Cnx Resources Corporation · NYSE:CNX
Cnx Resources — CONSOL Energy — Q1 2015 Earnings Presentation
48 slides from Cnx Resources's earnings presentation, 2015
Slide 1: Company Presentation Q1 2015
Company Presentation Q1 2015
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: First Quarter 2015 Results
Company Overview First Quarter 2015 Results Net income for the first quarter was $79 million - Includes the following pre-tax items: $67.7 million loss on debt extinguishment $60.0 million unrealized gain on commodity derivative instruments E&P Division’s first quarter net income was $30.9 m
Slide 4: E&P Division: Summary
Company Overview E&P Division: Summary Q-to-Q Q-to-Q E&P Division 1Q2015 1Q2014 Change 1Q2015 4Q2014 Change Average Sales Price ($ / Mcfe) $3.56 $5.52 ($1.96) $3.56 $3.90 ($0.34) Average Costs ($ / Mcfe) $3.05 $3.63 ($0.58) $3.05 $3.19 ($0.14) Sales Volumes (Bcfe) 71.6 48.4 23.2 71.6 70.5 1.1 Sales
Slide 5: Coal Division: Summary
Company Overview Coal Division: Summary Q-to-Q Q-to-Q Coal Division 1Q2015 1Q2014 Change 1Q2015 4Q2014 Change Average Sales Price ($ / ton) $60.23 $66.20 ($5.97) $60.23 $61.19 ($0.96) Average Costs ($ / ton) $43.34 $45.14 ($1.80) $43.34 $45.00 ($1.66) Coal Production (millions of tons) 8.3 8.1 0.2 8
Slide 6: Strong Liquidity Position of $1.6 Billion
Company Overview Strong Liquidity Position of $1.6 Billion Amount/ Amount Letters Amount March 31, 2015 ($ in million) Capacity Drawn of Credit Available Cash and Cash Equivalents $5 $0 $0 $5 Accounts Receivable Securitization $78 $33 $49 ($4) Revolving Credit Facility $2,000 $761 $214 $1,025 Term L
Slide 7: CONSOL Energy: Net (Decrease)/Increase in Cash
Company Overview CONSOL Energy: Net (Decrease)/Increase in Cash Goal is to maintain our strong liquidity position Cash Flow Summary Q-to-Q Q-to-Q ($ in millions) 1Q2015 1Q2014 Change 1Q2015 4Q2014 Change Net Cash Provided by Operations $228 $336 ($108) $228 $87 $141 Capital Expenditures ($294) ($4
Slide 8: Marketing 2Q15 and 2015 Forecasts
Company Overview Marketing 2Q15 and 2015 Forecasts 2015 Coal Sales Facts and Goals Sales Tons by Product Year 2015 Contracted tons for 2015: 83% - Priced: 82% 7% 12% Approximately 84% of the PA Ops tons are expected to be sold domestically Approximately 73% of the VA Ops tons are expected to b
Slide 9: Q1 2015 Operations Summary
E&P Division Q1 2015 Operations Summary Marcellus Shale Quarterly Summary Utica Shale Quarterly Summary Avg. TIL Avg. TIL Turned Turned Sub- Horizontal Lateral Sub- Horizontal Lateral Drilled Completed In Line Counties Drilled Completed In Line Counties Regions Rigs Length Regions Rigs Length (TIL)
Slide 10: Large and Growing E&P Reserves
E&P Division Large and Growing E&P Reserves YE 2014 Proved Reserves Proved Reserves Growth 8,000 8,000 218 16 6,828 1,098 (236) 7,000 6,828 7,000 6,000 5,731 6,000 5,731 5,000 5,000 4,000 19% increase in proved 3,993 Bcfe Bcfe reserves 4,000 3,732 3,480 26% increase in Marcellus 3,000 Shale prov
Slide 11: Resource and Opportunity Rich Portfolio
E&P Division Resource and Opportunity Rich Portfolio Proved Estimated Potential Locations (Gross) Tcfe Proved(2) Unproven Total Marcellus Shale 4.2 1,633 8,000 9,633 Utica Shale(1) 0.5 171 3,000 3,171 Upper Devonian 0.02 11 2,700 2,711 CBM 1.5 3,833 5,200 9,033 Conventional 0.5 11,672 66,000 77,672
Slide 12: Gas Division Production Growth
E&P Division Gas Division Production Growth Gas Production 450 400 +20% 350 300-310 300 250 235.7 Bcfe 200 172.4 153.5 156.3 150 127.9 94.4 100 76.6 56.1 58.2 44.5 48.6 48.4 50 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E Marcellus CBM Utica Other Total 2014 Marcellus Sh
Slide 13: Marcellus Shale Overview
Marcellus Shale Overview ~441,000 CONSOL net acres ─ ~88% NRI ─ ~91% HBP ─ ~85,000 net fee acres 23.9 Tcfe 3P Over 8,900 gross potential wells(1) 2015 YTD drilled wells: 25(2) ~93% Marcellus production growth in 2014 compared to 2013 Liquids growth from 2% in 2013 to 8% of total producti
Slide 14: Marcellus Shale: Growth Runway and Depth of Inventory
Marcellus Shale Growth Runway and Depth of Inventory Marcellus Shale Upside Potential Total Prospective Marcellus Acreage ~790,000 - Acres within JV ~701,000 - Acres outside JV – 100% CONSOL ~89,000 Acreage per well (assumed 750 ft spacing) ~86 Producing wells (JV - YE2014) 384 PDNP and PUD
Slide 15: Marcellus Shale: Sub-Regions Summary
Marcellus Shale: Sub-Regions Summary Marcellus Shale North South SWPA CPA WV Ohio(1) Total Wet Wet Net Acres ~45,000 ~110,000 ~117,000 ~13,000 ~54,000 ~102,000 ~441,000 Approximate Gross 800 2,000 2,400 100 1,400 2,200 ~8,900 Locations(2) Avg EURs/1,000 ft 2.1 1.6 1.8 1.3 1.7 1.4 -- (Bcfe) Avg Drill
Slide 16: Marcellus Shale: Southwest PA Overview
Marcellus Shale: Southwest PA Southwest PA Overview ~45,000 CONSOL net acres NV56 Pad Over 800 gross locations(1) 6 Wells 8,753’ Avg Lateral Length per well 9,230 Mcfe Avg 30-day IP per well ─ 175 wells online, as NV36 Pad NV57 Pad of 3/31/2015 8 Wells 7 Wells 8,914’ Avg Lateral Length per well
Slide 17: Marcellus Shale: Northern WV Dry Overview
Marcellus Shale: Northern WV Dry Northern WV Overview ~117,000 CONSOL net acres Over 2,400 gross ANDERSON (PDC Mountaineer) 3 Wells PHL10 Pad locations(1) 4,859’ Avg Lateral Length per well 6 Wells 595 MMcf/well – 1st 6-Month Cum 4,636’ Avg Lateral Length per well ─ 43 wells online, as of 3,148
Slide 18: Marcellus Shale: Central PA Overview
Marcellus Shale: Central PA Central PA Overview ~110,000 CONSOL net acres CRAWFORD 5 Pad Over 2,000 gross 2 Wells 7,305’ Avg Lateral Length per well NARDELL Pad Currently Flowing Back 2 locations(1) 13,586 Mcfe Avg 24-hr IP per well Marcellus wells 624 Mmcfe/well – 60 day Cum ─ 56 wells online,
Slide 19: Marcellus Shale: North Wet Gas Overview
Marcellus Shale: North Wet Gas North Wet Gas Overview ~54,000 CONSOL net acres Over 1,400 gross locations(1) ─ 111 wells online as of 3/31/2015 ─ 1 well brought online in Q1 2015 ─ 9,050 ft average laterals in Q1 2015 ─ 6 wells per pad on average ─ 136-acre spacing (assuming 7,900 ft SHL13 Pad 7
Slide 20: Marcellus Shale: South Wet Gas Overview
Marcellus Shale: South Wet Gas South Wet Gas Overview SHR1 Pad ~102,000 CONSOL net 6 Wells ~8,741’ Avg Lateral Length per well WEESE (Triad Hunter) 3 Wells acres PENS1 Pad 10,143 Mcfe Avg 30-day IP per well 9 Wells 3,711’ Avg Lateral Length per well Over 2,200 gross ~6,824’ Avg Lateral Length pe
Slide 21: Utica Shale Overview: A Leading Position
Utica Shale Overview: A Leading Position in the Utica Shale ~614,000 CONSOL net acres(1) ─ Includes ~70,000 net fee acres in Ohio Utica Over 3,000 gross locations ─ 53 wells online, as of 3/31/2015 ─ 5 wells brought online in Q1 2015 ─ 9,530 ft average laterals in 2015 ─ 6 wells per pad on avera
Slide 22: Utica Shale: Growth Runway and Depth of Inventory
Utica Shale Growth Runway and Depth of Inventory Utica Shale Upside Potential Total Prospective Utica Acreage ~690,000 - Acres within JV ~153,000 - Acres outside JV – 100% CONSOL ~537,000 Acreage per well (assumed 750 ft spacing) ~86 Producing wells (JV - YE2014) 44 PDNP and PUD locations (Y
Slide 23: Utica Shale: Sub-Regions 2014 Activity Overview
Utica Shale: Sub-Regions 2014 Activity Overview Utica Shale Ohio Wet Ohio Dry PA/WV Dry Total Net Acres ~88,000 ~30,000 ~496,000 ~614,000 Approximate Gross 500 300 2,200 3,000 Locations(1) Avg Drilled Lateral 7,224 10,683 7,185 -- Length ft Avg EURs/well 14.3 15.7 -- -- (Bcfe) Avg EURs/1,000 ft 1.9
Slide 24: Utica Shale: Ohio Dry Gas
Utica Shale: Ohio Dry Gas CNX Activity and Recent IP Rates In-and-Around Monroe County, OH CNX Gaut 4I (Utica) : Currently Drilling GPOR Irons 1-4H (Utica): 30.3 MMcf/d – Avg 24-hr rate NBL MND 6H (Utica): 1 Utica Well Finished Drilling CNX SWITZ 6 (Utica) : 4 Utica Wells CNX GH 9 (Utica) : Currentl
Slide 25: Utica Shale: PA/WV Dry Gas
Utica Shale: PA/WV Dry Gas Utica PA/WV Dry Gas Area Overview REXX – Cheeseman 1 RRC– Zahn #1 IP Gas: 9,200 Mcf/d IP Gas: ~4,500 Mcf/d IP Oil: 0 Bbl/d IP Oil: 0 Bbl/d CHK – Thompson 3H CHK– Hubbard 3H IP Gas: 6,400 Mcf/d IP Gas: 11,00 Mcf/d IP Oil: 0 Bbl/d IP Oil: 0 Bbl/d CHK – Brown 10H CNX – Gaut 4
Slide 26: Stacked Pay Potential
Stacked Pay Potential Appalachian Shale Acreage P a y Formation Name Wet Dry Total Net Acres Net Acres Net Acres Rhinestreet Shale Upper Cashaqua Shale Devonian 190,000 155,000 345,000 Middlesex Shale West River Shale Burkett Shale Tully Limestone Hamilton Shale Marcellus Marcellus 176,000 265,000 4
Slide 27: E&P Division Summary
E&P Division Summary 30% gas production growth in 2015 and 20% production growth in 2016 Implemented asset teams Driving costs down with efficiencies and lean manufacturing Stacked pay potential Q1 2015 Record drilling performance at Pittsburgh Airport project Executing stacked pay oppor
Slide 28: Gas Marketing: First Quarter Highlights
Gas Marketing First Quarter Highlights Exceeded previous quarter’s basis guidance Average gas price for the first quarter of 2015, including hedging, exceeded NYMEX by $0.49 per MMBtu ($3.47 vs. $2.98); excluding hedging, gas price exceeded NYMEX by $0.03 MMBtu ($3.01 vs. $2.98) Entered into a
Slide 29: Gas Marketing: Firm Transportation
Gas Marketing Firm Transportation CNX's Firm Transportation and Sales* 1,600,000 Total company FT capacity supports the majority of 1,400,000 NEXUS forecasted production through 1,200,000 ANR 2018 1,000,000 Columbia (TCO) MMBtu/day 800,000 East Tennesse Targeting pipeline projects that access fa
Slide 30: Gas Marketing: Natural Gas Sales
Gas Marketing Natural Gas Sales Gas Sales 2015 2016* Midwest In-Basin 64% 50% TETCO M3 Exports 36% 50% Dominion South 100% 100% * CY2016 Targets TCO Pool TETCO M2 East Tennessee Gas Sales CY 2015 Est. Columbia (TCO) 23% TETCO (M2) 21% TETCO (M3) 20% Dominion (DTI) 19% East Tennessee 12% TETCO ELA TE
Slide 31: Gas Marketing: Natural Gas Processing
Gas Marketing Natural Gas Processing Contracted capacity meets current requirements CNX’s Contracted Processing Capacity – Gross Inlet Gas Volumes 500,000 Options for additional volumes under our existing 450,000 contracts 400,000 350,000 Utilize the near-term market 300,000 power of midstream
Slide 32: Coal Division: High Quality, Low Cost Assets
Coal Division High Quality, Low Cost Assets with Long Mine Life Pennsylvania (“PA”) Operations Virginia (“VA”) Operations Other Type of Coal Primarily Thermal Primarily Met Primarily Thermal 5 Longwalls and 1 Longwall System and Stripping Shovels and Method Continuous Mining Machines Continuous Mini
Slide 33: Coal Division: Minor MATS Impact
Coal Division Minor MATS Impact – Limited Sales Loss, Potential Remaining Customer Gain MATS compliance deadlines Surviving 2014 CNX Customers 20,000 (after 2015-2019 retirements) 18,000 2014 coal burn 16,000 Actual and Demonstrated capability (2008) Announced U.S. Coal Retired Capacity (MW) 14,000
Slide 34: Financial Overview
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Slide 35: Summary: Driving EBITDA Improvement Through Cost Reduction
Financial Overview Summary: Driving EBITDA Improvement Through Cost Reduction Operating Cash Flow Improvements: including one-time items, expected administrative cost and operating cost improvements of over $200 million E&P Operating costs savings of $20 million versus prior forecast Coal Oper
Slide 36: Declining E&P Operating Unit Costs
Financial Overview: Cost Reductions Declining E&P Operating Unit Costs Driving Down Weighted Average Cost: Consolidated Cost per Mcfe Property & Other Taxes Direct Admin, Selling & Other Total operating cost per Mcfe expected to decline LOE Gathering and Transportation 10% to 15% over the next two
Slide 37: Reducing Overhead & Administrative Costs
Financial Overview: Cost Reductions Reducing Overhead & Administrative Costs CONSOL Energy Incom e Statem ent 2014 Target Target Revenues and Other Incom e: $ in M M 2013 2014 2015E 2016E Drivers Natural Gas, NGLs and Oil Sales $1,028,117 Coal Sales 2,052,166 General & Adm inistrative Headcount righ
Slide 38: Financial Overview: Service Cost Deflation
Financial Overview: Service Cost Deflation Realizing well cost reductions by partnering with vendors to optimize the supply chain - expected savings of $85 million versus 2014 with improving benefits in 2Q Implementing safety/compliance and productivity metrics to tie performance to payment Co
Slide 39: Financial Overview: E&P Capital Expenditures
Financial Overview: E&P Capital Expenditures High-grading E&P capital spending for 2015 results in a ~30% reduction versus 2014 levels - Increasing Utica capital by 113% YoY (Monroe County and dry Utica) - Marcellus spending directed towards high rate of return wells in wet and dry window - Alloca
Slide 40: Hedge and Coal Contract Program
Financial Overview Hedge and Coal Contract Program E&P Hedge Program: Program and actively monitored hedges Reducing the total portfolio VaR including coal - Program - protect margins on 90% of our Proved - Protect cash flows Developed Production - Threshold levels ensure positive - Active - Sup
Slide 41: Financial Overview: Joint Ventures
Financial Overview: Joint Ventures Summary of JV Carry Eligible Capital Description Marcellus / Noble Energy Inc. Utica / Hess Corporation Ownership 50/50 50/50 Acreage 345,151(1) 68,488 (2) Zones PA and WV Marcellus, Burkett to Onondaga OH Utica Noble to pay 1/3 of CNX 50% share of eligible charges
Slide 42: Recent Capital Structure Activity Summary
Financial Overview: Cost of Debt Recent Capital Structure Activity Summary Recent transactions reduced annual interest expense by over 15% and extended maturity by three years - Issued $500 million of 8% senior unsecured notes due 2023 - Tendered for $937.8 million of 8.25% senior unsecured notes
Slide 43: Debt and Liquidity Profile
Financial Overview: Cost of Debt Debt and Liquidity Profile Sources of Funds ($MM) Pro Forma Pre- Transactions Recent Actual 8.0% Senior Notes due 2023 $500 3/31/2015 Transactions 3/31/2015 2023 Senior Notes Discount (7) Cash and Cash Equivalents $5 $5 Term Loan Commitment 0 Revolver Borrowing 748 A
Slide 44: Legacy Liability Outlook
Financial Overview: Cost of Debt Legacy Liability Outlook Converted open OPEB and Pension to a fixed payout and 401K in 3Q14, results in a meaningful reduction in OPEB liabilities - Strengthens CNX’s balance sheet by exiting from retirement programs that generate long-term liabilities Total redu
Slide 45: Financial Summary: Reducing Risk and Increasing Valuation
Financial Summary Reducing Risk and Increasing Valuation Catalysts to drive stock performance: Improving E&P performance from high-grading activities, improving completion techniques, reducing cycle times, and service deflation Utica well results in 3Q – sets up 2016 stacked pay activities C
Slide 46: Appendix
(= CONSOL ENERGY AMERICA’S ENERGY STARTS HERE. Appendix 46
Slide 47: Non-GAAP Reconciliation
Appendix Non-GAAP Reconciliation Three Months Ended March 31 ($ in thousands) 2015 2014 Net Income $79,030 $116,003 Less: Net Loss Attributable to Discontinued Operations, net of tax -- 5,687 Add: Interest Expense 55,122 50,931 Less: Interest Income (1,143) (624) Add: Income Taxes (25,603) 8,489 Ear
Slide 48: Non-GAAP Reconciliation
Appendix Non-GAAP Reconciliation Twelve Months Ended March 31 ($ in thousands) 2015 Net Income $126,116 Less: Net (Income) Attributable to Discontinued Operations, net of tax -- Add: Interest Expense 227,755 Less: Interest Income (2,822) Add: Income Taxes (19,745) Earnings Before Interest & Taxes (E