Cnx Resources Corporation · NYSE:CNX
Cnx Resources — CONSOL Energy — Investor Day (December 2016)
83 slides from Cnx Resources's investor day presentation, Dec 13, 2016
Slide 1: Analyst and Investor Day
ANALYST AND INVESTOR DAY December 13, 2016
Slide 2: Cautionary Language
Cautionary Language 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). Statements that are not historical, are forward-looking, and include our operational and strategic
Slide 3: Agenda
Agenda Company Overview Nick DeIuliis, President and CEO Exploration & Production Tim Dugan, COO Andrea Passman, VP-E&P Development Don Rush, VP-E&P Marketing Diversified Business Units Steve Johnson, EVP-DBU Rodney Wilson, Director-Business Development Marshall Roberts, Director-CONVEY Water System
Slide 4: CONSOL Energy's Evolution
CONSOL Energy’s Evolution With the sale of the Looking to the future – Buchanan mine and working towards other remaining legacy complete separation Announces sale of coal assets, CONSOL’s from coal; monetizing five thermal coal mines transformation into a assets where possible; in West Virginia to p
Slide 5: CONSOL Energy Has Continued to Transform Itself in 2016
CONSOL Energy Has Continued to Transform Itself in 2016 Restructured Turned DUC Agreement Inventory RBL with Zero-Based Online Penguins Reaffirmation Integrated P2AA Asset Budgeting P2AA Asset Optimization Model Optimization (Phase 1) (Phase 2) Jan 2016 NBL JV Today Buchanan Re-org Restarted Resolut
Slide 6: Who We Are: Differentiating Ourselves Through Three Pillars
Who We Are: Differentiating Ourselves Through Three Pillars Values: • Never compromised regardless of circumstance • Operate daily free of injuries and environmental incidents • Pursuit of perfection driving towards best-in-class performance • Mitigates business risk profile and supports license to
Slide 7: Business Philosophy: Zero-Based Budgeting in Action
Business Philosophy: Zero-Based Budgeting in Action Transformed balance sheet: Reductions in Expenses 2012-2016E • Reduced legacy liabilities by $3 billion Reduced expenses: Overhead(1) • Cash servicing costs reduced by more than Executive Pay $250 million since 2012 Legacy Liabilities(2) Selling G&
Slide 8: The Path Forward: Realization of Value
The Path Forward: Realization of Value How we plan to close the value gap: Today $22.05 Closing price 12/7/2016 1 GROW EBITDA – PRUDENT GROWTH OF E&P PRODUCTION EFFICIENT CAPITAL ALLOCATION TO HIGH IRR, NAV ACCRETIVE AOIs 2 PAY DOWN DEBT – ORGANIC FREE CASH FLOW AND ASSET MONETIZATIONS DRIVE LEVERAG
Slide 9: Weathered Downturn Without Issuing Equity
Weathered Downturn Without Issuing Equity Since the beginning of 2014, total follow-on Follow-On Equity Issued Across equity issued by Appalachian peers totaled Energy Industry FY2015-YTD 2016 $10.6 billion: $40,000 • All seven Appalachian peers have issued follow- on equity since the beginning of 2
Slide 10: CONSOL Energy Represents a Unique Value Story
CONSOL Energy Represents a Unique Value Story Driving NAV/share growth: • Significant increases to estimated ultimate recoveries (EURs) Focus on • Reducing drilling and completion (D&C) costs and capital intensity NAV/Share Growth • Proving up and de-risking reserves • Accelerating activity • Contin
Slide 11: Exploration & Production
EXPLORATION & PRODUCTION 11
Slide 12: E&P Operations: NAV/Share Drivers
E&P Operations: NAV/Share Drivers MAJOR OPERATIONAL IMPROVEMENTS SINCE 2014 STACKED PAY OPPORTUNITIES CONVERTING NON-CORE ACREAGE TO CORE 12
Slide 13: Continuous Improvement
Continuous Improvement Capital Efficiency 160% 140% 120% NAV growth 100% being driven BTAX IRR (%) 1.24 Mcfe/$ 1.83 Mcfe/$ 2.78 Mcfe/$ by improved 80% capital 60% efficiency 40% 20% 0% 1.43 1.52 0.46 0.60 0.78 0.83 0.97 1.04 1.27 1.64 1.95 2.04 2.20 1.03 1.09 1.24 1.47 1.63 1.85 1.98 1.99 2.03 2.16
Slide 14: E&P Industry: F&D Costs
E&P Industry: F&D Costs Drilling Finding and Development Cost 5-yr. Average 2011-2015(1) $8.00 CONSOL has $7.00 had some of $6.00 the lowest F&D $5.00 $/Mcfe costs in the $4.00 industry over $3.00 the last $2.00 five years $1.00 $0.80 $0.00 2 1 3 4 5 6 7 CNX Source: Scotia Howard Weil: 2015 F&D Cost
Slide 15: Technological Evolution Driving Growth
Technological Evolution Driving Growth Tools and Procedures 2014 2016E Earth model - ✔ Fracture simulation - ✔ Reservoir simulation - ✔ Rate transient analysis (RTA) - ✔ Risk analysis - ✔ Portfolio NAV optimization - ✔ NAV/Share Growth Drivers Since 2014: • 100% increase in EUR/1,000' • 38% improvem
Slide 16: Operational Evolution
Operational Evolution Key Performance Metrics(1) 2014 2016E Average EUR (Bcfe/1,000’) 1.4 2.8 Total Marcellus capital ($/ft) 1,345 835 Lease operating expense (LOE) ($/Mcfe) 0.41 0.19 Average drilling days on well 27 18 Average completion days on well 32 15 Completion stage spacing (ft) 300 150-225
Slide 17: Well Performance Over Time
Well Performance Over Time Horizontal well production per 1,000’ since June 2015 – CNX vs. Peers 2,000 1,500 Mcfe/d 1,000 500 0 CNX 1 2 3 4 5 CNX 2014 - 5/2015 3 Mo (20:1) 6 Mo (20:1) Avg 3 Mo (20:1) Avg 6 Mo (20:1) Improved well performance: CNX Well Performance • Enhanced completions design 700 •
Slide 18: Large Acreage Position
Large Acreage Position CNX vs. Appalachian Peers – Acreage Position and Production Only 4% of total Marcellus and Utica Shale inventory 1,400,000 2,500 developed to date: • 8% of the Marcellus acreage 1,200,000 developed 2,000 - Marcellus 90% HBP 1,000,000 Daily Production (MMcfe/d) 490,000 • 1% of
Slide 19: New World View: Assets Before and After JV Separation
New World View: Assets Before and After JV Separation Post-JV Dissolution Pre-JV Dissolution SWPA WV CPA OH Total Total Change Upper Devonian Net Acres 102,000 112,000 21,000 - 235,000 280,000 (45,000) Net Acres 98,000 61,000 232,000 15,000 406,000 436,000 (30,000) Fee Acres 32,000 1,000 20,000 3,00
Slide 20: Dissolution of the Marcellus Shale Joint Venture
Dissolution of the Marcellus Shale Joint Venture 64% increase in Marcellus core acreage: Post-Exchange Marcellus Acreage Map • Full control of stacked pay opportunity set • Incremental 85 MMcfe/d of production • Further strengthens balance sheet • Higher weighted average EUR, compared to pre-dissolu
Slide 21: Engineering Workflow Drives Decisions
Engineering Workflow Drives Decisions 3D Frac Modeling Earth Modeling Production Modeling Forecasting Portfolio Risk Analysis ITERATIVE CYCLE Development Optimization Rate Transient Analysis NPV/Well 21
Slide 22: Asset Region 1: Southwest Pennsylvania Overview
Asset Region 1: Southwest Pennsylvania Overview Marcellus Shale average EUR/1,000’ of lateral increased 29% to 2.7 Bcfe(1) • Total net acres: 98,000 • Total NRI: 89% • Sizable capital expenditure in the next 2 years • 2 rigs in 2017 and 3 rigs in 2018 Utica Shale • Average EUR/1,000’ of 3.1 Bcf(1) •
Slide 23: Southwest Pennsylvania Modeling Inputs and Economics
Southwest Pennsylvania Modeling Inputs and Economics Reserves Detail Assumptions SWPA Marcellus Type Curve (2.7 Bcfe/1000') Gross EUR (Bcfe) 22.6 IP (MMcfe/d) 19.0 600,000 BTU 1,130 Decline 69% BTAX ROR % (3) B-factor 1.65 500,000 Gas Production (Mcf/month) Interest / Net Locations EUR/1000’ (Bcfe)
Slide 24: Asset Region 2: West Virginia Overview
Asset Region 2: West Virginia Overview Marcellus Shale average EUR/1,000’ of lateral increased 61% to 2.9 Bcfe(1) • Total net acres: 61,000 • Total NRI: 86% • Focus on completing DUC inventory: sunk capital results in improved IRR Utica Shale • Average EUR/1,000’ of 2.8 Bcf • Total net acres: 162,00
Slide 25: West Virginia Modeling Inputs and Economics
West Virginia Modeling Inputs and Economics Reserves Detail Assumptions WV Marcellus Type Curve (2.9 Bcfe/1000') Gross EUR (Bcfe) 22.8 IP (MMcf/d) 14.0 BTU 1,260 Decline 69% 400,000 Gas BTAX ROR % (4) 50,000 B-factor 1.65 Gross Gas Production (Mcf/month) NGL/CND Production (BBL/month) Interest / Net
Slide 26: Asset Region 3: Central Pennsylvania Overview
Asset Region 3: Central Pennsylvania Overview Marcellus Shale • Average EUR/1,000’ of 1.8 Bcf(1) • Total net acres: 232,000 • Total NRI: 88% • Weighted average EUR/1000’ for the entire region is 1.5 Bcf • Evaluate Marcellus development in conjunction with Utica Utica Shale average EUR/1,000’ of late
Slide 27: Central Pennsylvania Modeling Inputs and Economics
Central Pennsylvania Modeling Inputs and Economics Reserves Detail Assumptions CPA Marcellus Type Curve (1.8 Bcf/1000') Gross EUR (Bcf) 15.8 IP (MMcf/d) 13.3 BTU 1,000 400,000 Decline 69% B-factor 1.65 BTAX ROR % (3) Gas Production (Mcf/month) Interest / Net Locations EUR/1000’ (Bcf) 1.8 Realized Pr
Slide 28: Asset Region 4: Ohio Overview
Asset Region 4: Ohio Overview Total Ohio Utica: • Total net acres: 119,000 • Total NRI: 89% Utica Dry: • Average EUR/1,000’ of 2.8 Bcfe(1) • 23,000 net undeveloped acres • Continued development of Monroe County • 101 net locations Utica Wet: • Average EUR/1,000’ of 2.1 Bcfe(2) • 42,000 net undevelop
Slide 29: Ohio Modeling Inputs and Economics
Ohio Modeling Inputs and Economics OH Utica Total Assumptions OH Wet Utica Type Curve (2.1 Bcfe/1000') Net Locations(1) ~517 IP (MMcf/d) 16.3 Wells Online (9/30/16) 94 Decline 71% 500,000 30,000 Gas B-factor 1.40 BTAX ROR % (4) Gross Gas Production (Mcf/month) NGL/CND Production (BBL/month) Ohio Wet
Slide 30: Virginia Coalbed Methane
Virginia Coalbed Methane Virginia coalbed methane (CBM): • 267,000 net acres - 88,000+ undeveloped acres - WI / NRI: 100% / 87.5% • 4,000+ wells online - 3,690 future locations - 0.5 Bcf/well average EUR - 2,000+ refrac opportunities • Net production: 182 MMcf/d - Annual decline rate of approximatel
Slide 31: Development Methodology
Development Methodology CONSOL utilizes a portfolio Geology/ GIS Land, Title, Drilling, optimization development Reservoir Engineering Mapping JAD Marketing Midstream Water Completion, Production methodology to: • Assess the value of the assets within the portfolio to drive decision making targeted
Slide 32: New World View: Stacked Pay
New World View: Stacked Pay • 40+ years of stacked pay inventory(1) P Formation • a The JV separation gives CONSOL complete y Name operational control in stacked pay opportunities Rhinestreet • The Upper Devonian provides triple stacked pay potential, on top of Marcellus and Utica Cashaqua • Stacked
Slide 33: Stacked Pay Value for SWPA: Pad Level Example
Stacked Pay Value for SWPA: Pad Level Example Stacked Pay Pad Economics Example(1) $160,000 120% Unstacked NPV Stacked pay development improves IRR $140,000 Stacked NPV Unstacked IRR % 100% by 10-20 percentage points Stacked IRR % $120,000 • Marginal horizons may be pulled into the BTAX NPV ($ in mi
Slide 34: Stacked Pay Value for SWPA Marcellus: Well Level
Stacked Pay Value for SWPA Marcellus: Well Level 2016 Capital Efficiency Stacked Pay Potential 200% 180% 160% Capital Efficiency Mcfe/$ 140% Unstacked (actual) 2.78 Stacked (potential) 3.02 120% Change +9% BTAX IRR +15 percentage points BTAX IRR (%) 100% 80% 60% 40% 20% 0% 2.66 2.87 1.32 1.38 1.56 1
Slide 35: Stacked Pay Optimization: Richhill Field
Stacked Pay Optimization: Richhill Field Richhill Case Study • 33% NPV uplift due to stacked pay development • 17,000 Marcellus acres with Utica rights • Marcellus damp gas on its own requires processing • Blending Marcellus with dry Utica gas allows the avoidance of processing costs • Concurrent de
Slide 36: Upper Devonian: Rhinestreet and Burkett
Upper Devonian: Rhinestreet and Burkett Provides triple stacked pay potential, on top of Marcellus and Utica • 235,000 net acres • 16 operated Upper Devonian wells • Combination with Marcellus and Utica development driven by gas price trigger SWPA 7000’ Burkett 70% 60% 50% BTAX IRR (%) 40% 30% 20% 1
Slide 37: Moving Utica Non-Core to Core
Moving Utica Non-Core to Core Delineating the Utica through operated Delineation Opportunities and non-operated wells, data trades, and data purchases: • Provides geologic and reservoir data to evaluate NAV impact and helps assess development risk • 170,000 dry Utica core acres • Potential to increa
Slide 38: Why We Love the Utica: Gaut 4IH
Why We Love the Utica: Gaut 4IH Westmoreland County, PA Gaut 4IH 61.4 MMcf/d IP Initial SICP = 9,921 psig 5,808’ Lateral Length 7.8 Bcf by 01/2017 30,000 10,000 9,000 25,000 8,000 7,000 Casing Pressure (psi) Flow Rate (Mcf/d) 20,000 6,000 15,000 5,000 4,000 10,000 3,000 2,000 5,000 1,000 0 0 9/23/15
Slide 39: Stacked Pay with the Utica: The Size of the Prize
Stacked Pay with the Utica: The Size of the Prize • 360,000 net acres of double stacked pay opportunity 360,000+ in the core and non-core areas Net Acres • 180,000 core acres with double stacked pay opportunity • Utica stacked pay delineation in the next 2 years drives 20 Tcfe stacked pay developmen
Slide 40: Two-Year Development Plan
Two-Year Development Plan 2017 2018 • Consistently complete DUCs ($ in millions) TD FRAC TIL Capex TD FRAC TIL Capex from December 2016 through Marcellus 12 13 13 $80 54 42 40 $260 2018 SWPA Utica 0 0 0 $0 3 3 3 $40 Upper Devonian - 2 3 $15 - - - - - Total of 33 DUCs to be Marcellus - 20 18 $95 - -
Slide 41: E&P Capital Expenditure Guidance
E&P Capital Expenditure Guidance E&P Capital and Production Plans • Capital expenditure projections based ($ in millions) 2016E 2017E 2018E on current market conditions and forecast Drilling and Completion $175 $465 - Flexibility exists to adjust Midstream $20 $40 spending as necessitated by Land, P
Slide 42: E&P Marketing
E&P MARKETING 42
Slide 43: E&P Marketing: NAV/Share Drivers
E&P Marketing: NAV/Share Drivers FLEXIBLE FT STRATEGY TO MINIMIZE COSTS AND ENSURE PRODUCTION GROWTH SIGNIFICANT HEDGE BOOK PROTECTING DOWNSIDE, WHILE PRESERVING MEANINGFUL UPSIDE MAXIMIZING CASH FLOW AT THE WELLHEAD 43
Slide 44: E&P Marketing
E&P Marketing Ability to deal with the increasing uncertainty in a volatile marketplace: • A consistent, yet flexible strategy is necessary to help mitigate the uncertainty • Strategic and tactical expertise Contributing to NAV/share through a "barbell" strategy: • Previously focused primarily on pr
Slide 45: Increased Volatility
Increased Volatility Current infrastructure and systems are not U.S. LNG Export Forecast built to handle new gas market: • Storage capacity has remained the same, while supply has increased significantly - 50 Bcf/d in 2005 vs. approximately 75 Bcf/d in 2017 • Existing supply quickly falls, over 20%
Slide 46: Volatility Can Be Good
Volatility Can Be Good Take-away capacity is coming to the region: Projected Basin Takeaway Capacity 50,000 • Over 18 Bcf/d of projects in process: question of 45,000 when, not if 40,000 • Only need half to come online by 2018 to support the expected production growth 35,000 Average MMcf/d • It will
Slide 47: The Benefits of Flexible Firm Transportation
The Benefits of Flexible Firm Transportation FT strategy: Transportation, Gathering, & Processing • Sufficient short- and long-term FT at a cost Commitments and Differentials(1) lower than peers going to markets that $20.0 maximize netbacks without over-committing $- - Use FT, IT, AMAs, customers’ c
Slide 48: The Benefits of Flexible Firm Transportation (Cont'd)
The Benefits of Flexible Firm Transportation (Cont’d) Avoiding long-term, burdensome FT on new projects that go underwater: • Many greenfield project demand fees appear to exceed the forecasted price uplift at various basis locations • Short-term gains will be minimal compared to long-term deteriora
Slide 49: Firm Transportation Management
Firm Transportation Management Diversified sales and FT portfolios: Sales Portfolio Market Mix • Result in competitive basis differentials and 600 balanced basket of prices 400 Bcf • Strategically aligned with the best AMA partners in 200 our markets to optimize asset value and realize other tangibl
Slide 50: Hedging Strategy
Hedging Strategy Newly instituted programmatic hedge program: Hedge Position (Outer ring = NYMEX; Inner ring = Basis) • Systematically layering in hedges to protect margins on up to 90% of proved developed production • Protecting from in-basin blowout through regional basis hedges 2017 2018 • Lock i
Slide 51: NGL Strategy
NGL Strategy Processing flexibility on a third of wet volumes: Wet Gas Flexibility • Avoid processing fees when NGL pricing is low Gas $ High • Capture NGL uplift during peak pricing Avoid Processing Optimize • Leverage dry Utica blend-stock Plant optionality on nearly half of wet volumes: NGL $ Low
Slide 52: Key Marketing Financial Parameters
Key Marketing Financial Parameters Expected Market Mix 2017E 2018E Columbia (TCO) 14% 16% TETCO (M2) 38% 41% TETCO (M3) 12% 7% Dominion (DTI) 15% 13% East Tennessee 9% 7% TETCO ELA & WLA 6% 5% Midwest (Michcon) 6% 11% 100% 100% Estimated utilized firm transportation demand expense ($ in millions) $7
Slide 53: Diversified Business Units
DIVERSIFIED BUSINESS UNITS 53
Slide 54: Diversified Business Units: NAV/Share Drivers
Diversified Business Units: NAV/Share Drivers GROWING MISCELLANEOUS OTHER EBITDA SIGNIFICANTLY REDUCING LEGACY LIABILITIES $400-$600 MILLION IN 2017 ASSET SALES 54
Slide 55: Business Development: Strategy
Business Development: Strategy CONSOL has a strong track record of successful divestitures: • 20 NAV-enhancing divestitures since 2012 • Over $5 billion of combined value Team is now focused on divesting E&P assets: • Recent Marcellus JV separation provides more control and flexibility with asset ba
Slide 56: Other Miscellaneous: Income and Expense Sources
Other Miscellaneous: Income and Expense Sources Increasing value from a range of often overlooked sources: Miscellaneous Other Income 2016E 2017E 2018E Baltimore Terminal Royalty Income Right of Way Sales CONVEY Water Systems Rental Income & Other Miscellaneous Other Costs 2016E 2017E 2018E Baltimor
Slide 57: CONVEY Water Systems
CONVEY Water Systems Provides water related services for CNX and third party upstream E&P companies: • Fresh water delivery for well completion operations • Recycle and disposal of produced fluids • One of the largest water pipeline network in Appalachia • 2017E water life cycle management of approx
Slide 58: Baltimore Marine Terminal
Baltimore Marine Terminal Overview: • Coal export terminal • 15 million tons per year capacity throughput; 1.1 million tons coal storage yard capacity • Strategically located: able to access the attractive seaborne markets supplying both Europe and Asia • The only coal export terminal on the East Co
Slide 59: Recent Transactions: Legacy Assets
Recent Transactions: Legacy Assets Miller Creek / Fola transaction: Buchanan Mine transaction: • Eliminated small non-core coal operation • Includes potential royalty payment based on rising • Removed $100 million of long-term liabilities met coal prices from CONSOL’s balance sheet - 20% royalty on
Slide 60: Financial: Legacy Liabilities
Financial: Legacy Liabilities Significant legacy liability reductions over Balance Sheet Liability Long-Term Liability Guidance 12/31/2016E FY 2017 FY 2018 past three years: LTD $17 • Miller Creek/Fola transaction drove WC 82 CWP 125 substantial reduction in legacy liabilities OPEB 655 in 2016 Salar
Slide 61: Finance
FINANCE 61
Slide 62: Finance: NAV/Share Drivers
Finance: NAV/Share Drivers CAPITAL ALLOCATION IMPROVING FORECASTING CAPABILITY AND TRANSPARENCY REDUCING COST OF CAPITAL 62
Slide 63: Financial Accomplishments Since 2014
Financial Accomplishments Since 2014 By attacking all parts of our business, we have reduced the nominal and per unit spend by 45% and 55%, respectively. Reduced Debt Paid down approximately $1 billion in debt Managed Reduced legacy liabilities by approximately $300 million and annual cash Legacy Li
Slide 64: Tools to Grow NAV/Share
Tools to Grow NAV/Share Zero-Based Budgeting Safety Capital Allocation NAV/Share Liability Management Growth Compliance Revenue Management Operating Efficiencies Prudent capital allocation is one of the most important tools to grow NAV/share; a clear and consistent methodology to assess capital allo
Slide 65: Capital Allocation Decision Making
Capital Allocation Decision Making Managing Risk Appropriately Throughout the Commodity Cycle CAPITAL SOURCES CAPITAL USES KEY PERFORMANCE METRICS • Pulling back capital • Developing high rate NAV/Share spend/activity level of return Marcellus and Utica opportunities Liquidity • Selling assets/drop
Slide 66: 2017E-2018E E&P Capital Allocation
2017E-2018E E&P Capital Allocation 70% DUCs 60% Ranking projects CPA Utica 50% and capital allocation priorities 2017E-2018E 40% IRR OH Dry Utica 30% SWPA Marcellus 20% VA CBM SWPA Utica 10% Full Well IRR 0% Sunk Cost IRR Note: Based on D&C capital 66
Slide 67: Benchmarking: Capital Yield Has Been Improving
Benchmarking: Capital Yield Has Been Improving 2014: Capital Yield 2015: Capital Yield 2016E: Capital Yield 180% 180% 180% 130% 130% 130% 80% 80% 80% 30% 30% 30% -20% 1 2 3 4 5 6 7 CNX -20% 1 2 3 4 5 6 7 CNX -20% CNX 1 2 3 4 5 6 7 CONSOL Capital Yield 2014-2018E • Focused on improving capital yield
Slide 68: SG&A Nominal and Unit Reductions
SG&A Nominal and Unit Reductions Total Company SG&A(1) 2012-2018E 300 Since 2014, CONSOL Energy 250 has reduced 200 its SG&A $/Mcfe $ in millions faster than its peers 150 100 50 SG&A $/Mcfe 2014-YTD 2016 $0.60 $0.55 - 2012 2013 2014 2015 2016E 2017E 2018E SG&A Spend ($/Mcfe(2)) $0.50 Cash SG&A Expe
Slide 69: Improving Transparency: E&P Guidance
Improving Transparency: E&P Guidance E&P Segment Guidance 2016E 2017E 2018E Production Volumes: Natural Gas (Bcf) 348 375 445 NGLs (MBbls) 6,740 5,800 5,950 Oil (MBbls) 70 45 40 Condensate (MBbls) 860 740 730 Total Production (Bcfe) 395 415 485 % Liquids 12% 10% 8% Open Natural Gas Basis Differentia
Slide 70: PA Mining Operations Guidance
PA Mining Operations Guidance PA Mining Operations 2016E 2017E 2018E Estimated Total Coal Sales Volumes (in millions of tons) 24.0 26.5 26.5 Total Committed Volumes (Contracted & Priced) 23.3 23.1 % Committed 97% 87% Capital Expenditures ($ in millions): Production $70 $120 Other (Land/Water/Safety)
Slide 71: EBITDA Guidance
EBITDA Guidance EBITDA Guidance by Segment – 2017E ($ in millions) E&P(1) Coal Other Total EBITDA $465 $390 ($15) $840 Adjustments: Unrealized Gain Loss on Hedging ($5) - - ($5) Stock-Based Compensation $20 $10 $0 $30 Adjusted EBITDA $480 $400 ($15) $865 Less: Noncontrolling Interest - ($45) - ($45)
Slide 72: E&P Reserves Guidance
E&P Reserves Guidance Reserves Growth Estimates 2014-2018E (Net) 12,000 $10.00 11,000 Assumed 12 Mo. Average Price $/MMBtu $9.00 10,000 $8.00 8,000 9,000 $7.00 8,000 $6.00 6,200 Bcfe 6,000 6,827 $5.00 6,500 5,643 5,800 $4.00 4,000 $3.00 $2.00 2,000 $1.00 0 $- 2014 2015 2016E 2017E 2018E Reserves Est
Slide 73: Cost of Capital: Leverage Ratio Target Between 2.0x to 2.5x
Cost of Capital: Leverage Ratio Target Between 2.0x to 2.5x Importance of the Target: Offense Importance of the Target: Defense • Provides the financial flexibility to grow NAV per • Enables the company to weather volatility in share through several means: drilling pace, commodity prices and limits
Slide 74: Leverage Ratio and Liquidity Projection
Leverage Ratio and Liquidity Projection Leverage Ratio 2016E-2018E(1) • Path to reaching and maintaining a sub-2.5x leverage ratio 5.0 4.7 • Liquidity rises by estimated $1 billion in free cash flow by 2018 4.0 • Bank revolver reaffirmed at $2 billion for fall 2016 3.0 2.4 • Plan Upside: - Increased
Slide 75: E&P WACC History
E&P WACC History CNX E&P WACC Over Time 11% Sample WACC Calculation 10% CNX E&P Cost of Capital Nov-16 Equity 9% Risk Free Rate(1) 2.6% 8% Beta (Peer Beta)(2) 1.4 Jan Feb Mar Apr May Jun Jul 2016 Aug Sep Oct Nov Equity Market Risk Premium 6.5% 2016 2016 2016 2016 2016 2016 2016 2016 2016 2016 Cost o
Slide 76: CONE Midstream Drives Value to CONSOL Energy
CONE Midstream Drives Value to CONSOL Energy CONE Midstream Partners LP value to CNX is comprised of four main drivers: Ownership of Retained EBITDA Cash Distributions Drop Downs LP and GP/IDR How CNX views the total value of CONE Midstream Partners LP: CONE Value Streams to CNX CONE Value to CNX 20
Slide 77: CONE Distributions Expected to Grow Meaningfully
CONE Distributions Expected to Grow Meaningfully Net to CNX GP & IDR Distribution Cases $50 $40 $ in millions $30 $20 $10 $0 2015 2016 2017 2018 2019 2020 2021 10% CAGR 15% CAGR 20% CAGR Net to CNX LP Distribution Cases $60 $50 $ in millions $40 $30 $20 $10 $0 2015 2016 2017 2018 2019 2020 2021 10%
Slide 78: CNXC: Value of CNX Passive Ownership in PA Operations
CNXC: Value of CNX Passive Ownership in PA Operations CNX Coal Resources LP value to CNX is comprised of four main drivers: Ownership of Retained EBITDA Cash Distributions Drop Downs LP and GP/IDR 75% ownership of PA CNX % LP Units' share 60.1% 16.6 million total LP units Base plan to drop remaining
Slide 79: Conditions Improving for Complete Separation from CNXC
Conditions Improving for Complete Separation from CNXC Path to Completing Separation from CNXC Financial Conditions Growing Improving CNXC revenue and margins Performance Reduction in Base plan: Multi-Year Drops financing costs Capital Market Strength - Forecast assumes 20% drop in 2018 Greater spon
Slide 80: Financial Outlook: NAV/Share Value Drivers Accelerating
Financial Outlook: NAV/Share Value Drivers Accelerating We expect growth while generating free cash flow: • Stringent focus on capital allocation to drive the highest NAV per share decisions • Become a leader in capital allocation, when compared to the best global companies • Invest when rates of re
Slide 81: Regulatory Update
REGULATORY UPDATE 81
Slide 82: Core Themes Driving the CONSOL Value Story
Core Themes Driving the CONSOL Value Story OPERATIONAL IMPROVEMENT Increasing EURs Decreasing Costs Disciplined Capital Spending UNIQUE ASSET BASE Robust Stacked Pay Opportunities GROWING Turning Non-Core Acreage to Core Supplemental Value Streams NAV/Share CAPITAL ALLOCATION Growing Free Cash Flow
Slide 83: Q&A
Q&A 83