2011 Nov - CNX Resources Corporationinvestors.cnx.com/~/media/Files/C/Consol-Energy-IR/... ·...
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11/5/2011 1 CONSOL Energy Inc. – November 2011 Investor Presentation 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, 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 unless required by the securities laws, 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.
Transcript of 2011 Nov - CNX Resources Corporationinvestors.cnx.com/~/media/Files/C/Consol-Energy-IR/... ·...
11/5/2011
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CONSOL Energy Inc. – November 2011 Investor Presentation
Cautionary Language
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This presentation contains statements, estimates and projections which are forward-looking statements (as defined inSection 21E of the Securities Exchange Act of 1934, as amended). Such statements include estimates of reserves andresources, 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 causeactual results to differ materially from those statements, estimates and projections. Accordingly, investors should not placeundue reliance on forward-looking statements as a prediction of future actual results. Factors that could cause future actualresults to differ from the forward-looking statements are described in detail under the captions "Forward LookingStatements" 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 updatethe statements unless required by the securities laws, 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 andgas reserves that a company anticipates as of a given date to be economically and legally producible and deliverable byapplication 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 fromincluding in filings with the SEC. These measures are by their nature more speculative than estimates of reserves preparedin accordance with SEC definitions and guidelines and accordingly are less certain. We also note that the SEC strictlyprohibits us from aggregating proved, probable and possible reserves in filings with the SEC due to the different levels ofcertainty 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 rightswe hold, as well as a summary review of the title to the coal from which many of our coalbed methane rights derive. As iscustomary in the gas industry, prior to the commencement of gas drilling operations on our properties, we conduct athorough title examination and perform curative work with respect to significant defects. We are typically responsible forcuring any title defects at our expense. This curative work may include the acquisition of additional property rights in orderto 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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CONSOL Energy Inc – Corporate Profile
n Headquartered in Pittsburgh, Pennsylvania
n Founded in 1860
n Approximately 8,600 Employees
n Current Market Capitalization of $9.3 Billion
n 2010 Revenue of $5.2 Billion
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The leading diversified fuel producer in the Eastern United States
n Over 4.4 billion tons of proven and probable coal reserves
n 2011 estimated coal exports of approximately 10.0-10.5 million tons
n Q4 2011 Production Guidance of 14.7 – 15.3 million tons
n Over 3.7 Tcfe of proved reserves
n Approx. 737,000 acres the Marcellus Shale
n Approx. 200,000 acres prospective for the Ohio Utica / Point Pleasant
n Q4 2011 Production Guidance of 36 – 38 billion cubic feet
Coal Natural Gas
CNX Land Resources,
Inc.
Research & Development
CONSOL Energy - Overview
River & Dock Services
Fairmont Supply
Company
CNX MarineTerminals,
Inc.
CONSOL Energy Inc.
Manages land assets of the Company
R&D facility devoted exclusively to coal and energy utilization and production
Distributor of mining, 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
Other
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Strength in Product Diversity
n COAL
n Low-Vol Coal
n High-Vol Coal
n PCI Coal
n Thermal Coal
n GAS
n Marcellus Shale
n Utica Shale
n CoalbedMethane
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• Growing Production• Amonate - 400,000 tons in 2012 ramping to
800,000 per year in 2015• BMX - 5 million tons annually beginning in 2014
• Growing Exports• 2010 Exports of 6.8 million tons• 2011 Exports expected to be 10 – 10.5 million tons•Expanding Baltimore Port in 2012
• Growing Margins• Fully Participating in record Low-Vol Pricing• Rebranding Thermal coal as Met Coal• Exporting Thermal Coal to Europe• Re-pricing domestic coal in 2012
• Coal Capital Expenditures of $615 Million
Coal Division’s Growth Strategy
Reserves by Coal Type (million tons) 2010 Coal Revenue by Coal Type ($ mm)
Low Vol1463%
High Vol41610%
Thermal3,83987%
4,401 Million Tons
Low Vol68018%
High Vol1724%
Thermal3,00178%
$3,853 Million
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Strength in Market Diversity
Coal Cash Generation by Coal Type ($ mm)
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178 135227 259
183 16635
2714
1846
5829199
92142
114
144203
214
050
100150200250300350400450500
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11
Thermal High Vol Low Vol 7
2011 Est. Coal Exports by Geography (million tons)
Expanding our Exports to 10-10.5 million tons in 2011
2010 Coal Exports by Geography (million tons)
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Asia3.0
44%
Europe2.2
32%
S. America1.6
24%
6.8 Million Tons
Asia50%
Europe30%
S. America20%
10 – 10.5 Million Tons
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CONSOL’s Industry-Leading Coal Margins
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Quarter Ended September 30, 2011Low-Vol
MetHigh-Vol
Met Thermal
Total Coal Sales (millions of tons) 1.5 1.0 12.4
Average Realized Price Per Ton –Company Produced $208.51 $83.76 $59.97
Total Cost Per Ton, before DD&A $65.97 $54.93 $46.60
DD&A Per Ton $6.73 $7.15 $6.19
Total Cost Per Ton – Company Produced $72.70 $62.08 $52.79
Average Margin Per Ton, before DD&A $142.54 $28.83 $13.37
Sales (millions of tons) times Average Margin Per Ton, before DD&A ($ MM) $214 $29 $166
Gas Division’s Growth Strategy
Total Proved Reserves by Gas Type (Bcfe) Proved Reserves by Category (Bcfe)
CBM1,78948%
Marcellus85923%
Other Shale1003%
Conventional98426%
3.7 Trillion Cubic Feet
PD1,93152%
PUD1,80048%
3.7 Trillion Cubic Feet
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• Development Program• Marcellus Drilling - $335 Million
• Exploration Drilling Program•Utica Shale - $35 Million
•Maintenance of Production• CBM - $60 Million• Chattanooga Shale - $25 Million• Conventional - $0
• Midstream Build-Out of $200 Million
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Notable Achievements in Shale Formations
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üSecond to produce from a horizontal well in the Marcellus Shale (October 2008).
üFirst to announce a discovery in the Utica Shale (October 2010).
üFirst to use rotary steering tools in the Marcellus Shale
üFirst to use fully-lined sites
üFirst to use closed loop drilling
üFirst to use check valve plugs, incase of wellhead leaks
üPossibly the first to use 24-hour employee coverage on all drilling and frac operations…
…. First to drill a 10-Well Pad in the Marcellus Shale
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Gas Division’s Growth Strategy − CONSOL Announces JVs/SalesWorth $4.1 billion
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•Partnering with Noble Energy in the Marcellus Shale, for $3.3 billion
•Partnering with Hess Corporation in the Utica Shale in Ohio, for $0.6 billion
•Sold ORRI in 115,000 acres in the Marcellus Shale to Antero for $0.2 billion
•Continuing to grow production (net to CONSOL) to 350 Bcf in 2015
CONSOL Energy & Noble Energy JV
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CNX to sell an interest in Marcellus Shale asset to Noble Energy
§ Total deal valuation of $3.3 billion
§ CNX selling 50% interest in Marcellus Shale position (628,000 acres in PA & WV)
for $3.10 billion ($9,650 / net acre)§ Cash: $1.0 Billion paid in 3 annual installments beginning at closing§ Carry: $2.02 Billion covering 33% of CNX’s share of drilling and completion costs
§ Annual cap of $400 million
§ Carry is suspended if gas prices are less than $4.00 / MMBtu for 3 consecutive months
§ Carry resumes when gas prices are above $4.00 / MMBtu for 3 consecutive months
§ CNX Sold 50% interest in existing Marcellus proved developed producing (PDP)
reserves for $160 million§ $1.80 / mcf for 89 BCF of PDP Reserves
§ CNX Sold an interest in the associated gathering systems for $73 million
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CONSOL Energy & Noble Energy JV
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Transaction Rationale
§ Marks to market entire Marcellus position at $9,650 / acre
§ Validates legacy CNX Gas and Dominion asset base
§ Partners with a highly respected, world class E&P partner
§ Shared values and cultural alignment
§ Shared belief in developing acreage to maximize long term value
§ Accelerates monetization of asset base and economic returns
§ Significant increase in rig fleet and drilling activity
§ Creates significant free cash flow
CONSOL Energy & Noble Energy JV
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Marcellus Shale JV Acreage
§ CNX/NBL Operating Areas
§ CONSOL – Dry Gas Areas
§ ~ 570K acres
§ ~ 3,700 horizontal locations
§ Noble Energy – Wet Gas Areas
§ ~ 95K acres
§ ~ 630 horizontal locations
§ High net revenue interest (88%)
§ Over 85% of acres held-by production
§ 859 Bcf of total Marcellus proved reserves
§ (PDPs & PUDs)
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CONSOL Energy & Noble Energy JV
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Development Plan
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8
12
1516
-
4
8
12
16
20
2011 2012 2013 2014 2015
Rig Schedule
35
140
227
318354
-
100
200
300
400
2011 2012 2013 2014 2015
Gross Wells Drilled
549
482
544
243270
-
100
200
300
400
500
600
2011 2012 2013 2014 2015
Net Proceeds ($MM)Includes cash and carry
§ Rig schedule ramps up to 16 by 2015
§ Accelerated development of acreage
§ Substantial cash generation throughout plan
CONSOL Energy & Hess Corporation JV
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Utica Shale JV Acreage
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Barnesville #1 Statistics
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• Encountered the Utica Shale at a depth of 8,450 feet
• Utica Shale was 200 feet thick
• Well was unstimulated, but open flowed at 1.5 MMcf over a 24-hour period
Our Investment Thesis
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• Aggregate proceeds from Marcellus Shale JV: $3.3 billion
• Aggregate proceeds from Utica Shale JV: $0.6 billion
• Cash from sale of ORRI to Antero: $0.2 billion
• Gross-up on a 100%-basis: $8.0 billion
• Plus, value of flowing gas: $3.9 billion (325 MMcf per day x $12,000 per Mcf)
• Result: An investor is getting our valuable coal business for free.
$4.1 billion
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CONSOL Energy Inc. – Thank You.
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