27
BMO Metals and Mining Conference February 25-26, 2013
BMO Metals and Mining Conference
February 25-26, 2013
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). 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,
2012 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.
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Ticker: CNX
Headquartered in
Pittsburgh, Pennsylvania
Company Founded in 1860
Approx. 9,000 Employees
Market Cap = $7.8 Billion(2)
2012 Revenue = $5.4 Billion
The Leading Diversified Fuel Producer in the Eastern United States
CONSOL Energy Overview
(1) As of February 19, 2013.
4
CONSOL Energy Overview
Safety
─ In 2012, CONSOL’s Coal Division saw safety exceptions drop 10%, from 150 to 134
─ In 2012, CONSOL’s Gas Division worked the entire year without having recorded a lost-time
incident
─ CONSOL has invested approximately $1.2 billion since 2006 on coal-related safety projects
─ Commitment to “Absolute Zero”
Compliance
─ Coal and Gas Divisions saw an improvement in compliance of 11% and 53%, respectively, in
2012 when compared to 2011
─ Corporate Responsibility Report : http://consolenergy.com/corporateresponsibilityreport/
Continuous Improvement
─ Rebalancing portfolio: Approximately $350 million in asset sales for 2012
─ Average drilling lateral length increase and average cost per stage decrease
Production
─ Record gas production in 2012
Cost
─ Improved coal costs in Q4 2012
Core Values
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Summary
Key Points
Since 2011, CONSOL generated >$1B in GAAP net income and $2.3B in operating cash flow
CONSOL has executed at a high and consistent level both in both good and challenging times
High quality Tier 1 energy assets
- High quality low-vol coal
- Versatile high-vol and high-Btu thermal coal
- In gas, our coalbed methane
- Marcellus shale position
- Utica shale position
Organic production growth and expansion of our product mix in both coal and gas
- Expect 5 million tons per year with the BMX Mine that will open in about 12 months
- Gas production continues to grow at 8-15% per year
- New potential in oil and liquids
CONSOL’s financial strength remains solid
- Approximately $2.4 billion in liquidity
- Expected net investment in 2013 around $850 million
CONSOL should be a core holding for every energy investor
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Goal is to maintain our strong liquidity position
Total
2011-
2012 2011 2012
Revenue - Outside $4,826 $5,661 ($835) $10,487
Net Income $388 $632 ($244) $1,021
Net Cash Provided by Operations $728 $1,528 ($800) $2,256
Net Investment(1) ($928) ($634) ($294) ($1,562)
Proceeds From/(Payments on) Short-Term Debt(2) $5 ($496) $501 ($491)
Dividends Paid(3) ($142) ($96) ($46) ($238)
Other ($17) $41 ($58) $24
Net (Decrease)/Increase in Cash ($354) $343 ($697) ($11)
Y-to-Y
Change
Year Ending
Net (Decrease) / Increase in Cash - $MM
CONSOL Energy Overview
Source: Company filings.
(1) Net investment is defined as total capital expenditures less proceeds from asset sales.
(2) Includes restricted cash.
(3) Accelerated the declaration and payment of the dividend that shareholders normally would have received in February 2013.
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2013 Capital Budget
CONSOL Energy Overview
Expect annual coal investments to approach maintenance-of-production
levels following BMX completion
Assumes no carry from Noble for drilling in Marcellus, which is
dependent on natural gas prices being at or above $4.00 per MMBtu for
three consecutive months
2013 Net Investment Details ($ MM)
Low High
Coal Operations $410 $520
Gas Operations(1) $835 $935
Water Operations $45 $50
Total CapEx $1,290 $1,505
Less: Asset Sales(2) ($455) ($640)
Net Investment $835 $865
(1) These figures are net of approximately $100 million in drilling carry from Hess Corporation for drilling in the Ohio Utica Shale.
(2) Includes final annual installment of $328 million from Noble Energy.
CONSOL Cost Metrics
CONSOL Energy Overview
8 Source: Company filings.
$2.0
$2.5
$3.0
$3.5
$4.0
$4.5
$5.0
$5.5
$6.0
Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012
Gas: Operating Costs per Mcfe (in US Dollars)
CBM Marcellus Shallow Oil & Gas
$42
$44
$46
$48
$50
$52
$54
$56
$58
Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012
Active Coal Division (in US Dollars)
Quarterly average costs per ton Annual average costs per ton
(per Mcfe)
(per ton)
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Why CNX Coal?
Operations Overview – Coal
CONSOL is participating in the growth of world coal markets
Low-cost mines
Dual rail service from Pittsburgh seam mines to Baltimore
100%-owned Baltimore terminal, with capacity increasing to 16
million tons
“Boots on the ground” globally, through marketing partner X-Coal
CONSOL ships to four continents
In-house R&D lab with sensor-equipped coke oven
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CONSOL Ships To Four Continents
Export Forecast For 2013: 5-10 MTs
Strength in Market Diversity
Operations Overview – Coal
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Operations Overview – Coal
Our Domestic Market Remains Solid
Source: EIA, PIRA, and CONSOL Analysis
-
5
10
15
20
25
30
Feb 12 May 12 Aug 12 Nov 12
To
ns (
MM
)
PJM Coal Inventory
Trailing 12 Months 5 Year Average
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89%
7% 3%
1%
Sales Tons by Product Year 2013
Thermal Low Vol High Vol Mid Vol
1st
Quarter
2013
Year
2013
1st
Quarter
2012
Year
2012
Thermal 11.9 50.1 13.2 49.2
Low Vol 0.9 3.9 1.0 3.7
High Vol 1.1 1.8 1.0 3.6
Mid Vol 0.1 0.5 0.0 0.0
Total 14.0 56.3 15.2 56.5
(1) Includes revenue from the sale of 0.1 million tons of coal which were recovered during the reclamation process at idled facilities for the year ended December 31, 2012.
(1)
Marketing 1Q13 and 2013 Forecasts
Operations Overview – Coal
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BMX Mine Overview
Operations Overview – Coal
BMX Mine completion: mid Q1 2014
- Lowest cost CNX mine
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Gas Operations Summary
Operations Overview – Gas
Marcellus Shale
Production has more than doubled in 2012 to ~135 MMcfe/d; 64
wells drilled and 51 wells completed in 2012
Well results better than anticipated
Well and project costs are decreasing
Noble Partner aligned and implementing best practices
Utica
Drilled 8 and completed 4 wells in 2012
Noble County: NBL 16A well completed with 16 stages and
tested 12.0MMcfd and 768 BCPD
Planning to drill 27 gross wells for 2013:
- CONSOL expects to drill 11 wells, all in Noble County
- Hess plans to drill 16 wells
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Gross Wells Drilled By Formation From 2010 Through 2013E
Formation Region 2010 2011 2012 2013E
Coalbed Methane Virginia 181 214 44 63
Total Shales: (Gross) 24 78 99 148-153
Marcellus Shales Central PA 4 19 13 5
Southwest PA (incl. NBL) 20 50 70 108-113
West Virginia 0 9 6 8
Totals 24 78 89 121-126
Utica Shale (incl. HES) 0 0 10 27
Shallow and Other 129 36 25 13
Totals (net to CONSOL) 334.0 328.0 118.5 150.0-152.5
% Shales Wells: Dry gas target 100% 100% 65% 24%
% Shales Wells: Liquids target 0% 0% 35% 76%
Total Production (Bcfe) 128 154 156 170-180
Total Capital ($MM) $420 $662 $528 $835-935
(1) These figures are net of approximately $100 million in drilling carry from Hess Corporation for drilling in the Ohio Utica Shale.
(1)
Drilling Results and Forecast - Adding Balance With Liquids Focus
Operations Overview – Gas
Marcellus Drilling and Completions Summary – CNX Operated Wells
Operations Overview – Gas
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Drilling Summary by Year
2011 2012
Wells TD'd 78 64
Lateral Ft 300,466' 328,428'
Total MD 922,264' 794,098'
Average Lateral 3,853' 5,514'
Average TMD 11,824' 13,280'
Average Drill Cost $180/ft $220/ft
Average Lateral Cost $552/ft $529/ft
Completions Summary by Year
2011 2012
Wells Completed 57 51
Lateral Ft Completed 188,800' 270,256'
Total Stages 684 940
Average Stg/Well 12 18
Average Stage Cost $205k $184k
Large Acreage Position within Marcellus
Fairway
87% of Acreage HBP Allowing for Development
Flexibility
─ 50% of 628,000 gross acres
Average NRI of ~88%
VA
OH PA
WV
MD
Dry Gas
Wet Gas
CONSOL Operated
452,000 Gross Acres
NBL Operated
176,000 Gross Acres
2012-2013 Marcellus Shale Drilling Program: 89 Wells
Operations Overview – Gas
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CONSOL Wells Drilled: Dry Gas
2012 2013E
Southwest PA 45 23
Central PA 13 5
Northern W.VA 6 8
CONSOL Marcellus Total 64 36
Noble Wells Drilled: Wet Gas
2012 2013E
W.VA 25 85-90
0
2
4
6
8
Gas NGL Condensate
$/Mcf
1,050 MMBtu
2% shrink
Dry Gas Wet Gas
$7.10
$3.60
1,130 MMBtu residue gas (includes ethane)
10% shrink
15 Bbl/MMcf condensate at 80% WTI
Price Uplift for Wet Gas: Nearly Doubles Value to Over $7 per Mcf of Wellhead Gas
Operations Overview – Gas
50 Bbl/MMcf NGLs at 55% WTI
18 Note: Calculations based on NG=$3.50/MMBtu and WTI=$90/Bbl.
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Ohio Utica Shale Acreage Update: Hess JV in the Ohio Utica Shale
Operations Overview – Gas
Core acres: ~70,000 gross acres; 35,000 net acres to CONSOL
Core acres include the following counties:
- Guernsey
- Jefferson
- Harrison
- Belmont
- Noble
- Carroll
Non-core acres: ~90,000 gross acres; 45,000 net acres to CONSOL
A Leading Position in the Ohio Utica Shale
Operations Overview – Gas
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CONSOL-Operated
County Well Lateral Length Stages Results
Tuscarawas TUSC 3A 5,020 17 400 Bbls of oil/day & 386 Mcfd gas
TUSC 8A 7,568 24 Expected Completion: Q1 2013
Noble NBL 1A 4,394 14 10 BCPD & 9 MMcfd
NBL 16A 4,793 16 768 BCPD & 12 MMcfd
Portage PORT 2A 4,690 16 Completed but waiting on results
Mahoning MAH 2A 2,785 9
MAH 7A 5,411 -- Expected Completion: Q2 2013
MAH 7C 5,290 -- Expected Completion: Q2 2013
Hess-Operated
County Well Lateral Length Stages Results
Harrison 1H-24 -- -- 1,056 BCPD & 13.9 MMcfd
1H-23 -- -- --
1H-6 -- -- --
Utica 2013: 27 gross wells planned
─ CONSOL plans to drill 11 wells, all in Noble County
─ Hess plans to drill 16 joint horizontal wells
Note: Results as of December 31, 2012.
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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 – and highly trained personnel −
provide more consistent operational execution
Our emphasis on safety and compliance increases reliability
Monetizing assets to drive shareholder value
Executive management transition complete
Balance sheet remains strong with $2.4 billion of liquidity
Appendix
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Asset Rich: Bringing $4.29 Billion in Value Forward Since 2010
Appendix: Key Highlights
In 2011, CONSOL sold the following assets for $3.94 billion(1)
- Marcellus assets to Noble Energy
- Utica assets to Hess Corporation
- Royalty interest to Antero
In 2012, we sold non-core, non-revenue producing assets for $350 million
- Assets sold include: coal reserves and/or resources from Central Appalachia, the Powder River
Basin, and western Canada
In 2013, we are looking to:
- Continue selling non-core, non-revenue producing assets
- We have also begun a process to monetize some assets, such as Midstream, that we are
currently operating but that supplement our core businesses
- Our goal, when evaluating assets sales, is to enter into transactions that can narrow the gap
between our share price and the value of all of our assets
(1) Marcellus assets to Noble and Utica assets to Hess both include expected aggregate payments of cash and carry; Utica assets to Hess are based on recent adjustments with
respect to record title issues on 36,000 acres: $593 million less $146 million (the allocated transaction value) equals $447 million.
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The New Team
Appendix: Management Transition Complete
Bill Lyons and Bob Pusateri: Dedicated leaders that have successfully navigated the company
through tumultuous times
- Bill has been steadfast in maintaining our financial discipline through the cycles
- Bob has expanded our global sales footprint in recent years
Jerry Richey has also been a key member of CONSOL’s senior management team
- Jerry served as a trusted advisor , assembled a first rate legal team, and brought a sharper
focus on ethics to the company
From a financial, market, and legal perspective, CONSOL continues to be in very good shape
David Khani will be assuming the role as Chief Financial Officer
- CONSOL will benefit from his vast industry expertise
- David is committed to increasing shareholder value
Jim Grech is the Chief Commercial Officer
- Jim is strengthening our internal view on global markets
- Looking for innovative ways to partner with customers
Steve Johnson is the Chief Legal Officer
- Steve has performed in an exemplary manner for us at both CNX Gas and CONSOL
- Steve has a proven track record of success as a key player in numerous major transactions
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CONSOL Energy and CNX Gas currently maintain strong leverage ratios
Both facilities are well within debt covenants
Limit
December 31,
2012
CONSOL Energy Revolver:
Maximum Leverage Ratio > 4.75 to 1.0 2.50 to 1.0
Minimum Interest Coverage Ratio < 2.50 to 1.0 5.31 to 1.0
Senior Secured Leverage Ratio > 2.00 to 1.0 0.08 to 1.0
CNX Gas Revolver:
Maximum Leverage Ratio > 3.50 to 1.0 0.54 to 1.0
Minimum Interest Coverage Ratio < 3.00 to 1.0 46.98 to 1.0
Revolving Credit Facilities Debt Covenants
Appendix
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Cash on hand of $22 million
Accounts receivable securitization and revolving credit facilities of
over $2.3 billion
Amount/ Amount Letters Amount
December 31, 2012 ($MM) Capacity Drawn of Credit Available
Cash and Cash Equivalents $22 $0 $0 $22
Accounts Receivable Securitization $200 $38 $162 $0
Revolving Credit Facilities $2,500 $0 $170 $2,330
TOTAL $2,722 $38 $333 $2,351
Strong Liquidity Position of $2.4 Billion
CONSOL Energy Overview
Note: “Letters of Credit” and “Amount Available” do not sum due to rounding.
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2011 Marcellus Shale JV with Noble Energy: $3.3 billion
in expected aggregate payments of cash and carry
2011 Antero Resources ORRI sale: $193 million in cash
2011 Utica Shale JV with Hess Corporation: $447(1)
million in expected aggregate payments of cash and
carry
2012 misc. asset sales: $54 million in cash
2012 sale of Youngs Creek reserves/resources: $170
million in cash, plus 8% royalty
2012 sale of coal assets in Alberta, Canada: $127 million
for two separate transactions
Asset Sales
Appendix
(1) Based on recent adjustments with respect to record title issues on 36,000 acres: $593 million less $146 million (the allocated transaction value) equals $447 million.
