CONSOL Energy Inc. – First Quarter 2012 Earnings Call
April 26, 2012
J. Brett Harvey, Chairman and CEO
Nicholas J. DeIuliis, President
William J. Lyons, CFO
Robert F. Pusateri, EVP, Sales, Marketing, & Transportation
Cautionary Language
2
This presentation contains statements, estimates and projections which are forward-looking statements (as defined in
Section 21E of the Securities Exchange Act of 1934, as amended). Such statements include estimates of reserves and
resources, projections and estimates concerning the timing and rates of return of future projects, and our future production,
revenues, income and capital spending. These forward-looking statements involve risks and uncertainties that could cause
actual results to differ materially from those statements, estimates and projections. Accordingly, investors should not place
undue reliance on forward-looking statements as a prediction of future actual results. Factors that could cause future actual
results to differ from the forward-looking statements are described in detail under the captions "Forward Looking
Statements" and "Risk Factors" in CONSOL Energy Inc.’s annual report on Form 10-K for the year ended December 31,
2011 filed with the Securities and Exchange Commission (SEC), as updated by any subsequent Form 10-Qs. The forward-
looking statements in this presentation speak only as of the date of this presentation; we disclaim any obligation to update
the statements, and we caution you not to rely on them unduly.
The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible oil and
gas reserves that a company anticipates as of a given date to be economically and legally producible and deliverable by
application of development projects to known accumulations. We may use certain terms in this press release, such as EUR
(estimated ultimate recovery), unproved reserves and total resource potential, that the SEC's rules strictly prohibit us from
including in filings with the SEC. These measures are by their nature more speculative than estimates of reserves prepared
in accordance with SEC definitions and guidelines and accordingly are less certain. We also note that the SEC strictly
prohibits us from aggregating proved, probable and possible reserves in filings with the SEC due to the different levels of
certainty associated with each reserve category.
Except for proved reserve data, the information this presentation is based on a summary review of the title to the gas rights
we hold, as well as a summary review of the title to the coal from which many of our coalbed methane rights derive. As is
customary in the gas industry, prior to the commencement of gas drilling operations on our properties, we conduct a
thorough title examination and perform curative work with respect to significant defects. We are typically responsible for
curing any title defects at our expense. This curative work may include the acquisition of additional property rights in order
to perfect our ownership for development and production of the gas estate.
This presentation does not constitute an offer to sell or a solicitation of offers to buy securities of CONSOL Energy Inc.
3
Investment Thesis and Scorecard
Tier One Coal and E&P Assets Provide Synergies and Risk Reduction
Low cost, high-BTU coal that can travel and transform target markets
Low cost E&P assets; adding liquid targets to the 2012 program
Long-Lived Assets Enable Strategic Value Enhancements
Integration with partners going well
Monetized underutilized assets to pull value forward
Solid Balance Sheet and Liquidity To Capitalize on Our Organic Projects
$2.7B of liquidity and solid debt leverage ratios
Consistent Operating and Financial Results
Solid earnings and operational cash flow – hit our 1Q12 production guidance
Reinstated 2012 Guidance
Trimmed sales guidance by 1 MTs
Exports raised to 11-12 MTs from 9-11 MTs
CONSOL Continues to Respond to Challenging Market Conditions
Blacksville and Buchanan longwall operations will be restarted
Increased focus on cost
4
Energy Markets
Experienced a slowdown in both sides of our business
and CONSOL is adjusting
Coal
Idled mines – kept our inventories at manageable
levels
E&P
Shifted capital to higher return areas and prepared to
expand our product lines to include liquids
Actions
Intensified focus on costs
Adjusting To Weak Energy Markets
.
4.5 billion tons of proven and probable coal
reserves
Raising 2012 estimated coal exports of
approximately to 11-12 MTs from 9-11 MTs
Trimming 2012 sales guidance by about 1 MTs to
58.9 – 60.9 MTs
New 2Q12 sales guidance of 14.2 – 14.9 MTs
3.5 Tcfe of proved reserves
628,000 gross Marcellus Shale acres in the JV with
Noble Energy
200,000 gross Utica Shale acres in Ohio in the JV
with Hess Corporation
2Q12 production guidance of 37 - 38 Bcf
50% of shale wells targeting liquids-rich strata
Coal and Gas: Rich Asset Base With Some Vertical Integration
5
Manages land
assets of the
Company
R&D facility
devoted to coal,
gas, and energy
utilization and
production
Distributor of
mining, gas
drilling, and
industrial
supplies
Fleet of 625
barges, 22
towboats and 5
harbor boats
Baltimore Port with
capacity to load 14
million tons of coal
per year
Manages gas
gathering assets
of the Company
CONSOL Energy Inc
Coal Natural Gas
Other
Midstream CNX Land Resources
Inc.
Research &
Development
Fairmont Supply
Company
River & Dock
Services
CNX Marine Terminals
Inc.
6
Operated Our Coal and Gas Operations Efficiently
We Faced Challenging Energy & Coking Coal Markets
As a Result, CONSOL Energy:
Earned $97 million, or $0.42 per diluted share
Generated $229 million of cash flow from operations, and
Generated $324 million in EBITDA (a non-GAAP financial measure)*
Year-Over-Year Measures are Lower Driven By:
Blacksville and Buchanan longwalls idled for a combined seven weeks, and
Unusual weather exacerbated the decline in natural gas prices for our
unhedged production
*See first quarter 2012 earnings release for reconciliation.
Posted Solid Quarterly Results
7
Goal is to Maintain our Strong Liquidity Position
Operating Cash Flow - $MM
2012 2011
Net Cash Provided by Operations $229 $435 ($206)
Capital Expenditures ($306) ($255) ($51)
Proceeds From Assets of Sales $29 $0 $29
Net Payments on Short-Term and Long-Term Debt $0 ($64) $64
Proceeds From Issuance of Common Stock $0 $0 $0
Debt Insurance & Financing Fees $0 ($5) $5
Dividends Paid ($28) ($23) ($5)
Other ($12) $7 ($19)
Net (Decrease)/Increase in Cash ($88) $95 ($183)
March 31,
Year To Date Year-Over
Year
Change
8
Strong Liquidity Position of $2.7 Billion
Cash on Hand of $287 Million
About $39 Million Available on Accounts Receivable Securitization Facility
Over $2 Billion Available on Credit Facilities
Amount/ Amount Letters Amount
March 31, 2012 ($MM) Capacity Drawn of Credit Available
Cash and Cash Equivalents $287 $0 $0 $287
Accounts Receivable Securitization $200 $0 $161 $39
Revolving Credit Facility $2,500 $0 $171 $2,329
TOTAL $2,987 $0 $332 $2,655
9
Revolving Credit Facilities Debt Covenants
CONSOL has Two Credit Facilities for each of its Coal and E&P Businesses
CONSOL Energy and CNX Gas Currently Maintain Strong Leverage Ratios
Limit
March 31,
2012
CONSOL Energy Revolver:
Maximum Leverage Ratio > 4.75 to 1.0 2.10 to 1.0
Minimum Interest Coverage Ratio < 2.50 to 1.0 5.84 to 1.0
Senior Secured Leverage Ratio > 2.00 to 1.0 0.07 to 1.0
CNX Gas Revolver:
Maximum Leverage Ratio > 3.50 to 1.0 0.00 to 1.0
Minimum Interest Coverage Ratio < 3.00 to 1.0 35.79 to 1.0
10
E&P Division Goals Migrating Capital and Activity to High Value Areas
Program Goals to Drive CBM and Marcellus Costs Lower
Marcellus: multi-well pads and lengthening laterals
CBM: lower contractor rates and field services
Marcellus Horizon Objectives
Ramp up development of our wet acreage position with our partner Noble Energy
Focusing on 100% NRI acreage in Greene and Westmoreland Counties, PA
Further delineate Central PA and Northern WV position
99 gross wells expected for 2012; 39 wells targeting liquids
Utica Horizon Objectives
Explore and exploit the Ohio Utica Formation with our partner Hess Corporation
22 gross wells expected for 2012; 22 wells targeting liquids
11
2012 Drilling Focuses on Liquids Exposure
OH
PA
WV
MD
VA
Dry Gas
Wet Gas
22 (Gross) Utica Shale Wells 39 (Gross) Marcellus Shale Wells
12
Drilling Results and Forecast
Formation Region 2009 2010 2011 1Q12A 2Q12E 2012E
Coalbed Methane Virginia 204 181 214 14.0 13.0 52.0
Total Shales: 17 24 78 27.0 27.0 121.0
Marcellus Shale Central PA 0 4 19 8.0 5.0 13.0
Southwest PA 17 20 50 14.0 17.0 79.0
West Virginia 0 0 9 4.0 2.0 6.0
Totals 17 24 78 26.0 24.0 99.0
Utica Shale 0 0 0 1.0 3.0 22.0
Conventional and Other 18 129 36 13.0 6.0 25.0
Totals 239 334 328 40.5 32.5 137.0
% Shales Wells: Dry gas target 100% 100% 100% 78% 63% 49%
% Shales Wells: Liquids target 0% 0% 0% 22% 37% 51%
% Shales Wells: Completed 100% 96% 88% NM NM 100%
Total Production (Bcfe) 94 128 154 38 37-38 157-159
Total Capital ($MM) 335 420 662 98.5 NM 623
Gross Wells Drilled By Formation From 2009 Through 2012E
13
Marketing 2Q12 and 2012 Forecasts
85%
7% 8% 0%
Sales Tons by Product Year 2012
Thermal Low Vol High Vol Mid Vol
2nd
Quarter
2012
Year
2012
2nd
Quarter
2011
Year
2011
Thermal 12.4 50.9 13.5 52.8
Low Vol 0.8 4.1 1.4 5.6
High Vol 1.3 4.6 1.5 4.8
Mid Vol 0.1 0.3 0.0 0.0
Total 14.5 59.9 16.4 63.2
Contracted tons for 2012: 93%
Priced: About 91% priced with more under negotiation
Unpriced: About 50% unsold is High-Vol
Approximately 80% of the Low-Vol & High-Vol met coal tons are expected to be shipped overseas
Approximately 90% of the thermal coal tons are expected to be delivered domestically
Developing new markets for all thermal and met
9% of the overseas thermal coal sales will be shipped to our new market in India
Added three new customers
85%
5% 9% 1%
Sales Tons by Product 2nd Quarter 2012
Thermal Low Vol High Vol Mid Vol
2012 Coal Sales Facts and Goals
14
Our Assets, Strategy and People Create An
Investment Opportunity
Coal and gas operations are long-lived, low-cost, and provide solid growth
Our well-capitalized assets provide more consistent operational execution
Our emphasis on safety and compliance increases reliability
Balance sheet remains strong with $2.7 billion of liquidity
Valuation remains compelling using sum of the parts
Marcellus liquids and Utica results (2Q12) to drive valuation improvement
Stabilization and rebound in the met coal markets
Solid Execution of our core program and coal projects to serve a rebounding market
CONSOL Energy Inc. – Questions?
15
Top Related