CONSOL Energy Inc. CONSOL Coal Resources...
Transcript of CONSOL Energy Inc. CONSOL Coal Resources...
November 2018
CONSOL Energy Inc.CONSOL Coal Resources LP
Investor Presentation
Disclaimer
1
This presentation contains statements, estimates and projections which are forward-looking statements (as defined in Section 21E of the SecuritiesExchange Act of 1934, as amended). Statements that are not historical are forward-looking, and include, without limitation, projections andestimates concerning the timing and success of specific projects and the future production, revenues, income and capital spending of CONSOLEnergy, Inc. (“CEIX”) and CONSOL Coal Resources LP (“CCR,” and together with CEIX, “we,” “us,” or “our”). When we use the words “anticipate,”“believe,” “could,” “continue,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “should,” “will,” or their negatives, or other similarexpressions, the statements which include those words are usually forward-looking statements. These forward-looking statements involve risks anduncertainties that could cause actual results to differ materially from those statements, plans, estimates and projections. Accordingly, investorsshould not place undue reliance on forward-looking statements as a prediction of future actual results. We have based these forward-lookingstatements on our current expectations and assumptions about future events. While our management considers these expectations andassumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingenciesand uncertainties, most of which are difficult to predict and many of which are beyond our control. Factors that could cause future actual results todiffer materially from the forward-looking statements include risks, contingencies and uncertainties that are described in detail under the captions“Cautionary Statements Regarding Forward-Looking Statements” and “Risk Factors” in our public filings with the Securities and ExchangeCommission. The forward-looking statements in this presentation speak only as of the date of this presentation; we disclaim any obligation toupdate the statements, and we caution you not to rely on them unduly.
This presentation includes unaudited “non-GAAP financial measures” as defined in Regulation G under the Securities Exchange Act of 1934,including EBIT, EBITDA, Adjusted EBITDA, Bank EBITDA, PAMC Adjusted EBITDA, leverage ratio, bank net leverage ratio, Adjusted EBITDAattributable to CONSOL Energy shareholders, average cash margin per ton sold and Free Cash Flow. The presentation of non-GAAP financialmeasures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance withGAAP. See the Appendix for a reconciliation of the non-GAAP financial measures included in this presentation to their comparable GAAP financialmeasures. References to historical measures means historical predecessor measures, for which we have provided calculations and reconciliations inthe Appendix.
Introduction
Premier U.S. coal mining complex with a proven track record of operational excellence.
• Highly competitive with natural gas and driven by a superior cost position vs. Appalachian E&P producers.
Highly-experienced, proven management team with the vision and skills to optimize this world-class portfolio.
Diversified sales portfolio and proven marketing strategy.
• Provides volume stability and multiple paths toward growing market share.
Ownership of CONSOL Marine Terminal strategically located in Baltimore.
• Provides ability to capture arbitrage between domestic and international thermal and met export markets.
Compelling coal industry backdrop, driven by multi-year underinvestment and rising global demand.
Coal equities trading at low valuation multiples and coal companies have better balance sheets.
Investment Thesis
3
4
CEIX Performance Since November 2017 Spin
Source: CONSOL Energy Inc. management Company filings.Note: “Today” is based on COB November 8, 2018 & “Spin” is based on November 28, 2017 unless otherwise noted.(1) LTM Adjusted EBITDA for “Spin” is based on initial 2018 mid-point Adjusted EBITDA guidance during 4Q17 earnings release and “Today” is based on LTM 9/30/2018.(2) “Spin” is CONSOL Mining Company pro forma 6/30/2017 and “Today” is as of 9/30/2018.(3) “Spin” figure is calculated as pro forma 6/30/2017 net debt of $766 million / $370 LTM adjusted EBITDA (mid-point of initial 2018 guidance) and “Today” is as of 9/30/2018.
$21.50
$40.40
88%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-
10.00
20.00
30.00
40.00
50.00
Common Stock
$98
$1024%
0%
1%
1%
2%
2%
3%
3%
4%
4%
5%
75.00
80.00
85.00
90.00
95.00
100.00
105.00
Term Loan B Pricing
$100
$113
13%
0%
2%
4%
6%
8%
10%
12%
14%
75.00
80.00
85.00
90.00
95.00
100.00
105.00
110.00
115.00
2nd Lien Notes Pricing
Performance of Our Securities since the November 2017 Spin…
…Driven by Improvements in Our Key Financial Metrics
$370
$489
32%
0%
5%
10%
15%
20%
25%
30%
35%
-
100.00
200.00
300.00
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LTM Adjusted EBITDA
$766
$634
-17%
-20%
-18%
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
-
100.00
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300.00
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500.00
600.00
700.00
800.00
900.00
Net Debt
2.1x
1.3x
(0.8x)
(0.9x)
(0.8x)
(0.7x)
(0.6x)
(0.5x)
(0.4x)
(0.3x)
(0.2x)
(0.1x)
-
-
0.5x
1.0x
1.5x
2.0x
2.5x
Net Debt/Adjusted EBITDA
56%
36%
-36%
-40%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
Net Debt / Enterprise Value
Spin Today
(1) (3)(2)
B1 / B
B1 / B+
+1 S&P notch
0%
5%
10%
15%
20%
25%
30%
35%
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5.00
10.00
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25.00
Corporate Ratings
Moody's / S&P Global
Spin Today
Pure-Play Coal Company with Significant Current and Growing Export Exposure
5
CONSOL Energy Inc. (“CEIX”) was created through the November 2017 spin-off of CNX Resources Corporation’s
(“CNX”) coal business
Differential Assets: Foundation of CEIX is the premier US mining complex, Pennsylvania Mining Complex (“PAMC”)
75% undivided interest in PAMC; 100% ownership of CONSOL Marine Terminal (“CMT”); 1.6 BTs of undeveloped
coal reserves
MLP Ownership: CEIX owns the GP and ~60% LP interest in CONSOL Coal Resources LP (NYSE: “CCR”)
CCR is an MLP formed in 2015 with a current 25% undivided interest in PAMC
CCR has consistently paid $0.5125/unit quarterly distribution to its common unitholders since its June 2015 IPO
FCF Generation: PAMC is the workhorse for CEIX and CCR generating FCF(1) throughout the downturn in 2015-2016
2014-17 average of $449 million annual PAMC Adjusted EBITDA(1) and $297 million annual free cash flow
(FCF)(1)
Two Ways To Invest: CEIX and CCR enable investors access to participate in growing global thermal and met coal
demand with a differentiated marketing strategy and control through ownership in our CONSOL Marine Terminal
CCR - MLP with a consistent distribution history, currently yielding ~11%(2)
CEIX - C-Corp with ability to capture share price appreciation tying to a broader set of assets
(1) PAMC Adjusted EBITDA is defined as Adjusted EBITDA attributable to the Pennsylvania Mining Complex segment. Free cash flow or “FCF” herein is defined as PAMC Adjusted EBITDA less capex. These are non-GAAP measures. A reconciliation to the GAAP measures is provided in the Appendix.
(2) Based on COB 11/8/2018 price of $19.27.
3Q18 Performance Executive Summary and 2018 Outlook
6
CEIX posted 3Q18 Earnings per Diluted Share of $0.20 and Adjusted EBITDA(1) of $83MM.
CCR announced 3Q18 Net Income per Limited Partner Unit – Diluted of $0.31 per unit and Adjusted EBITDA(1) of
$22MM.
PAMC posted 3Q18 revenue per ton and average cash margins per ton(1) of $47.21 and $16.33, respectively.
Added several multi-year contracts for 2019-2021 capturing pricing improvement and reducing volatility.
Raising 2018 CEIX and CCR Adjusted EBITDA guidance(2) 5% and 4%, respectively, since 2Q18.
Raised CEIX and CCR by 26% and 10%, respectively, since the initial guidance in Jan 2018.
CEIX & CCR posted net leverage ratios(3) of 1.3x and 1.4x at 9/30/18, respectively.
CEIX generated Organic Free Cash Flow Net to CEIX Shareholders(1) of $217MM and $6MM, for the 9 months and
3 months-ended 9/30/18, respectively.
For the nine months-ended 9/30/18, CEIX has reduced total debt by $50MM through payments on Term-Loan A (TLA) / Term-Loan B
(TLB) and repurchases of outstanding CEIX second lien debt.
For the nine months-ended 9/30/18, CEIX has purchased CEIX common shares of $11MM and CCR common units of more than
$1MM.
S&P Global ratings raised CEIX’s issuer credit rating to B+ from B.
(1) A non-GAAP measure. Please see the appendix for a definition of this measure and also a reconciliation to the most directly comparable GAAP measure.(2) Based on the midpoint.(3) Please see page 23 for a definition/calculation of this ratio.
For the Quarter Ended Guidance
September
30, 2018
September
30, 2017 Change
CEIX
2018(4)
CCR
2018(4)
Pennsylvania Mining ComplexVolumes (MM Tons)
Production 6.4 6.1 0.3
Sales 6.2 6.3 (0.1) 26.9 - 27.5 6.70 - 6.90
Operating Metrics ($/Ton)
Average Revenue per Ton Sold $47.21 $44.16 $3.05 $48.40 - $48.85 $48.40 - $48.85
Average Cash Cost per Ton Sold(1) $30.88 $30.94 ($0.06) $28.75 - $29.10 $28.75 - $29.10
Average Cash Margin per Ton Sold(1) $16.33 $13.22 $3.11
CONSOL Marine TerminalVolumes (MM Tons)
Throughput Volume 2.7 3.5 (0.8) 12.0 - 14.0
Financials ($MM)
Terminal Revenue 16 15 1
Operating and Other Costs 7 6 1
CEIX Financials ($MM)
Adjusted EBITDA(2) 83 69 14 450 - 485
Capital Expenditures 41 28 13 130 - 145
Organic Free Cash Flow Net to CEIX Shareholders(3) 6 34 (28)
Earnings per Share - Dilutive ($/share) $0.20 $0.28 ($0.08)
CCR Financials ($MM)
Adjusted EBITDA(2) 22 18 4 110 - 119
Capital Expenditures 8 7 1 33 - 36
Organic Free Cash Flow(3) 9 13 (4)
Net Income per Limited Partner Unit - Diluted ($/unit) $0.31 $0.07 $0.24
Earnings Results
(1) “Average cash cost per ton sold” & “average cash margin per ton sold” are operating ratios derived from non-GAAP financial measures, each of which are reconciled to the most directly comparable GAAP financial measure in the appendix.
(2) Adjusted EBITDA is a non-GAAP financial measure. Please see the appendix for a definition of Adjusted EBITDA and a reconciliation to net income.(3) Organic Free Cash Flow Net to CEIX Shareholders, a non-GAAP financial measure, is defined as Net Cash Provided by Operations less Capital Expenditures, less Distributions to Noncontrolling
Interest. Organic Free Cash Flow is defined as Net Cash Provided by Operations less Capital Expenditures. Please see the appendix for a reconciliation.(4) CEIX & CCR are unable to provide a reconciliation of adjusted EBITDA guidance to net income, the most comparable financial measure calculated in accordance with GAAP, nor a reconciliation of
average cash cost per ton sold, an operating ratio derived from non-GAAP financial measures, due to the unknown effect, timing and potential significance of certain income statement items.
Third Quarter Results and 2018 Guidance Raise
7
Operations
Pennsylvania Mining Complex Overview
Three highly productive, well-capitalized underground coal mines
Five longwalls and 15-17 continuous miner sections
Largest central preparation plant in the United States
~79% of 736 mm ton reserves are owned and require no royalty payment
Extensive logistics network served by two Class I railroads
Access to seaborne markets through CONSOL Marine Terminal
Nearly $1.5bn invested in the mine operations since 2012
Non-union workforce since 1982
*(million tons)
9
2017 PA Mining Complex Domestic Power Plant
Customers
PA Mining Complex
CONSOL Marine Terminal
Source: CONSOL Energy Inc. management, ABB Velocity Suite, EIANote: Data shown on a 100% basis for PAMC(1) For the fiscal year period ending and as of 12/31/2017(2) Represent the average of power plant deliveries for the three years ending 12/31/17 per EIA / ABB Velocity Suite. Excludes waste coal(3) Represents illustrative general capacity for each mine; actual production on a mine by mine basis can exceed illustrative capacity in order to maximize complex capacity of 28.5MM tons
Total Average AR Average AR Est. Annual
Recoverable Gross Heat Sulfur Production 2017A
Mine Reserves* Content (Btu/lb) Content Capacity*(3) Production*
Bailey(1) 245 12,898 2.60% 11.5 12.1
Enlow Fork(1) 296 12,897 2.12% 11.5 9.2
Harvey(1) 195 12,963 2.22% 5.5 4.8
Total 736 12,915 2.30% 28.5 26.1
Illinois Basin(2) 11,348 2.94%
Other Napp(2) 12,410 3.27%
8,000
9,000
10,000
11,000
12,000
13,000
Sulfur % 8,000
9,000
10,000
11,000
12,000
13,000
BTU Content
68%
18%
11%
2%<1%
US Asia Europe South America Africa
1% 2% 8%
39%
50%
PJM
Southeast
MISO
Industrials
NY/NewEngland
The Premier U.S. Coal Mining Complex
(Btu/lb gross as-received) (Btu/lb gross as-received)
Best-in-class Btu content(1)
26.1 million tons
Highly-diversified portfolio with access to free markets
2017A Sales
10
5.69
7.31
5.23
2014 2017 Other NAAP longwalls
$37.29$34.47
$28.09 $29.02
2014A 2015A 2016A 2017A
5.69
7.31
5.23
2014 2017 Other NAAP longwalls
Highly productive and cost efficient mines
(2)
Tons of coal production per employee hour Operating costs per ton sold(3)
Source: CONSOL Energy Inc. management, Mine Safety and Health Administration (“MSHA”), ABB Velocity Suite, EIA, and S&P Global Platts(1) Other NAPP, CAPP, ILB and PRB represent the average of power plant deliveries for the three years ending 12/31/2017 per EIA / ABB Velocity Suite. Excludes waste coal. BTU content for other
countries from S&P Global Platts.(2) Average for the year ended 2017.(3) PAMC operating costs per historical SEC filings.
$29.57 $28.25$22.94
$11.83
$28.66
$13.91$9.77
$28.87 $28.29$23.04
$12.26
$29.99
$14.68$11.28
(2%) +0% +0%+4% +5% +6%
+15%
-
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
CEIX HNRG FELP ARCH ARLP BTU - US CLD
YTD 9/30/17 YTD 9/30/18
74% 74%
61%
50%56%
47%
90%84%
75% 75%70%
53%
CEIX HNRG ARLP BTU-US CLD ARCH FELP
3Q18 Update As of 2Q18
Source: CONSOL Energy Inc. management and historical SEC filings(1) Cash cost is based on historical company SEC filings.(2) Committed volumes for PAMC are as of the quarter-ended September 30, 2018 and include any optional tons that the Company projects customers will take given current market conditions.
Committed volume - contract portfolio provides sales visibility(2)
Cash Cost Improvement vs. Peer Average(1)
Thermal Coal Peer Benchmarking Analysis
11
2019E peers comparison (% committed)
No
t re
po
rted
Excellent Access to Transportation Infrastructure Provides Global Reach
Eastern U.S. coal regions and points of thermal export(1)
Dual-served railroad access
Source: S&P Global Market Intelligence, CONSOL Energy Inc. management.(1) Represents estimated ocean/rail rates to port terminals, exclusive of terminal throughput charges.
12
PAMC
PAMC
Core Markets
Battleground Markets
~$12 - $14/ton East Coast to EUR
~$13 - $16/ton
~$18/ton
~$17 - $20/ton
~$15 - $17/ton Gulf Coast to EUR
CONSOL Marine
Terminal
CONSOL Marine Terminal – Provides Strategic Access to Export Market
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
− Operational 24/7, 363 days per year
− Exports both PAMC and third party coal
Achieved significant service and operating cost efficiencies
starting in 2016
CMT achieved a record year in 2017
− Throughput volume of 14.3 mm tons (~50% 3rd party)
− Terminal revenue of $60 million
− Operating and other costs of $21 million
Take-or-pay agreement for an aggregate $120M in
throughput revenue from 2Q18 to 2Q20
13
Marketing
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 (export or domestic) that maximize FOB mine margins
Capitalize on innovative marketing tactics and strategies to grow opportunities and realizations in all of the Company’s market areas
Multi-pronged PAMC Marketing Strategy
Illustrative portion of annual production
Source: CONSOL Energy Inc. management
1
2
3
4
~60 – 80%
~10%
~10 – 30%
Creative contract structures
Technical marketing initiatives to gain market share for PAMC by displacing other basins
Development of crossover met markets for PAMC
15
PJM Southeast MISO NY/New Eng Industrial/Met
In 2017, the Company sold PAMC coal to 32 domestic power plants located in 15 states, and to thermal and
metallurgical end-users located across five continents.
Highly-diversified Portfolio Provides Volume Stability and Multiple Paths to Upside
2014A 2015A 2016A 2017A 2018E
Domestic Export Thermal Export Met
26.1
22.9 24.6
2017A Domestic Thermal:
Source: CONSOL Energy Inc. managementNote: 2018E is based on 3Q18 guidance midpoint.
Annual coal sales (million tons)
16
57%
41%
2%
Industrial/Met
Customers
Merchant
(Unregulated) Power
PlantsRegulated Power
Plants
2017A Export Met:
Other Asia South AmericaEurope Africa India
2017A Export Thermal:
26.127.2
Market cap: $47.3bnBaa2 / BBB+
Market cap: $21.4bnBaa1 / BBB+
Well-established Diversified Credit-worthy Customer Base Minimizes Market Risk
Average capacity factor (weighted by capacity)(2)(3)
Major select customers(1)
Market cap: $60.7bnBaa1 / A-
Market cap: $47.4bnBaa2 / A-
Private- / -
PrivateB2 / B+
Source: CONSOL Energy Inc. management, EIA, ABB Velocity Suite, SEC filings, and FactSet.(1) Market capitalizations and credit ratings for select customers are as of intra-day 11/9/2018.(2) PAMC Top Customer Plants represent the thirteen domestic power plant customers to which PAMC shipped >500,000 tons of coal in 2017.(3) Other NAPP Rail-Served Plants include all other power plants that took delivery of NAPP rail coal in January-December 2017.
2017 domestic power plant shipments by unit retirement status
Limited volume at risk due to announced power plant retirements
Private- / -
17
Announced Coal
Retirement4%
No Announced
Coal Retirement
96%
0%
20%
40%
60%
80%
Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17
PAMC Top Customer Plants Other NAPP Rail-Served Plants
12%Delta% 5% 11% 14% 19% 17% 20% 17% 7% 11% 7%
Avera
ge
cap
acit
y f
acto
r (%
)
5%
$0
$20
$40
$60
$80
$100
$120
Jan-2012 May-2013 Sep-2014 Feb-2016 Jun-2017 Nov-2018 Mar-2020 Aug-2021
$/t
on
ne
cif
AR
A
Historic API 2 (Prompt)
API 2 Futures (10/29/2018)
API 2 Futures (4/30/2018)
API 2 Futures (10/31/2017)
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
Prompt 4Q18 CY2019 CY2020
$/t
on
Domestic NAPP PetCoke API4 API2
0%
5%
10%
15%
20%
25%
30%
35%
PAMC Foresight Alliance Arch Cloud Peak Peabody
(US)
Hallador
Significant Opportunities in Improving Export Markets
Growing demand from India and other developing countries has created new opportunities for NAPP coal and pulled traditional
supply out of the Atlantic seaborne market, helping to boost pricing. PAMC and CMT are well-positioned to take advantage.
Historic and Forward API 2 Prices
18
FOB Mine Export Netbacks – Export Netback Prices are Above
$50/ton
Selected US Coal Producer Exports
as % of Total FY 2017 Sales
Source: ABB Velocity Suite, CONSOL Energy Inc. Management and company 10-K filings. Domestic NAPP is sourced from Coaldesk LLC’s forecast at 4.75lb sulfur and 13,000 mmBtu.
API 2 has more-than doubled from its
February 2016 low …
… and futures have continued to rise,
creating meaningful forward contracting
opportunities
Layered multi-year export contracts
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00N
AP
P C
oa
l
Henry
Hub
Spo
t
WT
I C
rud
e O
il
AP
I 2
Coa
l -
Euro
pe
UK
LN
G
Bre
nt
Cru
de O
il
New
ca
stle C
oa
l
Ja
pa
n L
NG
Ind
ia L
NG
Chin
a L
NG
Duba
i C
rud
e O
il
$/m
mB
tu
Arbitrage Opportunity in the Global Value Proposition for Coal
Source: Coaldesk LLC, World Bank, Doyle Trading Consultants, EIA, FERC
Spot / Prompt Prices – September 2018
19
United States Europe Asia / Pacific
R² = 0.6164
20%
25%
30%
35%
40%
45%
50%
1.00 2.00 3.00 4.00 5.00 6.00 7.00
Co
al
Sh
are
of
Mo
nth
ly G
en
era
tio
n
(%)
Monthly Average Natural Gas Price ($/mmBtu, Henry Hub Spot)
Highly Competitive with Natural Gas Today- Shortage of Coal and Natural Gas Inventories Currently
Source: ABB Velocity Suite, NYMEX, Coaldesk, EIA
Thermal coal price behavior vs. natural gas price
Coal Share of U.S. generation vs. natural gas price (January 2014 – May 2018)
20
On average, coal’s share of the U.S. generation mix has increased by ~1 percentage point for every $0.25/mmBtu increase in Henry
Hub natural gas price.
$1.90
$2.40
$2.90
$3.40
$3.90
$4.40
$30
$35
$40
$45
$50
$55
$60
$65
$70
Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18
Fo
rward
Gas P
rice
($
/mm
Btu
)
Fo
rward
Co
al P
rice
($/t
on
)
Prompt Year NAPP Low-Sulfur Rail
Prompt Year NYMEX Gas
Strong burn /Inventory drawdown
Inventory imbalance
~$3/mmBtu forward gas supports>$45/ton forward coal
Strong export market and falling inventories lift coal
in spite of softer gas
Forward coal and gaswell-correlated
Finance
CEIX - Summary of Financial Policy
Deleveraging and Targeted Shareholder
Returns
Primary use of free cash flow(1) will be to de-lever the balance sheet and improve shareholder returns
Long-term incentive compensation of executives tied to free cash flow generation and shareholder returns
Selectively pursue open market equity (CEIX common shares and CCR units) and debt repurchases under the previously announced Board authorization
Improve return on capital over time through disciplined capital allocation
Maintain strong liquidity
Disciplined use of
capital
Strong liquidity position of $496 million including $250 million of cash and cash equivalents provides flexibility in volatile commodity markets
CEIX cash flow expected to be augmented by CCR via pro rata distributions to unitholders (on ~60% ownership interest), interest payments and any potential principal paydown on Affiliate Loan
Expecting to further improve cash flows due to the implementation of tax reform
Continue to operate assets with disciplined approach to capital expenditures
Evaluate other investment opportunities in light of cost of capital, B/S and sector and commodity price outlook
Ability to fund opportunistic, and accretive growth investments while maintaining leverage targets
Greenfield reserves provide attractive monetization opportunities for efficient growth through asset sales and JVs
(1) Free cash flow is defined as operating cash flow less capital expenditures
22
CCR Financial Metrics ($MM except ratio) LTM 9/30/2018
Leverage
EBITDA per Affiliated Company Credit Agreement(1) $122
Net Debt per Affiliated Company Credit Agreement 176
Net Leverage Ratio 1.4x
Liquidity (as of 9/30/2018)Cash and Cash Equivalents
Affiliated Company Credit Agreement
Less: Amount Drawn
Total CCR Liquidity
$1
275
(167)
$109
Adjusted Method Bank Method
LTM 9/30/2018 LTM 9/30/2018
Leverage
EBITDA(1)(2) $489 $390
Consolidated Net Debt(3) 634 634
Net Leverage Ratio 1.3x 1.6x
Adjusted EBITDA Attributable to CONSOL Energy Shareholders (1) $443
Consolidated Net Debt less non-controlling portion of CCR Affiliate Loan (4) 570
Modified Net Leverage Ratio 1.3x
Liquidity (as of 9/30/2018)(5)
Cash and Cash Equivalents less CCR Cash(6)
Revolving Credit Facility
Accounts Receivable Securitization (lesser of $100MM and A/R borrowing base)
Restricted Cash - Securitization
Less: Letters of Credit Outstanding
Total CEIX Liquidity
CEIX Financial Metrics ($MM except ratios)
$249
300
41
(107)
11
$495
23
Leverage and Liquidity Analysis
Some numbers may not foot due to rounding.
(1) “Adjusted EBITDA”, “Bank EBITDA”, “Adjusted EBITDA Attributable to CONSOL Energy Shareholders” and “EBITDA Per Affiliated Company Credit Agreement” are non-GAAP financial measures. Please see the appendix for a reconciliation to net income.
(2) Adjusted Method is based on “Adjusted EBITDA” and Bank Method is based on “Bank EBITDA”. Please see the Disclaimer for a definition of “Bank EBITDA”.(3) See appendix for a reconciliation.(4) Calculated as consolidated net debt of ~$634 million less the 38.7% public ownership of CCR’s Affiliate Loan of $167 million.(5) TLB requires CEIX to make a mandatory prepayment of outstanding principal when CEIX has “excess cash flow” (which is defined in the credit facility documents filed with the SEC). Refer to slide 24.(6) Calculated as CEIX cash and equivalents of $250 million as of 9/30/2018 less CCR cash and equivalents of $1 million as of 9/30/2018.
$26$23
$1$1 $2
$9
2.4x
2.0x
1.6x 1.6x
4Q17 1Q18 2Q18 3Q18
Debt Repayment CEIX Equity Purchases
Net Leverage Ratio
24
Debt Repayment/Equity Purchase Update and 1Q19 TLB Sweep
Note: Chart values in millions except leverage ratios.Debt repayment excludes capital lease principal payments of $11 million YTD September 30, 2018.
For the nine months-ended September 30, 2018, CEIX has reduced total debt by $50 million through payments on TLA /TLB and repurchases of outstanding CEIX second lien debt.
For the nine months-ended September 30, 2018, CEIX has purchased CEIX common shares of $11 million and CCRcommon units of more than $1 million.
As of September 30, 2018, $397 million in principal, less $7 million of unamortized bond discount, was outstanding underCEIX’s TLB.
TLB requires CEIX to make a mandatory prepayment of outstanding principal when CEIX has “excess cash flow” (which isdefined in the credit facility documents filed with the SEC).
For fiscal year 2018, such repayment shall be equal to 75% of the Company’s excess cash flow for 2018 less any voluntaryprepayments of its borrowings under the TLB Facility made by the Company, if any, during 2018. If this covenant wasapplicable as of September 30, 2018, management estimates the repayment under this covenant would be approximately$100 million, subject to fourth quarter performance and other discretionary uses of cash.
CEIX must make any required prepayment of excess cash flow on TLB no later than 10 business days after it reports itsannual results for an applicable year.
CCR Equity Purchases
$1MM
$8MM
14%
5%
2%
9%
CEIX
LTM 9/30/2018
E&P
2017A
E&P
2015A-2018E
25
Return on Capital Highlights the Need for Rising Commodity Prices
The goal is to raise CEIX’s Return on Capital over time while lowering its WACC.
Focused on margins and corporate returns instead of just growth.
Low production decline coal assets vs. very steep initial decline for the natural gas shale assets.
Ability to export a high percentage of production to capture the highest BTU value chain.
Use our free cash flow generation to improve our cost of capital and increase returns to shareholders over time.
Return on Capital(1)
Weighted Average Cost of Debt(2)
Return on Capital(3)
Return on Capital(3)
(4) (4)
Source: CONSOL Energy Inc. management and Factset(1) CEIX return on capital has been adjusted to exclude legacy liability expense in the numerator as it is already captured as a liability in the denominator. Return on capital is an operating ratio derived
from a non-GAAP financial measure which is reconciled to the most directly comparable GAAP financial measure in the appendix.(2) Calculated as the weighted average interest expense for TLA, TLB, 2nd Lien Notes and Baltimore Bonds multiplied by their respective interest rates. Assumed LIBOR of 2.25% for TLA and TLB.(3) Return on capital for E&P is defined as EBIT/(Total Assets – Current Liabilities). No adjustment has been made to exclude E&P group companies’ legacy liability expense.(4) Comparable E&P universe = CHK, COG, RRC, SWN, EQT, REP, EOG, AR, and GPOR.
Source: CONSOL Energy Inc. managementNote: Coal reserves represent clean tons
Undeveloped reserve holdings
Marshall
Marion
Braxton
WyomingItmann Mine
Coal reserves: ~26 million tons
Pocahontas 3 Seam
Low-vol met coal
Birch Mine
Coal reserves: ~117 million tons
Coalburg / Lower Kittanning Seam
Thermal and high-vol met coal
Martinka Mine
Coal reserves: ~40 million tons
Middle Kittanning Seam
High-vol met coal
Mason Dixon Mine
Coal reserves: ~377 million tons
Pittsburgh Seam
Thermal and crossover met coal
River Mine
Coal reserves: ~591 million tons
Pittsburgh Seam
Thermal coal
West Virginia
Kentucky
Ohio
Virginia
MarylandWetzelMonongalia
1.6 billion tons of additional greenfield met and thermal reserves in NAPP, CAPP and ILB
Greenfield reserves provide attractive monetization opportunities for efficient growth through asset sales and joint ventures
CEIX - Extensive, High-quality Reserve Base Presents Multiple Value Creation Options
26
27
CEIX Peer Valuation vs API#2 and Coking Coal Price Performance
Source: FactSetNote: Peer group includes: ARCH, BTU, HCC, CLD, ARLP, FELP, HNRG and CNTE. CEIX not included.
Consensus is based on analyst EBITDA forecasts of then-listed peers for each period.
While the coal landscape has evolved over time, there are many similarities to the early 2000s.
Peer coal companies’ balance sheets are much healthier today than they were historically.
Valuations do not reflect the full potential of undeveloped reserves and the use of significant free cash flow generation.
We believe that the coal sector has significant upside from current levels.
5.7x 5.6x
4.6x4.9x
5.2x
4.2x 4.4x4.2x
4.5x
7.5x
-
$50
$100
$150
$200
$250
-
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
8.0x
Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Sep-18 2019
$/S
ho
rt T
on
EV
/EB
ITD
A
Mu
ltip
le
Peer Valuation vs Coal Price Performance Peer Avg 2018 EV/EBITDA Peer Avg 2019 Consensus EV/EBITDA
API2 Coal Prices Coking Coal Prices
API2 Forward Coking Coal Forward
Historical EV/EBITDA multiple levels
Appendix
29
Organizational Structure Overview
Source: CONSOL Energy Inc. filings and Management.(1) Owned through CONSOL Pennsylvania Coal Company LLC (“CPCC”) and Conrhein Coal Company (“Conrhein”).(2) Through various subsidiaries and associated entities.
100% ownership
interest
CONSOL Energy Inc.
NYSE: CEIX
~28 million shares outstanding
Pennsylvania Mining Complex
CONSOL Coal Resources GP LLC
(“our general partner”)
General Partner Interest
CONSOL Coal Resources LPNYSE: CCR
100% ownership interest
1.7% general partner interest
38.3% limited partner interest
25% undivided ownership interestand management and control rights
75% undivided ownership interest(1)
60.0% limited partner
interestCONSOL Marine Terminal1.6 billion tons of
undeveloped reserves(2)
Public and
Private
Placement
10,736,757
Common Units
$1,497
$1,362
$1,267
$1,163$1,143
$139 $133
$92$73 $72
2014 2015 2016 2017 LTM 9/30/2018
Total Legacy Liabilities
Total Annual Legacy Liabilities Cash Servicing Cost
Legacy liabilities(1) Balance Sheet
Value
Cash Servicing
Cost
LTM 9/30/2018
Long-term disability 14 3
Workers’ compensation 78 14
Coal workers’ pneumoconiosis 162 13
Other post-employment benefits 579 33
Pension obligations 42 2
Asset retirement obligations 268 9
Total legacy liabilities 1,143 72
9/30/2018
Significant legacy liability reductions over past three years
Administrative changes in 2017 reduced our OPEB liability without impacting the level of benefits delivered to beneficiaries
Cash payments related to legacy liabilities are declining over time
Considerable tax benefits associated with legacy liability payments
Legacy liabilities could be viewed as payment obligations between unsecured debt and equity on a company’s balance sheet
Approximately 80% of all CEIX employee legacy liabilities are closed classes
Actuarial and demographic developments continue to drive medium-term reduction in liabilities
Actively managing costs down
CEIX’s Qualified Pension Plan was 99% funded as of 9/30/2018 as compared to 92% for the S&P 1500 qualified plans
The investment performance over the past 10 years has been in the top 5th percentile of all corporate pension plans
CEIX Balance Sheet Legacy Liabilities, Manageable and Declining
30
2022E Payments2018E Payments
$67 $58
CEIX legacy liabilities and cash costs
($ mm)
CEIX employee-related liability projections
OPEB CWP Workers' Comp LTD NQ Pension
(1) Numbers may not foot due to rounding
($ mm)
Experienced Management Team Focused on Safety, Compliance and Financial Discipline
Key performance results
Significant expertise owning, developing, and managing
coal and associated infrastructure assets
‒ Effectively reduced operating costs per ton sold by
22% from 2014 levels as of year-end 2017
Strong focus on achieving and maintaining industry-
leading safety and compliance standards
‒ PAMC's Mine Safety and Health Administration
("MSHA") reportable incident rate was 39% lower than
the industry average in 2013-2017
‒ PAMC’s MSHA significant and substantial citation rate
was 33% lower than the industry average for YE 2017
‒ Executive and workforce compensation tied in part to
environmental and safety performance
Addressing environmental and legacy liabilities
‒ Annual cash servicing costs reduced from $139mm in
2014 to $72mm LTM 9/30/2018
Management incentivized to improve free cash flow and
shareholder returns
Source: CONSOL Energy Inc. management
Executive role at CEIX
Jimmy BrockPresident and Chief Executive Officer
David Khani
EVP and Chief Financial Officer
Kurt SalvatoriChief Administrative Officer
Jim McCaffreyChief Commercial Officer
Martha WiegandGeneral Counsel andSecretary
CONSOL Industry
Years of experience
37 37
6 23
25 25
41 41
9 17
Eric SchubelVP – Operations 34 34
31
Organic Free Cash Flow Net to CEIX Shareholders Reconciliation YTD
9/30/2018 3Q18 3Q17
Net Cash Provided by Operations $330.3 $52.1 $67.6
Less: Capital Expenditures (96.9) (40.7) (27.8)
Organic Free Cash Flow $233.4 $11.4 $39.8
Less: Distributions to Noncontrolling Interest (16.8) (5.6) (5.5)
Organic Free Cash Flow Net to CEIX Shareholders $216.6 $5.8 $34.4
CEIX Adjusted EBITDA & Organic Free Cash Flow Net to CEIX Shareholders Reconciliations
32
Some numbers may not foot due to rounding.
EBITDA Reconciliation
3Q18 3Q17
Net Income $9.1 $8.5
Plus:
Interest Expense, net 20.9 3.9
Interest Income (0.5) (0.4)
Income Tax Expense (0.7) 3.8
Depreciation, Depletion and Amortization 51.2 46.7
EBITDA $80.0 $62.4
Plus:
Stock/Unit-Based Compensation 3.0 6.3
Total Pre-tax Adjustments 3.0 6.3
Adjusted EBITDA $83.0 $68.7
Less: Adjusted EBITDA Attributable to Noncontrolling Interest (8.5) (7.1)
Adjusted EBITDA Attributable to CONSOL Energy Inc. Shareholders $74.5 $61.6
EBITDA Reconciliation
3Q18 3Q17
Net Income $8.6 $3.6
Plus:
Interest Expense, net 1.6 2.4
Depreciation, Depletion and Amortization 11.1 10.4
EBITDA $21.3 $16.4
Plus:
Unit-Based Compensation 0.5 2.1
Total Adjustments 0.5 2.1
Adjusted EBITDA $21.8 $18.5
Organic Free Cash Flow Reconciliation
3Q18 3Q17
Net Cash Provided by Operations $16.9 $20.0
Less: Capital Expenditures (8.1) (6.8)
Organic Free Cash Flow $8.8 $13.2
CCR Adjusted EBITDA & Organic Free Cash Flow Reconciliations
33
Some numbers may not foot due to rounding.
CEIX Net Leverage Ratio Reconciliations
34
Some numbers may not foot due to rounding.
CEIX Net Leverage Ratio Reconciliations Adjusted Method Bank Method
LTM 9/30/2018 LTM 9/30/2018
Net Income $108 $108
Plus:
Interest Expense, net $78 $78
Interest Income ($3) ($3)
Income Tax Expense $73 $73
EBIT $256 $256
Plus:
Depreciation, Depletion and Amortization $203 $203
EBITDA $459 $459
Plus:
Stock/Unit-Based Compensation $15 $15
Pension Settlement $10 $10
Transaction Fees $2 $2
Loss on Debt Extinguishment $3 $3
Total Pre-tax Adjustments $30 $30
Adjusted EBITDA $489 $489
Less:
CCR Adjusted EBITDA, Net of Distributions Received - ($87)
Employee Legacy Liability Payments, Net of Provision - ($14)
Other Adjustments - $2
Bank EBITDA - $390
Total Long-Term Debt $857 $857
Plus: Current Portion of Long-Term Debt $21 $21
Plus: Debt Issuance Costs $17 $17
Less: CCR Capitalized Leases ($9) ($9)
Less: Advanced Mining Royalties ($2) ($2)
Less: Cash and Cash Equivalents ($250) ($250)
Total Net Debt 634 634
Net Leverage Ratios 1.3x 1.6x
CCR Net Leverage Ratio Reconciliation LTM
9/30/2018
Net Income $61.3
Plus:
Interest Expense 7.3
Depreciation, Depletion and Amortization 44.1
Unit-Based Compensation 3.5
Cash Payments for Legacy Employee Liabilities, Net of Non-Cash Expense 1.5
Loss on Extinguishment of Debt 2.5
Other Adjustments to Net Income 1.6
EBITDA Per Affiliated Company Credit Agreement $121.7
Borrowings under Affiliated Company Credit Agreement $167.0
Capitalized Leases 9.5
Total Debt $176.5
Less:
Cash on Hand 0.9
Net Debt Per Affiliated Company Credit Agreement $175.5
Net Leverage Ratio (Net Debt/EBITDA) 1.4x
CCR Leverage Ratio Reconciliation
35
Some numbers may not foot due to rounding.
CEIX Return on Capital Reconciliation
36
Some numbers may not foot due to rounding.
CEIX Return on Capital Reconciliation LTM
9/30/2018
Net Income $108
Plus:
Interest Expense, net $78
Interest Income ($3)
Income Tax Expense $73
EBIT $256
Add Legacy Liability Expense 72
EBIT less Legacy Liability Expense $328
Total Assets $2,746
Less Current Liabilities ($373)
Total Capital Employed $2,373
Return on Capital 14%
($MM except per ton data) 3Q18 3Q17
Total Coal Revenue $295 $279
Operating and Other Costs 223 230
Less: Other Costs (Non-Production) (31) (33)
Total Cash Cost of Coal Sold 192 197
Add: Depreciation, Depletion and Amortization 51 47
Less: Depreciation, Depletion and Amortization (Non-Production) (9) (7)
Total Cost of Coal Sold $234 $236
Average Revenue per Ton Sold $47.21 $44.16
Average Cash Cost per Ton Sold $30.88 $30.94
Depreciation, Depletion and Amortization Costs per Ton Sold $6.60 $6.38
Average Cost per Ton Sold $37.48 $37.32
Average Margin per Ton Sold $9.73 $6.84
Add: Depreciation, Depletion and Amortization Costs per Ton Sold $6.60 $6.38
Average Cash Margin per Ton Sold $16.33 $13.22
Average Cash Margin and Average Cash Cost Per Ton Sold Reconciliations
37
Some numbers may not foot due to rounding.
($MM except per ton data) YTD 9/30/18 YTD 9/30/17
Total Coal Revenue $1,017 $899
Operating and Other Costs 635 609
Less: Other Costs (Non-Production) (38) (21)
Total Cash Cost of Coal Sold 597 588
Add: Depreciation, Depletion and Amortization 135 125
Less: Depreciation, Depletion and Amortization (Non-Production) (6) (7)
Total Cost of Coal Sold $726 $706
Average Revenue per Ton Sold $49.11 $45.26
Average Cash Cost per Ton Sold $28.87 $29.57
Depreciation, Depletion and Amortization Costs per Ton Sold $6.20 $5.94
Average Cost per Ton Sold $35.07 $35.51
Years Ended
2014 2015 2016 2017
Earnings before Income Taxes $431 $405 $131 $189
Plus:
Interest Expense, net - 3 9 10
Depreciation, Depletion and Amortization 173 177 168 167
PAMC EBITDA $604 $585 $308 $366
Plus:
Stock/Unit-Based Compensation 17 5 8 19
OPEB Plan Changes - (129) - -
Other CCR MLP Transaction Fees - 12 - -
PAMC Adjusted EBITDA $621 $473 $316 $385
Less:
Capex ($341) ($136) ($51) ($78)
PAMC Adjusted EBITDA - Capex $280 $337 $265 $307
PAMC Adjusted EBITDA Reconciliation
38