CONSOL Energy Announces Results for the Second Quarter 2023
- Strong financial and operating results for Q2 2023
- Record quarterly throughput volume at CONSOL Marine Terminal
- Strategic sales shift into export and industrial markets
- Near-fully contracted position for PAMC segment in 2023 and 2024
- None.
Second Quarter 2023 Highlights Include:
- GAAP net income of
and GAAP dilutive earnings per share of$167.7 million ;$4.94 - Quarterly adjusted EBITDA1 of
;$276.0 million - Total revenue and other income of
;$661.0 million - Net cash provided by operating activities of
;$227.6 million - Quarterly free cash flow1 of
;$180.8 million - CONSOL Marine Terminal (CMT) record quarterly throughput volume of 5.4 million tons;
- Increased the revolving credit facility capacity by
with additional covenant flexibility;$95.0 million - Debt repayments of
during 2Q23, including$54.6 million to fully retire Term Loan B;$23.6 million - Repurchased 3.1 million shares of CEIX common stock at a weighted average price of
per share year-to-date through July 31, 2023;$60.83 78% of 2Q23 recurring revenues and other income1 derived from export sales and64% derived from non-power generation sales; and- Pennsylvania Mining Complex (PAMC) contracted position remains near-fully contracted in 2023 and improves to 17.6 million tons in 2024.
Management Comments
"During the second quarter of 2023, we achieved strong results on many fronts, despite multiple longwall moves," said Jimmy Brock, Chief Executive Officer of CONSOL Energy Inc. "We delivered another quarter of strong free cash flow1, which allowed us to advance multiple objectives. With this free cash flow1, we fully retired our Term Loan B, redeemed an additional
"On the safety front, our Bailey Preparation Plant, Itmann Preparation Plant and CONSOL Marine Terminal each had ZERO employee recordable incidents during the second quarter of 2023. Our year-to-date total recordable incident rate across our coal mining segment was approximately
Pennsylvania Mining Complex Review and Outlook
PAMC Sales and Marketing
CEIX sold 6.4 million tons of PAMC coal during the second quarter of 2023, generating realized coal revenue1 of
On the marketing front, coal demand for the power generation markets continued to come under pressure during the second quarter due to the carryover effect of an abnormally warm winter. The mild winter weather reduced electric power and home heating demand during the first quarter, which contributed to increased power plant coal stockpiles and natural gas inventory build, with corresponding softening in coal, natural gas, and power prices. This in turn reduced the need for restocking during the second quarter, which is traditionally a shoulder season characterized by reduced electric power demand, putting further pressure on prices. Domestically, Henry Hub natural gas spot prices and PJM West day-ahead power prices continued to decline during the second quarter, retreating
Furthermore, during 2Q23, we strengthened our forward contract book at the PAMC, opportunistically securing an additional 4.4 million tons for delivery through 2026. We are near-fully contracted for 2023 and have 17.6 million tons contracted for 2024.
Operations Summary
During the second quarter of 2023, we produced 6.3 million tons at the Pennsylvania Mining Complex, compared to 7.0 million tons in 1Q23 and 6.2 million tons in the year-ago period. The reduction compared to the first quarter of 2023 was due to multiple longwall moves during 2Q23 compared to zero moves in 1Q23.
CEIX's total revenue and other income during the second quarter of 2023 was
Three Months Ended | ||||
June 30, 2023 | June 30, 2022 | |||
Total Coal Revenue (PAMC Segment) | thousands | $ 521,176 | $ 518,976 | |
Settlements of Commodity Derivatives | thousands | — | (73,923) | |
Realized Coal Revenue1 | thousands | $ 521,176 | $ 445,053 | |
Operating and Other Costs | thousands | $ 276,596 | $ 244,217 | |
Total Cash Cost of Coal Sold1 | thousands | $ 233,523 | $ 214,151 | |
Coal Production | million tons | 6.3 | 6.2 | |
Coal Sales | million tons | 6.4 | 6.2 | |
Average Realized Coal Revenue per Ton Sold1 | per ton | $ 81.27 | $ 72.18 | |
Average Cash Cost of Coal Sold per Ton1 | per ton | 36.33 | 34.81 | |
Average Cash Margin per Ton Sold1 | per ton | $ 44.94 | $ 37.37 |
CONSOL Marine Terminal Review
For the second quarter of 2023, throughput volume at the CMT was 5.4 million tons, the highest quarterly throughput volume in its history, compared to 3.8 million tons in the year-ago period. Terminal revenues and CMT total costs and expenses were
Itmann Update
During the second quarter of 2023, with the Itmann project fully transitioned out of the development phase and into our operations group, the ramp up to full run-rate production neared completion. As of the end of 2Q23, all three continuous miner super sections have been installed underground. Long-term construction work for our 1-West Mains intersection is nearly complete, which will enable the three super sections to produce in specific blocks of the coal reserves, targeting higher average production rates and balanced coal quality across the mine. In addition to a full complement of equipment, labor markets continued to improve throughout the first half of the year, and we were able to increase staffing levels throughout the quarter. The Itmann Mining Complex produced 70 thousand tons of coal during the second quarter of 2023 and sold 126 thousand tons of Itmann and third-party coal in aggregate during the quarter. Year-to-date, the Itmann Mining Complex produced 134 thousand tons of coal and sold 234 thousand tons of Itmann and third-party coal in aggregate.
Shareholder Returns Update
During the second quarter of 2023, CEIX repurchased 1.2 million shares of its common stock for
Debt Repurchases Update
During the second quarter of 2023, we continued to progress on our goal of reducing total debt levels and made repayments of
Revolving Credit Facility Update
During the second quarter of 2023, CEIX amended its revolving credit facility to achieve additional financial flexibility by increasing the capacity of the facility and easing certain restrictive covenants, specifically around investments and shareholder returns. The majority of these covenants have been simplified to better align with the significantly improved credit profile of the business, and most covenants are now leverage and liquidity-based moving forward. CEIX was successful in securing incremental commitments in the amount of
2023 Guidance and Outlook
Based on our current contracted position, estimated prices and production plans, we are providing the following financial and operating performance guidance for full fiscal year 2023:
- 2023 targeted PAMC coal sales volume of 25.0-27.0 million tons
- PAMC average realized coal revenue per ton sold2 expectation of
$76.00 -$80.00 - PAMC average cash cost of coal sold per ton2 expectation of
$34.00 -$36.00 - Itmann Mining Complex production volume of 400-500 thousand tons
- Capital expenditures:
$160 -$185 million
Second Quarter Earnings Conference Call
A conference call and webcast, during which management will discuss the second quarter 2023 financial and operational results, is scheduled for August 8, 2023, at 10:00 AM eastern time. Prepared remarks by members of management will be followed by a question and answer session. Interested parties may listen via webcast on the "Events and Presentations" page of our website, www.consolenergy.com. An archive of the webcast will be available for 30 days after the event.
Participant dial in (toll free) 1-877-226-2859
Participant international dial in 1-412-542-4134
Availability of Additional Information
Please refer to our website, www.consolenergy.com, for additional information regarding the company. In addition, we may provide other information about the company from time to time on our website.
We also filed our Form 10-Q with the Securities and Exchange Commission (SEC) reporting our results for the period ended June 30, 2023 on August 8, 2023. Investors seeking our detailed financial statements can refer to the Form 10-Q once it has been filed with the SEC.
Footnotes:
1 "Adjusted EBITDA", "Free Cash Flow", "CONSOL Marine Terminal Adjusted EBITDA", "CMT Operating Cash Costs", "Total Realized Coal Revenue", "Recurring Revenues and Other Income" and "Total Cash Cost of Coal Sold" are non-GAAP financial measures and "Average Realized Coal Revenue per Ton Sold", "Average Cash Cost of Coal Sold per Ton" and "Average Cash Margin per Ton Sold" are operating ratios derived from non-GAAP financial measures, each of which are reconciled to the most directly comparable GAAP financial measures below, under the caption "Reconciliation of Non-GAAP Financial Measures".
2 CEIX is unable to provide a reconciliation of Average Realized Coal Revenue per Ton Sold and Average Cash Cost of Coal Sold per Ton guidance, operating ratios derived from non-GAAP financial measures, due to the unknown effect, timing and potential significance of certain income statement items.
About CONSOL Energy Inc.
CONSOL Energy Inc. (NYSE: CEIX) is a
Contacts:
Investor:
Nathan Tucker, (724) 416-8336
nathantucker@consolenergy.com
Media:
Erica Fisher, (724) 416-8292
ericafisher@consolenergy.com
Condensed Consolidated Statements of Cash Flows
The following table presents the condensed consolidated statements of cash flows for the three months ended June 30, 2023 and 2022 (in thousands):
Three Months Ended | |||
2023 | 2022 | ||
Cash Flows from Operating Activities: | (Unaudited) | (Unaudited) | |
Net Income | $ 167,723 | $ 126,291 | |
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | |||
Depreciation, Depletion and Amortization | 64,528 | 57,880 | |
Other Non-Cash Adjustments to Net Income | 2,189 | (3,697) | |
Changes in Working Capital | (6,867) | 17,877 | |
Net Cash Provided by Operating Activities | 227,573 | 198,351 | |
Cash Flows from Investing Activities: | |||
Capital Expenditures | (42,325) | (39,418) | |
Proceeds from Sales of Assets | 239 | 940 | |
Other Investing Activity | (29,069) | (154) | |
Net Cash Used in Investing Activities | (71,155) | (38,632) | |
Cash Flows from Financing Activities: | |||
Net Payments on Long-Term Debt, Including Fees | (54,596) | (115,946) | |
Repurchases of Common Stock | (65,398) | — | |
Dividends | (37,187) | — | |
Other Financing Activities | (3,410) | (122) | |
Net Cash Used in Financing Activities | (160,591) | (116,068) | |
Net (Decrease) Increase in Cash and Cash Equivalents and Restricted Cash | (4,173) | 43,651 | |
Cash and Cash Equivalents and Restricted Cash at Beginning of Period | 246,843 | 269,008 | |
Cash and Cash Equivalents and Restricted Cash at End of Period | $ 242,670 | $ 312,659 |
Reconciliation of Non-GAAP Financial Measures
We evaluate our cost of coal sold and cash cost of coal sold on an aggregate basis by segment, and our average cash cost of coal sold per ton on a per-ton basis. Cost of coal sold includes items such as direct operating costs, royalty and production taxes, direct administration costs, and depreciation, depletion and amortization costs on production assets. Cost of coal sold excludes any indirect costs and other costs not directly attributable to the production of coal. The cash cost of coal sold includes cost of coal sold less depreciation, depletion and amortization costs on production assets. We define average cash cost of coal sold per ton as cash cost of coal sold divided by tons sold. The GAAP measure most directly comparable to cost of coal sold, cash cost of coal sold and average cash cost of coal sold per ton is operating and other costs.
The following table presents a reconciliation for the PAMC segment of cash cost of coal sold, cost of coal sold and average cash cost of coal sold per ton to operating and other costs, the most directly comparable GAAP financial measure, on a historical basis, for each of the periods indicated (in thousands, except per ton information).
Three Months Ended | |||
2023 | 2022 | ||
Operating and Other Costs | $ 276,596 | $ 244,217 | |
Less: Other Costs (Non-Production and non-PAMC) | (43,073) | (30,066) | |
Cash Cost of Coal Sold | $ 233,523 | $ 214,151 | |
Add: Depreciation, Depletion and Amortization (PAMC Production) | 47,877 | 46,570 | |
Cost of Coal Sold | $ 281,400 | $ 260,721 | |
Total Tons Sold (in millions) | 6.4 | 6.2 | |
Average Cost of Coal Sold per Ton | $ 43.88 | $ 42.29 | |
Less: Depreciation, Depletion and Amortization Costs per Ton Sold | 7.55 | 7.48 | |
Average Cash Cost of Coal Sold per Ton | $ 36.33 | $ 34.81 |
We evaluate our average realized coal revenue per ton sold and average cash margin per ton sold on a per-ton basis. We define realized coal revenue as total coal revenue, net of settlements of commodity derivatives. We define average realized coal revenue per ton sold as total coal revenue, net of settlements of commodity derivatives divided by tons sold. We define average cash margin per ton sold as average realized coal revenue per ton sold, net of average cash cost of coal sold per ton. The GAAP measure most directly comparable to realized coal revenue, average realized coal revenue per ton sold and average cash margin per ton sold is total coal revenue.
The following table presents a reconciliation for the PAMC segment of realized coal revenue, average realized coal revenue per ton sold and average cash margin per ton sold to total coal revenue, the most directly comparable GAAP financial measure, on a historical basis, for each of the periods indicated (in thousands, except per ton information).
Three Months Ended | |||
2023 | 2022 | ||
Total Coal Revenue (PAMC Segment) | $ 521,176 | $ 518,976 | |
Less: Settlements of Commodity Derivatives | — | (73,923) | |
Realized Coal Revenue | $ 521,176 | $ 445,053 | |
Operating and Other Costs | 276,596 | 244,217 | |
Less: Other Costs (Non-Production and non-PAMC) | (43,073) | (30,066) | |
Cash Cost of Coal Sold | $ 233,523 | $ 214,151 | |
Total Tons Sold (in millions) | 6.4 | 6.2 | |
Average Realized Coal Revenue per Ton Sold | $ 81.27 | $ 72.18 | |
Less: Average Cash Cost of Coal Sold per Ton | 36.33 | 34.81 | |
Average Cash Margin per Ton Sold | $ 44.94 | $ 37.37 |
We define CMT operating costs as operating and other costs related to throughput tons. CMT operating costs exclude any indirect costs and other costs not directly attributable to throughput tons. CMT operating cash costs include CMT operating costs, less depreciation, depletion and amortization costs on throughput assets. The GAAP measure most directly comparable to CMT operating costs and CMT operating cash costs is operating and other costs.
The following table presents a reconciliation of CMT operating costs and CMT operating cash costs to operating and other costs, the most directly comparable GAAP financial measure, on a historical basis, for each of the periods indicated (in thousands).
Three Months Ended | |||
2023 | 2022 | ||
Operating and Other Costs | $ 276,596 | $ 244,217 | |
Less: Other Costs (Non-Throughput) | (268,507) | (237,461) | |
CMT Operating Costs | $ 8,089 | $ 6,756 | |
Less: Depreciation, Depletion and Amortization (Throughput) | (1,065) | (1,062) | |
CMT Operating Cash Costs | $ 7,024 | $ 5,694 |
We define adjusted EBITDA as (i) net income (loss) plus income taxes, interest expense and depreciation, depletion and amortization, as adjusted for (ii) certain non-cash items, such as stock-based compensation, loss on debt extinguishment and fair value adjustments of commodity derivative instruments. The GAAP measure most directly comparable to adjusted EBITDA is net income (loss).
The following tables present a reconciliation of adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure, on a historical basis, for each of the periods indicated (in thousands).
Three Months Ended June 30, 2023 | |||||||
PAMC | CONSOL | Other | Total | ||||
Net Income (Loss) | $ 218,636 | $ 21,094 | $ (72,007) | $ 167,723 | |||
Add: Income Tax Expense | — | — | 37,574 | 37,574 | |||
Add: Interest Expense | — | 1,526 | 5,629 | 7,155 | |||
Less: Interest Income | (513) | — | (3,198) | (3,711) | |||
Earnings (Loss) Before Interest & Taxes (EBIT) | 218,123 | 22,620 | (32,002) | 208,741 | |||
Add: Depreciation, Depletion & Amortization | 50,268 | 1,176 | 13,084 | 64,528 | |||
Earnings (Loss) Before Interest, Taxes and DD&A (EBITDA) | $ 268,391 | $ 23,796 | $ (18,918) | $ 273,269 | |||
Adjustments: | |||||||
Add: Stock-Based Compensation | $ 1,674 | $ 60 | $ 259 | $ 1,993 | |||
Add: Loss on Debt Extinguishment | — | — | 688 | 688 | |||
Total Pre-tax Adjustments | 1,674 | 60 | 947 | 2,681 | |||
Adjusted EBITDA | $ 270,065 | $ 23,856 | $ (17,971) | $ 275,950 | |||
Three Months Ended June 30, 2022 | |||||||
PAMC | CONSOL | Other | Total | ||||
Net Income (Loss) | $ 159,404 | $ 12,354 | $ (45,467) | $ 126,291 | |||
Add: Income Tax Expense | — | — | 23,223 | 23,223 | |||
Add: Interest Expense | 68 | 1,530 | 11,523 | 13,121 | |||
Less: Interest Income | (452) | — | (987) | (1,439) | |||
Earnings (Loss) Before Interest & Taxes (EBIT) | 159,020 | 13,884 | (11,708) | 161,196 | |||
Add: Depreciation, Depletion & Amortization | 49,465 | 1,142 | 7,273 | 57,880 | |||
Earnings (Loss) Before Interest, Taxes and DD&A (EBITDA) | $ 208,485 | $ 15,026 | $ (4,435) | $ 219,076 | |||
Adjustments: | |||||||
Add: Stock-Based Compensation | $ 1,066 | $ 51 | $ 152 | $ 1,269 | |||
Add: Loss on Debt Extinguishment | — | — | 1,565 | 1,565 | |||
Less: Fair Value Adjustment of Commodity Derivative Instruments | (5,571) | — | — | (5,571) | |||
Total Pre-tax Adjustments | (4,505) | 51 | 1,717 | (2,737) | |||
Adjusted EBITDA | $ 203,980 | $ 15,077 | $ (2,718) | $ 216,339 |
We define recurring revenues and other income as total revenue and other income, less fair value adjustments of commodity derivatives and gains/losses on sales of assets. The GAAP measure most directly comparable to recurring revenues and other income is total revenue and other income. The following table presents a reconciliation of recurring revenues and other income to total revenue and other income, the most directly comparable GAAP financial measure, on a historical basis, for each of the periods indicated (in thousands).
Three Months Ended June 30, | |||
2023 | 2022 | ||
Total Revenue and Other Income | $ 660,967 | $ 544,619 | |
Less: Fair Value Adjustments of Commodity Derivatives | — | (5,571) | |
Less: Gain on Sale of Assets | (10) | (365) | |
Total Recurring Revenues and Other Income | $ 660,957 | $ 538,683 |
Free cash flow is a non-GAAP financial measure, defined as net cash provided by operating activities plus proceeds from sales of assets less capital expenditures and investments in mining-related activities. Management believes that this measure is meaningful to investors because management reviews cash flows generated from operations and non-core asset sales after taking into consideration capital expenditures due to the fact that these expenditures are considered necessary to maintain and expand CONSOL's asset base and are expected to generate future cash flows from operations. It is important to note that free cash flow does not represent the residual cash flow available for discretionary expenditures since other non-discretionary expenditures, such as mandatory debt service requirements, are not deducted from the measure. The following table presents a reconciliation of free cash flow to net cash provided by operations, the most directly comparable GAAP financial measure, on a historical basis, for each of the periods indicated (in thousands).
Three Months Ended | Three Months Ended | ||
June 30, 2023 | June 30, 2022 | ||
Net Cash Provided by Operations | $ 227,573 | $ 198,351 | |
Capital Expenditures | (42,325) | (39,418) | |
Proceeds from Sales of Assets | 239 | 940 | |
Investments in Mining-Related Activities | (4,731) | — | |
Free Cash Flow | $ 180,756 | $ 159,873 |
Cautionary Statement Regarding Forward-Looking Statements
Certain statements in this press release are "forward-looking statements" within the meaning of the federal securities laws. With the exception of historical matters, the matters discussed in this press release are forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended) that involve risks and uncertainties that could cause actual results to differ materially from results projected in or implied by such forward-looking statements. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. When we use the words "anticipate," "believe," "could," "continue," "estimate," "expect," "intend," "may," "plan," "predict," "project," "should," "target," "will," or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe our expectations with respect to the Itmann Mine or any other strategy that involves risks or uncertainties, we are making forward-looking statements. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. Specific risks, contingencies and uncertainties are discussed in more detail in our filings with the Securities and Exchange Commission. The forward-looking statements in this press release speak only as of the date of this press release and CEIX disclaims any intention or obligation to update publicly any forward-looking statements, whether in response to new information, future events, or otherwise, except as required by applicable law.
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SOURCE CONSOL Energy Inc.
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