CONSOL Energy Inc. Fourth Quarter 2011 Earnings Call J. Brett - - PowerPoint PPT Presentation

CONSOL Energy Inc. Fourth Quarter 2011 Earnings Call

• J. Brett Harvey, Chairman and CEO

Nicholas DeIuliis, President William J. Lyons, CFO Robert Pusateri, EVP of Marketing

Cautionary Language

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This presentation contains statements, estimates and projections which are forward-looking (as defined in Section 21E of the Securities Exchange Act of 1934, as amended). Such statements include estimates of reserves and resources, projections and estimates concerning the timing and rates of return of future projects, and our 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, 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 from the forward-looking statements 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, 2010 filed with the Securities and Exchange Commission (SEC), as updated by any subsequent 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. 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 press release, 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. 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 this presentation is based on a summary review of the title to the gas rights we hold, as well as a summary review of the title to the coal from which many of our coalbed methane rights derive. As is customary in the gas industry, prior to the commencement of 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. This curative work may include the acquisition of additional property rights in order to perfect our ownership for development and production of the gas estate. This presentation does not constitute an offer to sell or a solicitation of offers to buy securities of CONSOL Energy Inc.

Over 4.4 billion tons of proven and probable coal reserves

(as of 12/31/10)

2012 estimated coal exports of approximately 9.0

11.0 MTs

1Q12 production guidance of 15.5 - 15.9 MTs (as of

January 17, 2012)

1Q12 sales guidance of 15.2 MTs Over 3.7 Tcfe of proved reserves (as of 12/31/10

to be updated in next several weeks)

• Approx. 737,000 gross Marcellus shale acres (as of

12/31/10)

• Approx. 200,000 gross Utica acres in Ohio

1Q12 production guidance of 36 - 38 billion cubic feet (as

• f January 17, 2012)

About 50% shale wells targeting liquids

Coal Natural Gas

CNX Land Resources Inc. Research & Development

Coal and Gas Rich Asset Base: Coal and Gas

River & Dock Services Fairmont Supply Company CNX Marine Terminals Inc.

CONSOL Energy Inc. Other

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Midstream

Manages land assets of the Company R&D facility devoted to coal, gas, and energy utilization and production Distributor of mining, gas drilling, and industrial supplies Fleet of 620 barges, 22 towboats and 5 harbor boats Baltimore Port with capacity to load 14 million tons of coal per year Manages gas gathering assets

• f the Company

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Solid Quarterly and Yearly Results

• Reported 4Q11 earnings of $0.85 per share and operating cash flow of $275 million
• Coal and Gas Division operations ran well and hit our upper end of guidance targets
• Active coal operations generated EBIT of $274 million
• Gas operations generated EBIT of $71 million
• Record 2011 net income and operating cash flow of $632 million and $1.5 billion
• Positioned for economic uncertainty
• Strong balance sheet and liquidity
• Nearly 100% sold out in thermal coal
• About 50% of natural gas volumes hedged at $5.25 per Mcf

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Year-Over Year Improvement in Cash Flow

Over $2.7B in Total Liquidity as of Year-End 2011 Annual Cash Flow from Operations Improved Nearly $400M

Year-Ending Year-Over Year ($ Million) 2011 2010 Change Net Cash Provided by Operations $1,528 $1,131 $397 Capital Expenditures ($1,382) ($1,154) ($228) Acquisitions and Divestitures $748 ($4,401) $5,149 Proceeds from Short-Term and Long-Term Debt ($511) $2,700 ($3,211) Proceeds from Issuance of Common Stock $0 $1,829 ($1,829) Debt Issuance & Financing Fees ($16) ($84) $68 Dividends Paid ($96) ($86) ($10) Other $72 $32 $40 Net Increase/(Decrease) in Cash $ $343 ($33) $376

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Strong Liquidity Position of $2.7 Billion

Cash on Hand of $376 Million Nearly $200 Million Available on Accounts Receivable

Securitization Facility

Over $2 Billion of Availability on Credit Facilities

Amount/ Amount Letters Amount December 31, 2011 (Mill $) Capacity Drawn

• f Credit

Available Cash and Cash Equivalents $376 NA NA $376 Accounts Receivable Securitization $193 $0 $0 $193 Revolving Credit Facility $2,500 $0 $336 $2,164 Total $3,069 $0 $336 $2,733

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Migrating Capital and Activity to High Value Areas Gas Division Drilling Goals for 2012

Marcellus Horizon Objectives

Ramp up development of our wet acreage position with our partner Noble Energy Focusing on 100% NRI acreage in Greene and Westmoreland counties, PA Further delineate Central PA and Northern WV position 99 gross wells expected for 2012; 39 wells targeting liquids Utica Horizon Objectives Explore and exploit the Ohio Utica Formation with our partner Hess Corporation 22 gross wells expected for 2012; 22 wells targeting liquids

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Drilling Results and Forecast Net Wells Drilled By Formation From 2009 Through 1Q12E Formation Region 2009 2010 2011 1Q12E Coalbed Methane Virginia 204 181 214 22.0 Total Shales 17 24 78 15.0 Marcellus Shale Central PA 4 19 4.5 Southwest PA 17 20 50 8.0 West Virginia 9 2.0 Totals 17 24 78 14.5 Utica Shale 0.5 Conventional and Other 18 129 36 10.0 Totals 239 334 328 47.0 % Shales Wells: Dry gas target 100% 100% 100% 80% % Shales Wells: Liquids target 0% 0% 0% 20% Total Production (Bcfe) 94 128 154 36-38 Total Capital ($MM) 335 420 662 129

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Over 500 Day Period, CNX Wells in SW PA Yielded 21% More Production Than Competitor Well Average

1,000 2,000 3,000 4,000

100 200 300 400 500 600 700 800 900 1,000 Days

Mcf/d

Gross Wellhead Gas Production

CNX Avg. 2010-2011 (39 laterals ~2,285 ft.) Competitor Avg. 2009-2010 (103 laterals ~2,800 ft.) CNX Avg. 2008-2009 (13 laterals ~1,625 ft.) NBL Acq. Model (normalized to 2,850 lateral ft.)

Marcellus Wells Improving

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CONSOL Energy Capital Spending CONSOL Is Reinvesting Significant Capital in Core Businesses Capital Spending Division Spending Category 2011A 2012E Coal Maintenance of Production +Safety $261 $360 Growth (Efficiency & New Projects) $297 $313 Total Coal $558 $673 Gas Maintenance of Current Production $150 $158 Growth (Marcellus and Utica Exploration) $512 $465 Total Gas $662 $623 Other Mandatory (Water, Transportation, Other) $151 $233 Discretionary $11 $15 Total Other $162 $248 Totals Maintenance/Mandatory $562 $751 Growth/Discretionary $820 $793 Total Capital $1,382 $1,544

Marketing: 1Q12 Forecasts and 2011 Coal Statistics

Sales volumes 63.2 MTs for $4.5B of revenue Achieved record annual average $72.24 price per ton Low-Vol met coal volumes increased to 5.6 MTs at an average price exceeding $190.00 per ton High-Vol met coal volumes grow to 4.8 MTs at an average price of $80.00 per ton Total export volumes increased 68% over 2010 levels to a record of 11.4 MTs Expanded new markets

• Developed 16 new customers with 5 new

met customers

• High-Vol met coal shipments to domestic &

export steel makers

• Four new multiple-year export thermal sales

agreements resulting in over 3 MTs.

2011 Coal Sales Facts

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Note: Set at the midpoint of guidance

Marketing: 2012 Coal Sales Forecast Details

Contracted tons for 2012: 90%

• Priced: 88% with 2% under negotiation
• Unpriced: 10% of which 58% are High-Vol

met sales made quarterly Approximately 75% of the Low-Vol & High-Vol met coal tons are expected to be shipped overseas Approximately 95% of the Thermal coal tons are expected to be delivered domestically Developing new markets for all metallurgical products

2012 Coal Sales Facts and Goals

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Our Assets, Strategy and People Create An Investment Opportunity

Coal and gas operations are long-lived, low-cost, and provide solid growth Our well-capitalized assets provide more consistent operational execution Our emphasis on safety and compliance increases reliability Asset rich company that has an expanding products mix and market reach New partnerships bring cash flow and value forward Balance sheet remains strong with $2.7 billion of liquidity Valuation remains compelling using sum of the parts