Cnx Resources Corporation · NYSE:CNX
Cnx Resources — CONSOL Energy — Debt Investor Presentation (October 2017)
47 slides from Cnx Resources's debt investor presentation, Oct 16, 2017
Slide 1: Lender Presentation October 2017 CONSOL Mining Corporation
Lender Presentation October 2017 CONSOL Mining Corporation Exhibit 99.1
Slide 2: Disclaimer
Disclaimer 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, without limitation, statements regardi
Slide 3: Disclaimer (cont'd)
Disclaimer (cont’d) This presentation includes unaudited “non-GAAP financial measures” as defined in Regulation G under the Securities Exchange Act of 1934, including EBITDA, Adjusted EBITDA, Bank EBITDA and Free Cash Flow. CONSOL Energy Inc. and CONSOL Mining Corporation believe that the presentati
Slide 4: Agenda
AGENDA Topics Transaction Overview CONSOL Mining Corp. Overview Key Credit Highlights Marketing Overview Industry Overview Financial Summary 4
Slide 5: Presenters
Presenters Jimmy Brock Chief Executive Officer, CONSOL Mining Corp. David KhaniExecutive VP and Chief Financial Officer, CONSOL Mining Corp. Jim McCaffrey Senior VP-Coal Marketing, CONSOL Mining Corp. Matt Bashaw Vice President, Citi 5
Slide 6: 1. Transaction Overview
( CONSOLENERGY 1. Transaction Overview
Slide 7: Planned separation of CONSOL Energy's coal business through spinoff
CONSOL Energy Inc. (“CEI”) is planning to separate its coal business (“CONSOL Mining Corp.” or “CMC”) through a distribution of CMC common stock to CEI shareholders (the “spinoff”) Management believes the spinoff will be beneficial for CEI and its stockholders for a number of reasons, including: Imp
Slide 8: Post-spinoff ownership structure
1.7% general partner interest 100% Ownership interest 100% Ownership interest 25% undivided ownership interest and management and control rights CONSOL Mining Corporation CNX Coal Resources GP LLC CNX Coal Resources LP (the “Partnership”) NYSE: CNXC CNX Coal Resources Operating LLC CNX Thermal Coal
Slide 9: 2. CONSOL Mining Corp. Overview
2.CONSOL Mining Corp. Overview 13
Slide 10: Pennsylvania Mining Complex Overview
Pennsylvania Mining Complex Overview Source:CONSOL Mining Corp. management, ABB Velocity Suite, EIA Note:Data shown on a 100% basis for PAMC (1)For the fiscal year period ending and as of 12/31/2016 (2) Represent the average of power plant deliveries for the 36 months ending 6/30/17 per EIA / ABB Ve
Slide 11: PAMC Is The Premier U.S. Coal Mining Complex
PAMC Is The Premier U.S. Coal Mining Complex Largest underground coal reserve base in the US(1) Leading 2016A NAPP cash margin per ton(3)(4) U.S. mines International mines Source:CONSOL Mining Corp. management, Mine Safety and Health Administration (“MSHA”), Wood Mackenzie and ABB Velocity Suite, EI
Slide 12: Baltimore Terminal Overview
Baltimore Terminal Overview Overview Coal export terminal strategically located in Baltimore, MD 15.0 million tons per year throughput capacity 1.1 million tons coal storage yard capacity Sole East Coast coal export terminal served by two railroads Opened for throughput capacity from third party shi
Slide 13: 3. Key Credit Highlights
( CONSOLENERGY 3. Key Credit Highlights
Slide 14: Key Credit Highlights
Key Credit Highlights 1 2 3 4 5 6 Long-term contracts provide strong sales visibility and robust cash generation Extensive, high-quality reserve base with long mine life and monetization opportunities Well-capitalized, highly efficient longwall mining complex Strategically located mining operations
Slide 15: Low-cost Production Sustains Margins and Provides Flexibility Through the Cycle
Low-cost Production Sustains Margins and Provides Flexibility Through the Cycle 1st quartile cost position in NAPP (2016) PAMC ($ per ton) 38.9% Cash margin % 34.9% 41.7% 40.2% 37.9% 31.1% 33.9% 37.4% 38.6% 35.0% ($ per ton) 1 Century (Murray) Harrison County (Murray) Monongalia (Murray) Ohio County
Slide 16: Long-Term Contracts Provide Strong Sales Visibility and Robust Cash Generation
Source:CONSOL Mining Corp. filings and management Excludes non-recurring costs, such as Harvey mine idling in 2016, other incidental transactions not directly related to coal produced, servicing costs of legacy liabilities and equity based compensation Committed volumes for PAMC are as of October 9t
Slide 17: Well-established Diversified Blue Chip Customer Base Minimizes Market Risk
Market cap: $50.5bn Baa2 / BBB+ Market cap: $19.7bn Baa1 / BBB+ Well-established Diversified Blue Chip Customer Base Minimizes Market Risk Average capacity factor (weighted by capacity) Blue-chip customers(1) Market cap: $60.8bn Baa1 / A- Market cap: $50.9bn Baa2 / A- Private - / - Private B1 / B+ S
Slide 18: Extensive, High-quality Reserve Base With Long Mine Life and Monetization Opportunities
Extensive, High-quality Reserve Base With Long Mine Life and Monetization Opportunities (million tons) U.S. Mines International Mines Attractive product qualities(2) PAMC is the largest underground thermal coal reserve base(1) Source:CONSOL Mining Corp. management Reserve data for NAPP mines based o
Slide 19: Undeveloped reserve holdings
Source: CONSOL Mining Corp. management Note: Coal reserves represent clean tons Undeveloped reserve holdings 4 Marshall Marion Braxton Wyoming Itmann Mine Coal reserves: ~26 million tons Pocahontas 3 Seam Low-vol met coal Birch Mine Coal reserves: ~117 million tons Coalburg / Lower Kittanning Seam T
Slide 20: Well-capitalized, Highly Efficient Longwall Mining Complex
Well-capitalized, Highly Efficient Longwall Mining Complex Capital investments: expansion and improvement projects ($ in millions) (capex per ton) Source: CONSOL Mining Corp. management (1)As of 6/30/2017 $486 $890 $1,231 $1,367 $1,418 Cumulative capital investments ($ millions) 5 Highly productive
Slide 21: NAPP longwall mine comparison
Source:MSHA Note:Number of longwalls indicated in parentheses. Excludes the Emerald and Powhatan mines, which closed in 2015 and 2016, respectively Well-capitalized, Highly Efficient Longwall Mining Complex (cont’d) NAPP longwall mine comparison 2016 Peer average: 5.4 2016 Peer average: 5.2 PAMC is
Slide 22: Key drivers of cost improvements
Key drivers of cost improvements Major capital investments since 2010 have led to significant improved cost efficiencies at PAMC mines Invested in highly automated underground mining equipment that is driven by advanced longwall systems Cost management efficiency improvements resulted in significant
Slide 23: Strategically Located Mining Operations with Excellent Access to Logistics Infrastructure
Strategically Located Mining Operations with Excellent Access to Key Logistics Infrastructure 6 Eastern U.S. coal regions and points of export(1) Dual-served railroad access Source: CONSOL Mining Corp. management (1)Represents estimated ocean/rail rates to port terminals, exclusive of terminaling ch
Slide 24: Experienced Management with a Focus on Safety, Compliance and Financial Discipline
Experienced Management with a Focus on Safety, Compliance and Financial Discipline 7 CMC’s management and operating teams have a long history in the coal industry Significant expertise owning, developing and managing coal mining operations Valuable relationships with customers, railroads and other p
Slide 25: Safety and compliance performance
Safety and compliance are CMC’s top two core values PAMC has industry leading safety and compliance standards 2013 - 2016, PAMC’s Mine Safety and Health Administration (“MSHA”) reportable incident rate was ~42% lower than industry average PAMC’s MSHA significant and substantial citation rate was 24%
Slide 26: 4. Marketing Overview
( CONSOLENERGY 4. Marketing Overview
Slide 27: PAMC Expected Marketing Strategy
Maximize sales to established customer base of rail-served power plants in the Eastern U.S., with a focus on top-performing environmentally-controlled plants Place approximately 2.0 – 2.5 million tons per annum in the seaborne met coal market Selectively place remaining tonnage in opportunities (dom
Slide 28: Proven Track Record of Growing Market Share at Targeted Customer Plants
CMC has achieved a 20% point increase in market share at its top 15 customer plants since 2011, largely by displacing other NAPP and CAPP producers, with more room to grow Proven Track Record of Growing Market Share at Targeted Customer Plants Provide steady demand for >50 mm tons of coal per year A
Slide 29: Proven Track Record of Growing Market Share (cont'd): Duke Energy
Proven Track Record of Growing Market Share at Targeted Customer Plants (cont’d) PAMC deliveries to Duke Energy plants PAMC share at Duke’s North Carolina fleet Share of deliveries to North Carolina Plants PAMC Deliveries (in million tons) The Company has continued to execute the same approach to de
Slide 30: PAMC's Highly-diversified Portfolio Has Provided Volume Stability
In 2016, the Company sold PAMC coal to 38 domestic power plants located in 18 states, and to thermal and metallurgical end-users located across four continents PAMC’s Highly-diversified Portfolio Has Provided Volume Stability 2016A Export Met: 26.1 22.9 24.6 2016A Domestic Thermal: 2016A Export Ther
Slide 31: Significant Opportunities in Improving Export Markets
Significant Opportunities in Improving Export Markets Strong committed sales base for 2018 allows for selective placing of remaining tons to maximize FOB mine realizations Exports, in spite of showing significant volatility, have provided the most upside recently Historically, exports (thermal and c
Slide 32: PAMC Has a Vast Presence Among NAPP Rail Power Plants, with Room to Grow
PAMC Has a Vast Presence Among NAPP Rail Power Plants, with Room to Grow NAPP rail customers span diverse market areas in the eastern U.S., with few slated to retire. PAMC’s coal has a presence in a majority of these plants, with more room to grow. Source: EIA, ABB Velocity Suite. Market shares base
Slide 33: Minimal Impact from Announced Power Plant Retirements on NAPP Rail Coal Demand
Minimal Impact from Announced Power Plant Retirements on NAPP Rail Coal Demand Source: CONSOL Mining Corp. management, EIA, ABB Velocity Suite, EPA Includes all plants that took delivery of NAPP rail coal in 2016 Based on 2016 NAPP rail market share and average of 2015-2016 coal consumption In 2016,
Slide 34: 5. Industry Overview
( CONSOLENERGY 5. Industry Overview
Slide 35: Industrial Growth and Easing Regulations Support Improved Fundamentals for Coal
Industrial Growth and Easing Regulations Support Improved Fundamentals for Coal Growing natural gas exports and industrial demand support stronger gas prices and pull gas from electric power generation Electricity use continues to increase driven by resurgence in industrial demand Source:EIA annual
Slide 36: Limited Exposure to Natural Gas Basis Differential, with Improving Outlook
Limited Exposure to Natural Gas Basis Differential, with Improving Outlook Natural gas pipeline and LNG projects Basis differentials may improve beyond current expectations due to overbuild of pipeline projects out of the region, creating undersupply locally Source:CONSOL Mining Corp. management, SN
Slide 37: Thermal Coal Prices Have Significantly Rebounded Due to Improved Gas Prices
Thermal Coal Prices Have Significantly Rebounded Due to Improved Gas Prices Source:ABB Velocity Suite, NYMEX, Coaldesk (1)Calculated as quarterly operating cost of sales per ton plus $5 per ton maintenance capex; converted at 13,000Btu/lb and 2,000lb/ton Coal prices vs. gas prices Strong burn / Inve
Slide 38: Effect of Gas Prices on Coal Generation
Effect of Gas Prices on Coal Generation Coal Share of U.S. generation vs. natural gas price ranges (January 2014 – June 2017) Natural gas futures curve and consensus forecast(1)(2) ($ per mmBtu) Futures and consensus data as of 10/4/2017. 2017 consensus forecast and NYMEX futures are for the remaind
Slide 39: NAPP has had Less Supply / Demand Imbalance than Other Basins During Recent Downturn
NAPP has had Less Supply / Demand Imbalance than Other Basins During Recent Downturn Source: ABB Velocity Suite (MSHA data) and Wood Mackenzie (1)Peak production per Wood Mackenzie (2)Calculated with peak year of 2014 (3)Illustrative pricing data based on prompt month prices reported by Coaldesk LLC
Slide 40: 6. Financial Summary
( CONSOLENERGY 6. Financial Summary
Slide 41: Financial Policy
Financial Policy Deleveraging through debt repayment with free cash flow and EBITDA expansion Primary use of free cash flow will be used to de-lever the balance sheet in the medium term(1) LT incentive compensation of executives expected to be tied to leverage metrics, B/S strength, and profitabilit
Slide 42: Financial Overview and Update on Bailey Mine Permit
September 18th, 2017, CEI announced the Pennsylvania Department of Environmental Protection requires more time to evaluate approval of the Bailey mine permit CEI moved the longwall to another panel and resumed operations the first week of October CEI mitigating production impact through additional n
Slide 43: Overview of Legacy Liabilities
Overview of Legacy Liabilities Significant legacy liability reductions over past three years: Several divestitures drove substantial reduction in legacy liabilities in 2013 and 2016 Cash payments related to legacy liabilities are predictable and declining over time Considerable tax benefits associat
Slide 44: Conclusion and Q&A
Conclusion and Q&A Excellent Logistics Infrastructure Highly Experienced Management World-Class Mines 1st Quartile Cost Position Diversified Customer Portfolio with Minimum Volume Risk Best-In-Class BTU Content Strong, Stable Free Cash Flow Largest Underground U.S. Coal Base CONSOL Mining Corporatio
Slide 45: Appendix
( CONSOLENERGY Appendix
Slide 46: Appendix: CMC EBITDA Reconciliation
Appendix: CMC EBITDA Reconciliation 50 EBITDA Reconciliation LTM Low High 2014A 2015A 2016A 6/30/17 Q3 2017 Q3 2017 Net Income $291.0 $317.4 $50.5 $126.4 $5.0 $11.0 Plus: Interest Expense -- 7.5 14.1 15.5 3.0 4.0 Income Tax 121.4 125.6 14.6 33.8 4.0 5.0 Depreciation, Depletion and Amortization 206.7
Slide 47: Appendix: PAMC EBITDA Reconciliation
Appendix: PAMC EBITDA Reconciliation Amounts per CEI’s Form 10K for the fiscal year ended December 31, 2016 and CEI’s Form 10Q for the quarterly period ended June 30, 2017 filed with the SEC 51 EBITDA Reconciliation LTM 2014A 2015A 2016A 6/30/17 (1) Earnings before Income Taxes (1) $431.0 $405.0 $13
CONSOL Energy — Debt Investor Presentation (October 2017) on 6ix