Cnx Resources Corporation · NYSE:CNX
Cnx Resources — CONSOL Energy — Q2 2015 Earnings Presentation
63 slides from Cnx Resources's earnings presentation, 2015
Slide 1: Company Presentation Q2 2015
Company Presentation Q2 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: Q2 2015 Overview
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Slide 4: CONSOL Energy: Second Quarter 2015 Results
Q2 2015 Overview CONSOL Energy: Second Quarter 2015 Results Net loss for the second quarter was ($603.3) million - Includes the following pre-tax items: $828.9 million impairment of certain E&P properties, primarily shallow oil and gas properties $33.6 million gain related to changes in retire
Slide 5: Net Change in Cash and Free Cash Flow Outlook
Q2 2015 Overview CONSOL Energy: Net (Decrease)/Increase in Cash Expect free cash flow generation over the next 18 months, starting in 2H15 through 2016 Roadmap: - E&P production guidance reaffirmed: 2015 production projected to be between 300- 310 Bcfe Production volumes expected to have 20%
Slide 6: Strong Liquidity Position of ~$1 Billion
Q2 2015 Overview Strong Liquidity Position of ~$1 Billion June 30, 2015, pro forma CNXC IPO Amount/ Amount Letters Amount ($ in millions) Capacity Drawn of Credit Available Cash and Cash Equivalents $10 $0 $0 $10 Accounts Receivable Securitization(1) $0 $0 $0 $0 (2) Revolving Credit Facility $2,000
Slide 7: Coal Division: Q2 2015 Results Summary
Q2 2015 Overview Coal Division: Q2 2015 Results Summary Y/Y Q-to-Q Seq. Q-to-Q Coal Division 2Q2015 2Q2014 Change 2Q2015 1Q2015 Change Average Sales Price ($ / ton) $56.78 $62.43 ($5.65) $56.78 $60.23 ($3.45) Average Costs ($ / ton) $45.69 $47.63 ($1.94) $45.69 $43.34 $2.35 Coal Production (millions
Slide 8: Coal Division: Marketing Update and Forecasts
Q2 2015 Overview Coal Division: Q3 and FY 2015 and 2016 Marketing Update and Forecasts 2015 Coal Sales Facts and Goals 2015 Sales Tons by Segment Contracted tons for 2015: 96% - Priced: 94% 7% 14% Approximately 82% of the PA Ops tons are expected to be sold domestically Approximately 78% of th
Slide 9: E&P Division: Q2 2015 Results Summary
Q2 2015 Overview E&P Division: Q2 2015 Results Summary Y/Y Q-to-Q Seq. Q-to-Q E&P Division 2Q2015 2Q2014 Change 2Q2015 1Q2015 Change (1) Average Sales Price ($ / Mcfe) $2.68 $4.44 ($1.76) $2.68 $3.56 ($0.88) (2) Average Costs ($ / Mcfe) $2.90 $3.44 ($0.54) $2.90 $3.05 ($0.15) Sales Volumes (Bcfe) 75
Slide 10: E&P Division: Q2 2015 Operations Summary
Q2 2015 Overview E&P Division: Q2 2015 Operations Summary Marcellus Shale Quarterly Summary Utica Shale Quarterly Summary Avg. TIL Turned Turned Avg. TIL Sub- Horizontal Lateral Sub- Horizontal Drilled Completed In Line Counties Drilled Completed In Line Lateral Counties Regions Rigs Length Regions
Slide 11: E&P Division Production Growth
E&P Division Gas Division Production Growth E&P Production Volumes 450 Production by Area 400 2015E 2016E +20% Marcellus 51% 52% 350 Utica 18% 24% CBM 23% 18% 300-310 300 Other 8% 6% 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 2
Slide 12: F&D/Mcfe: Continued Operational Efficiency Improvements
E&P Division F&D/Mcfe: Continued Operational Efficiency Improvements 2012-2014 Drill-bit F&D Cost: 5-Year Average vs. E&P Peers $3.50 $3.00 Average $2.06 $2.50 $2.00 $/Mcfe $1.50 $1.00 $0.50 $0.00 CNX 2012-2014 Drill-bit F&D Cost: 3-Year Average vs. E&P Peers $4.00 $3.50 $3.00 Average $2.14 $2.50 $/
Slide 13: E&P Division
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Slide 14: Marcellus Shale: Southwest PA
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 ─ 184 wells online, as of NV36 Pad NV57 Pad 6/30/2015 8 Wells 7 Wells 8,914’ Avg Lateral Length per well
Slide 15: Marcellus Shale: North Wet Gas
Marcellus Shale: North Wet Gas North Wet Gas Overview ~54,000 CONSOL net acres Over 1,400 gross locations(1) ─ 123 wells online as of 6/30/2015 ─ 12 wells TIL in Q2 2015 ─ 6,983 ft average laterals in Q2 2015 ─ 6 wells per pad on average ─ 136-acre spacing (assuming 7,900 ft lateral) SHL13 Pad 7
Slide 16: Marcellus Shale: South Wet Gas
Marcellus Shale: South Wet Gas South Wet Gas Overview ~102,000 CONSOL net SHR1 Pad 6 Wells acres ~8,741’ Avg Lateral Length per well WEESE (Triad Hunter) 3 Wells PENS1 Pad 10,143 Mcfe Avg 30-day IP per well Over 2,200 gross 9 Wells 3,711’ Avg Lateral Length per well ~6,824’ Avg Lateral Length pe
Slide 17: Utica Shale: 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 ─ 66 wells online, as of 6/30/2015 ─ 9 wells TIL in Q2 2015 ─ 6,983 ft average TIL laterals in Q2 2015 ─ 4 wells per pad on average i
Slide 18: Utica Shale: Ohio Wet Gas
Utica Shale: Ohio Wet Gas CONSOL Acreage Position in the Core Wet Gas Utica Window HES – Cadiz A HES – Cadiz B CHK - Buell 8H IP GAS: 8,006 Mcf/d IP GAS: 10,254 Mcf/d ~88,000 CONSOL net acres GPOR - Boy Scout 33H IP GAS: 9,500 Mcf/d IP OIL: 399 Bbl/d IP OIL: 191 Bbl/d IP GAS: 5,300 Mcf/d ~34,000
Slide 19: Utica Shale: PA/WV Dry Gas
Utica Shale: PA/WV Dry Gas Utica PA/WV Dry Gas Area Overview RRC– Zahn #1 REXX – Cheeseman 1 IP Gas: ~4,500 Mcf/d IP Gas: 9,200 Mcf/d IP Oil: 0 Bbl/d IP Oil: 0 Bbl/d CHK– Hubbard 3H CHK – Thompson 3H IP Gas: 11,00 Mcf/d IP Gas: 6,400 Mcf/d IP Oil: 0 Bbl/d IP Oil: 0 Bbl/d CNX – Gaut 4IH CHK – Brown 1
Slide 20: Utica Shale: GH9 Greene County, PA
Utica Shale: GH 9 Greene County, PA Range Resources - Claysville Sportsman’s Club #1 IP Gas – 59.0 MMcf/d EQT - Hopkins No Completion Data 100% WI to CONSOL EQT – Scotts Run 24 hr IP – 72.9 Expected TVD: 13,500’ MMcf/d Currently drilling 12.25” vertical hole CNX’s GH9 Utica well is at 10,827’
Slide 21: Utica Shale: Gaut 4I Westmoreland County, PA
Utica Shale: Gaut 4I Westmoreland County, PA CONSOL – GAUT4IH Flowback underway ~ 5,800’ single lateral; 100% WI to CONSOL 30 stage completion, currently in flowback 200’ stages with 500k# proppant : 160k# 100 mesh + 200k # 40/80 ceramic + 140k# 30/50 ceramic Ready supply of water Producti
Slide 22: Utica Shale: Ohio Dry Gas
Utica Shale: Ohio Dry Gas CNX Activity and Recent IP Rates In-and-Around Monroe County, OH CVX Conner well (Utica): GPOR Irons 1-4H (Utica): 25.0 MMcf/d – Avg 24-hr rate 30.3 MMcf/d – Avg 24-hr rate NBL / CNX MND 6H (Utica): 1 Utica Well Currently being frac’d CNX SWITZ 6 (Utica) : Currently frac’in
Slide 23: Gas Marketing
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Slide 24: Gas Marketing: Second Quarter Highlights
Gas Marketing Second Quarter Highlights Average gas price for the second quarter of 2015, including hedging, was $(0.06) per MMBtu below NYMEX ($2.58 vs. $2.64); excluding hedging, gas price was $(0.68) per MMBtu below NYMEX ($1.96 vs. $2.64) CONSOL entered into ethane, propane, and butane sales
Slide 25: 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 2020 ANR Columbia (TCO) 1,000,000 MMBtu/day Targeting pipeline projects that 800,000 East Tennesse access fa
Slide 26: Gas Marketing: Natural Gas Sales
Gas Marketing Natural Gas Sales Midwest TETCO M3 Dominion South TCO Pool TETCO M2 East Tennessee Gas Sales CY 2015 Est. CY 2016 Est. Columbia (TCO) 24% 19% TETCO (M2) 19% 25% TETCO (M3) 20% 15% Dominion (DTI) 19% 18% East Tennessee 13% 10% TETCO ELA TETCO ELA & WLA 4% 8% TETCO WLA Midwest (Chicago)
Slide 27: Gas Marketing: Natural Gas Processing
Gas Marketing Natural Gas Processing Contracted capacity meets current requirements CNX’s Contracted Processing Capacity – Gross Inlet Gas Volumes Options for additional 500,000 volumes under our existing contracts 450,000 400,000 Utilize the near-term market power of midstream partners 350,00
Slide 28: Natural Gas Liquids, Oil, and Condensate
Gas Marketing Natural Gas Liquids, Oil, and Condensate Q2 2015 Avg. “NGL Barrel” Composition Q2 liquids revenue composed 4% of total 2Q15 Actual Company revenue and 12% of E&P sales revenue Natural (~100% gasoline Ethane Ethane 15% 0% Rejection) Q2 liquids sold: 9.1 Bcfe N- Butane 18% Propane 58
Slide 29: Coal Division
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Slide 30: High Quality, Low Cost Assets with Long Mine Life
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 31: Pennsylvania Mining Complex
Coal Division Pennsylvania Mining Complex Pennsylvania mining complex consists of three like-new underground mines and related infrastructure with high-Btu bituminous coal (785.6 million tons proven and probable(1)) - PA mining complex– 785.6 million tons reserves / 28.5 million tons annual capaci
Slide 32: Not All NAPP Longwalls Are Created Equal
Coal Division Not All NAPP Longwalls Are Created Equal 30 5.0 2014 Production - CNXC Assets 2014 Production - Other Longwalls 2014 Sulfur 4.5 25 4.0 Production (million tons) Sulfur (% as received) 3.5 20 3.0 15 2.5 2.0 10 Closed 1.5 in 2015 1.0 5 0.5 0 0.0 Federal (1) Leer (1) Cumberland (1) Ohio C
Slide 33: 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
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Slide 35: Financial: Focused on Free Cash Flow
Financial: Focused on Free Cash Flow CNXC IPO Growing revenue and income - E&P production volume growth - Steady coal production with lower cost base - Commodity price risk management that leaves upside potential (netback pricing, etc.) - CONE Midstream cash flows and EBITDA growing Reductions
Slide 36: CNX Coal Resources LP (CNXC) IPO
Financial: CNX Coal Resources LP (CNXC) IPO CNXC: Organizational Structure CONSOL Energy Inc. CNXC: 20% Undivided interest in Pennsylvania mining ("CONSOL Energy") complex (Bailey, Enlow Fork and Harvey mines) NYSE: CNX Sold 10.6 million LP units, or 44.6%, raising 100% ownership approximately $15
Slide 37: Financial: Liquidity
Financial: Liquidity Debt and Liquidity Profile, Pro Forma CNXC Offering PF CNXC Sources of Funds ($MM) Actual CNXC IPO CNXC Initial Public Offering $150 6/30/2015 IPO 6/30/2015 CNXC Revolver Borrowing 200 Cash and Cash Equivalents $10 $10 CNXC Initial Public Offering - Greenshoe 8 Thermal Term Loan
Slide 38: Commodity Price Risk Management
Financial: Commodity Price Risk Management Hedge and Coal Contract Program E&P Hedge Program: Program and actively monitored hedges Reducing the total portfolio VaR including coal - Protect cash flows - Program - protect margins on 90% of our Proved Developed Production - Threshold levels ensure
Slide 39: CONE Midstream & Gathering Growing
Financial: CONE Midstream & Gathering Growing CONSOL owns 32.1% of CONE Midstream Partners’ (CNNX) LP units and 50% of the General Partner (GP), which has a CONSOL Energy's Ownership Interest in 2% interest in CNNX (and rights to IDRs) CONE Midstream Partners, LP(1) (in millions except for per sha
Slide 40: Operating Cost Reductions
Financial: Operating Cost Reductions Declining E&P Operating Unit Costs Consolidated Cost per Mcfe Driving Down Weighted Average Cost: Property & Other Taxes Direct Admin, Selling & Other LOE Gathering and Transportation Already met prior operating cost reduction target of DD&A 10% to 15% in two y
Slide 41: Overhead Cost Reductions
Financial: Overhead Cost Reductions Reducing Overhead & Administrative Costs Target Target CONSOL Energy Incom e Statem ent 2014 $ in M M 2013(4) 2014 2015E 2016E Drivers Revenues and Other Incom e: Natural Gas, NGLs and Oil Sales $1,028,117 General & Adm inistrative Headcount right-sizing, Coal Sal
Slide 42: E&P Capital Expenditures
Financial: E&P Capital Expenditures Efficiencies Driving Reduced E&P Capital Expenditures Without Sacrificing Growth High-grading locations, capital efficiency improvements and cost reductions driving further E&P capital spending reductions 2015 E&P capital budget lowered by $120 million to $800
Slide 43: Legacy Liabilities
Financial: Legacy Liabilities Significant Legacy Liability Reductions Over Past 3 Years $4,500 $375 $370 $4,345 $4,000 Projected: $350 • $50MM Reduction in Legacy Liabilities $325 Annual Cash Servicing Cost $3,500 • and $31MM Reduction in Annual Cash $300 $3,000 Legacy Liabilities Servicing Cost by
Slide 44: Financial: Summary
Financial: Summary Plans and Goals Aligned to Drive Increased Valuation Catalysts to drive stock performance: Coal MLP – executed Improving E&P performance from high-grading activities, improving completion techniques, reducing cycle times, and service deflation Benefits from recent long-ter
Slide 45: Appendix
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Slide 46: Non-GAAP Reconciliation: Quarterly EBITDA and Adj. EBITDA
Appendix Non-GAAP Reconciliation: Quarter-over-Quarter EBITDA and Adj. EBITDA Three Months Ended June 30 ($ in thousands) 2015 2014 Net Income / (Loss) ($603,301) ($24,935) Add: Interest Expense 46,507 64,211 Less: Interest Income (364) (676) Add: Income Taxes (291,929) 1,214 (Loss) Earnings Before
Slide 47: Non-GAAP Reconciliation: Trailing Twelve Months EBITDA
Appendix Non-GAAP Reconciliation: Trailing Twelve Months EBITDA and Adj. EBITDA Twelve Months Ended June 30 ($ in thousands) 2015 Net Income / (Loss) ($452,250) Add: Interest Expense 210,051 Less: Interest Income (2,510) Add: Income Taxes (312,888) (Loss) Earnings Before Interest & Taxes (EBIT) (557
Slide 48: Adjusted Net Cash Provided by Continuing Operations
Appendix Non-GAAP Reconciliation: Adjusted Net Cash Provided by Continuing Operations Three Months Ended June 30 ($ in thousands) 2015 Net Cash Provided by Continuing Operations $61,742 Addback: Revolver Amendment (2,302) Addback: Thermco and Metco Transaction Fees (2,078) Changes in Working Capital
Slide 49: Joint Ventures
Appendix Joint Ventures Summary of JV Carry Eligible Capital Description Marcellus / Noble Energy Inc. Utica / Hess Corporation Ownership 50/50 50/50 (1) Acreage 345,151 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 p
Slide 50: Marcellus Shale: Overview
Appendix 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: 60 ~93% Marcellus production growth in 2014 compared to 2013 Liquids growth from 2% in 2013 to 8% of total p
Slide 51: Marcellus Shale: Growth Runway and Depth of Inventory
Appendix Marcellus Shale: Growth Runway and Depth of Inventory Marcellus Shale Upside Potential Total Gross Prospective Marcellus Acreage ~790,000 - Gross Acres within JV ~701,000 - Acres outside JV – 100% CONSOL ~89,000 Acreage per well (assumed 750 ft spacing) ~86 Gross Producing wells (JV -
Slide 52: Marcellus Shale: Sub-Regions Summary
Appendix 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 2.1 -- (Bcfe)
Slide 53: Marcellus Shale: Northern WV Dry Overview
Appendix Marcellus Shale: Northern WV Dry 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 Mcf
Slide 54: Marcellus Shale: Central PA Overview
Appendix Marcellus Shale: 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 ─ 58 wells online, as
Slide 55: Utica Shale: Growth Runway and Depth of Inventory
Appendix Utica Shale: Growth Runway and Depth of Inventory Utica Shale Upside Potential Total Gross Prospective Utica Acreage ~690,000 - Gross Acres within JV ~153,000 - Acres outside JV – 100% CONSOL ~537,000 Acreage spacing per well (assumed 750 ft spacing) ~86 Gross Producing wells (JV - YE
Slide 56: Utica Shale: Sub-Regions Summary
Appendix Utica Shale: Sub-Regions Summary 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 EURs/1,000 ft 2.1 2.4 -- -- (Bcfe) Hz Rigs (as of 2Q15) 1 1 1 3 Potential resource of ~30 Tcfe (1) Based on 5,000
Slide 57: Utica Shale: PA/WV/OH Dry Gas Overview
Appendix Utica Shale: PA/ WV/ OH Dry Gas Overview ~526,000 CONSOL net acres ─ ~302,000 net acres in PA ─ ~194,000 net acres in WV ─ 30,000 net acres in OH ~13,000 net acres in Monroe County, OH 4 Utica and 1 Marcellus 100% WI underway in Monroe County, OH. TIL expected 2H15 JV formed with No
Slide 58: Stacked Pay Potential: CONSOL's Shale Fairway
Appendix 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 =
Slide 59: Stacked Pay Potential: Appalachian Shale Acreage
Appendix 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
Slide 60: E&P Division: Resource and Opportunity Rich Portfolio
Appendix 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 66,0
Slide 61: Low-cost, Highly Productive Longwall Mining Operations
Appendix Coal Division: Low-cost, Highly Productive Longwall Mining Operations During 2014, the PA mining complex generated the h i g h e s t c a s h m a r g i n o f a n y o f o u r c o a l p e e r s (1)(2) The design of the Pennsylvania mining complex is optimized to 2014 Average Cash Margin ($ /
Slide 62: Coal Continues to be the Low-Cost Choice for Electricity Generation
Appendix Coal Division: Coal Continues to be the Low-Cost Choice for Electricity Generation U.S. power generation will remain highly dependent on thermal coal for the foreseeable future Coal generation maintains a market share of 37-39% through 2030 Coal increases its advantage over natural ga
Slide 63: Coal Division: Bullish Gas = Bullish Coal
Appendix Coal Division: Bullish Gas = Bullish Coal Natural gas prices are more volatile than coal prices, and coal compares favorably on a Btu-equivalent basis: Natural Gas Price ($/mmBtu) $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 Equivalent Coal Price* ($/ton) $38.85 $51.80 $64.75 $77.70 $90.65 $10