Through PVR Midstream, we own and operate natural gas midstream assets that include approximately 3,631 miles of natural gas gathering pipelines and three natural gas processing facilities located in Oklahoma and Texas, which have 160 million cubic feet per day (or MMcfd) of total capacity.

We commenced our natural gas midstream operations through the acquisition of Cantera Gas Resources, LLC in March 2005. We believe that this acquisition established a platform for future growth in the natural gas midstream sector and diversified our cash flows into another long-lived asset base. Since acquiring these assets, we have expanded our natural gas midstream business by acquiring for constructing 181 miles of new gathering lines, including the Transwestern Acquisition in 2006.

As of year-end 2006, PVR Midstream’s primary operating assets included:

• The Beaver/Perryton System, located in the Oklahoma and Texas Panhandles
• The Crescent System in north central Oklahoma
• The Hamlin System in north central Texas; and
• The Arkoma System in southeastern Oklahoma..

Much of PVR’s profitability depends on the relationship between the price it receives for the natural gas liquids (NGLs) it extracts and sells at its processing plants and the price of natural gas it buys as feedstock. The difference between these two prices, the so-called “frac spread,” can be volatile and difficult to predict. Therefore, PVR employs various hedges to protect its margins and help ensure a steady, predictable cash flow stream.

We also continue to explore potential operating synergies with Penn Virginia Corporation’s oil and gas exploration and production business. For example, we currently market a significant portion of PVA’s natural gas production, and we plan to build a gas processing plant in east Texas to process PVA’s gas volumes.