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We are maintaining our Buy recommendation on Penn Virginia Resource Partners L.P. (NYSE:PVR) but decreasing our target price from $31.25 per unit to $28 per unit. The partnership's recent acquisitions in the midstream space have positioned it to grow throughput volumes but also diversify its operations into several of the most active basins in the U.S.

Backed by strong coal fundamentals, both of PVR's operating segments should see stellar results through '09 as throughput volumes look to ramp up significantly and coal doesn't seem to be slowing anytime soon. We estimate that PVR will increase its annualized distribution 9% to $2 per unit from its current annualized rate of $1.84 per unit over the next twelve months.

Our positive investment sentiment on PVR is based on the near-term cash flow growth from both favorable coal pricing and leverage to Central Appalachian [CAPP], the accretive acquisitions made in its midstream segment and the growth opportunities from them and the recent pullback across the energy sector. On August 14, PVR announced that it will pay to unit-holders of record on August 4 $0.46 per unit or an annualized rate of $1.84 per unit. This is a 9.5% increase over the annualized distribution for the same quarter 07.

We are increasing our 2008 earnings estimates slightly from $1.63 to $1.64 per unit due to minor adjustments to margins and other revenue assumptions. We are increasing our 2009 estimated from $2.12 to $2.30 per unit due to increases in throughput volumes from acquisitions in 2008, further supported by strong coal royalty revenues.

Source: Penn Virginia: Positioned to Grow and Diversify Operations