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BB&T Conference 3/29/12

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  • 1. BB&T Commercial & Industrial Conference March 29, 2012energystrengthopportunity
  • 2. AGENDA ► Overview and Key Investment Highlights ► Natural Gas Midstream Business ► Coal and Natural Resource Management Business ► Financial Overview ► QuestionsBB&T Conference - 3/29/2012 2
  • 3. Forward Looking Statements This presentation includes "forward-looking statements” within the meaning of federal securities laws. All statements, other than statements of historical facts, included in this presentation that address activities, events or developments that the Partnership expects, believes or anticipates will or may occur in the future are forward-looking statements. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties, factors and risks, many of which are outside the Partnerships ability to control or predict, which could cause results to differ materially from those expected by management. Such risks and uncertainties include, but are not limited to, regulatory, economic and market conditions, the timing and success of business development efforts and other uncertainties. Additional information concerning these and other factors can be found in our press releases and public periodic filings with the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2011 and most recently filed Quarterly Reports on Form 10-Q. 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.BB&T Conference - 3/29/2012 3
  • 4. BB&T Conference - 3/29/2012 4
  • 5. PVR – Delivering Results ► Separation from PVA  Dedicated management focused on PVR ► Simplified Partnership Structure / GP Merger  Reduced cost of capital ► Strengthened Financial Capacity to Support Growth  Senior notes  Expanded revolver with improved terms  Successful equity offering ► Executing on Marcellus Potential  Lycoming County System – Phases I and II completed and in service – Phase III construction scheduled to start spring 2012 (ROW optioned/purchased)  Fresh water delivery pipeline (JV with Aqua America) – first section in service  Expansion/extension of Wyoming system on-going ► Strategic Midstream and Coal Asset Acquisitions  Antelope Hills, Middle Fork (Begley), Oatsville Reserves ► Resumption of Growth of Cash Distributions  Increased quarterly distribution by $0.01 each of last four quarters Strong Positive Partnership MomentumBB&T Conference - 3/29/2012 5
  • 6. PVR – 10 Years of Growth ► Initial Public Offering: 10/25/01 ► 10 Year Results for IPO Investor: (Results at 10/25/11 assuming distribution reinvestment )  Initial investment of $21.00 worth > $110  427% total return  18% annual compounded return ► Current yield on original investment: > 40%  Would own 4.1328 units as of 10/25/11  $0.51 / unit distribution paid 2/13/12 ($2.04 annualized)BB&T Conference - 3/29/2012 6
  • 7. Key Investment Highlights Diversified Portfolio of Midstream Assets and Coal Reserves Simplified Capital Structure to Enhance Growth Potential Midstream Business with Excellent Organic Growth Opportunities Stable and Predictable Coal Royalty Business Stable Cash Flows and Distribution Coverage Strong, Simple Balance Sheet with Ample Liquidity Well Positioned to Capitalize on Partnership Momentum & Industry TrendsBB&T Conference - 3/29/2012 7
  • 8. Simplified Partnership Structure PVR / PVG merger: Public Unitholders ► Simplified structure 79.0 Million Common Units  Non-economic GP interest ► Elimination of incentive 100% LP interest 100% distribution rights LLC interest  No “high splits” Penn Virginia Penn Virginia ► Reduced cost of capital Resource Partners, L.P. (NYSE: PVR) Resource GP, LLC ► Reduced corporate costs ► Enhanced investor and Non-economic GP interest market profile PVR Finco LLC  Increased float and trading liquidity ► Improved governance PVR  Unitholders gain right to PVR Coal Operations Midstream Operations elect all directorsBB&T Conference - 3/29/2012 8
  • 9. Business Segments Natural Gas Midstream Coal & Natural Resource Management ► Traditional gathering and processing business ► Coal royalty business, not coal mining ► Assets are located in attractive natural gas ► Managed coal properties since 1882 basins with long-lived reserves ► Controls approximately 900 MM tons of high  4,400+ miles of pipelines quality coal reserves (~23 year R/P ratio)  7 processing facilities ► Long-term leases with experienced operators  480 MMcfd of capacity ► Cash flows naturally hedged with multi-year ► Average throughput volume: 595 MMcfd contracts between producers and end users (2012 Q4) ► Ancillary businesses include coal services, ► Attractive fee-based organic growth timber and gas royalties opportunities in Marcellus ShaleBB&T Conference - 3/29/2012 9
  • 10. Strategically Located Assets Natural Gas Midstream Coal & Natural Resource Management ► Gathering systems located in major gas basins ► Coal reserves located in major supply basins ► Oklahoma and Texas reserves include plays in ► Access to major coal hauling railroads and inland Granite Wash and liquids-rich production basins waterways ► Significant fee-based growth potential from Marcellus Shale ► Close proximity to power generation facilities Marcellus Powder River Basin Northern & Central San Juan Basin Appalachia Illinois Basin Texas & OklahomaBB&T Conference - 3/29/2012 10
  • 11. Midstream Business: Managed Growth► Management focused on Volumes by Contract continued reduction of commodity 2004 4Q 2011 price risk by:  Pursuing system expansions backed by Fee- fee-based contracts Based Fee- 14% Percent of Based Percent of  Converting a portion of the existing Proceeds 33% Proceeds keep-whole contracts to fee-based or 34% Keep- 55% POP Whole Keep- 52% Whole  Acquiring fee-based businesses 12%  Many gas purchase / keep-whole contracts contain fee-based components or a processing fee floor Midstream Throughput Volume► Significant organic growth 700 potential: 600  Anticipate investing in $200-$250 million during 2012 Volume - MMcfd 500 – Granite Wash (plant / new connections) 400 – Marcellus Shale (fee-based) 300  Potential opportunities over next 3-5 200 years in excess of $500 million 100 0 2006 2007 2008 2009 2010 2011 2011 Q4BB&T Conference - 3/29/2012 11
  • 12. Coal Royalty Business: Stable Cash Flow Coal Royalty vs. Coal Operator Average Coal Royalties vs. Spot Prices► Coal royalty – not a coal mining operation $7 $140 Characteristic Coal Royalty Coal Operator $6 $120 Operating Margins High Variable Average Royalty Per Ton $5 $100 Spot Price ($/Ton) Cash Flow Stability High Variable $4 $80 Reinvestment Medium High Requirements $3 $60 Social Costs (e.g. benefits, Low High black lung) $2 $40 Reclamation Exposure Low High $1 Central Appalachia Illinois Basin $20 CAPP Spot Price IB Spot Price $0 $0► Majority of our royalty payments (~80%) are based Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 on the higher of a percentage of the gross sales price or a fixed price per ton► Contracts with our lessees are long-term, with an average life of 10 – 15 years► Substantially all leases require minimum payments even if no mining activities are ongoing► No direct exposure to mine operating costs and risks or reclamation costs► Our lessees generally sell their coal to end users under long-term fixed-price contractsBB&T Conference - 3/29/2012 12
  • 13. Conservatively Financed, Low-Risk Growth ► Historical growth fueled by strong margins, organic growth opportunities and acquisitions  Recent organic growth in midstream  Recent acquisition growth primarily coal and natural resource assets ► Completed acquisitions in excess of $1.3 billion since IPO in 2001  No single acquisition > $200 million ► Midstream throughput volumes have almost tripled since 2006 ► Coal reserves have increased by >80% since 2001; Annual production volume has increased by >150% ► Raised approximately $575 million of equity since IPO in 2001 EBITDA(1) Growth with Conservative Leverage $300 4.0x EBITDA Debt / EBITDA 3.5x $250 3.0x EBITDA(1) ($ Millions) $200 (1) 2.5x Debt / EBITDA $150 2.0x 1.5x $100 1.0x $50 0.5x $0 0.0x 2007 2008 2009 2010 2011(1) EBITDA is a non-GAAP financial measure. See Appendix for a reconciliation of EBITDA to net income and cash flow from operations. BB&T Conference - 3/29/2012 13
  • 14. BB&T Conference - 3/29/2012 14
  • 15. Natural Gas Midstream Overview Gathering Processing 2011 System Pipeline Capacity Volume Thunder Creek Marcellus (Miles) (MMcfd) (MMcfd) Panhandle 1,964 280 316 Marcellus 17 N/A 74 Crescent 1,708 40 22 Arkoma 78 N/A 10 Crescent North Texas 135 N/A 13 Panhandle Crossroads 8 80 52 (Granite Wash) Arkoma Hamlin Hamlin 516 20 7 Crossroads Thunder North Texas 537 N/A 351 Creek (25% JV)(1) Data as of 12/31/2011 and does not include Antelope Hills capacity expansion. Totals do not include Thunder Total (1) 4,426 420 495 Creek. Pipeline miles and volume totals may not foot due to individual system rounding. BB&T Conference - 3/29/2012 15
  • 16. Well Positioned Asset Base ► Our assets are well positioned to benefit from increasing activity in active resource plays with low well breakeven costs:  Marcellus Shale  Granite Wash ► Attractive midstream processing economics are expected to persist Lower 48 States On-Shore Gas Production Frac Spread $20 25 Oil Associated Coalbed Methane NGL $/MMBtu Shale Gas Conventional $18 Gas $/MMBtu 20 $16 Frac Spread $14Trillion Cubic Feet 15 $12 Shale gas drives future production growth $10 10 $8 $6 5 $4 $2 0 2012 2008 2010 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 $0 Apr-09 Apr-10 Apr-11 Oct-09 Oct-10 Oct-11 Jan-09 Jan-10 Jan-11 Jan-12 Jul-09 Jul-10 Jul-11 Source: Energy Information Agency BB&T Conference - 3/29/2012 16
  • 17. $ / MMBtu $0 $2 $4 $6 $8 $10 $12 Piceance Eagle Ford Shale Source: Credit Suisse Granite Wash HorizontalBB&T Conference - 3/29/2012 Haynesville Shale (core) Marcellus Shale Horizontal PVR midstream basins in the US Huron Shale of the 5 lowest cost operations focus on 2 Barnett Shale Fayetteville Shale Powder River Pinedale Anticline Haynesville East Texas Woodford Shale Uinta Basin Basin Breakeven NYMEX natural gas prices for 10% after tax IRR. Includes direct drilling plus acreage costs Piceance Basin Marcellus Shale Vertical Cotton Valley Sands US Average Western Natural Gas Well Breakeven Costs Oklahoma Powder River Basin Barnett Shale Western17
  • 18. Panhandle System (Granite Wash) Overview & Statistics ► Gathering systems in the Anadarko Basin of Texas and Oklahoma ► 1,964 miles of pipeline with 43 compressor stations ► 4 Processing Plants with 280 MMcfd of total inlet capacity  Beaver: 100 MMcfd  Spearman: 100 MMcfd  Sweetwater: 60 MMcfd  Antelope Hills: 80 MMcfd – Acquired June 2011 w/20 MMcfd capacity – 60 MMcfd capacity in service Q1 2012 – Additional 60 MMcfd expansion under construction / expected on-line mid-2012 ► More than 260 producers pursuant to more than 360 contracts ► Positioned to capitalize on the development of the Granite WashBB&T Conference - 3/29/2012 18
  • 19. Marcellus Systems Overview ► Rapidly developing, strategically located shale play with favorable economics  Two systems in operation (Lycoming County and Wyoming County)  Optioned 28 miles of right-of-way in Susquehanna County for future development ► PVR provides gathering, compression & related services  100% fee-based - firm reservation charges ($20 million in 2011) provide a floor on returns  Additional volumetric fees based upon actual deliveries ► Capital Investment: 2011 Actual - $122 Million; 2012 Budget: $80-90 MillionBB&T Conference - 3/29/2012 19
  • 20. Marcellus Systems Lycoming System Wyoming System ► Lycoming West System ► Began service June 2010  First large-diameter gathering system in north-central PA Marcellus fairway ► 12-inch pipeline / 154 MMcfd  30-inch pipeline / 850 MMcfd capacity capacity  Phase II began service in February 2012 ► Currently constructing system  Phase III construction – spring/summer 2012 extensions to service additional ► Fresh water pipeline (JV with Aqua) to supply producers local producers Completed or Under Future Expansion Phase III Construction Construction 2012 Phase I In Service Feb ‘11 Phase II In Service Feb ‘12BB&T Conference - 3/29/2012 20
  • 21. Natural Gas Midstream – Other Systems Crossroads Crescent Hamlin► Located in the southeast portion of ► Gathering system in Oklahoma’s ► Gathering system stretching over Harrison County, Texas Sooner Trend eight West Central Texas counties► Anchored by a long-term ► Consists of 1,708 miles of pipeline ► 516 miles of gathering pipeline commitment under a fee-based and 14 related compressor stations ► 20 MMcfd cryogenic processing arrangement ► 40 MMcfd cryogenic processing plant located in Fisher County,► 80 MMcfd cryogenic processing plant Texas plant ► Wells are generally low-volume and► Centered around 5 major producers long-lived with large NGL quantities ► Production is from associated gas► Gas production is associated gas ► Production is associated gas from from the Cotton Valley, Lower the Tonkawa and Mississippian Bossier and Haynesville formations Lime Formations North Texas Arkoma Thunder Creek Gas Services► Gas gathering and transportation ► Consists of three separate stand- ► Located in Wyoming’s Powder assets in the Barnett Shale play alone gathering systems in River Basin in the Fort Worth Basin southeastern Oklahoma’s ► 25% JV interest (Devon Energy► 135 miles of gathering pipeline Arkoma Basin owns the other 75% interest)► Approximately 240,000 ► Two systems are 100% owned, ► 100% fee-based gathering and dedicated acres third system is 49% owned treating► 100% fee-based revenues ► Average 2011 throughput ► 2011 volume: 351 MMcfd volume of 10 MMcfd ► Production is from coal bed methane with potential new volumes from the Niobrara formationBB&T Conference - 3/29/2012 21
  • 22. BB&T Conference - 3/29/2012 22
  • 23. Coal: Attractive Industry Fundamentals EIA(1) forecasts that coal: U.S. Energy Supply Composition By Primary Source 120  Usage will continue to increase for next 25 100 Other BTUs (Quadrillions) years 80 Natural Gas 60  Will continue to be the dominant fuel for 40 Liquid Fuels electric power generation in the U.S. 20 Coal 0  Will retain its cost advantage as the 2026 2030 2008 2010 2012 2014 2016 2018 2020 2022 2024 2028 2032 2034 cheapest energy source U.S. Electrical Generation By Fuel Type Energy Prices (2) 6,000 30 2009 dollars per million Btu 5,000 25KWH (billions) 4,000 Other 20 Nuclear Fuel Oil 3,000 15 Natural Gas 2,000 Petroleum 10 Natural Gas 1,000 Coal 5 Steam Coal 0 0 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 (1) Annual Energy Outlook 2011 (March 2011), Energy Information Administration (EIA) (2) Prices paid for energy by Electric Generation Sector as reported by EIA BB&T Conference - 3/29/2012 23
  • 24. Coal & Natural Resource Management Proven / 2011 Lease R/P Probable Region Production Ratio (MM tons) Reserves (years) (MM tons) Northern 3.9 25.9 6.6 Appalachia Central 19.7 663.9 33.7 Appalachia Illinois 4.7 184.2 39.2 Basin San Juan 10.1 19.3 1.9 Basin Total 38.4 893.3 23.3BB&T Conference - 3/29/2012 24
  • 25. Coal – Operations Royalties by Region (1) Reserves by Region (1) Reserves by Type (1) Northern Northern Appalachia 5% Appalachia 3% Metallurgical Illinois Illinois Basin 11% Basin 8% 21% San Juan San Juan Basin Basin 14% 2% Central Central Appalachia Appalachia Steam 73% 74% 89% Changes in Coal Reserves Coal Production 893 50 Central Appalachia San Juan Basin 1,000 Illinois Basin Northern Appalachia 800 40(Millions of Tons) 600 (Millions of Tons) 30 708 400 20 311 200 496 10 0 Reserves Production Acquired 0 10/25/01 10/25/01 - 12/31/11 10/25/01 - 12/31/11 2005 2006 2007 2008 2009 2010 2011 1) Data for year ending 12/31/2011 BB&T Conference - 3/29/2012 25
  • 26. Primary Coal Basins Central Appalachia Illinois Basin► 74% Of Reserves ► 21% Of Reserves► Surface and underground mines located in ► Properties in southern Illinois and western Kentucky KY, TN, VA and WV ► Installation of scrubbers by Eastern and Midwestern► Coal is high BTU, high quality, lower sulfur utilities has increased demand for the high sulfur► Proximity to East Coast ports make these mines an coal in the Illinois Basin ideal source of exportsBB&T Conference - 3/29/2012 26
  • 27. Other Coal Basins Northern Appalachia San Juan Basin► 3% of Reserves ► 2% of Reserves► Northern Appalachia holdings consist of the Federal ► Our Lee Ranch property is located in the San Juan and Upshur properties in northern WV Basin of northwestern New Mexico and contains► Reserves are 100% owned and 97% have been only surface coal mines leased to operatorsBB&T Conference - 3/29/2012 27
  • 28. Services, Timber & Oil & Gas Royalties Services Timber Oil & Gas Royalties ~ 5% of Coal & NRM Revenue (1) ~ 3% of Coal & NRM Revenue (1) ~ 2% of Coal & NRM Revenue (1) Fees charged to lessees for use  Approximately 249,000 acres of  Approximately 7.0 Bcfe of of coal preparation and loading forestland in Kentucky, Virginia, proved oil and gas reserves in facilities Tennessee and West Virginia eastern Kentucky, Tennessee, West Virginia and Virginia Fee-based revenues  Premium quality hardwood primarily used for furniture Predictable cash flows (1) 2011 Coal & Natural Resource Management segment revenueBB&T Conference - 3/29/2012 28
  • 29. BB&T Conference - 3/29/2012 29
  • 30. Strong Financial Position ► Strong, simple balance sheet  Bank debt, senior notes and common units  No debt maturity until 2016  Expect to maintain or improve BB-/Ba3 corporate ratings ► Well structured bank credit facility  $1.0 billion revolving credit facility  19 banks with no bank holding more than 9% of total  Available liquidity on revolver in excess of $459 million (1) ► Maintain conservative and flexible capital structure  Fund organic growth and acquisitions with cash and balanced mix of debt and equity  Target a long-term Debt/EBITDA of 3.5 – 4.0x (1) Based on outstandings as of 12/31/11BB&T Conference - 3/29/2012 30
  • 31. Financial Overview ► Prudently managed balance sheet, Annual EBITDA (1) cash flows and distributions $300 ► Target distribution coverage of 1.05x $250 after deducting replacement capital $200 $ Millions ► Future debt and equity financings for $150 acquisitions and internal growth will $100 target long-term net debt / EBITDA $50 ratio of 3.5x – 4.0x $0 2007 2008 2009 2010 2011 2012 Distributable Cash Flow(2) vs. Distributions Debt / EBITDA (1) $160 DCF 4.0x $140 Distributions $120 3.0x$ Millions $100 $80 2.0x $60 $40 1.0x $20 $0 0.0x 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 (1) Adjusted EBITDA is a non-GAAP financial measure. See Appendix for a reconciliation of Adjusted EBITDA to Operating Income. (2) Distributable Cash Flow is a non-GAAP financial measure. See Appendix for a reconciliation of Distributable Cash Flow to Net Income. BB&T Conference - 3/29/2012 31
  • 32. Per Unit Distribution $0.25 $0.30 $0.35 $0.45 $0.50 $0.55 $0.40 Feb-05 May-05BB&T Conference - 3/29/2012 Aug-05 Nov-05 Feb-06 May-06 Aug-06 Nov-06 Feb-07 May-07 Aug-07 Nov-07 Feb-08 May-08 Aug-08 Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 Quarterly Distribution History May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-1232
  • 33. Conservative Capitalization Balance Sheet as of December 31, 2011 Revolving Credit Facility $ 541.0 8.25% Senior Notes due 2018 300.0 Total Debt $ 841.0 Partners Capital 581.7 Total Capitalization $ 1,422.7 EBITDA 243.0 Debt / EBITDA 3.5 x Debt / Capitalization 59% Revolver Capacity $ 1,000.0 Revolver Availability $ 459.0 EBITDA is a non-GAAP financial measure. See Appendix for a reconciliation of EBITDA to operating income and cash flows from operations Conservative Pro Forma Leverage with Strong Liquidity ProfileBB&T Conference - 3/29/2012 33
  • 34. Key Investment Highlights Diversified Portfolio of Midstream Assets and Coal Reserves Simplified Capital Structure to Enhance Growth Potential Midstream Business with Excellent Organic Growth Opportunities Stable and Predictable Coal Royalty Business Stable Cash Flows and Distribution Coverage Strong, Simple Balance Sheet with Ample Liquidity Well Positioned to Capitalize on Partnership Momentum & Industry TrendsBB&T Conference - 3/29/2012 34
  • 35. BB&T Conference - 3/29/2012 35
  • 36. Distributable Cash Flow Reconciliation PVR - Historical Distributable Cash Flow Summary Reconciliation of Distributable Cash Flow to Net Income (Amounts in $ Millions) Guidance Range Year Ended December 31, 2012 2011 2010 2009 2008 2007 Net income $ 110.0 $ 120.0 $ 96.3 $ 64.2 $ 62.9 $ 102.6 $ 54.6 Depreciation, depletion and amortization 95.0 105.0 89.4 75.9 70.2 58.2 41.5 Impairments - - - - 1.5 31.8 - Derivative losses (gains) included in net income 1.0 5.0 13.4 23.6 22.7 (11.4) 50.2 Cash payments to settle derivatives (8.0) (13.0) (25.7) (10.1) 3.0 (38.5) (17.8) Equity earnings from joint ventures, net of distributions 3.0 6.0 8.5 3.3 (2.5) (0.2) (0.3) Maintenance capital expenditures (14.0) (16.0) (11.2) (15.3) (8.4) (14.5) (9.8) Replacement capital reserve (27.0) (27.0) (26.9) - - - - Distributable Cash Flow As Reported $ 160.0 $ 180.0 $ 143.8 $ 141.6 $ 149.4 $ 128.0 $ 118.4 Distributable cash flow represents net income plus depreciation, depletion and amortization expenses, plus impairments, plus (minus) derivative losses (gains) included in other income, plus (minus) cash received (paid) for derivative settlements, minus equity earnings in joint ventures, plus cash distributions from joint ventures, minus maintenance capital expenditures minus replacement capital reserve. Distributable cash flow is a significant liquidity metric which is an indicator of our ability to generate cash flows at a level that can sustain or support an increase in quarterly cash distributions paid to our partners. Distributable cash flow is also the quantitative standard used by investors and professional research analysts in the valuation, comparison, rating and investment recommendations of publicly traded partnerships. Distributable cash flow is presented because we believe it is a useful adjunct to net cash provided by operating activities under GAAP. Distributable cash flow is not a measure of financial performance under GAAP and should not be considered as an alternative to cash flows from operating, investing or financing activities, as an indicator of cash flows, as a measure of liquidity or as an alternative to net income. Note: Totals may not foot due to roundingBB&T Conference - 3/29/2012 36
  • 37. Reconciliation of EBITDA PVR - Historical EBITDA Summary Reconciliation of GAAP "Operating Income" to Non-GAAP "EBITDA" (Amounts in $ Millions) Guidance Range Year Ended December 31, 2012 2011 2010 2009 2008 2007 Operating Income $ 165.0 $ 175.0 $ 153.6 $ 121.6 $ 105.9 $ 113.2 $ 115.2 Depreciation, depletion & amortization 95.0 105.0 89.4 75.9 70.2 58.2 41.5 Impairments - - - - 1.5 31.8 - EBITDA (1) $ 260.0 $ 280.0 $ 243.0 $ 197.5 $ 177.6 $ 203.2 $ 156.7 EBITDA, or earnings before interest, tax and depreciation, depletion and amortization ("DD&A) represents operating income plus DD&A, plus impairments. We believe this presentation is commonly used by investors and professional research analysts in the valuation, comparison, rating and investment recommendations of companies in the coal and natural gas midstream industries. We use this information for comparative purposes within the industry. EBITDA is not a measure of financial performance under GAAP and should not be considered as a measure of liquidity or as an alternative to net income.BB&T Conference - 3/29/2012 37

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