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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------

For the quarterly period ended June 30, 2009

or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from  to

Commission File Number: 1-33171





PENN VIRGINIA GP HOLDINGS, L.P.

(Exact name of registrant as specified in its
charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 20-5116532                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



|                                         |  |           
|---------------------------------------- |  | ----------
|THREE RADNOR CORPORATE CENTER, SUITE 300 |  |           
|100 MATSONFORD ROAD                      |  |           
|RADNOR, PA                               |  | 19087     
|(Address of principal executive offices) |  | (Zip Code)

(610) 687-8900

(Registrants telephone number, including area code)

(Former name, former address and former
fiscal year, if changed since last report)





Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (Exchange Act) during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes     ̈  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈

Indicate by a check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule
12b-2 of the Exchange Act.



|                                                                          |  |                                      
|------------------------------------------------------------------------- |  | -------------------------------------
|Large accelerated filer   ̈                                                |  | Accelerated filer                   x
|                                                                          | 
|Non-accelerated filer     ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company   ̈         

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).     ̈  Yes    x  No

As of August 5, 2009, 39,074,500 common limited partner units were outstanding.









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PENN VIRGINIA GP HOLDINGS, L.P. AND SUBSIDIARIES

INDEX



|         |  |                                                                                                            |  |     
|-------- |  | ---------------------------------------------------------------------------------------------------------- |  | ----
|         |  |                                                                                                            |  | Page
|PART I.  |  | Financial Information                                                                                      |  |     
|         |  |                                                                                                           
|Item 1.  |  | Financial Statements                                                                                       |  |     
|         |  |                                                                                                           
|         |  | Condensed Consolidated Statements of Income for the Three and Six Months Ended 
June 30, 2009 and 2008     |  | 1   
|         |  |                                                                                                           
|         |  | Condensed Consolidated Balance Sheets as of June 30, 2009 and December 
31, 2008                           |  | 2   
|         |  |                                                                                                           
|         |  | Condensed Consolidated Statements of Cash Flows for the Three and Six Months Ended 
June 30, 2009 and 2008 |  | 3   
|         |  |                                                                                                           
|         |  | Notes to Condensed Consolidated Financial Statements                                                       |  | 4   
|         |  |                                                                                                           
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results 
of Operations                     |  | 15  
|         |  |                                                                                                           
|Item 3.  |  | Quantitative and Qualitative Disclosures About Market Risk                                                 |  | 32  
|         |  |                                                                                                           
|Item 4.  |  | Controls and Procedures                                                                                    |  | 35  
|         |  |                                                                                                           
|PART II. |  | Other Information                                                                                          |  |     
|         |  |                                                                                                           
|Item 6.  |  | Exhibits                                                                                                   |  | 36  



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PART I. FINANCIAL INFORMATION



|Item 1 | Financial Statements
|------ | --------------------

PENN VIRGINIA GP HOLDINGS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME  unaudited

(in thousands, except per unit data)



|                                                                                       |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|-------------------------------------------------------------------------------------- |  | -------------------------- | ------- | - | ------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                                       |  | Three Months EndedJune 30, |         |   | Six Months EndedJune 30, |  
|                                                                                       |  | 2009                       |         |   | 2008                     |   |         | 2009 |  |   | 2008    |  
|Revenues                                                                               |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Natural gas midstream                                                                  |  | $                          | 113,060 |   |                          | $ | 234,797 |      |  | $ | 230,439 |   |  | $ | 359,845 |  
|Coal royalties                                                                         |  |                            | 29,997  |   |                          |   | 31,641  |      |  |   | 60,627  |   |  |   | 55,603  |  
|Coal services                                                                          |  |                            | 1,745   |   |                          |   | 1,841   |      |  |   | 3,633   |   |  |   | 3,703   |  
|Other                                                                                  |  |                            | 4,617   |   |                          |   | 8,226   |      |  |   | 11,479  |   |  |   | 14,168  |  
|                                                                                       |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Total revenues                                                                         |  |                            | 149,419 |   |                          |   | 276,505 |      |  |   | 306,178 |   |  |   | 433,319 |  
|                                                                                       |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Expenses                                                                               |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Cost of midstream gas purchased                                                        |  |                            | 92,154  |   |                          |   | 202,819 |      |  |   | 192,774 |   |  |   | 302,516 |  
|Operating                                                                              |  |                            | 9,018   |   |                          |   | 8,719   |      |  |   | 17,908  |   |  |   | 15,512  |  
|Taxes other than income                                                                |  |                            | 980     |   |                          |   | 976     |      |  |   | 2,203   |   |  |   | 2,048   |  
|General and administrative                                                             |  |                            | 8,819   |   |                          |   | 7,305   |      |  |   | 16,952  |   |  |   | 14,439  |  
|Depreciation, depletion and amortization                                               |  |                            | 17,617  |   |                          |   | 12,919  |      |  |   | 34,120  |   |  |   | 24,419  |  
|                                                                                       |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Total expenses                                                                         |  |                            | 128,588 |   |                          |   | 232,738 |      |  |   | 263,957 |   |  |   | 358,934 |  
|                                                                                       |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Operating income                                                                       |  |                            | 20,831  |   |                          |   | 43,767  |      |  |   | 42,221  |   |  |   | 74,385  |  
|                                                                                       |  |                            |         |  
|Other income (expense)                                                                 |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Interest expense                                                                       |  |                            | (6,365  | ) |                          |   | (5,374  | )    |  |   | (11,981 | ) |  |   | (10,306 | )
|Other                                                                                  |  |                            | 347     |   |                          |   | 501     |      |  |   | 676     |   |  |   | 1,046   |  
|Derivatives                                                                            |  |                            | (2,034  | ) |                          |   | (29,942 | )    |  |   | (9,195  | ) |  |   | (22,166 | )
|                                                                                       |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Net income                                                                             |  | $                          | 12,779  |   |                          | $ | 8,952   |      |  | $ | 21,721  |   |  | $ | 42,959  |  
|Less net income attributable to noncontrolling interests                               |  |                            | (4,440  | ) |                          |   | (2,890  | )    |  |   | (6,533  | ) |  |   | (20,095 | )
|                                                                                       |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Net income attributable to Penn Virginia GP Holdings, L.P.                             |  | $                          | 8,339   |   |                          | $ | 6,062   |      |  | $ | 15,188  |   |  | $ | 22,864  |  
|                                                                                       |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Net income per unit attributable to Penn Virginia GP Holdings, L.P., basic and diluted |  | $                          | 0.21    |   |                          | $ | 0.16    |      |  | $ | 0.39    |   |  | $ | 0.59    |  
|Weighted average number of units outstanding, basic and diluted                        |  |                            | 39,075  |   |                          |   | 39,075  |      |  |   | 39,075  |   |  |   | 39,075  |  

The accompanying notes are an integral part of these condensed consolidated financial statements.



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PENN VIRGINIA GP HOLDINGS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS  unaudited

(in thousands)



|                                                            |  |              |           |   |                  |   |           |  
|----------------------------------------------------------- |  | ------------ | --------- | - | ---------------- | - | --------- | -
|                                                            |  | June 30,2009 |           |   | December 31,2008 |  
|Assets                                                      |  |              |           |   |                  |   |           |  
|Current assets                                              |  |              |           |   |                  |   |           |  
|Cash and cash equivalents                                   |  | $            | 17,093    |   |                  | $ | 18,338    |  
|Accounts receivable, net of allowance for doubtful accounts |  |              | 62,449    |   |                  |   | 73,267    |  
|Derivative assets                                           |  |              | 11,478    |   |                  |   | 30,431    |  
|Other current assets                                        |  |              | 4,797     |   |                  |   | 4,263     |  
|                                                            |  |              |           |   |                  |   |           |  
|Total current assets                                        |  |              | 95,817    |   |                  |   | 126,299   |  
|                                                            |  |              |           |   |                  |   |           |  
|Property, plant and equipment                               |  |              | 1,121,838 |   |                  |   | 1,093,526 |  
|Accumulated depreciation, depletion and amortization        |  |              | (228,894  | ) |                  |   | (198,407  | )
|                                                            |  |              |           |   |                  |   |           |  
|Net property, plant and equipment                           |  |              | 892,944   |   |                  |   | 895,119   |  
|                                                            |  |              |           |   |                  |   |           |  
|Equity investments                                          |  |              | 79,512    |   |                  |   | 78,442    |  
|Intangible assets, net                                      |  |              | 88,962    |   |                  |   | 92,672    |  
|Other long-term assets                                      |  |              | 42,652    |   |                  |   | 35,142    |  
|                                                            |  |              |           |   |                  |   |           |  
|Total assets                                                |  | $            | 1,199,887 |   |                  | $ | 1,227,674 |  
|                                                            |  |              |           |   |                  |   |           |  
|Liabilities and Partners Capital                           |  |              |           |   |                  |   |           |  
|Current liabilities                                         |  |              |           |   |                  |   |           |  
|Accounts payable                                            |  | $            | 50,008    |   |                  | $ | 60,442    |  
|Accrued liabilities                                         |  |              | 8,914     |   |                  |   | 11,039    |  
|Deferred income                                             |  |              | 2,987     |   |                  |   | 4,842     |  
|Derivative liabilities                                      |  |              | 12,278    |   |                  |   | 13,585    |  
|                                                            |  |              |           |   |                  |   |           |  
|Total current liabilities                                   |  |              | 74,187    |   |                  |   | 89,908    |  
|                                                            |  |              |           |   |                  |   |           |  
|Deferred income                                             |  |              | 5,662     |   |                  |   | 6,150     |  
|Other liabilities                                           |  |              | 17,484    |   |                  |   | 18,078    |  
|Derivative liabilities                                      |  |              | 3,949     |   |                  |   | 6,915     |  
|Long-term debt                                              |  |              | 597,100   |   |                  |   | 568,100   |  
|                                                            |  |             
|Partners capital:                                          |  |              |           |   |                  |   |           |  
|Penn Virginia GP Holdings, L.P. partners capital           |  |              | 256,071   |   |                  |   | 269,542   |  
|Noncontrolling interests of subsidiaries                    |  |              | 245,434   |   |                  |   | 268,981   |  
|                                                            |  |              |           |   |                  |   |           |  
|                                                            |  |              | 501,505   |   |                  |   | 538,523   |  
|                                                            |  |              |           |   |                  |   |           |  
|Total liabilities and partners capital                     |  | $            | 1,199,887 |   |                  | $ | 1,227,674 |  
|                                                            |  |              |           |   |                  |   |           |  

The accompanying notes are an integral part of these condensed consolidated financial statements.



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PENN VIRGINIA GP HOLDINGS, L.P. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  unaudited

(in thousands)



|                                                                                  |  |                            |         |   |                          |   |          |      |  |   |         |   |  |   |          |  
|--------------------------------------------------------------------------------- |  | -------------------------- | ------- | - | ------------------------ | - | -------- | ---- |  | - | ------- | - |  | - | -------- | -
|                                                                                  |  | Three Months EndedJune 30, |         |   | Six Months EndedJune 30, |  
|                                                                                  |  | 2009                       |         |   | 2008                     |   |          | 2009 |  |   | 2008    |  
|Cash flows from operating activities                                              |  |                            |         |   |                          |   |          |      |  |   |         |   |  |   |          |  
|Net income                                                                        |  | $                          | 12,779  |   |                          | $ | 8,952    |      |  | $ | 21,721  |   |  | $ | 42,959   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                            |         |   |                          |   |          |      |  |   |         |   |  |   |          |  
|Depreciation, depletion and amortization                                          |  |                            | 17,617  |   |                          |   | 12,919   |      |  |   | 34,120  |   |  |   | 24,419   |  
|Commodity derivative contracts:                                                   |  |                            |         |   |                          |   |          |      |  |   |         |   |  |   |          |  
|Total derivative losses                                                           |  |                            | 2,951   |   |                          |   | 31,459   |      |  |   | 10,566  |   |  |   | 24,791   |  
|Cash settlements of derivatives                                                   |  |                            | 1,613   |   |                          |   | (9,703   | )    |  |   | 4,449   |   |  |   | (19,225  | )
|Non-cash interest expense                                                         |  |                            | 1,242   |   |                          |   | 204      |      |  |   | 1,733   |   |  |   | 368      |  
|Equity earnings, net of distributions received                                    |  |                            | 489     |   |                          |   | 354      |      |  |   | (1,070  | ) |  |   | (6       | )
|Other                                                                             |  |                            | (425    | ) |                          |   | (223     | )    |  |   | (632    | ) |  |   | (441     | )
|Changes in operating assets and liabilities                                       |  |                            | 2,610   |   |                          |   | 500      |      |  |   | 1,648   |   |  |   | (424     | )
|                                                                                  |  |                            |         |   |                          |   |          |      |  |   |         |   |  |   |          |  
|Net cash provided by operating activities                                         |  |                            | 38,876  |   |                          |   | 44,462   |      |  |   | 72,535  |   |  |   | 72,441   |  
|                                                                                  |  |                            |         |   |                          |   |          |      |  |   |         |   |  |   |          |  
|Cash flows from investing activities                                              |  |                            |         |   |                          |   |          |      |  |   |         |   |  |   |          |  
|Acquisitions                                                                      |  |                            | (606    | ) |                          |   | (96,220  | )    |  |   | (1,862  | ) |  |   | (96,240  | )
|Additions to property, plant and equipment                                        |  |                            | (15,208 | ) |                          |   | (21,190  | )    |  |   | (32,258 | ) |  |   | (38,840  | )
|Other                                                                             |  |                            | 307     |   |                          |   | 334      |      |  |   | 572     |   |  |   | 675      |  
|                                                                                  |  |                            |         |   |                          |   |          |      |  |   |         |   |  |   |          |  
|Net cash used in investing activities                                             |  |                            | (15,507 | ) |                          |   | (117,076 | )    |  |   | (33,548 | ) |  |   | (134,405 | )
|                                                                                  |  |                            |         |   |                          |   |          |      |  |   |         |   |  |   |          |  
|Cash flows from financing activities                                              |  |                            |         |   |                          |   |          |      |  |   |         |   |  |   |          |  
|Distributions to partners                                                         |  |                            | (29,986 | ) |                          |   | (25,220  | )    |  |   | (59,974 | ) |  |   | (49,392  | )
|Proceeds from borrowings                                                          |  |                            | 14,000  |   |                          |   | 99,800   |      |  |   | 41,000  |   |  |   | 124,800  |  
|Repayments of borrowings                                                          |  |                            | (12,000 | ) |                          |   | (132,400 | )    |  |   | (12,000 | ) |  |   | (155,400 | )
|Net proceeds from issuance of partners capital                                   |  |                            |        |   |                          |   | 138,015  |      |  |   |        |   |  |   | 138,015  |  
|Other                                                                             |  |                            |        |   |                          |   | (620     | )    |  |   | (9,258  | ) |  |   | (620     | )
|                                                                                  |  |                            |         |   |                          |   |          |      |  |   |         |   |  |   |          |  
|Net cash provided by (used in) financing activities                               |  |                            | (27,986 | ) |                          |   | 79,575   |      |  |   | (40,232 | ) |  |   | 57,403   |  
|                                                                                  |  |                            |         |   |                          |   |          |      |  |   |         |   |  |   |          |  
|Net increase (decrease) in cash and cash equivalents                              |  |                            | (4,617  | ) |                          |   | 6,961    |      |  |   | (1,245  | ) |  |   | (4,561   | )
|Cash and cash equivalents  beginning of period                                   |  |                            | 21,710  |   |                          |   | 18,981   |      |  |   | 18,338  |   |  |   | 30,503   |  
|                                                                                  |  |                            |         |   |                          |   |          |      |  |   |         |   |  |   |          |  
|Cash and cash equivalents  end of period                                         |  | $                          | 17,093  |   |                          | $ | 25,942   |      |  | $ | 17,093  |   |  | $ | 25,942   |  
|                                                                                  |  |                            |         |   |                          |   |          |      |  |   |         |   |  |   |          |  
|Supplemental disclosure:                                                          |  |                            |         |   |                          |   |          |      |  |   |         |   |  |   |          |  
|Cash paid for interest                                                            |  | $                          | 5,846   |   |                          | $ | 4,249    |      |  | $ | 12,002  |   |  | $ | 10,372   |  

The accompanying notes are an integral part of these condensed consolidated financial statements.



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PENN VIRGINIA GP HOLDINGS, L.P. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS  unaudited

June 30, 2009



|1. | Organization
|-- | ------------

Penn Virginia GP Holdings, L.P. (the
Partnership, we, us or our) is a publicly traded Delaware limited partnership formed in June 2006 that owns three types of equity interests in Penn Virginia Resource Partners, L.P. (PVR), a
publicly traded Delaware limited partnership. As of June 30, 2009, the equity interests are (1) a 2% general partner interest in PVR, which we hold through our 100% ownership interest in Penn Virginia Resource GP, LLC, PVRs general
partner, (2) all of the incentive distribution rights (IDRs) in PVR, which we hold through our 100% ownership interest in PVRs general partner and (3) an approximately 37% limited partner interest in PVR. With the IDRs,
we receive an increasing percentage of PVRs quarterly distributions of available cash from operating surplus after certain levels of cash distributions have been achieved. Our only cash generating assets consist of our equity interests in PVR.
Due to our control of the general partner of PVR, the financial results of PVR are included in our condensed consolidated financial statements. However, PVR functions with a capital structure that is independent of ours, consisting of its own debt
instruments and publicly traded common units.

Our general partner is an indirect wholly owned subsidiary of Penn Virginia Corporation
(Penn Virginia). As of June 30, 2009, Penn Virginia and its subsidiaries owned an approximately 77% limited partner interest in us.

PVR currently conducts operations in two business segments: (i) coal and natural resource management and (ii) natural gas midstream.

We, through our ownership of the general partner of PVR, manage the operations and activities of PVR. Most of PVRs personnel are employees of Penn
Virginia or its affiliates. PVRs general partner is liable for all of PVRs debts, to the extent not paid from PVRs assets, except for indebtedness or other obligations that are made specifically non-recourse to us.

We do not receive any management fee or other compensation for the management of PVR. We and our affiliates are reimbursed for expenses incurred on
PVRs behalf. These expenses include the costs of employee, officer and director compensation and benefits properly allocable to PVR and all other expenses necessary or appropriate to conduct the business of, and allocable to, PVR. PVRs
partnership agreement provides that PVRs general partner will determine the expenses that are allocable to PVR in any reasonable manner determined by PVR in its sole discretion.



|2. | Basis of Presentation
|-- | ---------------------

Unless otherwise indicated,
for the purposes of our condensed consolidated financial statements, the Partnership, we, us or our refers to Penn Virginia GP Holdings, L.P. and subsidiaries.

Our condensed consolidated financial statements include the accounts of the Partnership and all of our wholly owned subsidiaries. Investments in
non-controlled entities over which we exercise significant influence are accounted for using the equity method. Intercompany balances and transactions have been eliminated in consolidation. Our condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the United States of America. These statements involve the use of estimates and judgments where appropriate. In the opinion of management, all adjustments, consisting of normal
recurring accruals, considered necessary for a fair presentation of our condensed consolidated financial statements have been included. Our condensed consolidated financial statements should be read in conjunction with our consolidated financial
statements and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2008. Operating results for the three and six months ended June 30, 2009 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2009. Certain reclassifications have been made to conform to the current periods presentation. In preparing the accompanying condensed consolidated financial statements, we have evaluated subsequent events
through August 5, 2009.



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|3. | Fair Value Measurements
|-- | -----------------------

Effective January 1,
2009, Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements, applies to both our financial and nonfinancial assets and liabilities that are measured and reported on a fair value basis. Our
financial instruments that are subject to fair value disclosures consist of cash and cash equivalents, accounts receivable, accounts payable, derivative instruments and PVRs long-term debt. We have followed consistent methods and assumptions
to estimate the fair values as more fully described in our Annual Report on Form 10-K for the year ended December 31, 2008. At June 30, 2009, the carrying values of all of these financial instruments approximated fair value.

The following table summarizes the valuation of certain assets and liabilities by category as of June 30, 2009 (in thousands):



|                                            |  |                                                             |        |                                             |                                                 |   |                                         |  |   |        |   |  |   |  
|------------------------------------------- |  | ----------------------------------------------------------- | ------ | ------------------------------------------- | ----------------------------------------------- | - | --------------------------------------- |  | - | ------ | - |  | - | -
|Description                                 |  | Fair ValueMeasurements atJune 30, 2009                      |        |                                             | Fair Value Measurements at June 30, 2009, Using
|                                            |  | Quoted Prices inActive Markets forIdentical Assets(Level 1) |        | Significant OtherObservable Inputs(Level 2) |                                                 |   | SignificantUnobservableInputs (Level 3)
|Interest rate swap - noncurrent             |  | $                                                           | 900    |                                             |                                                 | $ |                                        |  | $ | 900    |   |  | $ | 
|Interest rate swap liabilities - current    |  |                                                             | (6,478 | )                                           |                                                 |   |                                        |  |   | (6,478 | ) |  |   | 
|Interest rate swap liabilities - noncurrent |  |                                                             | (3,949 | )                                           |                                                 |   |                                        |  |   | (3,949 | ) |  |   | 
|Commodity derivative assets - current       |  |                                                             | 11,478 |                                             |                                                 |   |                                        |  |   | 11,478 |   |  |   | 
|Commodity derivative liabilities - current  |  |                                                             | (5,800 | )                                           |                                                 |   |                                        |  |   | (5,800 | ) |  |   | 
|                                            |  |                                                             |        |                                             |                                                 |   |                                         |  |   |        |   |  |   |  
|Total                                       |  | $                                                           | (3,849 | )                                           |                                                 | $ |                                        |  | $ | (3,849 | ) |  | $ | 
|                                            |  |                                                             |        |                                             |                                                 |   |                                         |  |   |        |   |  |   |  

See Note 4  Derivative Instruments, for the effects of derivative instruments on
our condensed consolidated financial statements.



|4. | Derivative Instruments
|-- | ----------------------

PVR Natural Gas Midstream Segment
Commodity Derivatives

PVR determines the fair values of its derivative agreements based on discounted cash flows based on quoted
forward prices for the respective commodities as of June 30, 2009, using discount rates adjusted for the credit risk of the counterparties if the derivative is in an asset position and PVRs own credit risk if the derivative is in a
liability position. The following table sets forth PVRs positions as of June 30, 2009 for commodities related to natural gas midstream revenues and cost of midstream gas purchased:



|                                                                |  |                        |  |                               |       |                          |   |              |  |   |        |  |   |      
|--------------------------------------------------------------- |  | ---------------------- |  | ----------------------------- | ----- | ------------------------ | - | ------------ |  | - | ------ |  | - | -----
|                                                                |  | Average Volume Per Day |  | Weighted Average PriceCollars |       | Fair Value(in thousands)
|                                                                |  | Additional PutOption   |  | Put                           |       | Call                     |  
|Crude Oil Three-Way Collar                                      |  | (in barrels)           |  |                               |       |                          |   | (per barrel) |  |   |       
|Third Quarter 2009 through Fourth Quarter 2009                  |  | 1,000                  |  | $                             | 70.00 |                          | $ | 90.00        |  | $ | 119.25 |  | $ | 2,634
|                                                                |  |                        |  |                              
|Frac Spread Collar                                              |  | (in MMBtu)             |  |                               |       |                          |   | (per MMBtu)  |  |   |       
|Second Quarter 2009 through Fourth Quarter 2009                 |  | 6,000                  |  |                               |       |                          | $ | 9.09         |  | $ | 13.94  |  |   | 1,235
|                                                                |  |                        |  |                              
|Crude Oil Collar                                                |  | (in barrels)           |  |                               |       |                          |   | (per barrel) |  |   |       
|Second Quarter 2010 through Fourth Quarter 2010                 |  | 750                    |  |                               |       |                          | $ | 70.00        |  | $ | 81.25  |  |   | 28   
|                                                                |  |                        |  |                               |      
|Settlements to be received in subsequent period                 |  |                        |  |                               |       |                          |   |              |  |   |        |  |   | 1,781
|                                                                |  |                        |  |                               |       |                          |   |              |  |   |        |  |   |      
|Natural gas midstream segment commodity derivatives - net asset |  |                        |  |                               |       |                          |   |              |  |   |        |  | $ | 5,678
|                                                                |  |                        |  |                               |       |                          |   |              |  |   |        |  |   |      

See the Financial Statement Impact of Derivativessection below for the impact of the
natural gas midstream commodity derivatives on our condensed consolidated financial statements.



5



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##### Table of Contents

PVR Interest Rate Swaps

PVR has entered into interest rate swaps (the PVR Interest Rate Swaps) to establish fixed rates on a portion of the outstanding borrowings under its revolving credit facility (the PVR
Revolver). The following table sets forth PVRs Interest Rate Swap positions at June 30, 2009:



|                              |  |                  |       |                             |      |  
|----------------------------- |  | ---------------- | ----- | --------------------------- | ---- | -
|Dates                         |  | Notional Amounts |       | Weighted-Average Fixed Rate |     
|                              |  | (in millions)    |       |                             |     
|Until March 2010              |  | $                | 310.0 |                             | 3.54 | %
|March 2010 - December 2011    |  | $                | 250.0 |                             | 3.37 | %
|December 2011 - December 2012 |  | $                | 100.0 |                             | 2.09 | %

During the first quarter of 2009, PVR discontinued cash flow hedge accounting for all of the PVR
Interest Rate Swaps. Accordingly, subsequent fair value gains and losses for the PVR Interest Rate Swaps are recognized in the derivative line item of our condensed consolidated statements of income. At June 30, 2009, a $3.0 million loss
remained in accumulated other comprehensive income (AOCI) related to these discontinued PVR Interest Rate Swap hedges. The $3.0 million loss will be recognized in interest expense as the originally forecasted transactions settle.

PVR reported a (i) net derivative liability of $9.5 million at June 30, 2009 and (ii) loss in AOCI of $3.0 million at
June 30, 2009 related to the PVR Interest Rate Swaps. In connection with periodic settlements, PVR reclassified a total of $1.7 million of net hedging losses on the PVR Interest Rate Swaps to interest expense during the six months ended
June 30, 2009. See the Financial Statement Impact of Derivativessection below for the impact of the PVR Interest Rate Swaps on our condensed consolidated financial statements.

Financial Statement Impact of Derivatives

The
following table summarizes the effects of PVRs derivative activities, as well as the location of the gains and losses, on our condensed consolidated statements of income for the three and six months ended June 30, 2009 (in thousands):



|                                                                                        |  |                                                            |  |                                |        |   |                              |   |         |  
|--------------------------------------------------------------------------------------- |  | ---------------------------------------------------------- |  | ------------------------------ | ------ | - | ---------------------------- | - | ------- | -
|                                                                                        |  | Location of gain (loss) onderivatives recognized in income |  | Three MonthsEnded June 30,2009 |        |   | Six MonthsEnded June 30,2009 |  
|Derivatives de-designated as hedging instruments:                                       |  |                                                            |  |                                |        |   |                              |   |         |  
|Interest rate contracts (1)                                                             |  | Interest expense                                           |  | $                              | (918   | ) |                              | $ | (1,743  | )
|                                                                                        |  |                                                            |  |                                |        |   |                              |   |         |  
|Decrease in net income resulting from derivatives de-designated as hedging instruments  |  |                                                            |  | $                              | (918   | ) |                              | $ | (1,743  | )
|                                                                                        |  |                                                            |  |                                |        |   |                              |   |         |  
|Derivatives not designated as hedging instruments:                                      |  |                                                            |  |                                |        |   |                              |   |         |  
|Interest rate contracts                                                                 |  | Derivatives                                                |  | $                              | 1,810  |   |                              | $ | 696     |  
|Commodity contracts                                                                     |  | Derivatives                                                |  |                                | (3,843 | ) |                              |   | (9,890  | )
|                                                                                        |  |                                                            |  |                                |        |   |                              |   |         |  
|Decrease in net income resulting from derivatives not designated as hedging instruments |  |                                                            |  | $                              | (2,033 | ) |                              | $ | (9,194  | )
|                                                                                        |  |                                                            |  |                                |        |   |                              |   |         |  
|Total decrease in net income resulting from derivatives                                 |  |                                                            |  | $                              | (2,951 | ) |                              | $ | (10,937 | )
|                                                                                        |  |                                                            |  |                                |        |   |                              |   |         |  
|Realized and unrealized derivative impact:                                              |  |                                                            |  |                                |        |   |                              |   |         |  
|Cash received for commodity and interest rate contract settlements                      |  | Derivatives                                                |  |                                | 1,613  |   |                              |   | 4,449   |  
|Cash paid for interest rate contract settlements                                        |  | Interest expense                                           |  |                                |       |   |                              |   | (370    | )
|Unrealized derivative losses (2)                                                        |  |                                                            |  |                                | (4,564 | ) |                              |   | (15,016 | )
|                                                                                        |  |                                                            |  |                                |        |   |                              |   |         |  
|Total decrease in net income resulting from derivatives                                 |  |                                                            |  | $                              | (2,951 | ) |                              | $ | (10,937 | )
|                                                                                        |  |                                                            |  |                                |        |   |                              |   |         |  





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##### Table of Contents

|(1) | This represents amounts reclassified out of AOCI and into earnings. At June 30, 2009, a $3.0 million loss remained in AOCI related to the PVR Interest Rate Swaps on which PVR
discontinued hedge accounting.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | This activity represents net unrealized gains (losses) in the natural gas midstream, cost of midstream gas purchased, interest expense and derivative line items on our condensed
consolidated statements of income. For the three months ended June 30, 2009, the net unrealized derivative losses were composed of a $2.6 million unrealized gain on PVRs Interest Rate Swaps and a $7.2 million unrealized loss on PVRs
commodity derivatives. For the six months ended June 30, 2009, the net unrealized derivative losses were composed of a $2.0 million unrealized gain on PVRs Interest Rates Swaps and a $17.0 million unrealized loss on PVRs commodity
derivatives.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The following table summarizes the fair value of PVRs derivative instruments, as well as the locations of
these instruments, on our condensed consolidated balance sheets as of June 30, 2009 and December 31, 2008 (in thousands):



|                                                        |  |                                            |  |                                 |        |                                     |   |                  |  |                       |        |  |   |       
|------------------------------------------------------- |  | ------------------------------------------ |  | ------------------------------- | ------ | ----------------------------------- | - | ---------------- |  | --------------------- | ------ |  | - | ------
|                                                        |  | Balance Sheet Location                     |  | Fair values as of June 30, 2009 |        | Fair values as of December 31, 2008
|                                                        |  |                                            |  | DerivativeAssets                |        | DerivativeLiabilities               |   | DerivativeAssets |  | DerivativeLiabilities
|Derivatives de-designated as hedging instruments:       |  |                                            |  |                                 |        |                                     |   |                 
|Interest rate contracts                                 |  | Derivative liabilities - current           |  | $                               |       |                                     | $ |                 |  | $                     |       |  | $ | 1,228 
|Interest rate contracts                                 |  | Derivative liabilities - noncurrent        |  |                                 |       |                                     |   |                 |  |                       |       |  |   | 1,842 
|                                                        |  |                                            |  |                                 |        |                                     |   |                  |  |                       |        |  |   |       
|Total derivatives de-designated as hedging instruments  |  |                                            |  | $                               |       |                                     | $ |                 |  | $                     |       |  | $ | 3,070 
|                                                        |  |                                            |  |                                 |        |                                     |   |                  |  |                       |        |  |   |       
|Derivatives not designated as hedging instruments:      |  |                                            |  |                                 |        |                                     |   |                  |  |                       |        |  |   |       
|Interest rate contracts                                 |  | Derivative liabilities - current           |  | $                               |       |                                     | $ | 6,478            |  | $                     |       |  | $ | 4,663 
|Interest rate contracts                                 |  | Derivative assets/liabilities - noncurrent |  |                                 | 900    |                                     |   | 3,949            |  |                       |       |  |   | 5,073 
|Commodity contracts                                     |  | Derivative assets/liabilities - current    |  |                                 | 11,478 |                                     |   | 5,800            |  |                       | 30,431 |  |   | 7,694 
|                                                        |  |                                            |  |                                 |        |                                     |   |                  |  |                       |        |  |   |       
|Total derivatives not designated as hedging instruments |  |                                            |  | $                               | 12,378 |                                     | $ | 16,227           |  | $                     | 30,431 |  | $ | 17,430
|                                                        |  |                                            |  |                                 |        |                                     |   |                  |  |                       |        |  |   |       
|Total fair values of derivative instruments             |  |                                            |  | $                               | 12,378 |                                     | $ | 16,227           |  | $                     | 30,431 |  | $ | 20,500
|                                                        |  |                                            |  |                                 |        |                                     |   |                  |  |                       |        |  |   |       

See Note 3, Fair Value Measurements, for a description of how the above financial
instruments are valued in accordance with SFAS No. 157.

The following table summarizes our interest expense for the three and six
months ended June 30, 2009 and 2008, including the effect of the PVR Interest Rate Swaps (in thousands):



|                       |  |                             |       |   |                           |   |       |      |  |   |        |   |  |   |        |  
|---------------------- |  | --------------------------- | ----- | - | ------------------------- | - | ----- | ---- |  | - | ------ | - |  | - | ------ | -
|                       |  | Three Months Ended June 30, |       |   | Six Months Ended June 30, |  
|Source                 |  | 2009                        |       |   | 2008                      |   |       | 2009 |  |   | 2008   |  
|Borrowings             |  | $                           | 5,596 |   |                           | $ | 4,935 |      |  | $ | 10,464 |   |  | $ | 10,622 |  
|Capitalized interest   |  |                             | (149  | ) |                           |   | (187  | )    |  |   | (226   | ) |  |   | (675   | )
|Interest rate swaps    |  |                             | 918   |   |                           |   | 626   |      |  |   | 1,743  |   |  |   | 359    |  
|                       |  |                             |       |   |                           |   |       |      |  |   |        |   |  |   |        |  
|Total interest expense |  | $                           | 6,365 |   |                           | $ | 5,374 |      |  | $ | 11,981 |   |  | $ | 10,306 |  
|                       |  |                             |       |   |                           |   |       |      |  |   |        |   |  |   |        |  

At June 30, 2009, we reported a commodity derivative asset
related to PVRs natural gas midstream segment of $5.7 million that is with three counterparties, which are investment grade financial institutions, and is substantially concentrated with one of those counterparties. This concentration may
impact our overall credit risk, either positively or negatively, in that these counterparties may be similarly affected by changes in economic or other conditions. PVR neither paid nor received collateral with respect to its derivative positions.
The maximum amount of loss due to credit risk if counterparties to PVRs derivative asset positions fail to perform according to the terms of the contracts would be equal to the fair value of the contracts as of June 30, 2009. No
significant uncertainties related to the collectability of amounts owed to PVR exist with regard to these counterparties.



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##### Table of Contents

The above hedging activity represents cash flow hedges. As of June 30, 2009, PVR did not own
derivative instruments that were classified as fair value hedges or trading securities. In addition, as of June 30, 2009, PVR did not own derivative instruments containing credit risk contingencies.



|5. | Long-Term Debt
|-- | --------------

In March 2009, PVR increased the
size of the PVR Revolver from $700.0 million to $800.0 million, which resulted in $9.3 million of debt issuance costs that will be amortized over the remaining life of the PVR Revolver. The PVR Revolver is secured with substantially all of
PVRs assets. The December 2011 maturity date for the PVR Revolver did not change. Interest is payable at a base rate plus an applicable margin of up to 1.25% if PVR selects the base rate borrowing option under the PVR Revolver or at a rate
derived from the London Interbank Offered Rate (LIBOR) plus an applicable margin ranging from 1.75% to 2.75% if PVR selects the LIBOR-based borrowing option. As of June 30, 2009 and 2008, the weighted average interest rate on
borrowings outstanding under the PVR Revolver was approximately 2.5% and 4.6%.



|6. | Noncontrolling Interests
|-- | ------------------------

We adopted SFAS
No. 160, Noncontrolling Interests in Consolidated Financial Statements, effective January 1, 2009. SFAS No. 160 requires that the noncontrolling interests in PVR be reported in our condensed consolidated balance sheets as a
separate item within partners capital. Net income attributable to the noncontrolling interests in PVR is separately presented on the face of the condensed consolidated statements of income. Our consolidated financial statements have been
retroactively adjusted to reflect this adoption. Comprehensive income attributable to the noncontrolling interests in PVR is separately presented in our schedule of comprehensive income. SFAS No. 160 also requires that gains from the sales of
subsidiary units be recorded directly to partners capital. If we sell sufficient controlling interests in our subsidiaries to require deconsolidation of those subsidiaries, then we expect to record a gain or loss on our condensed consolidated
statements of income.

The following is a reconciliation of the carrying amount of total partners capital, partners capital
attributable to us and partners capital attributable to the noncontrolling interests in PVR:



|                                                       |  |                                           |         |   |                         |   |         |       |  |   |                            |   |  |   |        |  
|------------------------------------------------------ |  | ----------------------------------------- | ------- | - | ----------------------- | - | ------- | ----- |  | - | -------------------------- | - |  | - | ------ | -
|                                                       |  | Penn Virginia GPHoldings, L.P.Unitholders |         |   | NoncontrollingInterests |   |         | Total |  |   | ComprehensiveIncome (Loss) |  
|                                                       |  | (in thousands)                            |        
|Balance at December 31, 2008                           |  | $                                         | 269,542 |   |                         | $ | 268,981 |       |  | $ | 538,523                    |   |  |   |        |  
|Distributions paid                                     |  |                                           | (29,696 | ) |                         |   | (30,280 | )     |  |   | (59,976                    | ) |  |   |        |  
|Comprehensive income:                                  |  |                                           |         |   |                         |   |         |       |  |   |                            |   |  |   |        |  
|Net income                                             |  |                                           | 15,188  |   |                         |   | 6,533   |       |  |   | 21,721                     |   |  |   | 21,721 |  
|Unrealized losses on derivative activities             |  |                                           | (196    | ) |                         |   | (310    | )     |  |   | (506                       | ) |  |   | (506   | )
|Reclassification adjustments for derivative activities |  |                                           | 1,233   |   |                         |   | 510     |       |  |   | 1,743                      |   |  |   | 1,743  |  
|                                                       |  |                                           |         |   |                         |   |         |       |  |   |                            |   |  |   |        |  
|Balances at June 30, 2009                              |  | $                                         | 256,071 |   |                         | $ | 245,434 |       |  |   | 501,505                    |   |  | $ | 22,958 |  
|                                                       |  |                                           |         |   |                         |   |         |       |  |   |                            |   |  |   |        |  
|                                                       |  |                                           |         |  
|Balance at December 31, 2007                           |  | $                                         | 224,502 |   |                         | $ | 156,957 |       |  |   | 381,459                    |   |  |   |        |  
|Distributions paid                                     |  |                                           | (25,789 | ) |                         |   | (23,602 | )     |  |   | (49,391                    | ) |  |   |        |  
|PVR issuance of units                                  |  |                                           |        |   |                         |   | 138,015 |       |  |   | 138,015                    |   |  |   |        |  
|Recognition of SAB 51 gain                             |  |                                           | 39,495  |   |                         |   | (39,495 | )     |  |   |                           |   |  |   |        |  
|Comprehensive income:                                  |  |                                           |         |   |                         |   |         |       |  |   |                            |   |  |   |        |  
|Net income                                             |  |                                           | 22,864  |   |                         |   | 20,095  |       |  |   | 42,959                     |   |  |   | 42,959 |  
|Unrealized losses on derivative activities             |  |                                           | (542    | ) |                         |   | (282    | )     |  |   | (824                       | ) |  |   | (824   | )
|Reclassification adjustments for derivative activities |  |                                           | 1,217   |   |                         |   | 1,767   |       |  |   | 2,984                      |   |  |   | 2,984  |  
|                                                       |  |                                           |         |   |                         |   |         |       |  |   |                            |   |  |   |        |  
|Balances at June 30, 2008                              |  | $                                         | 261,747 |   |                         | $ | 253,455 |       |  | $ | 515,202                    |   |  | $ | 45,119 |  
|                                                       |  |                                           |         |   |                         |   |         |       |  |   |                            |   |  |   |        |  



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##### Table of Contents

|7. | Cash Distributions
|-- | ------------------

The following table reflects
the allocation of total cash distributions paid by us during the three and six months ended June 30, 2009 and 2008:



|                                       |  |                                      |        |                                      |   |        |  |      |        |  |   |       
|-------------------------------------- |  | ------------------------------------ | ------ | ------------------------------------ | - | ------ |  | ---- | ------ |  | - | ------
|                                       |  | Three Months Ended June 30,          |        | Six Months Ended June 30,           
|Unitholders                            |  | 2009                                 |        | 2008                                 |   | 2009   |  | 2008
|                                       |  | (in thousands, except per unit data) |        | (in thousands, except per unit data)
|Publicly held unitholders              |  | $                                    | 3,419  |                                      | $ | 2,375  |  | $    | 6,838  |  | $ | 4,611 
|Penn Virginia Corporation              |  |                                      | 11,429 |                                      |   | 10,910 |  |      | 22,858 |  |   | 21,178
|                                       |  |                                      |        |                                      |   |        |  |      |        |  |   |       
|Total cash distributions paid          |  | $                                    | 14,848 |                                      | $ | 13,285 |  | $    | 29,696 |  | $ | 25,789
|                                       |  |                                      |        |                                      |   |        |  |      |        |  |   |       
|Total cash distributions paid per unit |  | $                                    | 0.38   |                                      | $ | 0.34   |  | $    | 0.76   |  | $ | 0.66  

On August 20, 2009, we will pay a $0.38 per unit quarterly distribution to unitholders of
record on August 3, 2009. This per unit distribution will remain unchanged from the previous distribution paid on May 20, 2009.



|8. | Related-Party Transactions
|-- | --------------------------

General and Administrative

Penn Virginia charges us for certain corporate administrative expenses which are allocable to us and our subsidiaries. When
allocating general corporate expenses, consideration is given to property and equipment, payroll and general corporate overhead. Any direct costs are paid by us. Total corporate administrative expenses charged to us and our subsidiaries totaled $1.6
million for both the three months ended June 30, 2009 and 2008 and $3.3 million for both the six months ended June 30, 2009 and 2008. Total corporate administrative expenses that Penn Virginia charged to PVR totaled $1.6 million for both
the three months ended June 30, 2009 and 2008 and $3.1 million for both the six months ended June 30, 2009 and 2008. These costs are reflected in the general and administrative expenses line item on our condensed consolidated statements of
income. At least annually, our management performs an analysis of general corporate expenses based on time allocations of shared employees and other pertinent factors. Based on this analysis, our management believes that the allocation methodologies
used are reasonable.

Accounts PayableAffiliate

Amounts payable to related parties totaled $8.2 million and $8.1 million as of June 30, 2009 and December 31, 2008. These amounts are primarily due to a wholly owned subsidiary of Penn Virginia, Penn
Virginia Oil & Gas, L.P. (PVOG LP) and are related to the natural gas gathering and processing agreement between PVR East Texas Gas Processing, LLC (PVR East Texas) and PVOG LP. See  Gathering and
Processing Revenues. These balances are included in the accounts payable line item on our condensed consolidated balance sheets.

Marketing
Revenues

PVOG LP and Connect Energy Services, LLC (Connect Energy), a wholly owned subsidiary of PVR, are parties to a
Master Services Agreement. PVOG LP and Connect Energy have agreed that Connect Energy will market all of PVOG LPs oil and gas production in Arkansas, Louisiana, Oklahoma and Texas for a fee equal to 1% of the net sales price (subject to
specified limitations) received by PVOG LP for such production. The Master Services Agreement has a primary term of five years and automatically renews for additional one-year terms until terminated by either party. Under the Master Services
Agreement, PVOG LP paid fees to Connect Energy of $0.4 million and $0.8 million for the three months ended June 30, 2009 and 2008 and $0.8 million and $1.5 million for the six months ended June 30, 2009 and 2008. Marketing revenues are
included in other revenues line item on our condensed consolidated statements of income.



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##### Table of Contents

Gathering and Processing Revenues

PVR East Texas and PVOG LP are parties to a natural Gas Gathering and Processing Agreement under which PVOG LP and PVR East Texas have agreed that PVR
East Texas will gather and process all of PVOG LPs current and future gas production in certain areas of the Bethany Field in East Texas and redeliver the natural gas liquids (NGLs) to PVOG LP for a $0.30 per MMBtu service fee
(with an annual CPI adjustment). The Gas Gathering and Processing Agreement has a primary term of 15 years and automatically renews for additional one-year terms until terminated by either party. PVR East Texas began gathering and processing PVOG
LPs gas in June 2008. Pursuant to the Gas Gathering and Processing Agreement, PVOG LP paid PVR East Texas $1.2 million and $0.7 million in fees for the three months ended June 30, 2009 and 2008 and $2.1 million and $0.7 million in fees
for the six months ended June 30, 2009 and 2008. These gathering and processing revenues are recorded in the natural gas midstream line on our condensed consolidated statements of income.

From time to time, PVOG LP sells gas or NGLs to Connect Energy at PVRs Crossroads plant and Connect Energy transports them to the marketing
location and then resells them to third parties. The sales price received by PVOG LP from Connect Energy for such gas or NGLs equals the sales price received by Connect Energy for such gas or NGLs from the third parties. PVOG LP received
from Connect Energy $20.0 million and $49.8 million in connection with such sales for the three months ended June 30, 2009 and 2008 and $41.2 million and $49.8 million in connection with such sales for the six months ended June 30, 2009
and 2008.

In the three months ended June 30, 2009 and 2008, PVR recorded $20.0 million and $49.8 million of natural gas midstream
revenue and $20.0 million and $49.8 million for the cost of midstream gas purchased related to the purchase of natural gas from PVOG LP and the subsequent sale of that gas to third parties. In the six months ended June 30, 2009 and 2008, PVR
recorded $41.2 million and $49.8 million of natural gas midstream revenue and $41.2 million and $49.8 million for the cost of midstream gas purchased related to the purchase of natural gas from PVOG LP and the subsequent sale of that gas to third
parties. PVR takes title to the gas and NGLs prior to transporting them to third parties. These transactions do not impact the gross margin, nor do they impact operating income other than the processing and marketing fee noted above.



|9. | Unit-Based Compensation
|-- | -----------------------

The Penn Virginia Resource
GP, LLC Fifth Amended and Restated Long-Term Incentive Plan (the PVR LTIP) permits the grant of phantom units to employees and directors. A phantom unit entitles the grantee to receive a common unit upon the vesting of the phantom unit,
or in the discretion of PVRs Compensation and Benefits Committee, the cash equivalent of the value of a common unit. In addition, all phantom units will vest upon a change of control.

PVR recognized a total of $1.3 million and $0.7 million for the three months ended June 30, 2009 and 2008 and $2.7 million and $1.5 million for the
six months ended June 30, 2009 and 2008 of compensation expense related to the vesting of restricted and phantom units and the granting of common and deferred common units under the PVR LTIP. During the six months ended June 30, 2009,
PVRs general partner granted 354,792 phantom units with a weighted average grant date fair value of $11.59 per unit to employees of Penn Virginia and its affiliates. The phantom units granted in 2009 vest over a three-year period, with
one-third vesting in each year. PVR recognizes compensation expense on a straight-line basis over the vesting period. These expenses are recorded in the general and administrative expense line on our condensed consolidated statements of income.



|10. | Commitments and Contingencies
|--- | -----------------------------

Legal

We are involved, from time to time, in various legal proceedings arising in the ordinary course of business. While the ultimate results of these
proceedings cannot be predicted with certainty, our management believes that these claims will not have a material effect on our financial position or results of operations.



10



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Environmental Compliance

As of June 30, 2009 and December 31, 2008, PVRs environmental liabilities were $1.1 million and $1.2 million, which represents PVRs best estimate of the liabilities as of those dates related to
its coal and natural resource management and natural gas midstream businesses. PVR has reclamation bonding requirements with respect to certain unleased and inactive properties. Given the uncertainty of when a reclamation area will meet regulatory
standards, a change in this estimate could occur in the future.

Mine Health and Safety Laws

There are numerous mine health and safety laws and regulations applicable to the coal mining industry. However, since PVR does not operate any mines and
does not employ any coal miners, PVR is not subject to such laws and regulations. Accordingly, we have not accrued any related liabilities.

Customer
Credit Risk

For the six months ended June 30, 2009, two of PVRs natural gas midstream segment customers accounted for $56.3
million and $35.6 million, or 18% and 12%, of our total consolidated revenues. At June 30, 2009, 20% of our consolidated accounts receivable related to these customers.



|11. | Segment Information
|--- | -------------------

Our reportable segments are as
follows:



| |  |  | PVR Coal and Natural Resource Managementmanagement and leasing of coal properties and subsequent collection of royalties; other land management activities
such as selling standing timber; leasing of fee-based coal-related infrastructure facilities to certain lessees and end-user industrial plants; collection of oil and gas royalties; and coal transportation, or wheelage, fees.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | PVR Natural Gas Midstreamnatural gas processing, gathering and other related services.
| | - |  | ---------------------------------------------------------------------------------------

The corporate and other line primarily represents corporate functions.



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The following tables present a summary of certain financial information relating to our segments as of
and for the three months ended June 30, 2009 and 2008 (in thousands):



|                                                           |  |                                     |         |                             |   |         |  |   |        |   |  |   |         |  
|---------------------------------------------------------- |  | ----------------------------------- | ------- | --------------------------- | - | ------- |  | - | ------ | - |  | - | ------- | -
|                                                           |  | Revenues                            |         | Operating income (loss)     |  
|                                                           |  | Three Months Ended June 30,         |         | Three Months Ended June 30, |  
|                                                           |  | 2009                                |         | 2008                        |   | 2009    |  |   | 2008   |  
|Coal and natural resource management                       |  | $                                   | 35,144  |                             | $ | 39,056  |  | $ | 20,333 |   |  | $ | 23,983  |  
|Natural gas midstream                                      |  |                                     | 114,275 |                             |   | 237,449 |  |   | 1,060  |   |  |   | 20,346  |  
|Corporate and other                                        |  |                                     |         |                             |   |         |  |   | (562   | ) |  |   | (562    | )
|                                                           |  |                                     |         |                             |   |         |  |   |        |   |  |   |         |  
|Consolidated totals                                        |  | $                                   | 149,419 |                             | $ | 276,505 |  | $ | 20,831 |   |  | $ | 43,767  |  
|                                                           |  |                                     |         |                             |   |         |  |   |        |   |  |   |         |  
|Interest expense                                           |  |                                     |         |                             |   |         |  |   | (6,365 | ) |  |   | (5,374  | )
|Other                                                      |  |                                     |         |                             |   |         |  |   | 347    |   |  |   | 501     |  
|Derivatives                                                |  |                                     |         |                             |   |         |  |   | (2,034 | ) |  |   | (29,942 | )
|Net income attributable to noncontrolling interest         |  |                                     |         |                             |   |         |  |   | (4,440 | ) |  |   | (2,890  | )
|                                                           |  |                                     |         |                             |   |         |  |   |        |   |  |   |         |  
|Net income attributable to Penn Virginia GP Holdings, L.P. |  |                                     |         |                             |   |         |  | $ | 8,339  |   |  | $ | 6,062   |  
|                                                           |  |                                     |         |                             |   |         |  |   |        |   |  |   |         |  
|                                                           |  |                                    
|                                                           |  | Additions to property and equipment |         | DD&A expense                |  
|                                                           |  | Three Months Ended June 30,         |         | Three Months Ended June 30, |  
|                                                           |  | 2009                                |         | 2008                        |   | 2009    |  |   | 2008   |  
|Coal and natural resource management                       |  | $                                   | 606     |                             | $ | 24,641  |  | $ | 8,164  |   |  | $ | 7,526   |  
|Natural gas midstream                                      |  |                                     | 15,208  |                             |   | 92,769  |  |   | 9,453  |   |  |   | 5,393   |  
|                                                           |  |                                     |         |                             |   |         |  |   |        |   |  |   |         |  
|Consolidated totals                                        |  | $                                   | 15,814  |                             | $ | 117,410 |  | $ | 17,617 |   |  | $ | 12,919  |  
|                                                           |  |                                     |         |                             |   |         |  |   |        |   |  |   |         |  



|                                     |  |                 |           |                   |   |          
|------------------------------------ |  | --------------- | --------- | ----------------- | - | ---------
|                                     |  | Total assets at
|                                     |  | June 30, 2009   |           | December 31, 2008
|Coal and natural resource management |  | $               | 594,491   |                   | $ | 600,418  
|Natural gas midstream                |  |                 | 595,653   |                   |   | 618,402  
|Corporate and other                  |  |                 | 9,743     |                   |   | 8,854    
|                                     |  |                 |           |                   |   |          
|Consolidated totals                  |  | $               | 1,199,887 |                   | $ | 1,227,674
|                                     |  |                 |           |                   |   |          



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The following tables present a summary of certain financial information relating to our segments as of
and for the six months ended June 30, 2009 and 2008 (in thousands):



|                                                           |  |                                     |         |                           |   |         |  |   |         |   |  |   |         |  
|---------------------------------------------------------- |  | ----------------------------------- | ------- | ------------------------- | - | ------- |  | - | ------- | - |  | - | ------- | -
|                                                           |  | Revenues                            |         | Operating income (loss)   |  
|                                                           |  | Six Months Ended June 30,           |         | Six Months Ended June 30, |  
|                                                           |  | 2009                                |         | 2008                      |   | 2009    |  |   | 2008    |  
|Coal and natural resource management                       |  | $                                   | 73,396  |                           | $ | 69,350  |  | $ | 45,307  |   |  | $ | 41,565  |  
|Natural gas midstream                                      |  |                                     | 232,782 |                           |   | 363,969 |  |   | (1,987  | ) |  |   | 33,998  |  
|Corporate and other                                        |  |                                     |        |                           |   |        |  |   | (1,099  | ) |  |   | (1,178  | )
|                                                           |  |                                     |         |                           |   |         |  |   |         |   |  |   |         |  
|Consolidated totals                                        |  | $                                   | 306,178 |                           | $ | 433,319 |  | $ | 42,221  |   |  | $ | 74,385  |  
|                                                           |  |                                     |         |                           |   |         |  |   |         |   |  |   |         |  
|Interest expense                                           |  |                                     |         |                           |   |         |  |   | (11,981 | ) |  |   | (10,306 | )
|Other                                                      |  |                                     |         |                           |   |         |  |   | 676     |   |  |   | 1,046   |  
|Derivatives                                                |  |                                     |         |                           |   |         |  |   | (9,195  | ) |  |   | (22,166 | )
|Net income attributable to noncontrolling interest         |  |                                     |         |                           |   |         |  |   | (6,533  | ) |  |   | (20,095 | )
|                                                           |  |                                     |         |                           |   |         |  |   |         |   |  |   |         |  
|Net income attributable to Penn Virginia GP Holdings, L.P. |  |                                     |         |                           |   |         |  | $ | 15,188  |   |  | $ | 22,864  |  
|                                                           |  |                                     |         |                           |   |         |  |   |         |   |  |   |         |  
|                                                           |  |                                    
|                                                           |  | Additions to property and equipment |         | DD&A expense              |  
|                                                           |  | Six Months Ended June 30,           |         | Six Months Ended June 30, |  
|                                                           |  | 2009                                |         | 2008                      |   | 2009    |  |   | 2008    |  
|Coal and natural resource management                       |  | $                                   | 1,906   |                           | $ | 24,689  |  | $ | 15,558  |   |  | $ | 13,939  |  
|Natural gas midstream                                      |  |                                     | 32,214  |                           |   | 110,391 |  |   | 18,562  |   |  |   | 10,480  |  
|                                                           |  |                                     |         |                           |   |         |  |   |         |   |  |   |         |  
|Consolidated totals                                        |  | $                                   | 34,120  |                           | $ | 135,080 |  | $ | 34,120  |   |  | $ | 24,419  |  
|                                                           |  |                                     |         |                           |   |         |  |   |         |   |  |   |         |  



|                                     |  |                 |           |                   |   |          
|------------------------------------ |  | --------------- | --------- | ----------------- | - | ---------
|                                     | 
|                                     |  | Total assets at
|                                     |  | June 30, 2009   |           | December 31, 2008
|Coal and natural resource management |  | $               | 594,491   |                   | $ | 600,418  
|Natural gas midstream                |  |                 | 595,653   |                   |   | 618,402  
|Corporate and other                  |  |                 | 9,743     |                   |   | 8,854    
|                                     |  |                 |           |                   |   |          
|Consolidated totals                  |  | $               | 1,199,887 |                   | $ | 1,227,674
|                                     |  |                 |           |                   |   |          



|12. | New Accounting Standards
|--- | ------------------------

In June 2008, the FASB
issued Staff Position EITF 03-6-1,Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities. EITF 03-6-1 provides that unvested unit-based payment awards that contain non-forfeitable rights to
distributions or distribution equivalents, whether paid or unpaid, are participating securities and, therefore, are included in the computation of both basic and diluted earnings per unit. EITF 03-6-1 is effective for fiscal years
beginning after December 15, 2008, and interim periods within those fiscal years. Early application was not permitted. We adopted EITF 03-6-1 effective January 1, 2009, and there was no material impact on our financial statements as a
result of this adoption.

In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures About Fair Value of Financial
Instruments, which requires disclosures about the fair value of financial instruments whenever we issue financial statements. The disclosures outlined in FSP FAS 107-1 and APB 28-1 are required for interim and annual periods ending after
June 15, 2009. Early adoption is permitted for periods ending after March 15, 2009, and we adopted FSP FAS 107-1 and APB 28-1 as of March 31, 2009. Disclosures for earlier periods presented for comparative purposes at initial adoption
are not required.

In April 2009, the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business
Combination That Arise from Contingencies, which requires us to recognize assets acquired or liabilities assumed in a business combination that arise from a contingency if the acquisition-date fair value of that asset or liability can be
determined during the measurement period. If the acquisition-date fair value of an asset acquired or a liability assumed in a business combination that arises



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from a contingency cannot be determined during the measurement period, we are required to recognize an asset or liability at the time of the acquisition at
the amount that would be recognized in accordance with SFAS No. 5, Accounting for Contingencies and FASB Interpretation No. 14, Reasonable Estimation of the Amount of a Lossan interpretation of FASB Statement
No. 5. FSP FAS 141(R)-1 is effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after December 15, 2008. We have had no material acquisitions since our adoption
of FSP FAS 141(R)-1. For each acquisition that includes assets acquired or liabilities assumed arising from contingencies, we will determine the fair value of the assets or liabilities and will make the appropriate disclosures.

In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly, which provides additional guidance for estimating fair value in accordance with FASB Statement No. 157, Fair Value Measurements, when the volume and activity
level for an asset or liability have significantly decreased and when transactions are not orderly (i.e. distressed or forced), since quoted prices may not be determinative of fair value. In such cases, FSP FAS 157-4 requires further analysis of the
transactions or quoted prices to determine whether a significant adjustment to the transactions or quoted prices, using a valuation technique other than the quoted price, is necessary to estimate fair value in accordance with Statement No. 157.
FSP FAS 157-4 amends Statement No. 157 and requires disclosure in interim and annual periods of the inputs and valuation techniques used, a discussion of changes in valuation techniques and related inputs, if any, and definition of major
categories for equity securities and debt securities. We adopted FSP FAS 157-4 effective June 30, 2009, and there was no impact on our financial statements as a result of this adoption. Further, we do not expect the standard to have a material
impact on our financial statements unless future fair value measurements are affected by inactive markets.

In May 2009, the FASB issued
Statement No. 165, Subsequent Events, which establishes recognition and disclosure requirements for events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Statement
No. 165 requires entities to disclose the date through which subsequent events have been evaluated, as well as whether that date is the date the financial statements were issued or the date the financial statements were available to be issued.
We adopted Statement No. 165 effective June 30, 2009, and there was no material impact on our financial statements as a result of this adoption.

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting StandardsCodification and the Hierarchy of Generally Accepted Accounting Principles, which replaces SFAS No. 162, The Hierarchy of
Generally Accepted Accounting Principles. SFAS No. 168 will become the source of authoritative U.S. generally accepted accounting principles recognized by the FASB to be applied by nongovernmental entities and is effective for financial
statements issued for interim and annual periods ending after September 15, 2009. We do not anticipate any material impact on our financial statements as a result of adopting SFAS No. 168 other than changes in reference from specific
accounting standards to accounting standards codification references, and will adopt it effective September 30, 2009.



|13. | Subsequent Events
|--- | -----------------

On July 13, 2009,
PVRs natural gas midstream business completed an acquisition of gas processing and residue pipeline facilities in western Oklahoma from Atlas Pipeline Partners, L.P. for approximately $22.6 million in cash. Funding for the acquisition was
provided by borrowings under the PVR Revolver. The acquired assets consist of a 60 MMcf per day processing plant within Atlas 180 MMcf per day Sweetwater facility. PVR expects the facility to be processing its gas by the end of August 2009
after system connections and field compression are installed at an additional cost of approximately $5.0 million. Additionally, a recently completed 40 MMcf per day processing plant expansion in PVRs Beaver/Spearman complex (the
Panhandle System) was in service at July 31, 2009.

The acquired and expanded processing facilities will increase
PVRs processing capacity in the Panhandle System to 260 MMcf per day and overall processing capacity to 400 MMcf per day. The increased processing capacity will allow PVR to process gas volumes of approximately 50 MMcf per day which were being
bypassed due to processing capacity constraints in the Panhandle System and will alleviate pipeline pressure-related volume constraints in the eastern portion of the Panhandle System.



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##### Table of Contents

|Item 2 | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------ | -------------------------------------------------------------------------------------

The following discussion and analysis of the financial condition and results of operations of Penn Virginia GP Holdings, L.P. and its subsidiaries
(we, us or our) should be read in conjunction with our condensed consolidated financial statements and the accompanying notes in Item 1, Financial Statements.

Overview of Our Business

General

We are a publicly traded Delaware limited partnership formed in June 2006. Our only cash generating assets consist of our interests in Penn Virginia
Resource Partners, L.P., or PVR, which consist of the following:



| |  |  | a 2% general partner interest in PVR, which we hold through our 100% ownership interest in Penn Virginia Resource GP, LLC, PVRs general partner;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | all of the incentive distribution rights, or IDRs, in PVR, which we hold through our 100% ownership interest in PVRs general partner; and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 19,587,049 common units of PVR, representing an approximately 37% limited partner interest in PVR.
| | - |  | --------------------------------------------------------------------------------------------------

All of our cash flows are generated from the cash distributions we receive with respect to the PVR equity interests we own. PVR is required by its
partnership agreement to distribute, and it has historically distributed within 45 days of the end of each quarter, all of its cash on hand at the end of each quarter, less cash reserves established by its general partner in its sole discretion to
provide for the proper conduct of PVRs business or to provide for future distributions. While we, like PVR, are structured as a limited partnership, our capital structure and cash distribution policy differ materially from those of PVR. Most
notably, our general partner does not have an economic interest in us and is therefore not entitled to receive any distributions from us and our capital structure does not include IDRs. Accordingly, our distributions are allocated exclusively to our
common units.

Because we control the general partner of PVR, the financial results of PVR are included in our condensed consolidated
financial statements. However, we and PVR both function with capital structures that are independent of each other, with both of us having publicly traded common units and PVR having its own debt instruments. We do not have any debt instruments on a
stand-alone basis.

Financial Presentation

We reflect our ownership interest in PVR on a consolidated basis, which means that our financial results are combined with PVRs financial results. The approximately 61% limited partner interest in PVR that we do
not own, after the effect of IDRs, is reflected as noncontrolling interests in our results of operations. We have no separate operating activities apart from those conducted by PVR, and our cash flows currently consist of distributions from PVR on
the partner interests, including the IDRs, that we own. Accordingly, the discussion and analysis of our financial position and results of operations in this Managements Discussion and Analysis of Financial Condition and Results of
Operations reflects the operating activities and results of operations of PVR.

Overview of PVRs Business

PVR is a publicly traded Delaware limited partnership formed by Penn Virginia Corporation in 2001 that is principally engaged in the management of coal
and natural resource properties and the gathering and processing of natural gas in the United States.



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##### Table of Contents

Selected Financial Data  Consolidated

Summary operating results for the three and six months ended June 30, 2009 and 2008 were as follows (in thousands):



|                                                          |  |                            |         |   |      |   |         |                          |  |     |      |  |   |         |   |  |          |         |   |  |     |   
|--------------------------------------------------------- |  | -------------------------- | ------- | - | ---- | - | ------- | ------------------------ |  | --- | ---- |  | - | ------- | - |  | -------- | ------- | - |  | --- | --
|                                                          |  | Three Months EndedJune 30, |         |   |      |   |         | Six Months EndedJune 30, |  |     |      | 
|                                                          |  | 2009                       |         |   | 2008 |   |         | % Change                 |  |     | 2009 |  |   | 2008    |   |  | % Change |        
|Revenues                                                  |  | $                          | 149,419 |   |      | $ | 276,505 |                          |  | (46 | )%   |  | $ | 306,178 |   |  | $        | 433,319 |   |  | (29 | )%
|Expenses                                                  |  |                            | 128,588 |   |      |   | 232,738 |                          |  | (45 | )%   |  |   | 263,957 |   |  |          | 358,934 |   |  | (26 | )%
|                                                          |  |                            |         |   |      |   |         |                          |  |     |      |  |   |         |   |  |          |         |   |  |     |   
|Operating income                                          |  |                            | 20,831  |   |      |   | 43,767  |                          |  | (52 | )%   |  |   | 42,221  |   |  |          | 74,385  |   |  | (43 | )%
|Other income (expense)                                    |  |                            | (8,052  | ) |      |   | (34,815 | )                        |  | (77 | )%   |  |   | (20,500 | ) |  |          | (31,426 | ) |  | (35 | )%
|                                                          |  |                            |         |   |      |   |         |                          |  |     |      |  |   |         |   |  |          |         |   |  |     |   
|Net income                                                |  | $                          | 12,779  |   |      | $ | 8,952   |                          |  | 43  | %    |  | $ | 21,721  |   |  | $        | 42,959  |   |  | (49 | )%
|Net income attributable tononcontrolling interest         |  |                            | (4,440  | ) |      |   | (2,890  | )                        |  | 54  | %    |  |   | (6,533  | ) |  |          | (20,095 | ) |  | (67 | )%
|                                                          |  |                            |         |   |      |   |         |                          |  |     |      |  |   |         |   |  |          |         |   |  |     |   
|Net income attributable toPenn Virginia GP Holdings, L.P. |  | $                          | 8,339   |   |      | $ | 6,062   |                          |  | 38  | %    |  | $ | 15,188  |   |  | $        | 22,864  |   |  | (34 | )%
|                                                          |  |                            |         |   |      |   |         |                          |  |     |      |  |   |         |   |  |          |         |   |  |     |   

PVR currently conducts operations in two business segments: (i) coal and natural resource
management and (ii) natural gas midstream.



| |  |  | Coal and Natural Resource Managementmanagement and leasing of coal properties and subsequent collection of royalties; other land management activities such as
selling standing timber; leasing of fee-based coal-related infrastructure facilities to certain lessees and end-user industrial plants; collection of oil and gas royalties; and coal transportation, or wheelage, fees. Both in its current limited
partnership form and in its previous corporate form, PVR has managed coal properties since 1882.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Natural Gas Midstreamnatural gas processing, gathering and other related services. PVR entered this business segment in 2005.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------

The following table presents a summary of certain financial information relating to our segments:



|                                         |  |                                       |        |                         |   |         |                    |  |   |              |   |  |   |        
|---------------------------------------- |  | ------------------------------------- | ------ | ----------------------- | - | ------- | ------------------ |  | - | ------------ | - |  | - | -------
|                                         |  | PVRCoal and NaturalResourceManagement |        | PVRNatural GasMidstream |   |         | Corporate andOther |  |   | Consolidated
|                                         |  | (in thousands)                       
|For the Six Months Ended June 30, 2009:  |  |                                       |       
|Revenues                                 |  | $                                     | 73,396 |                         | $ | 232,782 |                    |  | $ |             |   |  | $ | 306,178
|Cost of midstream gas purchased          |  |                                       |       |                         |   | 192,774 |                    |  |   |             |   |  |   | 192,774
|Operating costs and expenses             |  |                                       | 12,531 |                         |   | 23,433  |                    |  |   | 1,099        |   |  |   | 37,063 
|Depreciation, depletion and amortization |  |                                       | 15,558 |                         |   | 18,562  |                    |  |   |              |   |  |   | 34,120 
|                                         |  |                                       |        |                         |   |         |                    |  |   |              |   |  |   |        
|Operating income (loss)                  |  | $                                     | 45,307 |                         | $ | (1,987  | )                  |  | $ | (1,099       | ) |  | $ | 42,221 
|                                         |  |                                       |        |                         |   |         |                    |  |   |              |   |  |   |        
|For the Six Months Ended June 30, 2008:  |  |                                       |        |                         |   |         |                    |  |   |              |   |  |   |        
|Revenues                                 |  | $                                     | 69,350 |                         | $ | 363,969 |                    |  | $ |             |   |  | $ | 433,319
|Cost of midstream gas purchased          |  |                                       |       |                         |   | 302,516 |                    |  |   |             |   |  |   | 302,516
|Operating costs and expenses             |  |                                       | 13,846 |                         |   | 16,975  |                    |  |   | 1,178        |   |  |   | 31,999 
|Depreciation, depletion and amortization |  |                                       | 13,939 |                         |   | 10,480  |                    |  |   |             |   |  |   | 24,419 
|                                         |  |                                       |        |                         |   |         |                    |  |   |              |   |  |   |        
|Operating income (loss)                  |  | $                                     | 41,565 |                         | $ | 33,998  |                    |  | $ | (1,178       | ) |  | $ | 74,385 
|                                         |  |                                       |        |                         |   |         |                    |  |   |              |   |  |   |        

Results of Operations

PVR Coal and Natural Resource Management Segment

As of December 31, 2008, PVR owned or controlled approximately
827 million tons of proven and probable coal reserves in Central and Northern Appalachia, the San Juan Basin and the Illinois Basin. PVR enters into long-term leases with experienced,



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##### Table of Contents

third-party mine operators, providing them the right to mine PVRs coal reserves in exchange for royalty payments.
PVR actively works with its lessees to develop efficient methods to exploit its reserves and to maximize production from PVRs properties. PVR does not operate any mines. In the six months ended June 30, 2009, PVRs lessees produced
17.5 million tons of coal from its properties and paid to PVR coal royalties revenues of $60.6 million, for an average royalty per ton of $3.47 ($3.31 per ton net of coal royalties expense). Approximately 82% of PVRs coal royalties
revenues in the six months ended June 30, 2009 were derived from coal mined on its properties under leases containing royalty rates based on the higher of a fixed base price or a percentage of the gross sales price. The balance of PVRs
coal royalties revenues for the respective periods was derived from coal mined on PVRs properties under leases containing fixed royalty rates that escalate annually.

PVR also earns revenues from other land management activities, such as selling standing timber, leasing fee-based coal-related infrastructure facilities
to certain lessees and end-user industrial plants, collecting oil and gas royalties and from coal transportation, or wheelage, fees.

The
deterioration of the global economy, including financial and credit markets, has reduced worldwide demand for coal with resultant price declines. Depending on the longevity and ultimate severity of the deterioration, demand for coal may continue to
decline, which could adversely affect PVRs production and pricing for coal mined by its lessees, and, consequently, adversely affect the royalty income received by PVR and PVRs ability to make cash distributions to its limited partners
and to us, the owner of PVRs general partner. The deterioration of the global economy has also adversely affected credit availability and PVRs access to new capital. This limited access to capital and credit availability has and could
continue to hamper PVRs ability to fund acquisitions, potentially restricting future growth potential.



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##### Table of Contents

Three Months Ended June 30, 2009 Compared With the Three Months Ended June 30, 2008

The following table sets forth a summary of certain financial and other data for the PVR coal and natural resource management segment
and the percentage change for the three months ended June 30, 2009 and 2008:



|                                                          |  |                                 |        |   |      |   |        |          |  |     |   
|--------------------------------------------------------- |  | ------------------------------- | ------ | - | ---- | - | ------ | -------- |  | --- | --
|                                                          |  | Three Months EndedJune 30,      |        |   |      |  
|                                                          |  | 2009                            |        |   | 2008 |   |        | % Change | 
|                                                          |  | (in thousands, except as noted) |        |   |      |  
|Financial Highlights                                      |  |                                 |        |   |      |   |        |          |  |     |   
|Revenues                                                  |  |                                 |        |   |      |   |        |          |  |     |   
|Coal royalties                                            |  | $                               | 29,997 |   |      | $ | 31,641 |          |  | (5  | )%
|Coal services                                             |  |                                 | 1,745  |   |      |   | 1,841  |          |  | (5  | )%
|Timber                                                    |  |                                 | 1,456  |   |      |   | 1,833  |          |  | (21 | )%
|Oil and gas royalty                                       |  |                                 | 545    |   |      |   | 1,556  |          |  | (65 | )%
|Other                                                     |  |                                 | 1,401  |   |      |   | 2,185  |          |  | (36 | )%
|                                                          |  |                                 |        |   |      |   |        |          |  |     |   
|Total revenues                                            |  |                                 | 35,144 |   |      |   | 39,056 |          |  | (10 | )%
|                                                          |  |                                 |        |   |      |   |        |          |  |     |   
|Expenses                                                  |  |                                 |        |   |      |   |        |          |  |     |   
|Coal royalties                                            |  |                                 | 1,569  |   |      |   | 3,397  |          |  | (54 | )%
|Other operating                                           |  |                                 | 758    |   |      |   | 505    |          |  | 50  | % 
|Taxes other than income                                   |  |                                 | 300    |   |      |   | 371    |          |  | (19 | )%
|General and administrative                                |  |                                 | 4,020  |   |      |   | 3,274  |          |  | 23  | % 
|Depreciation, depletion and amortization                  |  |                                 | 8,164  |   |      |   | 7,526  |          |  | 8   | % 
|                                                          |  |                                 |        |   |      |   |        |          |  |     |   
|Total expenses                                            |  |                                 | 14,811 |   |      |   | 15,073 |          |  | (2  | )%
|                                                          |  |                                 |        |   |      |   |        |          |  |     |   
|Operating income                                          |  | $                               | 20,333 |   |      | $ | 23,983 |          |  | (15 | )%
|                                                          |  |                                 |        |   |      |   |        |          |  |     |   
|Operating Statistics                                      |  |                                 |        |   |      |   |        |          |  |     |   
|Royalty coal tons produced by lessees (tons in thousands) |  |                                 | 8,739  |   |      |   | 8,839  |          |  | (1  | )%
|Coal royalties revenue, net of coal royalties expense     |  | $                               | 28,428 |   |      | $ | 28,244 |          |  | 1   | % 
|Average coal royalties revenues per ton ($/ton)           |  | $                               | 3.43   |   |      | $ | 3.58   |          |  | (4  | )%
|Less coal royalties expense per ton ($/ton)               |  |                                 | (0.18  | ) |      |   | (0.38  | )        |  | (53 | )%
|                                                          |  |                                 |        |   |      |   |        |          |  |     |   
|Average net coal royalties per ton ($/ton)                |  | $                               | 3.25   |   |      | $ | 3.20   |          |  | 2   | % 
|                                                          |  |                                 |        |   |      |   |        |          |  |     |   

The following table summarizes coal production, coal royalties revenues and coal royalties per ton
by region for the three months ended June 30, 2009 and 2008:



|                                |  |                             |  |                             |  |      |                             |   |      |   |        |      |  |   |       |   |  |   |       |  
|------------------------------- |  | --------------------------- |  | --------------------------- |  | ---- | --------------------------- | - | ---- | - | ------ | ---- |  | - | ----- | - |  | - | ----- | -
|                                |  | Coal Production             |  | Coal Royalties Revenues     |  |      | Coal Royalties Per Ton      |  
|                                |  | Three Months Ended June 30, |  | Three Months Ended June 30, |  |      | Three Months Ended June 30, |  
|Region                          |  | 2009                        |  | 2008                        |  | 2009 |                             |   | 2008 |   |        | 2009 |  |   | 2008  |  
|                                |  | (tons in thousands)         |  | (in thousands)              |  |      | ($/ton)                     |  
|Central Appalachia              |  | 4,650                       |  | 5,144                       |  | $    | 21,192                      |   |      | $ | 24,450 |      |  | $ | 4.56  |   |  | $ | 4.75  |  
|Northern Appalachia             |  | 1,060                       |  | 1,110                       |  |      | 1,949                       |   |      |   | 1,857  |      |  |   | 1.84  |   |  |   | 1.67  |  
|Illinois Basin                  |  | 1,145                       |  | 1,119                       |  |      | 2,862                       |   |      |   | 2,312  |      |  |   | 2.50  |   |  |   | 2.07  |  
|San Juan Basin                  |  | 1,884                       |  | 1,466                       |  |      | 3,994                       |   |      |   | 3,022  |      |  |   | 2.12  |   |  |   | 2.06  |  
|                                |  |                             |  |                             |  |      |                             |   |      |   |        |      |  |   |       |   |  |   |       |  
|Total                           |  | 8,739                       |  | 8,839                       |  | $    | 29,997                      |   |      | $ | 31,641 |      |  | $ | 3.43  |   |  | $ | 3.58  |  
|                                |  |                             |  |                             |  |      |                             |   |      |   |        |      |  |   |       |   |  |   |       |  
|Less coal royalties expense (1) |  |                             |  |                             |  |      | (1,569                      | ) |      |   | (3,397 | )    |  |   | (0.18 | ) |  |   | (0.38 | )
|                                |  |                             |  |                             |  |      |                             |   |      |   |        |      |  |   |       |   |  |   |       |  
|Net coal royalties revenues     |  |                             |  |                             |  | $    | 28,428                      |   |      | $ | 28,244 |      |  | $ | 3.25  |   |  | $ | 3.20  |  
|                                |  |                             |  |                             |  |      |                             |   |      |   |        |      |  |   |       |   |  |   |       |  



|(1) | PVRs coal royalties expenses are incurred primarily in the Central Appalachian region.
|--- | ---------------------------------------------------------------------------------------

Production.Coal production in the Northern Appalachian and Illinois Basin regions remained relatively constant from the three months ended
June 30, 2008 to the same period of 2009. Coal production in the Central Appalachian region decreased by 0.4 million tons, or 10%, from 5.1 million tons in the three months ended June 30, 2008 to 4.7 million tons in the same
period of 2009. While the decrease in production primarily resulted from production cut backs due to a depressed coal market, the impact of the decreased coal production on net coal royalties revenue was not significant since a large part of
the decrease was from subleased properties in Central Appalachia, from which PVR makes lower net average royalties per ton produced than it makes in other regions where coal



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production increased or did not decrease. Coal production in the San Juan Basin region increased by 0.4 million
tons, or 29%, from 1.5 million tons in the three months ended June 30, 2008 to 1.9 million tons in the same period of 2009. This increase was primarily due to the start up of a new mine in the later part of 2008.

Revenues. Net coal royalties revenues increased slightly from $28.2 million in the three months ended June 30, 2008 to $28.4 million in the
same period of 2009, driven by a $0.05 per ton increase in average coal royalties per ton, offset by a slight volume decrease. The average net coal royalty per ton, which represents the average coal royalties revenue per ton net of coal royalties
expense, increased slightly from $3.20 per ton in the three months ended June 30, 2008 to $3.25 per ton in the same period of 2009.

Coal services revenues remained relatively constant from the three months ended June 30, 2008 to the same period of 2009. Timber revenues decreased by $0.3 million, or 21%, from $1.8 million in the three months ended June 30, 2008
to $1.5 million in the same period of 2009 primarily due to decreased sales prices resulting from weakened market conditions for furniture-grade wood products. Oil and gas royalties revenues decreased by $1.1 million, or 65%, from $1.6 million in
the three months ended June 30, 2008 to $0.5 million in the same period of 2009 primarily due to decreased natural gas prices. Other revenues decreased by $0.8 million, or 36%, from $2.2 million in the three months ended June 30, 2008 to
$1.4 million in the same period of 2009 primarily due to decreased wheelage income.

Expenses. Other operating expenses increased by
$0.3 million, or 50%, from $0.5 million in the three months ended June 30, 2008 to $0.8 million in the same period of 2009 primarily due to an increase in expenses related to PVRs timber operations and costs incurred under PVRs
contractual obligations for mine maintenance. Taxes other than income and depreciation, depletion and amortization expenses remained relatively constant from the three months ended June 30, 2008 to the same period of 2009. General and
administrative costs increased by $0.7 million, or 23%, from $3.3 million in the three months ended June 30, 2008 to $4.0 million in the same period of 2009 primarily due to PVRs increased staffing and related employee benefit costs.



19



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##### Table of Contents

Six Months Ended June 30, 2009 Compared With the Six Months Ended June 30, 2008

The following table sets forth a summary of certain financial and other data for the PVR coal and natural resource management segment
and the percentage change for the six months ended June 30, 2009 and 2008:



|                                                          |  |                                 |        |   |      |   |        |          |  |     |   
|--------------------------------------------------------- |  | ------------------------------- | ------ | - | ---- | - | ------ | -------- |  | --- | --
|                                                          |  | Six Months Ended June 30,       |        |   |      |  
|                                                          |  | 2009                            |        |   | 2008 |   |        | % Change | 
|                                                          |  | (in thousands, except as noted) |        |   |      |  
|Financial Highlights                                      |  |                                 |        |   |      |   |        |          |  |     |   
|Revenues                                                  |  |                                 |        |   |      |   |        |          |  |     |   
|Coal royalties                                            |  | $                               | 60,627 |   |      | $ | 55,603 |          |  | 9   | % 
|Coal services                                             |  |                                 | 3,633  |   |      |   | 3,703  |          |  | (2  | )%
|Timber                                                    |  |                                 | 2,773  |   |      |   | 3,417  |          |  | (19 | )%
|Oil and gas royalty                                       |  |                                 | 1,248  |   |      |   | 2,790  |          |  | (55 | )%
|Other                                                     |  |                                 | 5,115  |   |      |   | 3,837  |          |  | 33  | % 
|                                                          |  |                                 |        |   |      |   |        |          |  |     |   
|Total revenues                                            |  |                                 | 73,396 |   |      |   | 69,350 |          |  | 6   | % 
|                                                          |  |                                 |        |   |      |   |        |          |  |     |   
|Expenses                                                  |  |                                 |        |   |      |   |        |          |  |     |   
|Coal royalties                                            |  |                                 | 2,793  |   |      |   | 5,909  |          |  | (53 | )%
|Other operating                                           |  |                                 | 1,641  |   |      |   | 736    |          |  | 123 | % 
|Taxes other than income                                   |  |                                 | 725    |   |      |   | 742    |          |  | (2  | )%
|General and administrative                                |  |                                 | 7,372  |   |      |   | 6,459  |          |  | 14  | % 
|Depreciation, depletion and amortization                  |  |                                 | 15,558 |   |      |   | 13,939 |          |  | 12  | % 
|                                                          |  |                                 |        |   |      |   |        |          |  |     |   
|Total expenses                                            |  |                                 | 28,089 |   |      |   | 27,785 |          |  | 1   | % 
|                                                          |  |                                 |        |   |      |   |        |          |  |     |   
|Operating income                                          |  | $                               | 45,307 |   |      | $ | 41,565 |          |  | 9   | % 
|                                                          |  |                                 |        |   |      |   |        |          |  |     |   
|Operating Statistics                                      |  |                                 |        |   |      |   |        |          |  |     |   
|Royalty coal tons produced by lessees (tons in thousands) |  |                                 | 17,487 |   |      |   | 16,479 |          |  | 6   | % 
|Coal royalties revenue, net of coal royalties expense     |  | $                               | 57,834 |   |      | $ | 49,694 |          |  | 16  | % 
|Average coal royalties revenues per ton ($/ton)           |  | $                               | 3.47   |   |      | $ | 3.37   |          |  | 3   | % 
|Less coal royalties expense per ton ($/ton)               |  |                                 | (0.16  | ) |      |   | (0.36  | )        |  | (56 | )%
|                                                          |  |                                 |        |   |      |   |        |          |  |     |   
|Average net coal royalties per ton ($/ton)                |  | $                               | 3.31   |   |      | $ | 3.01   |          |  | 10  | % 
|                                                          |  |                                 |        |   |      |   |        |          |  |     |   

The following table summarizes coal production, coal royalties revenues and coal royalties per ton
by region for the six months ended June 30, 2009 and 2008:



|                                |  |                           |  |                           |  |      |                           |   |      |   |        |      |  |   |       |   |  |   |       |  
|------------------------------- |  | ------------------------- |  | ------------------------- |  | ---- | ------------------------- | - | ---- | - | ------ | ---- |  | - | ----- | - |  | - | ----- | -
|                                |  | Coal Production           |  | Coal Royalties Revenues   |  |      | Coal Royalties Per Ton    |  
|                                |  | Six Months Ended June 30, |  | Six Months Ended June 30, |  |      | Six Months Ended June 30, |  
|Region                          |  | 2009                      |  | 2008                      |  | 2009 |                           |   | 2008 |   |        | 2009 |  |   | 2008  |  
|                                |  | (tons in thousands)       |  | (in thousands)            |  |      | ($/ton)                   |  
|Central Appalachia              |  | 9,308                     |  | 9,955                     |  | $    | 42,875                    |   |      | $ | 43,029 |      |  | $ | 4.61  |   |  | $ | 4.32  |  
|Northern Appalachia             |  | 2,117                     |  | 1,784                     |  |      | 3,900                     |   |      |   | 2,991  |      |  |   | 1.84  |   |  |   | 1.68  |  
|Illinois Basin                  |  | 2,406                     |  | 2,152                     |  |      | 6,103                     |   |      |   | 4,250  |      |  |   | 2.54  |   |  |   | 1.97  |  
|San Juan Basin                  |  | 3,656                     |  | 2,588                     |  |      | 7,749                     |   |      |   | 5,333  |      |  |   | 2.12  |   |  |   | 2.06  |  
|                                |  |                           |  |                           |  |      |                           |   |      |   |        |      |  |   |       |   |  |   |       |  
|Total                           |  | 17,487                    |  | 16,479                    |  | $    | 60,627                    |   |      | $ | 55,603 |      |  | $ | 3.47  |   |  | $ | 3.37  |  
|                                |  |                           |  |                           |  |      |                           |   |      |   |        |      |  |   |       |   |  |   |       |  
|Less coal royalties expense (1) |  |                           |  |                           |  |      | (2,793                    | ) |      |   | (5,909 | )    |  |   | (0.16 | ) |  |   | (0.36 | )
|                                |  |                           |  |                           |  |      |                           |   |      |   |        |      |  |   |       |   |  |   |       |  
|Net coal royalties revenues     |  |                           |  |                           |  | $    | 57,834                    |   |      | $ | 49,694 |      |  | $ | 3.31  |   |  | $ | 3.01  |  
|                                |  |                           |  |                           |  |      |                           |   |      |   |        |      |  |   |       |   |  |   |       |  



|(1) | PVRs coal royalties expenses are incurred primarily in the Central Appalachian region.
|--- | ---------------------------------------------------------------------------------------

Production.Coal production in the Central Appalachian region decreased by 0.7 million tons, or 7%, from 10.0 million tons in the six
months ended June 30, 2008 to 9.3 million tons in the same period of 2009. This decrease in production primarily resulted



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from depleted reserve areas and production cut backs due to a depressed coal market. Most of this reduction occurred on
subleased properties in Central Appalachia, from which PVR makes lower margins per ton produced than it does in other regions. Coal production in the Northern Appalachian region increased by 0.3 million tons, or 19%, from 1.8 million tons
in the six months ended June 30, 2008 to 2.1 million tons in the same period of 2009. This increase was primarily due to increased longwall production from one of PVRs lessees who encountered adverse mining conditions in the
first half of 2008. Coal production in the Illinois Basin region increased by 0.2 million tons, or 12%, from 2.2 million tons in the six months ended June 30, 2008 to 2.4 million tons in the same period of 2009. This increase was
primarily due to improved mining conditions encountered by PVRs lessee in southern Illinois. Coal production in the San Juan region increased by 1.1 million tons, or 41%, from 2.6 million tons in the six months ended June 30,
2008 to 3.7 million tons in the same period of 2009. This increase was primarily due to the start up of a new mine in the later part of 2008.

Revenues. Net coal royalties revenues increased by $8.1 million, or 16%, from $49.7 million in the six months ended June 30, 2008 to $57.8 million in the same period of 2009. This increase was attributable
to increases in both production and average coal sales prices. The average net coal royalty per ton, which represents the average coal royalties revenue per ton net of coal royalties expense, increased by $0.30 per ton, or 10%, from $3.01 per ton in
the six months ended June 30, 2008 to $3.31 per ton in the same period of 2009 and is attributable to both the increase in the average coal royalties revenue per ton for all regions and decreased royalties expense caused by decreased production
from certain subleased properties.

Coal services revenues remained relatively constant from the six months ended June 30, 2008 to the
same period of 2009. Timber revenues decreased by $0.6 million, or 19%, from $3.4 million in the six months ended June 30, 2008 to $2.8 million in the same period of 2009 primarily due to decreased sales prices resulting from weakened market
conditions for furniture-grade wood products. Oil and gas royalties revenues decreased by $1.6 million, or 55%, from $2.8 million in the six months ended June 30, 2008 to $1.2 million in the same period of 2009 primarily due to decreased
natural gas prices. Other revenues, which consisted primarily of wheelage fees, forfeiture income and management fee income, increased by $1.3 million, or 33%, from $3.8 million in the six months ended June 30, 2008 to $5.1 million in the same
period of 2009 primarily due to increased wheelage income.

Expenses. Other operating expenses increased by $0.9 million, or 123%,
from $0.7 million in the six months ended June 30, 2008 to $1.6 million in the same period of 2009 primarily due an increase in expenses related to PVRs timber operations and costs incurred under PVRs contractual obligations for
mine maintenance. Taxes other than income remained relatively constant from the six months ended June 30, 2008 to the same period of 2009. General and administrative costs increased by $0.9 million, or 14%, from $6.5 million in the six months
ended June 30, 2008 to $7.4 million in the same period of 2009 primarily due to PVRs increased staffing and related employee benefit costs. Depreciation, depletion and amortization expenses increased by $1.7 million, or 12%, from $13.9
million in the six months ended June 30, 2008 to $15.6 million in the same period of 2009 primarily due to increased depletion expenses for PVRs mining and timber operations.

PVR Natural Gas Midstream Segment

The PVR natural gas midstream segment provides natural gas
processing, gathering and other related services. As of June 30, 2009, PVR owned and operated natural gas midstream assets located in Oklahoma and Texas, including five natural gas processing facilities having 300 MMcfd of total capacity and
approximately 4,069 miles of natural gas gathering pipelines. The PVR natural gas midstream business earns revenues primarily from gas processing contracts with natural gas producers and from fees charged for gathering natural gas volumes and
providing other related services. In addition, PVR owns a 25% member interest in Thunder Creek Gas Services, LLC, or Thunder Creek, a joint venture that gathers and transports coalbed methane in Wyomings Powder River Basin. PVR also owns a
natural gas marketing business, which aggregates third-party volumes and sells those volumes into intrastate pipeline systems and at market hubs accessed by various interstate pipelines.

For the six months ended June 30, 2009, system throughput volumes at PVRs gas processing plants and gathering systems, including
gathering-only volumes, were 63.6 Bcf, or approximately 352 MMcfd. For the six months ended June 30, 2009, 24% and 15% of the PVR natural gas midstream segments revenues and 18% and 12% of our total consolidated revenues were derived from
two of the PVR natural gas midstream segments customers, Conoco, Inc. and Tenaska Marketing Ventures.



21



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##### Table of Contents

PVR continually seeks new supplies of natural gas to offset the natural declines in production from the
wells currently connected to its systems and to increase system throughput volumes. New natural gas supplies are obtained for all of PVRs systems by contracting for production from new wells, connecting new wells drilled on dedicated acreage
and contracting for natural gas that has been released from competitors systems. In the six months ended June 30, 2009, the PVR natural gas midstream segment made aggregate capital expenditures of $26.2 million, primarily related to
PVRs Beaver/Spearman complex, or the Panhandle System, in Texas and Oklahoma.

Revenues, profitability and the future rate of growth
of the PVR natural gas midstream segment are highly dependent on market demand and prevailing natural gas liquid, or NGL, and natural gas prices. NGL and natural gas prices have been subject to significant volatility in recent years in response to
changes in the supply and demand for NGL products and natural gas market demand. The deterioration of the global economy has resulted in a decrease in demand for natural gas and NGLs. Depending on the longevity and ultimate severity of the
deterioration, NGL production from its processing plants could decrease and adversely affect PVRs natural gas midstream processing income and PVRs ability to make cash distributions. The deterioration of the global economy has also
adversely affected credit availability and PVRs access to new capital. This limited access to capital and credit availability has and could continue to hamper PVRs ability to fund acquisitions, potentially restricting future growth
potential.



22



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##### Table of Contents

Three Months Ended June 30, 2009 Compared With the Three Months Ended June 30, 2008

The following table sets forth a summary of certain financial and other data for the PVR natural gas midstream segment and the
percentage change for the three months ended June 30, 2009 and 2008:



|                                                         |  |                                 |         |      |   |         |          |  |     |   
|-------------------------------------------------------- |  | ------------------------------- | ------- | ---- | - | ------- | -------- |  | --- | --
|                                                         |  | Three Months Ended June 30,     |         |      |   |        
|                                                         |  | 2009                            |         | 2008 |   |         | % Change | 
|                                                         |  | (in thousands, except as noted) |         |      |   |        
|Financial Highlights                                     |  |                                 |         |      |   |         |          |  |     |   
|Revenues                                                 |  |                                 |         |      |   |         |          |  |     |   
|Residue gas                                              |  | $                               | 67,170  |      | $ | 153,537 |          |  | (56 | )%
|Natural gas liquids                                      |  |                                 | 38,917  |      |   | 70,507  |          |  | (45 | )%
|Condensate                                               |  |                                 | 3,945   |      |   | 8,452   |          |  | (53 | )%
|Gathering, processing and transportation fees            |  |                                 | 3,028   |      |   | 2,301   |          |  | 32  | % 
|                                                         |  |                                 |         |      |   |         |          |  |     |   
|Total natural gas midstream revenues (1)                 |  |                                 | 113,060 |      |   | 234,797 |          |  | (52 | )%
|Equity earnings in equity investment                     |  |                                 | 629     |      |   | 556     |          |  | 13  | % 
|Producer services                                        |  |                                 | 586     |      |   | 2,096   |          |  | (72 | )%
|                                                         |  |                                 |         |      |   |         |          |  |     |   
|Total revenues                                           |  |                                 | 114,275 |      |   | 237,449 |          |  | (52 | )%
|                                                         |  |                                 |         |      |   |         |          |  |     |   
|Expenses                                                 |  |                                 |         |      |   |         |          |  |     |   
|Cost of midstream gas purchased (1)                      |  |                                 | 92,154  |      |   | 202,819 |          |  | (55 | )%
|Operating                                                |  |                                 | 6,691   |      |   | 4,817   |          |  | 39  | % 
|Taxes other than income                                  |  |                                 | 680     |      |   | 605     |          |  | 12  | % 
|General and administrative                               |  |                                 | 4,237   |      |   | 3,469   |          |  | 22  | % 
|Depreciation and amortization                            |  |                                 | 9,453   |      |   | 5,393   |          |  | 75  | % 
|                                                         |  |                                 |         |      |   |         |          |  |     |   
|Total operating expenses                                 |  |                                 | 113,215 |      |   | 217,103 |          |  | (48 | )%
|                                                         |  |                                 |         |      |   |         |          |  |     |   
|Operating income                                         |  | $                               | 1,060   |      | $ | 20,346  |          |  | (95 | )%
|                                                         |  |                                 |         |      |   |         |          |  |     |   
|Operating Statistics                                     |  |                                 |         |      |   |         |          |  |     |   
|System throughput volumes (MMcf)                         |  |                                 | 31,342  |      |   | 23,884  |          |  | 31  | % 
|Daily throughput volumes (MMcfd)                         |  |                                 | 344     |      |   | 262     |          |  | 31  | % 
|                                                         |  |                                 |        
|Gross margin                                             |  | $                               | 20,906  |      | $ | 31,978  |          |  | (35 | )%
|Cash impact of derivatives                               |  |                                 | 3,377   |      |   | (8,186  | )        |  | 141 | % 
|                                                         |  |                                 |         |      |   |         |          |  |     |   
|Gross margin, adjusted for impact of derivatives         |  | $                               | 24,283  |      | $ | 23,792  |          |  | 2   | % 
|                                                         |  |                                 |         |      |   |         |          |  |     |   
|Gross margin ($/Mcf)                                     |  | $                               | 0.67    |      | $ | 1.34    |          |  | (50 | )%
|Cash impact of derivatives ($/Mcf)                       |  |                                 | 0.10    |      |   | (0.34   | )        |  | 129 | % 
|                                                         |  |                                 |         |      |   |         |          |  |     |   
|Gross margin, adjusted for impact of derivatives ($/Mcf) |  | $                               | 0.77    |      | $ | 1.00    |          |  | (23 | )%
|                                                         |  |                                 |         |      |   |         |          |  |     |   



|(1) | In the three months ended June 30, 2009, PVR recorded $20.0 million of natural gas midstream revenue and $20.0 million for the cost of midstream gas purchased related to the
purchase of natural gas from Penn Virginia Oil & Gas, L.P., or PVOG LP, and the subsequent sale of that gas to third parties. PVR takes title to the gas prior to transporting it to third parties. These transactions do not impact PVRs
gross margin.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Gross Margin. PVRs gross margin is the difference between PVRs natural gas midstream
revenues and PVRs cost of midstream gas purchased. Natural gas midstream revenues include residue gas sold from processing plants after NGLs are removed, NGLs sold after being removed from system throughput volumes received, condensate
collected and sold and gathering and other fees primarily from natural gas volumes connected to PVRs gas processing plants. Cost of midstream gas purchased consists of amounts payable to third-party producers for natural gas purchased under
percentage-of-proceeds and gas purchase/keep-whole contracts.



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PVRs 35% gross margin decrease in the three months ended June 30, 2009 as compared to the same
period of 2008 was primarily due to decreased commodity pricing and frac spreads. Frac spreads are the difference between the price of NGLs sold and the cost of natural gas purchased on a per MMBtu basis. The gross margin decrease was partially
offset by margins earned from increased system throughput volume production. The increased volumes were from regions exposed to both commodity prices and fixed fees.

System throughput volumes increased by 82 MMcfd, or 31%, from 262 MMcfd in the three months ended June 30, 2008 to 344 MMcfd in the same period of 2009. This increase in throughput volumes was primarily due to
the continued successful development by producers operating in the vicinity of the Panhandle System, as well as PVRs success in contracting and connecting new supply. The Crossroads plant in East Texas, which became fully operational in April
2008, and the acquisition of Lone Star Gathering L.P., or Lone Star, which was consummated in the third quarter of 2008, also contributed to the volume increase.

During the three months ended June 30, 2009, PVR generated a majority of its gross margin from contractual arrangements under which the gross margin is exposed to increases and decreases in the price of natural
gas and NGLs. As part of PVRs risk management strategy, PVR uses derivative financial instruments to economically hedge NGLs sold and natural gas purchased. See Note 4  Derivative Instruments, in the Notes to Condensed
Consolidated Financial Statements in Item 1, Financial Statements, for a description of PVRs derivatives program. Adjusted for the cash impact of PVRs commodity derivative instruments, PVRs gross margin increased
by $0.5 million, or 2%, from $23.8 million in the three months ended June 30, 2008 to $24.3 million in the same period of 2009. On a per Mcf basis, adjusted for the cash impact of PVRs commodity derivatives, the gross margin decreased by
$0.23 Mcf, or 23%, from $1.00 per Mcf in the three months ended June 30, 2008 to $0.77 in the same period of 2009. These changes were primarily due to the contribution of fixed fee volumes at the Crossroads plant and from the Lone Star
acquisition.

Producer Services Revenues. Producer services revenues decreased by $1.5 million, or 72%, from $2.1 million to $0.6
million in the three months ended June 30, 2008 compared to the same period of 2009. This decrease was primarily due to the relative changes in natural gas indices from the purchasing and selling of natural gas as well as a decrease in fees
earned from marketing.

Expenses.Operating expenses increased by $1.9 million, or 39%, from $4.8 million in the three months ended
June 30, 2008 to $6.7 million in the same period of 2009. This increase in operating expenses was primarily due to increased costs for compressor rentals, related to PVRs expanding footprint in the Texas and Oklahoma panhandle, expansion
projects and recent acquisitions. Taxes other than income remained relatively constant from the three months ended June 30, 2008 to the same period of 2009. General and administrative expenses increased by $0.7 million, or 22%, from $3.5
million in the three months ended June 30, 2008 to $4.2 million in the same period of 2009 primarily due to increased staffing and related employee benefit costs. Depreciation and amortization expenses increased by $4.1 million, or 75%, from
$5.4 million in the three months ended June 30, 2008 to $9.5 million in the same period of 2009. The increase in depreciation and amortization expense was primarily due to capital spending on expansion projects, such as the Spearman and
Crossroads plants and PVRs 2008 acquisitions.



24



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##### Table of Contents

The following table sets forth a summary of certain financial and other data for PVRs natural gas
midstream segment and the percentage change for the six months ended June 30, 2009 and 2008:



|                                                         |  |                                 |         |   |      |   |         |          |  |      |   
|-------------------------------------------------------- |  | ------------------------------- | ------- | - | ---- | - | ------- | -------- |  | ---- | --
|                                                         |  | Six Months Ended June 30,       |         |   |      |  
|                                                         |  | 2009                            |         |   | 2008 |   |         | % Change | 
|                                                         |  | (in thousands, except as noted) |         |   |      |  
|Financial Highlights                                     |  |                                 |         |   |      |   |         |          |  |      |   
|Revenues                                                 |  |                                 |         |   |      |   |         |          |  |      |   
|Residue gas                                              |  | $                               | 148,364 |   |      | $ | 215,204 |          |  | (31  | )%
|Natural gas liquids                                      |  |                                 | 69,523  |   |      |   | 126,704 |          |  | (45  | )%
|Condensate                                               |  |                                 | 6,848   |   |      |   | 14,668  |          |  | (53  | )%
|Gathering, processing and transportation fees            |  |                                 | 5,704   |   |      |   | 3,269   |          |  | 74   | % 
|                                                         |  |                                 |         |   |      |   |         |          |  |      |   
|Total natural gas midstream revenues (1)                 |  |                                 | 230,439 |   |      |   | 359,845 |          |  | (36  | )%
|Equity earnings in equity investment                     |  |                                 | 1,748   |   |      |   | 556     |          |  | 214  | % 
|Producer services                                        |  |                                 | 595     |   |      |   | 3,568   |          |  | (83  | )%
|                                                         |  |                                 |         |   |      |   |         |          |  |      |   
|Total revenues                                           |  |                                 | 232,782 |   |      |   | 363,969 |          |  | (36  | )%
|                                                         |  |                                 |         |   |      |   |         |          |  |      |   
|Expenses                                                 |  |                                 |         |   |      |   |         |          |  |      |   
|Cost of midstream gas purchased (1)                      |  |                                 | 192,774 |   |      |   | 302,516 |          |  | (36  | )%
|Operating                                                |  |                                 | 13,474  |   |      |   | 8,867   |          |  | 52   | % 
|Taxes other than income                                  |  |                                 | 1,478   |   |      |   | 1,306   |          |  | 13   | % 
|General and administrative                               |  |                                 | 8,481   |   |      |   | 6,802   |          |  | 25   | % 
|Depreciation and amortization                            |  |                                 | 18,562  |   |      |   | 10,480  |          |  | 77   | % 
|                                                         |  |                                 |         |   |      |   |         |          |  |      |   
|Total operating expenses                                 |  |                                 | 234,769 |   |      |   | 329,971 |          |  | (29  | )%
|                                                         |  |                                 |         |   |      |   |         |          |  |      |   
|Operating income (loss)                                  |  | $                               | (1,987  | ) |      | $ | 33,998  |          |  | (106 | )%
|                                                         |  |                                 |         |   |      |   |         |          |  |      |   
|Operating Statistics                                     |  |                                 |         |   |      |   |         |          |  |      |   
|System throughput volumes (MMcf)                         |  |                                 | 63,622  |   |      |   | 41,171  |          |  | 55   | % 
|Daily throughput volumes (MMcfd)                         |  |                                 | 352     |   |      |   | 226     |          |  | 56   | % 
|                                                         |  |                                 |        
|Gross margin                                             |  | $                               | 37,665  |   |      | $ | 57,329  |          |  | (34  | )%
|Cash impact of derivatives                               |  |                                 | 7,169   |   |      |   | (16,600 | )        |  | 143  | % 
|                                                         |  |                                 |         |   |      |   |         |          |  |      |   
|Gross margin, adjusted for impact of derivatives         |  | $                               | 44,834  |   |      | $ | 40,729  |          |  | 10   | % 
|                                                         |  |                                 |         |   |      |   |         |          |  |      |   
|Gross margin ($/Mcf)                                     |  | $                               | 0.59    |   |      | $ | 1.39    |          |  | (58  | )%
|Cash impact of derivatives ($/Mcf)                       |  |                                 | 0.11    |   |      |   | (0.40   | )        |  | 128  | % 
|                                                         |  |                                 |         |   |      |   |         |          |  |      |   
|Gross margin, adjusted for impact of derivatives ($/Mcf) |  | $                               | 0.70    |   |      | $ | 0.99    |          |  | (29  | )%
|                                                         |  |                                 |         |   |      |   |         |          |  |      |   



|(1) | In the six months ended June 30, 2009, PVR recorded $41.2 million of natural gas midstream revenue and $41.2 million for the cost of midstream gas purchased related to the
purchase of natural gas from PVOG LP and the subsequent sale of that gas to third parties. These transactions do not impact PVRs gross margin.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Gross Margin. PVRs 34% gross margin decrease in the six months ended June 30, 2009 as compared to the same period of 2008 was a result of decreased commodity pricing and frac spreads, partially
offset by margins earned from increased system throughput volume production.

System throughput volumes increased by 126 MMcfd, or 56%,
from 226 MMcfd in the six months ended June 30, 2008 to 352 MMcfd in the same period of 2009. This increase in throughput volumes was primarily due to the continued successful development by producers operating in the vicinity of the Panhandle
System, as well as PVRs success in contracting and connecting new supply. The Crossroads plant in East Texas, which became fully operational in April 2008, and the acquisition of Lone Star, which was consummated in the third quarter of 2008,
also contributed to the volume increase.



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During the six months ended June 30, 2009, PVR generated a majority of its gross margin from
contractual arrangements under which gross margin is exposed to increases and decreases in the price of natural gas and NGLs. As part of PVRs risk management strategy, PVR uses derivative financial instruments to economically hedge NGLs sold
and natural gas purchased. See Note 4  Derivative Instruments, in the Notes to Condensed Consolidated Financial Statements in Item 1, Financial Statements, for a description of PVRs derivatives program.
Adjusted for the cash impact of PVRs commodity derivative instruments, PVRs gross margin increased by $4.1 million, or 10%, from $40.7 million in the six months ended June 30, 2008 to $44.8 million in the same period of 2009. On a
per Mcf basis, adjusted for the cash impact of PVRs commodity derivatives, the gross margin decreased by $0.29 Mcf, or 29%, from $0.99 per Mcf in the six months ended June 30, 2008 to $0.70 in the same period of 2009. These changes were
primarily due to the contribution of fixed fee volumes at the Crossroads plant and from the Lone Star acquisition.

Equity Earnings in
Equity Investment. PVRs equity earnings increased $1.1 million, or 214%, from $0.6 million in the six months ended June 30, 2008 to $1.7 million in the same period of 2009. This increase was due to PVRs 25% member interest in
Thunder Creek, a joint venture that gathers and transports coalbed methane in Wyomings Powder River Basin. PVR acquired this member interest in the second quarter of 2008.

Producer Services Revenues. Producer services revenues decreased by $3.0 million, or 83%, from $3.6 million to $0.6 million in the six months
ended June 30, 2009 compared to the same period of 2008. This decrease was primarily due to the relative changes in natural gas indices from the purchasing and selling of natural gas as well as a decrease in the fees earned from marketing.

Expenses. Operating expenses increased by $4.6 million, or 52%, from $8.9 million in the six months ended June 30, 2008 to
$13.5 million in the same period of 2009. This increase in operating expenses was primarily due to increased costs for compressor rentals related to PVRs expanding footprint in areas of operation, including the addition of the Spearman and
Crossroads plants. Taxes other than income increased by $0.2 million, or 13%, from $1.3 million in the six months ended June 30, 2008 to $1.5 million in the same period of 2009 primarily due to increased property taxes resulting from the
construction of the Spearman and Crossroads plants. General and administrative expenses increased by $1.7 million, or 25%, from $6.8 million in the six months ended June 30, 2008 to $8.5 million in the same period of 2009 primarily due to
increased staffing and related employee benefit costs. Depreciation and amortization expenses increased by $8.1 million, or 77%, from $10.5 million in the six months ended June 30, 2008 to $18.6 million in the same period of 2009. This increase
in depreciation and amortization expense was primarily due to capital spending on expansion projects, such as the Spearman and Crossroads plants and PVRs 2008 acquisitions.

Other

Our other results consist of interest expense and derivative gains and losses. The
following table sets forth a summary of certain financial data for our other results for the three and six months ended June 30, 2009 and 2008 (in thousands):



|                       |  |                            |        |   |      |   |         |                          |  |     |      |  |   |         |   |  |          |         |   |  |     |   
|---------------------- |  | -------------------------- | ------ | - | ---- | - | ------- | ------------------------ |  | --- | ---- |  | - | ------- | - |  | -------- | ------- | - |  | --- | --
|                       |  | Three Months EndedJune 30, |        |   |      |   |         | Six Months EndedJune 30, |  |     |      | 
|                       |  | 2009                       |        |   | 2008 |   |         | % Change                 |  |     | 2009 |  |   | 2008    |   |  | % Change |        
|Operating income       |  | $                          | 20,831 |   |      | $ | 43,767  |                          |  | (52 | )%   |  | $ | 42,221  |   |  | $        | 74,385  |   |  | (43 | )%
|Other income (expense) |  |                            |        |   |      |   |         |                          |  |     |      |  |   |         |   |  |          |         |   |  |     |   
|Interest expense       |  |                            | (6,365 | ) |      |   | (5,374  | )                        |  | 18  | %    |  |   | (11,981 | ) |  |          | (10,306 | ) |  | 16  | % 
|Other                  |  |                            | 347    |   |      |   | 501     |                          |  | (31 | )%   |  |   | 676     |   |  |          | 1,046   |   |  | (35 | )%
|Derivatives            |  |                            | (2,034 | ) |      |   | (29,942 | )                        |  | (93 | )%   |  |   | (9,195  | ) |  |          | (22,166 | ) |  | (59 | )%
|                       |  |                            |        |   |      |   |         |                          |  |     |      |  |   |         |   |  |          |         |   |  |     |   
|Net income             |  | $                          | 12,779 |   |      | $ | 8,952   |                          |  | 43  | %    |  | $ | 21,721  |   |  | $        | 42,959  |   |  | (49 | )%
|                       |  |                            |        |   |      |   |         |                          |  |     |      |  |   |         |   |  |          |         |   |  |     |   



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Interest Expense. Our consolidated interest expense increased $1.0 million, or 18%, from $5.4
million in the three months ended June 30, 2008 to $6.4 million in the same period of 2009. Our consolidated interest expense for the three and six months ended June 30, 2009 and 2008 is comprised of the following (in thousands):



|                       |  |                             |       |   |                           |   |       |      |  |   |        |   |  |   |        |  
|---------------------- |  | --------------------------- | ----- | - | ------------------------- | - | ----- | ---- |  | - | ------ | - |  | - | ------ | -
|                       |  | Three Months Ended June 30, |       |   | Six Months Ended June 30, |  
|Source                 |  | 2009                        |       |   | 2008                      |   |       | 2009 |  |   | 2008   |  
|Borrowings             |  | $                           | 5,596 |   |                           | $ | 4,935 |      |  | $ | 10,464 |   |  | $ | 10,622 |  
|Capitalized interest   |  |                             | (149  | ) |                           |   | (187  | )    |  |   | (226   | ) |  |   | (675   | )
|Interest rate swaps    |  |                             | 918   |   |                           |   | 626   |      |  |   | 1,743  |   |  |   | 359    |  
|                       |  |                             |       |   |                           |   |       |      |  |   |        |   |  |   |        |  
|Total interest expense |  | $                           | 6,365 |   |                           | $ | 5,374 |      |  | $ | 11,981 |   |  | $ | 10,306 |  
|                       |  |                             |       |   |                           |   |       |      |  |   |        |   |  |   |        |  

Interest expense for both the three and six months ended June 30, 2009 increased from the
comparative periods in 2008 due to an increase in PVRs weighted average debt balance caused by PVRs past capital spending program including acquisitions and an increase in non-cash interest expense related to debt issuance costs,
partially offset by an interest rate decrease.

Derivatives. Our results of operations and operating cash flows were impacted by
changes in market prices affecting fair values for NGL, crude oil and natural gas prices. Commodity markets are volatile, and as a result, PVRs hedging activity results can vary significantly. PVR determines the fair values of its commodity
derivative instruments based on discounted cash flows based on quoted forward prices for the respective commodities. The discounted cash flows utilize discount rates adjusted for the credit risk of PVRs counterparties for derivatives in an
asset position and PVRs own credit risk for derivatives in a liability position, in accordance with Statement of Financial Accounting Standards No. 157, Fair Value Measurements.

PVRs derivative activity for the three and six months ended June 30, 2009 and 2008 is summarized below (in thousands):



|                                                                |  |                             |        |   |                           |   |         |      |  |   |         |   |  |   |         |  
|--------------------------------------------------------------- |  | --------------------------- | ------ | - | ------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                |  | Three Months Ended June 30, |        |   | Six Months Ended June 30, |  
|                                                                |  | 2009                        |        |   | 2008                      |   |         | 2009 |  |   | 2008    |  
|Interest Rate Swap unrealized derivative gain                   |  | $                           | 3,574  |   |                           | $ |        |      |  | $ | 3,416   |   |  | $ |        |  
|Interest Rate Swap realized derivative loss                     |  |                             | (1,764 | ) |                           |   |        |      |  |   | (2,720  | ) |  |   |        |  
|Natural gas midstream commodity unrealized derivative loss      |  |                             | (7,221 | ) |                           |   | (20,239 | )    |  |   | (17,060 | ) |  |   | (2,941  | )
|Natural gas midstream commodity realized derivative gain (loss) |  |                             | 3,377  |   |                           |   | (9,703  | )    |  |   | 7,169   |   |  |   | (19,225 | )
|                                                                |  |                             |        |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Total derivative loss                                           |  | $                           | (2,034 | ) |                           | $ | (29,942 | )    |  | $ | (9,195  | ) |  | $ | (22,166 | )
|                                                                |  |                             |        |   |                           |   |         |      |  |   |         |   |  |   |         |  

Noncontrolling Interests. Noncontrolling interests represent net income allocated to the
limited partner units owned by the public. See Note 6, Noncontrolling Interests, in the Notes to Condensed Consolidated Financial Statements in Item 1, Financial Statements, for a description of the noncontrolling
interests in PVR. In the three months ended June 30, 2009 and 2008, noncontrolling interests in PVR reduced our consolidated net income by $4.4 million and $2.9 million. The increase in noncontrolling interests in PVR was primarily due to the
increase in PVRs net income, from $9.5 million in the three months ended June 30, 2008 to $13.3 million in the same period of 2009. In the six months ended June 30, 2009 and 2008, noncontrolling interests in PVR reduced our
consolidated net income by $6.5 million and $20.1 million. The decrease in noncontrolling interests in PVR was primarily due to the decrease in PVRs net income, from $44.0 million in the six months ended June 30, 2008 to $22.8 million in
the same period of 2009.

Liquidity and Capital Resources

Liquidity and Working Capital

On an ongoing basis, PVR generally satisfies its working capital requirements and
funds its capital expenditures using cash generated from its operations, borrowings under its $800.0 million revolving credit facility, or the PVR Revolver, and proceeds from PVR equity offerings. As discussed in more detail in Long-Term
Debt below, as of June 30, 2009, PVR had availability of $201.3



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##### Table of Contents

million on the PVR Revolver. PVR funds its debt service obligations and distributions to unitholders solely using cash
generated from its operations. PVR believes that the cash generated from its operations and its borrowing capacity will be sufficient to meet its working capital requirements, anticipated capital expenditures (other than major capital improvements
or acquisitions), scheduled debt payments under the PVR Revolver and distribution payments for the remainder of 2009. However, PVRs ability to satisfy its obligations and planned expenditures in the future will depend upon PVRs future
operating performance, which will be affected by prevailing economic conditions in the coal industry and natural gas midstream market, some of which are beyond PVRs control. Depending on the longevity and ultimate severity of the deterioration
of the global economy, PVRs ability to meet its working capital requirements and capital expenditures, including PVRs ability to grow organically in the future through acquisitions, may be significantly adversely affected, as may
PVRs ability to make debt payments and cash distributions to its limited partners and to us, the owner of PVRs general partner.

Cash Flows

The following table summarizes our cash flow statements for the six months ended June 30, 2009 and 2008:



|                                                                                           |  |                           |         |   |      |   |          |  
|------------------------------------------------------------------------------------------ |  | ------------------------- | ------- | - | ---- | - | -------- | -
|                                                                                           |  | Six Months Ended June 30, |        
|                                                                                           |  | 2009                      |         |   | 2008 |  
|                                                                                           |  | (in thousands)            |        
|Cash flows from operating activities:                                                      |  |                           |         |   |      |   |          |  
|Net income contribution                                                                    |  | $                         | 21,721  |   |      | $ | 22,864   |  
|Adjustments to reconcile net income to net cash provided operating activities (summarized) |  |                           | 49,166  |   |      |   | 50,001   |  
|Net changes in operating assets and liabilities                                            |  |                           | 1,648   |   |      |   | (424     | )
|                                                                                           |  |                           |         |   |      |   |          |  
|Net cash provided by operating activities                                                  |  |                           | 72,535  |   |      |   | 72,441   |  
|Net cash used in investing activities                                                      |  |                           | (33,548 | ) |      |   | (134,405 | )
|Net cash provided by (used in) financing activities                                        |  |                           | (40,232 | ) |      |   | 57,403   |  
|                                                                                           |  |                           |         |   |      |   |          |  
|Net decrease in cash and cash equivalents                                                  |  | $                         | (1,245  | ) |      | $ | (4,561   | )
|                                                                                           |  |                           |         |   |      |   |          |  

Operating Activities. At June 30, 2009, we had $17.0 million in cash and cash
equivalents compared to $18.3 million at December 31, 2008. Cash provided by operating activities for the six months ended June 30, 2009 was approximately $72.5 million compared to $72.4 million for the six months ended June 30, 2008.
Cash flows provided by operating activities remained relatively constant from the six months ended June 30, 2008 to the same period of 2009. The effects of decreased commodity prices on our cash flows were partially offset by the effects of cash
received in settlement of PVRs commodity derivative instruments.

Investing Activities. Cash used in investing
activities was approximately $33.5 million for the six months ended June 30, 2009 compared to $134.4 million for the six months ended June 30, 2008. This decrease was due to lower acquisition activity during the six months ended
June 30, 2009, compared to the same period of the prior year, as a result of economic conditions and lower commodity prices.

Financing Activities. Cash used in financing activities was approximately $40.2 million for the six months ended June 30, 2009 compared to cash provided of $57.4 million for the six months ended June 30, 2008. During the
six months ended June 30, 2008, a PVR equity issuance provided net proceeds of approximately $141.0 million and was used in part to repay borrowings under the PVR Revolver. The proceeds from PVRs borrowings during both periods were used
to fund PVRs capital expenditures.

Long-Term Debt

As of June 30, 2009, we had no outstanding borrowings other than the borrowings of PVR discussed below, which are included in our condensed consolidated financial statements.



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PVR Revolver.In March 2009, PVR increased the size of the PVR Revolver from $700.0 million to
$800.0 million, which resulted in $9.3 million of debt issuance costs. The PVR Revolver is secured with substantially all of PVRs assets. As of June 30, 2009, PVR had remaining borrowing capacity of $201.3 million on the PVR Revolver net
of outstanding borrowings of $597.1 million and letters of credit of $1.6 million. The PVR Revolver matures in December 2011 and is available to PVR for general purposes, including working capital, capital expenditures and acquisitions, and includes
a $10.0 million sublimit for the issuance of letters of credit. Interest is payable at a base rate plus an applicable margin of up to 1.25% if PVR selects the base rate borrowing option or at a rate derived from the London Interbank Offered Rate, or
LIBOR, plus an applicable margin ranging from 1.75% to 2.75% if PVR selects the LIBOR-based borrowing option. At June 30, 2009, the weighted average interest rate on borrowings outstanding under the PVR Revolver was approximately 2.5%. PVR has
entered into interest rate swaps, or PVR Interest Rate Swaps, to establish fixed rates on a portion of the outstanding borrowings under the PVR Revolver. As of June 30, 2009, PVR was in compliance with all of its covenants under the PVR
Revolver.

Future Capital Needs and Commitments

Currently, we have no capital requirements. In the future, we may decide to facilitate PVR acquisitions and other capital expenditures by the issuance of debt or equity.

PVR believes that its borrowing capacity will be sufficient for its capital needs and commitments for the remainder of 2009. Subject to commodity prices
and the availability of capital, PVR is committed to the growth of both of its business segments through a combination of organic projects and acquisitions of new properties and assets. For the remainder of 2009, PVR anticipates making capital
expenditures of approximately $61.3 to $66.3 million. The majority of PVRs 2009 capital expenditures are expected to be incurred in the PVR natural gas midstream segment, including the July 2009 acquisition of gas processing and residue
pipeline facilities in western Oklahoma from Atlas Pipeline Partners, L.P. for approximately $22.6 million in cash, which was funded by borrowings under the PVR Revolver.

Long-term cash requirements for PVRs acquisitions and other capital expenditures are expected to be funded by several sources, including cash flows from PVRs operating activities, borrowings under the PVR
Revolver and the issuance of additional debt and PVR equity securities if available under commercially acceptable terms. However, disruptions in the global financial and commodities markets and the general economic climate have made access to equity
and debt capital markets very difficult since late in 2008. While signs of improvement in these markets have occurred, including issuances of debt and equity securities by other publicly traded partnerships, the short-term outlook remains uncertain
with respect to PVRs ability to access the capital markets on acceptable terms. If the situation deteriorates and PVR is unable to access the capital markets for an extended period, PVRs ability to make acquisitions and other capital
expenditures, as well as PVRs ability to increase or sustain cash distributions to its limited partners and to us, the owner of PVRs general partner, will likely become impaired. If additional financing is required, there are no
assurances that it will be available, or if available, that it can be obtained on terms favorable to PVR or not dilutive to PVRs future earnings.

Environmental Matters

PVRs operations and those of its coal lessees are subject to environmental laws and regulations
adopted by various governmental authorities in the jurisdictions in which these operations are conducted. The terms of PVRs coal property leases impose liability on the relevant lessees for all environmental and reclamation liabilities arising
under those laws and regulations. The lessees are bonded and have indemnified PVR against any and all future environmental liabilities. PVR regularly visits its coal properties to monitor lessee compliance with environmental laws and regulations and
to review mining activities. PVRs management believes that its operations and those of its lessees comply with existing laws and regulations and does not expect any environment-related material adverse impact on its financial condition or
results of operations.

As of June 30, 2009 and December 31, 2008, PVRs environmental liabilities included $1.1 million and
$1.2 million, which represents PVRs best estimate of the liabilities as of those dates related to its coal and natural resource management and natural gas midstream businesses. PVR has reclamation bonding requirements with respect to certain
unleased and inactive properties. Given the uncertainty of when a reclamation area will meet regulatory standards, a change in this estimate could occur in the future.



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Summary of Critical Accounting Policies and Estimates

The process of preparing financial statements in accordance with accounting principles generally accepted in the United States of America requires our
management to make estimates and judgments regarding certain items and transactions. It is possible that materially different amounts could be recorded if these estimates and judgments change or if the actual results differ from these estimates and
judgments. Our most critical accounting policies which involve the judgment of our management were fully disclosed in our Annual Report on Form 10-K for the year ended December 31, 2008 and remained unchanged as of June 30, 2009.

Recent Accounting Pronouncements

See
Note 12New Accounting Standards in the Notes to Condensed Consolidated Financial Statements for a description of recent accounting pronouncements.

Forward-Looking Statements

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, NGLs, crude oil and coal;
| | - |  | -----------------------------------------------------------------------------



| |  |  | PVRs ability to access external sources of capital;
| | - |  | ----------------------------------------------------



| |  |  | any impairment writedowns of PVRs assets;
| | - |  | ------------------------------------------



| |  |  | the relationship between natural gas, NGL and coal prices;
| | - |  | ----------------------------------------------------------



| |  |  | the projected demand for and supply of natural gas, NGLs and coal;
| | - |  | ------------------------------------------------------------------



| |  |  | competition among producers in the coal industry generally and among natural gas midstream companies;
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | the extent to which the amount and quality of actual production of PVRs coal differs from estimated recoverable coal reserves;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------



| |  |  | PVRs ability to generate sufficient cash from its businesses to maintain and pay the quarterly distribution to its general partner and its unitholders;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the experience and financial condition of PVRs coal lessees and natural gas midstream customers, including PVRs lessees ability to satisfy their
royalty, environmental, reclamation and other obligations to PVR and others;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | operating risks, including unanticipated geological problems, incidental to PVRs coal and natural resource management or natural gas midstream business;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | PVRs ability to acquire new coal reserves or natural gas midstream assets and new sources of natural gas supply and connections to third-party pipelines on
satisfactory terms;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | PVRs ability to retain existing or acquire new natural gas midstream customers and coal lessees;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | the ability of PVRs lessees to produce sufficient quantities of coal on an economic basis from PVRs reserves and obtain favorable contracts for such
production;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the occurrence of unusual weather or operating conditions including force majeure events;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | delays in anticipated start-up dates of PVRs lessees mining operations and related coal infrastructure projects and new processing plants in the PVR
natural gas midstream segments business;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | environmental risks affecting the mining of coal reserves or the production, gathering and processing of natural gas;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



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| |  |  | the timing of receipt of necessary governmental permits by PVR or its lessees;
| | - |  | ------------------------------------------------------------------------------



| |  |  | hedging results;
| | - |  | ----------------



| |  |  | accidents;
| | - |  | ----------



| |  |  | changes in governmental regulation or enforcement practices, especially with respect to environmental, health and safety matters, including with respect to
emissions levels applicable to coal-burning power generators;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | uncertainties relating to the outcome of current and future litigation regarding mine permitting;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | 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, 2008.
| | - |  | ----------------------------------------------------------------------------------------------------

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, 2008. 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.



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##### Table of Contents

|Item 3 | Quantitative and Qualitative Disclosures About Market Risk
|------ | ----------------------------------------------------------

Market risk is the risk of loss arising from adverse changes in market rates and prices. The principal market risks to which PVR is exposed are as follows:



| |  |  | Price Risk
| | - |  | ----------



| |  |  | Interest Rate Risk
| | - |  | ------------------



| |  |  | Customer Credit Risk
| | - |  | --------------------

PVR is
also indirectly exposed to the credit risk of its customers and lessees. If PVRs customers or lessees become financially insolvent, they may not be able to continue to operate or meet their payment obligations.

As a result of PVRs risk management activities as discussed below, PVR is also exposed to counterparty risk with financial institutions with whom
PVR enters into these risk management positions. Sensitivity to these risks has heightened due to the deterioration of the global economy, including financial and credit markets.

Price Risk

PVRs price risk management program permits the utilization of derivative financial
instruments (such as swaps, costless collars and three-way collars) to seek to mitigate the price risks associated with fluctuations in natural gas, NGL and crude oil prices as they relate to the PVR natural gas midstream segment. The derivative
financial instruments are placed with major financial institutions that PVR believes are of acceptable credit risk. The fair values of PVRs price risk management activities are significantly affected by fluctuations in the prices of natural
gas, NGLs and crude oil.

At June 30, 2009, we reported a commodity derivative asset related to the PVR natural gas midstream segment
of $5.7 million that is with three counterparties and is substantially concentrated with one of those counterparties. This concentration may impact our overall credit risk, either positively or negatively, in that these counterparties may be
similarly affected by changes in economic or other conditions. PVR neither paid nor received collateral with respect to its derivative positions. The maximum amount of loss due to credit risk if counterparties to PVRs derivative asset
positions fail to perform according to the terms of the contracts would be equal to the fair value of the contracts as of June 30, 2009. No significant uncertainties related to the collectability of amounts owed to PVR exist with regard to
these counterparties.

For the three months ended June 30, 2009 and 2008, we reported net derivative losses of $2.0 million and $9.2
million. Because PVR no longer uses hedge accounting for its commodity derivatives or the PVR Interest Rate Swaps, we recognize changes in fair value in earnings currently in the derivatives line item of our condensed consolidated statements of
income. We have experienced and could continue to experience significant changes in the estimate of derivative gains or losses recognized due to fluctuations in the value of these commodity derivative contracts. The discontinuation of hedge
accounting has no impact on our reported cash flows, although our results of operations are affected by the volatility of mark-to-market gains and losses and changes in fair value, which fluctuate with changes in natural gas, crude oil and NGL
prices. These fluctuations could be significant in a volatile pricing environment.



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The following table lists PVRs derivative agreements and their fair values as of June 30,
2009:



|                                                                |  |                      |   |  |                               |       |     |   |              |  |                          |        |  |   |      
|--------------------------------------------------------------- |  | -------------------- | - |  | ----------------------------- | ----- | --- | - | ------------ |  | ------------------------ | ------ |  | - | -----
|                                                                |  |                      |   |  | Weighted Average PriceCollars |       |    
|                                                                |  | AverageVolume PerDay |   |  | Additional PutOption          |       | Put |   | Call         |  | Fair Value(in thousands)
|Crude Oil Three-Way Collar                                      |  | (in barrels          | ) |  |                               |       |     |   | (per barrel) |  |                          |       
|Third Quarter 2009 through Fourth Quarter 2009                  |  | 1,000                |   |  | $                             | 70.00 |     | $ | 90.00        |  | $                        | 119.25 |  | $ | 2,634
|                                                                |  |                      |   | 
|Frac Spread Collar                                              |  | (in MMBtu            | ) |  |                               |       |     |   | (per MMBtu)  |  |                          |       
|Second Quarter 2009 through Fourth Quarter 2009                 |  | 6,000                |   |  |                               |       |     | $ | 9.09         |  | $                        | 13.94  |  |   | 1,235
|                                                                |  |                      |   | 
|Crude Oil Collar                                                |  | (in barrels          | ) |  |                               |       |     |   | (per barrel) |  |                          |       
|Second Quarter 2010 through Fourth Quarter 2010                 |  | 750                  |   |  |                               |       |     | $ | 70.00        |  | $                        | 81.25  |  |   | 28   
|                                                                |  |                      |   |  |                              
|Settlements to be received in subsequent period                 |  |                      |   |  |                               |       |     |   |              |  |                          |        |  |   | 1,781
|                                                                |  |                      |   |  |                               |       |     |   |              |  |                          |        |  |   |      
|Natural gas midstream segment commodity derivatives  net asset |  |                      |   |  |                               |       |     |   |              |  |                          |        |  | $ | 5,678
|                                                                |  |                      |   |  |                               |       |     |   |              |  |                          |        |  |   |      

PVR estimates that, excluding the effects of derivative positions described above, for every $1.00
per MMBtu increase or decrease in the natural gas price, PVRs natural gas midstream gross margin and operating income for the remainder of 2009 would decrease or increase by approximately $2.5 million. In addition, PVR estimates that for
every $5.00 per barrel increase or decrease in the crude oil price, PVRs natural gas midstream gross margin and operating income for the second half of 2009 would increase or decrease by approximately $2.4 million. This assumes that
natural gas prices, crude oil prices and inlet volumes remain constant at anticipated levels. These estimated changes in gross margin and operating income exclude potential cash receipts or payments in settling these derivative positions.

PVR estimates that a $5.00 per barrel increase in the crude oil price would decrease the fair value of the crude oil collars by $1.6
million. PVR estimates that a $5.00 per barrel decrease in the crude oil price would increase the fair value of the crude oil collars by $1.5 million. In addition, PVR estimates that a $1.00 per MMBtu increase or decrease in the natural gas purchase
price and a $4.65 per barrel (the estimated equivalent of $5.00 per barrel of crude oil) increase or decrease in the NGL sales price would affect the fair value of the frac spread collar by $0.1 million. These estimated changes exclude potential
cash receipts or payments in settling these derivative positions.

Interest Rate Risk

As of June 30, 2009, PVR had $597.1 million of outstanding indebtedness under the PVR Revolver, which carries a variable interest rate throughout its
term. PVR entered into the PVR Interest Rate Swaps to effectively convert the interest rate on $310.0 million of the amount outstanding under the PVR Revolver from a LIBOR-based floating rate to a weighted average fixed rate of 3.54% plus the
applicable margin until March 2010. From March 2010 to December 2011, the notional amounts of the PVR Interest Rate Swaps total $250.0 million with PVR paying a weighted average fixed rate of 3.37% on the notional amount, and the counterparties
paying a variable rate equal to the three-month LIBOR. From December 2011 to December 2012, the notional amounts of the PVR Interest Rate Swaps total $100.0 million, with PVR paying a weighted average fixed rate of 2.09% on the notional amount, and
the counterparties paying a variable rate equal to the three-month LIBOR. The PVR Interest Rate Swaps extend one year past the maturity of the current PVR Revolver. A 1% increase in short-term interest rates on the floating rate debt
outstanding under the PVR Revolver (net of amounts fixed through hedging transactions) as of June 30, 2009 would cost us approximately $2.9 million in additional interest expense per annum.

In the first quarter of 2009, PVR discontinued hedge accounting for all of the PVR Interest Rate Swaps. Accordingly, subsequent fair value gains and
losses for the PVR Interest Rate Swaps are recognized in earnings currently. PVRs results of operations are affected by the volatility of changes in fair value, which fluctuates with changes in interest rates. These fluctuations could be
significant. See Note 4  Derivative Instruments, in the Notes to Condensed Consolidated Financial Statements in Item 1, Financial Statements, for a further description of PVRs derivatives program.



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##### Table of Contents

Customer Credit Risk

We are exposed to the credit risk of PVRs natural gas midstream customers and coal lessees. For the six months ended June 30, 2009, two of PVRs natural gas midstream segment customers accounted for $56.3
million and $35.6 million, or 18% and 12%, of our total consolidated revenues. At June 30, 2009, 20% of our consolidated accounts receivable related to these customers. No significant uncertainties related to the collectability of amounts owed to
PVR exist in regard to these two natural gas midstream customers.

This customer concentration increases our exposure to credit risk on
PVRs receivables, since the financial insolvency of any of these customers could have a significant impact on our results of operations. If any of PVRs natural gas midstream customers or coal lessees become financially insolvent, they
may not be able to continue to operate or meet their payment obligations to PVR. Any material losses as a result of customer or lessee defaults could harm and have an adverse effect on our business, financial condition or results of operations.
Substantially all of PVRs trade accounts receivable are unsecured.

To mitigate the risks of nonperformance by its natural gas
midstream customers, PVR performs ongoing credit evaluations of its existing customers. PVR monitors individual customer payment capability in granting credit arrangements to new customers by performing credit evaluations, seek to limit credit to
amounts PVR believes the customers can pay and maintains reserves PVR believes are adequate to cover exposure for uncollectible accounts. As of June 30, 2009, no receivables were collateralized, and we had a $2.0 million allowance for doubtful
accounts recorded for the PVR natural gas midstream and coal and natural resource management segments.



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##### Table of Contents

|Item 4 | Controls and Procedures
|------ | -----------------------

(a)
Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our Chief Executive
Officer and our Chief Financial Officer, we performed an evaluation of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) as of June 30, 2009. Our disclosure controls and
procedures are designed to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported accurately and on a timely basis. Based on that evaluation, our
Chief Executive Officer and our Chief Financial Officer concluded that, as of June 30, 2009, such disclosure controls and procedures were effective.

(b) Changes in Internal Control Over Financial Reporting

No changes were made in our internal control over
financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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##### Table of Contents

PART II. OTHER INFORMATION



|Item 6 | Exhibits
|------ | --------



|     |  |                                                                                                                                               
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|12.1 |  | Statement of Computation of Ratio of Earnings to Fixed Charges Calculation.                                                                   
|     | 
|31.1 |  | Certification Pursuant to Exchange Act Rule 13a-14(a) or Rule 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|     | 
|31.2 |  | Certification Pursuant to Exchange Act Rule 13a-14(a) or Rule 15d-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|     | 
|32.1 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                       
|     | 
|32.2 |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                       



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                     |  |     |  |                                           
|-------------------- |  | --- |  | ------------------------------------------
|                     |  |     |  | PENN VIRGINIA GP HOLDINGS, L.P.           
|                     |  |    
|                     |  |     |  | By: PVG GP, LLC                           
|                     |  |    
|Date: August 6, 2009 |  | By: |  | /s/    Frank A. Pici                      
|                     |  |     |  | Frank A. Pici                             
|                     |  |     |  | Vice President and Chief Financial Officer
|                     |  |    
|Date: August 6, 2009 |  | By: |  | /s/    Forrest W. McNair                  
|                     |  |     |  | Forrest W. McNair                         
|                     |  |     |  | Vice President and Controller             



37