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Howard Weil 40th Annual Energy Conference March 27, 2012 J. Brett Harvey, Chairman and CEO, CONSOL Energy Inc.
Transcript

Howard Weil 40th Annual Energy Conference

March 27, 2012

J. Brett Harvey, Chairman and CEO, CONSOL Energy Inc.

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,

2011 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.

CONSOL Energy Inc – Corporate Profile

3

Ticker: CNX

Headquartered in

Pittsburgh, Pennsylvania

Founded in 1860

9,164 Employees

Market Cap = $8.5 Billion

EV = $11.4 Billion

2011 Revenue = $6.1 Billion

The leading diversified fuel producer in the Eastern United States

.

4.5 billion tons of proven and probable coal

reserves

High-Btu thermal coal

High-vol coking coal

Premium low-vol coking coal

2012 coal production will be managed to match

market demand

3.5 Tcfe of (net) proved reserves

361,000 net Marcellus Shale acres

100,000 net Utica Shale acres in Ohio

1Q12 net production guidance of 36 - 38 Bcf

About 50% of 2012 shale wells target liquids

Coal and Gas: Rich Asset Base With Some Vertical Integration

4

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

of the Company

CONSOL Energy Inc

Coal Natural Gas

Other

Midstream CNX Land Resources

Inc.

Research &

Development

Fairmont Supply

Company

River & Dock

Services

CNX Marine Terminals

Inc.

5

Investment Thesis and Scorecard

Tier-One Coal and E&P Assets Provide Synergies and Risk Reduction

Low cost, high-BTU coal that can travel and transform target markets.

Low cost gas assets close to market, with liquids potential in 2012.

Long-Lived Assets Enable Strategic Value Enhancements

New JV’s create strategic partnerships and accelerate asset exploration and delineation.

Solid Balance Sheet and Liquidity To Capitalize on Our Organic Projects

Repaid $500 million of debt and raised the dividend by 25% in 2011. Ended 2011 with $2.7 billion in liquidity.

Consistent Operating and Financial Results

Record 2011 earnings and cash flow, 528% production replacement at $0.47 per Mcf.

Updated 2012 Guidance Recently

Already includes 1 MTs of lower sales, lowered met coal price guidance, and exports within 9-11 MTs

CONSOL continues to respond to challenging market conditions

Idled Blacksville and Buchanan longwall operations.

Reduced $180 million in original 2012 capital budget.

Reduced Marcellus shale well count to 99 wells, down from 122 on Jan. 2012 & 140 on Aug. 2011.

6

Capital Spending $MM

Division Spending Category 2011A 2012E

Coal Maintenance of Production + Safety $261 $327

Growth (Efficiency & New Projects) $297 $349

Total Coal $558 $676

Gas CBM & Other $232 $ 97

Growth (Marcellus and Utica Exploration) $430 $526

Total Gas $662 $623

Other Mandatory (Water, Transportation, Other) $ 89 $190

Discretionary $ 73 $ 55

Total Other $162 $245

Totals Maintenance/Mandatory $582 $614

Growth/Discretionary $800 $930

Total Capital $1,382 $1,544

CONSOL Energy – Capital Spending & Flexibility

Strategy Relies On Cultivating Our Tier One Long-Lived Assets Consistent operations driven by reinvesting in core business

Organic growth projects on both coal and gas projects

7

E&P Division Goals: Migrating Capital and Activity to High Value Areas

Program Goals to Drive CBM and Marcellus Costs Lower

Marcellus program through multi-well pads and lengthening laterals

Reported 4Q11 fully loaded Marcellus costs of $2.74 per Mcf

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

8

Net Wells Drilled By Formation From 2009 Through 2012E

Formation Region 2009 2010 2011 1Q12E 2012E

Total Shales 17 24 78 15.0 60.5

Marcellus Shale Central PA 0 4 19 4.5 6.5

Southwest PA 17 20 50 8.0 40

West Virginia 0 0 9 2.0 3

Totals 17 24 78 14.5 49.5

Utica Shale 0 0 0 0.5 11

Coalbed Methane Virginia 204 181 214 22.0 87

Conventional and Other 18 129 36 10.0 31

Totals 239 334 328 47.0 178.5

% Shales Wells: Dry gas target 100% 100% 100% 80% 50%

% Shales Wells: Liquids target 0% 0% 0% 20% 50%

Total Production (Bcfe) 94 128 154 36-38 160

Total Capital ($MM) 335 420 662 129 623

Drilling Results and Forecast Migrating Capital and Activity to High Value Areas

CONSOL Energy & Noble Energy JV

9

2012 Development Plan

Six rigs running as of January 2012 (2 in CPA, 3 in SW PA, 1 in WV)

99 (gross) wells to be drilled by the JV, including 39 in the liquids-rich area

Note: The net proceeds will increase above the minimums shown when gas

prices exceed $4.00 per MMBtu for three consecutive months.

Total value of the carry is $2.1 billion.

$-

$100

$200

$300

$400

$500

$600

2011 2012 2013

$356 $356 $356

$160

$73

Guaranteed Net Proceeds ($MM)

Gathering

PDPs

Annual Pymt

CONSOL Energy & Hess Corporation JV

Sold 50% of 200,000 Gross Ohio Utica

Cash: $60 Million

Carry: $554 million covering 50% of CNX’s share of drilling and completion costs.

Partnered with top tier Oil Operator with Marketing History

Structured as an Exploration Play

Raises CONSOL’s Exposure to Liquids/Oil

Targeting 22 gross wells in 2012

First well to be completed in April

10

Total Deal Consideration of $594 million or $6,000 per acre

11

Marcellus JV Position Significant scale and impact

Large Acreage Position Within

Marcellus Fairway

50% of 628,000 net acres, including:

161,000 acres in the liquids-rich window

High NRI (~88%)

87% of Acreage Held by Production

Allows flexibility in development and

lowers cost

Requires fewer permits and smaller

environmental footprint

9.9 Tcfe “3P” Reserves, net to

CONSOL

Access to Established Infrastructure

OH

PA

WV

MD

VA

Industry Recognized Sweet Spot in SW PA

Key Geologic Attributes

Systematic Development and Expansion

Adds Efficiency

Continue to Test Other Acreage for Future

Development

Hutchinson 10-Well Pad

Initial production rates 5 - 16 MMcf/d

5 wells 5 - 9 MMcf/d

5 wells 10 - 16 MMcf/d

Potentially Extends Sweet Spot Further

North

12

Pad Location

SW PA Sweet Spot

Marcellus Sweet Spot Hutchinson Pad results may extend sweet spot further north

Dry Gas

Wet Gas

13

Marcellus Drilling and Completion Cost Lateral lengths increasing while gaining efficiencies

1,000

2,000

3,000

4,000

5,000

2009 2010 2011

Lateral Length Ft.

100

150

200

250

2009 2010 2011

17% Improvement

$/Ft. Drilling Cost

100

150

200

250

300

350

2009 2010 2011

29% Improvement

Completion Cost $M/Stage

14

External source to Majorsville 350 GPM optional

-

N. Nineveh

Nineveh

Greenhill

Morris

Leatherwood

Alex Paris

Rutan

Majorsville

Columbian Chemical Ohio River to Majorsville 800 GPM

Ohio River via Shoemaker Mine 500 GPM

N. WV R.O. Project 1000 GPM

Alex Paris Booster Project 800 GPM

Sufficient for 16 Frac Stages per Day

Moving Water by Pipeline

Reduces environmental and safety risk

Smaller activity footprint

Improves efficiency of completion

operations

Lowers overall costs

Water Sourcing Plan for SW PA Supply established and infrastructure build-out underway

15

Gas Gathering System Plan for SW PA Systematic expansion to stay ahead of drilling activity

Gas Gathering System Installed or Under

Construction to Support 2012 Drilling

Pad Drilling Allows for Lower Number of

Permits, Efficiency and Reduced Costs

Early Infrastructure Development Creates

Backbone for Future Expansion

Firm Transportation and Processing

Contracts Cover Production Through mid

2014

Firm – 365 MMBtu, net

Processing – 115 MMBtu, net

OH

PA

WV

MD

VA

Dry Gas

Wet Gas

16

Over 500-Day Period, CNX Wells in SW PA Yielded 21%

More Production Than Competitor Well Average

0

1,000

2,000

3,000

4,000

0 100 200 300 400 500 600 700 800 900 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

World Coal Market Participation

Growing Coal Exports

Cash Generation from Met Products

Unique Asset Portfolio

Mines – Safe, Reliable and Low Cost

Rail – Dual Rail Service

Port Access

Research & Development

Boots on the Ground in International Markets

Coal Capital Expenditures of $676 Million for 2012

Coal Division Strategy

17

Participating in Growing World Coal Markets with a Portfolio of Assets that CAN NOT be replicated

$0

$500

$1,000

$1,500

$2,000

2009 20102011

Mill

ion $

’s

Coal Division Cash by Coal Category

Thermal

Low-Vol + High-Vol

Strength in Market Diversity Produce Locally, Distribute Globally

18

CONSOL Ships To Four Continents

Widening of The Panama Canal Should Improve Shipping Costs and

Potential Coal Margins

Marketing: 1Q12 Forecasts and 2011 Coal Statistics Produce Locally, Distribute Globally

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

19

Note: Set at the midpoint of guidance

1Q

2012

Year

2012

1Q

2011

Year

2011

Thermal 13.2 50.4 14.2 52.8

Low Vol 1.0 4.8 1.4 5.6

High Vol 1.0 5.0 1.1 4.8

Mid Vol 0.0 0.4 0.0 0.0

Total 15.2 60.6 16.7 63.2

Sales Tons by Product – 1st Quarter 2012

20

Weighted Individual Plants by: Capacity Factor, Age, Size, Heat Rate

Lowest weighted plants were assumed to be shut down first

Performed some sensitivity around scrubbed plants

CONSOL Positioned for EPA Regulations R&D Study of industry coal burn due to regulations - 90% of CONSOL Thermal Coal sold to scrubbed facilities

Baseline (2009) 309.0 GW 943.2 MM tpy Coal

Regulatory Impact - 40.0 GW - 79.9 MM tpy

- 8.3 GW - 14.4 MM tpy

New Capacity + 16.5 GW + 52.1 MM tpy

- 31.8 GW

(-10%)

Bit

Sub

Other

- 42.2 MM tpy

(-4%)

- 36.4 MM tpy

- 18.4 MM tpy

+12.6 MM tpy

Overall -7%

21

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

Balance sheet remains strong with $2.7 billion of liquidity (as of 12/31/2011)

Valuation remains compelling using sum of the parts

Marcellus liquids and Utica results (1Q12) to drive valuation improvement

Stabilization and rebound in the met coal markets

Solid Execution of our core program and coal projects to serve a rebounding market

CONSOL Energy Inc. – Questions?

22


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