Fourth Quarter 2013 Earnings Presentation January 31, 2014 J. - - PowerPoint PPT Presentation

Fourth Quarter 2013 Earnings Presentation

January 31, 2014

• J. Brett Harvey, Chairman and CEO

Nicholas J. DeIuliis, President David Khani, CFO James C. Grech, Chief Commercial Officer

Cautionary Language

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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). 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 are described in detail under (i) the captions "Forward Looking Statements" in our earnings press release issued today and (ii) "Risk Factors" in CONSOL Energy Inc.’s annual report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission (SEC), as updated by our 2013 Form 10-K and 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 included in 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. A registration statement relating to the securities of the MLP that would be sold in the offering has not been filed with the Securities and Exchange Commission or become effective. This presentation does not constitute an offer to sell or a solicitation of offers to buy securities of CONSOL Energy Inc. This presentation is being made pursuant to, and in accordance with, Rule 135 under the Securities Act of 1933.

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Summary

Fourth Quarter 2013 Results



Pre-tax income for the fourth quarter was $16 million

• Net income from continuing operations was $147 million as a result of an income tax benefit of $131

million

• Income from discontinued operations, net of tax, was $591 million



Gas Production re-iterates 30% growth through 2016

• Marcellus production volumes increased 56%, compared to the year-earlier quarter

(1) Earnings includes $591 million from discontinued operations, net of tax, and an income tax benefit of $131 million. (2) EBITDA is a non-GAAP financial measure.

Q-to-Q Q4 2013 Summary 4Q2013 4Q2012 Change Net Income (1) $738 $150 $588 Earnings per Diluted Share $3.20 $0.65 $2.55 Revenue - Outside $754 $793 ($39) Cash Flow from Operations $70 $198 ($128) EBITDA (2) $193 $302 ($109)

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Summary

Gas Division

Q-to-Q Gas Division 4Q2013 4Q2012 Change Average Sales Price ($ / Mcfe) $4.26 $4.44 ($0.18) Average Costs ($ / Mcfe) $3.55 $3.41 $0.14 Sales Volumes (Bcfe) 48.5 41.8 6.7 Sales Volumes (Bcfe) by Category Marcellus 19.4 12.4 7.0 CBM 20.3 21.4 (1.1) Shallow Oil and Gas 7.3 7.4 (0.1) Other 1.5 0.7 0.8



Impact of gas hedging for Q4 2013 was $0.40/Mcf compared to $0.84/Mcf from the year-earlier quarter

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Summary

Coal Division

Q-to-Q Coal Division 4Q2013 4Q2012 Change Average Sales Price ($ / ton) $66.85 $75.84 ($9.00) Average Costs ($ / ton) $50.05 $49.19 $0.86 Coal Production (millions of tons) 7.1 6.6 0.5 Sales Volumes (millions of tons) 7.2 7.1 0.1 Sales Per Ton Low-Vol $81.84 $128.79 ($46.95) High-Vol $58.88 $69.51 ($10.63) Thermal $64.66 $69.18 ($4.52)

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

Goal is to maintain our strong liquidity position

Net (Decrease) / Increase in Cash - $ in millions

CONSOL Energy Overview

Source: Company filings. (1) Includes ($43) million in Q4 2013 for operating activities of discontinued operations. (2) Includes $826 million in Q4 2013 for investing activities of discontinued operations.

Q-to-Q Cash Flow Summary 4Q2013 4Q2012 Change Net Cash Provided by Operations (1) $70 $198 ($128) Capital Expenditures ($483) ($295) ($188) Proceeds From Asset Sales $19 $63 ($44) Proceeds From /(Payments on) Short-Term Debt ($47) $22 ($69) Dividends Paid ($29) ($57) $28 Other (2) $776 ($140) $916 Net (Decrease) / Increase in Cash $306 ($209) $515

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Gas Operations: Capital Expenditure

Source: Company filings and CONSOL Analysis.

$528 $953 $1,110 $0 $200 $400 $600 $800 $1,000 $1,200 2012 2013 2014E Land Capex Other Gas Capex 2014E Total Gas Capex Estimate Natural Gas Operations: ($ in millions) 2014E Capex Land and Permitting 70 Liquids-rich drilling and completions: Marcellus 410 Utica 105 Dry-gas drilling and completions: Marcellus/Upper Devonian 415 Utica 10 CBM/Shallow Gas 40 Midstream: Marcellus Gathering 60 Total Natural Gas Operations $1,110

• CONSOL Gas Capex: Coring up land

positions

• Put together an acceleration plan in 2013

for a 2014 production ramp

─

~$30 million of capital for acceleration

• f plan

─

Driving efficiencies in drill plan and infrastructure ($ in millions)

44.5 48.6 48.4 56.1 58.2 76.6 94.4 127.9 153.5 156.3 172.4 215.0 - 235.0 +30% +30% 100 200 300 400 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014E 2015E 2016E

Gas Production

• CONSOL is rapidly growing its natural gas production

─

Total 2013 natural gas production: 172.4 Bcfe

─

Total 2014 natural gas production guidance: 215 – 235 Bcfe (30% growth)

─

Total 2015 and 2016 natural gas production guidance: 30% per year

Gas Division Production Results and Forecast

8 Source: Company filings. Note: Acquired ~23 Bcfe of Conventional gas production from Dominion E&P in 2010. Divested ~11 Bcfe through the Marcellus JV with Noble Energy and the Antero Royalty Interest transactions in 2011.

Gas and Liquids Production (Bcfe)

(in Bcfe)

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

Cash on hand of $327 million



Accounts receivable securitization and revolving credit facilities of $1.8 billion

Strong Liquidity Position of $2.1 Billion

Amount/ Amount Letters Amount December 31, 2013 ($ in million) Capacity Drawn

• f Credit

Available Cash and Cash Equivalents $327 $0 $0 $327 Accounts Receivable Securitization $115 $0 $66 $49 Revolving Credit Facilities $2,000 $0 $295 $1,705 Total $2,442 $0 $361 $2,081 December 31, Debt Covenants Limit 2013 CONSOL Energy Revolver: Minimum Interest Coverage Ratio < 1.50 to 1.00 2.21 to 1.00 Senior Secured Leverage Ratio > 2.00 to 1.00 0.00 to 1.00 CNX Gas Revolver: Maximum Leverage Ratio > 3.50 to 1.00 0.61 to 1.00 Minimum Interest Ratio < 3.00 to 1.00 25.33 to 1.00 Revolving Credit Facilities Debt Covenants



CONSOL Energy and CNX Gas currently maintain strong leverage ratios



Both facilities are well within debt covenants

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Use of Cash Proceeds

Source: CONSOL Analysis.

$13 $327 $850 $8 ($361 ) ($115 ) ($31 ) ($37 ) $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 Beginning Cash Balance as of 12/5/2013 Receipt from Murray Tetrick Override Credit Facilities Paydown DTI Acres / Utica Interest to Hess Fees Other Ending Cash Balance as of 12/31/2013

CONSOL Closed On Sale of Five W.Va. Coal Mines to Murray Energy on December 5, 2013; Total Value of the Transaction was $3.5 billion, including $850 million in Cash Paid at Closing

($ in millions)

CONSOL Credit Metrics and Total Available Liquidity Improve Markedly Post-Sale

Pre-Transaction vs. Post-Transaction Credit Metrics

CONSOL Energy ($ in millions) 12/31/2011 12/31/2012 12/31/2013 Cash and Cash Equivalents $376 $22 $327 Available Liquidity $2,733 $2,351 $2,081 Total Debt $3,198 $3,188 $3,175 Net Debt $2,822 $3,166 $2,848 Legacy Liabilities OPEB $3,242 $3,018 $1,022 LTD 36 39 20 WC 174 180 85 CWP 184 184 121 Other Liabilities 696 775 668 Salary Retirement/Pension 275 225 45 Total Legacy Liabilities $4,606 $4,421 $1,962 Total Legacy Liabilities Servicing Cost $343 $305 $267 LTM EBITDA $1,778 $1,312 $1,851 LTM EBITDA + Servicing Cost 2,121 1,617 2,118 Credit Metrics: (Net Debt + LL)/(LTM EBITDA + Servicing Cost) 3.5x 4.7x 2.3x Net Debt/LTM EBITDA 1.6x 2.4x 1.5x

Source: Company filings and CONSOL Analysis. Note: 2011 and 2012 are not restated for discontinued operations. 11

174,954 174,954 748,235

• 200,000

400,000 600,000 800,000 1,000,000 Peer 1 Peer 2 Peer 3 Peer 4 CNX Gas CNX Tot 000 MMBtu

2013 Hedge Positions

Production Coal Production Hedge + Priced Coal 75% 13% 46% 25% 64% 13%

60%

75% 77% 51% 75% 64% 74% 64% 5% 50%

• 20%

40% 60% 80% 100% Peer 1 Peer 2 Peer 3 Peer 4 CNX Gas CNX Total

2014 Competitor and CNX Hedge Positions

(As Percent of Total Production compared to 2013)

Swaps Collars Priced Coal 2013 Hedge + Priced Coal

84% Hedged 62% Hedged 59% Hedged 74% Hedged 51% Hedged 90% Hedged + Priced

CNX Active Hedge Program

Actively Monitored Hedge Program:



Recently increased hedge position for 2014 and will add incremental hedges for 2015

• For 2014: 40 Bcf added at approximately

$4.30 per MMBtu to 64%



Future hedges will use SWAPS and Collars



Add basis hedges when possible



Protects cash flows from commodity price risk



Ensures positive economics for 30% growth

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

Gas and coal operations are long-lived, low-cost, and provide solid growth



Our well-capitalized assets – and highly trained personnel – provide more consistent

• perational execution



Our emphasis on safety and compliance increases reliability



Balance sheet remains strong with $2.1 billion of liquidity



Valuation remains compelling using sum of the parts

Summary

CONSOL Energy Overview

Our Assets, Strategy, and People Create An Investment Opportunity

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Appendix

Formation Region 2011 2012 2013 2014E Marcellus Shale: Southwest Pa. (incl NBL) 50 70 97 129 West Virginia 9 6 10 23 Central Pa. 19 13 10 9 Ohio 1(1) Total: 78 89 117 162 Utica Shale (incl Hess): 10 24 33(2) Total Shales (Gross): 78 99 141 195 Coalbed Methane: Virginia 214 44 64 71 Shallow and Other 36 25 11 5 Total (net to CONSOL) 328.0 118.5 145.5 173.5 % Shale Wells: Dry Gas Target 100% 65% 33% 38% % Shale Wells: Liquids Target 0% 35% 67% 62% Total Production (Bcfe) 154 156 172 215 - 235 Total Capital ($ in millions) $662 $528 $953 $1,110(3)

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Appendix

(1) Planned non-JV wet Marcellus Shale well located in Monroe County, OH. (2) Includes 1 planned non-JV dry Utica Shale well located in Monroe County, OH. (3) These figures are net of approximately $115 million in drilling carry from Hess Corporation for drilling in the Ohio Utica Shale.

Gross Wells Drilled By Formation From 2011 Through 2014E

Drilling Results and Forecast

$36 $46 $56 $66 $76 $86 1Q2011 2Q2011 3Q2011 4Q2011 1Q2012 2Q2012 3Q2012 4Q2012 1Q2013 2Q2013 3Q2013 4Q2013

Coal: Cost per Ton Sold

Thermal High-Vol Low-Vol Total Company $2 $3 $4 $5 $6 1Q2011 2Q2011 3Q2011 4Q2011 1Q2012 2Q2012 3Q2012 4Q2012 1Q2013 2Q2013 3Q2013 4Q2013

Gas: Operating Costs per Mcfe

CBM Marcellus Shallow Oil & Gas

Appendix

16 Source: Company filings.

($ per Ton) ($ per Mcfe)

CONSOL Cost Metrics

CONSOL-Operated Wells: Marcellus Drilling and Completions Summary

Appendix

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Drilling Summary 2011 2012 2013 Wells TD'd 78 64 46 Lateral Ft 300,466' 328,428' 366,615' Total MD 92,264' 794,098' 730,316' Average Lateral 3,853' 5,514' 7,970' Average TMD 11,824' 13,280' 15,876' Average Drill Cost $180/ft $220/ft $190/ft Average Lateral Cost $552/ft $529/ft $378/ft Completions Summary 2011 2012 2013 Wells Completed 57 51 59 Lateral Ft Completed 188,800' 270,256' 333,895' Total Stages 684 940 1,527 Average Stg/Well 12 18 26 Average Stage Cost $205k $184k $193k

78% 14% 8%

Sales Tons by Product Year 2014

Thermal Low Vol High Vol Mid Vol

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Marketing 1Q14 and 2014 Forecasts

Appendix

Q1 2014 2014 Q1 2013 2013 Thermal 5.6+ 23.8+ 5.4 21.5 Low Vol 1.1-1.2 4.2-4.7 1.4 4.8 High Vol 0.7+ 2.3+ 0.7 2.5 Total 7.2-7.6 30.1-32.1 7.5 28.8 76% 15% 9%

Sales Tons by Product 1st Quarter 2014

Thermal Low Vol High Vol Mid Vol 2014 Coal Sales Facts and Goals



Contracted tons for 2014: more than 82%

• Priced: more than 78%



Approximately 80% of the Low-Vol & High-Vol met coal tons are forecasted to be shipped

• verseas



Approximately 93% of the thermal coal tons are forecasted to be delivered domestically

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BMX Mine Overview



BMX Mine: Begin operations in mid-March 2014

• Lowest cost CNX mine

Appendix

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Appendix

Source: EIA, PIRA, and CONSOL analysis.

Our Domestic Coal Market Remains Solid

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10 15 20 25 30 Jan 13 Apr 13 Jul 13 Oct 13 Tons (MM)

PJM Coal Inventory

Trailing 12 Months 5 Year Average