CONSOL Energy Advances E&P Growth Strategy October 28, 2013
CONSOL Energy Advances E&P Growth Strategy
October 28, 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 include risks, contingencies and uncertainties that related to, among
other matters, the following with respect to the proposed transaction: The ability to obtain regulatory approvals for the
transaction on the proposed terms and schedule; disruption to our business, including customer, employee and supplier
relationships resulting from this transaction; risks that conditions to closing may not be satisfied; and the impact of the
transaction on our future operating results, our capital investment program, and our dividend. Additional factors 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 quarterly reports on 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.
This presentation does not constitute an offer to sell or a solicitation of offers to buy securities of CONSOL Energy Inc.
3
Strategy: Evolution Continues
-
$20
$40
$60
$80
$100
$120
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
CONSOL Energy Equity (Adjusted Closing Price - NYSE)
4
CONSOL Energy’s Evolution The Past 15 Years
CNX has actively managed to high-grade the asset base
CNX Gas
listed on
NYSE January 2006
$4.0B
Marcellus &
Utica acreage
joint ventures September 2011
CONSOL Energy
IPO April 1999
DuPont/Conoco sell
CONSOL to RWE 1995-1998
$1.0B
CNX Gas
minority interest
buyback June 2010
$0.2B
Antero royalty
sale September 2011
$0.3B
AMVEST
acquisition August 2007
CNX Gas
private
placement August 2005
RWE fully divests
CNX investment 2004
CNX authorized
$0.5B share
repurchase September 2009
$3.5B
Acquisition of
Dominion
Resources April 2010
$0.4B
Monetize non-
core coal
reserves 2012
CONSOL
implements
Absolute ZERO March 2007
$3.5B
CONSOL
Energy announces
sale of five mines October 2013
5
Strategy: Evolution Continues
Grow natural gas production
─ 30% annual production increase through 2016
─ Develop our liquids profile within our footprint
─ High-grade our acreage position
Aggressively manage coal margins and maintenance capital with retained mines
─ BMX mine comes online at the end of 1Q14
No transformational acquisitions
─ CONSOL is focusing on our organic growth
Constantly close the value gap
─ Continue to examine opportunities to high-grade our portfolio of assets
─ Includes non-core and infrastructure assets
6
Transaction Overview
7
Transaction Summary
Divesting: 5 West Virginia longwall thermal coal mines, select reserves, and river division
─ Total coal reserves of 1.1 billion tons, and production of approximately 30 million tons
─ Mines have multi-year contracts, long-lived reserves, and low capital requirements
CONSOL receives $3.5 billion in value
─ Cash of $850 million
─ Future payments with an NPV of $184 million
─ Retention of royalty on select reserves, certain water treatment payments, and tolling
fees at CONSOL’s Baltimore Terminal
Buyer acquires $2.4 billion in balance sheet liabilities
─ Includes $2.1 billion in other postretirement benefit plans (OPEB)
CONSOL currently contributes $5.50 per hour, or about $33 million per year
─ If this payment stream were to be capitalized, it would have a present value of
approximately $941 million, assuming a discount rate of 4.02%
8
CONSOL’s Follow-Up Actions
CONSOL Will Reduce the Impact To Our Cash Outflows Several Ways:
In a separate action following the sale, CONSOL will be reducing its administrative
expenses by approximately $65 million per year
─ Composition of cuts to be determined before year-end
Tax efficient transaction with an expected cash tax benefit
Realign its dividend payments by $58 million per year
─ Regular quarterly dividend reduced by 50%, to $0.0625 per share
9
The Process: Started Early This Year
CONSOL conducted a robust process
─ Using Stifel (lead banker) and BofA Merrill Lynch, we contacted 28 potential bidders
─ Legal representation included Greenberg Traurig LLP, Wachtell, Lipton, Rosen & Katz,
Steptoe & Johnson PLLC, and Buchanan Ingersoll & Rooney PC
We received several bids by the final deadline
─ The bids were very different
Murray Energy emerged as the best candidate
─ Private firm with extensive experience with longwall operations
─ Firm financing received at signing
Expect to close by year end
10
Retained Assets
Oil and Gas operations intact
Total coal reserves of 3.1 billion tons
─ Our lower sulfur and lower cost assets
Infrastructure Assets: Baltimore Terminal, midstream, and prep plants
12/31/2012 Approximate
Reserves 2014 Production 2012 Sales Revenues
Mine (in million tons) Mine Type (in million tons) ($ in millions) Logistics % Sulfur
Northern Appalachian
Bailey 395 2 Longwall 10.0 $650 Rail 2.0 - 2.5%
Enlow Fork 260 2 Longwall 10.0 $640 Rail 2.0 - 2.5%
BMX 180 1 Longwall 4.0 N/A Rail 2.0 - 2.5%
WAE 180 CM 0.1 $17 Rail 1.0%
Central Appalachian
Buchanan 98 1 Longwall 5.0 $503 Rail 0.6 - 0.8%
Amonate 21 HWM, CM - $3 Rail 0.8%
Fola 73 Surface, HWM, CM, Drag - $113 Rail, Truck 1.2%
Miller Creek 22 Surface, HWM, CM, Drag 2.0 $205 Rail, Truck 0.9 - 1.0%
Other 1,871
Total 3,100 31.1
11
Valuation
12
Value Proposition – Sale of Five West Virginia Mines
Note: BMX estimate is normalized for full year based on 2014 estimates.
Blacksville normalized for 2013 mine fire outage.
EBITDA Reconciliation % of Total Production Tons (in millions)
Bailey Complex / Buchanan (6 Longwalls) 72% 32
WV Mines (6 Longwalls) 28% 30
Total 100% 62
EBITDA Reconciliation EBITDA Multiple
Analysts' Avg. Coal Multiple 7.0x
Bailey Complex / Buchanan Multiple High: 8.5x Low: 7.5x
Implied WV Mines Multiple 3.1x 5.7x
-
50
100
150
200
250
300
Mine 1 Mine 2 Mine 3 Mine 4 Other Mines Mine 1 Mine 2 Mine 3 Mine 4 Mine 5
$ in
millio
ns
Estimated Coal Ops EBITDA
Retained Mines Divested Mines
13
Value Proposition – Sale of Five West Virginia Mines Selected Public Companies Analysis
Source: Stifel.
(1) Reflects $850 million of cash consideration plus seller estimated PV from the retention of a royalty on select reserves.
($ in millions, except per share data)
Equity (EV + LL)/
Price as of Market Enterprise Legacy (EBITDA + Servicing Cost)
Company (Ticker) 10/22/2013 Value Value Liabilites EV + LL 2013E 2014E 2015E
Teck Resources Limited (TCK) $28.04 $16,158 $20,983 $1,831 $22,814 7.4x 6.9x 6.2x
CONSOL Energy Inc. (CNX) 38.37 8,776 12,046 5,325 17,371 12.4x 9.6x 8.3x
Peabody Energy Corporation (BTU) 19.09 5,151 10,653 1,789 12,442 10.6x 8.4x 7.1x
Cliffs Natural Resources Inc. (CLF) 24.11 3,692 8,636 488 9,124 6.7x 8.2x 7.6x
Alpha Natural Resources, Inc. (ANR) 6.06 1,339 4,211 2,762 6,973 16.2x 12.7x 9.0x
Arch Coal, Inc. (ACI) 4.00 849 4,884 590 5,474 11.1x 9.5x 7.2x
Walter Energy, Inc. (WLT) 15.11 946 3,381 1,334 4,715 22.1x 10.8x 8.7x
1st Quartile 9.0x 8.3x 7.1x
Mean 12.4x 9.4x 7.7x
Median 11.1x 9.5x 7.6x
3rd Quartile 14.3x 10.2x 8.5x
Transaction $1,000 $3,395 $4,395 10.6x 10.2x 10.4x(1)
14
Value Proposition – Sale of Five West Virginia Mines
Source: CONSOL analysis.
Note: CONSOL valuation capitalizes $34 million associated with certain water treatment payments and tolling fees at Baltimore Terminal.
Transaction Valuation Summary ($ in millions )
Capitalized Method
(excl. 1974 Pension Plan)
Capitalized Method
(incl. 1974 Pension Plan)
Cash 850 850
Future Payments:
Retention of a Royalty on Select Reserves 150 150
Certain Water Treatment Payments + Tolling Fees at Baltimore Terminal 34 34
Value of Future Payments 184 184
Liabilities Acquired:
OPEB 2,106 2,106
UMWA 1974 Pension - 941
WC / CWP / LTD / Environmental:
CWP 61 61
Workers' Compensation 105 105
Long Term Disability 13 13
Environmental 149 149
WC / CWP / LTD / Environmental 329 329
Value of Liabilities Acquired: 2,434 3,376
Total Value Received 3,469 4,410
EBITDA:
Related to Assets Delivered (Direct) 475 475
Servicing Cost Related to the 1974 Pension Plan (33) -
Related to Liabilities Delivered (Reflected above in acquired liabilities) - -
Related to Administrative Expense Reduction (65) (65)
Net EBITDA associated with transaction: 377 410
Total Value Received / Net EBITDA Reduction 9.2x 10.7x
15
Strategy Going Forward
16
Financial Focus to Fund Gas Production Growth
Transaction generates $850 million in cash
─ Cash is expected to fund natural gas production growth
─ Expected to generate a cash tax benefit
Transaction reduces coal MOP capex to $100 - $110 million per year, going forward
─ Retained coal mines, as a group, are the most profitable
Realignment of dividend will also provide an additional $58 million per year in funding
─ Regular quarterly dividend reduced by 50%, to $0.0625 per share
In a separate action following the sale, CONSOL will be reducing its administrative
expenses by approximately $65 million per year
After the BMX Mine is completed in April 2014, nearly all of CONSOL
Energy’s production growth will occur in natural gas
44.5 48.6 48.4 56.1 58.2
76.6 94.4
127.9
153.5 156.3 170.0 - 172.0
210.0 - 225.0
+30%
+30%
-
100
200
300
400
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013E 2014E 2015E 2016E
Bcf
e
Natural Gas Production
CONSOL is rapidly growing its natural gas production
─ Total 2013 natural gas production guidance: 170 – 172 Bcfe
─ Total 2014 natural gas production guidance: 210 – 225 Bcfe (23 – 32% growth)
─ Total 2015 and 2016 natural gas production guidance: 30% per year
Gas Division Production Results and Forecast
17
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)
VA
OH PA
WV
MD
Dry Gas
Wet Gas
CONSOL Operated
430,000 Gross Acres
NBL Operated
170,000 Gross Acres
18
CONSOL Wells Drilled: Dry Gas 2012 2013E
Southwest PA 45 27
Central PA 13 10
Northern W.VA 6 11
CONSOL Marcellus Total 64 48
Noble Wells Drilled: Wet Gas 2012 2013E
W.VA 25 75
2013 Marcellus Shale Drilling Program: 123 wells
Large Acreage Position within Marcellus
Fairway
87% of Acreage HBP Allowing for Development
Flexibility
─ 50% of approximately 600,000 gross acres
Average NRI of ~88%
Continue to look for bolt-on acreage
opportunities
Marcellus Shale Acreage Tract: Pittsburgh Airport
Approximately 8,700 contiguous acres: 6 pads with up to 49 Marcellus and a
potentially similar number of Upper Devonian Wells to be drilled.
Expect first well spud before February 2015 19
5 Underlying Marcellus Wells on Pad
Upper Devonian Exploration Well – NV39F
20
CONSOL
Nineveh Core Area
VA
OH PA
WV
MD
Dry Gas
Wet Gas
Washington County, PA
─ Drilled lateral length of 4,889’
─ Frac’d 17 stages in Burkett Shale
─ Tested 3.0 MMcfd, TIL 6/21/13
─ Currently producing 2.7 MMcfd
─ Great impact on underlying Marcellus wells
that tested 10.0 MMcfd and 9.0 MMcfd
─ Planning Rhinestreet Shale Tests
30,000 Core
Acres, net to
CONSOL
21
Utica Shale Acreage
Hess operates in a four
county area of
Jefferson, Harrison,
Belmont, and Guernsey
CONSOL operates in
surrounding areas
22
Retained Mines Sell Coal to 19 Countries
Participating in the Growth of World Coal Markets
23
Participating in the Growth of World Coal Markets
Low-cost mines
Dual-rail service from Pittsburgh #8 seam mines to Baltimore
100%-owned Baltimore terminal, with capacity of 16 million tons
“Boots-on-the-ground” globally, through marketing partner
In-house R&D lab with sensor-equipped coke oven
Shipping coal to customers in 19 countries
Remaining coal has optionality
- 100% export capable
- Lowest sulfur mines in portfolio
- Nearly 100% met quality
24
Capacity of 16 Million Tons
Also Retaining 100%-owned Baltimore Terminal
25
Implementing Strategic Vision Towards Growth
CONSOL is participating in the growth of world
thermal coal markets
─ Retaining Pennsylvania Operations(1), which
contain:
─ Bailey Mine: 10 million tons of production
capacity
─ Enlow Fork Mine: 10 million tons of
production capacity
─ Soon-to-be-completed BMX Mine: 5 million
tons of production capacity
─ Retaining Miscellaneous:
2 million tons of production capacity
Investing to Reduce Costs
Note: All tonnage figures are approximate.
(1) All Pennsylvania Operations coal is high-vol/thermal.
25 million tons of production capacity of High-
Btu thermal/high-vol coal
26
Implementing Strategic Vision Towards Growth
CONSOL is participating in the growth of world
met markets
─ Retaining premium low-vol Buchanan Mine: 5
million tons of production capacity
─ Retaining Western Allegheny joint venture:
ramping to 1 million tons of production
capacity
─ Retaining (idled) Amonate Mine: 300,000 tons
of production capacity
Investing to Reduce Costs
27
Post-Transaction and Next Steps
28
Post-Transaction: Capitalization Table
Capitalization ($ in millions) Pre-Transaction Pro Forma Difference
Long-Term Debt
8.00% senior notes due 2017 1,500 1,500 -
8.25% senior notes due 2020 1,250 1,250 -
6.375% senior notes due 2021 250 250 -
Baltimore bonds due 2025 103 103 -
Advance royalty commitments 20 20 -
Capital lease obligations 48 48 -
Other long-term notes 8 8 -
Total Long-Term Debt 3,179 3,179 -
Long-Term Liabilities:
OPEB 2,998 892 (2,106)
CWP 185 124 (61)
Workers' Compensation 180 75 (105)
Long Term Disability 39 26 (13)
Environmental (Mine closing & perpetual care) 491 342 (149)
Salary Retirement 90 90 -
Reclamation 57 57 -
Gas Well Closing 222 222 -
Total Long Term Liabilities 4,262 1,828 (2,434)
Total Long-Term Debt & Liabilities 7,441 5,007 (2,434)
3.1%
2.6%
1.8%
1.3% 1.2% 1.2%0.9% 0.8% 0.7% 0.7%
0.4% 0.3% 0.2% 0.1% 0.1%
-
1%
2%
3%
4%
ACI CLF BTU CNX CHK HES APA NBL APC CNXPro
Forma
EOG WLT RRC COG EQT AR ANR CLD JRCC PCX WLB KWK PETD SWN UPL
CNX Dividend Yield Peer Comparison (Current & Pro Forma)Dividend yields as of October 18, 2013
29
Post-Transaction: Dividend Policy
Reducing dividend by 50% for an annual rate of $0.25 / share
─ High IRR in organic investment prospects
─ Consistent with growth strategy
─ Closer alignment with E&P peers
Reducing dividend by 50%, which is consistent with the growth strategy, and
brings CNX closer to its core E&P peer group
CNX Core
E&P Peer
Group
Pro Forma assumes no price appreciation post-transaction
CNX Dividend Sensitivity
Dividend / Share
Share Price $0.50 $0.25
$30 1.7% 0.8%
$35 1.4% 0.7%
$40 1.3% 0.6%
$45 1.1% 0.6%
$50 1.0% 0.5%
30
What’s Next?
Continued non-core asset sales
Continue to evaluate monetizing some remaining infrastructure assets
Announce 2014 capital budget in early 2014
Year-end gas reserve report in early 2014
Continued shale investment to meet production growth targets
─ Marcellus development – expanding our liquids exposure
─ Utica exploitation converted to a development plan
─ Upper Devonian exploration
Continued bolt-on acreage acquisition within our existing gas footprint
31
Implementing Our Strategic Vision
Transaction in line with our strategic goals to close the value gap
Committed to multi-year production growth
─ Marcellus Shale
─ Utica Shale
Retained coal assets generate high margins and can be sold throughout world coal markets
Management is focused on closing the value gap
Between the Coal Division, potential asset sales, and carry from our joint venture partners
(Noble/Hess), we have several funding sources to help execute our multi-year 30% Gas Division
production growth