PITTSBURGH, July 28, 2015 /PRNewswire/ -- CONSOL Energy
Inc. (NYSE: CNX) reported a net loss of $603
million for the quarter, or ($2.64) per diluted share. This compares to a net
loss of $25 million, or ($0.11) per diluted share from the year-earlier
quarter. The net loss for the quarter includes a significant
unusual item: an $829 million pre-tax
impairment in the carrying value of CONSOL's shallow oil and
natural gas assets largely due to the continuation of depressed
NYMEX forward prices.
After adjusting for certain unusual items, which are listed in
the EBITDA reconciliation table, the company had an adjusted net
loss1 in the 2015 second quarter of $84 million, or ($0.37) per share. Adjusted EBITDA1
was $138 million for the 2015 second
quarter, compared to $246 million in
the year-earlier quarter. Cash flow from operations in the
just-ended quarter was $62 million,
compared to $221 million in the
year-earlier quarter.
"CONSOL is focused on managing through what continues to be a
very challenging commodity price environment," commented
Nicholas J. DeIuliis, president and
CEO. "Given this environment, we will manage the company to be free
cash positive over the next 18 months, beginning in the second half
of 2015. We are moving forward by resetting the company using
zero-based budgeting, lean manufacturing and continuous improvement
to hold our E&P production growth targets, while achieving our
free cash flow targets."
CONSOL's E&P Division achieved record production of 75.5
Bcfe, or an increase of 45% from the 51.9 Bcfe produced in the
year-earlier quarter. CONSOL Energy's annual gas production
guidance remains at 30% growth for 2015 and 20% for 2016. CONSOL
lowered its 2015 E&P capital expenditures (CAPEX) forecast to
$800 million, which is $120 million lower than the previous guidance due
to a combination of improved well profiles, decreased cycle times,
and the de-bottlenecking of midstream infrastructure. Also, due to
lean manufacturing and continuous improvement, the company intends
to significantly reduce E&P capital in 2016 to approximately
$400 - $500 million depending on
natural gas prices.
Marcellus Shale production volumes in the 2015 second quarter
were 39.0 Bcfe, or 64% higher than the 23.8 Bcfe produced in the
2014 second quarter. Marcellus Shale costs were $2.68 per Mcfe in the just-ended quarter, which
is a $0.26 per Mcfe improvement from
the second quarter of 2014 costs of $2.94 per Mcfe. The company achieved all-in cash
costs of only $1.72 per Mcfe in the
Marcellus Shale.
CONSOL Energy's Utica Shale production volumes in the 2015
second quarter were 10.6 Bcfe, up from 1.7 Bcfe in the year-earlier
quarter. Utica Shale costs were $2.31
per Mcfe in the just-ended quarter, which is a substantial
improvement from the year-earlier quarter. CONSOL expects its Utica
Shale program to become a much bigger portion of the production mix
mainly due to the additional dry Utica wells that are expected to come online
in the second half of the year. These dry Utica wells will help delineate a significant
portion of CONSOL's acreage, which could potentially either shift
more future development to these areas or help catalogue the value
as a monetization opportunity.
CONSOL's Coal Division produced 7.5 million tons in the 2015
second quarter. In the Virginia Operations, the company's Buchanan
Mine saw metallurgical coal prices decline in the quarter due to
weakening markets. Despite these market headwinds, CONSOL's premier
Buchanan Mine repeated another stellar cost performance with total
costs of $48.38 per ton sold in the
just-ended quarter, or a reduction of $12.76 per ton from the year-earlier quarter.
During the quarter, CONSOL took another step towards creating
more transparency by successfully executing a thermal coal MLP
initial public offering (IPO). The thermal coal MLP, known as CNX
Coal Resources LP ("CNXC"), raised approximately $345 million of net proceeds, including the
assignment of approximately $200
million in debt. The company used the proceeds to pay down
CONSOL's parent credit facility in July since the transaction
closed after the second quarter ended. In connection with the
completion of the IPO of CNX Coal Resources LP, CONSOL granted CNXC
a right of first offer to acquire its retained 80% undivided
interest in the Pennsylvania
mining complex along with the following three assets: the Baltimore
Marine Terminal, Cardinal States Gathering System, and the Buchanan
Mine.
Due to the continued degradation of metallurgical coal prices,
CONSOL is putting the MetCo IPO on hold, which was previously
announced to occur early in the fourth quarter of 2015. In addition
to evaluating this asset as a potential future drop down into CNXC,
CONSOL is also evaluating the possibility of partnering with a
third party to grow this asset through consolidation, before a
potential future initial public offering. Both options support
CONSOL's strategic and structural goals, and the company expects to
make a decision regarding its Buchanan asset by year-end 2015.
"CONSOL continues to make significant progress towards executing
our strategy," commented Nicholas J.
DeIuliis, president and CEO. "This started by divesting our
West Virginia coal mines in late
2013; refinancing our debt over the past two years, which has
helped modernize our covenants, extend our debt maturities, and
lower our cost of capital; and most recently, executing an initial
public offering of CNXC, which monetized only 9% of the total
Pennsylvania Operations. Despite taking place in a tough coal
environment, this was a valuable transaction that not only brings
in cash proceeds, but more importantly, sets up the structure to
drive net asset value (NAV)."
The second quarter earnings results included the following
pre-tax items related to recent transactions:
- Recorded an $828.9 million
impairment primarily on our shallow oil and gas properties;
- Recorded an unrealized loss on commodity derivative instruments
of $24.9 million;
- Recorded $7.3 million in backstop
loan fees;
- Recorded $5.0 million in
transaction fees; and
- Recorded a $33.6 million gain
related to changes in our retiree medical (OPEB) plan
Consistent with what the company previously announced on
December 10, 2014 and in connection
with the initial public offering of CNX Coal Resources LP, CONSOL
Energy intends to reduce its current regular dividend to
$0.01 per share, per quarter,
effective in the third quarter of 2015.
E&P Division:
E&P Second Quarter Summary:
Production increased by 45% in the just-ended quarter, when
compared to the year-earlier quarter. Despite increased production,
total quarterly sales revenue decreased by $28.0 million for the same period due to
depressed commodity prices. As a result of decreases to revenue and
the impairment loss on shallow oil and gas properties, the E&P
Division realized a net loss of $540.1
million in the second quarter of 2015, compared to net
income of $15.5 million in the year
earlier quarter.
The tables below summarize the quarterly comparison of key
metrics for the E&P Division:
E&P DIVISION RESULTS — Quarter-to-Quarter
Comparison
|
|
|
Quarter
Ended
|
|
Quarter
Ended
|
|
Quarter
Ended
|
|
June 30,
2015
|
|
June 30,
2014
|
March 31,
2015
|
Sales - Gas
|
$
|
135.1
|
|
$
|
208.5
|
$
|
196.5
|
Realized Hedging Impact - Gas
|
42.3
|
|
(6.4)
|
30.1
|
Sales - Oil
|
1.2
|
|
2.9
|
1.1
|
Sales - NGLs
|
15.0
|
|
17.7
|
22.2
|
Sales - Condensate
|
8.7
|
|
7.6
|
5.2
|
Total Sales Revenue ($ MM)
|
$
|
202.3
|
|
$
|
230.3
|
$
|
255.1
|
|
|
|
|
|
Net (Loss) Income ($ MM)
|
$
|
(540.1)*
|
|
$
|
15.5
|
$
|
30.9
|
Net Cash Provided By Operating Activities ($
MM)
|
$
|
297.9
|
|
$
|
86.0
|
$
|
177.8
|
Total Period Production (Bcfe)
|
75.5
|
|
51.9
|
71.6
|
Average Daily Production (MMcfe)
|
829.6
|
|
570.0
|
795.7
|
Capital Expenditures ($ MM)
|
$
|
289.2
|
|
$
|
304.5
|
$
|
250.3
|
* Includes an $828.9 million pre-tax impairment
loss on shallow oil and gas properties, less the tax effect of
$312.5 million. Adjusted net loss for the E&P segment for the
three months ended June 30, 2015 is calculated as GAAP net loss of
$540.1 million plus total pre-tax adjustments of $828.9 million,
less the tax effect of $312.5 million equals the adjusted net loss
of $23.7 million.
|
CONSOL's E&P division production in the quarter came
from the following categories:
|
|
Quarter
|
|
Quarter
|
|
|
|
Quarter
|
|
|
|
|
Ended
|
|
Ended
|
|
|
Ended
|
|
|
|
|
June 30,
2015
|
|
June 30,
2014
|
|
% Increase
/(Decrease)
|
March 31,
2015
|
|
% Increase
/(Decrease)
|
GAS
|
|
|
|
|
|
|
|
|
|
Marcellus Sales Volumes (Bcf)
|
|
33.6
|
|
22.0
|
|
52.7%
|
31.6
|
|
6.3%
|
Utica Sales Volumes (Bcf)
|
|
7.1
|
|
1.1
|
|
545.5%
|
6.2
|
|
14.5%
|
CBM Sales Volumes (Bcf)
|
|
18.8
|
|
19.7
|
|
(4.6)%
|
18.9
|
|
(0.5)%
|
Other Sales Volumes (Bcf)
|
|
6.9
|
|
6.5
|
|
6.2%
|
6.8
|
|
1.5%
|
|
|
|
|
|
|
|
|
|
|
LIQUIDS*
|
|
|
|
|
|
|
|
|
|
NGLs Sales Volumes (Bcfe)
|
|
7.2
|
|
1.9
|
|
278.9%
|
6.5
|
|
10.8%
|
Oil Sales Volumes (Bcfe)
|
|
0.2
|
|
0.2
|
|
—%
|
0.1
|
|
100.0%
|
Condensate Sales Volumes (Bcfe)
|
|
1.7
|
|
0.5
|
|
240.0%
|
1.5
|
|
13.3%
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
75.5
|
|
51.9
|
|
45.5%
|
71.6
|
|
5.4%
|
|
Production results are net of royalties. *NGLs,
Oil, and Condensate are converted to Mcfe at the rate of one barrel
equals six Mcf based upon the approximate relative energy content
of oil and natural gas.
|
Liquids production of 9.1 Bcfe, as a percentage of the total of
75.5 Bcfe, was approximately 12% in the just-ended quarter.
E&P PRICE AND COST DATA PER MCFE —
Quarter-to-Quarter Comparison:
|
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Ended
|
|
Ended
|
Ended
|
(Per Mcfe)
|
June 30,
2015
|
|
June 30,
2014
|
March 31,
2015
|
Average Sales Price - Gas
|
$
|
2.03
|
|
$
|
4.23
|
$
|
3.10
|
Realized Hedging Impact - Gas
|
$
|
0.64
|
|
$
|
(0.13)
|
$
|
0.48
|
Average Sales Price - Oil*
|
$
|
7.69
|
|
$
|
15.85
|
$
|
7.97
|
Average Sales Price - NGLs*
|
$
|
2.08
|
|
$
|
9.26
|
$
|
3.40
|
Average Sales Price - Condensate*
|
$
|
5.21
|
|
$
|
15.82
|
$
|
3.47
|
|
|
|
|
|
Average Sales Price - Total Company
|
$
|
2.68
|
|
$
|
4.44
|
$
|
3.56
|
Costs - Production
|
|
|
|
|
Lifting
|
$
|
0.34
|
|
$
|
0.51
|
$
|
0.44
|
Ad Valorem, Severance and Other
Taxes
|
0.09
|
|
0.19
|
0.13
|
DD&A
|
1.03
|
|
1.21
|
1.06
|
Total Production Costs
|
$
|
1.46
|
|
$
|
1.91
|
$
|
1.63
|
Costs - Gathering
|
|
|
|
|
Transportation
|
$
|
0.83
|
|
$
|
0.60
|
$
|
0.72
|
Operating Costs
|
0.32
|
|
0.51
|
0.38
|
DD&A
|
0.11
|
|
0.16
|
0.12
|
Total Gathering Costs
|
$
|
1.26
|
|
$
|
1.27
|
$
|
1.22
|
|
|
|
|
|
Gas Direct Administrative Selling &
Other
|
$
|
0.18
|
|
$
|
0.26
|
$
|
0.20
|
|
|
|
|
|
Total Costs
|
$
|
2.90
|
|
$
|
3.44
|
$
|
3.05
|
|
|
|
|
|
Margin
|
$
|
(0.22)
|
|
$
|
1.00
|
$
|
0.51
|
|
*Oil, NGLs, and Condensate are converted to Mcfe
at the rate of one barrel equals six Mcf based upon the approximate
relative energy content of oil and natural gas, which is not
indicative of the relationship of oil, NGLs, condensate, and
natural gas prices.
|
Note: Costs - The line item "Gas Direct
Administrative Selling & Other" excludes general
administration, incentive compensation, and other corporate
expenses.
|
The average sales price per Mcfe within the E&P Division was
impaired in the just-ended quarter, when compared to the
year-earlier quarter due to the continued decline in commodity
prices.
The average sales price of $2.68
per Mcfe, when combined with unit costs of $2.90 per Mcfe, resulted in a margin of
($0.22) per Mcfe. This was a decrease
when compared to the year-earlier quarter even though the
improvements in unit costs partially offset the decline in price
realizations.
All-in unit costs in the Marcellus Shale were $2.68 per Mcfe in the just-ended quarter, or a
decrease of $0.26 from the
$2.94 per Mcfe in the year-earlier
quarter. The decrease in unit costs was primarily related to the
64% increase in total Marcellus sales volumes, including liquids,
during the just-ended quarter, compared to the year-earlier
quarter.
During the quarter, transportation costs were $0.83 per Mcfe, or an increase of $0.23 from the year-earlier quarter. The increase
was primarily related to additional processing and gathering fees
associated with increased liquids volumes.
E&P Marketing, Transportation, and Processing
Update:
For the second quarter of 2015, CONSOL's average sales price for
natural gas, natural gas liquids, oil, and condensate was
$2.68 per Mcfe. CONSOL's average
price for natural gas was $2.03 per
Mcf for the quarter and, including hedging, was $2.67 per Mcf. During the second quarter, CONSOL
produced NGL, oil, and condensate volumes of 9.1 Bcfe, or 12% of
the company's total gas equivalent volumes. These liquids volumes
were over three times greater than the year-earlier quarter, which
then comprised 5% of the company's total gas equivalent volumes.
The average realized price for all liquids for the second quarter
of 2015 was $16.52 per barrel. Across
all volumes, the sale of liquids provided a sales value uplift of
$0.09 per Mcfe, excluding hedging,
during the 2015 second quarter.
During the second quarter, CONSOL entered into ethane, propane,
and butane sales agreements to ship volumes via Mariner East
pipelines to the Marcus Hook Industrial Complex, which will
ultimately export the volumes to Europe. The deals, which commence late next
year, are expected to yield price premiums compared with in-basin
pricing and expose a portion of the company's liquefied petroleum
gas (LPG) portfolio to Brent Crude pricing.
The company currently has a total of 1.1 Bcf per day of
available firm transportation capacity. This is composed of 0.8 Bcf
per day of firm capacity on existing pipelines and an additional
0.3 Bcf per day of long-term firm sales with major customers having
their own firm capacity. Additionally, CONSOL has contracted
volumes of approximately 0.6 Bcf per day on several pipeline
projects that will be completed over the next several years. Even
with the future expiration of certain transportation contracts, the
company's effective firm transportation capacity will increase to
approximately 1.8 Bcf per day. The average demand cost for the
existing firm capacity is approximately $0.28 per MMBtu. The average demand cost for the
existing and committed firm capacity is approximately $0.33 per MMBtu.
In addition to firm transportation capacity, CONSOL has
developed a processing portfolio to support the projected volumes
from its wet production areas. The company has agreements in place
to support the processing of approximately 0.4 Bcf per day of gross
natural gas volumes.
Coal Division Results:
Coal Division First Quarter Summary:
Due to a reduced operating schedule, Pennsylvania Operations
sold 5.7 million tons in the 2015 second quarter, slightly below
the guidance range of 5.8 - 6.1 million tons. During the quarter,
Pennsylvania Operations all-in unit costs were $44.30 per ton, compared to $45.02 per ton in the year-earlier quarter.
Pennsylvania Operations sales volumes decreased 1.4 million tons
during the second quarter of 2015, compared to the year-earlier
quarter, after the company exerted production discipline due to
market conditions. Despite the decrease in volumes, the complex
drove unit costs lower during the same period, illustrating the
significant cost performance of the complex.
In the second quarter of 2015, total coal division unit costs
were $45.69 per ton, or an
improvement of $1.94 per ton, when
compared to the same quarter 2014. During the quarter, CONSOL's
active coal operations generated $133
million of cash before capital expenditures.
COAL DIVISION RESULTS BY PRODUCT CATEGORY -
Quarter-To-Quarter Comparison
|
|
|
PA Ops
|
|
PA Ops
|
|
VA Ops
|
|
VA Ops
|
|
Other
|
|
Other
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Quarter
|
|
Ended
|
|
Ended
|
|
Ended
|
|
Ended
|
|
Ended
|
|
Ended
|
|
June 30,
|
|
June 30,
|
|
June 30,
|
|
June 30,
|
|
June 30,
|
|
June 30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
Beginning Inventory (millions of
tons)
|
0.2
|
|
0.3
|
|
0.1
|
|
0.2
|
|
0.2
|
|
0.1
|
Coal Production (millions of tons)
|
5.9
|
|
6.8
|
|
1.0
|
|
1.0
|
|
0.6
|
|
0.5
|
Ending Inventory (millions of tons)
|
0.3
|
|
0.1
|
|
0.1
|
|
0.2
|
|
0.2
|
|
0.1
|
Sales - Company Produced (millions of
tons)
|
5.7
|
|
7.1
|
|
1.1
|
|
0.9
|
|
0.5
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales Per Ton
|
$
|
56.21
|
|
$
|
61.47
|
|
$
|
57.76
|
|
$
|
70.99
|
|
$
|
60.84
|
|
$
|
59.99
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Costs Per Ton
|
$
|
33.25
|
|
$
|
34.57
|
|
$
|
35.73
|
|
$
|
45.66
|
|
$
|
46.23
|
|
$
|
48.81
|
Direct Administration and Selling
|
1.11
|
|
1.29
|
|
1.19
|
|
1.58
|
|
0.93
|
|
1.23
|
Royalty/Production Taxes Per Ton
|
2.49
|
|
2.99
|
|
3.23
|
|
4.44
|
|
5.10
|
|
4.98
|
DD&A Per Ton
|
7.45
|
|
6.17
|
|
8.23
|
|
9.46
|
|
2.82
|
|
3.44
|
Total Production Costs
|
$
|
44.30
|
|
$
|
45.02
|
|
$
|
48.38
|
|
$
|
61.14
|
|
$
|
55.08
|
|
$
|
58.46
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Margin Per Ton Sold
|
$
|
11.91
|
|
$
|
16.45
|
|
$
|
9.38
|
|
$
|
9.85
|
|
$
|
5.76
|
|
$
|
1.53
|
Addback: DD&A Per Ton
|
$
|
7.45
|
|
$
|
6.17
|
|
$
|
8.23
|
|
$
|
9.46
|
|
$
|
2.82
|
|
$
|
3.44
|
Average Margin Per Ton, before
DD&A
|
$
|
19.36
|
|
$
|
22.62
|
|
$
|
17.61
|
|
$
|
19.31
|
|
$
|
8.58
|
|
$
|
4.97
|
Cash Flow before Cap. Ex and DD&A
($MM)
|
$
|
110
|
|
$
|
161
|
|
$
|
19
|
|
$
|
17
|
|
$
|
4
|
|
$
|
2
|
|
PA Ops includes Bailey, Enlow Fork, and Harvey
mines. VA Ops includes the Buchanan Mine. Other includes the Miller
Creek Complex. Sales and production tons exclude CONSOL Energy's
portion from equity affiliates. Total Operating Costs per Ton
include items such as labor and benefits, supplies, power,
preparation costs, project expenses, gas well plugging costs,
subsidence costs, permitting and compliance, asset retirement
obligations and charges for pension, retiree medical and other
employee related long-term liabilities. Direct Administration and
Selling Per Ton include items such as labor and benefits,
marketing, and consulting. Sales tons times Average Margin Per Ton,
before DD&A is meant to approximate the amount of cash
generated for the PA Ops, VA Ops, and Other coal categories. This
cash generation will be offset by maintenance of production (MOP)
capital expenditures. Table may not sum due to
rounding.
|
Coal Marketing Update:
Pennsylvania Operations:
Pennsylvania Operations had another solid quarter selling 5.7
million tons to 38 different end users. During the quarter, CONSOL
contracted for 0.1 million additional tons for 2015, bringing the
total firm and priced contracted position to 22.6 million tons, or
98% of estimated sales volumes based on the midpoint of guidance.
For 2016, CONSOL contracted for 1.3 million additional tons during
the second quarter, bringing the total firm and priced contracted
position to 14.2 million tons, or 54% (and sold position to 15.7
million tons, or 60%) of expected sales volumes based on the
midpoint of guidance. For 2017 and 2018 combined, CONSOL's sold
position is averaged at 40% of expected sales volumes. The company
continues to work with customers to lock in multi-year deals and
expects to significantly increase committed volumes for 2017 and
2018 throughout the year.
Virginia Operations:
In the second quarter of 2015, CONSOL sold 1.1 million tons of its
Buchanan low-vol coal. Buchanan continued to expand its customer
base with a new sales opportunity in Europe. The new opportunity in Europe, combined with existing business from
traditional customers, enabled the Buchanan Mine to achieve the
high end of its second quarter sales forecast. During the quarter,
CONSOL contracted for 0.5 million additional tons for 2015 and
expects additional contracting opportunities throughout the year.
CONSOL expects to ship approximately 80% of Buchanan's production
to customers in the U.S. and Atlantic Basin in 2015.
Other:
In the second quarter, CONSOL sold 0.5 million tons of Miller Creek coal, which is flat compared to the
year-earlier quarter.
E&P Division Guidance:
CONSOL expects third quarter 2015 gas production to be
approximately 75 – 79 Bcfe, while annual 2015 production guidance
remains between 300 – 310 Bcfe, or 30% growth compared to 2014
total production. CONSOL Energy continues to expect 2016 annual gas
production to grow by 20%.
Total hedged natural gas production in the 2015 third quarter is
39.3 Bcf, at an average price of $3.87 per Mcf. The annual gas hedge position for
two years is shown in the table below:
E&P DIVISION GUIDANCE
|
|
|
|
2015
|
|
2016
|
Total Yearly Production (Bcfe) / %
growth
|
|
300-310
|
|
+20%
|
Volumes Hedged (Bcf), as of 7/09/15
|
|
140.8*
|
|
110.9
|
Average Hedge Price ($/Mcf)
|
|
$3.94
|
|
$3.97
|
* Includes 2015 actual settlements of 62.1
Bcf.
|
The hedged gas volumes shown in the previous table include the
following NYMEX hedges that have basis hedged as well.
NYMEX PLUS BASIS HEDGES
|
|
|
|
2015
|
|
2016
|
Columbia (TCO)
|
|
|
|
|
Volume (Bcf)
|
|
49.6
|
|
76.2
|
Average Hedge Price
($/Mcf)
|
|
$
|
3.84
|
|
$
|
3.69
|
Texas Eastern (TETCO)
|
|
|
|
|
Volume (Bcf)
|
|
3.5
|
|
-
|
Average Hedge Price
($/Mcf)
|
|
$
|
3.93
|
|
-
|
|
|
|
|
|
|
|
Coal Division Guidance:
For full year 2015, Pennsylvania Operations sales guidance is
lower, compared to previous quarter's guidance, due to a reduced
operating schedule. Starting in June, and prior to the IPO
roadshow, CONSOL decided to move to a four-day operating schedule,
compared to five days previously, in order to better align
production to contracted sales and preserve margins. CONSOL expects
to maintain the four-day schedule through the remainder of 2015,
while continuing to focus on further reducing costs.
The following table describes the forecasted contracted
position (in millions of tons) for the years ending December 31, 2015 and 2016 as of July 28, 2015:
COAL DIVISION GUIDANCE
|
|
|
Q3 2015
|
|
2015
|
|
2016
|
Est. Total Coal Sales
|
6.6 - 7.1
|
|
28.4 - 29.9
|
|
30.6 - 33.4
|
Committed
|
6.1
|
|
27.5
|
|
15.6
|
Estimated Price (committed
tons)
|
$
|
60.56
|
|
$
|
59.88
|
|
$
|
59.97
|
Est. PA Operations Sales
|
5.4 - 5.6
|
|
22.5 - 23.5
|
|
25.0 - 27.0
|
Committed
|
5.4
|
|
22.6
|
|
14.2
|
Est. VA Operations Sales
|
0.8 - 1.0
|
|
3.9 - 4.2
|
|
3.7 - 4.2
|
Committed
|
0.2
|
|
2.9
|
|
0.7
|
Est. Other Sales
|
0.4 - 0.5
|
|
2.0 - 2.2
|
|
1.9 - 2.2
|
Committed
|
0.5
|
|
2.0
|
|
0.7
|
|
|
|
|
|
|
|
|
|
Refer to note at the end of the press release for
additional disclosures.
|
Liquidity:
As of June 30, 2015, CONSOL Energy
had $1.3 billion in total liquidity,
which is comprised of $10.0 million
of cash, $0.7 billion available to be
borrowed under its $2.0 billion bank
facility, $1.3 million capacity under
its accounts receivable securitization facility, and a $0.6 billion term loan commitment.
After adjusting for the CNXC IPO transaction, CONSOL Energy had
$1.0 billion in total liquidity.
During the quarter, liquidity decreased by approximately
$600 million, when compared to the
first quarter of 2015, due to the expected termination of the
$600 million term loan commitment
upon the completion of the CNXC transaction.
As of June 30, 2015, CONSOL's
leverage ratio was 3.9x but excludes the impact of the CNXC IPO
proceeds. After the close of the quarter, CONSOL received
approximately $345 million of equity
and debt proceeds from the thermal coal MLP IPO, and the proceeds
have since been used to reduce borrowings on the revolving credit
facility, which results in CONSOL's pro-forma leverage ratio
declining to 3.7x.
CONSOL Energy Moving Forward:
Structure:
Over the past three quarters CONSOL has aggressively developed a
durable and transparent structure that will allow the company to
more efficiently allocate cash flows and liquidity across all of
the business segments. CONE Midstream Partners contains the
midstream gathering assets across the Marcellus Shale joint venture
and is a major contributor responsible for supporting future
growth. CNX Coal Resources LP serves as the company's thermal coal
entity where additional ownership interests in CONSOL's
Pennsylvania thermal coal mines
will get dropped down over time. If CONSOL decides to not pursue a
stand-alone metallurgical coal entity, CNX Coal Resources has a
right of first offer to acquire these assets for additional growth.
In addition to the structural changes, CONSOL has modernized its
debt covenants, which allows for a greater level of flexibility.
CONSOL Energy continues to effectively manage the growing E&P
Division with the sustained goal of evolving into a pure play
Appalachian Shale entity. Today the company sits with the necessary
components and structure to drive net asset value (NAV) moving
forward.
Current and Expected Performance Metrics:
Over the past 18 months the company has aggressively implemented
a number of key concepts to unlock NAV per share to include
zero-based budgeting and lean manufacturing. Cumulatively, these
concepts have improved safety performance and reduced E&P
capital intensity, administrative, overhead, "other" spend, and
balance sheet liabilities. The continued application of these
concepts will have an even greater impact on the company's
performance in the coming quarters. The following summarizes many
of these areas, the progress already made, and future
expectations:
E&P Division Production Growth, Capital Intensity, and Unit
Costs:
CONSOL believes a number of factors within the E&P division
should create the confluence of production growth and reduced
capital intensity. Well profiles continue to improve across both
the Marcellus and Utica shales;
lean manufacturing techniques continue to compress cycle times
across development activities including permitting, construction,
water infrastructure, drilling, completions, and midstream;
de-bottlenecking efforts in producing areas should provide low-cost
incremental production growth that allows for the deferral of
capital for new wells; economies of scale from pooled resources
allow for the tightening of capital outlays. Also, in the near
future, stacked pay opportunities across the Upper Devonian,
Marcellus, and Utica shales should
decrease capital intensity further.
The culmination of these factors will positively impact E&P
production and lower capital intensity through 2016, while allowing
CONSOL to achieve its production growth targets. As a result,
CONSOL has reduced the second half of 2015 E&P capital budget
to approximately $250 million. When
combined with the $539 million of
E&P capital expenditures in the first half of 2015, which
includes CONE gathering midstream capital, total 2015 E&P
capital investment is now expected to be approximately $800 million, down from $1.0 billion at the start of the year.
The 2016 E&P capital budget is expected to be approximately
$400 - $500 million. CONSOL expects
cumulative capital investment for the E&P segment for the
second half of 2015 and all of 2016 to include developing an
inventory of future permitted locations and pads for 2017 and
beyond.
Also, the production growth and capital investment targets
through 2016 do not assume opportunities resulting from the dry
Utica and stacked pays. CONSOL
intends to provide any improvements to future production or capital
intensity as results from the dry Utica are assessed. Lastly, CONSOL will
formalize 2017 production growth targets around mid-2016, once
stacked pay opportunities are further evaluated.
The E&P Division's total unit costs declined steadily over
the past year. For example, during the second quarter, the E&P
Division drove down total unit costs to $2.90 per Mcfe, compared to $3.44 per Mcfe during the year-earlier quarter.
In-line with previous guidance, and ahead of the forecasted
timeline, CONSOL's E&P Division has achieved reducing total
operating costs between 10% -15%, when compared to 2014. CONSOL
expects to further reduce total unit costs through 2016. The
drivers of this trend include many of the same factors in reducing
capital intensity, along with deflation of service costs,
consumables and optimization of support personnel through
zero-based budgeting. In addition, CONSOL expects that DD&A
rates from the shallow oil and gas assets will decline from
$2.25 per Mcfe in 2014 to
approximately $0.35 per Mcfe in the
second half of 2015 and 2016 due to the aforementioned unusual
impairment charge during the quarter. CONSOL expects that the
culmination of these factors will result in the E&P Division
total unit costs to further decline between 10% - 15% through 2016,
when compared to the second quarter 2015.
Coal Division Production, Unit Costs, and Capital:
The Coal Division continues to achieve production targets, deliver
unit cost improvements, and build future sales volumes. Moving
forward, CNX Coal Resources will discuss more of the details
associated with Pennsylvania Operations.
In the Pennsylvania Operations, CONSOL expects total unit costs
to improve in the second half of 2015 due to no additional planned
longwall moves, better geological conditions, and a continued focus
on cost reduction efforts. For full year 2015, CONSOL expects total
unit costs, including DD&A, to be between $40 - $43 per ton.
In the Virginia Operations, as discussed last quarter, better
utilization from previously completed efficiency projects and
reduced travel time to the face of the longwall have resulted in
significantly improved operating cost performance at the Buchanan
Mine. However, as expected, these improvements were offset somewhat
due to the planned longwall move and a scheduled outage to perform
a maintenance upgrade during the quarter. As stated last quarter,
CONSOL continues to expect Virginia Operations 2015 total unit
costs, including DD&A, to be $50 -
$55 per ton due primarily to lower forecasted quarterly tons
for the remainder of the year, compared to the first half, as well
as the company planning to bring back a development section early
in the third quarter.
In the Other Operations (Miller
Creek), CONSOL expects 2015 total unit costs to be between
$50 - $55 per ton.
CONSOL continues to expect maintenance of production capital
expenditures between $4.00 - $5.00
per ton moving forward.
Administrative and Overhead Costs:
CONSOL continues to apply zero-based budgeting across the operating
segments and corporate functions. This focuses attention to
critical path items, streamlines the organizational structure, and
eliminates bureaucracy. In 2015 year-to-date (YTD), CONSOL has
reduced corporate headcount by approximately 30%, compared to
year-end 2014 levels. Company-wide executive positions have been
reduced by 27%, over the same period, and are expected to hit 40%
by year-end 2015. Due to additional headcount right-sizing and
zero-based budgeting efforts, CONSOL now expects approximately
$100 million in administrative and
overhead costs reductions in 2015, when compared to 2014. When
compared to last quarter estimates, this is an improvement of
approximately $35 million and
$48 million in 2015 and 2016,
respectively.
Balance Sheet Liabilities:
CONSOL continues to actively manage and reduce its long-term
liability exposure. In an effort to modernize benefits, the company
instituted a number of plan amendments and executed divestitures
that have resulted in the following reductions:
Legacy Liabilities ($ in
millions)
|
12/31/2012
|
|
12/31/2013
|
|
12/31/2014
|
|
6/30/2015
|
|
12/31/2015E
|
OPEB
|
$
|
3,018
|
|
$
|
1,022
|
|
$
|
761
|
|
$
|
703
|
|
$
|
682
|
Long-term Disability
(LTD)
|
$
|
39
|
|
$
|
20
|
|
$
|
22
|
|
$
|
21
|
|
$
|
20
|
Workers Compensation
(WC)
|
$
|
180
|
|
$
|
85
|
|
$
|
90
|
|
$
|
89
|
|
$
|
91
|
Coal Workers' Pneumoconiosis
(CWP)
|
$
|
184
|
|
$
|
121
|
|
$
|
126
|
|
$
|
127
|
|
$
|
125
|
Salary
Retirement/Pension
|
$
|
225
|
|
$
|
53
|
|
$
|
119
|
|
$
|
113
|
|
$
|
107
|
Asset Retirement Obligation
(ARO)
|
$
|
699
|
|
$
|
601
|
|
$
|
576
|
|
$
|
579
|
|
$
|
619
|
Total Legacy Liabilities
|
$
|
4,345
|
|
$
|
1,902
|
|
$
|
1,694
|
|
$
|
1,632
|
|
$
|
1,644
|
|
|
|
|
|
|
|
|
|
|
Annual Cash Servicing Cost
|
$
|
370
|
|
$
|
148
|
|
$
|
153
|
|
$
|
129
|
|
$
|
122
|
CONSOL expects to continue efforts to reduce balance sheet
liabilities and cash servicing costs in 2016.
Asset Sales:
The company posted approximately $7
million of assets sales in the first half of 2015. CONSOL
has a large inventory of non-core asset sales and expects between
$75 - $125 million of additional
sales through 2016. These estimates reflect a select number of
small-to-medium sized assets with higher sales probability and
exclude proceeds from CNX Coal Resources and CONE Midstream. Also,
proceeds from the potential sale of other, larger non-core assets
are not included in these estimates.
Cash Flows and Leverage Ratios through 2016:
The cumulative impact of these efforts should result in CONSOL
generating positive free cash flow in the second half of 2015 and
throughout 2016, when applying the current NYMEX 12-month futures
strip on unhedged gas volumes and assuming an average basis
differential of approximately ($0.60)
per Mcf in both 2015 and 2016. In addition, CONSOL applies
conservative assumptions for thermal and metallurgical coal prices
over the next 18 months to meet the company's free cash flow
targets.
Also, CONSOL expects its leverage ratio to decline and hold
below its current level through 2016, under the same pricing
assumptions, as stated above.
About
CONSOL Energy Inc. (NYSE: CNX) is a Pittsburgh-based producer of natural gas and
coal. The company is one of the largest independent natural gas
exploration, development and production companies, with operations
centered in the major shale formations of the Appalachian basin.
CONSOL Energy deploys an organic growth strategy focused on rapidly
developing its resource base. As of December
31, 2014, CONSOL Energy reported 6.8 trillion cubic feet
equivalent of proved natural gas reserves. The company's premium
coals are sold to electricity generators and steel makers, both
domestically and internationally. CONSOL Energy is a member of the
Standard & Poor's 500 Equity Index. Additional information can
be found at www.consolenergy.com.
Non-GAAP Financial Measures
Definition: EBIT is
defined as earnings before deducting net interest expense (interest
expense less interest income) and income taxes. EBITDA is defined
as earnings before deducting net interest expense (interest expense
less interest income), income taxes and depreciation, depletion and
amortization. Adjusted EBITDA is defined as EBITDA after adjusting
for the discrete items listed below. Although EBIT, EBITDA, and
Adjusted EBITDA are not measures of performance calculated in
accordance with generally accepted accounting principles,
management believes that it is useful to an investor in evaluating
CONSOL Energy because it is widely used to evaluate a company's
operating performance before debt expense and its cash or as a
substitute for measures of performance in accordance with generally
accepted accounting principles. In addition, because all companies
do not calculate EBIT, EBITDA, or Adjusted EBITDA identically, the
presentation here may not be comparable to similarly titled
measures of other companies.
Reconciliation of EBIT, EBITDA and Adjusted EBITDA to financial
net income attributable to CONSOL Energy Shareholders is as follows
(dollars in 000):
|
Three Months Ended
|
|
June 30
|
|
2015
|
|
2014
|
Net Loss
|
$
|
(603,301)
|
|
$
|
(24,935)
|
|
|
|
|
Add: Interest Expense
|
46,507
|
|
64,211
|
Less: Interest Income
|
(364)
|
|
(676)
|
Add: Income Taxes
|
(291,929)
|
|
1,214
|
(Loss) Earnings Before Interest & Taxes
(EBIT)
|
(849,087)
|
|
39,814
|
|
|
|
|
Add: Depreciation, Depletion &
Amortization
|
154,497
|
|
137,899
|
|
|
|
|
(Loss) Earnings Before Interest, Taxes and DD&A
(EBITDA)
|
(694,590)
|
|
177,713
|
|
|
|
|
Adjustments:
|
|
|
|
Impairment of E&P Properties
|
828,905
|
|
—
|
Unrealized Loss on Commodity Derivative
Instruments
|
24,936
|
|
—
|
Backstop Loan Fees
|
7,334
|
|
—
|
Other Transaction Fees
|
4,968
|
|
—
|
Loss on Debt Extinguishment
|
17
|
|
74,277
|
OPEB Plan Changes
|
(33,649)
|
|
—
|
Pension Settlement
|
—
|
|
20,707
|
Revolver Modification
|
—
|
|
2,989
|
Coal Contract Buyout
|
—
|
|
(30,000)
|
Total Pre-tax Adjustments
|
832,511
|
|
67,973
|
|
|
|
|
Adjusted Earnings Before Interest, Taxes and DD&A
(Adjusted EBITDA)
|
$
|
137,921
|
|
$
|
245,686
|
|
Note: Income tax effect of Total Pre-tax
Adjustments was $313,327 and $26,598 for the three months ended
June 30, 2015 and June 30, 2014, respectively. Adjusted net loss
for the three months ended June 30, 2015 is calculated as GAAP net
loss of $603,301 plus total pre-tax adjustments of $832,511, less
the tax effect of $313,327 equals the adjusted net loss
$84,117.
|
Coal Division Guidance
Note: Committed tons include tons that are both sold and
priced. Committed tons exclude collared tons and tons that are sold
but not yet priced. There are no collared tons in 2015. Collared
tons in 2016 are 0.4 million tons, with a ceiling of $62.00 per ton and a floor of $57.00 per ton. Not included in the table are the
tons from Western Allegheny Energy (WAE). We forecast WAE
production of 0.2 million tons for Q3 2015, and 0.5 million tons
and 0.4 million tons for all of 2015, and 2016, respectively. For
purposes of this table, the forecasted price of each committed
contract includes the base price stated in the contract and an
estimate of the future adjustments to the contracted base price as
set forth in such contract. The adjustment mechanisms reflect (i)
variances in the quality characteristics of coal delivered to the
customer beyond threshold quality characteristics specified in the
applicable sales contract, (ii) the actual calorific value of coal
delivered to the customer, and/or (iii) changes in electric power
prices in the markets in which our customers operate, as adjusted
for any factors set forth in the applicable contract. Each customer
contract is different and not all contracts contain adjustments
described in the preceding sentence. The forecasted prices set
forth in the table above were based in part on certain assumptions
made by management. With respect to clause (i) quality
characteristics, for 2016 we assumed that the coal we will deliver
will be within the contract range, and no premiums or penalties
relating to the quality of coal delivered are forecasted. For the
current year, 2015, we based our assumption on our average monthly
forecasted quality numbers generated with our production forecast,
created using pre-mining geology and analytical work, to determine
the likely penalties and premiums associated with each contract
using the average mine quality for tons estimated to be shipped
during the time period. With respect to clause (ii) actual
calorific value, for 2016 we assumed that the coal we deliver will
be within the contract range, and no premiums or penalties relating
to the calorific value of coal delivered are forecasted. For the
current year, 2015, we based our assumption on our average monthly
forecasted quality numbers generated with our production forecast,
created using pre-mining geology and analytical work, to determine
the likely penalties and premiums associated with each contract
using the average mine quality for tons estimated to be shipped
during the time period. With respect to clause (iii), the electric
power price-related adjustments, if any, result only in positive
monthly adjustments to the contracted base price that we receive
for our coal. These adjustments to contracted base prices were
estimated using publicly available regional power generation
information applicable to the markets in which our customers
operate and other internally forecasted information regarding
contract specific factors that impact pricing. The key assumptions
used for the forecasted electric power price-related adjustments
were derived using PJM Western Hub Day-Ahead Calendar Month (Peak
and Off-Peak) prices adjusted using management's judgment and
historical results. These derived assumptions were held constant in
2015 and 2016. While management considers the expectations and
assumptions regarding forecasted prices, including with respect to
forecasted electric power price-related adjustments, to be
reasonable, they are inherently subject to business, economic,
competitive, regulatory, and other risks and uncertainties, most of
which are beyond our control.
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, if any, 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:
deterioration in economic conditions in any of the industries in
which our customers operate; an extended decline in prices we
receive for our gas, natural gas liquids and coal including the
impact on gas prices of our gas operations being concentrated in
Appalachia which has experienced a dramatic increase in gas
production and decline in gas pricing relative to the benchmark
Henry Hub prices; foreign currency fluctuations affecting the
competitiveness of our coal abroad; our customers extending
existing contracts or entering into new long-term contracts for
coal; our reliance on major customers; our inability to collect
payments from customers if their creditworthiness declines; the
disruption of rail, barge, gathering, processing and transportation
facilities and other systems that deliver our gas and coal to
market; a loss of our competitive position because of the
competitive nature of the gas and coal industries, or a loss of our
competitive position because of overcapacity in these industries
impairing our profitability; coal users switching to other fuels in
order to comply with various environmental standards related to
coal combustion emissions; the impact of potential, as well as any
adopted regulations relating to greenhouse gas emissions on the
demand for natural gas and coal ; the risks inherent in gas and
coal operations, including our reliance upon third party
contractors, being subject to unexpected disruptions, including
geological conditions, equipment failure, timing of completion of
significant construction or repair of equipment, fires, explosions,
accidents and weather conditions which could impact financial
results; decreases in the availability of, or increases in, the
price of commodities or capital equipment used in our mining
operations; obtaining and renewing governmental permits and
approvals for our natural gas and coal gas operations; the effects
of government regulation on the discharge into the water or air,
and the disposal and clean-up of, hazardous substances and wastes
generated during our natural gas and coal operations; our ability
to find adequate water sources for our use in gas drilling, or our
ability to dispose of water used or removed from strata in
connection with our gas operations at a reasonable cost and within
applicable environmental rules; the effects of stringent federal
and state employee health and safety regulations, including the
ability of regulators to shut down a mine; the potential for
liabilities arising from environmental contamination or alleged
environmental contamination in connection with our past or current
gas and coal operations; the effects of mine closing, reclamation,
gas well closing and certain other liabilities; uncertainties in
estimating our economically recoverable gas, oil and coal reserves;
defects may exist in our chain of title and we may incur additional
costs associated with perfecting title for gas rights on some of
our properties or failing to acquire these additional rights we may
have to reduce our estimated reserves; the outcomes of various
legal proceedings, which are more fully described in our reports
filed under the Exchange Act; increased exposure to
employee-related long-term liabilities; lump sum payments made to
retiring salaried employees pursuant to our defined benefit pension
plan exceeding total service and interest cost in a plan year;
replacing our natural gas and oil reserves, which if not replaced,
will cause our gas and oil reserves and production to decline;
acquisitions that we recently completed or may make in the future
including the accuracy of our assessment of the acquired businesses
and their risks, achieving any anticipated synergies, integrating
the acquisitions and unanticipated changes that could affect
assumptions we may have made and asset monetization transactions,
including sales of additional interests in our thermal coal or
other assets to CNX Coal Resources LP and divestitures to third
parties we anticipate may not occur or produce anticipated
proceeds; the terms of our existing joint ventures restrict
flexibility, actions taken by the other party in our gas joint
ventures may impact our financial position and various
circumstances could cause us not to realize the benefits we
anticipate receiving from these joint ventures; risks associated
with our debt; our hedging activities may prevent us from
benefiting from price increases and may expose us to other risks;
changes in federal or state income tax laws, particularly in the
area of percentage depletion and intangible drilling costs, could
cause our financial position and profitability to deteriorate;
failure to appropriately allocate capital and other resources among
our strategic opportunities may adversely affect our financial
condition; failure by Murray Energy to satisfy liabilities it
acquired from us, or failure to perform its obligations under
various arrangements, which we guaranteed, could materially or
adversely affect our results of operations, financial position, and
cash flows; information theft, data corruption and/or financial
loss resulting from a terrorist attack or cyber incident; operating
in a single geographic area; and other factors discussed in the
2014 Form 10-K under "Risk Factors," as updated by any subsequent
Form 10-Qs, which are on file at the Securities and Exchange
Commission.
1The terms "adjusted net loss" and "adjusted EBITDA"
are non-GAAP financial measures, which are defined and reconciled
to the GAAP net income below, under the caption "Non-GAAP Financial
Measures."
CONSOL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
|
|
(Dollars in thousands, except per share
data)
|
Three Months Ended
|
|
Six Months Ended
|
(Unaudited)
|
June 30,
|
|
June 30,
|
Revenues and Other Income:
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Natural Gas, NGLs and Oil
Sales
|
$
|
201,911
|
|
$
|
229,743
|
|
$
|
456,491
|
|
$
|
496,041
|
Unrealized (Loss) Gain on Commodity
Derivative Instruments
|
(24,936)
|
|
—
|
|
35,068
|
|
—
|
Coal Sales
|
414,480
|
|
536,298
|
|
911,146
|
|
1,070,979
|
Other Outside Sales
|
6,337
|
|
70,087
|
|
19,467
|
|
139,374
|
Production Royalty Interests and
Purchased Gas Sales
|
6,887
|
|
19,739
|
|
25,343
|
|
49,958
|
Freight-Outside Coal
|
4,251
|
|
10,109
|
|
10,776
|
|
20,054
|
Miscellaneous Other
Income
|
35,694
|
|
69,977
|
|
73,760
|
|
125,031
|
Gain on Sale of Assets
|
4,315
|
|
1,417
|
|
6,480
|
|
5,086
|
Total Revenue and Other
Income
|
648,939
|
|
937,370
|
|
1,538,531
|
|
1,906,523
|
Costs and Expenses:
|
|
|
|
|
|
|
|
Exploration and Production
Costs
|
|
|
|
|
|
|
|
Lease Operating
Expense
|
25,319
|
|
26,374
|
|
56,931
|
|
55,617
|
Transportation, Gathering and
Compression
|
86,979
|
|
57,796
|
|
165,723
|
|
111,578
|
Production, Ad Valorem, and Other
Fees
|
6,938
|
|
10,145
|
|
16,130
|
|
20,331
|
Direct Administrative and
Selling
|
13,252
|
|
13,503
|
|
27,918
|
|
25,156
|
Depreciation, Depletion and
Amortization
|
87,510
|
|
71,499
|
|
172,614
|
|
143,228
|
Exploration and Production Related Other
Costs
|
2,322
|
|
4,624
|
|
4,363
|
|
7,723
|
Production Royalty Interests and
Purchased Gas Costs
|
3,635
|
|
16,672
|
|
19,762
|
|
42,768
|
Other Corporate
Expenses
|
20,551
|
|
21,010
|
|
39,647
|
|
47,174
|
Impairment of Exploration and Production
Properties
|
828,905
|
|
—
|
|
828,905
|
|
—
|
General and
Administrative
|
14,431
|
|
15,517
|
|
29,573
|
|
32,881
|
Total Exploration and Production
Costs
|
1,089,842
|
|
237,140
|
|
1,361,566
|
|
486,456
|
Coal Costs
|
|
|
|
|
|
|
|
Operating and Other
Costs
|
271,284
|
|
354,286
|
|
582,867
|
|
688,096
|
Royalties and Production
Taxes
|
22,056
|
|
27,603
|
|
44,373
|
|
54,091
|
Direct Administrative and
Selling
|
8,984
|
|
12,130
|
|
17,967
|
|
23,672
|
Depreciation, Depletion and
Amortization
|
66,982
|
|
65,899
|
|
132,465
|
|
122,765
|
Freight Expense
|
4,251
|
|
10,109
|
|
10,776
|
|
20,054
|
General and Administrative
Costs
|
6,901
|
|
10,657
|
|
14,309
|
|
23,366
|
Other Corporate
Expenses
|
13,288
|
|
12,037
|
|
22,183
|
|
31,331
|
Total Coal
Costs
|
393,746
|
|
492,721
|
|
824,940
|
|
963,375
|
Other Costs
|
|
|
|
|
|
|
|
Miscellaneous Operating
Expense
|
14,052
|
|
92,020
|
|
24,436
|
|
159,361
|
General and Administrative
Costs
|
—
|
|
221
|
|
—
|
|
431
|
Depreciation, Depletion and
Amortization
|
5
|
|
501
|
|
12
|
|
1,022
|
Loss on Debt
Extinguishment
|
17
|
|
74,277
|
|
67,751
|
|
74,277
|
Interest Expense
|
46,507
|
|
64,211
|
|
101,629
|
|
115,142
|
Total Other
Costs
|
60,581
|
|
231,230
|
|
193,828
|
|
350,233
|
Total Costs And Expenses
|
1,544,169
|
|
961,091
|
|
2,380,334
|
|
1,800,064
|
Earnings Before Income Tax
|
(895,230)
|
|
(23,721)
|
|
(841,803)
|
|
106,459
|
Income Taxes
|
(291,929)
|
|
1,214
|
|
(317,532)
|
|
9,703
|
(Loss) Income From Continuing
Operations
|
(603,301)
|
|
(24,935)
|
|
(524,271)
|
|
96,756
|
Loss From Discontinued Operations,
net
|
—
|
|
—
|
|
—
|
|
(5,687)
|
Net (Loss) Income
|
$
|
(603,301)
|
|
$
|
(24,935)
|
|
$
|
(524,271)
|
|
$
|
91,069
|
CONSOL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
|
|
(Dollars in thousands, except per share
data)
|
Three Months Ended
|
|
Six Months Ended
|
(Unaudited)
|
June 30,
|
|
June 30,
|
Earnings Per Share
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Basic
|
|
|
|
|
|
|
|
(Loss) Income from Continuing
Operations
|
$
|
(2.64)
|
|
$
|
(0.11)
|
|
$
|
(2.29)
|
|
$
|
0.42
|
Loss from Discontinued
Operations
|
—
|
|
—
|
|
—
|
|
(0.02)
|
Total Basic (Loss) Earnings Per
Share
|
$
|
(2.64)
|
|
$
|
(0.11)
|
|
$
|
(2.29)
|
|
$
|
0.40
|
Dilutive
|
|
|
|
|
|
|
|
(Loss) Income from Continuing
Operations
|
$
|
(2.64)
|
|
$
|
(0.11)
|
|
$
|
(2.29)
|
|
$
|
0.42
|
Loss from Discontinued
Operations
|
—
|
|
—
|
|
—
|
|
(0.03)
|
Total Dilutive (Loss) Earnings Per
Share
|
$
|
(2.64)
|
|
$
|
(0.11)
|
|
$
|
(2.29)
|
|
$
|
0.39
|
|
|
|
|
|
|
|
|
Dividends Paid Per Share
|
$
|
0.0625
|
|
$
|
0.0625
|
|
$
|
0.125
|
|
$
|
0.125
|
|
|
|
CONSOL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME
|
|
|
Three Months Ended
|
|
Six Months Ended
|
(Dollars in thousands)
|
June 30,
|
|
June 30,
|
(Unaudited)
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Net (Loss) Income
|
$
|
(603,301)
|
|
$
|
(24,935)
|
|
$
|
(524,271)
|
|
$
|
91,069
|
Other Comprehensive Loss:
|
|
|
|
|
|
|
|
Actuarially Determined Long-Term
Liability Adjustments (Net of tax: ($4,875), $2,214, ($4,785),
($771))
|
9,467
|
|
(3,798)
|
|
9,318
|
|
1,321
|
Net Decrease in the Value of Cash Flow
Hedges (Net of tax: $0, $8,027, $0, $38,883)
|
—
|
|
(12,218)
|
|
—
|
|
(59,183)
|
Reclassification of Cash Flow Hedges
from OCI to Earnings (Net of tax: $12,103, ($6,642), $23,316,
($17,593))
|
(20,804)
|
|
6,951
|
|
(40,118)
|
|
23,264
|
|
|
|
|
|
|
|
|
Other Comprehensive Loss
|
(11,337)
|
|
(9,065)
|
|
(30,800)
|
|
(34,598)
|
|
|
|
|
|
|
|
|
Comprehensive (Loss) Income
|
$
|
(614,638)
|
|
$
|
(34,000)
|
|
$
|
(555,071)
|
|
$
|
56,471
|
CONSOL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
|
(Unaudited)
|
|
|
(Dollars in thousands)
|
June 30,
2015
|
|
December 31,
2014
|
ASSETS
|
|
|
|
Current Assets:
|
|
|
|
Cash and Cash
Equivalents
|
$
|
10,031
|
|
$
|
176,989
|
Accounts and Notes
Receivable:
|
|
|
|
Trade
|
173,240
|
|
259,817
|
Other
Receivables
|
219,655
|
|
347,146
|
Accounts Receivable -
Securitized
|
38,669
|
|
—
|
Inventories
|
111,694
|
|
101,873
|
Deferred Income Taxes
|
74,539
|
|
66,569
|
Recoverable Income
Taxes
|
21,211
|
|
20,401
|
Prepaid Expenses
|
172,463
|
|
193,555
|
Total Current
Assets
|
821,502
|
|
1,166,350
|
Property, Plant and Equipment:
|
|
|
|
Property, Plant and
Equipment
|
15,344,327
|
|
14,674,777
|
Less—Accumulated Depreciation, Depletion
and Amortization
|
5,624,326
|
|
4,512,305
|
Total Property,
Plant and Equipment—Net
|
9,720,001
|
|
10,162,472
|
Other Assets:
|
|
|
|
Investment in
Affiliates
|
216,583
|
|
152,958
|
Other
|
244,015
|
|
277,750
|
Total Other
Assets
|
460,598
|
|
430,708
|
TOTAL
ASSETS
|
$
|
11,002,101
|
|
$
|
11,759,530
|
CONSOL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
|
(Unaudited)
|
|
|
(Dollars in thousands, except per share
data)
|
June 30,
2015
|
|
December 31,
2014
|
LIABILITIES AND EQUITY
|
|
|
|
Current Liabilities:
|
|
|
|
Accounts Payable
|
$
|
442,153
|
|
$
|
531,973
|
Current Portion of Long-Term
Debt
|
13,401
|
|
13,016
|
Short-Term Notes
Payable
|
1,058,000
|
|
—
|
Borrowings Under Securitization
Facility
|
38,669
|
|
—
|
Other Accrued
Liabilities
|
543,806
|
|
602,972
|
Total Current
Liabilities
|
2,096,029
|
|
1,147,961
|
Long-Term Debt:
|
|
|
|
Long-Term Debt
|
2,558,678
|
|
3,236,422
|
Capital Lease
Obligations
|
38,820
|
|
39,456
|
Total Long-Term
Debt
|
2,597,498
|
|
3,275,878
|
Deferred Credits and Other
Liabilities:
|
|
|
|
Deferred Income Taxes
|
5,119
|
|
325,592
|
Postretirement Benefits Other Than
Pensions
|
635,693
|
|
703,680
|
Pneumoconiosis
Benefits
|
118,288
|
|
116,941
|
Mine Closing
|
306,231
|
|
306,789
|
Gas Well Closing
|
181,768
|
|
175,369
|
Workers' Compensation
|
75,365
|
|
75,947
|
Salary Retirement
|
107,233
|
|
109,956
|
Reclamation
|
34,264
|
|
33,788
|
Other
|
162,718
|
|
158,171
|
Total Deferred
Credits and Other Liabilities
|
1,626,679
|
|
2,006,233
|
TOTAL
LIABILITIES
|
6,320,206
|
|
6,430,072
|
Stockholders' Equity:
|
|
|
|
Common Stock, $.01 Par Value;
500,000,000 Shares Authorized,
229,001,412 Issued and Outstanding at June 30,
2015;
230,265,463 Issued and Outstanding at December 31,
2014
|
2,294
|
|
2,306
|
Capital in Excess of Par
Value
|
2,425,822
|
|
2,424,102
|
Preferred Stock, 15,000,000 shares
authorized, None issued and
outstanding
|
—
|
|
—
|
Retained Earnings
|
2,435,679
|
|
3,054,150
|
Accumulated Other Comprehensive
Loss
|
(181,900)
|
|
(151,100)
|
Total CONSOL Energy
Inc. Stockholders' Equity
|
4,681,895
|
|
5,329,458
|
TOTAL LIABILITIES
AND EQUITY
|
$
|
11,002,101
|
|
$
|
11,759,530
|
CONSOL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY
|
|
(Dollars in thousands, except per share
data)
|
Common
Stock
|
|
Capital in
Excess
of Par
Value
|
|
Retained
Earnings
(Deficit)
|
|
Accumulated
Other
Comprehensive
Loss
|
|
Total CONSOL
Energy Inc.
Stockholders'
Equity
|
December 31, 2014
|
$
|
2,306
|
|
$
|
2,424,102
|
|
$
|
3,054,150
|
|
$
|
(151,100)
|
|
$
|
5,329,458
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Net Loss
|
—
|
|
—
|
|
(524,271)
|
|
—
|
|
(524,271)
|
Other Comprehensive Loss
|
—
|
|
—
|
|
—
|
|
(30,800)
|
|
(30,800)
|
Comprehensive Loss
|
—
|
|
—
|
|
(524,271)
|
|
(30,800)
|
|
(555,071)
|
Issuance of Common Stock
|
10
|
|
8,278
|
|
—
|
|
—
|
|
8,288
|
Retirement of Common Stock (2,213,100
shares)
|
(22)
|
|
(17,683)
|
|
(53,969)
|
|
—
|
|
(71,674)
|
Treasury Stock Activity
|
—
|
|
—
|
|
(11,520)
|
|
—
|
|
(11,520)
|
Tax Cost From Stock-Based
Compensation
|
—
|
|
(3,004)
|
|
—
|
|
—
|
|
(3,004)
|
Amortization of Stock-Based Compensation
Awards
|
—
|
|
14,129
|
|
—
|
|
—
|
|
14,129
|
Dividends ($0.125 per share)
|
—
|
|
—
|
|
(28,711)
|
|
—
|
|
(28,711)
|
Balance at June 30, 2015
|
$
|
2,294
|
|
$
|
2,425,822
|
|
$
|
2,435,679
|
|
$
|
(181,900)
|
|
$
|
4,681,895
|
CONSOL ENERGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(Dollars in thousands)
|
Three Months Ended
|
|
Six Months Ended
|
(Unaudited)
|
June 30,
|
|
June 30,
|
Operating Activities:
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Net (Loss) Income
|
$
|
(603,301)
|
|
$
|
(24,935)
|
|
$
|
(524,271)
|
|
$
|
91,069
|
Adjustments to Reconcile Net Income to
Net Cash Provided By
Continuing Operating Activities:
|
|
|
|
|
|
|
|
Net Loss from
Discontinued Operations
|
—
|
|
—
|
|
—
|
|
5,687
|
Depreciation, Depletion and
Amortization
|
154,497
|
|
137,899
|
|
305,091
|
|
267,015
|
Impairment of Exploration
and Production Properties
|
828,905
|
|
—
|
|
828,905
|
|
—
|
Stock-Based
Compensation
|
6,648
|
|
9,608
|
|
14,129
|
|
25,500
|
Gain on Sale of
Assets
|
(4,315)
|
|
(1,417)
|
|
(6,480)
|
|
(5,086)
|
Loss on Debt
Extinguishment
|
17
|
|
74,277
|
|
67,751
|
|
74,277
|
Unrealized Loss (Gain) on
Commodity Derivative
Instruments
|
24,936
|
|
—
|
|
(35,068)
|
|
—
|
Deferred Income
Taxes
|
(291,914)
|
|
5,636
|
|
(313,114)
|
|
13,785
|
Equity in Earnings of
Affiliates
|
(11,927)
|
|
(14,062)
|
|
(23,250)
|
|
(21,512)
|
Return on Equity
Investment
|
4,059
|
|
—
|
|
8,162
|
|
—
|
Changes in Operating
Assets:
|
|
|
|
|
|
|
|
Accounts
and Notes Receivable
|
63,861
|
|
(30,689)
|
|
90,384
|
|
(52,920)
|
Inventories
|
(6,450)
|
|
8,180
|
|
(9,821)
|
|
9,909
|
Prepaid
Expenses
|
45,084
|
|
9,036
|
|
83,560
|
|
24,529
|
Changes in Other
Assets
|
10,222
|
|
13,073
|
|
17,188
|
|
13,427
|
Changes in Operating
Liabilities:
|
|
|
|
|
|
|
|
Accounts
Payable
|
(79,882)
|
|
36,776
|
|
(97,602)
|
|
53,371
|
Accrued
Interest
|
(16,570)
|
|
(61,716)
|
|
26,149
|
|
(10,483)
|
Other
Operating Liabilities
|
(28,267)
|
|
45,080
|
|
(96,978)
|
|
74,714
|
Changes in Other
Liabilities
|
(36,090)
|
|
6,268
|
|
(46,395)
|
|
9,923
|
Other
|
2,229
|
|
3,691
|
|
5,875
|
|
4,814
|
Net Cash Provided by
Continuing Operations
|
61,742
|
|
216,705
|
|
294,215
|
|
578,019
|
Net Cash Provided By (Used
in) Discontinued Operating
Activities
|
—
|
|
4,340
|
|
—
|
|
(20,872)
|
Net Cash Provided by
Operating Activities
|
61,742
|
|
221,045
|
|
294,215
|
|
557,147
|
Cash Flows from Investing
Activities:
|
|
|
|
|
|
|
|
Capital Expenditures
|
(341,766)
|
|
(368,286)
|
|
(635,785)
|
|
(819,295)
|
Proceeds from Sales of
Assets
|
4,823
|
|
7,547
|
|
6,931
|
|
133,075
|
Net Investments In Equity
Affiliates
|
(11,666)
|
|
(29,000)
|
|
(43,761)
|
|
(39,000)
|
Net Cash Used in Investing
Activities
|
(348,609)
|
|
(389,739)
|
|
(672,615)
|
|
(725,220)
|
Cash Flows from Financing
Activities:
|
|
|
|
|
|
|
|
Proceeds from (Payments On) Short-Term
Borrowings
|
297,500
|
|
(11,736)
|
|
1,058,000
|
|
(11,736)
|
(Payments on) Proceeds from
Miscellaneous Borrowings
|
(1,634)
|
|
1,503
|
|
(4,112)
|
|
(3,167)
|
Payments on Long Term Notes, including
Redemption Premium
|
(2,710)
|
|
(1,583,965)
|
|
(1,263,719)
|
|
(1,583,965)
|
Proceeds from Securitization
Facility
|
6,000
|
|
—
|
|
38,669
|
|
—
|
Proceeds from Issuance of Long-Term
Notes
|
—
|
|
1,600,000
|
|
492,760
|
|
1,600,000
|
Tax Benefit from Stock-Based
Compensation
|
183
|
|
2,321
|
|
198
|
|
2,413
|
Dividends Paid
|
(14,311)
|
|
(14,382)
|
|
(28,711)
|
|
(28,733)
|
Issuance of Common
Stock
|
6,552
|
|
8,259
|
|
8,288
|
|
13,234
|
Purchases of Treasury
Stock
|
—
|
|
—
|
|
(71,674)
|
|
—
|
Debt Issuance and Financing
Fees
|
—
|
|
—
|
|
(18,257)
|
|
—
|
Net Cash Provided by (Used
in) Financing Activities
|
291,580
|
|
2,000
|
|
211,442
|
|
(11,954)
|
Net Increase (Decrease) in Cash and Cash
Equivalents
|
4,713
|
|
(166,694)
|
|
(166,958)
|
|
(180,027)
|
Cash and Cash Equivalents at Beginning of
Period
|
5,318
|
|
314,087
|
|
176,989
|
|
327,420
|
Cash and Cash Equivalents at End of
Period
|
$
|
10,031
|
|
$
|
147,393
|
|
$
|
10,031
|
|
$
|
147,393
|
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SOURCE CONSOL Energy Inc.