Penn Virginia Corporation Announces Capital Expenditures Budget and Provides Initial Guidance for 2011

17.12.2010  |  Business Wire

Penn Virginia Corporation (NYSE: PVA) today announced a 2011 capital
expenditures budget of $290 million and also provided initial full-year
2011 guidance.

The 2011 capital budget is approximately 40 percent lower than expected
2010 capital expenditures of $475 million due primarily to a weak
natural gas price environment and outlook. We intend to focus 2011
capital spending on higher-return play types that are oily or liquids
rich and to defer drilling of the gassier, and largely
held-by-production, Haynesville Shale and Cotton Valley in east Texas
and Selma Chalk in Mississippi. We expect to fund our capital spending
program entirely by internally generated cash flows and over $500
million of financial liquidity at the beginning of 2011, comprised of
cash on hand, committed availability under our revolving credit facility
($300 million) and an additional $120 million of borrowing base
availability.

A. James Dearlove, President and Chief Executive Officer said, 'We have
adjusted our capital spending plans to reflect changing market
conditions while continuing to provide production and reserve growth. We
believe that our program for 2011 provides new growth opportunities,
which will meaningfully increase our oil and liquids production and
allow us to succeed in the current commodity price environment.?

The capital budget includes approximately $240 million of development
and exploratory drilling and completion expenditures, mostly associated
with horizontal drilling, approximately $25  million for leasehold
acquisition and approximately $18 million for geological and geophysical
expenditures. Capital expenditures in 2011 will primarily target the
Granite Wash and other play types in Oklahoma, the Eagle Ford Shale in
South Texas and the Marcellus Shale in Pennsylvania. Approximately
$212  million, or 73 percent of the capital budget, relates to oily and
liquids rich play types, and we expect that oil and liquids production
will constitute 25 to 30 percent of our expected 2011 production, a
significant increase from the approximately 17 to 18 percent oil and
liquids contribution to production expected in 2010.

We anticipate 2011 production will range between 50.0 and 54.0 billion
cubic feet of natural gas equivalent ('Bcfe?), as compared to 2010
production guidance of 46.5 to 47.5  Bcfe, an 11 percent increase between
the midpoints of the guidance ranges. Due to natural declines in
production from the Haynesville Shale, Cotton Valley and Selma Chalk,
and given that we expect initial production contributions from the Eagle
Ford Shale and Marcellus Shale to begin in mid-2011, we expect the
majority of 2011 production will occur in the second half of the year.
Furthermore, we expect the large majority of the year-over-year
production increase to come from the Granite Wash play in the
Mid-Continent region.

The capital budget assumes base NYMEX (New York Mercantile Exchange)
commodity prices of $4.25 per million British thermal units (MMBtu) for
natural gas and $80.00 per barrel for crude oil. We have hedged
approximately 40 percent and 12  percent of the respective midpoints of
expected 2011 natural gas and crude oil production at weighted average
floor and ceiling prices of $5.37 to $6.98 per MMBtu and approximately
$80 to $102 per barrel.

The 2011 capital budget reflects the anticipated drilling of up to 91
(38.8 net) wells in the following areas:

• Mid-Continent - approximately $127 million to drill 65 (19.2
  net) wells, including 55 (16.0 net) horizontal Granite Wash wells, 32
  (12.3 net) of which will be drilled in the South Clinton Field and
  23  (3.7 net) of which will be drilled in new Granite Wash prospect
  areas, as well as 10 (3.2 net) wells targeting other formations;
  
• South Texas - approximately $54 million to drill 12 (9.6 net)
  horizontal Eagle Ford Shale wells in Gonzales County; and
  
• Appalachia - approximately $56 million to drill 14 (10.1 net)
  horizontal Marcellus Shale wells in Potter and Tioga Counties,
  Pennsylvania.
  

Guidance for 2010 and 2011

See the Guidance Table included in this release for guidance estimates
for full-year 2010 and 2011. These estimates, including capital
expenditure plans, are meant to provide guidance only and are subject to
revision dependent upon operational results and changes in market
conditions.

Penn Virginia Corporation (NYSE: PVA) is an independent natural gas
and oil company focused on the exploration, acquisition, development and
production of reserves in onshore regions of the U.S., including
Oklahoma, Texas, the Appalachian Basin and Mississippi.

For more information, please visit our website at www.pennvirginia.com.

Certain statements contained herein that are not descriptions of
historical facts are 'forward-looking? statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. Because such
statements include risks, uncertainties and contingencies, actual
results may differ materially from those expressed or implied by such
forward-looking statements. These risks, uncertainties and contingencies
include, but are not limited to, the following: the volatility of
commodity prices for natural gas, natural gas liquids, or NGLs, and
crude oil; our ability to access external sources of capital;
uncertainties relating to the occurrence and success of capital-raising
transactions, including securities offerings and asset sales; reductions
in the borrowing base under our revolving credit facility; our ability
to develop and replace oil and gas reserves and the price for which such
reserves can be acquired; any impairment write-downs of our reserves or
assets; reductions in our anticipated capital expenditures; the
relationship between natural gas, NGL and crude oil; the projected
demand for and supply of natural gas, NGLs and crude oil; the
availability and costs of required drilling rigs, production equipment
and materials; our ability to obtain adequate pipeline transportation
capacity for our oil and gas production; competition among producers in
the oil and natural gas industry generally; the extent to which the
amount and quality of actual production of our oil and natural gas
differ from estimated proved oil and gas reserves; operating risks,
including unanticipated geological problems, incidental to our business;
the occurrence of unusual weather or operating conditions including
force majeure events; delays in anticipated start-up dates of our oil
and natural gas production; environmental risks affecting the drilling
and producing of oil and gas wells; the timing of receipt of necessary
governmental permits by us; hedging results; accidents; changes in
governmental regulation or enforcement practices, especially with
respect to environmental, health and safety matters; risks and
uncertainties relating to general domestic and international economic
(including inflation, interest rates and financial and credit markets)
and political conditions (including the impact of potential terrorist
attacks); and other risks set forth in our Annual Report on Form 10-K
for the fiscal year ended December 31, 2009.

Additional information concerning these and other factors can be found
in our press releases and public periodic filings with the SEC,
including our Annual Report on Form 10-K for the year ended December 31,
2009. Many of the factors that will determine our future results are
beyond the ability of management to control or predict. Readers should
not place undue reliance on forward-looking statements, which reflect
management′s views only as of the date hereof. We undertake no
obligation to revise or update any forward-looking statements, or to
make any other forward-looking statements, whether as a result of new
information, future events or otherwise.

We estimate that, excluding the derivative positions described above,
for every $1.00 per MMBtu increase or decrease in the natural gas price,
operating income for 2011 would increase or decrease by approximately
$39.5 million. In addition, we estimate that for every $10.00 per barrel
increase or decrease in the crude oil price, operating income for 2011
would increase or decrease by approximately $8.5 million. This assumes
that crude oil prices, natural gas prices and inlet volumes remain
constant at anticipated levels. These estimated changes in operating
income exclude potential cash receipts or payments in settling these
derivative positions.