So here Penn Virginia Resource Partners (NYSE:PVR) sits, down about 5% today after announcing earnings last night. With all due respect to management and current shareholders, that suits me just fine. I inexplicably missed my chance to buy shares on the dip from the early February coal panic, and I'm bird-dogging this one in the hopes of getting another second chance.
This stock is really all about making a solid total return (that is, income from distributions and capital gains) from the underlying strength in the coal and natural gas markets. So with that in mind, I don't particularly care about one quarter's performance. But since I know some of you do, here you go ...
Distributable cash flow was up 54% from last year and up about 17% on a sequential basis. As this is the number that management really looks to when determining payouts, it's the one I pay a lot of attention to. That said, management elected to keep the distribution the same this quarter (adjusted for the stock split).
In the coal business, operating income was up 39%, as the company saw production jump about 15% (mostly flat on a sequential basis) and royalties rise about 8% per ton. Keep in mind, Penn Virginia doesn't mine coal -- it effectively leases the right for others to do so and collects a per-ton royalty for it.
On the gas side, there was good news and there was confusing news. Inlet volumes were strong, and that's good news. The company is still sorting through some problems with the business, though, and opted to take a sizable ($4.6 million) non-cash charge to account for an account for which it cannot fully account. This, obviously, is confusing news. If you look past this charge, though, the processing margin looked quite appealing.
As it is, Penn Virginia is pretty close to a price that I'd consider good enough for a buy. Granted, there are many other coal investment options. Foundation Coal (NYSE:FCL) and James River (NASDAQ:JRCC) come to mind, as well as more income-oriented ideas like Natural Resource Partners (NYSE:NRP), Canada's metallurgical coal specialist Fording (NYSE:FDG), and Alliance Resource Partners (NASDAQ:ARLP).
In other words, there's no shortage of options. Do your due diligence carefully, and maybe one of these will pop up as an intriguing prospect.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
