Tickers in this Article: PVR, PVG, BTU, ACI, ANR, ARLP, NRP
Coal has been hot again lately. Prices have rebounded from last year, domestic utilities have worked down stockpiles and overseas demand continues to grow. As a result, coal companies all across the board are near their 52-week highs, including giants like Peabody Energy (NYSE:BTU) and Arch Coal (NYSE:ACI). For investors more inclined towards income-producing assets, however, there is still time to consider the merits of Penn Virginia Resource Partners (NYSE:PVR) - a high-quality company involved in both coal and natural gas.

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A Third Quarter Lacking A Bit of Energy
On first blush, Penn Virginia's third quarter results do not look like the sort that would get investors very excited. Distributable cash flow (a non-GAAP metric that gives a sense of the company's distribution-paying capability) was down 9% and adjusted net income was down about 13% from last year.

The coal business held up well enough - royalty revenue rose 17% on a 15% increase in royalties per ton, while production barely ticked higher. That, in turn, fueled 25% operating income growth.

The gas business had a more challenging quarter, though. Midstream volume was higher (up 21%), but margins fell almost 10%. A big culprit has been the low prices of natural gas liquids (and natural gas, generally) this summer, but the good news is that this performance was not really a surprise and PVR's overall results are not likely to be seen as all that disappointing. (For related reading, check out Penn Virginia Turning Coal Into Cash.)

The Road Ahead
Penn Virginia is well-positioned as a long-term play on utility growth and demand - coal is the electricity-generating fuel of today, and natural gas is likely to be increasingly significant in the future. Although the company arguably could do more to diversify into metallurgical and Powder River Basin coal (as Alpha Natural Resources (NYSE:ANR) has), it is difficult to argue that the company's expansion of gas-handling assets into the Marcellus Shale region will not be a growth driver. (For more, see The Story On Natural Gas Liquids.)

Investors can also likely look forward to the merger of PVR with its general partner Penn Virginia GP Holdings (NYSE:PVG). This deal will simplify the corporate structure, theoretically reduce the company's cost of capital, eliminate the incentive distribution rights due to PVG and generally improve the expected returns for PVR unit holders.

The Bottom Line
Investors now have ample choice for income-earning coal investments. Beyond PVR there is Alliance Resource Partners (Nasdaq:ARLP), Natural Resource Partners (NYSE: NRP) and Oxford Resource Partners (NYSE:OXF) - each with its own unique mix of coal properties and different distribution payouts.

PVR does not have the highest yield of the group, but the company is a proven performer with growth potential in its gas business (assuming gas prices go up again someday). Moreover, the company is arguably stronger today than in its past and yet the dividend yield is towards the lower end of the range. Limited partnerships can create some complicated tax headaches, but investors looking for a somewhat more stable play on coal should give PVR a serious look. (For more, see Metallurgical Coal Update.)

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