PITTSBURGH, July 25, 2016 /PRNewswire/ -- CNX Coal
Resources LP (NYSE: CNXC) today reported financial and operating
results for the quarter ended June 30,
2016.
Second Quarter 2016 Results
Highlights of the CNXC second quarter of 2016 results
include:
- Cash distribution of $0.5125
per each common unit
- Net income of $2.6
million
- Adjusted EBITDA1 of $13.3
million
- Sales volume recovers to the highest level since first
quarter of 2015
- Reaffirming previously announced guidance for 2016
Management Comments
"Earlier this month, we completed our first year as a public
company," said Jimmy Brock, Chief
Executive Officer of CNX Coal Resources GP LLC (the "General
Partner"). "Reflecting on our journey since the initial public
offering of CNXC, we have made significant progress on the
marketing and operations fronts. At the time of the IPO, we had a
significant open position in our 2016 sales book while utility
inventories were building and the price for coal was declining.
Today we are fully sold out for 2016 and 79% sold for 2017. The
shipment schedule is improving and for the first time we have an
opportunity to optimize our customer mix. On the operational front,
we inherited historical costs and as we entered the weak winter
period, customer deferrals forced us to reduce work schedules and
eventually idle the Harvey mine. Earlier in the second quarter, we
restarted the Harvey mine and are now running all five longwalls on
a full five days per week schedule. We have achieved significant
cost reductions through productivity improvements, headcount
reductions and extracting value from suppliers. This has helped us
reposition the mines to successfully compete and gain market share
even outside of our core regions while many of our competitors
remain in financial distress. While commodity markets still remain
challenging, the warm winter weather and falling export prices seem
to finally be giving way to a hot summer and rising export prices.
Natural gas prices have also recovered from sub-$2 per mmBtu to approximately $3 per mmBtu. All of the above sets us up very
well heading into the second half of 2016 and beyond. While our
financial metrics, such as coverage and leverage ratios, were
negatively impacted by challenging market conditions, we expect
that trend to reverse as the above mentioned improvements begin to
be realized. In the meantime, we are taking steps to improve our
financial metrics including keeping the leverage ratio under 3.0x.
While it is our goal to pay all unitholders, to the extent we fall
short of our financial goals, we are taking prudent measures using
the tools we have available to protect our common
unitholders. Accordingly, for the second quarter, we have
elected to not pay the subordinated unit distribution."
"For the second quarter of 2016, the CNXC team delivered another
strong operating performance despite four longwall moves, difficult
mining conditions at the Enlow Fork mine and difficult longwall
recovery conditions during one of the Bailey mine longwall moves.
Despite the continued decline in average realized price per ton,
our operating performance allowed us to modestly improve earnings
compared to the first quarter of 2016."
"On the safety and compliance side, I am very pleased to
announce that our Bailey mine was awarded the 2015 Safety Award in
the underground bituminous coal mine category by the Joseph A.
Holmes Safety Association at the Pennsylvania State Council.
Specifically during the quarter, we were able to reduce the
severity of the incidents compared to the same period last year. We
remain focused on our core values of safety and compliance and
continue our efforts to improve further."
Sales & Marketing
The second quarter of 2016 had the strongest coal shipments
since the first quarter of 2015, marking a significant improvement
in coal sales over first quarter of 2016. While the domestic
shipments were challenging for much of the second quarter, our
marketing team was successful in improving overall coal shipments
by taking more export business. During the quarter, we were
successful in selling 1.2 million tons to 51 different end users.
While the overall trend of customer deferrals peaked in
May 2016, our marketing team
continues to work with a few customers who are still facing
challenges due to high inventory levels. Earlier this month, we
pursued legal action against one of our customers, who we believe
is in breach of the contract terms. We believe this will continue
to weigh on our average realized price per ton.
We contracted for 0.9 million additional tons for years 2016-18,
which allowed us to improve our contract book and positions us well
going into the fall contracting season. Specifically for 2016, we
are now committed to sell approximately 5.0 million tons or 100% of
estimated sales volumes. For 2017 and 2018, the total sold position
is 79% and 55% respectively, assuming a 5.2 million ton run rate
for sales volume.
According to the most recent estimates published by the EIA in
its short term energy outlook, U.S. coal demand declined
approximately 19%, while industry-wide coal production declined
almost 28% in the first half of 2016 compared to the year-earlier
period. With summer weather now upon most of the nation and
warmer-than-normal conditions expected to continue through the
fall, we anticipate a boost in power demand and thus coal
consumption, which will draw down coal stockpiles at utilities. As
customers throughout the eastern half of the nation become
exceedingly concerned about the financial stability of a growing
number of coal suppliers, we continue to grow our market share into
non-traditional markets. We have established new customer
bases and displaced competing CAPP and ILB coals with our
production. These new outlets have strategic advantages in the
grid system and have been successfully dispatching even in this
challenging environment.
We continue to take advantage of export opportunities driven by
the recent improvement in API2 prices, which are up 28% during the
second quarter. For the second quarter 2016, we exported 0.4
million tons compared to 0.2 million tons in the same quarter of
2015. We also booked additional business for the remainder of 2016
and 2017. Looking forward, even though the export market has become
more attractive, we expect the share of exports to come down in the
second half of 2016, while the demand for contracted tonnage picks
up as power plants improve their dispatch during summer months and
the railroads return from downtime.
Operational Update and Outlook
From an operational standpoint, the second quarter came in ahead
of our expectations primarily due to higher shipments. Our
operational team delivered those tons despite four longwall moves,
difficult mining conditions at the Enlow Fork mine and difficult
longwall recovery conditions during one of the Bailey longwall
moves. The Harvey mine, which was idled in January 2016, was brought back online during the
second quarter to meet customer demands while the Bailey and Enlow
Fork mines were undergoing longwall moves. Based on our current
outlook for shipment volumes, we expect to run all five longwalls
for the rest of 2016. Productivity for the second quarter, as
measured by tons per employee-hour, improved by 17% compared to the
year-ago period, despite the higher number of longwall moves
negatively impacting production. For the third quarter, we expect
coal shipments and average realized price per ton to increase
slightly, and the cost of coal sold per ton to decrease compared to
the second quarter.
Quarterly Distribution
During the second quarter of 2016, CNXC generated distributable
cash flow2 of $4.8 million
and distribution coverage of 0.40x. While we are seeing positive
developments in the coal markets, the Board of Directors of the
general partner, has elected not to pay a distribution to holders
of subordinated units, which are held in their entirety by CONSOL
Energy, for the period ended June 30,
2016. The general partner declared a cash distribution to
the Partnership's common unitholders for the second quarter of 2016
of $0.5125 per unit and the general
partner interest for the second quarter of 2016. The cash
distribution will be paid on August 15,
2016 to the common unitholders of record at the close of
business on August 8, 2016.
"The board's decision to not pay subordinated distributions for
the second quarter of 2016 is tough, but prudent," said Mr. Brock.
"This decision not only underscores the support we have from our
sponsor, CONSOL Energy Inc., but also highlights the flexibility
our structure provides to preserve the distribution to our common
unitholders. For the partnership, this decision strengthens the
balance sheet, boosts near term liquidity and improves our
resources to bridge to better market conditions."
Second Quarter Summary
For our 20% undivided interest in the Pennsylvania mining complex, we sold 1.2
million tons of coal during the second quarter of 2016 compared to
1.1 million tons in the year ago period as weakness in domestic
shipments was offset by higher export sales. Sales price per ton
was impacted due to weakness in domestic coal prices, reduced burn
at utilities, and lower priced export tons replacing higher priced
domestic tons. During the quarter, one of our customers executed a
partial contract buyout, which resulted in a $1.3 million increase in other income. However,
this also resulted in an adverse impact on our average realized
price per ton as those tons were replaced by lower priced export
sales.
Our total unit costs for coal sold in the quarter improved to
$34.46 per ton, compared to
$44.15 per ton in the year-earlier
quarter, primarily driven by the cost reduction measures undertaken
earlier in 2016.
|
|
Three Months
Ended
|
|
|
June 30,
2016
|
|
June 30,
2015
|
Coal
Production
|
million
tons
|
1.2
|
|
1.2
|
Coal Sales
|
million
tons
|
1.2
|
|
1.1
|
Average Realized
Price
|
per ton
|
$40.61
|
|
$56.21
|
Average Cost of Coal
Sold
|
per ton
|
$34.46
|
|
$44.15
|
Guidance and Outlook
Based on the results to date and our expectations for the
remainder of 2016, we are reaffirming our previously announced
guidance ranges for 2016 as follows:
- Coal sales of 4.5-5.1 million tons
- Adjusted EBITDA of $59-$69
million
- Maintenance capital expenditures of $18-$20 million
Second Quarter Earnings Conference Call
A conference call and webcast, during which management will
discuss the second quarter of 2016 financial and operational
results, is scheduled for July 25,
2016 at 5:00 PM ET. Prepared
remarks by members of management will be followed by a question and
answer session. Interested parties may listen via webcast on the
Events page of our website, www.cnxlp.com. An archive of the
webcast will be available for 30 days after the event.
Participant dial in (toll
free) 1-855-656-0928
Participant international dial
in 1-412-902-4112
About CNX Coal Resources LP
CNX Coal Resources is a growth-oriented master limited
partnership formed by CONSOL Energy Inc. (NYSE: CNX) to manage and
further develop all of CONSOL's active thermal coal operations in
Pennsylvania. Its assets include a 20% undivided interest in,
and operational control over, CONSOL's Pennsylvania mining complex, which consists of
three underground mines and related infrastructure. More
information is available on our website www.cnxlp.com.
Contacts:
Investor:
Mitesh Thakkar, (724) 485-3133
miteshthakkar@cnxlp.com
Media:
Brian Aiello, (724) 485-3078
brianaiello@cnxlp.com
Non-GAAP Financial Measures
Adjusted EBITDA and distributable cash flow are not Generally
Accepted Accounting Principles ("GAAP") measures. We define
adjusted EBITDA as (i) net income (loss) before net interest
expense, depreciation, depletion and amortization, as adjusted for
(ii) certain non-cash items, such as Unit Based Compensation.
The GAAP measure most directly comparable to adjusted EBITDA is net
income. Management believes that the presentation of adjusted
EBITDA in this report provides information useful to investors in
assessing our financial condition and results of operations.
Adjusted EBITDA should not be considered an alternative to net
income or any other measure of financial performance or liquidity
presented in accordance with GAAP. Adjusted EBITDA excludes
some, but not all, items that affect net income and our
presentation of adjusted EBITDA may not be comparable to similarly
titled measures of other companies. We define distributable
cash flow as (i) net income (loss) before net interest expense,
depreciation, depletion and amortization, as adjusted for (ii)
certain non-cash items, such as Unit Based Compensation, less net
cash interest paid and estimated maintenance capital expenditures,
to analyze our performance. Distributable cash flow will not
reflect changes in working capital balances. Management believes
that the presentation of distributable cash flow in this report
provides information useful to investors in assessing our financial
condition and results of operations. The GAAP measures most
directly comparable to distributable cash flow are net income and
net cash provided by operating activities. Distributable cash
flow should not be considered an alternative to net income, net
cash provided by (used in) operating activities or any other
measure of financial performance or liquidity presented in
accordance with GAAP. Distributable cash flow excludes some,
but not all, items that affect net income or net cash, and our
presentation may not be comparable to similarly titled measures of
other companies.
The following table presents a reconciliation of adjusted EBITDA
to net income, the most directly comparable GAAP financial measure,
on a historical basis for each period indicated. The table
also presents a reconciliation of distributable cash flow to net
income and operating cash flows, the most directly comparable GAAP
financial measures, on a historical basis for each period
indicated.
(Dollars in
thousands)
|
|
Three Months
Ended
June 30,
2016
|
Net
Income
|
|
$
|
2,607
|
|
Plus:
|
|
|
Interest
Expense
|
|
2,091
|
|
Depreciation,
Depletion and Amortization
|
|
8,339
|
|
Stock/Unit Based
Compensation
|
|
307
|
|
Adjusted
EBITDA
|
|
$
|
13,344
|
|
Less:
|
|
|
Cash
Interest
|
|
1,789
|
|
Estimated Maintenance
Capital Expenditures
|
|
6,752
|
|
Distributable Cash
Flow
|
|
$
|
4,803
|
|
|
|
|
Net Cash Provided
by Operating Activities
|
|
$
|
16,649
|
|
Less:
|
|
|
Interest Expense,
Net
|
|
2,091
|
|
Other, Including
Working Capital
|
|
1,214
|
|
Adjusted
EBITDA
|
|
$
|
13,344
|
|
Less:
|
|
|
Cash
Interest
|
|
1,789
|
|
Estimated Maintenance
Capital Expenditures
|
|
6,752
|
|
Distributable Cash
Flow
|
|
$
|
4,803
|
|
Cautionary Statements
Various statements in this release, including those that express
a belief, expectation or intention, may be considered
forward-looking statements under federal securities laws including
Section 21E of the Securities Exchange Act of 1934 (the "Exchange
Act") that involve risks and uncertainties that could cause actual
results to differ materially from projected results. Accordingly,
investors should not place undue reliance on forward-looking
statements as a prediction of actual results. The forward-looking
statements may include projections and estimates concerning the
timing and success of specific projects and our future production,
revenues, income and capital spending. When we use the words
"believe," "intend," "expect," "may," "should," "anticipate,"
"could," "estimate," "plan," "predict," "project," or their
negatives, or other similar expressions, the statements which
include those words are usually forward-looking statements. When we
describe strategy that involves risks or uncertainties, we are
making forward-looking statements. The forward-looking statements
in this press release speak only as of the date of this press
release; we disclaim any obligation to update these statements. We
have based these forward-looking statements on our current
expectations and assumptions about future events. While our
management considers these expectations and assumptions to be
reasonable, they are inherently subject to significant business,
economic, competitive, regulatory and other risks, contingencies
and uncertainties, most of which are difficult to predict and many
of which are beyond our control. These risks, contingencies and
uncertainties relate to, among other matters, the following:
generation of sufficient distributable cash flow to support the
payment of minimum quarterly distributions; changes in coal prices
or the costs of mining or transporting coal; uncertainty in
estimating economically recoverable coal reserves and replacement
of reserves; our ability to develop our existing coal reserves and
successfully execute our mining plans; changes in general economic
conditions, both domestically and globally; competitive conditions
within the coal industry; changes in the consumption patterns of
coal-fired power plants and steelmakers and other factors affecting
the demand for coal by coal-fired power plants and steelmakers; the
availability and price of coal to the consumer compared to the
price of alternative and competing fuels; competition from the same
and alternative energy sources; energy efficiency and technology
trends; our ability to successfully implement our business plan;
the price and availability of debt and equity financing; operating
hazards and other risks incidental to coal mining; major equipment
failures and difficulties in obtaining equipment, parts and raw
materials; availability, reliability and costs of transporting
coal; adverse or abnormal geologic conditions, which may be
unforeseen; natural disasters, weather-related delays, casualty
losses and other matters beyond our control; interest rates; labor
availability, relations and other workforce factors; defaults by
our sponsor under our operating agreement and employee services
agreement; changes in availability and cost of capital; changes in
our tax status; delays in the receipt of, failure to receive or
revocation of necessary governmental permits; defects in title or
loss of any leasehold interests with respect to our properties; the
effect of existing and future laws and government regulations,
including the enforcement and interpretation of environmental laws
thereof; the effect of new or expanded greenhouse gas regulations;
the effects of litigation; and other factors discussed in our 2015
Form 10-K under "Risk Factors," as updated by any subsequent Form
10-Qs, which are on file at the Securities and Exchange
Commission.
CNX COAL RESOURCES
LP
|
EARNINGS
SUMMARY
|
(Dollars in
thousands)
|
(unaudited)
|
|
|
|
For the Three
Months Ended,
|
|
June
30,
|
|
|
2016
|
|
|
|
2015
|
|
|
Variance
|
Revenue:
|
|
|
|
|
|
|
|
|
|
Coal
Revenue
|
$
|
50,112
|
|
|
$
|
63,799
|
|
$
|
(13,687)
|
Freight
Revenue
|
2,237
|
|
|
541
|
|
|
1,696
|
Other
Income
|
1,424
|
|
|
|
145
|
|
|
1,279
|
Total Revenue and
Other Income
|
53,773
|
|
|
64,485
|
|
|
(10,712)
|
Cost of Coal
Sold:
|
|
|
|
|
|
|
|
|
Operating
Costs
|
34,785
|
|
|
41,276
|
|
|
(6,491)
|
Depreciation,
Depletion and Amortization
|
7,739
|
|
|
|
8,840
|
|
|
(1,101)
|
Total Cost of Coal
Sold
|
42,524
|
|
|
50,116
|
|
|
(7,592)
|
Other
Costs:
|
|
|
|
|
|
|
|
|
Other
Costs
|
2,052
|
|
|
(2,020)
|
|
|
4,072
|
Depreciation,
Depletion and Amortization
|
600
|
|
|
|
627
|
|
|
(27)
|
Total Other
Costs
|
2,652
|
|
|
(1,393)
|
|
|
4,045
|
Freight
Expense
|
2,237
|
|
|
541
|
|
|
1,696
|
Selling, General
and Administrative Expenses
|
1,662
|
|
|
2,917
|
|
|
(1,255)
|
Interest
Expense
|
2,091
|
|
|
|
2,328
|
|
|
(237)
|
Total
Costs
|
51,166
|
|
|
|
54,509
|
|
|
(3,343)
|
Net
Income
|
$
|
2,607
|
|
|
$
|
9,976
|
|
$
|
(7,369)
|
Adjusted
EBITDA
|
$
|
13,344
|
|
|
$
|
20,070
|
|
$
|
(6,726)
|
Distributable Cash
Flow
|
$
|
4,803
|
|
|
$
|
7,796
|
|
$
|
(2,993)
|
Effective first quarter of 2016, CNXC reported selling related
expenses as part of selling, general & administrative expenses.
For historical reconciliation of this change, please refer to the
"Investors" section of our website www.cnxlp.com.
CNX COAL RESOURCES
LP
|
CONSOLIDATED
BALANCE SHEETS
|
(Dollars in
thousands)
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
June 30,
2016
|
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Cash
|
$
|
8,961
|
|
|
$
|
6,531
|
Trade
Receivables
|
|
18,148
|
|
|
|
15,518
|
Other
Receivables
|
|
92
|
|
|
|
377
|
Inventories
|
|
8,893
|
|
|
|
9,791
|
Prepaid
Expenses
|
|
2,682
|
|
|
|
4,080
|
Total Current
Assets
|
|
38,776
|
|
|
|
36,297
|
Property, Plant and
Equipment:
|
|
|
|
|
|
|
Property, Plant and
Equipment
|
|
695,982
|
|
|
|
692,482
|
Less—Accumulated
Depreciation, Depletion and Amortization
|
|
337,022
|
|
|
|
320,729
|
Total Property,
Plant and Equipment—Net
|
|
358,960
|
|
|
|
371,753
|
Other
Assets:
|
|
|
|
|
|
|
Other
|
|
17,185
|
|
|
|
14,079
|
Total Other
Assets
|
|
17,185
|
|
|
|
14,079
|
TOTAL
ASSETS
|
$
|
414,921
|
|
|
$
|
422,129
|
|
|
|
|
|
|
|
LIABILITIES AND
PARTNERS' CAPITAL
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Accounts
Payable
|
$
|
11,240
|
|
|
$
|
14,023
|
Accounts
Payable—Related Party
|
|
981
|
|
|
|
3,452
|
Other Accrued
Liabilities
|
|
32,332
|
|
|
|
29,978
|
Total Current
Liabilities
|
|
44,553
|
|
|
|
47,453
|
Long-Term
Debt:
|
|
|
|
|
|
|
Revolver, net of debt
issuance and financing fees
|
|
194,394
|
|
|
|
180,946
|
Capital Lease
Obligations
|
|
111
|
|
|
|
100
|
Total Long-Term
Debt
|
|
194,505
|
|
|
|
181,046
|
Deferred Credits and
Other Liabilities:
|
|
|
|
|
|
|
Pneumoconiosis
Benefits
|
|
1,866
|
|
|
|
1,547
|
Workers'
Compensation
|
|
2,420
|
|
|
|
2,343
|
Asset Retirement
Obligations
|
|
7,275
|
|
|
|
6,799
|
Other
|
|
536
|
|
|
|
571
|
Total Deferred
Credits and Other Liabilities
|
|
12,097
|
|
|
|
11,260
|
TOTAL
LIABILITIES
|
|
251,155
|
|
|
|
239,759
|
Partners'
Capital:
|
|
|
|
|
|
|
Common Units
(11,611,067 Units Outstanding at June 30, 2016 and December 31,
2015)
|
|
145,524
|
|
|
|
154,309
|
Subordinated Units
(11,611,067 Units Outstanding at June 30, 2016 and December 31,
2015)
|
|
(3,212
|
|
|
|
6,188
|
General Partner
Interest
|
|
12,699
|
|
|
|
13,081
|
Accumulated Other
Comprehensive Income
|
|
8,755
|
|
|
|
8,792
|
Total Partners'
Capital
|
|
163,766
|
|
|
|
182,370
|
TOTAL LIABILITIES
AND PARTNERS' CAPITAL
|
$
|
414,921
|
|
|
$
|
422,129
|
CNX COAL RESOURCES
LP
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(Dollars in
thousands)
|
(unaudited)
|
|
|
|
Three Months Ended
June 30,
|
|
2016
|
|
|
2015
|
Cash Flows from
Operating Activities:
|
|
|
|
|
Net Income
(Loss)
|
$
|
2,607
|
|
|
$
|
9,976
|
Adjustments to
Reconcile Net Income to Net Cash Provided By Operating
Activities:
|
|
|
|
|
|
Depreciation,
Depletion and Amortization
|
8,339
|
|
|
9,467
|
(Gain) Loss on Sale
of Assets
|
(1)
|
|
|
(10)
|
Unit Based
Compensation
|
307
|
|
|
—
|
Other Adjustments to
Net Income
|
232
|
|
|
(36)
|
Changes in Operating
Assets:
|
|
|
|
|
|
Accounts and Notes
Receivable
|
1,277
|
|
|
(376)
|
Inventories
|
2,008
|
|
|
(1,656)
|
Prepaid
Expenses
|
961
|
|
|
989
|
Changes in Other
Assets
|
(1,164)
|
|
|
1,364
|
Changes in Operating
Liabilities:
|
|
|
|
|
|
Accounts
Payable
|
(1,173)
|
|
|
(5,684)
|
Accounts Payable -
Related Party
|
(299)
|
|
|
—
|
Other Operating
Liabilities
|
2,351
|
|
|
2,885
|
Changes in Other
Liabilities
|
1,204
|
|
|
|
(3,424)
|
Net Cash Provided by
Operating Activities
|
16,649
|
|
|
|
13,495
|
Cash Flows from
Investing Activities:
|
|
|
|
|
|
Capital
Expenditures
|
(2,621)
|
|
|
(7,083)
|
Proceeds from Sales
of Assets
|
1
|
|
|
|
26
|
Net Cash Used in
Investing Activities
|
(2,620)
|
|
|
|
(7,057)
|
Cash Flows from
Financing Activities:
|
|
|
|
|
Proceeds from
(Payments on) Miscellaneous Borrowings
|
(19)
|
|
|
4,822
|
Proceeds from
(Payments on) Revolver
|
(2,000)
|
|
|
—
|
Net Change in Parent
Advancements
|
—
|
|
|
(11,261)
|
Unitholder
Distributions
|
(12,144)
|
|
|
|
—
|
Net Cash Used In
Financing Activities
|
(14,163)
|
|
|
|
(6,439)
|
Net Increase
(Decrease) in Cash
|
(134)
|
|
|
(1)
|
Cash at Beginning of
Period
|
9,095
|
|
|
|
4
|
Cash at End of
Period
|
$
|
8,961
|
|
|
$
|
3
|
1"Adjusted EBITDA" is a non-GAAP financial measures,
which is reconciled to GAAP net income under the caption "Non-GAAP
Financial Measures"
2"Distributable Cash Flow" is a non-GAAP financial
measure which is reconciled to GAAP net income under the caption
"Non-GAAP Financial Measures"
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/cnx-coal-resources-lp-announces-results-for-the-second-quarter-2016-300303437.html
SOURCE CNX Coal Resources LP