NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
NOTE 1—SIGNIFICANT ACCOUNTING POLICIES:
A summary of the significant accounting policies of CNX Resources Corporation and subsidiaries ("CNX" or "the Company") is presented below. These, together with the other notes that follow, are an integral part of the Consolidated Financial Statements.
Basis of Consolidation:
The Consolidated Financial Statements include the accounts of CNX Resources Corporation, its wholly-owned subsidiaries, and its majority-owned and/or controlled subsidiaries. Investments in business entities in which CNX does not have control but has the ability to exercise significant influence over the operating and financial policies, are accounted for under the equity method. All significant intercompany transactions and accounts have been eliminated in consolidation. Investments in oil and natural gas producing entities are accounted for under the proportionate consolidation method.
Prior to the Merger on September 28, 2020, see Note 4 - Acquisitions and Dispositions, certain variable interest entities were required to be consolidated pursuant to the Consolidation topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification. The portion of these entities that was not owned by the Company was presented as non-controlling interest.
Use of Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as well as various disclosures. Actual results could differ from those estimates. The most significant estimates included in, but not limited to, the preparation of the consolidated financial statements are related to long-lived assets (including intangible assets and goodwill), accounts receivable credit losses, the values of natural gas, NGLs, condensate and oil (collectively "natural gas") reserves, asset retirement obligations, deferred income tax assets and liabilities, contingencies, fair value of derivative instruments, the fair value of the liability and equity components of the convertible senior notes, stock-based compensation and salary retirement benefits.
Cash, Cash Equivalents, and Restricted Cash
Cash and cash equivalents include cash on hand and on deposit at banking institutions as well as all highly liquid short-term securities with original maturities of three months or less.
Restricted cash consists of cash that the Company is contractually obligated to maintain in accordance with the terms of the Cardinal States Gathering LLC and CSG Holdings II LLC Credit Agreements, each dated March 13, 2020 (See Note 12 - Long-Term Debt for more information).
The following table provides a reconciliation of cash, cash equivalents, and restricted cash to amounts shown in the statement of cash flows:
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December 31,
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2020
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2019
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2018
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Cash and Cash Equivalents
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$
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15,617
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|
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$
|
16,283
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|
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$
|
17,198
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Restricted Cash, Current Portion
|
735
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—
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—
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Restricted Cash, Less Current Portion
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5,247
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—
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—
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Total Cash, Cash Equivalents and Restricted Cash
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$
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21,599
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|
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$
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16,283
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|
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$
|
17,198
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Trade Accounts Receivable and Allowance for Credit Losses:
Trade accounts receivable are recorded at the invoiced amount and do not bear interest.
On January 1, 2020, CNX adopted Accounting Standards Update (ASU) 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. CNX adopted Topic 326 using the prospective transition method.
Prior to adopting Topic 326, CNX reserved for specific accounts receivable when it was probable that all or a part of an outstanding balance would not be collected, such as customer bankruptcies. Collectability was determined based on terms of sale, credit status of customers and various other circumstances. CNX regularly reviewed collectability and established or adjusted the allowance as necessary using the specific identification method. Account balances were charged off against the allowance after all means of collection had been exhausted and the potential for recovery was considered remote. Reserves for uncollectible amounts were not material in the periods presented.
Under Topic 326, management records an allowance for credit losses related to the collectability of third-party customers' receivables using the historical aging of the customer receivable balance. The collectability is determined based on past events, including historical experience, customer credit rating, as well as current market conditions. CNX monitors customer ratings and collectability on an on-going basis. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
There were no material financing receivables with a contractual maturity greater than one year at December 31, 2020 or 2019.
As of December 31, 2020 and 2019, Accounts Receivable - Trade were $145,929 and $133,480, respectively, and Other Receivables were $4,238 and $13,679, respectively.
The following represents the roll forward of the allowance for credit losses for the years ended:
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December 31,
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2020
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2019
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Allowance for Credit Losses - Trade, Beginning of Year
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$
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—
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$
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—
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Provision for Expected Credit Losses
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84
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—
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Allowance for Credit Losses - Trade, End of Period
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$
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84
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$
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—
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Allowance for Credit Losses - Other Receivables, Beginning of Year
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$
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2,463
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|
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$
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2,038
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Provision for Expected Credit Losses
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2,760
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|
595
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Write-off of Uncollectible Accounts
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(1,975)
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(170)
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Allowance for Credit Losses - Other Receivables, End of Period
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$
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3,248
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$
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2,463
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Inventories:
Inventories are stated at the lower of cost or net realizable value. The cost of supplies inventory is determined by the average cost method and includes operating and maintenance supplies to be used in the Company's operations.
Property, Plant and Equipment:
CNX uses the successful efforts method of accounting for natural gas producing activities. Costs of property acquisitions, successful exploratory, development wells and related support equipment and facilities are capitalized. Periodic valuation provisions for impairment of capitalized costs of unproved mineral interests are expensed. Costs of unsuccessful exploratory wells are expensed when such wells are determined to be non-productive, or if the determination cannot be made after finding sufficient quantities of reserves to continue evaluating the viability of the project. The costs of producing properties and mineral
interests are amortized using the units-of-production method. Depreciation, depletion and amortization expense is calculated based on the actual produced sales volumes multiplied by the applicable rate per unit, which is derived by dividing the net capitalized costs by the number of units expected to be produced over the life of the reserves. Wells and related equipment and intangible drilling costs are also amortized on a units-of-production method. Proved developed reserves, as estimated by petroleum engineers, are used to calculate amortization of wells and related equipment and facilities and amortization of intangible drilling costs. Total proved reserves, also estimated by petroleum engineers, are used to calculate depletion on property acquisitions. Proved oil and natural gas reserve estimates are based on geological and engineering evaluations of in-place hydrocarbon volumes. Units-of-production amortization rates are revised at least once per year, or more frequently if events and circumstances indicate an adjustment is necessary. Such revisions are accounted for prospectively as changes in accounting estimates. The Company recorded depreciation, depletion and amortization expense related to proved gas properties using the units-of-production method of $400,758, $423,488, and $412,588 for the years ended December 31, 2020, 2019, and 2018, respectively.
Property, plant and equipment is recorded at cost upon acquisition. Expenditures which extend the useful lives of existing plant and equipment are capitalized. Interest costs applicable to major asset additions are capitalized during the construction period. Planned major maintenance costs which do not extend the useful lives of existing plant and equipment are expensed as incurred.
Depreciation of plant and equipment is calculated on the straight-line method over their estimated useful lives or lease terms, generally as follows:
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Years
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Buildings and Improvements
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10 to 45
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Machinery and Equipment
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3 to 25
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Gathering and Transmission
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30 to 40
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Leasehold Improvements
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Life of Lease
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Costs for purchased software are capitalized and amortized using the straight-line method over the estimated useful life which does not exceed seven years.
Impairment of Long-Lived Assets:
Impairment of long-lived assets is recorded when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying value. The carrying value of the assets is then reduced to its estimated fair value which is usually measured based on an estimate of future discounted cash flows. Impairment of equity investments is recorded when indicators of impairment are present, and the estimated fair value of the investment is less than the assets' carrying value.
Impairment of Proved Properties:
CNX performs a quantitative impairment test whenever events or changes in circumstances indicate that an asset group's carrying amount may not be recoverable, over proved properties using the published NYMEX forward prices, timing, methods and other assumptions consistent with historical periods. When indicators of impairment are present, tests require that the Company first compare expected future undiscounted cash flows by asset group to their respective carrying values. If the carrying amount exceeds the estimated undiscounted future cash flows, a reduction of the carrying amount of the natural gas properties to their estimated fair values is required, which is determined based on discounted cash flow techniques using significant assumptions including projected revenues, future commodity prices and a market-specific weighted average cost of capital which are affected by expectations about future market and economic conditions.
During the year ended December 31, 2020, CNX recognized certain indicators of impairments specific to our Southwest Pennsylvania Coalbed Methane asset group and determined that the carrying value of that asset group was not recoverable. The fair value of the asset group was estimated by using level 3 inputs which consisted of discounting the estimated future cash flows using discount rates and other assumptions that market participants would use in their estimates of fair value. As a result, an impairment of $61,849 was recognized and is included in Impairment of Exploration and Production Properties in the Consolidated Statements of Income. The impairment was related to an economic decision to temporarily idle certain wells and the related processing facility during the first quarter.
During the fourth quarter of 2019, CNX identified certain indicators of impairment specific to our Central Pennsylvania Marcellus asset group and determined that the carrying value of that asset group was not recoverable. The fair value of the asset group was estimated by using level 3 inputs which consisted of discounting the estimated future cash flows using discount rates and other assumptions that market participants would use in their estimates of fair value. As a result, an impairment of $327,400 was included in Impairment of Exploration and Production Properties in the Consolidated Statements of Income. This impairment was related to 56 operated wells and approximately 51,000 acres within our Central Pennsylvania Marcellus proved properties in Armstrong, Indiana, Jefferson and Westmoreland counties. The majority of these properties were developed prior to 2013 and the last of these properties were developed in 2015.
Impairment of Unproved Properties:
Capitalized costs of unproved oil and gas properties are evaluated at least annually for recoverability on a prospective basis. Indicators of potential impairment include, but are not limited to, changes brought about by economic factors, commodity price outlooks, our geologists’ evaluation of the property, favorable or unfavorable activity on the property being evaluated and/or adjacent properties, potential shifts in business strategy employed by management and historical experience. The likelihood of an impairment of unproved oil and gas properties increases as the expiration of a lease term approaches if drilling activity has not commenced. If it is determined that the Company does not intend to drill on the property prior to expiration or does not have the intent and ability to extend, renew, trade, or sell the lease prior to expiration, an impairment expense is recorded. Expense for lease expirations that were not previously impaired are recorded as the leases expire.
For the year ended December 31, 2019, CNX recorded an impairment related to unproved properties of $119,429 that was included in Impairment of Unproved Properties and Expirations in the Consolidated Statements of Income. These unproved properties are within CNX's Central Pennsylvania operating region and east of the acreage associated with the proved property impairment described above.
Exploration expense, which is associated primarily with lease expirations, was $14,994, $44,380 and $12,033 for the years ended December 31, 2020, 2019 and 2018, respectively, and is included in Exploration and Production Related Other Costs in the Consolidated Statements of Income.
Impairment of Goodwill:
In connection with the Midstream Acquisition (See Note 4 - Acquisitions and Dispositions for more information), CNX recorded $796,359 of goodwill through the application of purchase accounting. The goodwill recorded was allocated in its entirety to the Midstream reporting unit within the Shale segment.
Goodwill is the cost of an acquisition less the fair value of the identifiable net assets of the acquired business. Goodwill is not amortized, but rather it is evaluated for impairment annually during the fourth quarter, or more frequently if recent events or prevailing conditions indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. These indicators include, but are not limited to, overall financial performance, industry and market considerations, anticipated future cash flows and discount rates, changes in the stock price with regards to CNX, regulatory and legal developments, and other relevant factors.
In connection with the annual evaluation of goodwill for impairment or earlier if an impairment indicator is identified, CNX may first consider qualitative factors to assess whether there are indicators that it is more likely than not that the fair value of a reporting unit may not exceed its carrying amount. If after assessing such factors or circumstances, CNX determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then a quantitative assessment is not required. If CNX chooses to bypass the qualitative assessment, or if it chooses to perform a qualitative assessment but is unable to qualitatively conclude that no impairment has occurred, then CNX will perform a quantitative assessment. In the case of a quantitative assessment, CNX estimates the fair value of the reporting unit with which the goodwill is associated using level 3 inputs and compares it to the carrying value. If the estimated fair value of a reporting unit is less than its carrying value, an impairment charge is recognized for the excess of the reporting unit's carrying value over its fair value. The Company uses a combination of the income approach (generally a discounted cash flow method) and market approach (which may include the guideline public company method and/or the guideline transaction method) to estimate the fair value of a reporting unit.
The income approach is used to estimate value based on the present value of future economic benefits that are expected to be produced by an asset or business entity. This approach generally involves two general steps:
(i) The first step involves establishing a forecast of the estimated future net cash flows expected to accrue directly or indirectly to the owner of the asset over its remaining useful life or to the owner of the business entity (including a
reporting unit).
(ii) The second step involves discounting these estimated future net cash flows to their present value using a market rate of return.
CNX determined the fair value based on estimated future revenues and earnings before deducting net interest expense (interest expense less interest income) and income taxes (EBITDA - a non-GAAP financial measure), and also included estimates for capital expenditures, discounted to present value using an industry rate adjusted for company-specific risk, which management feels reflects the overall level of inherent risk of the reporting unit. These assumptions are affected by expectations about future market, industry and economic conditions. Cash flow projections were derived from board approved budgeted amounts, a seven-year operating forecast and an estimate of future cash flows. Subsequent cash flows were developed using growth or contraction rates that management believes are reasonably likely to occur.
The estimates of future cash flows and EBITDA are subjective in nature and are subject to impacts from business risks as described in Item 1A. Risk Factors of this Form 10-K. The fair value estimation process requires considerable judgment and determining the fair value is sensitive to changes in assumptions impacting management’s estimates of future financial results. Although CNX believes the estimates and assumptions used in estimating the fair value are reasonable and appropriate, different assumptions and estimates could materially impact the estimated fair value. Future results could differ from our current estimates and assumptions.
In connection with CNX's assessment of goodwill in the first quarter of 2020 in relation to the deteriorating macroeconomic conditions, and the decline in the observable market value of CNXM securities both in relation to the COVID-19 pandemic and the overall decline in the master limited partnership (MLP) market space, an impairment indicator was identified. CNX bypassed the qualitative assessment and performed a quantitative test that utilized a combination of the income and market approaches to estimate the fair value of the Midstream reporting unit. As a result of this assessment, CNX concluded that the carrying value exceed its estimated fair value, and as a result, an impairment of $473,045 was included in Impairment of Goodwill in the Consolidated Statements of Income.
In connection with our annual assessment of goodwill in the fourth quarter of 2020, we bypassed the qualitative assessment and performed a quantitative test that utilized a combination of the income and market approaches to estimate the fair value of the Midstream reporting unit. As a result of this assessment, we concluded that the estimated fair value exceeded carrying value, and accordingly no adjustment to goodwill was necessary. However, the margin by which the fair value of the Midstream reporting unit exceeded its carrying value was less than 10%. As a result, this reporting unit is susceptible to impairment risk from further adverse macroeconomic conditions or other adverse factors such as future gathering volumes being less than those currently estimated. Any such adverse changes in the future could reduce the underlying cash flows used to estimate fair values and could result in a decline in fair value that could trigger future impairment charges relating to the Midstream reporting unit.
Impairment of Definite-Lived Intangible Assets:
Definite-lived intangible assets are amortized on a straight-line basis over their estimated economic lives and they are reviewed for impairment when indicators of impairment are present.
In connection with the Midstream Acquisition (See Note 4 - Acquisitions and Dispositions for more information), CNX recorded $128,781 of other intangible assets, which are comprised of customer relationships, through the application of purchase accounting.
In May 2018, CNX determined that the carrying value of a portion of the customer relationship intangible assets that were acquired in connection with the Midstream acquisition exceeded their fair value in conjunction with the Asset Exchange Agreement with HG Energy II Appalachia, LLC (See Note 4 - Acquisitions and Dispositions for more information). CNX recognized an impairment on this intangible asset of $18,650, which is included in Impairment of Other Intangible Assets in the Consolidated Statements of Income.
The customer relationships intangible asset is amortized on a straight-line basis over approximately 17 years.
Income Taxes:
Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. The provision for income taxes represents income taxes paid or
payable for the current year and the change in deferred taxes, excluding the effects of acquisitions during the year. Deferred taxes result from differences between the financial and tax bases of the Company's assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a deferred tax benefit will not be realized.
CNX evaluates all tax positions taken on the state and federal tax filings to determine if the position is more likely than not to be sustained upon examination. For positions that do not meet the more likely than not to be sustained criteria, the Company determines, on a cumulative probability basis, the largest amount of benefit that is more likely than not to be realized upon ultimate settlement. A previously recognized tax position is reversed when it is subsequently determined that a tax position no longer meets the more likely than not threshold to be sustained. The evaluation of the sustainability of a tax position and the probable amount that is more likely than not is based on judgment, historical experience and on various other assumptions that the Company believes are reasonable under the circumstances. The results of these estimates, that are not readily apparent from other sources, form the basis for recognizing an uncertain tax position liability. Actual results could differ from those estimates upon subsequent resolution of identified matters.
Asset Retirement Obligations:
CNX accrues for dismantling and removing costs of gas-related facilities and related surface reclamation using the accounting treatment prescribed by the Asset Retirement and Environmental Obligations Topic of the FASB Accounting Standards Codification. This topic requires the fair value of an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. Estimates are regularly reviewed by management and are revised for changes in future estimated costs and regulatory requirements. The present value of the estimated asset retirement costs is capitalized as part of the carrying amount of the long-lived asset. Amortization of the capitalized asset retirement cost is generally determined on a units-of-production basis. Accretion of the asset retirement obligation is recognized over time and generally will escalate over the life of the producing asset, typically as production declines. Accretion is included in Depreciation, Depletion and Amortization in the Consolidated Statements of Income.
Investment Plan:
CNX has an investment plan that is available to most employees. Throughout the years ended December 31, 2020, 2019 and 2018, the Company's matching contribution was 6% of eligible compensation contributed by eligible employees. The Company may also make discretionary contributions to the Plan ranging from 1% to 6% of eligible compensation for eligible employees (as defined by the Plan). There were no such discretionary contributions made by CNX for the years ended December 31, 2020, 2019 and 2018. Total matching contribution payments and costs were $2,976, $3,460 and $3,205 for the years ended December 31, 2020, 2019 and 2018, respectively.
Revenue Recognition:
Revenues are recognized when the recognition criteria of ASC 606 are met, which generally occurs at the point in which title passes to the customers. For natural gas, NGL and oil revenue, this occurs at the contractual point of delivery. For revenues generated from natural gas gathering services provided to third-parties, this occurs when obligations under the terms of the contract with the shipper are satisfied.
CNX sells natural gas to accommodate the delivery points of its customers. In general, this gas is purchased at market price and re-sold on the same day at market price less a small transaction fee. These matching buy/sell transactions include a legal right of offset of obligations and have been simultaneously entered into with the counterparty. These transactions qualify for netting under the Nonmonetary Transactions Topic of the FASB Accounting Standards Codification and are, therefore, recorded net within the Consolidated Statements of Income in the Purchased Gas Revenue line.
CNX purchases natural gas produced by third-parties at market prices less a fee. The gas purchased from third-parties is then resold to end users or gas marketers at current market prices. These revenues and expenses are recorded gross as Purchased Gas Revenue and Purchase Gas Costs, respectively, in the Consolidated Statements of Income. Purchased gas revenue is recognized when title passes to the customer. Purchased gas costs are recognized when title passes to CNX from the third-party.
Contingencies:
From time to time, CNX, or its subsidiaries, are subject to various lawsuits and claims with respect to such matters as personal injury, wrongful death, damage to property, exposure to hazardous substances, governmental regulations (including environmental remediation), employment and contract disputes and other claims and actions, arising out of the normal course of
business. Liabilities are recorded when it is probable that obligations have been incurred and the amounts can be reasonably estimated. Estimates are developed through consultation with legal counsel involved in the defense of these matters and are based upon the nature of the lawsuit, progress of the case in court, view of legal counsel, prior experience in similar matters and management's intended response. Environmental liabilities are not discounted or reduced by possible recoveries from third-parties. Legal fees associated with defending these various lawsuits and claims are expensed when incurred.
Stock-Based Compensation:
Stock-based compensation expense for all stock-based compensation awards is based on the grant date fair value estimated in accordance with the provisions of the Stock Compensation Topic of the FASB Accounting Standards Codification. CNX recognizes these compensation costs on a straight-line basis over the requisite service period of the award, which is generally the award's vesting term. See Note 15 - Stock-Based Compensation for more information.
Derivative Instruments:
CNX enters into interest rate swap agreements to manage its exposure to interest rate volatility. These swaps change the variable-rate cash flow exposure on the debt obligations to fixed cash flows. The change in fair value of the interest rate swap agreements are accounted for on a mark-to-market basis with the changes in fair value recorded in current period earnings.
CNX enters into financial derivative instruments to manage its exposure to commodity price volatility. Natural gas commodity hedges are accounted for on a mark-to-market basis with changes in fair value recorded in current period earnings.
None of the Company's counterparty master agreements currently require CNX to post collateral for any of its positions. However, as stated in the counterparty master agreements, if CNX's obligations with any of its counterparties cease to be secured on the same basis as similar obligations with the other lenders under the credit facility, CNX would be required to post collateral for instruments in a liability position in excess of defined thresholds. All of the Company's derivative instruments are subject to master netting arrangements with the counterparties. CNX recognizes all financial derivative instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets on a gross basis, generally measured based upon Level 2 inputs, which is further described in Note 18 - Fair Value of Financial Instruments.
Each of the Company's counterparty master agreements allows, in the event of default, the ability to elect early termination of outstanding contracts. If early termination is elected, CNX and the applicable counterparty would net settle all open hedge positions.
CNX is exposed to credit risk in the event of non-performance by counterparties, whose creditworthiness is subject to continuing review. Historically, CNX has not experienced any issues of non-performance by derivative counterparties.
Recent Accounting Pronouncements:
In August 2020, the FASB issued Accounting Standards Update (ASU) 2020-06 - Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. This ASU simplifies an entity's accounting for convertible instruments by eliminating two of the three models in ASC 470-20 that require separate accounting for embedded conversion features, simplifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification, requires entities to use the if-converted method for all convertible instruments in the diluted EPS calculation and include the effect of potential share settlement (if the effect is more dilutive) for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards, requires new disclosures about events that occur during the reporting period and cause conversion contingencies to be met and about the fair value of an entity's convertible debt at the instrument level, among other things. The amendments in this ASU are effective for public entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, and can be adopted through either a modified retrospective method of transition or a fully retrospective method of transition. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is still evaluating the effect of adopting this guidance.
In March 2020, the FASB issued ASU 2020-04 - Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848). This ASU provides optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates (IBORs) and, particularly, the risk of cessation of the London Interbank Offered Rate (LIBOR), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based
and less susceptible to manipulation. The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. In January 2021, the FASB issued ASU 2021-01, which clarifies that certain provisions in Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The amendments in these ASUs are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is still evaluating the effect of adopting this guidance.
In March 2020, the FASB issued ASU 2020-03 - Codification Improvements to Financial Instruments. This ASU improves and clarifies various financial instruments topics, including the CECL standard. The ASU includes seven different issues that describe the areas of improvement and the related amendments to GAAP, intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications. The amendments in this ASU have different effective dates. The adoption of this guidance is not expected to have a material impact on the Company's financial statements.
Reclassifications:
Certain amounts in prior periods have been reclassified to conform with the report classifications of the year ended December 31, 2020, with no effect on previously reported net income, stockholders' equity, or statement of cash flows.
Subsequent Events:
The Company has evaluated all subsequent events through the date the financial statements were issued. No material recognized or non-recognizable subsequent events were identified.
NOTE 2—EARNINGS PER SHARE:
Basic earnings per share is computed by dividing net income attributable to CNX shareholders by the weighted average shares outstanding during the reporting period. Diluted earnings per share is computed similarly to basic earnings per share, except that the weighted average shares outstanding are increased to include, if dilutive, additional shares from stock options, performance stock options, restricted stock units, performance share units and shares issuable upon conversion of CNX's outstanding Convertible Notes (See Note 12 - Long-Term Debt). The number of additional shares is calculated by assuming that outstanding stock options and performance share options were exercised, that outstanding restricted stock units and performance share units were released, and that the proceeds from such activities were used to acquire shares of common stock at the average market price during the reporting period.
Pursuant to the Merger (See Note 4 - Acquisitions and Dispositions for more information), all outstanding phantom units previously granted under the CNXM long-term incentive plan were converted into the right to receive 0.88 shares of common stock of CNX. As such, all outstanding phantom units were converted, effective as of the closing of the Merger, into CNX restricted stock units. Each CNX restricted stock unit will be subject to the same vesting, forfeiture and other terms and conditions applicable to the converted CNXM phantom units. Under Accounting Standards Codification Topic 718, Compensation - Stock Compensation, it was determined that there was no additional compensation cost to record as the conversion of awards did not result in incremental fair value. CNXM's dilutive units did not have a material impact on the Company's earnings per share calculations for the period from January 1, 2020 through September 30, 2020, the year ended December 31, 2019, or the period from January 3, 2018 through December 31, 2018.
The table below sets forth the share-based awards that have been excluded from the computation of diluted earnings per share because their effect would be antidilutive:
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For the Years Ended December 31,
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2020
|
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2019
|
|
2018
|
Anti-Dilutive Options
|
4,200,509
|
|
|
4,696,264
|
|
|
2,285,775
|
|
Anti-Dilutive Restricted Stock Units
|
2,160,727
|
|
|
1,282,582
|
|
|
—
|
|
Anti-Dilutive Performance Share Units
|
721,244
|
|
|
752,899
|
|
|
145,217
|
|
Anti-Dilutive Performance Share Options
|
—
|
|
|
927,268
|
|
|
927,268
|
|
|
7,082,480
|
|
|
7,659,013
|
|
|
3,358,260
|
|
The Company expects to settle the principal amount of the Convertible Notes in cash. As a result, only the amount by which the conversion value exceeds the aggregated principal amount of the Convertible Notes is included in the diluted
earnings per share computation under the treasury stock method. The conversion spread has a dilutive impact on diluted earnings per share when the average market price of the Company’s common stock for a given period exceeds the initial conversion price of $12.84 per share for the Convertible Notes. As of December 31, 2020, the if-converted value of the Convertible Notes did not exceed the outstanding principal amount. In connection with the Convertible Notes’ issuance, the Company entered into privately negotiated capped call transactions with certain counterparties, (the “Capped Calls” and “Capped Call Transactions”), which were not included in calculating the number of diluted shares outstanding, as their effect would have been anti-dilutive.
The computations for basic and diluted (loss) earnings per share are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Net (Loss) Income
|
$
|
(428,744)
|
|
|
$
|
31,948
|
|
|
$
|
883,111
|
|
Less: Net Income Attributable to Non-Controlling Interest
|
55,031
|
|
|
112,678
|
|
|
86,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Income Attributable to CNX Resources Shareholders
|
$
|
(483,775)
|
|
|
$
|
(80,730)
|
|
|
$
|
796,533
|
|
|
|
|
|
|
|
Weighted-Average Shares of Common Stock Outstanding
|
199,225,441
|
|
|
190,727,122
|
|
|
212,348,581
|
|
Effect of Diluted Shares*
|
—
|
|
|
—
|
|
|
2,280,384
|
|
Weighted-Average Diluted Shares of Common Stock Outstanding
|
199,225,441
|
|
|
190,727,122
|
|
|
214,628,965
|
|
|
|
|
|
|
|
(Loss) Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(2.43)
|
|
|
$
|
(0.42)
|
|
|
$
|
3.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
$
|
(2.43)
|
|
|
$
|
(0.42)
|
|
|
$
|
3.71
|
|
*During periods in which the Company incurs a net loss, diluted weighted average shares outstanding are equal to basic weighted average shares outstanding because the effect of all equity awards is antidilutive.
Shares of common stock outstanding were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Balance, Beginning of Year
|
186,642,962
|
|
|
198,663,342
|
|
|
223,743,322
|
|
Issuance Related to Stock-Based Compensation (1)
|
882,335
|
|
|
909,107
|
|
|
814,344
|
|
Retirement of Common Stock (2)
|
(4,138,527)
|
|
|
(12,929,487)
|
|
|
(25,894,324)
|
|
Issuance Related to CNXM Merger
|
37,054,223
|
|
|
—
|
|
|
—
|
|
Balance, End of Year
|
220,440,993
|
|
|
186,642,962
|
|
|
198,663,342
|
|
(1) See Note 15 - Stock-Based Compensation for additional information.
(2) See Note 5 - Stock Repurchase for additional information.
NOTE 3—REVENUE FROM CONTRACTS WITH CUSTOMERS:
Revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company has elected to exclude all taxes from the measurement of transaction price.
For natural gas, NGL and oil, and purchased gas revenue, the Company generally considers the delivery of each unit (MMBtu or Bbl) to be a separate performance obligation that is satisfied upon delivery. Payment terms for these contracts typically require payment within 25 days of the end of the calendar month in which the hydrocarbons are delivered. A significant number of these contracts contain variable consideration because the payment terms refer to market prices at future delivery dates. In these situations, the Company has not identified a standalone selling price because the terms of the variable payments relate specifically to the Company’s efforts to satisfy the performance obligations. A portion of the contracts contain fixed consideration (i.e. fixed price contracts or contracts with a fixed differential to NYMEX or index prices). The fixed consideration is allocated to each performance obligation on a relative standalone selling price basis, which requires judgment from management. For these contracts, the Company generally concludes that the fixed price or fixed differentials in the contracts are representative of the standalone selling price. Revenue associated with natural gas, NGL and oil as presented on the accompanying Consolidated Statements of Income represent the Company’s share of revenues net of royalties and
excluding revenue interests owned by others. When selling natural gas, NGL and oil on behalf of royalty owners or working interest owners, the Company is acting as an agent and thus reports the revenue on a net basis.
Included in Other Revenue and Operating Income in the Consolidated Statements of Income and in the below table are revenues generated from natural gas gathering services provided to third-parties. The gas gathering services are interruptible in nature and include charges for the volume of gas actually gathered and do not guarantee access to the system. Volumetric based fees are based on actual volumes gathered. The Company generally considers the interruptible gathering of each unit (MMBtu) of natural gas as a separate performance obligation. Payment terms for these contracts typically require payment within 25 days of the end of the calendar month in which the hydrocarbons are gathered.
Disaggregation of Revenue
The following table is a disaggregation of revenue by major source:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
2020
|
|
2019
|
|
2018
|
Revenue from Contracts with Customers:
|
|
|
|
|
|
Natural Gas Revenue
|
$
|
823,132
|
|
|
$
|
1,251,013
|
|
|
$
|
1,391,459
|
|
NGL Revenue
|
64,138
|
|
|
104,139
|
|
|
165,883
|
|
Oil/Condensate Revenue
|
9,475
|
|
|
9,173
|
|
|
20,595
|
|
Total Natural Gas, NGL and Oil Revenue
|
896,745
|
|
|
1,364,325
|
|
|
1,577,937
|
|
|
|
|
|
|
|
Purchased Gas Revenue
|
105,792
|
|
|
94,027
|
|
|
65,986
|
|
|
|
|
|
|
|
Other Sources of Revenue and Other Operating Income:
|
|
|
|
|
|
Gain (Loss) on Commodity Derivative Instruments
|
172,982
|
|
|
376,105
|
|
|
(30,212)
|
|
Other Revenue and Operating Income
|
82,459
|
|
|
87,992
|
|
|
116,723
|
|
Total Revenue and Other Operating Income
|
$
|
1,257,978
|
|
|
$
|
1,922,449
|
|
|
$
|
1,730,434
|
|
The disaggregated revenue information corresponds with the Company’s segment reporting found in Note 21 - Segment Information.
Contract Balances
CNX invoices its customers once a performance obligation has been satisfied, at which point payment is unconditional. Accordingly, CNX's contracts with customers do not give rise to contract assets or liabilities under ASC 606. The Company has no contract assets recognized from the costs to obtain or fulfill a contract with a customer. The opening and closing balances of the Company’s receivables related to contracts with customers were $133,480 and $145,929, respectively, as of December 31, 2020.
Transaction Price Allocated to Remaining Performance Obligations
ASC 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied. However, the guidance provides certain practical expedients that limit this requirement, including when variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a series.
A significant portion of CNX's natural gas, NGL and oil and purchased gas revenue is short-term in nature with a contract term of one year or less. For those contracts, CNX has utilized the practical expedient in ASC 606-10-50-14 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.
For revenue associated with contract terms greater than one year, a significant portion of the consideration in those contracts is variable in nature and the Company allocates the variable consideration in its contract entirely to each specific performance obligation to which it relates. Therefore, any remaining variable consideration in the transaction price is allocated
entirely to wholly unsatisfied performance obligations. As such, the Company has not disclosed the value of unsatisfied performance obligations pursuant to the practical expedient.
For revenue associated with contract terms greater than one year with a fixed price component, the aggregate amount of the transaction price allocated to remaining performance obligations was $120,275 as of December 31, 2020. The Company expects to recognize net revenue of $55,500 in the next 12 months and $37,151 over the following 12 months, with the remainder recognized thereafter.
For revenue associated with CNX's midstream contracts, which also have terms greater than one year, the interruptible gathering of each unit of natural gas represents a separate performance obligation; therefore, future volumes are wholly unsatisfied, and disclosure of the transaction price allocated to remaining performance obligations is not required.
Prior-Period Performance Obligations
CNX records revenue in the month production is delivered to the purchaser. However, settlement statements for certain natural gas, NGL and oil revenue may not be received for 30 to 90 days after the date production is delivered, and as a result, the Company is required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. CNX records the differences between the estimate and the actual amounts received in the month that payment is received from the purchaser. The Company has existing internal controls for its revenue estimation process and the related accruals, and any identified differences between its revenue estimates and actual revenue received historically have not been significant. For each of the years ended December 31, 2020, 2019, and 2018, revenue recognized in the current reporting period related to performance obligations satisfied in prior a reporting period was not material.
NOTE 4—ACQUISITIONS AND DISPOSITIONS:
On July 26, 2020, CNX entered into an Agreement and Plan of Merger (the “Merger Agreement”) with CNXM, CNX Midstream GP LLC (the “General Partner”) and CNX Resources Holding LLC., a wholly owned subsidiary of CNX (“Merger Sub”), pursuant to which Merger Sub merged with and into CNXM with CNXM surviving as an indirect wholly owned subsidiary of CNX (the “Merger”). On September 28, 2020, the Merger was completed and CNX issued 37,054,223 shares of common stock to acquire the 42,107,071 common units of CNXM not owned by CNX prior to the Merger at a fixed exchange ratio of 0.88 shares of CNX common stock for each CNXM common unit, for total implied consideration of $384,623. As a result of the Merger, CNXM’s common units are no longer publicly traded.
Except for the Class B units of CNXM, which were automatically canceled immediately prior to the effective time of the Merger for no consideration in accordance with CNXM’s partnership agreement, the interests in CNXM owned by CNX and its subsidiaries remain outstanding as limited partner interests in the surviving entity. The General Partner will continue to own the non-economic general partner interest in the surviving entity.
Because CNX controlled CNXM prior to the Merger and continues to control CNXM after the Merger, CNX accounted for the change in its ownership interest in CNXM as an equity transaction which was reflected as a reduction of noncontrolling interest with corresponding increases to common stock and capital in excess of par value. No gain or loss was recognized in its condensed consolidated statements of operations as a result of the Merger.
The tax effects of the Merger were reported as adjustments to deferred income taxes and capital in excess of par value.
Prior to the effective time of the Merger on September 28, 2020, public unitholders held a 46.9% equity interest in CNXM and CNX owned the remaining 53.1% equity interest. The earnings of CNXM that were attributed to its common units held by the public prior to the Merger are reflected in Net Income Attributable to Noncontrolling Interest in the Consolidated Statements of Income. There were no changes in CNX's ownership interest in CNXM during the year ended December 31, 2019. See discussion of Midstream Acquisition below for change in ownership interest during the year ended December 31, 2018.
CNXM’s revolving credit facility (See Note 10 - Revolving Credit Facilities) and the CNXM Senior Notes (See Note 12 - Long-Term Debt) were not impacted by the Merger.
The Company incurred $11,271 of transaction costs directly attributable to the Merger during the year ended December 31, 2020, including financial advisory, legal service and other professional fees, which were recorded to Other Expense (Income) in the Consolidated Statements of Income.
On August 31, 2018, CNX closed on the sale of substantially all of its Ohio Utica Joint Venture Assets in the wet gas Utica Shale areas of Belmont, Guernsey, Harrison, and Noble Counties, which included approximately 26,000 net undeveloped acres. The net cash proceeds of $381,124 are included in Proceeds from Asset Sales in the Consolidated Statements of Cash Flows and the net gain on the transaction of $130,710 is included in Gain on Asset Sales and Abandonments, net in the Consolidated Statements of Income.
On May 2, 2018, CNX closed on an Asset Exchange Agreement (the “AEA”) with HG Energy II Appalachia, LLC (“HG Energy”), pursuant to which, among other things, HG Energy (i) paid to CNX approximately $7,000 and (ii) assigned to CNX certain undeveloped Marcellus and Utica acreage in Southwest Pennsylvania, in exchange for CNX (x) assigning its interest in certain non-core midstream assets and surface acreage to HG Energy and (y) releasing certain HG Energy oil and gas acreage from dedication under a gathering agreement that is partially held, indirectly, by CNX. In connection with the transaction, CNX also agreed to certain transactions with CNXM, including the amendment of the existing gas gathering agreement between CNX and CNXM to increase the existing well commitment by an additional forty wells. The net gain on the sale was $286 and is included in Gain on Asset Sales and Abandonments, net in the Consolidated Statements of Income.
As a result of the AEA, CNX determined that the carrying value of a portion of the customer relationship intangible assets that were acquired in connection with the Midstream Acquisition discussed below (see also Note 9 - Goodwill and Other Intangible Assets) exceeded their fair value, and recognized an impairment of approximately $18,650, which is included in Impairment of Other Intangible Assets in the Consolidated Statements of Income.
On March 30, 2018, CNX Gas completed the sale of substantially all of its shallow oil and gas assets and certain Coalbed Methane (CBM) assets in Pennsylvania and West Virginia for $89,921 in cash consideration. In connection with the sale, the buyer assumed approximately $196,514 of asset retirement obligations. The net gain on the sale was $4,227 and is included in Gain on Asset Sales and Abandonments, net in the Consolidated Statements of Income.
On December 14, 2017, CNX Gas entered into a purchase agreement with Noble, pursuant to which CNX Gas acquired Noble’s 50% membership interest in CNX Gathering for a cash purchase price of $305,000 (the "Midstream Acquisition"). Prior to the Midstream Acquisition, the Company accounted for its 50% interest in CNX Gathering as an equity method investment as the Company had the ability to exercise significant influence, but not control, over the operating and financial policies of the midstream operations. In conjunction with the Midstream Acquisition, the Company obtained a controlling interest in CNX Gathering and, through CNX Gathering's ownership of the general partner, control over the Partnership. Accordingly, the Midstream Acquisition has been accounted for as a business combination using the acquisition method of accounting pursuant to ASC Topic 805, Business Combinations, or ASC 805. ASC 805 requires that, in circumstances where a business combination is achieved in stages (or step acquisition), previously held equity interests are remeasured at fair value and any difference between the fair value and the carrying value of the equity interest held be recognized as a gain or loss on the statement of income.
The fair value assigned to the previously held equity interest in CNX Gathering and CNXM for purposes of calculating the gain or loss was $799,033 and was determined using the income approach, based on a discounted cash flow methodology. The resulting gain on remeasurement to fair value of the previously held equity interest in CNX Gathering and CNXM of $623,663 is included in Gain on Previously Held Equity Interest in the Consolidated Statements of Income.
The fair value of the previously held equity interests was based on inputs that are not observable in the market and therefore represent Level 3 inputs (See Note 18 - Fair Value of Financial Instruments). The fair value was measured using valuation techniques that convert future cash flows into a single discounted amount. Significant inputs to the valuation included estimates of: (i) gathering volumes; (ii) future operating costs; and (iii) a market-based weighted average cost of capital. These inputs required significant judgments and estimates by management.
The fair value of midstream facilities and equipment, generally consisting of pipeline systems and compression stations, were estimated using the cost approach. Significant unobservable inputs in the valuation include management's assumptions about the replacement costs for similar assets, the relative age of the acquired assets and any potential economic or functional obsolescence associated with the acquired assets. As a result, the fair value estimates of the midstream facilities and equipment represents a Level 3 fair value measurement.
As part of the purchase price allocation, the Company identified intangible assets for customer relationships with third-party customers. The fair value of the identified intangible assets was determined using the income approach, which requires a forecast of the expected future cash flows generated and an estimated market-based weighted average cost of capital. Significant unobservable inputs in the valuation include future revenue estimates, future cost assumptions, and estimated
customer retention rates. As a result, the fair value estimate of the identified intangible assets represents a Level 3 fair value measurement.
The noncontrolling interest in the acquired business is comprised of the limited partner units in CNXM, which were not acquired by the Company. At the time of the Midstream Acquisition, the CNXM limited partner units were actively traded on the New York Stock Exchange and were valued based on observable market prices as of the transaction date and therefore represent a Level 1 fair value measurement.
Allocation of Purchase Price (Midstream Acquisition)
The following table summarizes the purchase price and the amounts of identified assets acquired and liabilities assumed based on the fair value as of January 3, 2018, with any excess of the purchase price over the fair value of the identified net assets acquired recorded as goodwill. The purchase price allocation was finalized as of December 31, 2018.
Fair Value of Consideration Transferred:
|
|
|
|
|
|
|
Amount
|
Cash Consideration
|
$
|
305,000
|
|
CNX Gathering Cash on Hand at January 3, 2018 Distributed to Noble
|
2,620
|
|
Fair Value of Previously Held Equity Interest
|
799,033
|
|
Total Estimated Fair Value of Consideration Transferred
|
$
|
1,106,653
|
|
The following is a summary of the fair values of the net assets acquired:
|
|
|
|
|
|
|
Amount
|
Fair Value of Assets Acquired:
|
|
Cash and Cash Equivalents
|
$
|
8,348
|
|
Accounts and Notes Receivable
|
21,199
|
|
Prepaid Expense
|
2,006
|
|
Other Current Assets
|
163
|
|
Property, Plant and Equipment, net
|
1,043,340
|
|
Intangible Assets
|
128,781
|
|
Other
|
593
|
|
Total Assets Acquired
|
1,204,430
|
|
|
|
Fair Value of Liabilities Assumed:
|
|
Accounts Payable
|
26,059
|
|
CNXM Revolving Credit Facility
|
149,500
|
|
Total Liabilities Assumed
|
175,559
|
|
|
|
Total Identifiable Net Assets
|
1,028,871
|
|
Fair Value of Noncontrolling Interest in CNXM
|
(718,577)
|
|
Goodwill
|
796,359
|
|
Net Assets Acquired
|
$
|
1,106,653
|
|
Post-Acquisition Operating Results (Midstream Acquisition)
The Midstream Acquisition contributed the following to the Midstream reporting unit within the Shale segment:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Other Revenue and Operating Income
|
$
|
64,710
|
|
|
$
|
74,314
|
|
|
$
|
89,781
|
|
Earnings Before Income Tax
|
$
|
156,818
|
|
|
$
|
166,654
|
|
|
$
|
133,811
|
|
NOTE 5— STOCK REPURCHASE:
As of December 31, 2020, CNX's Board of Directors had approved $750,000 in stock repurchases since the October 30, 2017 inception of the current stock repurchase program. On January 26, 2021, the Company’s Board of Directors approved an increase in the aggregate amount of the current stock repurchase program plan, to $900,000. This increases the amount available under the current stock repurchase program to $245,000, not subject to an expiration date. The repurchases may be affected from time-to-time through open market purchases, privately negotiated transactions, Rule 10b5-1 plans, accelerated stock repurchases, block trades, derivative contracts or otherwise in compliance with Rule 10b-18. The timing of any repurchases will be based on a number of factors, including available liquidity, the Company's stock price, the Company's financial outlook, and alternative investment options. The stock repurchase program does not obligate the Company to repurchase any dollar amount or number of shares and the Board may modify, suspend, or discontinue its authorization of the program at any time. The Board of Directors will continue to evaluate the size of the stock repurchase program based on CNX's free cash flow position, leverage ratio, and capital plans.
During the year ended December 31, 2020, 4,138,527 shares were repurchased and retired at an average price of $10.43 per share for a total cost of $43,247. During the year ended December 31, 2019, 12,929,487 shares were repurchased and retired at an average price of $8.91 per share for a total cost of $115,477. During the year ended December 31, 2018, 25,894,324 shares were repurchased and retired at an average price of $14.80 per share for a total cost of $383,752.
NOTE 6—INCOME TAXES:
Income tax (benefit) expense provided on earnings consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Current:
|
|
|
|
|
|
U.S. Federal
|
$
|
(55,799)
|
|
|
$
|
(51,243)
|
|
|
$
|
(130,003)
|
|
U.S. State
|
12
|
|
|
(113)
|
|
|
—
|
|
|
|
|
|
|
|
|
(55,787)
|
|
|
(51,356)
|
|
|
(130,003)
|
|
Deferred:
|
|
|
|
|
|
U.S. Federal
|
(83,080)
|
|
|
47,717
|
|
|
319,813
|
|
U.S. State
|
(35,220)
|
|
|
31,375
|
|
|
25,747
|
|
|
|
|
|
|
|
|
(118,300)
|
|
|
79,092
|
|
|
345,560
|
|
|
|
|
|
|
|
Total Income Tax (Benefit) Expense
|
$
|
(174,087)
|
|
|
$
|
27,736
|
|
|
$
|
215,557
|
|
The components of the net deferred taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Deferred Tax Assets:
|
|
|
|
Net Operating Loss- Federal
|
$
|
215,936
|
|
|
$
|
202,913
|
|
Net Operating Loss - State
|
129,641
|
|
|
130,430
|
|
Foreign Tax Credit
|
43,194
|
|
|
43,194
|
|
Operating Lease Right-of-Use Assets
|
28,085
|
|
|
47,849
|
|
Gas Well Closing
|
24,251
|
|
|
17,888
|
|
Salary Retirement
|
11,478
|
|
|
9,236
|
|
Equity Compensation
|
6,639
|
|
|
9,308
|
|
Alternative Minimum Tax
|
—
|
|
|
51,241
|
|
Interest Limitation
|
—
|
|
|
25,734
|
|
Other
|
9,416
|
|
|
10,030
|
|
Total Deferred Tax Assets
|
468,640
|
|
|
547,823
|
|
Valuation Allowance
|
(123,098)
|
|
|
(125,054)
|
|
Net Deferred Tax Assets
|
345,542
|
|
|
422,769
|
|
|
|
|
|
Deferred Tax Liabilities:
|
|
|
|
Property, Plant and Equipment
|
(649,917)
|
|
|
(593,401)
|
|
Investment in Partnership
|
(85,882)
|
|
|
(145,424)
|
|
Gas Derivatives
|
(26,882)
|
|
|
(105,721)
|
|
Operating Lease Liabilities
|
(28,287)
|
|
|
(46,640)
|
|
Discount on Convertible Notes
|
(18,097)
|
|
|
—
|
|
Advance Gas Royalties
|
(2,519)
|
|
|
(3,337)
|
|
Other
|
(211)
|
|
|
(4,354)
|
|
Total Deferred Tax Liabilities
|
(811,795)
|
|
|
(898,877)
|
|
|
|
|
|
Net Deferred Tax Liability
|
$
|
(466,253)
|
|
|
$
|
(476,108)
|
|
Deferred taxes are recorded for certain tax benefits, including net operating losses and tax credit carry-forwards, if management assesses the utilization of those assets to be more likely than not. A valuation allowance is required when it is not more likely than not that all or a portion of a deferred tax asset will be realized. All available evidence, both positive and negative, must be considered in determining the need for a valuation allowance. Positive evidence considered included financial earnings generated over the past three years for certain subsidiaries, reversals of financial to tax temporary differences and the implementation of and/or ability to employ various tax planning strategies. Negative evidence includes financial and tax losses generated in prior periods and the inability to achieve forecasted results for those periods.
As of December 31, 2020, the Company has a deferred tax asset related to federal net operating losses of $215,936, which expire at various times between 2034 and 2039. However, because of the Tax Cuts and Jobs Act (the "TCJA Act") enacted on December 22, 2017 and the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") enacted on March 27, 2020, the anticipated federal net operating losses generated in 2018 - 2020 do not expire but may only offset 80% of taxable income in any tax years beginning after 2020.
The CARES Act, which, among other things; increased the adjusted taxable income limitation for the disallowance of interest expense from 30% to 50% and provided for refunds of any remaining alternative minimum tax (AMT) credits in 2020. The impact of other tax implications of the Act on the financial statements and related disclosures are immaterial.
The TCJA Act repealed the corporate AMT for tax years beginning January 1, 2018 and provides that AMT credits can be utilized to offset current federal taxes owed in tax years 2018 through 2020. In addition, 50% of any unused AMT credits are refundable during these years with any remaining AMT credit carryforward being fully refunded in 2021, which was revised under the CARES Act to 2020. The Company has no deferred tax asset relating to federal AMT credits as of December 31,
2020 compared to $51,241 as of December 31, 2019, a decrease of $51,241 from the prior year that resulted from the refunds received of all remaining outstanding AMT credits.
A valuation allowance on foreign tax credits of $43,194 has also been recorded at December 31, 2020 and 2019. The foreign tax credits expire at various times between 2021 and 2023.
CNX has, on an after federal tax basis, a deferred tax asset related to state operating losses of $129,641 with a related valuation allowance of $79,197 at December 31, 2020. The deferred tax asset related to state operating losses, on an after-tax adjusted basis, was $130,430 with a related valuation allowance of $81,202 at December 31, 2019. A review of positive and negative evidence regarding these state tax benefits concluded that the valuation allowances for various CNX subsidiaries was warranted. These net operating losses (NOLs) expire at various times between 2021 and 2040.
Management will continue to assess the potential for realized deferred tax assets based upon income forecast data and the feasibility of future tax planning strategies and may record adjustments to valuation allowances against deferred tax assets in future periods, as appropriate, that could materially impact net income.
The following is a reconciliation, stated as a percentage of pretax income, of the United States statutory federal income tax rate to CNX's effective tax rate:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
|
Amount
|
|
Percent
|
Statutory U.S. Federal Income Tax Rate
|
$
|
(126,595)
|
|
|
21.0
|
%
|
|
$
|
12,534
|
|
|
21.0
|
%
|
|
$
|
230,721
|
|
|
21.0
|
%
|
Net Effect of State Income Taxes
|
(32,336)
|
|
|
5.5
|
|
|
1,333
|
|
|
2.2
|
|
|
60,814
|
|
|
5.6
|
|
Non-Controlling Interest
|
(11,556)
|
|
|
1.9
|
|
|
(23,662)
|
|
|
(39.6)
|
|
|
(18,181)
|
|
|
(1.7)
|
|
Uncertain Tax Positions
|
375
|
|
|
(0.1)
|
|
|
—
|
|
|
—
|
|
|
(4,265)
|
|
|
(0.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrual to Tax Return Reconciliation
|
13
|
|
|
—
|
|
|
603
|
|
|
1.0
|
|
|
3,028
|
|
|
0.3
|
|
Effect of Equity Compensation
|
4,311
|
|
|
(0.7)
|
|
|
8,771
|
|
|
14.7
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of Change in State Valuation Allowance
|
(2,004)
|
|
|
0.3
|
|
|
33,238
|
|
|
55.6
|
|
|
(22,684)
|
|
|
(2.1)
|
|
Effect of Change in Federal Valuation Allowance
|
48
|
|
|
—
|
|
|
(2,640)
|
|
|
(4.4)
|
|
|
(18,110)
|
|
|
(1.7)
|
|
Other Deferred Adjustments
|
1,166
|
|
|
(0.2)
|
|
|
(1,691)
|
|
|
(2.8)
|
|
|
5,957
|
|
|
0.6
|
|
Effect of Federal and State Rate Reductions
|
(1,450)
|
|
|
0.2
|
|
|
(3,842)
|
|
|
(6.4)
|
|
|
(27,429)
|
|
|
(2.5)
|
|
Effect of Federal Tax Credits
|
(6,284)
|
|
|
1.0
|
|
|
2,881
|
|
|
4.8
|
|
|
1,208
|
|
|
0.1
|
|
Other
|
225
|
|
|
—
|
|
|
211
|
|
|
0.4
|
|
|
4,498
|
|
|
0.4
|
|
Income Tax (Benefit) Expense / Effective Rate
|
$
|
(174,087)
|
|
|
28.9
|
%
|
|
$
|
27,736
|
|
|
46.5
|
%
|
|
$
|
215,557
|
|
|
19.6
|
%
|
The effective tax rate for the year ended December 31, 2020 was higher than the U.S. federal statutory rate primarily due to state taxes, equity compensation, and the decrease in certain state valuation allowances as a result of the Merger transaction with CNXM partially offset by the benefit from non-controlling interest.
The effective tax rate for the year ended December 31, 2019 was higher than the U.S. federal statutory rate primarily due to state taxes, equity compensation, and the increase in certain state valuation allowances as a result of the higher than projected net operating loss generated in 2018 partially offset by the benefit from non-controlling interest.
As a result of the Midstream Acquisition on January 3, 2018 as discussed in Note 4 - Acquisitions and Dispositions, the Company obtained a controlling interest in CNX Gathering LLC and, through CNX Gathering's ownership of the general partner, control over CNXM. The financial results for 2018 through 2020 reflect full consolidation of CNXM’s assets and liabilities. The effective tax rates for the years ended December 31, 2019 and 2018 reflect a $23,662 and $18,181 reduction in income tax expense, respectively, due to the non-controlling interest in CNXM’s earnings.
The effective tax rate for the year ended December 31, 2018 was lower than the U.S. federal statutory rate primarily due to the effect of the filing of a Federal NOL carryback for 2017 and 2016 resulting in a financial statement benefit of $23,483 through the realization of the Federal NOLs at a 35% tax rate as a carryback versus the current 21% tax rate as a carryforward, the reversal of the AMT credit sequestration valuation allowance, and the release of certain state valuation allowances as a result of a corporate reorganization during the year. The federal NOL carryback claims for 2016 and 2017 were subject to a review by the IRS and the Joint Committee on Taxation which has since been completed.
The TCJA Act, which, among other things, lowered the U.S. Federal corporate income tax rate from 35% to 21%, repealed the corporate AMT for tax years beginning January 1, 2018, and provided for a refund of previously accrued AMT credits. The Company's effective tax rate for 2018 reflects the release of previously recorded valuation allowances against AMT credit carry-forwards of $12,413, as those credits were able to be monetized under the TCJA Act.
In December 2019, the FASB issued ASU 2019-12 - Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740), which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. This ASU removes the following exceptions: (1) exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items; (2) exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; (3) exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and (4) exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments in this ASU also improve consistency and simplify other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this ASU were applied using different approaches depending on what the specific amendment relates to and, for public entities, are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company early adopted ASU 2019-12 as of January 1, 2020.
A reconciliation of the beginning and ending gross amounts of unrecognized tax benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended
|
|
December 31,
|
|
2020
|
|
2019
|
Balance at Beginning of Period
|
$
|
31,516
|
|
|
$
|
31,516
|
|
|
|
|
|
Increase in Unrecognized Tax Benefits Resulting from Tax Positions Taken During Prior Periods
|
1,726
|
|
|
—
|
|
Reduction in Unrecognized Tax Benefits Because of the Lapse of the Applicable Statute of Limitations
|
(1,351)
|
|
|
—
|
|
|
|
|
|
Balance at End of Period
|
$
|
31,891
|
|
|
$
|
31,516
|
|
If these unrecognized tax benefits were recognized, $31,891 and $31,516 would affect CNX's effective income tax rate for 2020 and 2019, respectively.
In 2020, CNX recognized an increase in unrecognized tax benefits of $1,726 for tax benefits resulting from a tax position taken on our 2019 federal tax return for additional tax credits. CNX recognized a reduction to unrecognized tax benefits of $1,351 due to the expiration of the statute of limitations from a position taken on a previously filed federal income tax return.
CNX recognizes accrued interest related to unrecognized tax benefits in its interest expense. As of December 31, 2020 and 2019, the Company reported no accrued liability relating to uncertain tax positions in Other Liabilities in the Consolidated Balance Sheets. During the years ended December 31, 2020 and 2019, CNX paid no interest related to income tax deficiencies.
CNX recognizes penalties accrued related to uncertain tax positions in its income tax expense. CNX had no accrued liabilities for tax penalties as of December 31, 2020 and 2019.
CNX and its subsidiaries file federal income tax returns with the United States and income tax returns within various states. With few exceptions, the Company is no longer subject to United States federal, state, local or non-U.S. income tax examinations by tax authorities for the years before 2018.
NOTE 7—ASSET RETIREMENT OBLIGATIONS:
The reconciliation of changes in asset retirement obligations is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
Balance, Beginning of Year
|
|
$
|
68,454
|
|
|
$
|
38,554
|
|
Obligations Divested
|
|
(703)
|
|
|
—
|
|
Accretion Expense
|
|
11,067
|
|
|
9,458
|
|
Obligations Incurred
|
|
2,806
|
|
|
2,933
|
|
Obligations Settled
|
|
(7,905)
|
|
|
(4,231)
|
|
Revisions in Estimated Cash Flows
|
|
19,449
|
|
|
21,740
|
|
Balance, End of Year
|
|
$
|
93,168
|
|
|
$
|
68,454
|
|
NOTE 8—PROPERTY, PLANT AND EQUIPMENT:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
Property, Plant and Equipment
|
2020
|
|
2019
|
Intangible Drilling Cost
|
$
|
4,965,252
|
|
|
$
|
4,688,497
|
|
Gas Gathering Equipment
|
2,510,917
|
|
|
2,463,866
|
|
Proved Gas Properties
|
1,253,094
|
|
|
1,208,046
|
|
Gas Wells and Related Equipment
|
1,120,061
|
|
|
1,042,000
|
|
Unproved Gas Properties
|
725,705
|
|
|
755,590
|
|
Surface Land and Other Equipment
|
199,322
|
|
|
226,285
|
|
Other
|
189,645
|
|
|
187,722
|
|
|
|
|
|
Total Property, Plant and Equipment
|
10,963,996
|
|
|
10,572,006
|
|
Less: Accumulated Depreciation, Depletion and Amortization
|
3,938,451
|
|
|
3,435,431
|
|
Total Property, Plant and Equipment - Net
|
$
|
7,025,545
|
|
|
$
|
7,136,575
|
|
|
|
|
|
During the years ended December 31, 2020 and 2019, the Company capitalized $1,328 and $5,482, respectively, of interest on Gas Gathering Equipment under construction.
Amounts below reflect properties where drilling operations have not yet commenced and therefore, were not being amortized for the years ended December 31, 2020 and 2019, respectively. These assets will be amortized using the units-of-production method and reclassified to proved gas properties when placed in service.
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Unproved Gas Properties
|
$
|
725,705
|
|
|
$
|
755,590
|
|
Advance Royalties
|
9,676
|
|
|
12,770
|
|
Total
|
$
|
735,381
|
|
|
$
|
768,360
|
|
NOTE 9—GOODWILL AND OTHER INTANGIBLE ASSETS:
In connection with the Midstream Acquisition that closed on January 3, 2018 (see Note 4 - Acquisitions and Dispositions for more information), CNX recorded $796,359 of goodwill and $128,781 of other intangible assets which are comprised of customer relationships.
Impairment of Goodwill
All goodwill is attributed to the Midstream reporting unit within the Shale segment. Goodwill is evaluated for impairment at least annually and whenever events or changes in circumstance indicate that the fair value of a reporting unit is less than its carrying amount. In connection with the evaluation of goodwill for impairment, CNX may first consider qualitative factors to assess whether there are indicators that it is more likely than not that the fair value of a reporting unit may not exceed its
carrying amount. If after assessing such factors or circumstances, CNX determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then a quantitative assessment is not required. If CNX chooses to bypass the qualitative assessment, or if it chooses to perform a qualitative assessment but is unable to qualitatively conclude that no impairment has occurred, then CNX will perform a quantitative assessment. If the estimated fair value of a reporting unit is less than its carrying value, an impairment charge is recognized for the excess of the reporting unit's carrying value over its fair value. The Company uses a combination of the income approach (generally a discounted cash flow method) and market approach (which may include the guideline public company method and/or the guideline transaction method) to estimate the fair value of a reporting unit.
In estimating the fair value of the Midstream reporting unit, the Company used the income approach’s discounted cash flow method, which applies significant inputs not observable in the public market (Level 3), including estimates and assumptions related to the use of an appropriate discount rate, future throughput volumes, operating costs and capital spending, discounted to present value using an industry rate adjusted for company-specific risk, which management feels reflects the overall level of inherent risk of the reporting unit. These assumptions are affected by expectations about future market, industry and economic conditions. Cash flow projections were derived from board approved budgeted amounts, a seven-year operating forecast and an estimate of future cash flows. Subsequent cash flows were developed using growth or contraction rates that management believes are reasonably likely to occur. The Company used the market approach’s comparable company method. The comparable company method evaluates the value of a company using metrics of other businesses of similar size and industry.
During the first quarter of 2020, the Company identified indicators of impairment in the form of deteriorating macroeconomic conditions, and the decline in the observable market value of CNXM securities both in relation to the COVID-19 pandemic and the overall decline in the MLP market space. Management concluded that these factors presented indications that the fair value of the Midstream reporting unit was more likely than not below the reporting unit’s carrying value. CNX bypassed the qualitative assessment and performed a quantitative test that utilized a combination of the income and market approaches as described above to estimate the fair value of the Midstream reporting unit. As a result of this assessment, CNX concluded that the carrying value exceeded its estimated fair value, and a corresponding impairment of $473,045 was recorded, which was included in Impairment of Goodwill in the accompanying Consolidated Statements of Income.
In connection with our annual assessment of goodwill in the fourth quarter of 2020, we bypassed the qualitative assessment and performed a quantitative test that utilized a combination of the income and market approaches to estimate the fair value of the Midstream reporting unit. As a result of this assessment, we concluded that the estimated fair value exceeded carrying value, and accordingly no adjustment to goodwill was necessary. However, the margin by which the fair value of the Midstream reporting unit exceeded its carrying value was less than 10%. As a result, this reporting unit is susceptible to impairment risk from further adverse macroeconomic conditions or other adverse factors such as future gathering volumes being less than those currently estimated. Any additional adverse changes in the future could reduce the underlying cash flows used to estimate fair values and could result in a decline in fair value that could trigger future impairment charges.
The estimates of future cash flows are subjective in nature and are subject to impacts from business risks as described in “Item 1A. Risk Factors”. The fair value estimation process requires considerable judgment and determining the fair value is sensitive to changes in assumptions impacting management’s estimates of future financial results. Although CNX believes the estimates and assumptions used in estimating the fair value are reasonable and appropriate, different assumptions and estimates could materially impact the estimated fair value. Future results could differ from our current estimates and assumptions.
Changes in the carrying amount of goodwill consist of the following activity:
|
|
|
|
|
|
|
Amount
|
December 31, 2019
|
$
|
796,359
|
|
Impairment
|
473,045
|
|
December 31, 2020
|
$
|
323,314
|
|
Other Intangible Assets
The carrying amount and accumulated amortization of other intangible assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Other Intangible Assets:
|
|
|
|
Gross Amortizable Asset - Customer Relationships
|
$
|
109,752
|
|
|
$
|
109,752
|
|
Less: Accumulated Amortization - Customer Relationships
|
19,657
|
|
|
13,105
|
|
Total Other Intangible Assets, net
|
$
|
90,095
|
|
|
$
|
96,647
|
|
During the year ended December 31, 2018, CNX determined that the carrying value of a portion of the customer relationship intangible assets exceeded their fair value as a result of the AEA with HG Energy. Accordingly, CNX recognized an impairment on this intangible asset of $18,650. There were no such impairments during the years ended December 31, 2020 and 2019.
The customer relationship intangible asset is being amortized on a straight-line basis over approximately 17 years. Amortization expense related to other intangible assets was $6,552 for each of the years ended December 31, 2020 and 2019, and $6,931 for the year ended December 31, 2018. The estimated annual amortization expense is expected to approximate $6,552 per year for each of the next five years.
NOTE 10—REVOLVING CREDIT FACILITIES:
CNX
In April 2019, CNX amended its senior revolving credit facility ("Credit Facility") and extended its maturity to April 2024. The lenders' commitments remained unchanged at $2,100,000, with an accordion feature that allows the Company to increase commitments to $3,000,000. In addition, the cumulative credit basket for dividends and distributions was replaced with a basket for dividends and distributions subject to a pro forma net leverage ratio of at least 3.00 to 1.00 and availability under the Credit Facility of at least 15% of the aggregate commitments. In April 2020, as part of the semi-annual borrowing base redetermination, both the lenders' commitments and borrowing base decreased to $1,900,000, and the $650,000 letters of credit aggregate sub-limit remained unchanged. The amount of cash on hand that CNX may have is also limited to $150,000 when loans under the credit agreement are outstanding, subject to certain exceptions. In October 2020, as part of the semi-annual borrowing base redetermination, the lenders reaffirmed CNX's $1,900,000 borrowing base. In November 2020, as part of the issuance of the $500,000 of 6.00% Senior Notes due January 2029 (See Note 12 - Long-Term Debt), both the lenders' commitments and borrowing base decreased to $1,775,000.
The CNX Credit Facility is secured by substantially all of the assets of CNX and certain of its subsidiaries (excluding the certain excluded subsidiaries, which includes Cardinal States Gathering LLC, CNX Midstream GP LLC and CNXM, and their respective subsidiaries).
Under the terms of the agreement, borrowings under the revolving credit facility will bear interest at CNX's option at either:
•the base rate, which is the highest of (i) the federal funds open rate plus 0.50%, (ii) PNC Bank, N.A.’s prime rate, or (iii) the one-month LIBOR rate plus 1.0%, in each case, plus a margin ranging from 0.75% to 1.75%; or
•the LIBOR rate, which is the LIBOR rate plus a margin ranging from 1.75% to 2.75%.
The CNX Credit Facility contains a number of affirmative and negative covenants including those that, except in certain circumstances, limit the Company and the subsidiary guarantors' ability to create, incur, assume or suffer to exist indebtedness, create or permit to exist liens on properties, dispose of assets, make investments, purchase or redeem CNX common stock, pay dividends, merge with another corporation and amend the senior unsecured notes. The Company must also mortgage 85% of the value of its proved reserves and 85% of the value of its proved developed producing reserves, in each case, which are included in the borrowing base, maintain applicable deposit, securities and commodities accounts with the lenders or affiliates thereof, and enter into control agreements with respect to such applicable accounts.
The CNX Credit Facility contains customary events of default, including, but not limited to, a cross-default to certain other debt, breaches of representations and warranties, change of control events and breaches of covenants.
The CNX Credit Facility also requires that CNX maintain a maximum net leverage ratio of no greater than 4.00 to 1.00, which is calculated as the ratio of debt less cash on hand to consolidated EBITDA, measured quarterly. CNX must also maintain a minimum current ratio of no less than 1.00 to 1.00, which is calculated as the ratio of current assets, plus revolver availability, to current liabilities, excluding borrowings under the revolver, measured quarterly. The calculation of all of the ratios exclude CNXM. CNX was in compliance with all financial covenants as of December 31, 2020.
At December 31, 2020, the CNX Credit Facility had $160,800 of borrowings outstanding and $185,272 of letters of credit outstanding, leaving $1,428,928 of unused capacity. At December 31, 2019, the CNX Credit Facility had $661,000 of borrowings outstanding and $204,726 of letters of credit outstanding, leaving $1,234,274 of unused capacity.
CNX Midstream Partners LP (CNXM)
CNXM's revolving credit facility was not impacted by the Merger (See Note 4 - Acquisitions and Dispositions).
In April 2019, CNXM amended its senior secured revolving credit facility (the “CNXM Credit Facility”) and extended its maturity to April 2024. The lenders' commitments remained unchanged at $600,000, with an accordion feature that allows CNXM to increase the available borrowings by up to an additional $250,000 under certain terms and conditions. The CNXM Credit Facility includes the ability to issue letters of credit up to $100,000 in the aggregate.
Under the terms of the amended agreement, borrowings under the CNXM Credit Facility will bear interest at CNXM's option at either:
•the base rate, which is the highest of (i) the federal funds open rate plus 0.50%, (ii) PNC Bank, N.A.’s prime rate, or (iii) the one-month LIBOR rate plus 1.0%, in each case, plus a margin ranging from 0.50% to 1.50%; or
•the LIBOR rate, plus a margin ranging from 1.50% to 2.50%.
Fees and interest rate spreads under the CNXM Credit Facility are based on the total leverage ratio, measured quarterly.
The CNXM Credit Facility requires CNXM to comply with a number of affirmative and negative covenants. In addition, CNXM is obligated to maintain at the end of each fiscal quarter (w) for so long as at least $150,000 of the CNXM 6.50% Senior Notes due March 2026 (CNXM Senior Notes) are outstanding, a maximum total leverage ratio of no greater than 5.25 to 1.00 (which increases to no greater than 5.50 to 1.00 during qualifying acquisition periods); (x) if less than $150,000 of the CNXM Senior Notes are outstanding, a maximum total leverage ratio of no greater than 4.75 to 1.00 (which increases to no greater than 5.25 to 1.00 during qualifying acquisition periods); (y) a maximum secured leverage ratio of no greater than 3.50 to 1.00 and (z) a minimum interest coverage ratio of no less than 2.50 to1.00. CNXM was in compliance with all financial covenants as of December 31, 2020.
The CNXM Credit Facility also contains customary events of default, including, but not limited to, a cross-default to certain other debt, breaches of representations and warranties, change of control events and breaches of covenants. The obligations under the revolving credit facility are secured by substantially all of the assets of CNXM and its wholly-owned subsidiaries. CNX is not a guarantor under the CNXM Credit Facility.
At December 31, 2020, the CNXM Credit Facility had $291,000 of borrowings outstanding and $30 of letters of credit outstanding, leaving $308,970 of unused capacity. At December 31, 2019, the CNXM Credit Facility had $311,750 of borrowings outstanding, leaving $288,250 of unused capacity.
NOTE 11—OTHER ACCRUED LIABILITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Royalties
|
$
|
72,401
|
|
|
$
|
74,061
|
|
Accrued Interest
|
26,549
|
|
|
30,862
|
|
Short-Term Incentive Compensation
|
20,340
|
|
|
21,030
|
|
Transportation Charges
|
15,969
|
|
|
16,533
|
|
Deferred Revenue
|
10,986
|
|
|
13,964
|
|
Accrued Other Taxes
|
10,580
|
|
|
9,115
|
|
Accrued Payroll & Benefits
|
5,009
|
|
|
6,248
|
|
Other
|
26,697
|
|
|
37,610
|
|
Current Portion of Long-Term Liabilities:
|
|
|
|
Asset Retirement Obligations
|
8,455
|
|
|
5,076
|
|
Salary Retirement
|
1,787
|
|
|
1,587
|
|
Total Other Accrued Liabilities
|
$
|
198,773
|
|
|
$
|
216,086
|
|
NOTE 12—LONG-TERM DEBT:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Senior Notes due March 2027 at 7.25% (Principal of $700,000 and $500,000, respectively, plus Unamortized Premium of $6,686 at December 31, 2020)
|
$
|
706,686
|
|
|
$
|
500,000
|
|
Senior Notes due January 2029 at 6.00%, Issued at Par Value
|
500,000
|
|
|
—
|
|
CNX Midstream Partners LP Senior Notes due March 2026 at 6.50% (Principal of $400,000 less Unamortized Discount of $3,875 and $4,625, respectively)*
|
396,125
|
|
|
395,375
|
|
CNX Midstream Partners LP Revolving Credit Facility*
|
291,000
|
|
|
311,750
|
|
Convertible Senior Notes due May 2026 at 2.25% (Principal of $345,000 less Unamortized Discount and Issuance Costs of $107,735)
|
237,265
|
|
|
—
|
|
CNX Revolving Credit Facility
|
160,800
|
|
|
661,000
|
|
Cardinal States Gathering Company Credit Facility maturing in March 2028 (Principal of $114,985 less Unamortized Discount of $1,126)
|
113,859
|
|
|
—
|
|
CSG Holdings II LLC Credit Facility maturing in March 2027 (Principal of $45,559 less Unamortized Discount of $441)
|
45,118
|
|
|
—
|
|
Senior Notes due April 2022 at 5.875% (Principal of $894,307 plus Unamortized Premium of $1,001 at December 31, 2019)
|
—
|
|
|
895,308
|
|
Less: Unamortized Debt Issuance Costs
|
26,852
|
|
|
8,990
|
|
|
2,424,001
|
|
|
2,754,443
|
|
Less: Amounts Due in One Year
|
22,574
|
|
|
—
|
|
Long-Term Debt
|
$
|
2,401,427
|
|
|
$
|
2,754,443
|
|
*CNX is not a guarantor of CNXM's 6.50% Senior Notes due March 2026 or CNXM's Credit Facility.
CNXM's Credit Facility and the CNXM Senior Notes were not impacted by the Merger (See Note 4 - Acquisitions and Dispositions).
At December 31, 2020, annual undiscounted maturities of CNX and CNXM long-term debt during the next five years and thereafter are as follows:
|
|
|
|
|
|
Year ended December 31,
|
Amount
|
2021
|
$
|
22,574
|
|
2022
|
23,712
|
|
2023
|
24,469
|
|
2024
|
474,366
|
|
2025
|
23,057
|
|
Thereafter
|
1,989,166
|
|
Total Long-Term Debt Maturities
|
$
|
2,557,344
|
|
During the year ended December 31, 2020, CNX purchased and retired the remaining $894,307 of its outstanding 5.875% Senior Notes due April 2022. As part of this transaction, a gain of $10,101 was included in (Gain) Loss on Debt Extinguishment in the Consolidated Statements of Income.
In November 2020, CNX completed a private offering of $500,000 aggregate principal amount of 6.00% Senior Notes due January 2029 (the “Senior Notes due January 2029”). The notes, along with the related guarantees, were issued pursuant to an indenture, dated November 30, 2020, among the Company, the subsidiary guarantors party thereto and UMB Bank, N.A., as trustee. The notes accrue interest from November 30, 2020 at a rate of 6.00% per year. Interest is payable semi-annually in arrears on January 15 and July 15 of each year, beginning July 15, 2021. The Senior Notes due January 2029 mature on January 15, 2029, subject to adjustment upon the occurrence of specified events. The notes rank equally in right of payment with all of the Company’s existing and future senior indebtedness and senior to any subordinated indebtedness that the Company may incur. The notes are guaranteed by most of CNX's subsidiaries but does not include CNXM (or its subsidiaries or general partner) or CSG Holdings III LLC.
In September 2020, CNX completed a private offering of $200,000 aggregate principal amount of 7.25% Senior Notes due March 2027 (the “Senior Notes due March 2027s”) plus $7,000 of unamortized bond premium at a price of 103.5% of par with an effective yield of 6.34%. The notes, along with the related guarantees, were issued pursuant to an indenture, dated March 14, 2019. The notes accrue interest from September 14, 2020 at a rate of 7.25% per year. Interest is payable semi-annually in arrears on March 14 and September 14 of each year, beginning March 14, 2021. The notes mature on March 14, 2027. The Senior Notes due March 2027 rank equally in right of payment with all of the Company’s existing and future senior indebtedness and senior to any subordinated indebtedness that the Company may incur. The notes are guaranteed by most of CNX's subsidiaries but does not include CNXM (or its subsidiaries or general partner) or CSG Holdings III LLC.
In April 2020, CNX issued $345,000 in aggregate principal amount of 2.25% convertible senior notes due May 2026 (the "Convertible Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, including $45,000 aggregate principal amount of Convertible Notes issued pursuant to the exercise in full of the initial purchasers’ option to purchase additional Convertible Notes. The Convertible Notes were issued pursuant to an indenture and are senior, unsecured obligations of the Company. The Convertible Notes bear interest at a fixed rate of 2.25% per annum, payable semi-annually in arrears on May 1 and November 1 of each year, commencing on November 1, 2020. Proceeds from the issuance of the Convertible Notes totaled $334,650, net of initial purchaser discounts and issuance costs. The notes are guaranteed by most of CNX's subsidiaries but does not include CNXM (or its subsidiaries or general partner) or CSG Holdings III LLC.
The initial conversion rate is 77.8816 shares of CNX's common stock per $1,000 principal amount of Convertible Notes, which represents an initial conversion price of approximately $12.84 per share, subject to adjustment upon the occurrence of specified events. The Convertible Notes will mature on May 1, 2026, unless earlier repurchased, redeemed or converted. Before February 1, 2026, note holders will have the right to convert their Convertible Notes only upon the occurrence of the following events:
•during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on June 30, 2020, if the Last Reported Sale Price per share of Common Stock exceeds one hundred and thirty percent (130%) of the Conversion Price for each of at least twenty (20) Trading Days (whether or not consecutive) during the thirty (30) consecutive Trading Days ending on, and including, the last Trading Day of the immediately preceding calendar quarter.
•during the five (5) consecutive Business Days immediately after any ten (10) consecutive trading day period (such ten (10) consecutive Trading Day period, the “Measurement Period”) if the trading Price per $1,000 principal amount of
Notes, as determined following a request by a Holder in accordance with the procedures set forth below, for each trading day of the Measurement Period was less than ninety eight percent (98%) of the product of the last reported sale price per share of common stock on such trading day and the conversion rate on such trading day.
•if we call any or all of the Convertible Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the redemption date; or
•upon the occurrence of certain specified corporate events as set forth in the indenture governing the Convertible Notes.
From and after February 1, 2026, note holders may convert their Convertible Notes at any time at their election until the close of business on the second scheduled trading day immediately before the maturity date.
Upon conversion, the Company may satisfy its conversion obligation by paying and/or delivering, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, in the manner and subject to the terms and conditions provided in the indenture governing the Convertible Notes. The conversion rate is subject to adjustment under certain circumstances in accordance with the terms of the indenture governing the Convertible Notes. In addition, following certain corporate events, as described in the indenture governing the Convertible Notes, that occur prior to the maturity date, the Company will increase the conversion rate, in certain circumstances, for a holder who elects to convert its Convertible Notes in connection with such a corporate event.
The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election. The Company’s current intent is to settle the principal amount of the Convertible Notes in cash upon conversion.
If certain corporate events that constitute a “Fundamental Change” (as defined in the indenture governing the Convertible Notes) occur, then noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect to the Company’s common stock. During the year ended December 31, 2020, the conditions allowing holders of the Convertible Notes to exercise their conversion right were not met and as of December 31, 2020, the notes were not convertible. The Convertible Notes are therefore classified as long-term debt at December 31, 2020.
In accounting for the transaction, the Convertible Notes were separated into liability and equity components. The carrying amount of the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated conversion feature. The fair value was based on market data available for publicly traded, senior, unsecured corporate bonds with similar maturity, which represent Level 2 observable inputs. The carrying amount of the equity component, representing the conversion option, was determined by deducting the fair value of the liability component from the principal value of the Convertible Notes and was recorded in Capital in Excess of Par Value in the Consolidated Statement of Stockholders Equity and is not remeasured as long as it continues to meet the conditions for equity classification. The excess of the principal amount of the Convertible Notes over the liability component and the debt issuance costs are amortized to interest expense over the contractual term of the Convertible Notes using the effective interest method.
In accounting for the debt issuance costs of $10,350 related to the Convertible Notes, the Company allocated the total amount incurred to the liability and equity components using the same proportions as the proceeds of the Convertible Notes. Issuance costs attributable to the liability component were $7,024 and will be amortized to interest expense using the effective interest method over the contractual term of the Convertible Notes. Issuance costs attributable to the equity component were $3,326 and were netted with the equity component in Capital in Excess of Par Value in the Consolidated Statement of Stockholders Equity and are not subject to amortization.
The net carrying amount of the liability and equity components of the Convertible Notes was as follows:
|
|
|
|
|
|
|
December 31, 2020
|
Liability Component:
|
|
Principal
|
$
|
345,000
|
|
Unamortized Discount
|
(101,367)
|
|
Unamortized Issuance Costs
|
(6,368)
|
|
Net Carrying Amount
|
$
|
237,265
|
|
|
|
Equity Component, net of Purchase Discounts and Issuance Costs
|
78,317
|
|
Interest expense related to the Convertible Notes is as follows:
|
|
|
|
|
|
|
For the Year Ended
|
|
December 31, 2020
|
Contractual Interest Expense
|
$
|
5,175
|
|
Amortization of Debt Discount
|
9,516
|
|
Amortization of Issuance Costs
|
655
|
|
Total Interest Expense
|
$
|
15,346
|
|
In connection with the offering of the Convertible Notes, the Company entered into privately negotiated capped call transactions with certain counterparties, (the “Capped Calls”). The Capped Calls each have an initial strike price of $12.84 per share, subject to certain adjustments, which correspond to the initial conversion price of the Convertible Notes. The Capped Calls have an initial cap price of $18.19 per share, subject to certain adjustments. The Capped Calls cover, subject to anti-dilution adjustments, the aggregate number of shares of the Company’s common stock that initially underlie the Convertible Notes, and are expected generally to reduce potential dilution to the Company’s common stock upon any conversion of Convertible Notes and/or offset any cash payments the Company is required to make in excess of the principal amount of converted Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap, based on the cap price of the Capped Call Transactions. The conditions that cause adjustments to the initial strike price of the Capped Calls mirror the conditions that result in corresponding adjustments for the Convertible Notes. For accounting purposes, the Capped Calls are separate transactions, and not part of the terms of the Convertible Notes. As these transactions meet certain accounting criteria, the Capped Calls are recorded in stockholders’ equity and are not accounted for as derivatives. The cost of $35,673 incurred in connection with the Capped Calls was recorded as a reduction to Capital in Excess of Par Value. The impact of the Capped Calls related to stockholders’ equity has been included in Capital in Excess of Par Value in the Consolidated Statement of Stockholders Equity and includes taxes in the amount of $9,322, for a net impact of $26,351.
During the year ended December 31, 2020, CNX's wholly-owned subsidiary Cardinal States Gathering Company LLC (Cardinal States) entered into a $125,000 non-revolving credit facility agreement (the "Cardinal States Facility"). The Cardinal States Facility matures in 2028, has an interest rate of 3-month LIBOR + 450 basis points and includes an excess cash flow sweep in an amount required to achieve a quarterly targeted debt balance. The facility is secured by substantially all of the Cardinal States assets, requires a minimum level of hedging of the variable interest rate exposure and is non-recourse to CNX.
Additionally, during the year ended December 31, 2020, CNX's wholly-owned subsidiary CSG Holdings II LLC (CSG Holdings) entered into a $50,000 non-revolving credit facility agreement (the "CSG Holdings Facility"). The CSG Holdings Facility matures in 2027, has interest rate of 3-month LIBOR + 675 basis points and includes a full excess cash sweep. The facility is secured by substantially all of the CSG Holding assets, requires a minimum level of hedging of the variable interest rate exposure and is non-recourse to CNX.
During the year ended December 31, 2019, CNX completed a private offering of $500,000 of 7.25% Senior Notes due March 2027. The notes are guaranteed by most of CNX's subsidiaries but do not include CNXM (or its subsidiaries or general partner).
During the year ended December 31, 2019, CNX purchased and retired $400,000 of its outstanding 5.875% Senior Notes due April 2022. As part of this transaction, a loss of $7,614 was included in (Gain) Loss on Debt Extinguishment in the Consolidated Statements of Income.
During the year ended December 31, 2018, CNX purchased and retired $411,375 of its outstanding 5.875% Senior Notes due April 2022. As part of this transaction, a loss of $15,320 was included in (Gain) Loss on Debt Extinguishment in the Consolidated Statements of Income.
During the year ended December 31, 2018, CNX called the $500,000 balance on its 8.00% Senior Notes due April 2023. As part of this transaction, a loss of $38,798 was included in (Gain) Loss on Debt Extinguishment in the Consolidated Statements of Income.
NOTE 13—LEASES:
On January 1, 2019, the Company adopted ASU 2016-02, and all related amendments, using the transition method, which allows for a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. CNX elected the transition relief package of practical expedients by applying previous accounting conclusions under ASC 840 to all leases that existed prior to the transition date. As a result, CNX did not reassess 1) whether existing or expired contracts contain
leases, 2) lease classification for any existing or expired leases or 3) whether lease origination costs qualified as initial direct costs. Additionally, the Company elected the short-term practical expedient for all asset classes by establishing an accounting policy to exclude leases with a term of 12 months or less. CNX will not separate lease components from non-lease components for any asset class. Lastly, CNX adopted the easement practical expedient, which allows the Company to apply ASC 842 prospectively to land easements after the adoption date. Easements that existed or expired prior to the adoption date that were not previously assessed under ASC 840 will not be reassessed.
CNX's leasing activities primarily consist of operating and finance leases for electric fracturing equipment, natural gas drilling rigs, CNX's corporate headquarters as well as field offices, a natural gas gathering pipeline and commercial vehicles. Some leases include options to renew ranging from a period of 1 to 10 years, which are not recognized as part of the lease right-of-use (ROU) assets or liabilities as they are not reasonably certain to be exercised.
Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of the lease payments over the lease term. As most of CNX's leases do not provide an implicit rate, an incremental borrowing rate is used to determine the present value of lease payments.
The components of lease cost were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2020
|
|
2019
|
Operating Lease Cost
|
$
|
74,703
|
|
|
$
|
73,809
|
|
Finance Lease Cost:
|
|
|
|
Amortization of Right-of-Use Assets
|
4,959
|
|
|
5,242
|
|
Interest on Lease Liabilities
|
739
|
|
|
1,241
|
|
Short-term Lease Cost
|
3,252
|
|
|
5,547
|
|
Variable Lease Cost*
|
9,634
|
|
|
17,337
|
|
Total Lease Cost
|
$
|
93,287
|
|
|
$
|
103,176
|
|
*Amounts recognized in the Consolidated Balance Sheets for natural gas drilling rigs are measured using the rates that would be paid if the rigs were idle, as this represents the minimum payment that could be made under the contract. Variable lease cost represents amounts paid for natural gas drilling rigs above this minimum when the rigs are in use. Amounts recognized in the Consolidated Balance Sheets for electric fracturing equipment are measured using minimum pumping hours under the contract; however, pumping hours may exceed the minimum and vary period to period. Any such amounts paid related to pumping hours in excess of the minimum represent variable lease cost.
Rental expense under operating leases prior to the adoption of ASC 842 was $21,441 for the year ended December 31, 2018.
Amounts recognized in the Consolidated Balance Sheets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Operating Leases:
|
|
|
|
Operating Lease Right-of-Use Asset
|
$
|
108,683
|
|
|
$
|
187,097
|
|
|
|
|
|
Current Portion of Operating Lease Obligations
|
$
|
52,575
|
|
|
$
|
61,670
|
|
Operating Lease Obligations
|
53,235
|
|
|
110,466
|
|
Total Operating Lease Liabilities
|
$
|
105,810
|
|
|
$
|
172,136
|
|
|
|
|
|
Finance Leases:
|
|
|
|
Property, Plant and Equipment
|
$
|
72,653
|
|
|
$
|
72,916
|
|
Less—Accumulated Depreciation, Depletion and Amortization
|
67,508
|
|
|
63,008
|
|
Property, Plant and Equipment—Net
|
$
|
5,145
|
|
|
$
|
9,908
|
|
|
|
|
|
Current Portion of Finance Lease Obligations
|
$
|
6,876
|
|
|
$
|
7,164
|
|
Finance Lease Obligations
|
1,057
|
|
|
7,706
|
|
Total Finance Lease Liabilities
|
$
|
7,933
|
|
|
$
|
14,870
|
|
Supplemental cash flow information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2020
|
|
2019
|
Cash Paid for Amounts Included in the Measurement of Lease Liabilities:
|
|
|
|
Operating Cash Flows from Operating Leases
|
$
|
62,610
|
|
|
$
|
66,827
|
|
Operating Cash Flows from Finance Leases
|
$
|
739
|
|
|
$
|
1,241
|
|
Financing Cash Flows from Finance Leases
|
$
|
7,155
|
|
|
$
|
7,149
|
|
Right-of-Use Assets Obtained in Exchange for Lease Obligations:
|
|
|
|
Operating Leases
|
$
|
4,027
|
|
|
$
|
15,347
|
|
Finance Leases
|
$
|
257
|
|
|
$
|
1,846
|
|
Maturities of lease liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
Finance
|
|
Leases
|
|
Leases
|
Year Ended December 31,
|
|
|
|
2021
|
$
|
56,190
|
|
|
$
|
7,138
|
|
2022
|
21,592
|
|
|
446
|
|
2023
|
5,453
|
|
|
442
|
|
2024
|
5,433
|
|
|
155
|
|
2025
|
4,824
|
|
|
38
|
|
Thereafter
|
25,996
|
|
|
40
|
|
Total Lease Payments
|
119,488
|
|
|
8,259
|
|
Less: Interest
|
13,678
|
|
|
326
|
|
Present Value of Lease Liabilities
|
$
|
105,810
|
|
|
$
|
7,933
|
|
Lease terms and discount rates are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Weighted Average Remaining Lease Term (years):
|
|
|
|
Operating Leases
|
4.68
|
|
4.39
|
Finance Leases
|
1.37
|
|
2.16
|
|
|
|
|
Weighted Average Discount Rate:
|
|
|
|
Operating Leases
|
4.40
|
%
|
|
4.96
|
%
|
Finance Leases
|
6.33
|
%
|
|
6.92
|
%
|
NOTE 14—PENSION:
The benefits for the Defined Contribution Restoration Plan were frozen effective July 1, 2018. Employees hired after this date are not eligible for this benefit plan. In addition, current participants receive no further compensation credits after that date, with the last award being 2017. Annual interest credits will continue to be made in accordance with the terms of the plan. The freezing of the plan triggered a curtailment gain of $416 during the year ended December 31, 2018.
The current portion of the pension obligation is included in Other Accrued Liabilities and the noncurrent portion is included in Other Liabilities in the Consolidated Balance Sheets.
The reconciliation of changes in the benefit obligation, plan assets and funded status of the pension benefits is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Change in Benefit Obligation:
|
|
|
|
Benefit Obligation at Beginning of Period
|
$
|
40,196
|
|
|
$
|
33,569
|
|
Service Cost
|
247
|
|
|
209
|
|
Interest Cost
|
1,179
|
|
|
1,338
|
|
Actuarial Loss
|
4,098
|
|
|
4,865
|
|
Plan Amendments
|
—
|
|
|
1,728
|
|
|
|
|
|
|
|
|
|
Benefits and Other Payments
|
(1,644)
|
|
|
(1,513)
|
|
Benefit Obligation at End of Period
|
$
|
44,076
|
|
|
$
|
40,196
|
|
|
|
|
|
Change in Plan Assets:
|
|
|
|
Fair Value of Plan Assets at Beginning of Period
|
$
|
—
|
|
|
$
|
—
|
|
Company Contributions
|
1,644
|
|
|
1,513
|
|
Benefits and Other Payments
|
(1,644)
|
|
|
(1,513)
|
|
|
|
|
|
Fair Value of Plan Assets at End of Period
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Funded Status:
|
|
|
|
Current Liabilities
|
$
|
(1,787)
|
|
|
$
|
(1,587)
|
|
Noncurrent Liabilities
|
(42,289)
|
|
|
(38,609)
|
|
|
|
|
|
Net Obligation Recognized
|
$
|
(44,076)
|
|
|
$
|
(40,196)
|
|
|
|
|
|
Amounts Recognized in Accumulated Other Comprehensive Loss Consist of:
|
|
|
|
Net Actuarial Loss
|
$
|
19,075
|
|
|
$
|
15,361
|
|
Prior Service Cost
|
1,506
|
|
|
1,727
|
|
Total
|
20,581
|
|
|
17,088
|
|
Less: Tax Benefit
|
5,397
|
|
|
4,483
|
|
Net Amount Recognized
|
$
|
15,184
|
|
|
$
|
12,605
|
|
The components of the net periodic benefit cost are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Components of Net Periodic Benefit Cost:
|
|
|
|
|
|
Service Cost
|
$
|
247
|
|
|
$
|
209
|
|
|
$
|
302
|
|
Interest Cost
|
1,179
|
|
|
1,338
|
|
|
1,265
|
|
Amortization of Prior Service Cost (Credit)
|
221
|
|
|
(17)
|
|
|
(193)
|
|
Recognized Net Actuarial Loss
|
383
|
|
|
242
|
|
|
865
|
|
Curtailment Gain
|
—
|
|
|
—
|
|
|
(416)
|
|
|
|
|
|
|
|
Net Periodic Benefit Cost
|
$
|
2,030
|
|
|
$
|
1,772
|
|
|
$
|
1,823
|
|
CNX utilizes a corridor approach to amortize actuarial gains and losses that have been accumulated under the pension plan. Cumulative gains and losses that are in excess of 10% of the greater of either the projected benefit obligation (PBO) or the market-related value of plan assets are amortized over the expected remaining future lifetime of all plan participants for the pension plan.
The following table provides information related to the pension plan with an accumulated benefit obligation in excess of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2020
|
|
2019
|
Projected Benefit Obligation
|
$
|
44,076
|
|
|
$
|
40,196
|
|
Accumulated Benefit Obligation
|
$
|
43,886
|
|
|
$
|
40,196
|
|
Fair Value of Plan Assets
|
$
|
—
|
|
|
$
|
—
|
|
Assumptions:
The weighted-average assumptions used to determine benefit obligations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2020
|
|
2019
|
Discount Rate
|
2.47
|
%
|
|
3.36
|
%
|
Rate of Compensation Increase
|
—
|
%
|
|
—
|
%
|
Interest Credited Rate
|
2.26
|
%
|
|
3.01
|
%
|
The discount rates are determined using a Company-specific yield curve model (above-mean) developed with the assistance of an external actuary. The Company-specific yield curve models (above-mean) use a subset of the expanded bond universe to determine the Company-specific discount rate. Bonds used in the yield curve are rated AA by Moody's or Standard & Poor's as of the measurement date. The yield curve models parallel the plans' projected cash flows, and the underlying cash flows of the bonds included in the models exceed the cash flows needed to satisfy the Company plans.
The weighted-average assumptions used to determine net periodic benefit cost are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Discount Rate
|
3.36
|
%
|
|
4.37
|
%
|
|
4.28
|
%
|
|
|
|
|
|
|
Rate of Compensation Increase
|
—
|
%
|
|
3.63
|
%
|
|
4.05
|
%
|
Interest Credited Rate
|
2.47
|
%
|
|
3.39
|
%
|
|
3.94
|
%
|
Cash Flows:
The following benefit payments, which reflect expected future service, are expected to be paid:
|
|
|
|
|
|
|
|
|
|
|
Pension
|
Year ended December 31,
|
|
Benefits
|
2021
|
|
$
|
1,787
|
|
2022
|
|
$
|
1,846
|
|
2023
|
|
$
|
1,913
|
|
2024
|
|
$
|
1,977
|
|
2025
|
|
$
|
2,049
|
|
Year 2026-2030
|
|
$
|
11,172
|
|
NOTE 15—STOCK-BASED COMPENSATION:
CNX's Equity Incentive Plan provides for grants of stock-based awards to key employees and to non-employee directors. Amendments to the Equity Incentive Plan have been adopted and approved by the Board of Directors and the Company's shareholders since the commencement of the Equity Incentive Plan. Most recently, in May 2020 the Company's Shareholders adopted and approved a 10,775,000 increase to the total number of shares available for issuance. At December 31, 2020, 14,081,055 shares of common stock remained available for grant under the plan. The Equity Incentive Plan provides that the aggregate number of shares available for issuance will be reduced by one share for each share relating to stock options and by 1.62 for each share relating to Performance Share Units (PSUs) or Restricted Stock Units (RSUs). No award of stock options may be exercised under the Equity Incentive Plan after the tenth anniversary of the grant date of the award.
For those shares expected to vest, CNX recognizes stock-based compensation costs on a straight-line basis over the requisite service period of the award, which is generally the vesting term. Options and RSUs vest over a three-year term. PSUs granted in 2016-2019 vest over a five-year term at 20% per year and PSUs granted in 2020 vest over a three-year term at 33.3% per year subject to performance conditions. If an employee leaves the Company, all unvested shares are forfeited. CNX recognizes forfeitures as they occur. The vesting of all awards will accelerate in the event of death and disability and may accelerate upon a change in control of CNX.
Pursuant to the terms of the change in control severance agreements of certain employees and CNX officers, outstanding equity awards held by such employees vest upon a stockholder (or stockholder group) becoming the beneficial owner of more than 25% of the Company's outstanding common stock. During the year ended December 31, 2019, Southeastern Asset Management, Inc. and its affiliates ("SEAM") acquired shares of CNX's common stock in the open market which resulted in SEAM's aggregate share ownership exceeding more than 25% of CNX's common stock outstanding. This transaction, as such, constituted a change in control event under the severance agreements, resulting in the accelerated vesting of 473,126 restricted stock units and 903,100 performance share units held by the aforementioned employees that were issued prior to 2019. Those affected employees and officers each consented to waive the change in control vesting provision included in the change in control severance agreements with respect to their restricted stock unit and performance share unit awards that were issued during 2019. The accelerated vesting resulted in $19,654 of additional long-term equity-based compensation expense for the year ended December 31, 2019, and is included in Selling, General and Administrative Costs in the Consolidated Statements of Income. The performance share unit awards that vested continue to be subject to the attainment of performance goals as determined by the Compensation Committee of CNX's Board of Directors after the end of the applicable performance period.
The total stock-based compensation expense recognized relating to CNX shares during the years ended December 31, 2020, 2019 and 2018 was $12,897, $36,545 and $18,930, respectively. The related deferred tax benefit totaled $2,134, $3,955, $4,169, respectively.
As of December 31, 2020, CNX has $10,830 of unrecognized compensation cost related to all non-vested stock-based compensation awards, which is expected to be recognized over a weighted-average period of 1.82 years. When stock options are exercised, and restricted and performance stock unit awards become vested, the issuances are made from CNX's common stock shares.
Pursuant to the Merger (See Note 4 - Acquisitions and Dispositions for more information), all outstanding phantom units previously granted under the CNXM long-term incentive plan were converted into the right to receive 0.88 shares of common stock of CNX. As such, all outstanding phantom units were converted, effective as of the closing of the Merger, into CNX restricted stock units. Each CNX restricted stock unit will be subject to the same vesting, forfeiture and other terms and conditions applicable to the converted CNXM phantom units. Under Accounting Standards Codification Topic 718, Compensation - Stock Compensation, it was determined that there was no additional compensation cost to record as the conversion of awards did not result in incremental fair value.
Stock Options:
CNX examined its historical pattern of option exercises in an effort to determine if there were any discernible activity patterns based on certain employee populations. From this analysis, CNX identified two distinct employee populations and used the Black-Scholes option pricing model to value the options for each of the employee populations. The expected term computation presented in the table below is based upon a weighted average of the historical exercise patterns and post-vesting termination behavior of the two populations. The risk-free interest rate was determined for each vesting tranche of an award based upon the calculated yield on U.S. Treasury obligations for the expected term of the award. A combination of historical and implied volatility is used to determine expected volatility and future stock price trends.
The total fair value of options granted during the years ended December 31, 2020, 2019 and 2018 was $1,066, $50, and $143 respectively, based on the following assumptions and weighted average fair values:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
Weighted Average Fair Value of Grants
|
|
$
|
3.56
|
|
|
$
|
3.48
|
|
|
$
|
6.50
|
|
Risk-free Interest Rate
|
|
1.61
|
%
|
|
2.13
|
%
|
|
2.66
|
%
|
Expected Dividend Yield
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Expected Forfeiture Rate
|
|
—
|
%
|
|
—
|
%
|
|
—
|
%
|
Expected Volatility
|
|
55.33
|
%
|
|
43.60
|
%
|
|
52.68
|
%
|
Expected Term in Years
|
|
5.11
|
|
6.50
|
|
3.71
|
A summary of the status of stock options granted is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Weighted
|
|
Remaining
|
|
Aggregate
|
|
|
|
|
Average
|
|
Contractual
|
|
Intrinsic
|
|
|
|
|
Exercise
|
|
Term (in
|
|
Value (in
|
|
|
Shares
|
|
Price
|
|
years)
|
|
thousands)
|
Outstanding at December 31, 2019
|
|
4,696,264
|
|
|
$
|
18.05
|
|
|
|
|
|
Granted
|
|
299,541
|
|
|
$
|
10.46
|
|
|
|
|
|
Exercised
|
|
(298,513)
|
|
|
$
|
6.87
|
|
|
|
|
|
Forfeited
|
|
(3,561)
|
|
|
$
|
10.53
|
|
|
|
|
|
Expired
|
|
(493,222)
|
|
|
$
|
43.53
|
|
|
|
|
|
Outstanding at December 31, 2020
|
|
4,200,509
|
|
|
$
|
15.32
|
|
|
4.18
|
|
$
|
9,430
|
|
Exercisable at December 31, 2020
|
|
3,908,444
|
|
|
$
|
15.68
|
|
|
3.81
|
|
$
|
9,330
|
|
At December 31, 2020, there were 3,710,157 employee stock options outstanding under the Equity Incentive Plan. Non-employee director stock options vest one year after the grant date. There are 490,352 stock options outstanding under these grants.
The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between CNX's closing stock price on the last trading day of the year ended December 31, 2020 and the option's exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2020. This amount varies based on the fair market value of CNX's stock. The total intrinsic value of options exercised for the years ended December 31, 2020, 2019 and 2018 was $1,263, $175, and $2,077, respectively.
Cash received from option exercises for the years ended December 31, 2020, 2019 and 2018 was $2,052, $546 and $1,714, respectively. The tax impact from option exercises totaled $328, $46 and $569 for the years ended December 31, 2020, 2019 and 2018, respectively.
Restricted Stock Units:
Under the Equity Incentive Plan, CNX grants certain employees and non-employee directors RSU awards, which entitle the holder to receive shares of common stock as the award vests. Non-employee director RSUs vest at the end of one year. Compensation expense is recognized over the vesting period of the units, described above. The total fair value of RSUs granted during the years ended December 31, 2020, 2019 and 2018 was $10,619, $10,844 and $13,768, respectively. The total fair value of restricted stock units vested during the years ended December 31, 2020, 2019 and 2018 was $4,798, $10,391 and $6,437, respectively.
The following table represents the nonvested restricted stock units and their corresponding fair value (based upon the closing share price) at the date of grant:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Weighted Average
|
|
|
Shares
|
|
Grant Date Fair Value
|
Nonvested at December 31, 2019
|
|
1,033,200
|
|
|
$11.71
|
Granted
|
|
1,251,065
|
|
|
$8.49
|
RSUs granted in conversion, as a result of the CNXM Merger
|
|
204,619
|
|
|
$18.01
|
Vested
|
|
(577,834)
|
|
|
$10.95
|
Forfeited
|
|
(39,923)
|
|
|
$9.65
|
Nonvested at December 31, 2020
|
|
1,871,127
|
|
|
$10.10
|
Performance Share Units:
Under the Equity Incentive Plan, CNX grants certain employees performance share unit awards, which entitle the holder to shares of common stock subject to the achievement of certain market and performance goals. Compensation expense is recognized over the performance measurement period of the units in accordance with the provisions of the Stock Compensation Topic of the FASB Accounting Standards Codification for awards with market and performance vesting conditions. The total fair value of performance share units granted during the years ended December 31, 2020, 2019 and 2018 was $3,826, $6,741 and $8,570, respectively. The total fair value of performance share units vested during the years ended December 31, 2020, 2019 and 2018 was $1,926, $4,668 and $7,547, respectively.
The following table represents the nonvested performance share units and their corresponding fair value (based upon the Monte Carlo Methodology) on the date of grant:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Weighted Average
|
|
|
Shares
|
|
Grant Date Fair Value
|
Nonvested at December 31, 2019
|
|
1,400,836
|
|
|
$18.91
|
Granted
|
|
660,634
|
|
|
$5.79
|
PSUs Issued
|
|
112,158
|
|
|
$20.39
|
Vested
|
|
(274,716)
|
|
|
$20.82
|
Forfeited
|
|
(131,474)
|
|
|
$18.37
|
Nonvested at December 31, 2020
|
|
1,767,438
|
|
|
$13.85
|
Performance Options:
Under the Equity Incentive Plan, CNX granted certain employees performance options in 2010, which entitled the holder to shares of common stock subject to the achievement of certain performance goals. Compensation expense was recognized over the vesting period of the options. The Black-Scholes option valuation model was used to value each tranche separately. There have been no performance options granted since 2010. The 927,268 performance options that were outstanding and exercisable at a weighted average exercise price of $39.00 at December 31, 2019 expired as of December 31, 2020.
NOTE 16—SUPPLEMENTAL CASH FLOW INFORMATION:
The following are non-cash transactions that impact the investing and financing activities of CNX. For non-cash transactions that relate to the separation, as well as acquisitions and dispositions, see Note 4 - Acquisitions and Dispositions.
As of December 31, 2020, 2019 and 2018, CNX purchased goods and services related to capital projects in the amount of $30,982, $43,982 and $58,246, respectively, which are included in accounts payable.
The following table shows cash paid (received):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
Interest (Net of Amounts Capitalized)
|
|
$
|
141,992
|
|
|
$
|
143,111
|
|
|
$
|
144,756
|
|
Income Taxes
|
|
$
|
(118,125)
|
|
|
$
|
(138,409)
|
|
|
$
|
(11,505)
|
|
NOTE 17—CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS:
CNX markets natural gas primarily to gas wholesalers in the United States. Concentration of credit risk is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Gas Wholesalers
|
$
|
133,253
|
|
|
$
|
115,641
|
|
NGL, Condensate & Processing Facilities
|
7,008
|
|
|
10,140
|
|
Other
|
5,752
|
|
|
7,699
|
|
Allowance for Credit Losses
|
(84)
|
|
|
—
|
|
Total Accounts Receivable Trade
|
$
|
145,929
|
|
|
$
|
133,480
|
|
As of December 31, 2020, a receivable of $19,995 due from Direct Energy Business Marketing LLC was included in the Gas Wholesalers balance above. As of December 31, 2019, receivables of $23,859 and $15,401 due from Direct Energy Business Marketing LLC and NJR Energy Services Company, respectively, were included. No other customers made up more than 10% of the total balances.
During the year ended December 31, 2020, sales to Direct Energy Business Marketing LLC were $167,390, which comprised over 10% of the Company's revenue from contracts with external customers for the period.
During the year ended December 31, 2019, sales to Direct Energy Business Marketing LLC were $214,980 and sales to NJR Energy Services Company were $147,540, each of which comprised over 10% of the Company's revenue from contracts with external customers for the period.
During the year ended December 31, 2018, sales to NJR Energy Services Company were $219,472 and sales to Direct Energy Business Marketing LLC were $184,668, each of which comprised over 10% of the Company's revenue from contracts with external customers for the period.
NOTE 18—FAIR VALUE OF FINANCIAL INSTRUMENTS:
CNX determines the fair value of assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. The fair value hierarchy is based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources (including NYMEX forward curves, LIBOR-based discount rates and basis forward curves), while unobservable inputs reflect the Company's own assumptions of what market participants would use.
The fair value hierarchy includes three levels of inputs that may be used to measure fair value as described below:
Level 1 - Quoted prices for identical instruments in active markets.
Level 2 - The fair value of the assets and liabilities included in Level 2 are based on standard industry income approach models that use significant observable inputs, including NYMEX forward curves, LIBOR-based discount rates and basis forward curves.
Level 3 - Unobservable inputs significant to the fair value measurement supported by little or no market activity.
In those cases when the inputs used to measure fair value meet the definition of more than one level of the fair value hierarchy, the lowest level input that is significant to the fair value measurement in its totality determines the applicable level in the fair value hierarchy.
The financial instrument measured at fair value on a recurring basis is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2020
|
|
Fair Value Measurements at December 31, 2019
|
Description
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Gas Derivatives
|
$
|
—
|
|
|
$
|
117,545
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
405,781
|
|
|
$
|
—
|
|
Interest Rate Swaps
|
$
|
—
|
|
|
$
|
(14,270)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,219)
|
|
|
$
|
—
|
|
The carrying amounts and fair values of financial instruments for which the fair value option was not elected are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
Cash and Cash Equivalents
|
$
|
15,617
|
|
|
$
|
15,617
|
|
|
$
|
16,283
|
|
|
$
|
16,283
|
|
|
|
|
|
|
|
|
|
Long-Term Debt (Excluding Debt Issuance Costs)
|
$
|
2,450,853
|
|
|
$
|
2,638,251
|
|
|
$
|
2,763,433
|
|
|
$
|
2,619,676
|
|
Cash and cash equivalents represent highly-liquid instruments and constitute Level 1 fair value measurements. Certain of the Company’s debt is actively traded on a public market and, as a result, constitute Level 1 fair value measurements. The portion of the Company’s debt obligations that is not actively traded is valued through reference to the applicable underlying benchmark rate and, as a result, constitute Level 2 fair value measurements.
NOTE 19—DERIVATIVE INSTRUMENTS:
CNX enters into interest rate swap agreements to manage its exposure to interest rate volatility. These swaps change the variable-rate cash flow exposure on the debt obligations to fixed cash flows. The change in fair value of the interest rate swap agreements are accounted for on a mark-to-market basis with the changes in fair value recorded in current period earnings.
In March 2020, CNX entered into interest rate swaps related to $175,000 of borrowings under the Cardinal States Facility and CSG Holdings Facility (See Note 12 - Long-Term Debt). In order to manage exposure to interest rate volatility, each respective entity entered into an interest rate swap for the full outstanding principal amounts inclusive of a put option at 25 basis points. The underlying notional for each swap and put option reduces over time based upon an expected amortization profile for each respective credit facility. In addition, CSG Holdings entered into a call option commencing March 31, 2023.
In June 2019, CNX entered into an interest rate swap agreement related to $160,000 of borrowings under CNX’s Credit Facility (See Note 10 - Revolving Credit Facilities) which has the economic effect of modifying the variable-interest obligation into a fixed-interest obligation over a three-year period. In March 2020, this swap was terminated and replaced via a new interest rate swap, effective April 3, 2020, into a new four-year interest rate swap inclusive of a put option at zero basis points. Also executed in March 2020 was a new four-year $250,000 interest rate swap inclusive of a put option at zero basis points, effective April 3, 2020. Consistent with the previous interest rate swap agreement, the $250,000 interest rate swap was entered into to manage CNX's exposure to interest rate volatility.
CNX enters into financial derivative instruments (over-the-counter swaps) to manage its exposure to commodity price volatility. Typically, CNX “sells” swaps under which it receives a fixed price from counterparties and pays a floating market price. During the second quarter of 2020, CNX purchased, rather than sold, financial swaps for the period May through November of 2020 under which CNX will pay a fixed price to and receive a floating price from its hedge counterparties. Swaps purchased have the effect of reducing total hedged volumes for the period of the swap. Natural gas commodity hedges are accounted for on a mark-to-market basis with changes in fair value recorded in current period earnings.
CNX is exposed to credit risk in the event of non-performance by counterparties. The creditworthiness of counterparties is subject to continuing review. The Company has not experienced any issues of non-performance by derivative counterparties.
None of the Company's counterparty master agreements currently require CNX to post collateral for any of its positions. However, as stated in the counterparty master agreements, if CNX's obligations with any of its counterparties cease to be secured on the same basis as similar obligations with the other lenders under the credit facility, CNX would have to post collateral for instruments in a liability position in excess of defined thresholds. All of the Company's derivative instruments are subject to master netting arrangements with our counterparties. CNX recognizes all financial derivative instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets on a gross basis.
Each of the Company's counterparty master agreements allows, in the event of default, the ability to elect early termination of outstanding contracts. If early termination is elected, CNX and the applicable counterparty would net settle all open hedge positions.
The total notional amounts of production of CNX's derivative instruments were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Forecasted to
|
|
2020
|
|
2019
|
|
Settle Through
|
Natural Gas Commodity Swaps (Bcf)
|
1,256.9
|
|
|
1,460.6
|
|
|
2025
|
Natural Gas Basis Swaps (Bcf)
|
1,294.1
|
|
|
1,290.4
|
|
|
2026
|
Interest Rate Swaps
|
$
|
569,972
|
|
|
$
|
160,000
|
|
|
2028
|
The gross fair value of CNX's derivative instruments was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
Current Assets:
|
|
|
|
Commodity Derivative Instruments:
|
|
|
|
Commodity Swaps
|
$
|
53,668
|
|
|
$
|
234,238
|
|
Basis Only Swaps
|
30,848
|
|
|
13,556
|
|
Interest Rate Swaps
|
141
|
|
|
—
|
|
Total Current Assets
|
$
|
84,657
|
|
|
$
|
247,794
|
|
|
|
|
|
Other Non-Current Assets:
|
|
|
|
Commodity Derivative Instruments:
|
|
|
|
Commodity Swaps
|
$
|
134,661
|
|
|
$
|
288,543
|
|
Basis Only Swaps
|
52,903
|
|
|
25,553
|
|
Interest Rate Swaps
|
673
|
|
|
—
|
|
Total Other Non-Current Assets
|
$
|
188,237
|
|
|
$
|
314,096
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
Commodity Derivative Instruments:
|
|
|
|
Commodity Swaps
|
$
|
23,506
|
|
|
$
|
345
|
|
Basis Only Swaps
|
14,491
|
|
|
40,626
|
|
Interest Rate Swaps
|
4,332
|
|
|
495
|
|
Total Current Liabilities
|
$
|
42,329
|
|
|
$
|
41,466
|
|
|
|
|
|
Non-Current Liabilities:
|
|
|
|
Commodity Derivative Instruments:
|
|
|
|
Commodity Swaps
|
$
|
59,388
|
|
|
$
|
9,693
|
|
Basis Only Swaps
|
57,150
|
|
|
105,445
|
|
Interest Rate Swaps
|
10,752
|
|
|
724
|
|
Total Non-Current Liabilities
|
$
|
127,290
|
|
|
$
|
115,862
|
|
The effect of derivative instruments on the Company's Consolidated Statements of Income was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Cash Received (Paid) in Settlement of Commodity Derivative Instruments:
|
|
|
|
|
|
Natural Gas:
|
|
|
|
|
|
Commodity Swaps
|
$
|
390,547
|
|
|
$
|
82,899
|
|
|
$
|
(41,098)
|
|
Basis Swaps
|
70,670
|
|
|
(13,119)
|
|
|
(28,622)
|
|
Total Cash Received (Paid) in Settlement of Commodity Derivative Instruments
|
461,217
|
|
|
69,780
|
|
|
(69,720)
|
|
|
|
|
|
|
|
Unrealized (Loss) Gain on Commodity Derivative Instruments:
|
|
|
|
|
|
Natural Gas:
|
|
|
|
|
|
Commodity Swaps
|
(407,308)
|
|
|
406,472
|
|
|
33,026
|
|
Basis Swaps
|
119,073
|
|
|
(100,147)
|
|
|
6,482
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Unrealized (Loss) Gain on Commodity Derivative Instruments
|
(288,235)
|
|
|
306,325
|
|
|
39,508
|
|
|
|
|
|
|
|
Gain (Loss) on Commodity Derivative Instruments:
|
|
|
|
|
|
Natural Gas:
|
|
|
|
|
|
Commodity Swaps
|
(16,761)
|
|
|
489,371
|
|
|
(8,072)
|
|
Basis Swaps
|
189,743
|
|
|
(113,266)
|
|
|
(22,140)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Gain (Loss) on Commodity Derivative Instruments
|
$
|
172,982
|
|
|
$
|
376,105
|
|
|
$
|
(30,212)
|
|
The effect of interest rate swaps on Interest Expense in the Company's Consolidated Statements of Income was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2020
|
|
2019
|
|
|
Cash (Paid) Received in Settlement of Interest Rate Swaps
|
$
|
(3,141)
|
|
|
$
|
223
|
|
|
|
Unrealized Loss on Interest Rate Swaps
|
(13,051)
|
|
|
(1,219)
|
|
|
|
Loss on Interest Rate Swaps
|
$
|
(16,192)
|
|
|
$
|
(996)
|
|
|
|
Cash Received (Paid) in Settlement of Commodity Derivative Instruments for the year ended December 31, 2020 includes $54,982 related to the monetization of certain NYMEX commodity swaps. The monetization resulted from reducing the contract swap prices of certain 2022, 2023 and 2024 NYMEX natural gas swap contracts. The notional quantities of the contracts were not changed by this monetization. Net proceeds received from the monetization are classified as operating cash flows in the Consolidated Statements of Cash Flows.
The Company also enters into fixed price natural gas sales agreements that are satisfied by physical delivery. These physical commodity contracts qualify for the normal purchases and normal sales exception and are not subject to derivative instrument accounting.
NOTE 20—COMMITMENTS AND CONTINGENT LIABILITIES:
CNX and its subsidiaries are subject to various lawsuits and claims with respect to such matters as personal injury, royalty accounting, damage to property, climate change, governmental regulations including environmental violations and remediation, employment and contract disputes and other claims and actions arising out of the normal course of business. CNX accrues the estimated loss for these lawsuits and claims when the loss is probable and can be estimated. The Company's current estimated accruals related to these pending claims, individually and in the aggregate, are immaterial to the financial position, results of operations or cash flows of CNX. It is possible that the aggregate loss in the future with respect to these lawsuits and claims could ultimately be material to the financial position, results of operations or cash flows of CNX; however, such amounts cannot be reasonably estimated.
The 1992 Coal Industry Retiree Health Benefit Act (“Coal Act”), in Section 9711, requires coal companies that were providing health benefits to United Mine Workers of America (“UMWA”) retirees as of February 1993 to continue providing health benefits to such individuals, in substantially the same coverages, for as long as the last signatory operator remains in
business. Section 9711 also requires any “related person” to be joint and severally liable for the provision of these health benefits. On May 1, 2020, the court in the Murray Energy Corporation (“Murray”) bankruptcy proceedings approved a settlement agreement between Murray and the UMWA that transferred to the UMWA 1992 Benefit Plan the Coal Act liabilities for retirees in Murray’s Section 9711 plan. The retirees transferred by Murray to the 1992 Benefit Plan include approximately 2,159 retirees allegedly traced to the December 2013 sale by CONSOL Energy Inc. to Murray Energy of the following possible last signatory operators: Consolidation Coal Company, McElroy Coal Company, Southern Ohio Coal Company, Central Ohio Coal Company, Keystone Coal Mining Corp., and Eight-Four Coal Mining Company (the “Sold Subsidiaries”). On May 2, 2020, the Trustees of the UMWA 1992 Benefit Plan sued CNX and CONSOL Energy Inc. (“CONSOL”) in federal court contending that the Sold Subsidiaries were last signatory operators and that CNX and CONSOL are related persons to the Sold Subsidiaries and, as such, CNX and CONSOL are jointly and severally liable for the Coal Act health benefits allegedly owed to the eligible retirees traced to the Sold Subsidiaries. The 1992 Plan seeks, among other relief, a declaration that CNX and CONSOL are obligated to enroll the eligible retirees attributed to the Sold Subsidiaries in a Section 9711 Plan; that CNX and CONSOL are liable to post the security required by Section 9712; and, that CNX and CONSOL are liable to pay per beneficiary premiums until the eligible retirees are enrolled in a Section 9711 plan, and other fees, costs and disbursements under the Coal Act. We disagree with the suit filed by the UMWA 1992 Plan, have filed a Motion to Dismiss and intend to defend this action. Further, under the Separation and Distribution Agreement that was entered into at the time we spun-out our coal business in 2017, CONSOL agreed to indemnify CNX for all coal-related liabilities, including this lawsuit. With respect to this matter although a loss is possible, it is not probable, and accordingly no accrual has been recognized.
At December 31, 2020, CNX has provided the following financial guarantees, unconditional purchase obligations, and letters of credit to certain third-parties as described by major category in the following tables. These amounts represent the maximum potential of total future payments that the Company could be required to make under these instruments. These amounts have not been reduced for potential recoveries under recourse or collateralization provisions. Generally, recoveries under reclamation bonds would be limited to the extent of the work performed at the time of the default. No amounts related to these unconditional purchase obligations and letters of credit are recorded as liabilities in the financial statements. CNX management believes that the commitments in the following table will expire without being funded, and therefore will not have a material adverse effect on financial condition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Commitment Expiration Per Period
|
|
Total
Amounts
Committed
|
|
Less Than
1 Year
|
|
1-3 Years
|
|
3-5 Years
|
|
Beyond
5 Years
|
Letters of Credit:
|
|
|
|
|
|
|
|
|
|
Firm Transportation
|
$
|
178,352
|
|
|
$
|
178,352
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
6,950
|
|
|
6,950
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total Letters of Credit
|
185,302
|
|
|
185,302
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Surety Bonds:
|
|
|
|
|
|
|
|
|
|
Employee-Related
|
2,600
|
|
|
2,600
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Environmental
|
12,447
|
|
|
12,187
|
|
|
260
|
|
|
—
|
|
|
—
|
|
Financial Guarantees
|
81,670
|
|
|
81,670
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Other
|
9,183
|
|
|
7,899
|
|
|
1,284
|
|
|
—
|
|
|
—
|
|
Total Surety Bonds
|
105,900
|
|
|
104,356
|
|
|
1,544
|
|
|
—
|
|
|
—
|
|
Total Commitments
|
$
|
291,202
|
|
|
$
|
289,658
|
|
|
$
|
1,544
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Excluded from the above table are commitments and guarantees entered into in conjunction with the spin-off of the Company's coal business in November 2017. Although CONSOL Energy has agreed to indemnify CNX to the extent that CNX would be called upon to pay any of these liabilities, there is no assurance that CONSOL Energy will satisfy its obligations to indemnify CNX in the event that CNX is so called upon (See “Item 1A. Risk Factors” in this Form 10-K).
CNX enters into long-term unconditional purchase obligations to procure major equipment purchases, natural gas firm transportation, gas drilling services and other operating goods and services. These purchase obligations are not recorded in the Consolidated Balance Sheets.
As of December 31, 2020, the purchase obligations for each of the next five years and beyond were as follows:
|
|
|
|
|
|
Obligations Due
|
Amount
|
Less than 1 year
|
$
|
253,692
|
|
1 - 3 years
|
431,282
|
|
3 - 5 years
|
390,693
|
|
More than 5 years
|
985,201
|
|
Total Purchase Obligations
|
$
|
2,060,868
|
|
NOTE 21—SEGMENT INFORMATION:
The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and assessing performance as the source of the Company’s reportable segments.
The Company evaluates the performance of its reportable segments based on total revenue and other operating income, and operating expenses directly attributable to that segment. Certain expenses are managed outside the reportable segments and therefore are not allocated. These expenses include, but are not limited to, interest expense, impairment of exploration and production properties, impairment of goodwill and other corporate expenses such as selling, general and administrative costs.
CNX's principal activity is to produce pipeline quality natural gas for sale primarily to gas wholesalers and the Company has two reportable segments that conducts those operations: Shale and Coalbed Methane. The Other Segment includes nominal shallow oil and gas production which is not significant to the Company. It also includes the Company's purchased gas activities, unrealized gain or loss on commodity derivative instruments, realized gain on commodity derivative instruments that were monetized prior to their settlement dates, exploration and production related other costs, impairments of exploration and production properties, as well as various other expenses that are managed outside the reportable segments as discussed above. Operating profit for each segment is based on sales less identifiable operating and non-operating expenses.
Prior to the Merger of CNXM that occurred in September 2020 (See Note 4 - Acquisitions and Dispositions), CNX consisted of two principal business divisions: Exploration and Production (E&P) and Midstream. The E&P Division included four reportable segments, Marcellus Shale, Utica Shale, Coalbed Methane and Other Gas. Certain reclassifications of 2019 and 2018 segment information have been made to conform to the 2020 presentation.
Industry segment results for the year ended December 31, 2020 are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shale
|
|
Coalbed
Methane
|
|
Other
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
Natural Gas, NGLs and Oil Revenue
|
|
$
|
781,038
|
|
|
$
|
114,366
|
|
|
$
|
1,341
|
|
|
|
|
|
|
|
|
|
|
$
|
896,745
|
|
(A)
|
Purchased Gas Revenue
|
|
—
|
|
|
—
|
|
|
105,792
|
|
|
|
|
|
|
|
|
|
|
105,792
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) on Commodity Derivative Instruments
|
|
337,269
|
|
|
39,884
|
|
|
(204,171)
|
|
|
|
|
|
|
|
|
|
|
172,982
|
|
(B)
|
Other Operating Income
|
|
64,710
|
|
|
—
|
|
|
17,749
|
|
|
|
|
|
|
|
|
|
|
82,459
|
|
(C)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue and Other Operating Income
|
|
$
|
1,183,017
|
|
|
$
|
154,250
|
|
|
$
|
(79,289)
|
|
|
|
|
|
|
|
|
|
|
$
|
1,257,978
|
|
|
Total Operating Expense
|
|
$
|
709,036
|
|
|
$
|
127,845
|
|
|
$
|
860,863
|
|
|
|
|
|
|
|
|
|
|
$
|
1,697,744
|
|
|
Earnings (Loss) Before Income Tax
|
|
$
|
473,981
|
|
|
$
|
26,405
|
|
|
$
|
(1,103,217)
|
|
|
|
|
|
|
|
|
|
|
$
|
(602,831)
|
|
|
Segment Assets
|
|
$
|
6,068,933
|
|
|
$
|
1,095,816
|
|
|
$
|
877,015
|
|
|
|
|
|
|
|
|
|
|
$
|
8,041,764
|
|
(D)
|
Depreciation, Depletion and Amortization
|
|
$
|
416,441
|
|
|
$
|
69,745
|
|
|
$
|
15,635
|
|
|
|
|
|
|
|
|
|
|
$
|
501,821
|
|
|
Capital Expenditures
|
|
$
|
474,545
|
|
|
$
|
9,789
|
|
|
$
|
2,957
|
|
|
|
|
|
|
|
|
|
|
$
|
487,291
|
|
|
(A) Included in Total Natural Gas, NGLs and Oil Revenue are sales of $167,390 to Direct Energy Business Marketing LLC, which comprises over 10% of revenue from contracts with external customers for the period.
(B) Included in Other is a realized gain on commodity derivative instruments of $83,997 related to the monetization of hedges (see Note 19 - Derivative Instruments for more information).
(C) Includes midstream revenue of $64,710 and equity in loss of unconsolidated affiliates of $688 for Shale and Other, respectively.
(D) Includes investments in unconsolidated equity affiliates of $16,022 .
Industry segment results for the year ended December 31, 2019 are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shale
|
|
Coalbed
Methane
|
|
Other
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
Natural Gas, NGLs and Oil Revenue
|
|
|
$
|
1,199,276
|
|
|
$
|
163,893
|
|
|
$
|
1,156
|
|
|
|
|
|
|
|
|
|
|
$
|
1,364,325
|
|
(E)
|
Purchased Gas Revenue
|
|
|
—
|
|
|
—
|
|
|
94,027
|
|
|
|
|
|
|
|
|
|
|
94,027
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on Commodity Derivative Instruments
|
|
|
62,418
|
|
|
7,335
|
|
|
306,352
|
|
|
|
|
|
|
|
|
|
|
376,105
|
|
|
Other Revenue and Operating Income
|
|
|
74,314
|
|
|
—
|
|
|
13,678
|
|
|
|
|
|
|
|
|
|
|
87,992
|
|
(F)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue and Other Operating Income
|
|
|
$
|
1,336,008
|
|
|
$
|
171,228
|
|
|
$
|
415,213
|
|
|
|
|
|
|
|
|
|
|
$
|
1,922,449
|
|
|
Total Operating Expense
|
|
|
$
|
787,488
|
|
|
$
|
135,778
|
|
|
$
|
813,207
|
|
|
|
|
|
|
|
|
|
|
$
|
1,736,473
|
|
|
Earnings (Loss) Before Income Tax
|
|
|
$
|
548,520
|
|
|
$
|
35,450
|
|
|
$
|
(524,286)
|
|
|
|
|
|
|
|
|
|
|
$
|
59,684
|
|
|
Segment Assets
|
|
|
$
|
6,527,245
|
|
|
$
|
1,222,005
|
|
|
$
|
1,311,556
|
|
|
|
|
|
|
|
|
|
|
$
|
9,060,806
|
|
(G)
|
Depreciation, Depletion and Amortization
|
|
|
$
|
427,219
|
|
|
$
|
73,189
|
|
|
$
|
8,055
|
|
|
|
|
|
|
|
|
|
|
$
|
508,463
|
|
|
Capital Expenditures
|
|
|
$
|
1,175,091
|
|
|
$
|
11,333
|
|
|
$
|
6,175
|
|
|
|
|
|
|
|
|
|
|
$
|
1,192,599
|
|
|
(E) Included in Total Natural Gas, NGLs and Oil Revenue are sales of $214,980 to Direct Energy Business Marketing LLC and $147,540 to NJR Energy Services Company, each of which comprises over 10% of revenue from contracts with external customers for the period.
(F) Includes midstream revenue of $74,314 and equity in earnings of unconsolidated affiliates of $2,103 for Shale and Other, respectively.
(G) Includes investments in unconsolidated equity affiliates of $16,710.
Industry segment results for the year ended December 31, 2018 are:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shale
|
|
Coalbed
Methane
|
|
Other
|
|
|
|
|
|
Consolidated
|
|
Natural Gas, NGLs and Oil Revenue
|
|
|
$
|
1,349,196
|
|
|
$
|
212,884
|
|
|
$
|
15,857
|
|
|
|
|
|
|
$
|
1,577,937
|
|
(H)
|
Purchased Gas Revenue
|
|
|
—
|
|
|
—
|
|
|
65,986
|
|
|
|
|
|
|
65,986
|
|
|
(Loss) Gain on Commodity Derivative Instruments
|
|
|
(60,326)
|
|
|
(8,768)
|
|
|
38,882
|
|
|
|
|
|
|
(30,212)
|
|
|
Other Revenue and Operating Income
|
|
|
89,781
|
|
|
—
|
|
|
26,942
|
|
|
|
|
|
|
116,723
|
|
(I)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Revenue and Other Operating Income
|
|
|
$
|
1,378,651
|
|
|
$
|
204,116
|
|
|
$
|
147,667
|
|
|
|
|
|
|
$
|
1,730,434
|
|
|
Total Operating Expense
|
|
|
$
|
751,673
|
|
|
$
|
154,121
|
|
|
$
|
321,169
|
|
|
|
|
|
|
$
|
1,226,963
|
|
|
Earnings Before Income Tax
|
|
|
$
|
626,978
|
|
|
$
|
49,995
|
|
|
$
|
421,695
|
|
|
|
|
|
|
$
|
1,098,668
|
|
|
Segment Assets
|
|
|
$
|
6,268,113
|
|
|
$
|
1,272,457
|
|
|
$
|
1,051,600
|
|
|
|
|
|
|
$
|
8,592,170
|
|
(J)
|
Depreciation, Depletion and Amortization
|
|
|
$
|
404,503
|
|
|
$
|
77,004
|
|
|
$
|
11,916
|
|
|
|
|
|
|
$
|
493,423
|
|
|
Capital Expenditures
|
|
|
$
|
1,094,471
|
|
|
$
|
17,083
|
|
|
$
|
4,843
|
|
|
|
|
|
|
$
|
1,116,397
|
|
|
(H) Included in Total Natural Gas, NGLs and Oil Revenue are sales of $219,472 to NJR Energy Services Company and $184,668 to Direct Energy Business Marketing LLC, each of which comprises over 10% of revenue from contracts with external customers for the period.
(I) Includes midstream revenue of $89,781 and equity in earnings of unconsolidated affiliates of $5,363 for Shale and Other, respectively.
(J) Includes investments in unconsolidated equity affiliates of $18,663.
Reconciliation of Segment Information to Consolidated Amounts:
Revenue and Other Operating Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
2020
|
|
2019
|
|
2018
|
Total Segment Revenue from Contracts with External Customers
|
|
$
|
1,067,247
|
|
|
$
|
1,532,666
|
|
|
$
|
1,733,704
|
|
Gain (Loss) on Commodity Derivative Instruments
|
|
172,982
|
|
|
376,105
|
|
|
(30,212)
|
|
Other Operating Income
|
|
17,749
|
|
|
13,678
|
|
|
26,942
|
|
Total Consolidated Revenue and Other Operating Income
|
|
$
|
1,257,978
|
|
|
$
|
1,922,449
|
|
|
$
|
1,730,434
|
|
NOTE 22—SUPPLEMENTAL GAS DATA (unaudited):
The following information was prepared in accordance with the FASB's Accounting Standards Update No. 2010-03, “Extractive Activities-Oil and Gas (Topic 932).” The supplementary information summarized below presents the results of natural gas and oil activities for the E&P segment in accordance with the successful efforts method of accounting for production activities.
Capitalized Costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
2020
|
|
2019
|
Intangible Drilling Costs
|
$
|
4,965,252
|
|
|
$
|
4,688,497
|
|
Gas Gathering Assets
|
2,510,916
|
|
|
2,463,866
|
|
Proved Gas Properties
|
1,253,094
|
|
|
1,208,046
|
|
Gas Wells and Related Equipment
|
1,120,061
|
|
|
1,042,000
|
|
Unproved Gas Properties
|
725,705
|
|
|
755,590
|
|
Other Gas Assets
|
95,734
|
|
|
73,479
|
|
Total Property, Plant and Equipment
|
10,670,762
|
|
|
10,231,478
|
|
Accumulated Depreciation, Depletion and Amortization
|
(3,852,593)
|
|
|
(3,317,442)
|
|
Net Capitalized Costs
|
$
|
6,818,169
|
|
|
$
|
6,914,036
|
|
Costs incurred for property acquisition, exploration and development (*):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Property Acquisitions:
|
|
|
|
|
|
Proved Properties
|
$
|
16,622
|
|
|
$
|
36,710
|
|
|
$
|
38,621
|
|
Unproved Properties
|
8,060
|
|
|
24,760
|
|
|
36,248
|
|
Development**
|
432,438
|
|
|
1,063,945
|
|
|
986,419
|
|
Exploration
|
33,644
|
|
|
79,855
|
|
|
61,604
|
|
Total
|
$
|
490,764
|
|
|
$
|
1,205,270
|
|
|
$
|
1,122,892
|
|
__________
(*) Includes costs incurred whether capitalized or expensed.
(**) Includes development costs for midstream of $67 million, $325 million and $142 million for 2020, 2019 and 2018, respectively.
Results of Operations for Producing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Natural Gas, NGLs and Oil Revenue
|
$
|
896,745
|
|
|
$
|
1,364,325
|
|
|
$
|
1,577,937
|
|
Realized Gain (Loss) on Commodity Derivative Instruments
|
461,217
|
|
|
69,780
|
|
|
(69,720)
|
|
Unrealized (Loss) Gain on Commodity Derivative Instruments
|
(288,235)
|
|
|
306,325
|
|
|
39,508
|
|
Purchased Gas Revenue
|
105,792
|
|
|
94,027
|
|
|
65,986
|
|
Total Revenue
|
1,175,519
|
|
|
1,834,457
|
|
|
1,613,711
|
|
Lease Operating Expense
|
40,407
|
|
|
65,443
|
|
|
95,139
|
|
Production, Ad Valorem and Other Fees
|
24,196
|
|
|
27,461
|
|
|
32,750
|
|
Transportation, Gathering and Compression
|
285,683
|
|
|
330,539
|
|
|
302,933
|
|
Purchased Gas Costs
|
100,902
|
|
|
90,553
|
|
|
64,817
|
|
Impairment of Exploration and Production Properties
|
61,849
|
|
|
327,400
|
|
|
—
|
|
Impairment of Undeveloped Properties
|
—
|
|
|
119,429
|
|
|
—
|
|
Exploration Costs
|
14,994
|
|
|
44,380
|
|
|
12,033
|
|
Depreciation, Depletion and Amortization
|
501,821
|
|
|
508,463
|
|
|
493,423
|
|
Total Costs
|
1,029,852
|
|
|
1,513,668
|
|
|
1,001,095
|
|
Pre-tax Operating Income
|
145,667
|
|
|
320,789
|
|
|
612,616
|
|
Income Tax Expense
|
42,098
|
|
|
149,167
|
|
|
120,073
|
|
Results of Operations for Producing Activities excluding Corporate and Interest Costs
|
$
|
103,569
|
|
|
$
|
171,622
|
|
|
$
|
492,543
|
|
The following is production, average sales price and average production costs, excluding ad valorem and severance taxes, per unit of production:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
2020
|
|
2019
|
|
2018
|
Production (MMcfe)
|
511,072
|
|
|
539,149
|
|
|
507,104
|
|
Total Average Sales Price Before Effects of Commodity Derivative Financial Settlements (per Mcfe)
|
$
|
1.75
|
|
|
$
|
2.53
|
|
|
$
|
3.11
|
|
Average Effects of Commodity Derivative Financial Settlements (per Mcfe)
|
$
|
0.74
|
|
|
$
|
0.14
|
|
|
$
|
(0.15)
|
|
Total Average Sales Price Including Effects of Commodity Derivative Financial Settlements (per Mcfe)
|
$
|
2.49
|
|
|
$
|
2.66
|
|
|
$
|
2.97
|
|
Average Lifting Costs, Excluding Ad Valorem and Severance Taxes (per Mcfe)
|
$
|
0.08
|
|
|
$
|
0.12
|
|
|
$
|
0.19
|
|
During the years ended December 31, 2020, 2019 and 2018, the Company drilled 29.0, 75.7, and 83.9 net development wells, respectively. There were no net dry development wells in 2020 and 2018, and 1.0 net dry development well in 2019.
During the years ended December 31, 2020 and 2019, the Company drilled 2.0 and 5.0 net exploratory wells, respectively. During the year ended December 31, 2018, the Company drilled no net exploratory wells. There were no net dry exploratory wells in 2020, 2019 or 2018.
At December 31, 2020, there were 23.0 net development wells and 1.0 exploratory well that are drilled but uncompleted. Additionally, there are 2.0 net exploratory wells that have been completed and are awaiting final tie-in to production.
CNX is committed to provide 492.5 Bcf of gas under existing sales contracts or agreements over the course of the next four years. The Company expects to produce sufficient quantities from existing proved developed reserves to satisfy these commitments.
Most of the Company's development wells and proved acreage are located in Virginia, West Virginia, Ohio and Pennsylvania. Some leases are beyond their primary term, but these leases are extended in accordance with their terms as long as certain drilling commitments or other term commitments are satisfied.
The following table sets forth, at December 31, 2020, the number of producing wells, developed acreage and undeveloped acreage:
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross(1)
|
|
Net(2)
|
Producing Gas Wells (including Gob Wells) - Working Interest
|
4,712
|
|
|
4,401
|
|
Producing Oil Wells - Working Interest
|
—
|
|
|
—
|
|
Producing Gas Wells - Royalty Interest
|
1,810
|
|
|
—
|
|
Producing Oil Wells - Royalty Interest
|
152
|
|
|
—
|
|
Acreage Position:
|
|
|
|
Proved Developed Acreage
|
351,537
|
|
|
351,537
|
|
Proved Undeveloped Acreage
|
43,713
|
|
|
43,713
|
|
Unproved Acreage
|
4,986,196
|
|
|
3,637,982
|
|
Total Acreage
|
5,381,446
|
|
|
4,033,232
|
|
____________
(1) All of our acreage identified as proved developed and undeveloped is controlled fully by CNX through ownership of a 100% working interest.
(2) Net acres include acreage attributable to our working interests in the properties. Additional adjustments (either increases or decreases) may be required as we further develop title to and further confirm our rights with respect to our various properties in anticipation of development. We believe that our assumptions and methodology in this regard are reasonable.
Proved Oil and Gas Reserves Quantities:
Annually, the preparation of natural gas reserves estimates is completed in accordance with CNX prescribed internal control procedures, which include verification of input data into a gas reserves forecasting and economic evaluation software, as well as multi-functional management review. As part of the annual review, management reviews and approves changes in the
future development plan and the impact to proved-undeveloped locations to ensure that annual changes are aligned with the overall strategic business plan of the Company. A detailed review is completed to ensure that all proved undeveloped locations will be fully developed within five-years of the reserves booking. As part of the development plan review, management reviews current well production data, acreage position, downstream infrastructure availability, operational leases and other commitments, financial capacity to complete the development and individual project economics in expected future gas pricing scenarios. The input data verification includes reviews of the price and operating, and development cost assumptions as well as tax rates by jurisdiction used in the economic model to determine the reserves. Also, the production volumes are reconciled between the system used to calculate the reserves and other accounting/measurement systems. The technical employee responsible for overseeing the preparation of the reserve estimates is a registered professional engineer in the state of West Virginia with over 16 years of experience in the oil and gas industry. The Company's gas reserves results, which are reported in the Supplemental Gas Data for the year ended December 31, 2020 Form 10-K, were audited by independent petroleum engineers, Netherland, Sewell & Associates, Inc. The technical person primarily responsible for overseeing the audit of the Company's reserves is a registered professional engineer in the state of Texas with over 13 years of experience in the oil and gas industry.
The gas reserves estimates are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Condensate
|
|
Consolidated
|
|
|
Natural Gas
|
|
NGLs
|
|
& Crude Oil
|
|
Operations
|
|
|
(MMcf)
|
|
(Mbbls)
|
|
(Mbbls)
|
|
(MMcfe)
|
Balance December 31, 2017 (a)
|
|
7,121,758
|
|
|
71,691
|
|
|
4,950
|
|
|
7,581,612
|
|
Revisions (b)
|
|
313,091
|
|
|
441
|
|
|
865
|
|
|
320,925
|
|
Price Changes
|
|
28,100
|
|
|
32
|
|
|
4
|
|
|
28,315
|
|
Extensions and Discoveries (c)
|
|
839,268
|
|
|
16,247
|
|
|
4,010
|
|
|
960,808
|
|
Production
|
|
(468,228)
|
|
|
(6,011)
|
|
|
(468)
|
|
|
(507,104)
|
|
|
|
|
|
|
|
|
|
|
Sales of Reserves In-Place (d)
|
|
(715,088)
|
|
|
(17,252)
|
|
|
(1,100)
|
|
|
(825,196)
|
|
Balance December 31, 2018 (a)
|
|
7,436,338
|
|
|
65,904
|
|
|
8,261
|
|
|
7,881,335
|
|
Revisions (e)
|
|
(521,617)
|
|
|
5,926
|
|
|
(5,418)
|
|
|
(518,570)
|
|
Price Changes
|
|
(40,773)
|
|
|
(740)
|
|
|
(5)
|
|
|
(45,246)
|
|
Extensions and Discoveries (c)
|
|
1,569,813
|
|
|
10,182
|
|
|
2,732
|
|
|
1,647,297
|
|
Production
|
|
(505,355)
|
|
|
(5,428)
|
|
|
(204)
|
|
|
(539,149)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2019 (a)
|
|
7,938,406
|
|
|
75,844
|
|
|
5,366
|
|
|
8,425,667
|
|
Revisions (f)
|
|
407,836
|
|
|
51,857
|
|
|
3,525
|
|
|
740,129
|
|
Price Changes
|
|
(1,019,523)
|
|
|
(50,456)
|
|
|
(4,946)
|
|
|
(1,351,934)
|
|
Extensions and Discoveries (c)
|
|
2,188,773
|
|
|
9,299
|
|
|
400
|
|
|
2,246,968
|
|
Production
|
|
(481,426)
|
|
|
(4,677)
|
|
|
(264)
|
|
|
(511,072)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2020 (a)
|
|
9,034,066
|
|
|
81,867
|
|
|
4,081
|
|
|
9,549,758
|
|
|
|
|
|
|
|
|
|
|
Proved developed reserves:
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
4,242,579
|
|
|
40,180
|
|
|
1,870
|
|
|
4,494,878
|
|
December 31, 2019
|
|
4,473,534
|
|
|
59,800
|
|
|
1,087
|
|
|
4,838,858
|
|
December 31, 2020
|
|
4,939,283
|
|
|
42,204
|
|
|
1,207
|
|
|
5,199,748
|
|
|
|
|
|
|
|
|
|
|
Proved undeveloped reserves:
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
3,193,759
|
|
|
25,724
|
|
|
6,391
|
|
|
3,386,457
|
|
December 31, 2019
|
|
3,464,873
|
|
|
16,044
|
|
|
4,278
|
|
|
3,586,809
|
|
December 31, 2020
|
|
4,094,783
|
|
|
39,664
|
|
|
2,874
|
|
|
4,350,010
|
|
__________
(a) Proved developed and proved undeveloped gas reserves are defined by SEC Rule 4.10(a) of Regulation S-X. Generally, these reserves would be commercially recovered under current economic conditions, operating methods and government regulations. CNX cautions that there are many inherent uncertainties in estimating proved reserve quantities, projecting future production rates and timing of development expenditures. Proved oil and gas reserves are estimated quantities of natural gas which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years
from known reservoirs under existing economic and operating conditions and government regulations. Proved developed reserves are reserves expected to be recovered through existing wells, with existing equipment and operating methods.
(b) The upward revision for 2018 of 321 Bcfe is primarily due to a 472 Bcfe upward revision from increased performance through our continued focus on optimization. This is partially offset by a 151 Bcfe downward revision due to plan changes.
(c) Extensions and Discoveries in 2018, 2019, and 2020 are due to the addition of wells on the Company's Shale acreage more than one offset location away with continued use of reliable technology. The Company uses reliable technologies when assigning reserves to undeveloped locations, including wire line open-hole log data, performance data, geological log cross sections, core data and statistical analysis. The statistical methods use production performance of analog wells and include data from operated and competitor wells. We also use geophysical data that includes data from our wells, published documents, state data-sits and data exchanges to confirm continuity of the formation. Total proved extensions and discoveries are a combination of proved developed and proved undeveloped reserves; and, extensions and discoveries for proven developed reserves are associated with non-operated assets and exploratory wells. In 2020 and 2019, the Company added 70 Bcfe and 77 Bcfe, respectively, related to exploratory and non-operated wells.
(d) The sales of reserves in-place is related to the divestiture of our Utica JV assets and substantially all of our conventional properties. Refer to Note 4 - Acquisitions and Dispositions for more information.
(e) The downward revisions in 2019 are due to changes in our five-year development plan due to increased dry gas investment which increased dry gas proved undeveloped reserves and decreased wet gas investment which lowered wet gas proved undeveloped reserves. The investment shift was a result of a significant decrease in forecasted liquids price realizations in the five-year plan. These five-year plan changes resulted in the removal of 872 Bcfe in reserves for wet gas investment. There was additionally a reduction of 304 Bcfe related to removal of proved undeveloped locations removed from our plans due to the SEC five-year development rule. These downward revisions were partially offset by efficiencies in operations investment in dry gas properties which increased reserves by 657 Bcfe.
(f) Upward revisions in 2020 are due to performance revisions of 579 Bcfe related to production performance and an 853 Bcfe increase in reserves due to a decrease in operating costs in 2020. These upward revisions were partially offset by negative revisions of 677 Bcfe due to changes in our development plan related to the removal of four Utica wells and 23 Marcellus wells from our development plan.
|
|
|
|
|
|
|
|
|
|
|
For the Year
|
|
|
Ended
|
|
|
December 31,
|
|
|
2020
|
Proved Undeveloped Reserves (MMcfe)
|
|
|
Beginning Proved Undeveloped Reserves
|
|
3,586,809
|
|
Undeveloped Reserves Transferred to Developed (a)
|
|
(1,152,598)
|
|
|
|
|
|
|
|
Price Revisions
|
|
(380,200)
|
|
Revisions Due to Plan Changes (b)
|
|
(691,054)
|
|
Revisions Due to Changes Due to Well Performance (c)
|
|
810,727
|
|
Extension and Discoveries (d)
|
|
2,176,326
|
|
Ending Proved Undeveloped Reserves(e)
|
|
4,350,010
|
|
_________
(a) During 2020, various exploration and development drilling and evaluations were completed. Approximately, $257,952 of capital was spent in the year ended December 31, 2020 related to undeveloped reserves that were transferred to developed.
(b) The downward revisions for 2020 plan changes is due to the removal of 88 Bcfe of reserves related to 4 Utica wells and 579 Bcfe of reserves related to 23 Marcellus wells which were removed from our development plan.
(c) The upward revisions due to a 342 Bcfe increase in reserves of liquids rich Marcellus production which requires processing due to a reduction in the Company's operating costs as a result of the CNXM take-in transaction completed in 2020. The remaining portion is due to production performance.
(d) Extensions and discoveries are due mainly to the addition of 1,465 Bcfe related to 47 net Marcellus wells within our Southwest Pennsylvania and West Virginia dry gas operations and 711 Bcfe of 23 net Utica wells within our Central Pennsylvania and Southwest Pennsylvania operations. The Company uses reliable technologies when assigning reserves to undeveloped locations, including wire line open-hole log data, performance data, geological log cross sections, core data and statistical analysis. The statistical methods use production performance of analog wells and include data from operated and competitor wells. We also use geophysical data that includes data from our wells, published documents, state data-sites and data exchanges to confirm continuity of the formation.
(e) Included in proved undeveloped reserves at December 31, 2020 are approximately 320,987 MMcfe of reserves that have been reported for more than five years. These reserves are all attributable to acreage within the current operating plan
identified by the life-of-mine timing maps for the Buchanan mine. The annual increase in proved undeveloped gob reserves is a result of a change in planned mining activity, which includes an expanded mining footprint, partially offset by the conversion to proved developed gob reserves. These reserves specifically relate to GOB (a rubble zone formed in the cavity created by the extraction of coal) production due to a complex fracture being generated in the overburden strata above the mined seam. Mining operations take a significant amount of time and our GOB forecasts are consistent with the future plans of the Buchanan Mine that was sold in March 2016 to Coronado IV LLC with the rights to this gas being retained by the Company. Evidence also exists that supports the continual operation of the mine beyond the current plan, unless there was an extreme circumstance resulting from an external factor. These reasons constitute the specific circumstances that exist to continue recognizing these reserves for CNX.
The following table indicates the changes to the Company's suspended exploratory well costs for the three years ended December 31, 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
Balance, Beginning of Period
|
$
|
8,984
|
|
|
$
|
8,178
|
|
|
$
|
6,388
|
|
Additions to Capitalized Exploratory Well Costs Pending the Determination of Proved Reserves
|
28,336
|
|
|
66,409
|
|
|
49,213
|
|
Reclassifications to Wells, Facilities and Equipment Based on the Determination of Proved Reserves
|
(28,258)
|
|
|
(65,603)
|
|
|
(46,614)
|
|
Capitalized Exploratory Well Costs Charged to Expense
|
—
|
|
|
—
|
|
|
(809)
|
|
Balance, End of Period
|
$
|
9,062
|
|
|
$
|
8,984
|
|
|
$
|
8,178
|
|
At December 31, 2020 there was one well pending the determination of proved reserves. The $9,062 of exploratory well costs capitalized for more than one year is related to one partially constructed well that the Company is currently evaluating to determine the most economic approach to access the natural gas reserves. The company expects to make a determination in 2021 to either finalize the well or to access the natural gas reserves from an alternative location.
CNX proved natural gas reserves are located in the United States.
Standardized Measure of Discounted Future Net Cash Flows:
The following information has been prepared in accordance with the provisions of the Financial Accounting Standards Board's Accounting Standards Update No. 2010-03, “Extractive Activities-Oil and Gas (Topic 932).” This topic requires the standardized measure of discounted future net cash flows to be based on the average, first-day-of-the-month price for the year. Because prices used in the calculation are average prices for that year, the standardized measure could vary significantly from year to year based on the market conditions that occurred.
The projections should not be viewed as realistic estimates of future cash flows, nor should the “standardized measure” be interpreted as representing current value to CNX. Material revisions to estimates of proved reserves may occur in the future; development and production of the reserves may not occur in the periods assumed; actual prices realized are expected to vary significantly from those used; and actual costs may vary. CNX investment and operating decisions are not based on the information presented, but on a wide range of reserve estimates that include probable as well as proved reserves and on different price and cost assumptions.
The standardized measure is intended to provide a better means for comparing the value of CNX proved reserves at a given time with those of other gas producing companies than is provided by a comparison of raw proved reserve quantities.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
|
2018
|
Future Cash Flows (a)
|
|
|
|
|
|
Revenues
|
$
|
16,577,563
|
|
|
$
|
19,489,588
|
|
|
$
|
26,610,100
|
|
Production Costs
|
(6,071,763)
|
|
|
(7,903,120)
|
|
|
(7,730,451)
|
|
Development Costs (b)
|
(1,957,519)
|
|
|
(1,121,073)
|
|
|
(1,600,128)
|
|
Income Tax Expense
|
(2,235,205)
|
|
|
(2,720,994)
|
|
|
(4,147,075)
|
|
Future Net Cash Flows
|
6,313,076
|
|
|
7,744,401
|
|
|
13,132,446
|
|
Discounted to Present Value at a 10% Annual Rate
|
(3,677,340)
|
|
|
(4,673,932)
|
|
|
(8,476,989)
|
|
Total Standardized Measure of Discounted Net Cash Flows
|
$
|
2,635,736
|
|
|
$
|
3,070,469
|
|
|
$
|
4,655,457
|
|
_________
(a) For 2020, the reserves were computed using unweighted arithmetic averages of the closing prices on the first day of each month during 2020, adjusted for energy content and a regional price differential. For 2020, this adjusted natural gas price was $1.70 per Mcf, the adjusted oil price was $35.61 per barrel and the adjusted NGL price was $13.18 per barrel. In 2020, as the result of the CNXM take-in transaction (see Note 4 - Acquisitions and Dispositions), there was a change in production costs and development costs. Historically the production costs included contractual CNXM rates but in 2020 this was replaced with actual operating costs of the midstream infrastructure. Additionally, our development costs in 2020 include capital related to connecting undeveloped Shale wells to the midstream gathering systems; in prior years this was captured within the CNXM contractual rate within production costs. These changes resulted in an increase of $932 million to the current year Standardized Measure of Discounted Net Cash Flows.
(b) Development costs for 2020 include $402,174 of plugging and abandonment costs and $286,724 of Midstream capital on an undiscounted pre-tax basis. On a PV-10 pre-tax discounted basis, these amounts equate to $18,357 and $231,512, respectively. The addition of Midstream capital is the result of the Merger that occurred on September 28, 2020 (See Note 4 - Acquisitions and Dispositions).
For 2019, the reserves were computed using unweighted arithmetic averages of the closing prices on the first day of each month during 2019, adjusted for energy content and a regional price differential. For 2019, this adjusted natural gas price was $2.24 per Mcf, the adjusted oil price was $44.31 per barrel and the adjusted NGL price was $19.10 per barrel.
For 2018, the reserves were computed using unweighted arithmetic averages of the closing prices on the first day of each month during 2018, adjusted for energy content and a regional price differential. For 2018, this adjusted natural gas price was $3.28 per Mcf, the adjusted oil price was $51.68 per barrel and the adjusted NGL price was $27.58 per barrel.
The following are the principal sources of change in the standardized measure of discounted future net cash flows for consolidated operations during:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2020
|
|
2019
|
|
2018
|
Balance at Beginning of Period
|
$
|
3,070,469
|
|
|
$
|
4,655,457
|
|
|
$
|
3,131,398
|
|
Net Changes in Sales Prices and Production Costs
|
(819,247)
|
|
|
(2,826,725)
|
|
|
1,732,229
|
|
Sales Net of Production Costs
|
(719,441)
|
|
|
(1,130,685)
|
|
|
(995,630)
|
|
Net Change Due to Revisions in Quantity Estimates
|
322,820
|
|
|
(252,796)
|
|
|
307,030
|
|
Net Change Due to Extensions, Discoveries and Improved Recovery
|
268,196
|
|
|
654,027
|
|
|
534,052
|
|
Development Costs Incurred During the Period
|
434,273
|
|
|
739,874
|
|
|
844,081
|
|
Difference in Previously Estimated Development Costs Compared to Actual Costs Incurred During the Period
|
(129,642)
|
|
|
(323,922)
|
|
|
(434,817)
|
|
Purchase of Reserves In-Place
|
—
|
|
|
—
|
|
|
209,630
|
|
Sales of Reserves In-Place
|
—
|
|
|
—
|
|
|
(434,103)
|
|
Changes in Estimated Future Development Costs
|
(499,316)
|
|
|
(24,469)
|
|
|
(49,294)
|
|
Net Change in Future Income Taxes
|
138,404
|
|
|
409,797
|
|
|
(507,410)
|
|
Timing and Other
|
390,391
|
|
|
586,591
|
|
|
(69,087)
|
|
Accretion
|
178,829
|
|
|
583,320
|
|
|
387,378
|
|
Total Discounted Cash Flow at End of Period
|
$
|
2,635,736
|
|
|
$
|
3,070,469
|
|
|
$
|
4,655,457
|
|
Supplemental Quarterly Information (unaudited):
(Dollars in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
|
2020
|
|
2020
|
|
2020
|
|
2020
|
Revenue (a)
|
$
|
411,401
|
|
|
$
|
145,088
|
|
|
$
|
61,609
|
|
|
$
|
622,131
|
|
Expenses (b)
|
$
|
149,004
|
|
|
$
|
125,548
|
|
|
$
|
142,327
|
|
|
$
|
134,775
|
|
Net (Loss) Income (c)
|
$
|
(305,222)
|
|
|
$
|
(130,487)
|
|
|
$
|
(188,793)
|
|
|
$
|
195,758
|
|
Net (Loss) Income Attributable to CNX Resources Shareholders
|
$
|
(329,086)
|
|
|
$
|
(145,749)
|
|
|
$
|
(204,698)
|
|
|
$
|
195,758
|
|
(Loss) Earnings Per Share:
|
|
|
|
|
|
|
|
Basic (Loss) Earnings Per Share
|
$
|
(1.76)
|
|
|
$
|
(0.78)
|
|
|
$
|
(1.03)
|
|
|
$
|
0.88
|
|
Diluted (Loss) Earnings Per Share
|
$
|
(1.76)
|
|
|
$
|
(0.78)
|
|
|
$
|
(1.03)
|
|
|
$
|
0.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
March 31,
|
|
June 30,
|
|
September 30,
|
|
December 31,
|
|
2019
|
|
2019
|
|
2019
|
|
2019
|
Revenue (a)
|
$
|
275,234
|
|
|
$
|
602,109
|
|
|
$
|
526,681
|
|
|
$
|
504,747
|
|
Expenses (b)
|
$
|
147,928
|
|
|
$
|
153,835
|
|
|
$
|
153,833
|
|
|
$
|
182,035
|
|
Net (Loss) Income (c)
|
$
|
(64,651)
|
|
|
$
|
192,694
|
|
|
$
|
143,960
|
|
|
$
|
(240,055)
|
|
Net (Loss) Income Attributable to CNX Resources Shareholders
|
$
|
(87,337)
|
|
|
$
|
162,477
|
|
|
$
|
115,538
|
|
|
$
|
(271,408)
|
|
(Loss) Earnings Per Share:
|
|
|
|
|
|
|
|
Basic (Loss) Earnings Per Share
|
$
|
(0.44)
|
|
|
$
|
0.85
|
|
|
$
|
0.62
|
|
|
$
|
(1.45)
|
|
Diluted (Loss) Earnings Per Share
|
$
|
(0.44)
|
|
|
$
|
0.84
|
|
|
$
|
0.61
|
|
|
$
|
(1.45)
|
|
_________
(a) Includes natural gas, NGLs, and oil revenue; gain (loss) on commodity derivative instruments, purchased gas revenue and midstream revenue.
(b) Includes exploration and production costs and other operating expense; excludes depreciation, depletion and amortization, impairment charges, selling, general and administrative, gain (loss) on debt extinguishment, interest expense and other expense.
(c) Includes impairment charges of $61,849 and $473,045 that were recorded during the three months ended March 31, 2020 related to CNX's exploration and production properties and goodwill, respectively, and $327,400 and $119,429 that were recorded during the three months ended December 31, 2019 related to CNX's exploration and production properties and unproved properties, respectively. See Note 1 - Significant Accounting Policies in Item 8 of this Form 10-K for additional information.