET RETIREMENT OBLIGATION

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

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

We identified all required
asset retirement obligations and determined the fair value of these obligations
on the date of adoption. The determination of fair value was based upon
regional market and facility type information. In conjunction with the
initial application of SFAS No. 143, we recorded a cumulative-effect of change
in accounting principle of approximately $0.1 million as a decrease to
income. In addition, we recorded an asset retirement obligation of
approximately $0.4 million. Below is a reconciliation of the
beginning and ending aggregate carrying amount of our asset retirement
obligations as of March 31, 2003.

	Three Months
	Ended March 31,
(in thousands)	2003

Beginning of the period	$ -
Initial adoption entry	435
Liabilities incurred in the current period	-
Liabilities settled in the current period	-
Accretion expense	9
End of the period	$ 444

On a pro forma basis as
requested by SFAS No. 143, if we had applied the provisions of the Statement as
of January 1, 2000, the amount of the asset retirement obligation would have
been $0.4 million as of December 31, 2002 and $0.2 million as of March 31, 2002,
December 31, 2001, December 31, 2000 and January 1, 2000. If SFAS No. 143
was applied retroactively, the impact on the consolidated statements of income
for the first quarter of 2002 would not be material.

5. LONG-TERM DEBT

As of March 31, 2003, we had
outstanding borrowings of $92.4 million, consisting of $2.5 million borrowed
against our $50.0 million revolving credit facility and $89.9 million
attributable to our senior unsecured notes ($90.0 million offset by $0.1 million
fair value of interest rate swap).

Revolving Credit Facility. In
connection with the closing of our initial public offering in October 2001, we
entered into a three-year $50.0 million revolving credit facility (the
"Revolver") with a syndicate of financial institutions led by PNC
Bank, National Association, as its agent. The Revolver is available for general
partnership purposes, including working capital, capital expenditures and
acquisitions, and includes a $5.0 million distribution sublimit that is
available for working capital needs and distributions and a $5.0 million
sublimit for the issuance of letters of credit.

Indebtedness under the Revolver will bear
interest, at our option, at either (i) the higher of the federal funds rate plus
0.50% or the prime rate as announced by PNC Bank, National Association or (ii)
the Euro-dollar rate plus an applicable margin which ranges from 1.25% to 1.75%
based on our ratio of consolidated indebtedness to consolidated EBITDA (as
defined in the credit agreement) for the four most recently completed fiscal
quarters. We will incur a commitment fee on the unused portion of the Revolver
at a rate per annum ranging from 0.40% to 0.50% based upon the ratio of our
consolidated indebtedness to consolidated EBITDA for the four most recently
completed fiscal quarters. The Revolver matures in October 2004. At that time,
it will terminate and all outstanding amounts thereunder will be due and
payable. We may prepay the Revolver at any time without penalty. We are required
to reduce all working capital borrowings under the working capital sublimit
under the Revolver to zero for a period of at least 15 consecutive days once
each calendar year.

The Revolver prohibits us from making
distributions to unitholders and distributions in excess of available cash if
any potential default or event of default, as defined in the credit agreement,
occurs or would result from the distribution. In addition, the Revolver contains
various covenants that limit, among other things, our ability to incur
indebtedness, grant liens, make certain loans, acquisitions and
investments, make any material change to the nature of our business, acquire
another company or enter into a merger or sale of assets, including the sale or
transfer of interests in our subsidiaries.

The Revolver also contains financial
covenants requiring us to maintain ratios of:

not more than 2.50:1.00 of total debt to consolidated EBITDA;
and

not less than 4.00:1.00 of consolidated EBITDA to interest.

In March 2003, a $43.4 million unsecured term loan
(the "Term Loan"), which was part of our credit facility, was repaid
and retired, and is not available for future borrowings. Part of the
proceeds from our issuance of senior unsecured notes, as described below, was
used to repay the Term Loan.

We believe we are currently in
compliance with all of the covenants in the Revolver. Based primarily on
the total debt to consolidated EBITDA covenant and subsequent to our issuance of
senior unsecured notes as described below, available borrowing capacity under
the Revolver was approximately $17 million as of March 31, 2003.

Senior Unsecured Notes.
In March 2003, we closed a private placement of $90 million of senior unsecured
notes payable (the "Notes"). The Notes bear interest at a fixed
rate of 5.77 percent and mature over a ten year period ending in March 2013,
with semi-annual interest payments through March 2004 followed by principal and
interest payments beginning in September 2004. Proceeds of the Notes after
the payment of expenses related to the offering were used to repay and retire
the $43.4 million Term Loan and to repay the majority outstanding on our
Revolver.

The Notes prohibit us from making
distributions to unitholders and distributions in excess of available cash if
any potential default or event of default, as defined in the Notes, occurs or
would result from the distribution. In addition, the Notes contain various
covenants similar to those contained in the Revolver, with the exception of the
financial covenants, which for the Notes require us to maintain ratios of:

not more than 3.00:1.00 of total debt to consolidated EBITDA;
and

not less than 3.50:1.00 of consolidated EBITDA to interest.

We believe we are in compliance with
all of the covenants of the Notes.

Concurrent with the closing of the
Notes, the Partnership also entered into an interest rate derivative transaction
to convert $30.0 million of the debt from a fixed interest rate to a floating
interest rate as described further in "Note 6. Interest Rate Swap"
below.

6. INTEREST RATE SWAP

In March
2003, we entered into an interest rate swap agreement with a notional amount of
$30 million, to hedge a portion of the fair value of the Notes. This swap is
designated as a fair value hedge and has been reflected as a decrease of
long-term debt of approximately $0.1 million as of March 31, 2003, with a
corresponding increase in accrued expenses. Under the terms of the interest rate
swap agreement, the counterparty pays us a fixed annual rate of 5.77 percent on
a total notional amount of $30 million, and we pay the counterparty a variable
rate equal to the floating interest rate which will be determined semi-annually
and will be based on the six month London Interbank Offering Rate plus 2.36
percent.

7. COMMITMENTS AND CONTINGENCIES

Legal

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

Environmental Compliance

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

The Partnership has some reclamation
bonding requirements with respect to its unleased and inactive properties. In
conjunction with the November 2002 purchase of equipment (see Note 3), the
Partnership assumed reclamation and mitigation liabilities of approximately $3.0
million. The Partnership is currently pursuing a potential lessee for this
property and, as is customary in our operations, we intend to assign all
reclamation liabilities to such lessee.

8. NET INCOME PER UNIT

Basic
and diluted net income per unit is determined by dividing net income, after
deducting the general partner's 2% interest, by the weighted average number of
outstanding common units and subordinated units.

At March 31, 2003, there were no potentially dilutive units outstanding.

9. RELATED PARTY TRANSACTION

Penn Virginia charges the
Partnership for certain corporate administrative expenses, which are allocable
to its subsidiaries. When allocating general corporate expenses, consideration
is given to property and equipment, payroll and general corporate overhead. Any
direct costs are charged directly to the Partnership. Total corporate
administrative expenses charged to the Partnership totaled $0.3 million for the
three months ended March 31, 2003 and 2002. These costs are reflected in
general and administrative expenses in the accompanying consolidated statements
of income. Management believes the allocation methodologies used are reasonable.

10. DISTRIBUTIONS

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

General

Quarterly cash distribution per
unit:
Unitholders
Partner

          Minimum
quarterly
distribution
98%
2%

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

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

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

          Thereafter - above $0.75
per
unit
50%
50%

To date, the Partnership
has not paid any incentive cash distributions to the General Partner. The
following table reflects the allocation of total cash distributions paid during
the three months ended March 31, 2003(in thousands):

          Limited
partner
units
$
7,827

         General partner ownership
interest                                                         181


Total cash
distributions
$
8,008

Total cash distributions paid per
unit
$
0.50

11. SEGMENT INFORMATION

Segment information has
been prepared in accordance with Statement of Financial Accounting Standards
("SFAS") No. 131 "Disclosure about
Segments of an Enterprise and Related Information." The Partnership's
reportable segments are as follows:

Coal Royalty

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

Coal Services

The Partnership's coal
services segment consists of fees charged to its lessees for the use of the
Partnership's unit train loadout facility, coal preparation plants, dock loading
facility and short-line railroad.

Timber

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

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

	Coal	Coal
	Royalty	Services	Timber	Consolidated
	(in thousands)
For the Three Months Ended March 31, 2003:
Revenues	$ 12,192	$ 493	$ 556	$ 13,241
Operating costs and expenses	2,141	652	154	2,947
Depreciation, depletion and amortization	3,965	250	3	4,218
Operating income (loss)	6,086	(409)	399	6,076
Interest income				330
Interest expense				(785)
Cumulative effect of change in accounting principle				(107)
Net income				$ 5,514

Total assets	$ 250,828	$ 14,002	$ 169	$ 264,830
Capital expenditures	$ 1,262	$ 7	$ -	$ 1,269

For the Three Months Ended March 31, 2002:
Revenues	$ 9,614	$ 559	$ 582	$ 10,755
Operating costs and expenses	2,177	237	179	2,593
Depreciation, depletion and amortization	775	117	3	895
Operating income (loss)	6,662	205	400	7,267
Interest income				548
Interest expense				(383)
Income before taxes				$ 7,432

Total assets	$ 158,736	$ 6,183	$ 178	$ 165,097
Capital expenditures	$ 106	$ 408	$ -	$ 514

12. NEW ACCOUNTING STANDARDS

In November 2002,
the FASB issued Interpretation No. 45 ( FIN 45), Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of the Indebtedness
of Others, which clarifies the requirements of SFAS No. 5, Accounting for Contingencies,
relating to a guarantor's accounting for and disclosures of certain guarantees
issued. FIN 45 requires enhanced disclosures for certain guarantees. It also
will require certain guarantees that are issued or modified after December 31,
2002, including certain third-party guarantees, to be initially recorded on the
balance sheet at fair value. For guarantees issued on or before December 31,
2002, liabilities are recorded when and if payments become probable and
estimable. The financial statement recognition provisions are effective
prospectively, and the Partnership cannot reasonably estimate the impact of
adopting FIN 45 until guarantees are issued or modified in future periods, at
which time their results will be initially reported in the financial statements.

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

Overview

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

Penn Virginia Resource Partners, L.P.
is a Delaware limited partnership formed by Penn Virginia Corporation
("Penn Virginia") in 2001 to acquire the coal properties and related
assets held by a subsidiary of Penn Virginia. Effective with the closing of the
Partnership's initial public offering, the ownership of these coal properties
and related assets was transferred to the Partnership in exchange for common and
subordinated units of the Partnership.

The Partnership leases coal
properties to coal mine operators in exchange for royalty payments. We do not
operate any mines. Instead, we enter into long-term leases with experienced,
third party coal mine operators for the right to mine coal reserves on our
properties in exchange for royalty payments. Generally, our lessees, other than
those lessees which are affiliates of Peabody Energy Corporation (the
"Peabody Lessees"), make payments to us based on the higher of a
percentage of the gross sales price or a fixed price per ton of coal they sell,
with pre-established minimum monthly or annual rental payments. The Peabody
Lessees are required to make payments to us based on fixed royalty rates per
ton, which escalate annually. The Peabody Lessees are also required to make
minimum monthly rental payments. We also generate coal services revenues by
providing fee-based coal preparation and transportation facilities to enhance
the coal production of certain of our lessees. We also generate timber revenues
by selling timber growing on our properties.

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

In addition to our coal royalty
revenues, we also generate coal services revenues from fees we charge to our
lessees for the use of our coal preparation and transportation facilities. The
majority of these fees have been generated by our unit train loadout facility,
which accommodates 108 car unit trains that can be loaded in approximately four
hours. Some of our lessees utilize the unit train loadout facility to reduce the
delivery costs incurred by their customers.

We also earn revenues from the sale of
standing timber on our properties. The timber revenues we receive are
dependent on market conditions, harvest levels and the species and quality of
timber harvested. Our harvest levels in any given year will depend upon a number
of factors, including anticipated mining activity, timber maturation and market
conditions. Any timber, which would otherwise be removed due to lessee mining
operations, is harvested in advance to prevent loss of the resource.

We also derive revenues from minimum
rental payments. Minimum rental payments are initially deferred and are
recognized as minimum rental revenues when our lessees fail to meet specified
production levels for certain predetermined periods. The recoupment period on
almost all of our leases other than those with the Peabody Lessees generally
ranges from 1-3 years. The recoupment period under the Peabody Leases, which
require significant monthly minimum rental payments, extends for the life of the
Peabody Leases.

Operating expenses that we incur in
our coal business consist primarily of lease payments on property which we lease
from third parties and sublease to our lessees. Our lease payment obligations
vary based on the production from these properties. We also incur costs
related to lease administration and property maintenance as well as technical
and support personnel. Operating expenses also include core drilling activities,
timber expenses and mine maintenance costs related to idled mines not currently
being leased.

We reimburse our general partner and
its affiliates for direct and indirect general and administrative expenses they
incur on our behalf. These expenses primarily relate to salaries, benefits and
administrative services, including legal, accounting, treasury, information
technology and other corporate services.

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Acquisitions

In December 2002, we announced the
formation of a strategic alliance with Peabody Energy Corporation
("Peabody"), the largest private sector coal company in the world.
Central to the transaction was the purchase and subsequent leaseback of
approximately 120 million tons of predominately low sulfur, low BTU coal
reserves located in New Mexico (80 million tons) and predominately high sulfur,
high BTU coal reserves in northern West Virginia (40 million tons) (the
"Peabody Acquisition"). The Peabody Acquisition, which included 8,800
mineral acres, was funded with $72.5 million in cash and the issuance by the
Partnership to Peabody of 1,522,325 common units and 1,240,833 class B common
units, a newly created series of units. Of the 1,240,833 class B common
units issued, 293,700 are currently being held in escrow pending (i) Peabody
obtaining approvals from the State of New Mexico regarding certain of the New
Mexico reserves we purchased and (ii) Peabody acquiring and transferring to us
certain of the West Virginia reserves we purchased. As a result of the escrowed
class B common units, approximately five million tons of coal reserves were
excluded from reserve totals, and 293,700 class B common units were excluded
from units issued, in the Partnership's financial statements for the period
ended March 31, 2003.

In addition to the Peabody
Acquisition, in August 2002, we purchased approximately 16 million tons of
reserves located on the Upshur properties in northern Appalachia for $12.3
million (the "Upshur Acquisition"). The Upshur Acquisition was our
first exposure outside of central Appalachia. The properties, which include
approximately 18,000 mineral acres, contain predominately high sulfur, high BTU
coal reserves.

In May 2001, we acquired the Fork
Creek property in West Virginia, purchasing approximately 53 million tons of
coal reserves for $33 million. In early 2002, the operator at Fork Creek filed
for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code. Fork
Creek's operations were idled on March 4, 2002. The operator continued to pay
minimum royalties until we recovered our lease on August 31, 2002. In November
2002, we purchased various infrastructure at Fork Creek, including a 900-ton per
hour coal preparation plant, a unit-train loading facility and a
railroad-granted rebate on coal loaded through the facility for $5.1 million
plus the assumption of approximately $2.4 million in reclamation liabilities and
approximately $0.6 million of stream mitigation obligations. With control of the
Fork Creek reserves, permits and the critical infrastructure, we are working
diligently to put a new, financially stable operator in place at Fork Creek. As
is customary in our operations, we intend to assign all related reclamation
liabilities to a new operator.

During the first quarter of 2003, the
Peabody and Upshur Acquisitions were the primary reasons for increased coal
royalty revenue and increased depreciation, depletion and amortization expense,
while the Fork Creek property was idle and incurred mine maintenance-related
operating expenses during the quarter.

Critical Accounting Policies

Property and Equipment. Property
and equipment is carried at cost and includes expenditures for additions and
improvements, such as roads and land improvements, which substantially increase
the productive lives of existing assets. Maintenance and repair costs are
expensed as incurred. Depreciation and amortization of property and equipment is
generally computed using the straight-line method over their estimated useful
lives, varying from 3 years to 20 years. From time to time, the Partnership
carries out core-hole drilling activities on its coal properties in order to
ascertain the quality and quantity of the coal. These core-hole drilling
activities are expensed as incurred. When an asset is retired or sold, its cost
and related accumulated depreciation and amortization are removed from the
accounts. The difference between the undepreciated cost and proceeds from
disposition is recorded as gain or loss.

Timber and timberlands are stated at
cost less depletion and amortization for timber previously harvested. The cost
of the timber harvested is determined based on the volume of timber harvested in
relation to the amount of estimated net merchantable volume, utilizing a single
composite pool.

Depletion. Coal
properties are depleted on an area-by-area basis at a rate based on the cost of
the mineral properties and the number of tons of estimated proven and probable
coal reserves contained therein. In 2001, we estimated proven and probable
coal reserves with the assistance of third-party mining consultants and involved
the use of estimation techniques and recoverability assumptions.
Subsequent to 2001, proven and probable reserves have been estimated internally
by our geologist. Our estimates of coal reserves are updated periodically
and may result in adjustments to coal reserves and depletion rates that are
recognized prospectively. As a result of our geologist's estimates in
2002, in connection with our initial public offering, we recorded a downward
revision of our coal reserves, resulting from differences in general reserve
criteria utilized by our independent engineers and the site or operator specific
criteria utilized by us. Consequently, we increased our depletion rates on a
prospective basis.

The Partnership estimates its
timber inventory using statistical information and data obtained from physical
measurements, site maps, photo-types and other information gathering techniques.
These estimates are updated annually and may result in adjustments of timber
volumes and depletion rates, which are recognized prospectively.

Coal Royalties. Coal royalty
revenues are recognized on the basis of tons of coal sold by the Partnership's
lessees and the corresponding revenue from those sales. Most coal leases other
than the Peabody Leases are based on a minimum dollar royalty per ton and/or a
percentage of the gross sales price, with minimum monthly or annual rental
payments. The Peabody Leases are based on fixed royalty rates per ton
which escalate annually and also provide for minimum monthly rental
payments. Coal royalty revenues are accrued on a monthly basis, based on
our best estimates of coal mined on our properties.

Coal
Services. Coal services revenues are recognized when lessees use the
Partnership's facilities for the processing and transportation of coal. Coal
services revenues consist of fees collected for the use of the Partnership's
loadout facility, coal preparation plants and dock loading facility. Coal
services revenues are accrued on a monthly basis, based on our best estimates of
our lessees' use of our facilities.

Timber. Timber revenues are
recognized when timber is sold in a competitive bid process involving sales of
standing timber on individual parcels and, from time to time, on a contract
basis where independent contractors harvest and sell the timber. Timber revenues
are recognized when the timber has been sold or harvested by the independent
contractors. Title and risk of loss pass to the independent contractors upon the
execution of the contract. In addition, if the contractors do not harvest the
timber within the specified time period, the title of the timber reverts back to
the Partnership with no refund of original payment.

Minimum Rentals. Most of the
Partnership's lessees must make minimum monthly or annual payments that are
generally recoupable over certain time periods. These minimum payments are
recorded as deferred income. If the lessee recoups a minimum payment through
production, the deferred income attributable to the minimum payment is
recognized as coal royalty revenues. If a lessee fails to meet its minimum
production for the recoupment period, the deferred income attributable to the
minimum payment is recognized as minimum rental revenues.

Results of Operations

Three Months Ended March 31, 2003 Compared With Three
Months Ended March 31, 2002.

The following table sets forth our revenues, operating
expenses and operating statistics for the three months ended March 31, 2003
compared with the same period in 2002.

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	Three Months Ended March 31,		Percentage Change
	2003	2002
Financial Highlights:	(in thousands, except prices)
Revenues:
Coal royalties	$ 11,451	$ 8,491	35%
Coal services	493	411	20%
Timber	556	582	(4%)
Minimum rentals	605	870	(30%)
Other	136	401	(66%)
Total revenues	13,241	10,755	23%

Operating costs and expenses:
Operating	840	885	(5%)
Taxes other than income	296	161	84%
General and administrative	1,811	1,547	17%
Depreciation, depletion and amortization	4,218	895	371%
Total operating costs and expenses	7,165	3,488	105%
Operating income	6,076	7,267	(16%)

Interest expense	(785)	(383)	105%
Interest income and other	330	548	(40%)
Income before cumulative effect of change in accounting principle	5,621	7,432	(24%)
Cumulative effect of accounting change for asset retirement obligations	(107)	-	-

Net Income	$ 5,514	$ 7,432	(26%)


Operating Statistics:
Coal:
Royalty coal tons produced by lessees (tons in thousands)	6,423	3,802	69%
Average royalty per ton	$ 1.78	$ 2.23	(20%)

Timber:
Timber sales (Mbf)	2,829	3,126	(10%)
Average timber sales price per Mbf	$ 187	$ 174	7%

Revenues. Our revenues in the
first quarter of 2003 were $13.2 million compared with $10.8 million for the
same period in 2002, representing a 23% increase.

Coal royalty revenue for the three
months ended March 31, 2003 was $11.5 million compared to $8.5 million for the
same period in 2002, an increase of $3.0 million, or 35%. Over these
respective periods, the production by our lessees increased 2.6 million tons, or
69%, primarily due to the Peabody and Upshur Acquisitions in 2002. The increase
in production was partially offset by a decrease in our average royalty per ton
of $0.45, or 20%, over the same periods, which is attributable primarily to the
lower fixed royalty rates per ton received from the Peabody leases.

Coal services revenue increased $0.1
million, or 20%, to $0.5 million in the first quarter of 2003, compared with
$0.4 million in the same period of 2002. The increase was attributable to small
preparation plants we leased to two of our lessees and a slight increase in
throughput fees from tonnage going through our loadout facility.

Timber revenue remained constant at
$0.6 million for the three months ended March 31, 2003 and March 31, 2002.
Volume sold declined 297 thousand board feet (Mbf), or 10%, to 2,829 Mbf in the
first quarter of 2003, compared with 3,126 Mbf for the same period in 2002. This
decrease was mitigated by an increase in the average price received, which
totaled $187 per Mbf in the first quarter of 2003 compared with $174 per Mbf in
the comparable period of 2002. The decrease in volume sold was due to the
timing of parcel sales and the increase in the average price received primarily
resulted from stronger market conditions.

Minimum rentals revenue decreased to
$0.6 million for the three months ended March 31, 2003 from $0.9 million in the
comparable period of 2002. The decrease was primarily due to the timing of
expiring recoupments from two of our lessees in the first quarter of 2002.

Other income decreased to $0.1
millionfor the three months ended March 31, 2003, compared with $0.4 million for
the same period in 2002. The $0.3 million decrease is primarily due to the
expiration of a railroad rebate received for the use of a specific portion of
railroad by one of our lessees, which was paid in full in the fourth quarter of
2002.

Operating Costs and Expenses. Our
aggregate operating costs and expenses for the first quarter of 2003 were $7.2
million, compared with $3.5 million for the same period in 2002, an increase of
$3.7 million, or 105%. The increase in operating costs and expenses related
primarily to an increase in depreciation, depletion and amortization.

Operating expenses decreased by 5%,
to $0.8 million in the first quarter of 2003, compared with $0.9 million in the
same period of 2002. The decrease is due to a decrease in production on
our subleased properties, offset in part by costs to maintain an idle mine on
our Fork Creek property (see "Liquidity and Capital Resources").

Taxes other than income increased
$0.1 million, or 84%, to $0.3 million for the three months ended March 31, 2003,
compared with $0.2 million in the same period of 2002. The variance was
attributable to increased property taxes as a result of assuming the property
tax obligation on our Fork Creek property upon re-acquiring the lease from the
bankrupt lessee (see "Liquidity and Capital Resources") and an
increase in West Virginia franchise taxes relating to the Peabody and Upshur
Acquisitions.

General and administrative expenses
increased $0.3 million, or 17%, to $1.8 million in the first quarter of 2003,
from $1.5 million in the same period of 2002. The increase was primarily
attributable to additional expenses associated with the Peabody Acquisition and
an increase in insurance premiums.

Depreciation, depletion and
amortization for the three months ended March 31, 2003 was $4.2 million compared
with $0.9 million for the same period of 2002, an increase of 371%. This
increase is a result of higher depletion rates caused by higher cost bases
relative to reserves added as well as increased production, both of which relate
primarily to the Peabody and Upshur Acquisitions completed in the last half of
2002.

Interest Expense. Interest
expense was $0.8 million for the three months ended March 31, 2003, compared
with $0.4 million for the same period in 2002, an increase of $0.4 million, or
105%. The increase was due to long-term borrowings in connection with the
Peabody Acquisition and other acquisitions in 2002.

Interest Income. Interest
income was $0.3 million for the three months ended March 31, 2003, compared with
$0.5 million for the same period in 2002, a decrease of 40%. The decrease
was primarily due to the existence U.S. Treasury notes in the first quarter of
2002, which were liquidated in the last half of 2002.

Cumulative effect of change in accounting principle.
On January 1, 2003, we adopted SFAS No. 143, "Accounting
for Asset Retirement Obligations."
As a result of the adoption, we recognized a cumulative effect of accounting
change. See "Note 4. Asset Retirement Obligations" in the
notes to the consolidated financial statements.

Liquidity and Capital Resources

Prior to the closing of our initial public offering in October
2001, the Partnership satisfied its working capital requirements and funded its
capital expenditures with cash generated from operations and affiliated
borrowings. Since that time, cash generated from operations and our borrowing
capacity, supplemented with the issuance of new common units for the Peabody
Acquisition in December 2002, have been sufficient to meet our scheduled
distributions, working capital requirements and capital expenditures. Our
ability to continue to satisfy our debt service obligations, fund planned
capital expenditures, make acquisitions and pay distributions to our unitholders
will depend upon our future operating performance, which will be affected by
prevailing economic conditions in the coal industry and financial, business and
other factors. Some of these factors are beyond our control, including the
ability of our lessees to continue to make payments to us as required by our
leases with them.

Part of our strategy is to make
acquisitions which increase cash available for distribution to our unitholders.
Our ability to make these acquisitions in the future will depend in part on the
availability of debt financing and on our ability to periodically use equity
financing through the issuance of new units. Our ability to incur additional
debt is restricted due to limitations in our debt instruments. This limitation
may have the effect of necessitating the issuance of new units, as opposed to
using debt, to make acquisitions in the future.

Net cash provided by operating activities
was $8.4 million for the three months ended March 31, 2003 compared with $8.0
million for the 2002 comparable period. The increase was primarily due to
an increase in coal royalty income, offset by an changes in working capital,
interest expense and general and administrative expenses.

In November 2002, Horizon Resources,
Inc. (formerly AEI Resources, Inc.) ("Horizon") filed for bankruptcy
protection under Chapter 11 of the Code for the second time in nine months. To
date, Horizon has made all payments required under its leases. Although we
believe that Horizon will continue to make payments due under its leases with
us, we cannot be certain as to the timing or actual amount of revenues we will
receive under these leases. We are continuing to evaluate our business
alternatives with respect to the Horizon leases.

Net cash used in investing activities
was $1.1 million for the three months ended March 31, 2003 compared with $0.4
million for the same period in 2002. Capital expenditures in the first
three months of 2003 represent $1.3 million of cash used for the purchase of
property and equipment, primarily related to closing expenses related to the
Peabody Acquisition.

Net
cash used in financing activities was $7.5 million for the three months
ended March 31, 2003 compared with $5.3 million in 2002. Cash used in financing
activities in the first three months of 2003 consisted of $8.0 million in
distributions to unitholders representing a distribution of $0.50 per unit for
the quarter ended December 31, 2002.

Long-Term Debt. As of
March 31, 2003, we had outstanding borrowings of $92.4 million, consisting of
$2.5 million borrowed against our $50.0 million revolving credit facility and
$89.9 million attributable to our senior unsecured notes ($90.0 million offset
by $0.1 million fair value of interest rate swap.

Revolving Credit Facility. In
connection with the closing of our initial public offering in October 2001, we
entered into a three-year $50.0 million revolving credit facility (the
"Revolver") with a syndicate of financial institutions led by PNC
Bank, National Association, as their agent. The Revolver is available for
general partnership purposes, including working capital, capital expenditures
and acquisitions, and includes a $5.0 million distribution sublimit that is
available for working capital needs and distributions and a $5.0 million
sublimit for the issuance of letters of credit.

Indebtedness under the Revolver bears
interest, at our option, at either (i) the higher of the federal funds rate plus
0.50% or the prime rate as announced by PNC Bank, National Association or (ii)
the Euro-dollar rate plus an applicable margin which ranges from 1.25% to 1.75%
based on our ratio of consolidated indebtedness to consolidated EBITDA (as
defined in the credit agreement) for the four most recently completed fiscal
quarters. We will incur a commitment fee on the unused portion of the Revolver
at a rate per annum ranging from 0.40% to 0.50% based upon the ratio of our
consolidated indebtedness to consolidated EBITDA for the four most recently
completed fiscal quarters. The Revolver matures in October 2004. At that time,
it will terminate and all outstanding amounts thereunder will be due and
payable. We may prepay the Revolver at any time without penalty. We are required
to reduce all working capital borrowings under the working capital sublimit
under the Revolver to zero for a period of at least 15 consecutive days once
each calendar year.

The Revolver also contains financial
covenants requiring us to maintain ratios of:

not more than 2.50:1.00 of total debt to consolidated EBITDA;
and

not less than 4.00:1.00 of consolidated EBITDA to interest.

In March 2003, a $43.4 million
unsecured term loan (the "Term Loan"), which was part of our credit
facility, was repaid and retired, and is not available for future
borrowings. Part of the proceeds from our issuance of senior unsecured
notes, as described below, was used to repay the Term Loan.

We believe we are currently in compliance
with all of the covenants in the Revolver. Based primarily on the total
debt to consolidated EBITDA covenant and subsequent to our issuance of senior
unsecured notes as described below, available borrowing capacity under the
Revolver was approximately $17 million as of March 31, 2003.

The Notes prohibit us from making
distributions to unitholders and distributions in excess of available cash if
any potential default or event of default, as defined in the Notes, occurs or
would result from the distribution. In addition, the Notes contain various
covenants that are similar to those contained in the Revolver, with the
exception of the financial covenants, which for the Notes require us to maintain
ratios of:

not more than 3.00:1.00 of total debt to consolidated EBITDA;
and

not less than 3.50:1.00 of consolidated EBITDA to interest.

We believe we are in compliance
with all of the covenants of the Notes.

Hedging Activities.In
March 2003, we entered into an interest rate swap agreement with a notional
amount of $30 million, to hedge a portion of the fair value of the 5.77 percent
Notes maturing over a ten year period. This swap is designated as a fair value
hedge and has been reflected as a decrease of long-term debt of approximately
$0.1 million as of March 31, 2003, with a corresponding increase in accrued
expenses. Under the terms of the interest rate swap agreement, the counterparty
pays us a fixed annual rate of 5.77 percent on a total notional amount of $30
million, and we pay the counterparty a variable rate equal to the floating
interest rate which will be determined semi-annually and will be based on the
six month London Interbank Offering Rate plus 2.36 percent.

Excluding acquisitions, we believe
our sources of funding are sufficient to meet short- and long-term liquidity
needs not funded by cash flows from operations, including the payment of minimum
quarterly distributions to unitholders.

Legal and Environmental

Mountaintop
Removal Litigation. On January 29, 2003, the United States Fourth
Circuit Court of Appeals (the "Circuit Court") vacated an injunction
issued in May 2002 by the United States District Court for the Southern District
of West Virginia (the "District Court"). This injunction had
prohibited the Huntington, West Virginia office of the U.S. Army Corps of
Engineers (the "Corps") from issuing permits under Section 404 of the
Clean Water Act for the construction of valley fills for the disposal of coal
mining overburden. These valleys typically contain streams that, under the Clean
Water Act, are considered navigable waters of the United States. The District
Court had found that the Corp's permitting of overburden valley fills under
Section 404 was a violation of the Clean Water Act since Section 404 allows only
the permitting of fill material deposited for a beneficial purpose and not for
mere waste disposal such as the disposal of coal overburden. The Circuit Court
reversed this finding, concluding, instead, that overburden valley fills may be
permitted under Section 404 and remanded the case back to the District Court for
further proceedings not inconsistent with the Circuit Court's opinion.

Mine Health and Safety Laws. Stringent
safety and health standards have been imposed by federal legislation since the
adoption of the Mine Health and Safety Act of 1969. The Mine Health and Safety
Act of 1969 resulted in increased operating costs and reduced productivity. The
Mine Safety and Health Act of 1977, which significantly expanded the enforcement
of health and safety standards of the Mine Health and Safety Act of 1969,
imposes comprehensive safety and health standards on all mining operations. In
addition, as part of the Mine Health and Safety Acts of 1969 and 1977, the Black
Lung Acts require payments of benefits by all businesses conducting current
mining operations to coal miners with black lung and to some survivors of a
miner who dies from this disease. Since we do not operate any mines and do
not employ any coal miners, we are not subject to such laws and regulations.

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

With respect to our unleased and
inactive properties, we have some reclamation bonding requirements. In
conjunction with the November 2002 purchase of equipment, we assumed reclamation
and mitigation liabilities of approximately $3.0 million. We are currently
pursuing a potential lessee for this property and, as is customary in our
operations, we intend to assign all reclamation liabilities to such lessee. Our
environmental liability as of March 31, 2003 is not covered by our
indemnification agreement with Penn Virginia.

Recent Accounting Pronouncements

In November 2002, the FASB
issued Interpretation No. 45 ( FIN 45), Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of the Indebtedness
of Others, which clarifies the requirements of SFAS No. 5, Accounting for Contingencies,
relating to a guarantor's accounting for and disclosures of certain guarantees
issued. FIN 45 requires enhanced disclosures for certain guarantees. It also
will require certain guarantees that are issued or modified after December 31,
2002, including certain third-party guarantees, to be initially recorded on the
balance sheet at fair value. For guarantees issued on or before December 31,
2002, liabilities are recorded when and if payments become probable and
estimable. The financial statement recognition provisions are effective
prospectively, and the Partnership cannot reasonably estimate the impact of
adopting FIN 45 until guarantees are issued or modified in future periods, at
which time their results will be initially reported in the financial statements.

Item 3. Quantitative and Qualitative
Disclosures about Market Risk

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

In March 2002, we refinanced
$90.0 million of current amounts borrowed on our credit facility borrowings with
more permanent debt which has a fixed interest rate throughout its term. We
executed an interest rate derivative transaction for $30.0 million of the amount
refinanced to hedge the fair value of our unsecured senior notes. The
interest rate swap is accounted for as a fair value hedge in compliance with
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended by SFAS No. 137 and SFAS No. 138. The debt we incur
in the future under our credit facility will bear variable interest at either
the applicable base rate or a rate based on LIBOR.

We are also exposed to credit risk if
our lessees do not manage their operations well or if there is a significant
decline in coal prices. Lessees may not be able to pay their debts as they
become due or our coal royalty revenues could decrease due to decreased
production volumes. In the fourth quarter of 2002, one of our lessees filed for
bankruptcy under Chapter 11 of the Code for the second time in nine months.
There is no assurance this bankruptcy filing will not have an adverse impact on
our financial position or results of operations. In addition, one of our
lessees declared bankruptcy and idled mining operations on our Fork Creek
property in the first quarter of 2002. Consequently, in the fourth
quarter of 2002, we recovered our lease and are currently pursuing a potential
lessee for this 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. In addition, we and our representatives may from time to
time make other oral or written statements which are also forward-looking
statements.

Such
forward-looking statements include, among other things, statements regarding
development activities, capital expenditures, acquisitions and dispositions,
expected commencement dates of coal mining by the Partnership's lessees,
projected quantities of future coal production by the Partnership's lessees
producing coal from reserves leased from the Partnership, costs and
expenditures, and projected demand or supply for coal, all of which may affect
sales levels, prices and royalties realized by the Partnership.

These
forward-looking statements are made based upon management's current plans,
expectations, estimates, assumptions and beliefs concerning future events
impacting Penn Virginia Resource Partners, L.P. and, therefore, involve a number
of risks and uncertainties. The Partnership cautions that forward-looking
statements are not guarantees and that actual results could differ materially
from those expressed or implied in the forward-looking statements.

Important factors that could cause the actual results of operations or financial
condition of Penn Virginia Resource Partners, L.P. to differ materially from
those expressed or implied in the forward-looking statements include, but are
not limited to: the cost of finding new coal reserves; the ability to
acquire new coal reserves on satisfactory terms; the price for which such
reserves can be sold; the volatility of commodity prices for coal; the risks
associated with having or not having price risk management programs; the
Partnership's ability to lease new and existing coal reserves; the ability of
lessees to produce sufficient quantities of coal on an economic basis from the
Partnership's reserves; the ability of lessees to obtain favorable contracts for
coal produced from the Partnership's reserves; competition among producers in
the coal industry generally and in Appalachia in particular; the extent to which
the amount and quality of actual production differs from estimated mineable and
merchantable coal reserves; unanticipated geological problems; availability of
required materials and equipment; the occurrence of unusual weather or operating
conditions including force majeure events; the failure of equipment
or processes to operate in accordance with specifications or expectations;
delays in anticipated start-up dates of coal mining by the Partnership's
lessees; environmental risks affecting 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;
uncertainties in the coal industry relating to the outcome of mountaintop
removal litigation and issues regarding coal truck weight restriction
enforcement and legislation; risks and uncertainties relating to general
domestic and international economic (including inflation and interest rates) and
political conditions; the experience and financial condition of the
Partnership's lessees, including their ability to satisfy their royalty,
environmental, reclamation and other obligations to the Partnership and others;
changes in financial market conditions; and other risk factors detailed in the
Partnership's Securities and Exchange commission filings. Many of such factors
are beyond the Partnership's ability to control or predict. Readers are
cautioned not to put undue reliance on forward-looking statements.

While the
Partnership periodically reassesses material trends and uncertainties affecting
the Partnership's results of operations and financial condition in connection
with the preparation of Management's Discussion and Analysis of Results of
Operations and Financial Condition and certain other sections contained in the
Partnership's quarterly, annual or other reports filed with the Securities and
Exchange Commission, the Partnership does not undertake any obligation to review
or update any particular forward-looking statement, whether as a result of
new information, future events or otherwise.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and
Procedures:

Within the 90 day period
prior to the filing date of this Quarterly Report on Form 10-Q, the Partnership,
under the supervision, and with the participation, of its management, including
its principal executive officer and principal financial officer, performed an
evaluation of the design and operation of the Partnership's disclosure controls
and procedures (as defined in Securities and Exchange Act Rule 13a-14(c)).
Based on that evaluation, the Partnership's principal executive officer and
principal financial officer concluded that such disclosure controls and
procedures are effective to ensure that material information relating to the
Partnership, including its consolidated subsidiaries, is accumulated and
communicated to the Partnership's management and made known to the principal
executive officer and principal financial officer, particularly during the
period for which this periodic report was being prepared.

(b) Changes in Internal Controls

No significant changes were made in
the Partnership's internal controls or in other factors that could significantly
affect these controls subsequent to the date of the evaluation described in Item
4(a).

PART II Other information

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

Item 6. Exhibits and Reports on Form 8-K

(a)
Exhibits

99.1
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002

99.2
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002

(b)
Reports on Form 8-K:

On January 2, 2003, the Partnership filed a Form 8-K involving the Partnership's
acquisition of approximately 120 million tons of coal reserves and related
assets from subsidiaries of Peabody Energy Corporation (the "Peabody
Acquisition"). This Form 8-K was filed under "Item 2.
Acquisition or Disposition of Assets." The Partnership filed a Form
8-K/A on April 22, 2003 amending this Form 8-K. The Partnership filed an
additional Form 8-K/A on April 22, 2003 amending a Form 8-K which the
Partnership had filed on December 20, 2002 which had also been with regards to
the Peabody Acquisition.

On each of January 7, 2003 and January 14, 2003, the Partnership filed a Form
8-K involving the election of a director to the Board of Directors of its
general partner. In each case, the Form 8-K was filed under "Item 5.
Other Events and Required FD Disclosure."

On April 2, 2003, the Partnership filed a Form 8-K involving its private
placement of $90 million of senior unsecured notes. This Form 8-K was
filed under "Item 5. Other Events and Required FD Disclosures."

The Partnership filed a Form 8-K on May 8, 2003 announcing it issued a press
release regarding its financial results for the three months ended March 31,
2003.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.



PENN VIRGINIA RESOURCE PARTNERS, L.P.


Date:	May 9, 2003	By:	/s/ Frank A. Pici
			Frank A. Pici, Vice President and
			Chief Financial Officer



Date:	May 9, 2003	By:	/s/ Forrest W. McNair
			Forrest W. McNair, Vice President and
			Controller

CERTIFICATIONS

I, A. James Dearlove, Chief Executive
Officer of Penn Virginia Resource GP, LLC, general partner of Penn Virginia
Resource Partners, L.P. (the "Registrant"), certify that:

1. I have reviewed
this quarterly report on Form 10-Q of the Registrant;

2. Based on my
knowledge, this quarterly report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly report;

3. Based on my
knowledge, the financial statements, and other financial information included in
this quarterly report, fairly present in all material respects the financial
condition, results of operations and cash flows of the Registrant as of, and
for, the periods presented in this quarterly report;

4. The Registrant's
other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) for the Registrant and we have:

a) designed such disclosure controls and
procedures to ensure that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this quarterly report is
being prepared;

b) evaluated the effectiveness of the
Registrant's disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the "Evaluation
Date"); and

c) presented in this quarterly report our
conclusions about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;

5. The Registrant's
other certifying officer and I have disclosed, based on our most recent
evaluation, to the Registrant's auditors and the audit committee of Registrant's
board of directors:

a) all significant deficiencies in the
design or operation of internal controls which could adversely affect the
Registrant's ability to record, process, summarize and report financial data and
have identified for the Registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that
involves management or other employees who have a significant role in the
Registrant's internal controls; and

6. The Registrant's
other certifying officers and I have indicated in this quarterly report whether
or not there were significant changes in internal controls or in other factors
that could significantly affect internal controls subsequent to the date of our
most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Date: May 9, 2003

/s/ A. James Dearlove


A. James Dearlove


Chief Executive Officer

I, Frank A. Pici, Vice President and
Chief Financial Officer of Penn Virginia Resource GP, LLC, general partner of
Penn Virginia Resource Partners, L.P. (the "Registrant"), certify
that:

1. I have reviewed
this quarterly report on Form 10-Q of the Registrant;

a)
designed such disclosure controls and procedures to ensure that material
information relating to the Registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;

b)
evaluated the effectiveness of the Registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c)
presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The Registrant's
other certifying officer and I have disclosed, based on our most recent
evaluation, to the Registrant's auditors and the audit committee of Registrant's
board of directors:

b) any fraud, whether or not material, that
involves management or other employees who have a significant role in the
Registrant's internal controls; and

Date: May 9, 2003__

/s/ Frank A. Pici


Frank A. Pici


Vice President and Chief Financial Officer

Basic and diluted net income per unit is determined by dividing net income, after deducting the general partner's 2% interest, by the weighted average number of outstanding common units and subordinated units. At March 31, 2003, there were no potentially dilutive units outstanding.

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

Three Months Ended March 31,

Operating income

Interest expense

Interest income and other

Income before cumulative effect of change in accounting principle

Cumulative effect of accounting change for asset retirement obligations

Net Income

CERTIFICATIONS

Basic
and diluted net income per unit is determined by dividing net income, after
deducting the general partner's 2% interest, by the weighted average number of
outstanding common units and subordinated units.

At March 31, 2003, there were no potentially dilutive units outstanding.

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

Three
Months

Ended March 31,

Income before cumulative effect of change in accounting
principle

Cumulative
effect of accounting change for asset retirement obligations