M arch 2011 Investor Presentation The leading diversified fuel producer in the Eastern U.S.
Cautionary Language This presentation contains state ments, estimates and projections which are forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934). These statements, which are described in detail in our annual report form 10-K filed with the Securities and Exchange Commission, involve risks and uncertainties that co uld cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The forward-looking statements include estimates of unproved reserves, projections and estimates concerning the timing and rates of return of future projects, and our future production, revenues, income and capital spending. The forward-looking statements in this presentation speak only as of the date of this presentation; we disclaim any obligation to update these statements unless required by the securities laws, and we caution you not to rely on them unduly. This presentation does not constitute an offer to sell any securities of CONSOL Energy Inc. The United States Securities and Exchange Commission (SEC) permits oil and gas companies, in their filings with the SEC, to disclose only proved reserves that a company has demonstrated by actual production or conclusive formation tests to be economically and legally producible under existing The unproved reserve data contained in this presentation is economic and operating conditions. We use certain terms in this based on a summary review of the title to coalbed methane and presentation, such as “unproved reserves and/ or unproved resources” that other gas rights we hold, as well as a summary review of the title the SEC's guidelines strictly prohibit us from including in filings with the SEC. to the coal from which many of our rights derive. As is We also caution you that the SEC views such “unproved reserves and/ or customary in the gas industry, prior to the commencement of unproved resources” estimates as inherently unreliable and these estimates gas drilling operations on our properties, we conduct a thorough may be misleading to investors unless the investor is an expert in the gas title examination and perform curative work with respect to industry. significant defects. We are typically responsible for curing any title defects at our expense. This curative work may include the In this presentation, the term “unproved reserves and/ or unproved acquisition of additional property rights in order to perfect our resources” refers to gas that we believe is economically recoverable, based ownership for development and production of the gas estate. on available data. 2
CONSOL Energy: Strength in Product Diversity � Coal � Low-vol coal � High-vol coal � PCI coal � Thermal coal � Gas CONSOL believes that it can create meaningful shareholder value by responsibly managing this unique portfolio. 3
CONSOL Energy: Strength in Product Diversity (2) Wall Street Journal headline, Feb. 22: BHP to Buy Shale Assets The world’s largest mining company validates CONSOL Energy’s strategy. 4
CONSOL Energy: Strength in M arket Diversity � U.S. � China � Europe � Brazil CONSOL Energy’s Pittsburgh seam coal is now being sold on four continents. 5
CONSOL Energy: The Nation’s Largest Coal Exporter 2010 Exports Europe: 2.2 China: 3.0 Brazil: 1.6 Total: 6.8 mm tons CONSOL Energy aspires to increase its export sales in 2011, with India and S. Korea representing potential new markets. 6
Transshipping our Coal off the Coast of Nova Scotia Coal in the Panamax-size vessel (on the left) is loaded onto the Cape-size vessel (on the right). 7
CONSOL: Coal’s Q4 Cash Generation Low-Vol High-Vol Met Met Thermal Quarter Ended December 31, 2010 Total Coal Sales (millions of tons) 1.1 0.5 15.4 Average Realized Price Per Ton – Company Produced $164.62 $72.69 $52.98 Total Cost Per Ton, before DD&A $61.20 $36.64 $38.22 DD&A Per Ton $5.03 $5.72 $5.05 Total Cost Per Ton – Company Produced $66.23 $42.36 $43.27 Average Margin Per Ton, before DD&A $103.42 $36.05 $14.76 Sales (millions of tons) times Average Margin $114 $18 $227 Per Ton, before DD&A ($ MM) 37% of the cash generated in CONSOL ’s Coal Division came from the sales of met coal. 8
CONSOL ’s BM X M ine Opens in Early 2014 � 5 M M tons/ year of low-cost NAPP coal � Potential M arkets: � Asian mills � European generators � Brazilian mills � Domestic generators CONSOL ’s Bailey Prep Plant will be expanding to serve the BM X M ine CONSOL can expand production of its premium product if world markets demand it. 9
CONSOL: M anaging the Coal Portfolio Potential to M onetize CAPP M et Reserves in Southern West Virginia � Amonate, Elk Creek, and Itmann properties � 5 M M tons/ year of low- vol, medium-vol, and high-vol � Potential EBITDA of $350 M M , assuming $150 per ton sales price CONSOL is assessing options, including joint-venturing, outright sale, and possible sole development. 10
CONSOL Energy’s 2011 Gas Strategy � Investing $675 million to grow the gas division of CONSOL � $215 mm: delineate Dominion acreage � $225 mm: grow production to 150-160 Bcf � $35 mm: Utica Shale exploration program CONSOL believes that its shareholders will reap substantial value from these investments. 11
CONSOL Nearly Doubled Proved Reserves in 2010 4,000 3,732 3,500 3,000 PDPs 2,500 1,911 Bcf 2,000 1,422 1,343 1,500 1,265 1,000 500 0 2006 2007 2008 2009 2010 CONSOL added 621 Bcf from extensions and discoveries. 12
2010 Drill Bit Finding Cost $/Mcf CONSOL Energy $0.41 Range Resources $0.60 Ultra Petroleum $1.48 CONSOL posts “Best in Class” finding cost.
Growth in M arcellus Shale Program 140 12/ 31 Exit Rate: M M cf/ day 125 120 100 80 70 #Wells Drilled 60 40 40 24 14 20 6 0 Estimated 2007 2008 2009 2010 2011 Our M arcellus Shale program is growing rapidly. 14
CONSOL has Three M arcellus Shale Operating Areas Central Pa. Ops Southwest Pa. Ops WV Ops CONSOL has 750,000 Net Acres in M arcellus Shale. 15
CONSOL is Long FT through 2013 DOM INION DOM INION TETCO TETCO COL COL UM BIA UM BIA DOM INION DOM INION CONSOL has +400 M M cf per day of unused take-away capacity. 16
2010 M arcellus Shale Results All in Greene County, Pa.: � EURs (p-50 case) range from 3.5 Bcf to 9.9 Bcf; 5.5 Bcf average � Laterals average 3,400 feet � D&C Costs average $ 4.1 million � M aximum 24-hour production averaged 3.7 M M cf � 30-day production averaged 3.4 M M cf per day CONSOL is achieving results much better than those suggested by the base case. 17
M arcellus Economic Assumptions Illustrative W ell Param eters Base 2011 Type 2011 Type (10% ($MM, ex cept as noted) D & C E fficiency) G ros s E U R (B cfe) 4.3 5.7 5.7 NRI 87.5% 87.5% 87.5% N et E U R (B cfe) 3.7 4.9 4.9 Drilling Cost 1.9 2.1 1.9 Completion Cost 1.3 2.8 2.5 Total D & C 3.2 4.9 4.4 Gathering 0.4 0.4 0.4 Land & Title 0.1 0.1 0.1 Acquisition - - - Total 3.7 5.4 4.9 M argin A nalysis B ase 2011 Ty pe 2011 Type (10% ($ / Mcfe, ex cept as noted) D & C E fficiency) Henry Hub Cash Price ($ / MMBT U) 4.50 4.50 4.50 Realized Price ($ / Mcfe) 5.12 5.12 5.12 Lease Operating Expense 1.26 1.26 1.26 Production Taxes 0.26 0.26 0.26 Gross Margin 3.60 3.60 3.60 otal D&C,G,L,A Cost ($ / Mcfe) 1 T 1.02 1.13 1.02 AT AX IRR 22.9% 22.5% 26.8% Price Required for 20% ATAX IRR $ 4.27 $4.31 $4.03 1. Includes production loss (shrink) of 3.5% CONSOL ’s 2011 Type Case shows attractive economics, even before possible efficiencies. 18
Illustrative M arcellus Well Economics Well ATAX IRR Comparison - Type Curve Analysis 100.0% 95.0% 90.0% 85.0% Base 80.0% 75.0% 2011 Type (10% D&C Efficiency) 70.0% 2011 Type 65.0% Internal Rate of Return % 60.0% 55.0% 50.0% 45.0% 40.0% 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% - $2.00 $2.50 $3.00 $3.50 $4.00 $4.50 $5.00 $5.50 $6.00 $6.50 $7.00 $7.50 $8.00 Henry Hub Cash Price ($ / MMBTU) CONSOL expects a 22% After-Tax IRR at $4.50 / M M BTU. 19 (1) Assumes 3,000 ft. laterals (2) Difference represents basis premium and gas quality characteristics (3) Includes production loss (shrink) of 3.5%
CONSOL Plans 6-Well Utica Shale Exploration Program Central Pa. Ops Southwest Pa. Ops WV Ops CONSOL drills vertical well in Belmont County, OH. 20
CONSOL Energy: Summary � CONSOL has the asset and customer base that makes it the leading diversified fuel producer in the Northeast. � CONSOL Coal Ops’ industry leading assets, margins and cash flows will allow the Gas business to reach a critical mass and become self funding. � CONSOL Gas Ops’ advantaged acreage position and lease terms will allow positive IRRs even in a $4 natural gas market. � CONSOL will manage this outstanding asset portfolio to optimize returns to our shareholders. CONSOL Energy – America’s Energy Starts Here. 21
M arch 2011 Investor Presentation The leading diversified fuel producer in the Eastern U.S.
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