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PVR Partners L.P. announced first-quarter 2013 earnings per unit of 8 cents, beating the Zacks Consensus Estimate by a penny. However, quarterly earnings were 12 cents lower than the year-ago level.

First Quarter Operational Update

PVR Partners posted first-quarter 2013 revenues of $263.4 million, surpassing the Zacks Consensus Estimate by $3.4 million. Reported revenues increased 6.9% year over year primarily due to a strong contribution from the natural gas business, and improvement in collection of trunkline and gathering fees.

PVR Partners’ total expenses decreased 32.1% year over year to $232.1 million primarily due to the absence of impairments. In addition, a drop in the cost of gas purchased and operating costs was also attributable for the decline. These positives were partially offset by increases in general and administrative expenses as well as depreciation, depletion and amortization expenses.

The partnership’s adjusted earnings before interest, tax, depreciation and amortization (EBITDA) increased 43.4% year over year to $76.0 million.

Segmental Highlights

Eastern Midstream Segment: Revenues surged 281.7% year over year to nearly $43.9 million, in the reported quarter. This can be attributed to a 306.6% year-over-year increase in average throughput volumes to 1,228 million cubic feet per day (MMcfd) owing to an expansion of the partnership’s existing systems, and acquisition as well as expansion of Chief Gathering LLC.

Midcontinent Midstream Segment: Revenues from this segment witnessed a 2.8% year-over-year decline to $190.1 million. The decline was primarily due to an 11.5% year-over-year decrease in average throughput volumes to 391 MMcfd and impacts of sale of the Crossroads system.

Coal and Natural Resource Management Segment: This division posted revenues of nearly $29.4 million, dropping 25.4% year over year. This was primarily due to a decline in coal royalty volumes and lower coal pricing.

Financial Condition

Cash and cash equivalents of the partnership as of Mar 31, 2013, were $13.0 million, down from $14.7 million as of Dec 31, 2012.

The partnership’s cash flow from operating activities during the first three months of 2013 was $79.4 million, higher than $45.2 million in the year-ago comparable period.

During the quarter, PVR Partners invested $90.1 million in its internal growth projects, primarily in the Eastern Midstream Segment.

Quarterly Distribution

The board of directors announced a quarterly cash distribution of 55 cents per unit, up 5.8% year over year. It will be paid on May 14, 2013, to common unitholders of record as of May 8.

Guidance

PVR Partners projects adjusted EBITDA in the band of $190–$230 million for the Eastern Midstream Segment, $70–$80 million for the Midcontinent Midstream Segment and $75–$85 million for the Coal and Natural Resource Management Segment.

Other Company Releases

DCP Midstream Partners LP (DPM - Snapshot Report) is slated to release its first quarter earnings on May 6. The Zacks Consensus Estimate is 63 cents.

Oiltanking Partners L.P. (OILT - Snapshot Report) is slated to release its first quarter earnings on May 8. The Zacks Consensus Estimate is 41 cents.

SemGroup Corporation (SEMG - Snapshot Report) is slated to release its first quarter earnings on May 8. The Zacks Consensus Estimate is 38 cents.

Our Take

In the first quarter of 2013, PVR Partners reported favorable results primarily on the back of strong contribution from the Eastern Midstream Segment. In addition, the partnership’s steady effort toward expansion of its array of assets through organic as well as inorganic ways is also appreciable.

The partnership is still having a strong projects pipeline, including building of a new compressor facility and central delivery point on the Wyoming County Trunkline. We believe these upcoming projects will boost the partnership’s presence in the market as well as improve its future performance.

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

PVR Partners L.P. currently has a Zacks Rank #3 (Hold).

Radnor, PA-based PVR Partners L.P. owns and operates a string of natural gas midstream pipeline systems and processing plants and is also involved in the management of coal as well as natural gas properties.

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