earnings results - cnx resources...
TRANSCRIPT
EARNINGS RESULTS
FOURTH QUARTER 2016
Cautionary Language
2
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 plans; estimates of coal and gas reserves and resources; the projected timing and rates of return of future investments; and projections and estimates of future production, revenues, income and capital spending. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those statements, plans, estimates and projections. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of future actual results. Factors that could cause future actual results to differ materially from the forward-looking statements include risks, contingencies and uncertainties that relate to, among other matters, the following: we may not receive the prices we expect to receive for our natural gas, natural gas liquids, and coal, including due to oversupply relative to the demand available for our products; we may not obtain on a timely basis the permits required for drilling and mining; we may not accurately estimate the volume of hydrocarbons that are recoverable from our oil and natural gas assets; we may encounter unexpected operational issues or disruptions when we drill and mine, including equipment failures, geological conditions, and higher than expected costs for equipment, supplies, services and labor, including with respect to third-party contractors; we may not achieve the efficiencies we expect to realize in our drilling and completion operations, and as a result, our projected cost savings may not be fully realized; our participation in joint ventures may restrict our operational and corporate flexibility, and actions taken by a joint venture partner may impact our financial position and operational results; we may not be able to sell non-core assets on acceptable terms; acquisitions and divestitures that we anticipate making or have made may not occur or produce anticipated benefits, or may cause disruptions to our business operations; we may be subject to environmental and other government regulations that adversely impact our operating costs and the market for our natural gas and coal; failure by Murray Energy to satisfy liabilities it acquired from us, or failure to perform its obligations under various arrangements, which we guaranteed, could materially or adversely affect our results of operations, financial position, and cash flows; we may be unable to incur indebtedness on reasonable terms; provisions in our multi-year coal sales contracts may provide limited protection and may result in economic penalties to us or permit the customer to terminate the contract; the majority of our common units in CNX Coal Resources LP are subordinated, and we may not receive related distributions; and other factors, many of which are beyond our control. Additional factors are described in detail under the captions "Forward Looking Statements" and "Risk Factors" in CONSOL Energy Inc.’s annual report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission (SEC), as updated by any subsequent quarterly reports on Form 10-Qs. The forward-looking statements in this presentation speak only as of the date of this presentation; we disclaim any obligation to update the statements, and we caution you not to rely on them unduly. Currently, the SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible oil and gas reserves that a company anticipates as of a given date to be economically and legally producible and deliverable by application of development projects to known accumulations. We may use certain terms in this presentation, such as EUR (estimated ultimate recovery), unproved reserves and total resource potential, that the SEC's rules strictly prohibit us from including in filings with the SEC. We caution you that the SEC views such estimates as inherently unreliable and these estimates may be misleading to investors unless the investor is an expert in the natural gas industry. These measures are by their nature more speculative than estimates of reserves prepared in accordance with SEC definitions and guidelines and accordingly are less certain. We also note that the SEC strictly prohibits us from aggregating proved, probable and possible reserves in filings with the SEC due to the different levels of certainty associated with each reserve category. Except for proved reserve data, the information included in this presentation is based on a summary review of the title to the gas rights we hold. As is customary in the gas industry, prior to the commencement of natural gas drilling operations on our properties, we conduct a thorough title examination and perform curative work with respect to significant defects. We are typically responsible for curing any title defects at our expense. As a result of our title review or otherwise, we may be required to acquire property rights from third parties at our expense in order to effectively drill and produce the gas rights we control and third parties may participate in the wells we drill, thereby reducing our working interest in those wells. This presentation does not constitute an offer to sell or a solicitation of offers to buy securities of CONSOL Energy Inc. or CNX Coal Resources LP.
E&P: Q4 2016 Operations Summary
3
Production Update:
• OPEX Efficiencies: Reduced Q4 2016 OPEX cash costs by $2.1 million while increasing production by 4.9 Bcfe in the same period, improving units costs by $0.09/Mcfe
• WV Ops: Operated additional 28 wells following the dissolution of the Marcellus JV representing an incremental 70 MMcf/d of production, while lowering LOE by $30,000/month
• PA Ops: Accelerated TIL of two RHL23 wells by 14 days, adding 17.3 MMcf/d in production. Production optimization efforts yielded an additional 2 MMcf/d resulting in a net uplift of 19.3 MMcf/d from the pad compared to legacy non-operated production levels
Marcellus Shale Quarterly Summary
Utica Shale Quarterly Summary
Asset Region SWPA
Horizontal Rigs -
Drilled -
Completed 3
Turned In Line (TIL) 8
Avg. TIL Lateral Length (ft) 7,833
Asset RegionOH - Dry Utica
(Monroe County)
Horizontal Rigs 2
Drilled 7
Completed -
Turned In Line (TIL) -
Avg. TIL Lateral Length (ft) -Cycle Time
Improvement
(Y/Y)
Cost
Reduction
(Y/Y)
Drilling 62% 53%
Completions 41% 34%
Q4 2016 Drilling and Completions Update:
E&P: Q4 2016 Results
4
E&P Results Summary
(3) Adjusted earnings before income tax for the E&P Division of $14.3 million for the three months ended December 31, 2016 is calculated as GAAP loss before income tax of $222.5 million plus total pre-tax adjustments of $236.8 million. The $236.8 million adjustment is the pre-tax loss related to the unrealized loss on commodity derivative instruments.
• Adjusted earnings before income tax for E&P segment of $14.3 million(3)
• Production increased by 6% in fourth quarter 2016, compared to year-earlier quarter
• Marcellus Shale total production costs were $2.20 per Mcfe in the fourth quarter, a decrease of $0.18 from $2.38 per Mcfe in the year-earlier quarter, or an 8% improvement
- The improvement in Marcellus Shale operating costs was largely driven by reduced Transportation, Gathering and Compression costs post-JV dissolution
• Utica Shale total production costs were $1.86 per Mcfe in the fourth quarter, a decrease of $0.02 from $1.88 per Mcfe in the year-earlier quarter, or a 1% improvement
• CBM total production costs were $2.72 per Mcfe in the fourth quarter, an increase of $0.09 from $2.63 per Mcfe in the year-earlier quarter, or a 3% impairment
(1) Average Sales Prices for 4Q2016, 4Q2015, and 3Q2016 include gains on commodity derivative instruments (cash settlements) of $0.46, $0.95, and $0.47, respectively. (2) Average Costs for 4Q2016, 4Q2016, and 3Q2016 include DD&A of $1.05 in each period.
E&P Results 4Q 2016(1)4Q 2015
Y/Y
Change 4Q 2016(1)3Q 2016
Q/Q
Change
Average Sales Price(1) ($/Mcfe) $2.77 $2.78 ($0.01) $2.77 $2.54 $0.23
Total Production Costs(2)
($/Mcfe) $2.27 $2.37 ($0.10) $2.27 $2.36 ($0.09)
Sales Volumes (Bcfe) 101.3 95.5 5.8 101.3 96.4 4.9
Sales Volumes (Bcfe) by Category
Marcellus 56.5 49.7 6.8 56.5 51.8 4.7
Utica 22.2 20.7 1.5 22.2 22.5 (0.3)
CBM 17.4 18.7 (1.3) 17.4 17.0 0.4
Other 5.2 6.3 (1.1) 5.2 5.1 0.1
E&P Marketing: Highlights
5
Q4 2016 E&P Realization and Marketing Highlights
• During the quarter, CONSOL successfully completed the majority of its planned firm transportation and processing capacity reallocations in connection with the separation of the joint venture with Noble Energy
• Directly-marketed ethane volumes were 466,000 barrels in Q4 and, on an equivalent basis, yielded a premium price over the Texas Eastern M2 gas market
- An additional ethane contract with favorable terms commenced October 1, 2016
- Directly-marketed ethane gross realization is up 41% from Q3 2016
• $0.09/Mcfe uplift from liquids, including the impact of hedging
Natural Gas Price Reconciliation
2016 2015
Q4 Q3 Q2 Q1 Q4
NYMEX Natural Gas ($/MMBtu) $2.98 $2.81 $1.95 $2.09 $2.27
Average Differential (0.88) (0.86) (0.46) (0.36) (0.54)
BTU Conversion (MMBtu/Mcf)* 0.12 0.11 0.09 0.10 0.10
Gain on Commodity Derivative
Instruments-Cash Settlement 0.46 0.47 0.91 0.98 0.95
Realized Gas Price per Mcf $2.68 $2.53 $2.49 $2.81 $2.78
* Conversion Factor 1.06 1.06 1.06 1.06 1.06
E&P Marketing: Gas Hedges
6
(1) Hedge positions as of 1/17/2017. FY 2017 includes actual settlements of 25.0 Bcf. (2) Includes the impact of NYMEX, index and basis-only hedges as well as physical sales agreements. (3) Based on total production guidance of 415 Bcfe in 2017E.
Hedged Open
Hedge Position (Outer ring = NYMEX; Inner ring = Basis)
2017
2018
020406080
100120140160180200220240260280300320
FY 2017 FY 2018 FY 2019 FY 2020 FY 2021
Gas
Vo
lum
es
He
dge
d (
Bcf
)
NYMEX Only Hedges Exposed to Basis
NYMEX + Basis (2)(2)
Hedge Volumes and Pricing 2017 2018 2019 2020 2021
NYMEX Only Hedges
Volumes (Bcf) 278.9 218.9 153.2 81.6 6.8
Average Prices ($/Mcf) $3.18 $3.15 $3.07 $3.17 $3.08
Index Hedges and Contracts
Volumes (Bcf) 32.4 1.7 8.5 3.4 -
Average Prices ($/Mcf) $3.19 $2.42 $2.52 $2.35 -
Total Volumes Hedged (Bcf) (1)311.3 220.6 161.7 85.0 6.8
NYMEX + Basis (fully-covered volumes)(2)
Volumes (Bcf) 287.1 182.4 108.6 57.0 -
Average Prices ($/Mcf) $2.57 $2.67 $2.60 $2.79 -
NYMEX Only Hedges Exposed to Basis
Volumes (Bcf) 24.2 38.2 53.1 28.0 6.8
Average Prices ($/Mcf) $3.18 $3.15 $3.07 $3.17 $3.08
Total Volumes Hedged (Bcf)(1)
311.3 220.6 161.7 85.0 6.8
• Approximately 75% of total 2017E production volumes hedged(3)
• NYMEX hedges added during Q4: 215 Bcf (2017-2021)
• Basis hedges added during Q4: 149 Bcf (2017-2020)
2017 2018 2019 2020 2020
E&P Marketing: Liquids Realizations
7
Natural Gas Liquids, Oil, and Condensate
• Q4 2016 liquids sold: 10.0 Bcfe
• Total weighted average price of all liquids increased 38% to $21.34 per Bbl in Q4 2016, from $15.48 per Bbl in Q3 2016(1)
• Liquids comprised approximately 10% of Q4 2016 production volumes, 13% of E&P revenue, and 8% of total company revenue(1)
• 17.5 million gallons of propane hedged from April 2016 through March 2017 at an average price of $0.48 per gallon
Average Price Realization ($ per Bbl)(1)
Gas $ High
Gas $ Low
NGL $ Low NGL $ High
Avoid Processing
Optimize Send to Processing
Optimize
22 Bcf
Wet Gas Flexibility
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
2017
Eth
ane
$/g
al
Mt. Belvieu Ethane CNX Netback Appalachian Gas Alternative
2016 2015
Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1
NGLs $20.40 $13.15 $12.86 $12.29 $14.18 $4.78 $12.46 $20.39
Oil 41.57 42.05 33.74 30.84 39.08 54.19 46.16 47.79
Condensate 30.84 37.27 31.68 14.66 25.37 27.82 31.27 20.83
2017 Direct Ethane Sales Netback Estimate
(1) Excludes propane hedging impact
Finance: Q4 2016 Review
8
Fourth Quarter 2016 Results
• Adjusted net income from continuing operations in the 2016 fourth quarter of $0.5 million, or $0.00 per diluted share(1); on a GAAP basis, net loss from continuing operations of $321 million or ($1.42) per diluted share
- Adjusted net income excludes the following pre-tax items: $236.8 million unrealized loss on commodity derivative instruments $166.8 million valuation allowance related to alternative minimum tax credits $4.8 million loss related to pension settlement $3.8 million of Marcellus JV Dissolution fees $0.4 million of severance expense
• Adjusted net loss from continuing operations for the full year 2016 of $100 million, or ($0.44) per diluted share;(2) on a GAAP basis, net loss from continuing operations of $536 million or ($2.38) per diluted share
• Total company adjusted EBITDA attributable to continuing operations in the fourth quarter of $205 million
(1) Income tax effect of Total Pre-tax Adjustments was $90,956 the three months ended December 31, 2016. Adjusted net income for the three months ended December 31, 2016 is calculated as GAAP net loss from continuing operations of $321,198 plus total pre-tax adjustments from the EBITDA reconciliation table of $245,826, less the associated tax expense of $90,956, plus a valuation allowance charge of $166,798 for alternative minimum tax credits equals the adjusted net income from continuing operations of $470.
(2) Income tax effect of Total Pre-tax Adjustments was $155,212 for the year ended December 31, 2016. Adjusted net income for year ended is calculated as GAAP net loss from continuing operations $535,965 plus pre-tax adjustments from the EBITDA reconciliation table of $424,274, less the associated tax expense of $155,212 plus a valuation allowance charge of $166,798 equals adjusted net loss of $100,105.
Note: The terms "adjusted net loss attributable to continuing operations," "adjusted EBITDA," “adjusted EBITDA attributable to continuing operations,” "free cash flow," and "organic free cash flow from continuing operations" are non-GAAP financial measures, which are defined and reconciled to GAAP net (loss)/income and net cash provided by continuing operations below, under the caption “Non-GAAP Reconciliation."
Q4 2016 Summary
($ in millions, except per share data) 4Q 2016 4Q 2015
Y/Y
Change 4Q 2016 3Q 2016
Q/Q
Change
Net (Loss) Income Attributable to CNX Shareholders ($306) $30 ($336) ($306) $25 ($331)
(Loss) Earnings per Diluted Share ($1.33) $0.13 ($1.46) ($1.33) $0.11 ($1.44)
Revenue and Other Income $462 $666 ($204) $462 $746 ($284)
Net Cash Provided by Continuing Operations $87 $106 ($19) $87 $166 ($79)Adjusted EBITDA Attributable to Continuing Operations $205 $198 $7 $205 $156 $49
Finance: Q4 2016 Review
9
Source: Company filings. Note: Numbers may not sum and may differ slightly from totals and financial statements due to rounding. The terms "adjusted net loss attributable to continuing operations," "adjusted EBITDA," “adjusted EBITDA attributable to continuing operations,” "free cash flow," and "organic free cash flow from continuing operations" are non-GAAP financial measures, which are defined and reconciled to GAAP net (loss)/income and net cash provided by continuing operations below, under the caption “Non-GAAP Reconciliation."
Q4 2016 Cash Flow Summary (including Discontinued Operations)
($ in millions) 4Q 2016 4Q 2015
Y/Y
Change 4Q 2016 3Q 2016
Q/Q
Change
Net Cash Provided by Operating Activities $83 $102 ($19) $83 $163 ($80)
Capital Expenditures ($47) ($119) $72 ($47) ($64) $17
Proceeds from Asset Sales $21 $28 ($7) $21 $21 -
Proceeds from Noble Exchange Settlement $213 - $213 $213 - $213
Other Investing $79 ($23) $102 $79 ($27) $106
(Payments on) / Proceeds from Short-Term Debt & Misc. Borrowings ($356) $4 ($360) ($356) ($114) ($242)
Dividends Paid - ($2) $2 - - - Other Financing ($13) - ($13) ($13) $4 ($17)
Net (Decrease) / Increase in Cash ($20) ($10) ($10) ($20) ($17) ($3)
Net (Decrease) / Increase in Cash
• Generated positive free cash flow
- Organic free cash flow from continuing operations in Q4 2016 of $118 million; full-year 2016 total organic free cash flow of $306 million
- Total free cash flow in Q4 2016 of $349 million; full-year 2016 total free cash flow of $957 million
- Reduced outstanding borrowings on the revolving credit facility by $354 million, which increased liquidity and de-levered the balance sheet
- Used free cash flow generated during the quarter, plus cash on hand
• Total capital expenditures in Q4 2016 of $47 million; full-year 2016 total capital expenditures of $227 million
Finance: Liquidity
10
Strong Liquidity Position of ~$1.7 Billion
$2.0 billion Revolving Credit Facility
• 5 year credit facility expires June 2019
• Paid down nearly $1 billion of revolving debt on the credit facility in 2016
• Gas reserves based lending facility borrowing base reaffirmed at $2 billion in Q4 2016
- Includes the right to separate the coal and gas business subject to a leverage test
(1) Cash and cash equivalents on CNX’s consolidated balance sheet was $60 million as of 12/31/2016, $9 million of which was CNXC’s and consolidated in CNX’s financial statements per US GAAP accounting.
(2) Revolving credit facility as of 12/31/2016.
December 31, 2016 ($ in millions)
Amount/
Capacity
Amount
Drawn
Letters
of Credit
Amount
Available
Cash and Cash Equivalents (1) $51 - - $51
Revolving Credit Facility(2) $2,000 $0 $326 $1,674
Total $2,051 $0 $326 $1,725
Maintenance Covenants Limit
Dec. 31,
2016
CONSOL Energy Revolver:
Minimum Interest Coverage Ratio < 2.5 to 1.0 3.5 to 1.0
Minimum Current Ratio < 1.0 to 1.0 2.6 to 1.0
Finance: Liquidity
11
Debt and Liquidity Profile CNX
Consolidated
CNXC:
100%
CNX
Attributable
Capitalization and Liquidity 12/31/2016 12/31/2016 12/31/2016
Capitalization
Cash and Cash Equiva lents $61 $10 $51
Revolving Credit Faci l i ty Balance 201 201 -
Capita l Lease Obl igations 49 - 49
Total Secured Debt $250 $201 $49
8.25% Senior Notes due 2020 $74 - $74
6.375% Senior Notes due 2021 21 - 21
5.875% Senior Notes due 2022 (1) 1,855 - 1,855
8.0% Senior Notes due 2023 (1) 494 - 494
Baltimore 5.75% Revenue Bonds due 2025 103 - 103
Miscel laneous Debt 5 - 5
Total Debt (2) $2,802 $201 $2,601
Net Debt (3) $2,741 $191 $2,550
Stockholders ’ Equity $3,941 $143 $3,798
Total Capitalization $6,743 $344 $6,399
Liquidity
Cash and Cash Equiva lents $61 $10 $51
Revolving Credit Faci l i ty Capacity (4)
1,873 199 1,674
Total Liquidity $1,934 $209 $1,725
CNX
Owned
LP Units(5)
Unit
Price(5)
Market
Value
CNX Coal Resources LP (CNXC:NYSE) 16.6 $17.90 $297
CONE Midstream Partners LP (CNNX:NYSE) 21.7 $24.55 $533
Total Equity Value of Ownership Interests in Affiliated Public MLPs $830
Liquidity of Affiliated MLPs
Total
Facility
Capacity
Outstanding
Balance
Available
CapacityCash
Total
Liquidity
CNX Coal Resources LP (6)
$400 $201 $199 $10 $209
CONE Midstream Partners LP (6) $250 $181 $69 $4 $73
Leverage Ratio 12/31/2016
LTM Bank EBITDA Attributable to CONSOL Energy Shareholders (7) $628
LTM Bank Net Debt / Adj. EBITDA (7) 4.4x
Equity Value of Ownership in Affiliated Public MLPs
Note: Some numbers may not match exactly to financial statements due to rounding. (1) The 2022 and 2023 senior notes includes $5 million and $6 million of
unamortized bond premium / discount, which will be amortized over the life of the notes, respectively.
(5) Number of MLP units owned by CNX as of 12/31/2016 and unit prices as of market close on 1/20/2017. (6) CNX Coal Resources liquidity data is as of 12/31/2016 and CONE Midstream data is pro forma as of 9/30/2016 to account for acquisition of additional interest in Anchor System funded in part by $140 million draw on revolving credit facility. (7) Adjusted EBITDA Attributable to CNX Shareholders is a non-GAAP financial measure and the reconciliation is provided in the Appendix. Bank methodology LTM EBITDA equals LTM Adjusted EBITDA of $687 million less a loss on sale of assets of $12 million, plus coal contract buyout of $6 million, less the $51 million of CNXC EBITDA net of cash distributions attributable to CNX, less $6 million of severance payments, plus $4 million of other net adjustments. For a reconciliation of CNXC’s EBITDA please see the Company’s form 10Q’s and 10K’s. Bank net debt of $2,741 equals debt of $2.802 billion, less $51 million cash on hand excluding CNXC’s cash, less $201 million of CNXC revolver debt, less $3 million of advance mining royalties, plus $243 million of net letters of credit related to firm transportation obligations, mining equipment leases, and insurance policies.
(2) Total Debt of $2.802 billion excludes total unamortized debt issuance costs of $28 million. (3) Net Debt equals Total Debt less Cash and Cash Equivalents. (4) As of 12/31/2016, CNX had approximately $326 million of outstanding letters of credit under its revolving credit facility, leaving approximately $1,674 million of availability. CNXC
had $201 million outstanding on its revolving credit facility leaving approximately $199 million of availability.
Finance: Leverage Ratio and Liquidity Projection
(1) Leverage ratio equals expected year-end net debt divided by expected EBITDA. CONSOL Energy is unable to provide a reconciliation of projected EBITDA to projected operating income, the most comparable financial measure calculated in accordance with GAAP, due to the unknown effect, timing, and potential significance of certain income statement items.
(2) Excludes letters of credit of $243 million Note: Assumes $400-$600 million in asset sales in 2017 and a 20% CNXC drop in 2018 Forecasts based on strip pricing for open volumes as of 1/3/2017
• Year-end 2016 leverage ratio below prior forecast; 2017E and 2018E targets reduced by 0.2x and 0.3x, respectively
• Path to reaching and maintaining a sub-2.5x leverage ratio
• Liquidity rises by estimated $1 billion in free cash flow by 2018
• Plan Upside: - Increased efficiencies - Rising commodity prices - Accelerated drops - Additional asset sales
12
Leverage Ratio 2016-2018E(1)
Liquidity 2016-2018E
Asset Sales Organic
FCF Sources 2017E-2018E
4.4
2.2
1.4
0.0
1.0
2.0
3.0
4.0
5.0
2016 2017E 2018E
1.7
2.3
2.8
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2016 2017E 2018E
$ in
bill
ion
s
(2) (2)
Finance: Legacy Liabilities
Significant legacy liability reductions over
past three years: • Miller Creek/Fola transaction drove
substantial reduction in legacy liabilities
in 2016
• Continue to actively manage the reduction
of legacy liabilities
13
Balance Sheet Liability Long-Term Liability Guidance
12/31/2016 FY 2017E FY 2018E
LTD $19
WC 80 CWP 119
OPEB 700
Salary Retirement/Pension 115
Asset Retirement Obligations 233
Total Legacy Liabilities $1,266
Total Cash Servicing Cost $92 $74 - $79 $70 - $75
EBITDA Impact ($60 - $65) ($18 - $23) ($21 - $26)
$4,187
$1,703 $1,497
$1,362 $1,266 $1,229
$365
$144 $139 $133
$92$77
$0
$50
$100
$150
$200
$250
$300
$350
$400
$450
$500
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
2012 2013 2014 2015 2016 2017E
An
nu
al C
ash
Se
rvic
ing
Co
sts
($ in
Mill
ion
s)
Lega
cy L
iab
iliti
es
($ in
mill
ion
s)
Total Legacy Liabilities Total Annual Legacy Liabilities Cash Servicing Cost
Note: 12/31/16 liability balance includes approximately $27 million and $40 million in employee-related and environmental liabilities associated with Pennsylvania Mining Operation (PAMC), respectively. Future EBITDA loss and cash servicing costs related to these liabilities will run through the PAMC segment financial detail and therefore the cash servicing costs and EBITDA loss related to these liabilities are excluded from the 2017 & 2018 forecast presented above. For FY 2017, the cash servicing costs associated with PAMC long-term liabilities are forecasted to approximate $8 million, while the EBITDA loss associated thereto is forecasted to approximate $12 million. Excludes gas well closing.
Finance: E&P Guidance
Note: Guidance as of 1/31/2017 (1) Excludes stock-based compensation (2) Includes Idle Rig Charges, Unutilized Firm Transportation Expense (Net Of 3rd Party Revenue), Land Rentals, Lease Expiration Costs, Misc. Gas, and Exploration Expense
14
E&P Segment Guidance 2017E 2018E
Production Volumes:
Natural Gas (Bcf) 375 445 NGLs (MBbls) 5,800 5,950 Oil (MBbls) 45 40 Condensate (MBbls) 740 730
Total Production (Bcfe) 415 485 % Liquids 10% 8%
Open Natural Gas Basis Differential to NYMEX ($/Mcf) ($0.63) ($0.50) NGL Realized Price ($/Bbl) 19.70 19.50 Condensate Realized Price % of WTI 70% 70% Oil Realized Price % of WTI 90% 90%
Capital Expenditures ($ in millions):
Drilling and Completions $465 Midstream $40 Land, Permitting and Other $50
Total E&P and Midstream CapEx $555 $600 Average per unit operating expenses ($/Mcfe):
Lease Operating Expense 0.23 Production, Ad Valorem, and Other Fees 0.07 Transportation, Gathering and Compression 0.77
Total Cash Production and Gathering Costs 1.06 1.05
Other Expenses ($ in millions):
Selling, General, and Administrative Costs(1) $70 $70
Other Corporate Expenses(2) $80 $60
Finance: PA Mining Operations Guidance
15
• Capital expenditures expected to be approximately $5 per ton in 2017 and beyond
PA Mining Operations – Consolidated 100% Basis 2017E 2018E
Estimated Total Coal Sales Volumes (in millions of tons) 26.0 26.0 Total Committed Volumes (Contracted & Priced) 25.4
% Committed 98% Capital Expenditures ($ in millions):
Production $120 Other (Land/Water/Safety) $15 Total Coal Capital Expenditures ($ in millions) $135 $140
Note: Guidance as of 1/31/2017
Finance: Raising 2017E EBITDA Guidance
(1) Includes forecasted Earnings of Equity Affiliates of $36 million in 2017 associated with CNX's proportionate share of ownership in CONE Midstream. This income is reflected within Miscellaneous Other Income in the CNX Income Statement.
Base plan assumes NYMEX as of 1/3/2017 $3.38 per MMBtu + weighted average basis of ($0.65) per MMBtu on open volumes. Note: CONSOL Energy is unable to provide a reconciliation of projected EBITDA to projected operating income, the most comparable financial measure calculated in accordance with GAAP, due to the unknown effect, timing, and potential significance of certain income statement items.
EBITDA Guidance by Segment – 2017E
16
($ in millions) E&P(1) Coal Other Current
Total (1/31/17)
Prior Total
(12/13/16)
Earnings Before Interest, Taxes and DD&A (EBITDA)
$705 $390 ($15) $1,080 $840
Adjustments:
Unrealized Loss/(Gain) on Commodity Derivative Instruments
(200) - - (200) (5)
Stock-Based Compensation 20 10 - 30 30
Adjusted EBITDA $525 $400 ($15) $910 $865
Noncontrolling Interest - (45) - (45) (45)
Adjusted EBITDA Attributable to CNX $525 $355 ($15) $865 $820
APPENDIX
17
Finance: Q4 2016 Review
18
Non-GAAP Reconciliation: EBITDA and Adjusted EBITDA
Source: Company filings. Note: Income tax effect of Total Pre-tax Adjustments was $90,956 and $36,257 for the three months ended December 31, 2016 and December 31, 2015, respectively. Adjusted net income for the three months ended December 31, 2016 is calculated as GAAP net loss from continuing operations of $321,198 plus total pre-tax adjustments from the above table of $245,826, less the associated tax expense of $90,956, plus a valuation allowance charge of $166,798 for alternative minimum tax credits equals the adjusted net income from continuing operations of $470. (1) CONSOL Energy's Other Division includes expenses from various other corporate and diversified business unit activities including legacy liabilities costs and income tax
expense that are not allocated to E&P or PA Mining Operations Divisions.
Three Months Ended
December 31,
2016 2016 2016 2016 2015
($ in thousands)
E&P Division
PA Mining
Operations
DivisionOther(1) Total Company Total Company
Net (Loss) Income ($222,454) $50,121 ($129,301) ($301,634) $34,325
Less: (Income) Loss from Discontinued Operations, net - - (19,564) (19,564) 11,017
Add: Interest Expense 646 2,502 43,719 46,867 49,081
Less: Interest Income - - (532) (532) (431)
Add: Tax Valuation Allowance - - 166,798 166,798 65,395
Add: Income Taxes - - (84,990) (84,990) 60,347
(Loss) Earnings Before Interest & Taxes (EBIT) (221,808) 52,623 (23,870) (193,055) 219,734
Add: Depreciation, Depletion & Amortization 105,730 42,861 7,992 156,583 139,988
(Loss) Earnings Before Interest, Taxes and DD&A (EBITDA) from
Continuing Operations ($116,078) $95,484 ($15,878) ($36,472) $359,722
Adjustments:
Unrealized Gain/(Loss) on Commodity Derivative Instruments 236,802 - - $236,802 (62,388)
Severance Expense - - 424 $424 -
Pension Settlement - - 4,848 $4,848 15,921
Marcellus Dissolution - - 3,752 $3,752 -
Industrial Supplies Working Capital Settlement - - - - 6,258
OPEB Plan Changes - - - - (109,879)
Gain on Sale of Non-Core Assets - - - - (7,551)
Total Pre-tax Adjustments $236,802 - $9,024 $245,826 ($157,639)
Adjusted EBITDA $120,724 $95,484 ($6,854) $209,354 $202,083
Less: Net Income Attributable to Noncontrolling Interest - 4,413 - 4,413 3,920
Adjusted EBITDA Attributable to Continuing Operations $120,724 $91,071 ($6,854) $204,941 $198,163
Finance: Q4 2016 Review
19
Non-GAAP Reconciliation: Trailing Twelve Months EBIT, EBITDA, and Adjusted EBITDA
Source: Company filings.
Three Months
Ended
Three Months
Ended
Three Months
Ended
Three Months
Ended
Year
Ended
March 31, June 30, September 30, December 31, December 31,
($ in thousands) 2016 2016 2016 2016 2016
Net Income / (Loss) ($96,458) ($468,649) $27,593 ($301,634) ($839,148)
Less: Loss from Discontinued Operations 53,167 234,605 34,975 (19,564) 303,183
Add: Interest Expense 49,865 47,427 47,317 46,867 191,476
Less: Interest Income (214) (547) (214) (532) (1,507)
Add: Tax Valuation Allowance - - - 166,798 166,798
Add: Income Taxes (23,800) (100,856) 52,858 (84,990) (156,788)
Earnings/(Loss) Before Interest & Taxes (EBIT) from Continuing Operations (17,440) (288,020) 162,529 (193,055) (335,986)
Add: Depreciation, Depletion & Amortization 154,988 135,220 151,712 156,583 598,503
Earnings/(Loss) Before Interest, Taxes and DD&A (EBITDA) from
Continuing Operations $137,548 ($152,800) $314,241 ($36,472) $262,517
Adjustments:
Unrealized Gain/(Loss) on Commodity Derivative Instruments 29,271 279,715 (159,555) 236,802 386,233
Severance Expense 2,918 1,451 952 424 5,745
Pension Settlement - 13,696 3,652 4,848 22,196
Noble Transaction Fees - - - 3,752 3,752
Coal Contract Buyout - (6,288) - - (6,288)
Gain/(Loss) on Sale of Non-core Assets 12,636 - - - 12,636
Total Pre-tax Adjustments $44,825 $288,574 ($154,951) $245,826 $424,274
Adjusted Earnings Before Interest, Taxes and DD&A (Adjusted EBITDA) $182,373 $135,774 $159,290 $209,354 $686,791
Less: Noncontrolling Interest $1,114 $1,179 $2,248 $4,413 $8,954
Adjusted EBITDA Attributable to Continuing Operations $181,259 $134,595 $157,042 $204,941 $677,837
Finance: Q4 2016 Review
20
Free Cash Flow Reconciliation
Source: Company filings.
Three Months Ended Year Ended
December 31, December 31,
($ in thousands) 2016 2016
Net Cash provided by Continuing Operations $87,139 $459,350
Capital Expenditures (47,431) (226,820)
Net Investment in Equity Affiliates 78,298 73,743
Organic Free Cash Flow From Continuing Operations $118,006 $306,273
Net Cash Provided By Operating Activities $82,647 $469,285
Capital Expenditures (47,431) (226,820)
Net Investment in Equity Affiliates 78,298 73,743
Proceeds from Noble Exchange 213,295 213,295
Proceeds from Sale of Assets 20,925 59,902
Capital Expenditures of Discontinued Operations - (8,295)
Payments on Sale of Miller Creek/Fola - (28,271)
Proceeds from Sale of Buchannan Mine 1,000 403,817
Free Cash Flow $348,734 $956,656