Cnx Resources Corporation · NYSE:CNX
Cnx Resources — CONSOL Energy — Investor Day (June 2014)
175 slides from Cnx Resources's investor day presentation, Jun 12, 2014
Slide 1: Analyst Day
‘) Analyst Day) 4 i June 12, 2014 SS A nid ‘ip F is i (= CONSOL ENERGY AMERICA’S ENERGY STARTS HERE.
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 E&P Division Tim Dugan Larry Cavallo COO–E&P Division VP–Exploration and Development ─ Marcellus Shale ─ Utica Shale ─ Upper Devonian ─ Stacked Pay Potential ─ Other Gas Reserves and Resources ─ Gas Marketing Jim Grech Chief Commercial Offi
Slide 4: Transformative Journey
Company Overview Transformative Journey Ten years ago – traditional coal producer, the largest underground producer in the world Eight years ago – created CNX Gas Four years ago – acquired Dominion Resources’ Appalachian E&P business and became a coal company with a growing natural gas busines
Slide 5: CONSOL Energy Core Values
Company Overview CONSOL Energy Core Values Unwavering focus on Core Values of safety, compliance, and continuous improvement 5
Slide 6: Strategic Evolution
Company Overview Strategic Evolution CONSOL’s E&P Division represents the greatest portion of EBITDA Natural gas is the de facto choice for new MWh demand as well as for backfilling market share ceded by nuclear and coal, which is a bullish indicator for natural gas Capitalized, low cost coal
Slide 7: Oil and Gas Acreage Ownership
Company Overview Oil and Gas Acreage Ownership CONSOL % of Legacy Ownership by State and Horizon State Marcellus Utica Burkett Rhinestreet PA 50% 100% 50% 100% WV 50% 100% 50% 100% OH 100% 50% 100% 100% Note: CONSOL’s percentage of ownership is per the original 2011 JV agreements. Noble and Hess wil
Slide 8: Summary
Company Overview Summary We have tier-one assets across our entire Appalachian-centric portfolio, in both E&P and Coal: - Sweet spots in both the wet and dry portions of the Marcellus and Utica shales - Multiple stack pay opportunities - In thermal coal, one of the highest Btu coals in the U.S. in
Slide 9: E&P Division
(= CONSOL ENERGY AMERICA’S ENERGY STARTS HERE. E&P Division
Slide 10: Tim Dugan, COO–E&P: Background and Vision
E&P Division Tim Dugan, COO–E&P: Background and Vision Over 30 years of experience across the nation’s major natural gas fields including: - Marcellus, Utica, Upper Devonian, Barnett, and Haynesville Most recently served as Vice President of Chesapeake Energy’s Appalachia South Business Unit: -
Slide 11: Continuous Improvement in the Marcellus Shale
E&P Division Continuous Improvement in the Marcellus Shale Average Completed Lateral Length Average Max IP and Average 30-Day Rate 9,000 14,000 8,000 8,000 11,555 12,000 7,000 10,000 9,297 6,000 5,483 8,298 5,137 8,000 7,394 Mcf/d 5,000 Feet 4,000 3,366 6,000 5,033 5,227 4,593 3,000 3,780 3,499 2,04
Slide 12: CONSOL Energy is a Low Cost Leader
E&P Division CONSOL Energy is a Low Cost Leader 2011-2013 All Sources Reserve Replacement: 3-Year Average vs. E&P Peers 2,000% 1,500% Average: 316% 1,000% 515% 500% 0% CONSOL Energy 2011-2013 All Sources F&D Cost: 3-Year Average vs. E&P Peers $10 $8 $6 Average: $3.85 $/Mcfe $4 $2 $0.88 $0 CONSOL Ene
Slide 13: Large and Growing E&P Reserves
E&P Division Large and Growing E&P Reserves YE 2013 Proved Reserves Proved Reserves Growth 6,000 172 105 (172) 1,633 5,731 6,000 5,731 5,000 5,000 3,993 4,000 3,993 4,000 3,732 3,480 3,000 44% increase in proved Bcfe Bcfe reserves 3,000 87% increase in Marcellus Shale proved reserves 2,000 1,911
Slide 14: 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 3.4 1,414 8,024 9,438 Utica Shale(1) 0.1 45 3,030 3,075 Upper Devonian 0.0 5 2,884 2,889 CBM 1.5 3,806 5,603 9,409 Conventional 0.6 9,997 71,871 81,868 Tota
Slide 15: E&P Division Summary
E&P Division Summary Marcellus Shale Utica Shale Future Development / Potential Growth engine over next 3-5 Growing portion of Stacked pay potential years of development production mix over next 3 ─ Pittsburgh Airport years ─ Over 60% CAGR ─ Southwest PA expected through 2016 ─ ~270% CAGR of U
Slide 16: 2014E Drill Schedule and Activity Overview
E&P Division 2014E Drill Schedule and Activity Overview Marcellus Shale Utica Shale Upper Devonian PA/W North South Ohio Ohio SWPA CPA WV Ohio(1) Total V Total SWPA WV Total Wet Wet Wet Dry Dry Drilled 46 12 25 1 68 30 182 32 1 -- 33 7 1 8 Completed 43 14 17 1 77 25 177 16 1 -- 17 -- -- -- TIL 19 14
Slide 17: Gas Division Production Growth
E&P Division Gas Division Production Growth Gas Production 400 +30% 300 +30% 215-235 Bcfe 200 172.4 153.5 156.3 127.9 +60% 94.4 100 76.6 56.1 58.2 +44% 44.5 48.6 48.4 +87% 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E Marcellus CBM Utica Conventional & Other Total 2014 M
Slide 18: 2014E E&P Capex: $1,110 million
E&P Division 2014E E&P Capex: $1,110 million Land capex Other E&P Capex Coal 2014E E&P Capex Potential Marcellus JV Carry 26% $1,200 $1,110 $953 $1,000 $ in millions $800 $600 $528 E&P $400 74% $200 $0 2012 2013 2014E E&P Division Capex: ($ in millions) 2014E Capex % of total Land and Permitting $70
Slide 19: 2014E E&P Capex: $1,110 million
E&P Division 2014E E&P Capex: $1,110 million Marcellus Wet $410 million Marcellus Dry $415 million Utica Wet $105 million Wet Dry Oil Wet Dry Utica Dry $10 million Source: Company filings. 19
Slide 20: Joint Ventures Overview
E&P Division Joint Ventures Overview Summary of JV Carry Eligible Capital Description Marcellus / Noble Utica / Hess Ownership 50/50 50/50 Net 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 Hess to pay 50% o
Slide 21: Declining E&P Unit Costs
E&P Division Declining E&P Unit Costs Consolidated Cost per Mcfe Property & Other Taxes Direct Admin, Selling & Other Driving Down Weighted Average Cost: LOE Gathering and Transportation Total operating cost per Mcfe expected to decline 5% to DD&A 10% over the next three years $1.50 $1.25 Mix sh
Slide 22: Asset Teams: Overview
E&P Division Asset Teams: Overview Ensuring locations are drill-ready ─ Build teams and alignment 4 Teams: ─ Northern Marcellus: Pennsylvania ─ Deliver on IRR and PVR ─ Southern Marcellus: West Virginia Focused on capital efficiency ─ Utica ─ Continuous measurement of KPIs and improvement ─ Ex
Slide 23: Enhanced Production Techniques: Pure Upside
E&P Division Enhanced Production Techniques: Pure Upside Eliminating chokes and bottlenecks Pad production increases around 34% EUR could increase as much as 29% Kuhns 3B Actual Gas Production vs Projected Production w/o Annular Flow 12,000 Gas Production (Mcfd) 10,000 8,000 6,000 4,000 2,000
Slide 24: Marcellus Recompletions
E&P Division Marcellus Recompletions GH15 recomplete added production and reserves ─ Original EUR: 3.9 Bcfe ─ Recomplete EUR: 6.0 Bcfe ─ Incremental EUR: 2.1 Bcfe 6 additional recompletes planned for 2014 GH 15 Production History and Recomplete 3,000 Recomplete at Recomplete at 2,500 time zero r
Slide 25: Marcellus Completions: Line Pressure Reduction
E&P Division Marcellus Completions: Line Pressure Reduction 120,000 1,400 10 MMcfd Increase 1,200 100,000 1,000 80,000 PSIG Mcfd 800 60,000 600 40,000 400 20,000 200 NV41 Pad N NV Field N NV Field (PSIG) NV41 (PSIG) 10 MMcfd Increase 0 - 3/1 3/8 3/15 3/22 3/29 4/5 4/12 4/19 4/26 5/3 Field pressure o
Slide 26: Marcellus Shale
(= CONSOL ENERGY AMERICA’S ENERGY STARTS HERE. Marcellus Shale 26
Slide 27: Overview
Marcellus Shale Overview ~436,000 CONSOL net acres ─ ~88% NRI ─ ~87% HBP 21.9 Tcfe 3P Over 8,900 gross potential wells(1) 2014E drilled wells: 182(2) ~87% Marcellus production growth expected in 2014E Liquids expected to grow from 2% in 2013 to 5%-8% in 2014E 10 horizontal rigs current
Slide 28: New Project Areas: Marcellus EUR/Ft
Marcellus Shale New Project Areas: Marcellus EUR/Ft 28
Slide 29: 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 ~690,000 - Acres outside JV – 100% CONSOL ~100,000 Acreage per well (assumed 750 ft spacing) ~86 Producing wells (YE2013) 259 PDNP and PUD loca
Slide 30: Continuous Improvement
Marcellus Shale Continuous Improvement Average Daily Well Production Grouped by TIL Year Focus on prioritization and optimization of assets Improved drilling and completions result in 10,000 better wells 2008-2011 Actuals Normalized to 5,000 ft 2012-2013 Actuals 2008-2011 includes 1 RCS/SSL
Slide 31: Actual Well Costs vs. Lateral Length
Marcellus Shale Actual Well Costs vs. Lateral Length 2012 and 2013 Combined Well Costs RCS/SSL Well Costs $12,000,000 $12,000,000 Actual RCS/SSL well costs $10,000,000 $10,000,000 $8,000,000 $8,000,000 $6,000,000 $6,000,000 $4,000,000 Targeted well costs $4,000,000 $2,000,000 $2,000,000 $0 $0 0 2,00
Slide 32: Increasing Economics By Drilling Longer Laterals
Marcellus Shale Increasing Economics By Drilling Longer Laterals IRR w/Carry IRR w/Eff IRR Hist. CONSOL has consistently 160% 154% increased drilled lateral 145% lengths each year 136% ─ 2011: 3,853 ft 126% 115% ─ 2012: 5,514 ft 120% 111% 105% 104% ─ 2013: 7,970 ft 98% 91% ─ 2014E: ~8,000 ft ATAX
Slide 33: Marcellus Shale: Drilling
Marcellus Shale: Drilling 33
Slide 34: CONSOL-Operated Summary
Marcellus Shale: Drilling CONSOL-Operated Summary Drilling Summary 2011 2012 2013 YTD 2014 Wells TD’d 78 64 46 20 Lateral ft 300,466 328,428 366,615 150,056 Total MD ft 92,264 794,098 730,316 308,198 Average Lateral ft 3,853 5,514 7,970 7,503 Average TMD ft 11,824 13,280 15,876 15,410 Average Drill
Slide 35: Cost Efficiencies and Improvements
Marcellus Shale: Drilling Cost Efficiencies and Improvements Air Directional: Expect a two-day reduction in horizontal cycle times Technological Advances: One-run RSS tools; drilling optimization, and evaluating 7-7/8” production hole Rig Move Improvements: Expect 20% reduction in rig move tim
Slide 36: Air Directional
Marcellus Shale: Drilling Air Directional NV34B – Without Air Directional Air Directional Top Hole Horizontal Comparison NV58E NV34B Air Directional Work Yes No Kick-Off Point ft 6,700 5,600 o o Starting Inclination 24 0 Total MD ft 15,843 17,201 Drilled Curve Length ft 782 2,074 NV58E – With Air Di
Slide 37: Marcellus Shale: Completions
Marcellus Shale: Completions 37
Slide 38: CONSOL-Operated Summary
Marcellus Shale: Completions CONSOL-Operated Summary Completions Summary 2011 2012 2013 YTD 2014 Wells Completed 57 51 59 12 Lateral Completed ft 188,800 270,256 333,895 104,475 Total Stages 684 940 1,527 700 Average Stage/Well 12 18 26 58 Average Stage Cost $205k $184k $193k $114k(1) Evolving Stimu
Slide 39: Cost Efficiencies and Improvements
Marcellus Shale: Completions Cost Efficiencies and Improvements Completions Pricing Reduction: Renegotiating contracts Efficiency Increases: Increases the number of stages per day Stimulation Design Optimization: Pump rates, sand schedules, additives, etc. Completions Per 150 ft Stage Cost Sav
Slide 40: Cost Efficiencies and Improvements
Marcellus Shale: Completions Cost Efficiencies and Improvements Entire pad average stages per day Increasing from 4 to 8 stages per day equates to capital savings of $430,000 and reduces cycle time by ~7 days Capital Savings vs. Stages per Day $116,000 $600,000 Capital Savings per well $114,000
Slide 41: RCS/SSL Overview
Marcellus Shale: Completions RCS/SSL Overview 30’ 30’ 30’ 30’ 30’ 30’ 30’ 30’ 30’ 60’ 60’ 60’ 60’ Cluster Spacing reduced from 60’ to 30’ Stage Length Standard 300’ Stage SSL 150’ SSL 150’ reduced from 300’ to 150’ Length Stage Stage RCS/SSL ensures a better distribution of the fracture treatment
Slide 42: RCS/SSL Activity Overview
Marcellus Shale: Completions RCS/SSL Activity Overview 8 RCS/SSL wells to date 20 RCS/SSL wells to date 9 RCS/SSL wells to date Producing Pads Note: Townships are shown in yellow where CONSOL holds 3,000 or more acres (as of 5/1/2014). 42
Slide 43: Marcellus Shale: Sub-Regions
Marcellus Shale: Sub-Regions 43
Slide 44: Summary
Marcellus Shale: Sub-Regions Summary Marcellus Shale North South SWPA CPA WV Ohio(1) Total Wet Wet Net Acres ~45,000 ~110,000 ~105,000 ~11,000 ~60,000 ~105,000 ~436,000 Approximate Gross 700 2,000 2,300 100 1,600 2,200 ~8,900 Locations(2) Avg EURs/1,000 ft 2.1 1.6 1.8 1.3 1.7 1.4 -- (Bcfe) Targeted
Slide 45: Southwest PA Overview
Marcellus Shale: Southwest PA Southwest PA Overview ~45,000 CONSOL net acres NV56 Pad Over 700 gross locations(1) 2 Wells 7,171’ Avg Lateral Length per well 9,365 Mcfe Avg 30-day IP per well ─ 128 wells online, as of 5/1/2014 ─ 19 wells online in NV36 Pad 2014E 7 Wells 5,021’ Avg Lateral Length
Slide 46: Southwest PA 5,000 ft Type Curve and Economics
Marcellus Shale: Southwest PA Southwest PA 5,000 ft Type Curve and Economics 1,000 100 MMcfe/Mo 10 1 0 50 100 150 200 Months IRR w/Carry IRR w/Eff IRR Hist. 160% 159% 131% Southwest PA Assumptions Type Curve 2014E 120% 105% 115% Lateral Length (ft) 5,000 8,800 ATAX IRR(1) 95% EUR (Bcfe) 10.5 18.5 76
Slide 47: Southwest PA Production vs. 5,000 ft Type Curve
Marcellus Shale: Southwest PA Southwest PA Production vs. 5,000 ft Type Curve 8.5 Bcfe Type Curve 7.2 Bcfe Type Curve Projecting 18% improvement in EURs utilizing RCS/SSL 47
Slide 48: Southwest PA Production vs. 5,000 ft Type Curve
Marcellus Shale: Southwest PA Southwest PA Production vs. 5,000 ft Type Curve 11.6 Bcfe Type Curve 9.6 Bcfe Type Curve We expect to drill 16, 53, and 19 horizontal wells in 2014, 2015, and 2016, respectively 48
Slide 49: Northern WV Overview
Marcellus Shale: Northern WV Dry Northern WV Overview ~105,000 CONSOL net acres Over 2,300 gross PHL13 Pad locations(1) ANDERSON (PDC Mountaineer) 6 Wells 3 Wells 7,949’ Avg Lateral Length per well ─ 22 wells online, as of 4,859’ Avg Lateral Length per well 6,869 Mcfe Avg 30-day IP per well 595
Slide 50: Northern WV 5,000 ft Type Curve and Economics
Marcellus Shale: Northern WV Dry Northern WV 5,000 ft Type Curve and Economics 1,000 100 MMcfe/Mo 10 1 0 50 100 150 200 Months IRR w/Carry IRR w/Eff IRR Hist. 100% Northern WV Dry 85% Assumptions Type Curve 2014E 80% 69% Lateral Length (ft) 5,000 6,800 62% ATAX IRR(1) 60% 54% EUR (Bcfe) 8.8 12.0 50%
Slide 51: Northern WV Production vs. 5,000 ft Type Curve
Marcellus Shale: Northern WV Dry Northern WV Production vs. 5,000 ft Type Curve 8.5 Bcfe Type Curve 7.2 Bcfe Type Curve Early constraints masking results but expect improved production with RCS/SSL 51
Slide 52: Northern WV - Dominion Transmission Storage Field
Marcellus Shale: Northern WV Dry Northern WV - Dominion Transmission Storage Field Antero Activity(1) Within 2 miles of DTI northern border Average EURs: 1.7 Bcfe/1,000’ lateral utilizing RCS/SSL AUD3 Pad 1 Well 8,691’ Avg Lateral Length per well 6,099 Mcfe Avg 30-day IP per wel 917 MMcf/well – 1st
Slide 53: Central PA Overview
Marcellus Shale: Central PA Central PA Overview ~110,000 CONSOL net acres Over 2,000 gross KUHNS3 Pad GAUT4 Pad locations(1) 5 Wells 4 Wells 7,237’ Avg Lateral Length per well 7,941’ Avg Lateral Length per well ─ 40 wells online, as of 7,259 Mcfe Avg 30-day IP per well 6,619 Mcfe Avg 30-day IP p
Slide 54: Central PA 5,000 ft Type Curve and Economics
Marcellus Shale: Central PA Central PA 5,000 ft Type Curve and Economics 1,000 100 MMcfe/Mo 10 1 0 50 100 150 200 Months IRR w/Carry IRR w/Eff IRR Hist. 80% 78% 63% Central PA 60% 57% Assumptions Type Curve 2014E 50% ATAX IRR(1) Lateral Length (ft) 5,000 6,900 46% EUR (Bcfe) 8.0 11.0 40% 36% 43% EUR
Slide 55: Central PA Production vs. 5,000 ft Type Curve
Marcellus Shale: Central PA Central PA Production vs. 5,000 ft Type Curve 8.0 Bcfe Type Curve 6.8 Bcfe Type Curve Flowback underway on first five RCS/SSL wells 55
Slide 56: New Project Areas – Pittsburgh Airport
Marcellus Shale: North Wet Gas New Project Areas – Pittsburgh Airport 45 planned Marcellus laterals 45 potential Upper Devonian laterals 15 planned 30 potential 45 potential Utica Shale laterals ~9,000 contiguous acres have resource potential in excess of 1.6 Tcfe 56
Slide 57: North Wet Gas Overview
Marcellus Shale: North Wet Gas North Wet Gas Overview ~60,000 CONSOL net acres Over 1,600 gross locations(1) ─ 66 wells online, as of 5/1/2014 IMPERIAL LAND (Range ─ 63 wells online in Resources) 2014E 4 Wells BARE WARREN (Range 3,182’ Avg Lateral Length per well Resources) 373 MMcf/well – 1st 6
Slide 58: North Wet Gas 5,000 ft Type Curve and Economics
Marcellus Shale: North Wet Gas North Wet Gas 5,000 ft Type Curve and Economics 1,000 5 Wellhead Sold Gas 4 100 Condensate MMcf/Mo MBbl/Mo NGL 3 2 10 1 1 0 0 50 100 150 200 Months IRR w/Carry IRR w/Eff IRR Hist. 100% 91% North Wet Gas 80% 74% Assumptions Type Curve 2014E 66% ATAX IRR(1) Lateral Lengt
Slide 59: North Wet Gas Production vs. Type Curve
Marcellus Shale: North Wet Gas North Wet Gas Production vs. 5,000 ft Non-RCS/SSL Type Curve Increasing productivity Limited use of RCS/SSL First 12 wells of 2014 ─ 2 of 12 wells utilized RCS/SSL in 2014 ─ 2014 IP rates significantly above 2012 and 2013 levels with limited use of RCS/SSL 15-20%
Slide 60: Liquids Production Growth
Marcellus Shale: North Wet Gas Liquids Production Growth Price Uplift from Wet Gas Increases Value ~60% to Liquids Volume Growth Over $8 per Mcf of Wellhead Gas Gas NGL Condensate $/Mcf 9 $8.57 5 Bbl/MMcf $0.46 condensate at 85% WTI 43 Bbl/MMcf $2.95 NGLs at 69% WTI 6 $5.23 3 1,057 MMBtu 1,070 $5.16
Slide 61: South Wet Gas Overview
Marcellus Shale: South Wet Gas South Wet Gas Overview SHR1 Pad ~105,000 CONSOL net 6 Wells ~8,741’ Avg Lateral Length per well WEESE (Triad Hunter) 3 Wells acres PEN1 Pad Completions underway 9 Wells 3,711’ Avg Lateral Length per well Over 2,200 gross ~6,824’ Avg Lateral Length per well Completi
Slide 62: South Wet Gas 5,000 ft Type Curve and Economics
Marcellus Shale: South Wet Gas South Wet Gas 5,000 ft Type Curve and Economics 1,000 5 Wellhead Sold Gas 4 100 Condensate MMcf/Mo MBbl/Mo NGL 3 2 10 1 1 0 0 50 100 150 200 Months IRR w/Carry IRR w/Eff IRR Hist. 60% 51% South Wet Gas Assumptions Type Curve 2014E 41% 40% 37% ATAX IRR(1) Lateral Length
Slide 63: Utica Shale
(= CONSOL ENERGY AMERICA’S ENERGY STARTS HERE. 63
Slide 64: Overview: A Leading Position in the Utica Shale
Utica Shale Overview: A Leading Position in the Utica Shale ~581,000 CONSOL net acres(1) Over 3,000 gross locations ─ 18 wells online, as of 5/1/2014 ─ 43 wells online in 2014E ─ 7,000 ft average laterals in 2014E ─ 4-5 wells per pad on average in 2014E ─ 120-acre spacing (assuming 7,000 ft late
Slide 65: Growth Runway and Depth of Inventory
Utica Shale Growth Runway and Depth of Inventory Utica Shale Upside Potential Total Prospective Utica Acreage ~650,000 - Acres within JV ~137,000 - Acres outside JV – 100% CONSOL ~513,000 Acreage per well (assumed 750 ft spacing) ~86 Producing wells (YE2013) 9 PDNP and PUD locations (YE2013)
Slide 66: Utica Production Growth
Utica Shale Utica Production Growth Production 50 40.4 40 37.8 30 Bcfe 20 13.5 10 0.8 0 2013 2014E 2015E 2016E Utica Net Production Utica shale production expected to become greater part of mix 66
Slide 67: Utica Shale: Drilling
(= CONSOL ENERGY AMERICA’S ENERGY STARTS HERE. Utica Shale: Drilling 67
Slide 68: CONSOL-Operated Summary
Utica Shale: Drilling CONSOL-Operated Summary Drilling Summary 2013 YTD 2014 Wells TD’d 9 3 Lateral ft 63,167 14,630 Total MD ft 137,769 39,527 Average Lateral ft 7,019 4,877 Average TMD ft 15,308 13,176 Average Drill Cost/ft $366 $332 Average Lateral Cost/ft $798 $897 33 Utica wells to be drilled i
Slide 69: Cost Efficiencies and Improvements
Utica Shale: Drilling Cost Efficiencies and Improvements Shortened Intermediate Casing: Potential to reduce cycle times by 8 days with revised casing program; could result in reduction in cost of $900k per well Technological Advances: One-run RSS tools, drilling optimization, and evaluating 7-7/
Slide 70: Utica Shale: Completions
(= CONSOL ENERGY AMERICA’S ENERGY STARTS HERE. Utica Shale: Completions 70
Slide 71: CONSOL-Operated Summary
Utica Shale: Completions CONSOL-Operated Summary Completions Summary 2012 2013 YTD 2014 Wells Completed 4 10 3 Lateral Completed ft 18,160 50,916 28,529 Total Stages 63 200 192 Average Stg/Well 16 20 64 Average Stage Cost $310k $224k $155k(1) Evolving Stimulation Design 2012 2013 Today Stage Length
Slide 72: Cost Efficiencies and Improvements
Utica Shale: Completions Cost Efficiencies and Improvements Completions Pricing Reduction: Renegotiating contracts Efficiency Increases: Increases the number of stages per day Stimulation Design Optimization: Pump rates, sand schedules, additives, etc. $180,000 $155,000 ($8,000) $160,000 ($5,0
Slide 73: Utica Shale: Sub-Regions
(= CONSOL ENERGY AMERICA’S ENERGY STARTS HERE. Utica Shale: Sub-Regions 73
Slide 74: 2014E Activity Overview
Utica Shale: Sub-Regions 2014E Activity Overview Utica Shale Ohio Wet Ohio Dry PA/WV Dry Total Net Acres ~84,000 ~25,000 ~472,000 ~581,000 Approximate Gross 500 300 2,200 3,000 Locations(1) Avg EURs/1,000 ft 1.9 2.4 1.8 -- (Bcfe) Targeted Avg Lateral 7,000 8.000 5,000 -- Length ft Avg EURs/well 13.3
Slide 75: The Utica Sweet Spot Evolves
Utica Shale: Ohio Wet Gas The Utica Sweet Spot Evolves CHK- Buell 8H GPOR - Wagner 1-28H IP GAS: 9,500 Mcf/d IP GAS: 14,000 Mcf/d IP OIL: 1,425 Bbl/d IP OIL: 432 Bbl/d ~36,000 net core wet acres GPOR - Boy Scout 33H GPOR- Shugert 1-12H IP GAS: 5,300 Mcf/d IP GAS: 28,500 Mcf/d IP OIL: 1,560 Bbl/d IP
Slide 76: CONSOL's Historic Core: Noble, Harrison, Belmont, Guernsey, Jefferson
Utica Shale: Ohio Wet Gas CONSOL’s Historic Core: Noble, Harrison, Belmont, Guernsey, and Jefferson Counties ~84,000 CONSOL net acres ~36,000 CONSOL net acres in core Type curve reflects core area Over 500 gross core area locations(1) ─ 16 wells online, as of 5/1/2014 ─ 41 wells online in 20
Slide 77: Recent IP Rates In and Around Monroe County, OH
Utica Shale: Ohio Dry Gas Recent IP Rates In and Around Monroe County, OH CVX Conner well (Utica): 25.0 MMcf/d – Avg 24-hr rate GPOR Irons 1-4H (Utica): 30.3 MMcf/d – Avg 24-hr rate MHR 3-UH (Utica): 32.5 MMcf/d – Avg 24-hr rate MHR 2-MH (Marcellus): 3.7 MMcf/d of gas and 312 Bbls of condensate per
Slide 78: Ohio Dry Gas Area Production vs. Type Curve
Utica Shale: Ohio Dry Gas Ohio Dry Gas Area Production vs. 5,000 ft Type Curve ~25,000 CONSOL net acres ─ ~11,000 net acres in Monroe County, OH ─ ~14,000 net acres in eastern portion of Jefferson, Belmont and Harrison counties Over 300 gross locations(1) ─ First well (SWITZ 6B) drilling underwa
Slide 79: Utica PA/WV Dry Gas Area Overview
Utica Shale: PA/WV Dry Gas Utica PA/WV Dry Gas Area Overview REXX – Cheeseman 1 IP Gas: 9,200 mcfd RRC– Zahn #1 IP Oil: 0 Bbld IP Gas: ~4,500 mcfd IP Oil: 0 Bbld CHK – Thompson 3H CHK– Hubbard 3H IP Gas: 6,400 mcfd IP Gas: 11,00 mcfd IP Oil: 0 Bbld IP Oil: 0 Bbld CHK – Brown 10H IP Gas: 9,500 mcfd R
Slide 80: Utica PA/WV Dry Gas Production vs. 5,000 ft Type Curve
Utica Shale: PA/WV Dry Gas Utica PA/WV Dry Gas Production vs. 5,000 ft Type Curve ~472,000 CONSOL net acres ─ ~300,000 prospective net acres in PA (~80,000 net acres located within Greene and Washington counties) ─ ~172,000 prospective net acres in WV Well count Over 2,200 gross locations(1) 1
Slide 81: Upper Devonian
(= CONSOL ENERGY AMERICA’S ENERGY STARTS HERE. Upper Devonian 81
Slide 82: Burkett Shale Sweet Spot
Upper Devonian Burkett Shale Sweet Spot CONSOL is well situated in the best part of the Burkett fairway, with an estimated 345,000 net acres of potential across the entire Upper Devonian 82
Slide 83: NV39F Upper Devonian Exploration Well Drilled in Southwest PA
Upper Devonian NV39F Upper Devonian Exploration Well Drilled in Southwest PA 5 underlying Marcellus wells on pad Washington County, PA ─ Drilled lateral length of 4,889 ft ─ Frac’d 17 stages in Burkett Shale ─ Tested 3.0 MMcf/d, TIL 6/21/13 ─ Currently producing 2.7 MMcf/d ─ Produced 944 MMcf in
Slide 84: Upper Devonian Production vs. 5,000 ft Type Curve
Upper Devonian Upper Devonian Production vs. 5,000 ft Type Curve First Upper Devonian well demonstrating very shallow decline compared to type curve Currently producing above type curve: Forecasted EUR 9 Bcfe Planning 6+ Burkett Shale and at least two Rhinestreet Shale wells in 2014 Within t
Slide 85: Stacked Pay Potential
(= CONSOL ENERGY AMERICA’S ENERGY STARTS HERE. Stacked Pay Potential 85
Slide 86: Appalachian Shale Acreage
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 175,000 261,000 4
Slide 87: CONSOL's Shale Fairway
Stacked Pay Potential CONSOL’s Shale Fairway PIT Airport Rhinestreet = 5,340’ Burkett = 5,460’ Marcellus = 5,690’ Utica = 10,760’ Monroe County/Moundsville Rhinestreet = 5,930’ Burkett = 6,110’ Southwest PA Marcellus = 6,190’ Rhinestreet = 6,730’ Utica = 10,680 Burkett = 7,000’ Marcellus = 7,270’ Ut
Slide 88: Gas Factory Development
Stacked Pay Potential Gas Factory Development Stacked laterals provide economies of scale to access up to 4 pays from 1 pad 88
Slide 89: Southwest PA Stack Pay Potential: ~9.0 Tcfe Resource Potential
Stacked Pay Potential Southwest PA Stack Pay Potential: ~9.0 Tcfe Resource Potential Potential Lateral Spacing Well CapEx EUR Liquids Resource Pay Wells Length (ft) (acre) ($MM) (Bcfe) (%) (Bcfe) Burkett 235 ~6,400 110 7.6 9.5 - 2,226 Rhinestreet 165 ~6,100 105 7.4 4.5 - 745 Marcellus 249 ~6,400 110
Slide 90: Pittsburgh Airport Stack Pay Potential: ~1.6 Tcfe Resource Potential
Stacked Pay Potential Pittsburgh Airport Stack Pay Potential: ~1.6 Tcfe Resource Potential Potential Lateral Spacing Well CapEx EUR Liquids Resource Pay Wells Length (ft) (acre) ($MM) (Bcfe) (%) (Bcfe) Upper Devonian (Burkett) 45 ~8,000 138 8.8 9.3 16% 418 Marcellus 45 ~8,000 138 8.8 13.3 16% 598 Ut
Slide 91: Other Gas Reserves and Resources
Other Gas Reserves and Resources 91
Slide 92: Virginia Coalbed Methane (CBM)
Other Gas Reserves and Resources Virginia Coalbed Methane (CBM) 350,000 net acres(1) Origin of CNX Gas Associated with mining at Buchanan mine Advantageous gas marketing location for basis Over 2,700 gross locations ─ ~3,000 wells online, as of 5/1/2014 ─ 60 wells online in 2014E 0.5 Bcf
Slide 93: Conventional Wells
Other Gas Reserves and Resources Conventional Wells 2,294,000 net acres(1) HBP position creates substantial flexibility to explore and develop other pays Mostly acquired with Dominion E&P acquisition in 2010 ~70,000 gross locations ─ ~10,000 wells online, as of 5/1/2014 0.250 Bcfe/well $
Slide 94: Chattanooga Shale, Monteagle SOG, and Conasauga Shale
Other Gas Reserves and Resources Chattanooga Shale, Monteagle SOG, and Conasauga Shale 243,000 CONSOL net acres 2,170 gross locations ─ ~74 wells online as of 5/1/2014 ─ 5 wells online in 2014E Chattanooga: $1.5 million/Hz well 1.0 Bcfe/well (4,200 ft) Currently producing 7.6 MMcf/d Annu
Slide 95: Illinois Basin
Other Gas Reserves and Resources Illinois Basin 277,000 net acres(1) ~1,400 gross locations Stacked pay potential ─ Mississippian and Devonian sandstones and carbonate ─ New Albany shale ─ Maquoketa shale Currently producing: ~0.2 MMcf/d Annual decline rate of ~12% Producing Wells (1) Incl
Slide 96: E&P Division Summary
E&P Division Summary 30% gas production growth Implemented asset teams Driving costs down with efficiencies and lean manufacturing Stacked pay potential Solid production with conventional assets Joint ventures with established partners CONSOL has the team and the assets to drive value 96
Slide 97: Gas Marketing
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Slide 98: Appalachia Energy Basin - Stacked Reserves
Gas Marketing Appalachia Energy Basin - Stacked Reserves Upper Devonian Utica Shale Marcellus Shale Pittsburgh 8 Coalbed Methane Conventional SOG Reserves Pocahontas Coalbed Methane CONSOL Energy is located in the middle of a world-class natural gas and coal reserve area that has decades of growth p
Slide 99: CONSOL Energy Assets
Gas Marketing CONSOL Energy Assets CNX Assets Marcellus Shale Utica Shale Upper Devonian Conventional SOG Upper Coalbed Methane Devonian Utica Coal Reserves Shale Marcellus Shale Bailey Complex Conventional SOG CNX Reserves • ~5.7 Tcfe of proved gas reserves Coalbed Methane • ~436,000 Marcellus net
Slide 100: Market Opportunities - Stacked Customers
Gas Marketing Market Opportunities - “Stacked Customers” Power Plants Natural Gas Plants Coal Plants Our ability to produce both natural gas and coal allows us the flexibility to provide an energy solution to utilities that burn either fuel Source: SNL Financial. 100
Slide 101: Shared Value Opportunities
Gas Marketing Shared Value Opportunities Land Thermal Coal Gathering NGL Sales Processing Export Ethane Met Coal Pipelines Domestic Ethane Power Purchases Export Coal Dry Gas Sales Export LNG Actively pursuing opportunities with customers for gas sales, coal sales, pipeline project development, land
Slide 102: Summary
Gas Marketing Summary Natural Gas Sales - Current NYMEX hedges cover 74% of total volumes for CY2014 - Sales portfolio of 80 customers in five index markets (34% basin exports) Firm Transportation - Total company FT capacity exceeds plan production for the next two years - Near-term regional req
Slide 103: Firm Transportation
Gas Marketing Firm Transportation Total company FT capacity exceeds plan production for two years Targeting pipeline projects that access favorable markets Will supplement direct FT with firm sales to customers that have matching firm capacity Will acquire third-party released firm capacity
Slide 104: Firm Transportation - Current Portfolio
Gas Marketing Firm Transportation - Current Portfolio ANR Pipeline Dominion (DTI) Columbia (TCO) East Tennessee Pipeline (MMcf/d) 2014 2016 Dominion (DTI) 255 370 East Tennessee 282 282 Texas Eastern (TETCO) Columbia (TCO) 240 240 TETCO (Firm Sales) 235 235 TETCO (Firm Capacity) 0 127 ANR Pipeline 0
Slide 105: Firm Transportation - Recent Projects
Gas Marketing Firm Transportation - Recent Projects ANR Capacity Volume: 47,000 Mcf/d Start Date: November 2015 Market: Michcon/Chicago TETCO - Gas City Project Volume: 47,000 Mcf/d Start Date: November 2015 Michcon Market: ANR Markets Gas City SWPA / Ohio Production Areas Short-Haul FT Capacity (12
Slide 106: Natural Gas Sales
Gas Marketing Natural Gas Sales Gas Sales 2014 2016* Midwest In-Basin 66% 50% TETCO M3 Exports 34% 50% Dominion South 100% 100% * CY2016 Targets TCO Pool TETCO M2 East Tennessee Gas Sales 2014 Columbia (TCO) 30% Dominion (DTI) 18% TETCO (M2) 18% TETCO East LA TETCO (M3) 17% East Tennessee 17% Midwes
Slide 107: Natural Gas Sales - Basis Risk
Gas Marketing Natural Gas Sales - Basis Risk Chicago Dawn CY 2014: $0.86 CY 2014: $1.00 CY 2016: - $0.04 CY 2016: $0.22 TETCO M3 Dominion South CY 2014: $0.46 CY 2014: - $0.78 CY 2016: $0.23 CY 2016: - $0.79 TCO Pool Basis TETCO M2 CY 2014: - $0.07 CY 2014: - $0.72 CY 2016: - $0.26 CY 2016: - $0.82
Slide 108: Natural Gas Sales - Volatile Prices
Gas Marketing Natural Gas Sales - Volatile Prices Natural gas prices and basis values are expected to remain volatile over time Manage price risk by adding program, supplemental, and basis hedges Manage basis risk by developing a diversified portfolio of sales locations Target additional fir
Slide 109: Natural Gas Sales - Pipeline Projects
Gas Marketing Natural Gas Sales - Pipeline Projects Dawn CY 2014: $1.00 CY 2016: $0.22 Dominion South CY 2014: - $0.78 Dawn Pipeline Projects CY 2016: - $0.79 TETCO M2 CY 2014: - $0.72 CY 2016: - $0.82 Southeast Pipeline Projects TCO Pool Basis East LA CY 2014: - $0.07 CY 2014: - $0.07 CY 2016: - $0
Slide 110: Natural Gas Processing
Gas Marketing Natural Gas Processing Contracted capacity exceeds current requirements by 45% Processing Contracted Capacity - Gross Inlet Gas Volumes MCF/d Options for additional volumes under our existing *CY2016 capacity = 415,000 Mcf/day ** contracts Maximize realizations by taking advantag
Slide 111: Natural Gas Processing - Majorsville
Gas Marketing Natural Gas Processing - Majorsville 4,500 3.8 Million Gallons 4,000 Normal Pentane ISO-Pentane 3,500 Hexane (000 Gallons Per Month) ISO-Butane 3,000 Normal Butane 2,500 2,000 1,500 1,000 846,000 Gallons Propane 500 0 Propane Normal Butane Iso-Butane Hexane Iso-Pentane Normal Pentane M
Slide 112: Ethane Sales - Market Options
Gas Marketing Ethane Sales - Market Options Shell Cracker MW Majorsville CNX McQuay Braskem Cracker INEOS Exports ATEX to Mont Belvieu Northeast ethane production has a number of sales alternatives including exports to Europe, two major cracker projects, and the ATEX pipeline to the Gulf markets Sou
Slide 113: Plan Forward
Gas Marketing Plan Forward Diversified Transportation - Selectively target pipeline projects that serve our production areas - Add new sales with matching firm transportation - Pursue third-party released capacity opportunities Diversified NGL Processing - Sell through midstream partners with th
Slide 114: Coal Division
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Slide 115: Best in Class Operations
Coal Division Best in Class Operations Industry AverageSafety CONSOL Energy Environmental CONSOL Energy 112 2011 2012 2013 Industry Average CONSOL Energy 5.29 79 3.42 42 1.97 1.22 Incident Rate S&S Industry Rate CNX Coal NOV Number of Recordable Injuries * 200,000 hours National Industry Rate for Si
Slide 116: Mining Complex Locations
Coal Division Mining Complex Locations Bailey Complex Buchanan Miller Creek Complex Southern West Virginia / Location Southwestern Pennsylvania Southwestern Virginia Mingo County 5 Longwalls and 1 Longwall System and Stripping Shovels and Method Continuous Mining Machines Continuous Mining Machines
Slide 117: Bailey Complex
Coal Division Bailey Complex Location: West Finley, PA Mine life: 25+ years Reserves: over 625 million tons Thermal & high-vol met coal Production units: - 5 longwalls - 18 miner sections Annual production capacity: 28 million tons Union free operations Upgrades: - 3 new coal silos -
Slide 118: Square Miles Mine Size Comparison
Coal Division Square Miles Mine Size Comparison 118
Slide 119: Bailey Distribution
Coal Division Bailey Distribution Around-the-clock reliability Strong relationships and service with both railroads Delivered record-breaking Q1 performance despite the most Ability to load up to 10 trains per day severe winter in several years 1 new side track built (total of 3 at the compl
Slide 120: Buchanan
Coal Division Buchanan Location: Buchanan County, VA Mine life: 20+ years Reserves: 98 million tons Low-vol met coal Production units: - 1 longwall - 5 miner sections - 2 mains - 3 longwall developments - Super-sections Annual production capacity: 5.2 million tons Lower cost than most
Slide 121: Miller Creek – Surface & Underground
Coal Division Miller Creek – Surface & Underground Location: Mingo County, WV Mine life: 9 Years on current permit - 15+ additional years on western expansion area High Quality Reserves - 13 million tons current permit - 20+ million tons additional on western expansion area - Owned in fee - Hi
Slide 122: Appalachia Powerhouse
Coal Division Appalachia Powerhouse Coal fleet generates strong cash flow - We divested our low-margin, high-maintenance operations - Remaining mines have been recapitalized and are brand new and running well - It’s not a matter of if we make money, but how much money we make. Bailey’s future is
Slide 123: Best-in-Class Assets: Historic Sales Price per Ton
Coal Division Best-in-Class Assets Historic Sales Price per Ton $200 Weighted average sales price per ton from 2009 – 1Q14 $150 $135 $100 $70 $64 $50 2014 Q1 2014 Q1 2014 Q1 2012 2009 2010 2011 2013 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 $- Bailey Buchanan Miller Creek 2014 Q1 prices are
Slide 124: Best-in-Class Operations: Cash Cost & Cash Margin
Coal Division Best-in-Class Operations Cash Cost & Cash Margin Cash margin per ton Q1 Cash Cost per Ton $200 Cash cost per ton $200 $150 $150 $135 5-yr Avg Price $100 $100 $19-135 Incremental Margin $69 5-yr Avg Price $64 5-yr Avg Price $7-19 Incremental Margin $50 $26.84 $50 $25-34 Incremental Marg
Slide 125: Strong Cash Margins
Coal Division Strong Cash Margins 1,800 1,600 1,400 Total 1,200 $ in millions 1,000 Miller Creek Bailey 800 600 400 Buchanan 200 Thermal Met Total Total annual potential cash margin range $0.8-$1.7 billion (20+ years of reserves) Note: Low Range = Internal estimate production and cost, minimum 5-yea
Slide 126: Distribution and Logistics Extend Our Market Reach
Coal Division Distribution and Logistics Extend Our Market Reach Europe Asia South America CNX Marine Terminal • 16 million TPY throughput capacity • Ships to 22 countries • Flexibility to sell into thermal and met markets CNX Mines CNX Marine Terminal NS Railroad System CSX Railroad System Transpor
Slide 127: Diversified Sales Portfolio
Coal Division Diversified Sales Portfolio Our core customers have: Large plants Low heat rates Environmental controls to exist post-MATS Mid Atlantic MM Tons Logistically-favorable plants Total Tons Burned 39 Quality requirements conducive to our coal 13 CNX Customer Plants 21 CNX 2014E Sa
Slide 128: Protecting Our Turf and Expanding Our Markets
Coal Division Protecting Our Turf and Expanding Our Markets CNX Mines CNX Marine Terminal $13-15 NAPP vs IB Mid Atlantic Transportation $/Ton Advantage $16-17 NAPP vs IB Europe Transportation $/Ton Advantage $9-10 NAPP vs IB Southeast Transportation $/Ton Advantage Transportation and distribution ab
Slide 129: Minor MATS Impact
s Coal Division Minor MATS Impact: Tonnage Reduction Due to MATS 2014-2019 10 GW 2 GW 40 GW 1 MMT 16 MMT 4 MMT 95 MMT Projected 2014 Mid Atlantic Total burn Total US Impact CNX Customers CNX shipments & Southeast Gas captures much of the retiring 40 GW; MATS has small impact on CONSOL demand and we
Slide 130: U.S. Coal and Gas Inventory/Storage Levels
Coal Division U.S. Coal and Gas Inventory/Storage Levels U.S. Total Coal Inventory Lower 48 Working Gas Underground Storage 5 Year Range 2014 5 Year Average 5 yr Range 2014 5 Yr Average 220 3.75 200 3.25 180 2.75 Tcf Tons in millions 160 2.25 140 1.75 1.27 TCF 120 118 MM Tons 1.25 100 0.75 Jan 14 Ap
Slide 131: Power Dispatch Curve
Coal Division Power Dispatch Curve Power dispatch curve/low gas price environment/pre-MATS MATS impact Gas price uplift $/MWH Hourly Demand Swing Cumulative Capacity (MW) Signs point to increased power prices, coal prices, gas prices, and volatility 131
Slide 132: Buchanan – A Sleeping Giant
Coal Division Buchanan – A Sleeping Giant Low-cost, high-quality low-vol met product Customers in US, Europe, Brazil, Korea, India, and China Diversifying portfolio away from China CNX financial strength permits disciplined pricing Huge free option as cash generating machine Well-capitaliz
Slide 133: Strong Cash Margins
Coal Division Strong Cash Margins 1,800 1,600 1,400 Total 1,200 $ in millions 1,000 Miller Creek Bailey 800 600 400 Buchanan 200 Thermal Met Total Total annual potential cash margin range $0.8-$1.7 billion (20+ years of reserves) Note: Low Range = Internal estimate production and cost, minimum 5-yea
Slide 134: Appalachia Powerhouse
Coal Division Appalachia Powerhouse Coal fleet generates strong cash flow - We divested our low-margin, high-maintenance operations - Remaining mines have been recapitalized and are brand new and running well - It’s not a matter of if we make money, but how much money we make. Bailey’s future is
Slide 135: Monetization of Non-Core Assets
Monetization of Non-Core Assets 135
Slide 136: Completed Divestitures and JVs Since 2012
Monetization of Non-Core Assets Completed Divestitures and JVs Since 2012 $450 $1,000 $400 $900 $800 $350 Cumulative Transaction Value ($MM) $700 $300 Transaction Value ($MM) $600 $250 $500 $200 $400 $150 $300 $100 170 $200 $50 103 $100 3 13 25 26 7 25 $0 15 $0 Routt County Burning Star Crows Nest E
Slide 137: Sale of West Virginia Mines to Murray Energy
Monetization of Non-Core Assets Sale of West Virginia Mines to Murray Energy Divested 5 West Virginia thermal longwall coal mines, select reserves, and river division - Total coal reserves of 1.1 billion tons, and production of approximately 30 million tons CONSOL received $3.5 billion in value
Slide 138: Future Asset Divestiture Opportunities
Monetization of Non-Core Assets Future Asset Divestiture Opportunities Key Future Asset Divestiture Opportunities Asset Type Potential Illinois Basin reserves/resources Thermal 1,082 MM tons Fola/Birch/Canfield coal mines/reserves Met/Thermal 230 MM tons Itmann coal mines/reserves Metallurgical 30 M
Slide 139: Illinois Basin Divestiture
Monetization of Non-Core Assets Illinois Basin Divestiture 8 coal blocks consisting of 1,082 MM tons of reserves and resources 139
Slide 140: Cardinal States Gathering
Monetization of Non-Core Assets Cardinal States Gathering CSG is a premier gathering system located in Virginia, Kentucky and West Virginia Consists of four interconnected pipelines, a treating/compressor station (Grant Station) and a downstream pipeline connected to a Columbia Pipeline and East
Slide 141: CNX Baltimore Terminal
Monetization of Non-Core Assets CNX Baltimore Terminal Located on 200 acres in the Port of Baltimore Only east coast terminal served by two rail lines (NS & CSX) Operational 24/7, 363 days a year Exported 35.8 million tons to 21 countries in the past three years 10.2 million tons exported
Slide 142: WV JV Development/Land Sales
Monetization of Non-Core Assets WV JV Development/Land Sales Mon-View project expected to generate >$30 million for CONSOL 142
Slide 143: Financial Overview
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Slide 144: Driving Down Our Cost of Capital
Financial Overview Driving Down Our Cost of Capital Sound investment philosophy: - Within our geographic footprint - Focus on strengthening our asset base for the long term - Improve efficiencies, lower capital intensity, and raise project rates of returns Managing our growth profile and risks a
Slide 145: Capital and Cash Flows
Financial Overview Capital and Cash Flows Cash Flow and Capital Ranges CF Range Capex Range Series7 CF CAGR $2,400 $2,200 $2,000 $1,800 $MM $1,600 Cash Flow CAGR: 11% $1,400 $1,200 $1,000 2014E 2015E 2016E Cash flow range projection based on assumptions and sensitivities to forecasted sales volumes,
Slide 146: Disciplined Investment Approach
Financial Overview Disciplined Investment Approach Coal: Shifted into maintenance mode after strong historical investment Invested $2.1 billion over the past 8 years - Organic coal capacity vs. acquisitions (BMX, Amonate, WAE) - Efficiency projects improve safety with expected 25% IRR Average ma
Slide 147: Historical F&D Costs
Financial Overview Historical F&D Costs Net Sales Volume Produced (in Bcf) 200 172.4 153.5 156.3 150 127.9 94.4 100 50 - 2009 2010 2011* 2012 2013 Proved Reserves (in Bcfe) 5,731 6,000 3,732 3,993 4,000 3,480 1,911 2,000 - 2009 2010 2011* 2012 2013 Drill Bit F&D Costs (in $/Mcfe) $1.00 $0.75 $0.47 $
Slide 148: Positive Capital Efficiency Trends
Financial Overview Positive Capital Efficiency Trends Improving Recycle Ratios Recycle Ratio 6.00 Investment cycle shifting to cash generation Liquids uplift 4.20 4.13 3.95 4.00 Improving economics through RCS/SSL and declining capital costs Carry impacts Midstream potential 2.00 1.42 - Hi
Slide 149: Ample Funding Tools
Financial Overview Ample Funding Tools Coal production stream: fully-capitalized and 25-year life Two JV-carried interests: Marcellus = $1.9B and Utica = $0.2B Non-core asset sales: estimated between $0.1-$0.3B/Year Infrastructure assets: 2 midstream assets, processing plants, and coal termi
Slide 150: MLP Formation Rationale
Financial Overview MLP Formation Rationale Premium valuation: assets within the MLP structure typically trade at higher valuations than those of their publicly-traded parent Broad and efficient access to capital: public trading allows the MLP to raise funds from a broader range of investors; MLP
Slide 151: CONE Asset Overview
Financial Overview CONE Asset Overview Over $400 million capital investment in gathering and processing systems Rapid organic volume growth through existing systems Ongoing development of new systems to support E&P’s projected growth Systems located on stacked pays with close proximity to pr
Slide 152: 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 (1) (2) Acreage 345,151 68,488 Zones PA and WV Marcellus, Burkett to Onondaga OH Utica Noble to pay 1/3 of CNX 50% share of eligible charges
Slide 153: Financial Overview: Cost of Equity
Financial Overview: Cost of Equity 153
Slide 154: Beta Declining While Stock Recovering
Financial Overview: Cost of Equity Beta Declining While Stock Recovering 1 Yr Beta (Daily Returns) Index Stock Price Index Indexed to Oct 28 2009-Oct 27 2010 Time Period Indexed to Oct 28 2009-Oct 27 2010 Time Period CNX Coal Peer Avg Gas Peer Avg CNX Coal Peer Avg Gas Peer Avg 1.4 2.0 1.2 1.5 1.0 I
Slide 155: Meeting or Exceeding Guidance
Financial Overview: Cost of Equity Meeting or Exceeding Guidance Gas Guidance and Production With the sale of the 5 mines, CONSOL increased Guidance Range Actual Production 50 its focus on growing our E&P production Our lean manufacturing concept will improve our 45 cycle times and provide more
Slide 156: Declining E&P Unit Costs
Financial Overview: Cost of Equity Declining E&P 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 5% to 10% over the next three years DD&
Slide 157: Ability to Maintain Low Unit Costs
Financial Overview: Cost of Equity Ability to Maintain Low Unit Costs Reducing Bailey Complex Average Cost: Bailey Complex Production Cost Ranges per Ton Cash Cost Range Total Cost Range Fully loaded and cash costs per ton $50 in 2014 improved to $43.68 and $34.95, respectively $45 Overall steam
Slide 158: Commodity Risks and Market Analysis
Financial Overview: Cost of Equity Commodity Risks and Market Analysis Market Definition Market Drivers Scope: The natural gas, thermal and metallurgical coal markets Supply: Domestic production are analyzed in the context of general economic drivers as well as and net imports those specific to thei
Slide 159: Commodity Interrelationships
Financial Overview: Cost of Equity Commodity Interrelationships Residential Domestic and Domestic and Global Commercial Global Power Steel Markets Industrial Markets Natural Gas Thermal Coal Metallurgical Coal CNX EBITDA Shifting Fast Towards E&P 2013 2014E 2016E E&P 32% Coal 37% Coal 47% E&P 53% E&
Slide 160: U.S. Electric Generation Mix
Financial Overview: Cost of Equity U.S. Electric Generation Mix Net Generation Mix United States Coal Natural Gas Uranium Other 50% 40% As gas prices rise above historic lows, coal generation ramps up in the near-term 30% 20% 10% - 2010 2014 2015 2019 2020 2011 2012 2013 2016 2017 2018 Natural Gas D
Slide 161: Managing Commodity Price Risk
Financial Overview: Cost of Equity Managing Commodity Price Risk Revenue and Cash Flow Risks: Value at Risk (VaR): CONSOL’s revenues and cash flows are derived from • Statistical risk management tool that calculates: three main products with price volatility 1. An asset’s greatest expected price l
Slide 162: VaR, Company Portfolio
Financial Overview: Cost of Equity VaR, Company Portfolio One month Value at Risk, 95% Confidence Interval Natural Gas Thermal Coal Metallurgical Coal Nat Gas VaR Thermal VaR Met Coal VaR CNX Unhedged Portfolio VaR CNX Hedged Portfolio VaR CNX Hedged Portfolio (2.4%) Risk reduction achieved through
Slide 163: Hedge and Coal Contract Program
Financial Overview: Cost of Equity Hedge and Coal Contract Program Hedge Program: Program Hedge: Program and actively monitored hedges Protect margins on 90% of our Proved Developed Production Reducing the total portfolio VaR including coal Use a program approach to layering on - Protect cas
Slide 164: Hedge Program
Financial Overview: Cost of Equity Hedge Program Actively Monitored Hedge: 2014 Competitor and CNX Hedge Positions (As Percent of Total Volume) Swaps Collars Priced Coal Recently increased hedge position for 2014 100% 89% 87% - For 2014: 25.7 Bcf added in the first 83% 75% 80% 74% quarter at appro
Slide 165: Financial Overview: Cost of Debt
Financial Overview: Cost of Debt 165
Slide 166: Legacy Liability Outlook
Financial Overview: Cost of Debt Legacy Liability Outlook Annual employee legacy liabilities cash servicing cost expected to decrease over time at approximately 5.5% per annum 0.25% increase in discount rate affects liability balance by ($36) and annual expenses incurred by ($5) 0.25% decrease
Slide 167: Debt Profile
Financial Overview: Cost of Debt Debt Profile Refinanced $1.5B of Senior Notes: Recently lowered cost of debt capital on ~49% of total long-term-debt by over 2%, from 8.000% to 5.875% Lowered cost of publicly traded debt by over 1%, to 6.837% from 7.895% Pushed out maturity from 2017 until 202
Slide 168: Debt Capacity and Philosophy
Financial Overview: Cost of Debt Debt Capacity and Philosophy CNX Forecasted Debt/EBITDA Debt/EBITDA Consolidated 6x CNX Debt/EBITDA High & Low Range Moody's Ratio From the Moody’s report dated February 14, 2014: 4x “The negative outlook reflects our expectation that Target Zone (2.0x – 3.0x) the
Slide 169: Finance Summary
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Slide 170: Reducing the Total Cost of Capital
Financial Summary Reducing the Total Cost of Capital Coal Business WACC Gas Business WACC Consolidated WACC 13% 2013 Cost of Capital Reduction Sale of Northern WV Thermal Mines Released $2.05B employee benefit/pension obligation Received $825MM net cash proceeds 12% Increased weighting of lowe
Slide 171: Reducing Risk and Increasing Valuation
Financial Summary Reducing Risk and Increasing Valuation We have a strong asset base and powerful planning and investing processes to manage our growth, reduce risk, and ultimately drive improving value for both our debt and equity stakeholders We are prepared to drive margin expansion and profi
Slide 172: Closing Remarks
(= CONSOL ENERGY AMERICA’S ENERGY STARTS HERE. Closing Remarks 172
Slide 173: Appendix
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Slide 174: Non-GAAP Reconciliation
Appendix Non-GAAP Reconciliation CONSOL Energy Continuing Ops (Dollars in millions) 2011 2012 2013 2013 Net Income Attributable to CONSOL Energy Inc. Shareholders $632 $388 $660 $81 Add: Interest Expense 248 220 219 219 Less: Interest Income (9) (29) (16) (16) Add: Income Taxes 155 109 357 (33) Add:
Slide 175: Non-GAAP Reconciliation (Cont'd)
Appendix Non-GAAP Reconciliation (Cont’d) Consolidated CONSOL Energy Cont. Ops (Dollars in thousands) 2013A 2014E 2015E 2016E Net Income $80,650 $235,607 $516,112 $624,344 Add back: Interest Expense 219,198 275,941 195,415 208,523 Income Tax Expense (33,189) 60,130 204,087 268,971 DD&A 461,122 557,0