Anda di halaman 1dari 107

1

ThisisagraphofArkema,whichweboughtatthewrongpartofthelastcycle.
Thestockdeservedtofall,andwelookedandfeltstupidforowningit.
_____________
Source:BloombergLP,retrievedNovember2015.

AndthisisthegraphofCONSOL,anenergycompanythathasgonefrom$40to$7.
Again,wetimeditpoorly,initiallybuyinginthe30sandaddingallthewaydown.
_____________
Source:BloombergLPasofNovember13,2015.

CONSOLisat$7.40ashare,givingita$1.7billionmarketcap,anda$5.5billionenterprise
value.
_____________
Source:CNXfilingsavailableathttp://phx.corporateir.net/phoenix.zhtml?c=66439&p=irolsec;BloombergLP
pricingasofNovember13,2015;andGreenlightcalculations.Minorityinterestisbasedonthepublically
tradedvalueofCNXCoalResourcesLP(CNXC)notownedbyCNXasofNovember2015.

ThemarketviewsCONSOLasacoalcompany.Wedisagree,butlet'slookatitthroughthat
lensforamoment.
Thesearecoalstocks,andamongthemCONSOLisnotanoutlier.
Asyoucansee,thewholeindustryhaspracticallybeenleftfordead.EvenCONSOLsbonds
tradelikeitmightgooutofbusiness.
_____________
Source:GreenlightcalculationsbasedonpricingdatafromBloombergLPasofNovember13,2015.
ComparativecoalcompaniesselectedinthesolediscretionofGreenlight.

Adecadeago,coalwasusedtogenerateroughlyhalfofallelectricityintheU.S.
_____________
Source:GreenlightcalculationsusingU.S.EnergyInformationAdministration(EIA)monthlyU.S.electricity
generationdata,filteredontheelectricpowersector,retrievedNovember2015,fromEIAscustomtable
builderatwww.eia.gov/forecasts/steo/query.ClassificationsselectedinthesolediscretionofGreenlight.

Thankstotheshalegasrevolutionandenvironmentalregulations,coalisnolongerking.
Weburnlessofitanditspricehasdeclined.
_____________
Source:Source:Platts Coal,obtainedNovember2015.

WhilecoalusedtoprovidenearlyhalfofU.S.electricity,itsnowprovidinglessthan35%.
_____________
Source:GreenlightcalculationsusingEIAmonthlyU.S.electricitygenerationdata,filteredontheelectric
powersector,retrievedNovember2015,fromEIAscustomtablebuilderat
www.eia.gov/forecasts/steo/query.Figuresfor2015areyeartodatethroughSeptember30,3015.
ClassificationsselectedinthesolediscretionofGreenlight.

Wevegonefromproducingmorethanabilliontonsofthermalcoalannuallytolessthan
850milliontonsinthelastfiveyears,andeveryoneagreesthatthistrendwillcontinue.
_____________
Source:GreenlightcalculationsusingEIAannualU.S.coalsupply,consumption,andinventoriesdata,
retrievedNovember2015,fromEIAsshorttermenergyoutlookbrowser(beta)atwww.eia.gov/beta/steo/.
Thermalcoalistotalcoallessexportedmetallurgicalcoalandcokeplantconsumption.

10

Butcoalisntdisappearingaltogether.

11

Evenunderconservativeprojections,20yearsfromnowcoalwillstillprovide25%ofthe
countryselectricity.
Thatsabout760milliontonsannually.Someonehastosupplyit.
_____________
Source:GreenlightcalculationsusingEIAselectricitysupply,dispositions,prices,andemissionsreference
case,retrievedNovember2015,fromEIAsAnalysisoftheImpactsoftheCleanPowerPlan,filteredon
ElectricPowerSector,availableatwww.eia.gov/oiaf/aeo/tablebrowser.Classificationsselectedinthesole
discretionofGreenlight.

12

CoalisproducedinthreemajorbasinsacrossthecontinentalUnitedStates
Theexpenseofshippingmakescoalamostlyregionalbusiness.
_____________
Source:GreenlightcalculationsusingEIAsshorttermenergyoutlookforNovember2015at
www.eia.gov/forecasts/steo/tables/pdf/6tab.pdf,withAppalachiaadjustedforexportedmetallurgicalcoal
andcokeplantconsumption.ClassificationsselectedinthesolediscretionofGreenlight.

13

Incaseyoucan'treadthatcartoon,itsays,"Isuspectmyhusband'shikingonme.
WeregoingtofocusonthecoalcomingoutofAppalachia,anareaknownforbeinga
favoritehikingspotofSouthCarolinagovernors.

14

Appalachiahasbeenhitespeciallyhardbythefallingdemand.
Inthepastfewyearsweveseenatleast20coalcompaniesgointobankruptcy,liquidating
theirinventoriesintoanalreadyoversuppliedmarketastheydoso.
Thecurrentspotpriceisjust$43perton,downfromabout$80fouryearsago.

15

Thecontagionshouldcontinueforanother1218monthsuntiltheuncompetitivemines
closeandinventorycomesbackintoequilibrium.
Theplayerswhowillsurviveandultimatelyprosperaretheonesonthelowendofthe
regionalcostcurve.

16

ThisbringsustoCONSOLEnergy,acompanythathasbeenminingcoalinAppalachiafor
150years, andhashistoricallybeenveryprofitable.
_____________
Source:GreenlightestimatesandcalculationsbasedonCNXfilingsandearningspresentationsforreferenced
timeperiods,availableathttp://phx.corporateir.net/phoenix.zhtml?c=66439&p=irolirhome.

17

Inlate2013,managementsoldthebulkofitshighercostWestVirginiacoalassetsto
MurrayEnergyfor$3.5billion,leavingitwithlowcost,modernized,nonunionmines,
mostlyinPennsylvania.

18

ThemineshavesomeofthemostdesirablecoalinNorthernAppalachia,withhighheat
andlowsulphurcontent.
Higherheatmeansmoreenergy,andlowersulphurreducesthecoststoburnthecoal,
makingitmoreattractivetoutilities.
_____________
Source:CNXQ32015earningscallslides,availableathttp://phx.corporate
ir.net/phoenix.zhtml?c=66439&p=irolpresentations.ThroughoutthispresentationweuseCONSOLThermal
CoaltorefertoCNXsPennsylvaniaOperationssegment.

19

Themineshavethecapacitytoproduceupto28milliontonsayearforalongtimewithout
substantialinvestment.
_____________
Source:CNXQ32015earningscallslidesavailableathttp://phx.corporate
ir.net/phoenix.zhtml?c=66439&p=irolpresentations.GreenlightupdatedCNXs2014reserveestimateby
subtractingGreenlights estimateofannualactivityfor2015.

20

Assumingcleanenergyregulationsgetimplemented,theEIAexpectsAppalachiancoal
demandtodeclinenearly35%overthenext10yearsuntilitstabilizesataround110
milliontons.
_____________
Source:Greenlightestimatesfrom2020onwardbasedonEIAscoalproductionbyregionandtypereference
case,retrievedNovember2015,fromEIAsAnalysisoftheImpactsoftheCleanPowerPlan,filteredonCoal
SupplyandPrices,availableatwww.eia.gov/oiaf/aeo/tablebrowser.Greenlightcalculationsforprioryears
baseduponEIAdatautilizedinSlide10,withAppalachiaadjustedforexportedmetallurgicalcoalandcoke
plantconsumption.ClassificationsselectedinthesolediscretionofGreenlight.

21

Only12%ofexistingproductioninAppalachiaislowercostthanCONSOL.
Lookingattheentirecostcurvefortheregion,thecurrentequilibriumfor168milliontons
isapproximately$80perton.At2025demandlevels,equilibriumwouldfallto
approximately$50perton,assumingnocostinflation.
_____________
Source:SupplycurvebasedondatafromWoodMackenzie,providedtoGreenlightinNovember2015.Chart
excludesmineswithcashcostspertongreaterthan$100.Curvecovers145milliontonsofAppalachia
production.EventualclosuresreflectGreenlightestimates.

22

Weexpectaveryweakpricingenvironmentoverthenextyear.Fortunately,CONSOLis
protectedinthenearterm,havinglockedinpricingforthebalanceofthisyearat
approximately$57pertonandenoughfornextyeartorealizeover$50perton.
_____________
Source:GreenlightestimatesbaseduponCNXfilings,earningspresentations,andmanagementguidancefor
referencedtimeperiods,availableathttp://phx.corporateir.net/phoenix.zhtml?c=66439&p=irolirhome.

23

CONSOLsfallingcostsandrecentlyimplementedzerobasedbudgetingshouldbringcash
coststoward$33pertonnextyear,allowingittoremainquiteprofitableduringthe
dislocation.
Bytheendofnextyear,manyuncompetitivemineswillhaveclosedandpricesshouldbe
recovering.
_____________
Source:GreenlightestimateofCNXsthermalcoaloperationsisbaseduponCNXfilings,investor
presentationsandmanagementguidanceforreferencedtimeperiods,availableathttp://phx.corporate
ir.net/phoenix.zhtml?c=66439&p=irolirhome.

24

EBITDAshouldsettleataround$425millionperyearandEBITDAlessCapexshouldbe
around$280million.
_____________
Source:GreenlightestimateofCNXsthermalcoaloperationsisbaseduponCNXfilings,investor
presentationsandmanagementguidanceforreferencedtimeperiods,availableathttp://phx.corporate
ir.net/phoenix.zhtml?c=66439&p=irolirhome.

25

Wethinkthatthebestwaytovaluealonglastingpileofreservesofanytypeiswitha
discountedcashflowanalysis.Here,theDCFreflectsthevalueoftheentirethermal
reservebasedowntothefullrunoff.WewillreleasethefullDCFlaterthisweek,butthe
bottomlineisthethermalcoalbusinessisworth$3billion.Asacrosscheck,thatisabout
11xdepressedEBITDAlessCapex,andlessthanfourdollarspertonofreserves.
_____________
Source:Greenlightestimate.Pleaserefertoaccompanyingthermalcoaldiscountedcashflowmodelfor
detailsandassumptions.

26

CONSOLsBuchananmineisthelowestcostmetallurgicalcoalmineinAmerica.Itproduces
4milliontonsofcoaland16milliondollarsofEBITDAintodaysdepressedmarkets.Idont
havetimetogothroughthemetcoalindustry,butdoingthesameworkwedidforthermal
coalgeneratesaDCFvalueofapproximately$490million.
_____________
Source:Greenlightestimates.Pleaserefertoaccompanyingmetallurgicalcoaldiscountedcashflowmodelfor
detailsandassumptions.

27

CONSOLproducesabout100BillionCubicFeetEquivalents(Bcfe)ayearofcoalbed
methaneandotherlegacygasoutof2TrillionCubicFeetEquivalents(Tcfe)ofproved
reserves,80%ofwhicharedeveloped.Attodayspricesitdoesnotmakesensetoinvest
morethanthebareminimuminthisbusiness,andthatswhatCONSOLisdoing.
Nonetheless,productioncontinues.Weusearunoffanalysistovalueitat$900million.
_____________
Source:Greenlightestimates.Pleaserefertoaccompanyinglegacygasdiscountedcashflowmodelfordetails
andassumptions.ReservedatafromCNXForm10K,availableathttp://phx.corporate
ir.net/phoenix.zhtml?c=66439&p=irolreports.

28

CONSOLalsoownspublicshares,aretainedinterestingatheringsystems,andIncentive
DistributionRights(IDRs)inCONEMidstream,tickerCNNX,whichCONSOLandits
MarcellusjointventurepartnerNobletookpublicinSeptember2014.WevalueCONSOLs
stakeat$667million.
_____________
Source:Greenlightestimatebaseduponthefollowingvalues:(a)Common,subordinatedandGPunitsatthe
closingpriceofCNNX,asofNovember13,2015;(b)retainedinterestingatheringsystemsat1.75xtangible
book;and(c)Greenlights estimateofIDRvalue.

29

Managementplanstodivestsomenoncoreassetsoverthenextyear.Weestimate
proceedstobearound$500millioninadditiontoanyassetswearecountingelsewhere.
Webelievethevalueofthethermalcoal,metcoal,legacyoilandgas,andassetstobesold
equaltoday'senterprisevalue.
_____________
Source:Greenlightcalculationbaseduponpriorslides.

30

Ifthatsalltherewas,thenCONSOLwouldberoughlyfairlyvaluedattodaysprice.But,
wait

31

CONSOLownsalotofshalegas.

32

ItisoneofthelargestplayersintheMarcellusandUticashales.Ithasamillionnetacres
and54tcfe ofresourcesinthesetwobasins.
Thatisenoughgastosupplytheentirecountryfortwoyears.
Webelievethatsvaluable.
_____________
Source:CNXQ32015earningscallslides,availableathttp://phx.corporate
ir.net/phoenix.zhtml?c=66439&p=irolpresentations.

33

Andyes,IrememberthatIpresentedashortthesisonoilfrackersattheSohn Investing
ConferencelastMay,callingthemvaluedestroyers.
Butnotallfrackingiscreatedequal.Wenotedthenthatthenaturalgasfrackershad
attractiveeconomics,whichwastrueatthetime.Sincethen,thepriceofgashasfallen.

34

BeforegettingintoCONSOLsfrackingbusiness,letsbrieflyrevisitPioneer,whichwe
highlightedastheMotherFracker.InMayweshowedthatPioneerdidnothaveapositive
valueonaDCFbasis.AkeyassumptionwasbasedonPioneers2014findingcostsof
$20.66perBOEorbarrelofoilequivalentinitshorizontaldrillingprogram.
_____________
Source:GreenlightpresentationonMay4,2015,availableatwww.greenlightcapital.com.

35

Lastmonth,wehadalongvisitwithPioneermanagementandwentthroughourthesis.
Theirmainobjectionwasthatourcapitalintensitywastoohigh theysaidtheirwellswere
moreproductivethanwegavethemcreditfor,and$15perBOEwouldmakemoresenseas
alongtermtarget.
Thisisnotwhatthecompanydidlastyear,orwhatitwilldothisyear,butitswhat
managementsaidPioneercandolongerterm.

36

WeupdatedourPioneerDCFmodelbasedontheirfeedbackandthecurrentcommodity
stripprices,whichshowsPioneergeneratesabout$33perBOEinrevenuesand$19of
undiscountedcashflows.Thepresentvalueofthoseis$12perBOE,whichislessthan
managementstargetedlongtermcapexof$15.So,atcurrentstripprices,Pioneers
drillingprogramcontinuestodestroyshareholdervalue.
_____________
Source:RevenueperBOEforWTIoilandHenryHubnaturalgascalculatedusinganaverageof2016,2017,
and2018NYMEXfuturesprice,obtainedfromBloombergLPinNovember2015.RealizedrevenuesperBOE
foroil,naturalgasandNGLbasedonGreenlightestimates.Greenlights estimated%ofBOEmixfromoil,
naturalgas,andNGLbasedonestimatesfromITG.Greenlights estimatedcapitalandoperatingcostforPXD
basedonmanagementguidanceandQ32015results.

37

WeupdatedthePioneerDCFanalysisaswell.Whiletheimprovedcapitalefficiencyhelps,
thelowercommoditypricebringsthevaluebackto$7pershareattodayscurveasshown
intheorangeintersection.
_____________
Source:Greenlights DCFvaluefromMay2015ishighlightedinyellow.Greenlights DCFvaluefrom
November2015ishighlightedinorange.CriticalassumptionsintheupdatedDCFare:
Greenlights typecurvebasedondatafromWoodMackenzieandITG
Capexis37%higherinfirstyearand7%growththereafter
10.2billionBOEdevelopedover40years
Oilpriceatforwardcurveuntil2023,flatthereafter
Naturalgaspriceatforwardcurveuntil2027,thengrows2%peryear
Operatingcostsdown30%in2016from2014,thenflatthereafter
Capexat$15perBOE
CorporateWACCof7.7%

38

Ineffect,Pioneerisjustanoptiononmuchhigheroilprices.Withamarketcapof$21
billionandaDCFvalueofonly$1billion,investorsarepaying$20billioninthehopethat
longtermoilpriceswillbemuchhigherthanthefuturesmarketexpects.Thecurrentvalue
reflectsenergypricesmorethan30%higheracrossthecurve.
_____________
Source:Greenlightcalculationbaseduponpriorslides.

39

LetslookatCONSOLsMarcellusandUticaassetsonthesamebasis.
ThesearetheeconomicsforCONSOLtogetgasoutofthegroundandtomarketbasedon
todaysprices.
Similartotheoilfrackers,drillingnowdestroysvalue.Butitsnotasbadforgasasitisfor
oil.
_____________
Source:RevenueperMcfe forWTIoilandHenryHubnaturalgascalculatedusinganaverageof2016,2017,
and2018NYMEXfuturesprice,obtainedfromBloombergLPinNovember2015.RealizedrevenuesperBOE
foroil,naturalgasandNGLbasedonGreenlightestimates.Estimated%ofMcfe mixofnaturalgas,NGL,and
oilbasedonmodellednewwellproductionmix.Greenlights estimatedcapitalandoperatingcostforCNX
basedonmanagementguidanceandQ32015results.CriticalassumptionsaredisclosedinSlide49.

40

Drillingandcompletiontechniquesareprettymuchstandardwhetherfrackingforgasor
oil,andsoarethecosts.
_____________
Source:PictureofgasrigbyMichaelHenninger ofthePostGazette,copyrightownedbyPGPublishingCo.
PictureofoilrigbyBirrell Services,copyrightownedbyBirrell Services.

41

Butwhattheyproduceisnotthesame.Forexample,Marcelluswellsrecover2.5times
moreenergythanPermianwells.Evenattodaysincrediblydepressedgasprices,the
revenuesatspotpricesarehigherforaCONSOLMarcelluswellthanaPioneerPermian
well.
_____________
Source:RevenueatspotareGreenlightestimates,basedonthefollowing:
WTIoil,HenryHubnaturalgas,andMountBelvieu NGLpricingfromBloombergLPasofNovember13,
2015.
Bcfe mixforCNXbasedonmodellednewwellproductionmix.
BOEmixforPXDbasedonestimatesfromITG.
Totalrecoverables of15bcfe forCNXbasedondatainQ32015earningscallslidesavailableat
http://phx.corporateir.net/phoenix.zhtml?c=66439&p=irolpresentations.
Totalrecoverables of1mmboe forPXDbasedondatainQ3earningscallslidesavailableat
http://investors.pxd.com/phoenix.zhtml?c=90959&p=irolpresentations.
Noadjustmentfortransportdifferentialsorroyalties.

42

YoudexpecttheoilfrackerslikePioneertobecuttingcapexfasterthanthegascompanies.
Nope.Instead,whileCONSOLhasstoppeddrillingnewwells,Pioneerhasaddedrigs.

43

CONSOLwillspendmoneytocompleteandbringonlinewellsthathavealreadybeen
drilled,allowingittoshowproductiongrowththatwouldexcitemanyoilandgasanalysts.
Buttous,what'sexcitingisthatmanagementisdisciplinedenoughtodefernew
investmentuntiltheeconomicsmakesense.
_____________
Source:2012to2014reflectdatafromCNXForms10Kforperiodspresented,availableat
http://phx.corporateir.net/phoenix.zhtml?c=66439&p=irolsec.2015and2016estimatesreflect
managementguidance.

44

AndCONSOLcanaffordtobepatient.Thecompanyownsmuchofthislandoutright,so
unlikemanyofitspeersitdoesntpayroyaltiesanditdoesntneedtodrillinorderto
maintainitsrights.

45

LikePioneer,CONSOLneedshigherpricestodrillprofitably.Thedifferenceisthat
PittsburghbasedCONSOLisunwillingtoinvestCapexfornegativereturns,whileDallas
basedPioneerplanstoinvestrightthroughthem.

46

Justaswiththeoilfrackers,webelievethemostaccuratewaytomeasurevalueistodoa
longtermDCF.

47

ThisistheNYMEXfuturespricefornaturalgas.Thecurvereflectsarecovery,subjectto
seasonality.WeusethecommodityforwardcurveinourDCF.
_____________
Source:BloombergLP,retrievedNovember2015.

48

ThesearethecriticalassumptionsinourDCF.Notably,weassumedrillingrestartsin2018
eventhoughIthinkgaspriceswillimprovefasterthanthemarketthinks.Illgettothat
shortly.
_____________
Source:Greenlightestimates.Pleaserefertoaccompanyingshalegasdiscountedcashflowmodelfordetails
andassumptions.

49

Puttingitalltogether,thisleadstoatotalbasecasevalueforCONSOLsshalegasbusiness
of$6.6billion.
_____________
Source:GreenlightestimatebasedupondatapresentedinSlide49.Pleaserefertoaccompanyingshalegas
discountedcashflowfordetailsandassumptions.

50

TheDCFvalueconvertsto$6,200pernetacreand$0.12permcfe ofpotentialresource.
Here,wecomparethattothevaluesof6otherpureplaysintheMarcellus/Uticaonaper
acreandperpotentialresourcebasis.Theindustryexpertswilltellyouthatallacresarent
equal.But,thepointImmakingisthatourDCFderivedvalueisnttoofarfromthecurrent
marketvaluesofthepureplays.
_____________
Source:Greenlightestimatesandcalculations,asfollows:
ForCNX:
AdjustedEVistheenterprisevaluebasedonGreenlights shalegasDCF,
NetAcrebaseduponCNXinvestorpresentations,and
ResourcebaseduponCNXinvestorpresentationsandGreenlightestimates.
Forallotherissuers(whichwereselectedinthesolediscretionofGreenlight):
AdjustedEVistheenterprisevaluebaseduponissuerfilings,reducedbyGreenlightforbookvalueof
balancesheetderivativeassets,andwhereappropriate,reducedbyeitherthemarketvalueorbookvalue
ofequityinvestments,
NetAcreisbaseduponinvestorpresentations.TheEV/NetAcreCalculationreflectsonlyMarcellusand
Uticanetacres,withtheexceptionofCabot,whichalsoincludesEagleFordnetacres,and
Resourcebaseduponinvestorpresentations,analystresearchreports,andGreenlightestimates.

51

AndcomparedtooilfrackerslikePioneer,wellthereisnocomparison.WhereasPioneer
getsvaluedat$20billionforitsundrilledacreage,CONSOLsstockimpliesnegativevalue
foritsundrilledacreage.
ThatspuzzlingconsideringhowremarkabletheMarcellusandUticaare.

52

Thestoryof21stcenturynaturalgasisthestoryoftheMarcellus&Utica.
Fromastandingstartadecadeago,theareahasbeenvirtuallyallofthesupplygrowth,
andnowproducesmorethan20%ofAmerica'sgas.
_____________
Source:TotalU.S.naturalgasproductionfromEIAsU.S.naturalgassupply,consumption,andinventories
data,retrievedNovember2015,fromEIAsshorttermenergyoutlookbrowser(beta)at
www.eia.gov/beta/steo/.MarcellusandUticapercentoftotalcalculatedbyGreenlightfromEIAsdrilling
productivityreportsatwww.eia.gov/petroleum/drilling/xls/dprdata.xlsx,retrievedNovember2015.

53

TheEIAprojectstheregiontodoublefromherebytheendofthedecade,andwevestill
justscratchedthesurface.
ExpertsthinkthereisenoughrecoverablegastosupplyAmericaforthenextcentury.

54

Itisnotonlythemostprolificacreage;itsgasisbyfarthecheapesttoproduce.
_____________
Source:WoodMackenzie,9thAnnualSectorForum,CostEfficiency&CapitalDiscipline,October8,2015.

55

Allthelowcostgashasdrivendowntheprice.ThisisagraphofhistoricalHenryHub
naturalgas.
Inthelasttenyearsithasspikedintothedoubledigits.Today,itisnearitslowsaround$2.
_____________
Source:BloombergLP,retrievedNovember2015.

56

Historically,gasatDominionSouth,nearPittsburgh,hastradedatapremiumtoHenryHub.
Today,itsatabigdiscount.Thisgapisknownasthebasisorthedifferential.
Rightnow,allthenewproductionhascreatedashortageofpipelinetotakegasoutofthe
region,whichhascreatedalocalizedglut.
InearlyNovember,whenHenryHubgaswas$2.25,itwasabouthalfthatatDominion
South.
_____________
Source:GreenlightcalculationsbasedonpricingdatafromBloombergLP,retrievedNovember2015.

57

Generallyspeaking,whennewentrantsdisruptamarketasthelowcostproducer,the
disruptersstockssoar,whiletheincumbentsstocksfade.
Buthere,witheachdiscoveryofadditionallowcostsupply,themarketgroansatthe
disrupters.
TheMarcellusandUticagasfrackersstockshavefallen.CONSOLhasdoneevenworse
becausethemarketinsistsit'snothingbutacoalstock.
_____________
Source:GreenlightcalculationsbasedonpricingdatafromBloombergLP,retrievedNovember2015.
ComparativeE&PcompaniesselectedinthesolediscretionofGreenlight.

58

Ordinarily,Iwouldaddthisallupandsaythatthesumofthepartsis$8.2billion,or$35.81
pershare,andbedonewithit.
ButI'dliketospendacouplemoreminutesonnaturalgas.WevaluedCONSOLbasedon
thecurrentforwardcurvebutwhatifthepriceactuallywentup?

59

Optimismonnaturalgasisprettyunpopularthesedays.Eventhepermabullshavegiven
up.
InDallaslastmonth,T.BoonePickenssaid,Idontthinknaturalgaswillevergoup.
_____________
Source:GreatInvestorsBestIdeas9thAnnualInvestmentSymposiumonOctober6,2015.

60

Likeanycommoditythecureforlowpricesislowprices.
Pricescan'tstaybelowthecostofthelowestcostproducersforlong.

61

Atthebeginningoftheyear,producersreactedtolowerpricesanddramaticallyslowed
drillingfornaturalgas.
_____________
Source:BakerHughesweeklynaturalgasrigcount,retrievedfromBloombergLPinNovember2015.

62

Thereisalagbetweenwhendrillingstopsandvolumesfallbecausepartiallydrilledand
completedwellswillcontinuetocomeonlineforthenextcoupleyears.

63

Butsinceproductionfromexistingwellsdeclineabout25%peryear,supplyanddemand
cancorrectquickly.
_____________
Source:ITGnaturalgasbasedeclinerateforthelower48statesthroughDecember2014,obtainedfromITG
inOctober2015.

64

Thelaggedimpactofreduceddrillingmaybeshowingupnow,asyearoveryear
productiongrowthhasdeceleratedandispushingzero.
_____________
Source:EIAsweeklyproductiongrowthdata,retrievedNovember2015,availableat
www.eia.gov/naturalgas/weekly.

65

Whilelowpricespressuresupply,recentdemandhasbeenstrong,upmidsingledigits,
drivenprimarilybyelectricityusage.Longertermdemandshouldgrowalmost3%peryear.
_____________
Source:GreenlightestimatebasedupondataprovidedbyBTUAnalytics,LLC.

66

Andbecausegasishardtostore,wedon'tstoreverymuchofit usuallyonlyabout40
daysworth.
_____________
Source:GreenlightcalculationsbasedonEIAsU.S.drynaturalgasproductiondatathroughAugust2015,
retrievedNovember2015,availableatwww.eia.gov/dnav/ng/hist/n9070us2m.htm;EIAsweeklyproduction
growthdatafromAugust2015toNovember2015,retrievedNovember2015,availableat
www.eia.gov/naturalgas/weekly;andBloombergLPstoragedata(DOENUST1Index),retrievedNovember
2015.

67

Torecap:

supplyisdeceleratingandthreateningtofallduetolackofinvestment;
demandhasseculargrowth;
wedon'tstoreverymuch;
pricesarebelowthecostofthelowestcostproducers;and
everyoneisbearish.

SounlessAmazondecidestogointothegasbusiness,gaspricesarelikelytogoup.

68

AndthebasisproblemthatiskillingPennsylvaniapricesisbeingsolvedbythemarket.This
isatimelineofnewpipelinecapacitycomingtotheregion,andthesituationshouldstart
improvingnextyear.
_____________
Source:BTUAnalytics,LLC,AFirmDilemma,August2015.

69

Inthelongertermtheoutlookforgaspricingisupwardslopingwhiletheoilcurveflattens.
Ithinkthisisbecausethedemandoutlookisbetterforgas.
_____________
Source:BloombergLP,retrievedNovember2015.

70

WhenImetwithPioneermanagement,wediscussedtheconversionofthetransportation
fleettootherenergysources,whichwouldbebearishforoilandthelongtermvalueof
Pioneer'sresources.
TheCEOrespondedbyasking:DoyoudriveaTesla?IsaidthatIdid.Heresponded
Thoughtso.

71

But,thereisaseriouspointhere.IcanfillmyTeslawithelectricityfrommywallatthe
equivalentof3centspermileandtheonlyreasonformetogotoagasstationistobuy
Funyuns andSlimJims.

72

Overthenextnumberofyears,improvementsintechnologywillallowmoreefficient
utilizationoftheautofleet,andbatterytechnologywillallowmorecarstorunongasfired
electricity.Oilwillgetleftout.

73

Basedpurelyonenergycontent,sixMcfe isthesameasabarrelofoil.Pricesstopped
reflectingthisafewyearsagobecauseweranoutofplaceswherewecouldswitchoilto
gas.Withadditionalsubstitutionasweconvertthetransportationfleettoelectricity,prices
shouldatleastpartlyreconvergetowardenergyequivalenceoverthenextdecade.Thisis
whythelongtermgascurvecontinuestorisewhiletheoilcurvestaysflat.
_____________
Source:Greenlightcalculationsbaseduponpricingofthefirstactiveoilandgasfuturescontracts,retrieved
fromBloombergLPinNovember2015.

74

HereistheDCFsensitivityintheshalebusinesstohighergasprices,notcountingthe
additionaloptionalityforhighercoalprices,whichwouldprobablyfollowgaspriceshigher.
Remember,WallStreetinsiststhisisacoalcompany.
_____________
Source:Greenlightestimatesandcalculations.Pleaserefertoaccompanyingshalegasdiscountedcashflow
modelfordetailsassumptions.

75

Butitmaynotbeforlong.Wehaveaverygoodmanagementteamhere.Theyhavealong
historyofmakinggooddecisions.
_____________
Source:CNXfilingsandpressreleasesforreferencedtimeperiodsavailableathttp://phx.corporate
ir.net/phoenix.zhtml?c=66439&p=irolirhome.

76

Imentionedthatthecompanyissellingsomenoncoreassets.Onceitdoesandusesthe
proceedstopaydownsomedebt,itsverylikelythatmanagementwillseparatethegas
businessfromthecoalbusiness,whichwillforcethemarkettoreconsider.

77

AfterArkema wentto10,itturnedaroundandwentto70.
IthinkthereisadecentchancethanCONSOLwilldosomethinglikethat.
_____________
Source:BloombergLP,retrievedNovember2015.

78

Thankyouverymuch.

79

Thereareseveralappendicesattachedtothispresentation:

AppendixA:ShaleGasDCF
AppendixB:LegacyGasDCF
AppendixC:ThermalCoalDCF
AppendixD:MetallurgicalCoalandOtherDCF

80

CONSOL Energy - Shale Gas


Discounted Cash Flow Key Assumptions & Statistics
Base Case
PV of cash flows ($B)

Cost of Capital
Equity risk premium
Adjusted beta
Risk-free rate
Equity cost of capital
Debt cost of capital
Equity as % of EV
Calculated WACC
GL Dislocation Premium (a)
WACC

$6.6

5.4%
1.25
2.3%
9.0%
3.5%
75%
7.6%
0.8%
8.4%

Capital Spending Inputs


Capex growth rate (b)
5.3%
Capex growth period
20 years
Peak capex period
35 years
Well production period
50 years
Capex / mcfe
$0.95
Capex / mcfe terminal growth rate (c)
2.0%

Development Data (B)


Starting capex
Peak capex
Peak cumm FCF burn
Total tcfe developed
Total tcfe produced

$0.45
$2.2
$0.4
52.4
53.9

Commodity Assumptions
Current curve strip prices
Natural gas (2027)
NGL (2023)
Oil (2023)
Natural gas Terminal Growth Rate (c)
LT Production as % of mcfe
Natural gas
NGL
Oil (Condensate)

Opex / mcfe
Oil & gas production (d)(e)
Production taxes (e)
SG&A/Corp/Other (e)(f)

$1.08
5.2%
$0.22

$4.23
$21
$59
2.0%
85%
12%
3%

Opex / mcfe terminal growth rate (c)

2.0%

Cash tax rate

35%

Notes:
Includes Marcellus and Utica segments.
Estimated % of mcfe mix of Natural Gas, NGLs and Oil (Condensate) based on recent production mix adjusting for increasing mix of dry gas Utica.
Marcellus and Utica horizontal type curves published by EQT, adjusted to terminal decline rate and economic life variables developed in discussion with CONSOL.
Cash tax calculation based on current & future estimated net operating loss carryforwards.
Hess drilling carry realized in 2016. Noble drilling carry realized when natural gas exceeds $4.00/mmbtu and is based on estimated Marcellus capital spend.
Incorporates pro rata share of CONSOL's in place gas hedges.
Assumed differentials are based on recent results adjusted for a modest improvement over the next several years as additional takeaway capacity comes online.
(a) To be conservative we made an adjustment to increase the cost of capital because our value was already plenty high.
(b) 2016-2035 CAGR.
(c) Terminal growth rate starting in 2028.
(d) Includes transportation, gathering and compression, lifting and direct administrative and selling segment level costs.
(e) Weighted average cost structure from 2016-2027.
(f) Incorporates pro rata net expenses from the Other Gas segment, not directly related to Other Gas segment production.
This includes G&A, corporate, net unutilized FT expense, net gas royalty income, net purchased gas income, exploration and other costs and other income.

A-1

CONSOL Energy - Shale Gas


Discounted Cash Flow
Base Case
($M unless otherwise noted)

Capex
Reserves Developed (bcfe)

2016
-450
640

2017
-232
244

2018
-557
586

2019
-723
761

2020
-793
835

2021
-847
891

2022
-879
925

2023
-935
984

2024
-949
999

2025
-902
950

Proved Developed Reserves (bcfe)


Production (bcfe)

2,344
294

2,320
268

2,590
316

2,960
390

3,329
465

3,683
537

4,007
602

4,324
666

4,602
721

4,796
755

Revenues / mcfe ($)


Revenues

2.62
771

2.73
732

2.84
897

2.94
1,149

3.05
1,421

3.19
1,713

3.33
2,006

3.47
2,313

3.61
2,601

3.74
2,824

Cash opex / mcfe ($)


Opex

1.61
474

1.57
421

1.52
481

1.47
576

1.47
683

1.47
788

1.46
882

1.47
977

1.47
1,057

1.46
1,106

EBITDA
Gross Capex
Drilling Carry Realization
Cash flow
Cash tax

297
-450
30
-124
0

311
-232
0
80
0

416
-557
0
-141
0

573
-723
0
-150
0

738
-793
0
-55
0

925
-847
0
78
0

1,124
-879
0
244
0

1,336
-935
0
402
0

1,544
-949
0
596
-149

1,718
-902
0
816
-285

After tax cash flow

-124
0

80
0

-141
0

-150
0

-55
0

78
0

244
0

402
0

447
0

530
0

A-2

CONSOL Energy - Shale Gas


Discounted Cash Flow
Base Case
($M unless otherwise noted)

Capex
Reserves Developed (bcfe)

2026
-899
947

2027
-886
933

2028
-920
950

2029
-958
970

2030
-999
991

2031
-1,041
1,012

2032
-1,085
1,035

2033
-1,113
1,040

2034
-1,157
1,060

2035
-1,202
1,080

Proved Developed Reserves (bcfe)


Production (bcfe)

4,960
783

5,090
802

5,217
823

5,344
843

5,470
864

5,597
886

5,724
908

5,837
927

5,950
947

6,063
967

Revenues / mcfe ($)


Revenues

3.86
3,024

3.98
3,197

4.06
3,336

4.13
3,481

4.20
3,633

4.28
3,791

4.36
3,956

4.44
4,114

4.52
4,278

4.60
4,449

Cash opex / mcfe ($)


Opex

1.46
1,145

1.46
1,173

1.49
1,226

1.52
1,282

1.55
1,341

1.58
1,402

1.61
1,465

1.65
1,526

1.68
1,590

1.71
1,656

EBITDA
Gross Capex
Drilling Carry Realization
Cash flow
Cash tax

1,880
-899
120
1,100
-385

2,024
-886
118
1,256
-440

2,109
-920
123
1,312
-459

2,199
-958
128
1,368
-479

2,292
-999
133
1,427
-499

2,389
-1,041
139
1,487
-521

2,491
-1,085
145
1,551
-543

2,588
-1,113
148
1,623
-568

2,688
-1,157
154
1,686
-590

2,792
-1,202
160
1,751
-613

715
0

816
0

853
0

889
0

927
0

967
0

1,008
0

1,055
0

1,096
0

1,138
0

After tax cash flow

A-3

CONSOL Energy - Shale Gas


Discounted Cash Flow
Base Case
($M unless otherwise noted)

2036
-1,098
967

2037
-1,120
967

2038
-1,142
967

2039
-1,165
967

2040
-1,188
967

2041
-1,212
967

2042
-1,236
967

2043
-1,261
967

2044
-1,286
967

2045
-1,312
967

Proved Developed Reserves (bcfe)


Production (bcfe)

6,063
967

6,063
967

6,063
967

6,063
967

6,063
967

6,063
967

6,063
967

6,063
967

6,063
967

6,063
967

Revenues / mcfe ($)


Revenues

4.68
4,530

4.77
4,613

4.86
4,698

4.95
4,784

5.04
4,872

5.13
4,962

5.23
5,054

5.32
5,147

5.42
5,243

5.52
5,340

Cash opex / mcfe ($)


Opex

1.75
1,689

1.78
1,723

1.82
1,758

1.85
1,793

1.89
1,829

1.93
1,865

1.97
1,902

2.01
1,940

2.05
1,979

2.09
2,019

2,841
-1,098
110
1,853
-648

2,890
-1,120
112
1,882
-659

2,940
-1,142
35
1,833
-641

2,992
-1,165
0
1,827
-639

3,044
-1,188
0
1,856
-649

3,097
-1,212
0
1,885
-660

3,152
-1,236
0
1,915
-670

3,207
-1,261
0
1,946
-681

3,264
-1,286
0
1,977
-692

3,321
-1,312
0
2,009
-703

1,204
0

1,223
0

1,191
0

1,187
0

1,206
0

1,225
0

1,245
0

1,265
0

1,285
0

1,306
0

Capex
Reserves Developed (bcfe)

EBITDA
Gross Capex
Drilling Carry Realization
Cash flow
Cash tax
After tax cash flow

A-4

CONSOL Energy - Shale Gas


Discounted Cash Flow
Base Case
($M unless otherwise noted)

2046
-1,338
967

2047
-1,365
967

2048
-1,392
967

2049
-1,420
967

2050
-1,449
967

2051
-1,478
967

2052
-1,507
967

2053
-1,537
967

2054
-1,568
967

2055
-1,599
967

Proved Developed Reserves (bcfe)


Production (bcfe)

6,063
967

6,063
967

6,063
967

6,063
967

6,063
967

6,063
967

6,063
967

6,063
967

6,063
967

6,063
967

Revenues / mcfe ($)


Revenues

5.63
5,439

5.73
5,541

5.84
5,644

5.95
5,749

6.06
5,857

6.17
5,966

6.29
6,078

6.40
6,192

6.52
6,308

6.65
6,427

Cash opex / mcfe ($)


Opex

2.13
2,059

2.17
2,100

2.22
2,142

2.26
2,185

2.31
2,229

2.35
2,274

2.40
2,319

2.45
2,365

2.50
2,413

2.55
2,461

3,380
-1,338
0
2,042
-715

3,440
-1,365
0
2,075
-726

3,502
-1,392
0
2,109
-738

3,564
-1,420
0
2,144
-750

3,628
-1,449
0
2,179
-763

3,693
-1,478
0
2,215
-775

3,759
-1,507
0
2,252
-788

3,827
-1,537
0
2,290
-801

3,896
-1,568
0
2,328
-815

3,966
-1,599
0
2,367
-828

1,327
0

1,349
0

1,371
0

1,394
0

1,417
0

1,440
0

1,464
0

1,488
0

1,513
0

1,538
0

Capex
Reserves Developed (bcfe)

EBITDA
Gross Capex
Drilling Carry Realization
Cash flow
Cash tax
After tax cash flow

A-5

CONSOL Energy - Shale Gas


Discounted Cash Flow
Base Case
($M unless otherwise noted)

2056
-1,631
967

2057
-1,664
967

2058
-1,697
967

2059
-1,731
967

2060
-1,766
967

2061
-1,801
967

2062
-1,837
967

2063
-1,874
967

2064
-1,911
967

2065
-1,950
967

Proved Developed Reserves (bcfe)


Production (bcfe)

6,063
967

6,063
967

6,063
967

6,063
967

6,063
967

6,063
967

6,063
967

6,063
967

6,063
967

6,063
967

Revenues / mcfe ($)


Revenues

6.77
6,548

6.90
6,671

7.03
6,797

7.16
6,926

7.30
7,057

7.44
7,190

7.58
7,327

7.72
7,466

7.87
7,607

8.02
7,752

Cash opex / mcfe ($)


Opex

2.60
2,510

2.65
2,560

2.70
2,612

2.75
2,664

2.81
2,717

2.87
2,771

2.92
2,827

2.98
2,883

3.04
2,941

3.10
3,000

4,038
-1,631
0
2,407
-842

4,111
-1,664
0
2,447
-857

4,186
-1,697
0
2,489
-871

4,262
-1,731
0
2,531
-886

4,340
-1,766
0
2,574
-901

4,419
-1,801
0
2,618
-916

4,500
-1,837
0
2,663
-932

4,582
-1,874
0
2,708
-948

4,666
-1,911
0
2,755
-964

4,752
-1,950
0
2,803
-981

1,564
0

1,591
0

1,618
0

1,645
0

1,673
0

1,702
0

1,731
0

1,760
0

1,791
0

1,822
0

Capex
Reserves Developed (bcfe)

EBITDA
Gross Capex
Drilling Carry Realization
Cash flow
Cash tax
After tax cash flow

A-6

CONSOL Energy - Shale Gas


Discounted Cash Flow
Base Case
($M unless otherwise noted)

2066
-1,989
967

2067
-2,028
967

2068
-2,069
967

2069
-2,110
967

2070
-2,152
967

2071
0
0

2072
0
0

2073
0
0

2074
0
0

2075
0
0

Proved Developed Reserves (bcfe)


Production (bcfe)

6,063
967

6,063
967

6,063
967

6,063
967

6,063
967

5,184
879

4,458
726

3,856
602

3,355
501

2,936
419

Revenues / mcfe ($)


Revenues

8.17
7,899

8.33
8,050

8.48
8,203

8.65
8,360

8.81
8,520

8.98
7,894

9.15
6,641

9.33
5,613

9.50
4,765

9.69
4,063

Cash opex / mcfe ($)


Opex

3.16
3,060

3.23
3,121

3.29
3,183

3.36
3,247

3.43
3,312

3.49
3,072

3.56
2,586

3.63
2,188

3.71
1,859

3.78
1,586

4,840
-1,989
0
2,851
-998

4,929
-2,028
0
2,901
-1,015

5,020
-2,069
0
2,951
-1,033

5,113
-2,110
0
3,002
-1,051

5,207
-2,152
0
3,055
-1,069

4,822
0
0
4,822
-1,688

4,055
0
0
4,055
-1,419

3,425
0
0
3,425
-1,199

2,906
0
0
2,906
-1,017

2,477
0
0
2,477
-867

1,853
0

1,885
0

1,918
0

1,952
0

1,986
0

3,135
0

2,636
0

2,226
0

1,889
0

1,610
0

Capex
Reserves Developed (bcfe)

EBITDA
Gross Capex
Drilling Carry Realization
Cash flow
Cash tax
After tax cash flow

A-7

CONSOL Energy - Shale Gas


Discounted Cash Flow
Base Case
($M unless otherwise noted)

Capex
Reserves Developed (bcfe)

2076
0
0

2077
0
0

2078
0
0

2079
0
0

2080
0
0

2081
0
0

2082
0
0

2083
0
0

2084
0
0

2085
0
0

Proved Developed Reserves (bcfe)


Production (bcfe)

2,583
352

2,286
297

2,035
251

1,821
214

1,639
182

1,475
164

1,328
148

1,195
133

1,075
119

968
108

Revenues / mcfe ($)


Revenues

9.87
3,478

10.06
2,989

10.26
2,579

10.45
2,233

10.65
1,940

10.86
1,780

11.07
1,633

11.28
1,498

11.50
1,374

11.72
1,261

Cash opex / mcfe ($)


Opex

3.86
1,359

3.93
1,169

4.01
1,009

4.09
875

4.18
760

4.26
698

4.34
641

4.43
588

4.52
540

4.61
496

EBITDA
Gross Capex
Drilling Carry Realization
Cash flow
Cash tax

2,119
0
0
2,119
-742

1,821
0
0
1,821
-637

1,570
0
0
1,570
-550

1,359
0
0
1,359
-476

1,180
0
0
1,180
-413

1,082
0
0
1,082
-379

992
0
0
992
-347

910
0
0
910
-318

834
0
0
834
-292

765
0
0
765
-268

After tax cash flow

1,377
0

1,183
0

1,021
0

883
0

767
0

703
0

645
0

591
0

542
0

497
0

A-8

CONSOL Energy - Shale Gas


Discounted Cash Flow
Base Case
($M unless otherwise noted)

2086
0
0

2087
0
0

2088
0
0

2089
0
0

2090
0
0

2091
0
0

2092
0
0

2093
0
0

2094
0
0

2095
0
0

871
97

784
87

706
78

635
71

571
63

514
57

463
51

417
46

375
42

337
37

Revenues / mcfe ($)


Revenues

11.95
1,157

12.18
1,061

12.42
973

12.66
893

12.90
819

13.15
752

13.41
690

13.67
633

13.93
581

14.20
533

Cash opex / mcfe ($)


Opex

4.70
455

4.80
418

4.89
384

4.99
352

5.09
323

5.19
297

5.30
272

5.40
250

5.51
230

5.62
211

EBITDA
Gross Capex
Drilling Carry Realization
Cash flow
Cash tax

701
0
0
701
-246

643
0
0
643
-225

590
0
0
590
-206

541
0
0
541
-189

496
0
0
496
-174

455
0
0
455
-159

417
0
0
417
-146

383
0
0
383
-134

351
0
0
351
-123

322
0
0
322
-113

456
0

418
0

383
0

352
0

322
0

296
0

271
0

249
0

228
0

209
0

Capex
Reserves Developed (bcfe)
Proved Developed Reserves (bcfe)
Production (bcfe)

After tax cash flow

A-9

CONSOL Energy - Shale Gas


Discounted Cash Flow
Base Case
($M unless otherwise noted)

2096
0
0

2097
0
0

2098
0
0

2099
0
0

2100
0
0

2101
0
0

2102
0
0

2103
0
0

2104
0
0

2105
0
0

304
34

273
30

246
27

221
25

199
22

179
20

161
18

145
16

131
15

118
13

Revenues / mcfe ($)


Revenues

14.48
489

14.76
448

15.05
411

15.34
377

15.64
346

15.95
318

16.26
292

16.58
268

16.90
246

17.23
225

Cash opex / mcfe ($)


Opex

5.73
193

5.85
178

5.96
163

6.08
150

6.20
137

6.33
126

6.46
116

6.58
106

6.72
98

6.85
90

EBITDA
Gross Capex
Drilling Carry Realization
Cash flow
Cash tax

295
0
0
295
-103

271
0
0
271
-95

248
0
0
248
-87

228
0
0
228
-80

209
0
0
209
-73

192
0
0
192
-67

176
0
0
176
-62

161
0
0
161
-56

148
0
0
148
-52

136
0
0
136
-47

192
0

176
0

161
0

148
0

136
0

125
0

114
0

105
0

96
0

88
0

Capex
Reserves Developed (bcfe)
Proved Developed Reserves (bcfe)
Production (bcfe)

After tax cash flow

A-10

CONSOL Energy - Shale Gas


Discounted Cash Flow
Base Case
($M unless otherwise noted)

2106
0
0

2107
0
0

2108
0
0

2109
0
0

2110
0
0

2111
0
0

2112
0
0

2113
0
0

2114
0
0

2115
0
0

106
12

95
11

86
10

77
9

69
8

63
7

56
7

49
7

42
7

35
7

Revenues / mcfe ($)


Revenues

17.57
207

17.91
190

18.26
174

18.62
160

18.98
147

19.35
134

19.73
137

20.12
140

20.52
143

20.92
145

Cash opex / mcfe ($)


Opex

6.99
82

7.13
75

7.27
69

7.41
64

7.56
58

7.71
54

7.87
55

8.03
56

8.19
57

8.35
58

EBITDA
Gross Capex
Drilling Carry Realization
Cash flow
Cash tax

124
0
0
124
-44

114
0
0
114
-40

105
0
0
105
-37

96
0
0
96
-34

88
0
0
88
-31

81
0
0
81
-28

82
0
0
82
-29

84
0
0
84
-29

86
0
0
86
-30

87
0
0
87
-31

81
0

74
0

68
0

62
0

57
0

53
0

54
0

55
0

56
0

57
0

Capex
Reserves Developed (bcfe)
Proved Developed Reserves (bcfe)
Production (bcfe)

After tax cash flow

A-11

CONSOL Energy - Shale Gas


Discounted Cash Flow
Base Case
($M unless otherwise noted)

2116
0
0

2117
0
0

2118
0
0

2119
0
0

2120
0
0

28
7

21
7

14
7

7
7

0
7

Revenues / mcfe ($)


Revenues

21.33
148

21.75
151

22.17
154

22.61
157

23.05
160

Cash opex / mcfe ($)


Opex

8.52
59

8.69
60

8.86
62

9.04
63

9.22
64

89
0
0
89
-31

91
0
0
91
-32

93
0
0
93
-32

94
0
0
94
-33

96
0
0
96
-34

58
0

59
0

60
0

61
0

62
0

Capex
Reserves Developed (bcfe)
Proved Developed Reserves (bcfe)
Production (bcfe)

EBITDA
Gross Capex
Drilling Carry Realization
Cash flow
Cash tax
After tax cash flow

A-12

CONSOL Energy - Legacy Gas


Discounted Cash Flow Key Assumptions & Statistics
Base Case
PV of cash flows ($B)
Cost of Capital
WACC (a)

$0.9

8.4%

Capital Spending Inputs


Assumes a blow down of existing proved
developed reserves with no further capital
spending (b)

Development Data (B)


Starting capex
Peak capex
Total tcfe developed
Total tcfe produced

Commodity Assumptions
Current curve strip prices
Natural gas (2027)
Oil (2023)
Natural gas Terminal Growth Rate (c)

Coalbed Methane Opex / mcfe


Oil & gas production (d)(e)
Production taxes (e)
SG&A/Corp/Other (e)(f)
Opex / mcfe terminal growth rate (c)

$1.57
3.7%
$0.22
2.0%

Other Gas Opex / mcfe


Oil & gas production (d)(e)
Production taxes (e)
SG&A/Corp/Other (e)(f)
Opex / mcfe terminal growth rate (c)

$1.80
5.0%
$0.22
2.0%

LT Production as % of mcfe
Natural gas
NGL
Oil

$4.23
$59
2.0%

99%
0%
1%

Cash tax rate

$0.0
$0.0
0.0
1.6

35%

Notes:
Includes Coalbed Methane and Other Gas segments.
Estimated % of mcfe mix of Natural Gas and Oil based on recent segment level production mix.
Legacy gas production is forecast to decline until reported proven developed reserves (as of 12/31/14) are exhausted.
Cash tax calculation based on current & future estimated net operating loss carryforwards.
Incorporates pro rata share of CONSOL in place gas hedges.
Assumed differentials are based on recent results adjusted for a modest improvement over the next several years as additional takeaway capacity comes online.
(a) Using CONSOL corporate WACC calculated in Appendix A-1.
(b) To the extent CONSOL spends incremental capital in its legacy gas business we would expect it to generate incremental production and EBITDA to what is modelled herein.
(c) Terminal growth rate starting in 2028.
(d) Includes transportation, gathering and compression, lifting and direct administrative and selling segment level costs.
(e) Weighted average cost structure from 2016-2027.
(f) Incorporates pro rata net expenses from the Other Gas segment, not directly related to Other Gas segment production.
This includes G&A, corporate, net unutilized FT expense, net gas royalty income, net purchased gas income, exploration and other costs and other income.

B-1

CONSOL Energy - Legacy Gas


Discounted Cash Flow
Base Case
($M unless otherwise noted)

Capex
Reserves Developed (bcfe)

2016
0
0

2017
0
0

2018
0
0

2019
0
0

2020
0
0

2021
0
0

2022
0
0

2023
0
0

2024
0
0

2025
0
0

Proved Developed Reserves (bcfe)


Production (bcfe)

1,472
96

1,379
93

1,290
90

1,203
86

1,120
83

1,041
80

964
76

891
73

820
70

753
68

Revenues / mcfe ($)


Revenues

2.68
257

2.67
248

2.73
245

2.82
243

2.94
244

3.08
245

3.23
247

3.39
249

3.55
250

3.70
251

Cash opex / mcfe ($)


Opex

2.02
194

2.02
187

1.99
178

1.96
169

1.96
163

1.97
157

1.97
151

1.98
145

1.98
140

1.99
134

EBITDA
Capex
Cash flow
Cash tax

64
0
64
0

61
0
61
0

67
0
67
0

74
0
74
0

81
0
81
0

88
0
88
0

96
0
96
0

104
0
104
-5

110
0
110
-6

116
0
116
-7

After tax cash flow

64
14

61
14

67
16

74
19

81
21

88
23

96
25

98
22

104
23

109
24

B-2

CONSOL Energy - Legacy Gas


Discounted Cash Flow
Base Case
($M unless otherwise noted)

2026
0
0

2027
0
0

2028
0
0

2029
0
0

2030
0
0

2031
0
0

2032
0
0

2033
0
0

2034
0
0

2035
0
0

Proved Developed Reserves (bcfe)


Production (bcfe)

688
65

625
62

566
59

510
56

456
53

405
51

357
48

311
46

268
44

226
41

Revenues / mcfe ($)


Revenues

3.85
250

3.99
249

4.07
241

4.16
234

4.25
227

4.34
220

4.43
214

4.52
207

4.61
201

4.71
195

Cash opex / mcfe ($)


Opex

1.99
129

1.99
124

2.03
120

2.07
116

2.11
113

2.15
109

2.19
106

2.24
103

2.28
99

2.33
96

EBITDA
Capex
Cash flow
Cash tax

121
0
121
-8

125
0
125
-22

121
0
121
-23

118
0
118
-23

114
0
114
-22

111
0
111
-22

108
0
108
-22

105
0
105
-22

102
0
102
-21

99
0
99
-21

After tax cash flow

113
24

103
25

98
24

95
23

92
23

89
22

86
21

83
20

80
20

78
19

Capex
Reserves Developed (bcfe)

B-3

CONSOL Energy - Legacy Gas


Discounted Cash Flow
Base Case
($M unless otherwise noted)

2036
0
0

2037
0
0

2038
0
0

2039
0
0

2040
0
0

2041
0
0

2042
0
0

2043
0
0

2044
0
0

2045
0
0

Proved Developed Reserves (bcfe)


Production (bcfe)

187
39

161
26

151
10

141
9

133
9

124
8

116
8

108
8

101
7

94
7

Revenues / mcfe ($)


Revenues

4.81
189

4.92
129

5.09
50

5.20
49

5.30
47

5.41
46

5.52
45

5.63
43

5.74
42

5.86
41

Cash opex / mcfe ($)


Opex

2.37
93

2.46
65

2.71
27

2.77
26

2.82
25

2.88
24

2.94
24

2.99
23

3.05
22

3.12
22

96
0
96
-21

65
0
65
-15

24
0
24
-6

23
0
23
-6

22
0
22
-6

21
0
21
-6

21
0
21
-6

20
0
20
-6

20
0
20
-5

19
0
19
-5

75
18

50
18

17
17

17
17

16
16

16
16

15
15

15
15

14
14

14
14

Capex
Reserves Developed (bcfe)

EBITDA
Capex
Cash flow
Cash tax
After tax cash flow

B-4

CONSOL Energy - Legacy Gas


Discounted Cash Flow
Base Case
($M unless otherwise noted)

2046
0
0

2047
0
0

2048
0
0

2049
0
0

2050
0
0

2051
0
0

2052
0
0

2053
0
0

2054
0
0

2055
0
0

88
7

81
6

75
6

70
6

64
5

59
5

54
5

50
5

46
4

41
4

Revenues / mcfe ($)


Revenues

5.97
39

6.09
38

6.21
37

6.34
36

6.47
35

6.60
34

6.73
33

6.86
32

7.00
31

7.14
30

Cash opex / mcfe ($)


Opex

3.18
21

3.24
20

3.31
20

3.37
19

3.44
18

3.51
18

3.58
17

3.65
17

3.72
16

3.80
16

EBITDA
Capex
Cash flow
Cash tax

18
0
18
-5

18
0
18
-5

17
0
17
-5

17
0
17
-5

16
0
16
-5

16
0
16
-5

15
0
15
-4

15
0
15
-4

14
0
14
-4

14
0
14
-4

After tax cash flow

13
13

13
13

12
12

12
12

12
12

11
11

11
11

10
10

10
10

10
10

Capex
Reserves Developed (bcfe)
Proved Developed Reserves (bcfe)
Production (bcfe)

B-5

CONSOL Energy - Legacy Gas


Discounted Cash Flow
Base Case
($M unless otherwise noted)

2056
0
0

2057
0
0

2058
0
0

2059
0
0

2060
0
0

2061
0
0

2062
0
0

2063
0
0

2064
0
0

2065
0
0

37
4

34
4

30
4

27
3

24
3

21
3

18
3

15
3

12
3

10
2

Revenues / mcfe ($)


Revenues

7.29
29

7.43
28

7.58
27

7.73
26

7.89
25

8.05
25

8.21
24

8.37
23

8.54
22

8.71
22

Cash opex / mcfe ($)


Opex

3.87
15

3.95
15

4.03
14

4.11
14

4.19
13

4.28
13

4.36
13

4.45
12

4.54
12

4.63
11

13
0
13
-4

13
0
13
-4

13
0
13
-4

12
0
12
-4

12
0
12
-4

11
0
11
-3

11
0
11
-3

11
0
11
-3

10
0
10
-3

10
0
10
-3

9
9

9
9

9
9

9
9

8
8

8
8

8
8

8
8

7
7

7
7

Capex
Reserves Developed (bcfe)
Proved Developed Reserves (bcfe)
Production (bcfe)

EBITDA
Capex
Cash flow
Cash tax
After tax cash flow

B-6

CONSOL Energy - Legacy Gas


Discounted Cash Flow
Base Case
($M unless otherwise noted)

2066
0
0

2067
0
0

2068
0
0

2069
0
0

2070
0
0

7
2

5
2

3
2

1
2

0
1

Revenues / mcfe ($)


Revenues

8.89
21

9.06
20

9.25
20

9.43
19

9.62
10

Cash opex / mcfe ($)


Opex

4.72
11

4.82
11

4.91
10

5.01
10

5.11
5

10
0
10
-3

10
0
10
-3

9
0
9
-3

9
0
9
-3

5
0
5
-1

7
7

7
7

6
6

6
6

3
3

Capex
Reserves Developed (bcfe)
Proved Developed Reserves (bcfe)
Production (bcfe)

EBITDA
Capex
Cash flow
Cash tax
After tax cash flow

B-7

CONSOL Energy - Thermal Coal


Discounted Cash Flow Key Assumptions & Statistics
Base Case
PV of cash flows ($B)

Cost of Capital
WACC (a)

$3.0

8.4%

Commodity Assumptions (b)


2016-2024 Realized Price CAGR
LT Price (starting in 2024)
Development Data
Starting Reserves (tons in millions)
Annual Production (tons in millions)
Final Year of Production
Maintenance Capex per ton
Opex / ton
Operating Costs
Direct Admin & Selling
Royalty/Production Taxes
G&A, Corp. & Other Income, Net
Cash tax rate

1%
$55

762
26
2045
$6

$30
$1
$2
$1
25%

Notes:
Includes CONSOL's Pennsylvania Operations segment. Pennsylvania Operations include the Company's Bailey, Enlow Fork and Harvey Mines.
(a) Using CONSOL corporate WACC calculated in Appendix A-1.
(b) Reflects mix of contracted and open tons in 2016-2017, with open prices increasing modestly from 2018 to 2024.

C-1

CONSOL Energy - Thermal Coal


Discounted Cash Flow
Base Case
($M unless otherwise noted)

Reserves Remaining (tons in millions)


Production (tons in millions)
Revenues / ton ($)
Revenues
Mine Level Cash Opex / ton ($)
Mine Level Cash Opex
G&A, Corp. & Other Income, Net / ton ($)
G&A, Corp. & Other Income, Net
EBITDA
Capex
Cash Flow
Cash tax
After tax cash flow

C-2

2016
736

2017
710

2018
684

2019
658

2020
632

2021
606

2022
580

2023
554

2024
528

2025
502

26

26

26

26

26

26

26

26

26

26

50
1,310

51
1,315

49
1,281

50
1,294

51
1,319

52
1,348

53
1,381

54
1,414

55
1,430

55
1,430

33
858

33
858

33
858

33
858

33
858

33
858

33
858

33
858

33
858

33
858

1
28

1
28

1
28

1
28

1
28

1
28

1
28

1
28

1
28

1
28

423
-143
280
-58

429
-143
286
-59

394
-143
251
-51

408
-143
265
-54

433
-143
290
-60

462
-143
319
-68

494
-143
351
-76

528
-143
385
-84

544
-143
401
-88

544
-143
401
-88

222

227

200

210

229

251

276

301

312

312

CONSOL Energy - Thermal Coal


Discounted Cash Flow
Base Case
($M unless otherwise noted)

Reserves Remaining (tons in millions)


Production (tons in millions)
Revenues / ton ($)
Revenues
Mine Level Cash Opex / ton ($)
Mine Level Cash Opex
G&A, Corp. & Other Income, Net / ton ($)
G&A, Corp. & Other Income, Net
EBITDA
Capex
Cash Flow
Cash tax
After tax cash flow

C-3

2026
476

2027
450

2028
424

2029
398

2030
372

2031
346

2032
320

2033
294

2034
268

2035
242

26

26

26

26

26

26

26

26

26

26

55
1,430

55
1,430

55
1,430

55
1,430

55
1,430

55
1,430

55
1,430

55
1,430

55
1,430

55
1,430

33
858

33
858

33
858

33
858

33
858

33
858

33
858

33
858

33
858

33
858

1
28

1
28

1
28

1
28

1
28

1
28

1
28

1
28

1
28

1
28

544
-143
401
-88

544
-143
401
-88

544
-143
401
-88

544
-143
401
-88

544
-143
401
-88

544
-143
401
-88

544
-143
401
-88

544
-143
401
-88

544
-143
401
-88

544
-143
401
-88

312

312

312

312

312

312

312

312

312

312

CONSOL Energy - Thermal Coal


Discounted Cash Flow
Base Case
($M unless otherwise noted)

Reserves Remaining (tons in millions)


Production (tons in millions)
Revenues / ton ($)
Revenues
Mine Level Cash Opex / ton ($)
Mine Level Cash Opex
G&A, Corp. & Other Income, Net / ton ($)
G&A, Corp. & Other Income, Net
EBITDA
Capex
Cash Flow
Cash tax
After tax cash flow

C-4

2036
216

2037
190

2038
164

2039
138

2040
112

2041
86

2042
60

2043
34

2044
8

2045
0

26

26

26

26

26

26

26

26

26

55
1,430

55
1,430

55
1,430

55
1,430

55
1,430

55
1,430

55
1,430

55
1,430

55
1,430

55
459

33
858

33
858

33
858

33
858

33
858

33
858

33
858

33
858

33
858

33
276

1
28

1
28

1
28

1
28

1
28

1
28

1
28

1
28

1
28

1
6

544
-143
401
-88

544
-143
401
-88

544
-143
401
-88

544
-143
401
-88

544
-143
401
-88

544
-143
401
-88

544
-143
401
-88

544
-143
401
-88

544
-143
401
-88

177
-46
131
-29

312

312

312

312

312

312

312

312

312

102

CONSOL Energy - Met Coal and Other


Discounted Cash Flow Key Assumptions & Statistics
Base Case
PV of cash flows ($B)

Cost of Capital
WACC (a)

$0.5

8.4%

Met (VA Ops) Commodity Assumptions


Short term Met Price (2016-2018)
Long term Met Price (starting in 2019)
Met (VA Ops) Development Data
Starting Reserves (tons in millions)
Annual Production 2016-2017 (tons in millions)
Annual Production starting in 2018 (tons in millions)
Final Year of Production
Maintenance Capex per ton
Met (VA Ops) Opex / ton
Operating Costs
Direct Admin & Selling
Royalty/Production Taxes
G&A, Corp. & Other Income, Net
Cash tax rate

$51
$65

203
4
7
2046
$6

$39
$1
$3
$3
25%

Notes:
Includes CONSOL's Virginia Operations segment, Other Coal segment and Other Division (unallocated corporate activities).
Virginia Operations segment includes the Company's Buchanan mine.
Other Coal segment mine level activities include the Company's Miller Creek complex.
Other Coal segment non-mine level activities includes purchased coal, terminal operations, freight, rental income, royalty income, certain gain on sale of assets, right of way,
closed and idle mine costs, coal reserve holding costs, lease rental expense, certain pension and opeb plan expenses and other income and expenses.
Other Division activities include certain bank fees and other unallocated expenses.
(a) Using CONSOL corporate WACC calculated in Appendix A-1.

D-1

CONSOL Energy - Met Coal and Other


Discounted Cash Flow
Base Case
($M unless otherwise noted)

2016
200

2017
196

2018
189

2019
182

2020
176

2021
169

2022
162

2023
155

2024
149

2025
142

VA Ops Revenues / ton ($)


VA Ops Revenues

51
193

51
193

51
347

65
439

65
439

65
439

65
439

65
439

65
439

65
439

VA Ops Mine Level Cash Opex / ton ($)


VA Ops Mine Level Cash Opex

44
164

44
164

44
294

44
294

44
294

44
294

44
294

44
294

44
294

44
294

VA Ops G&A/Corp/Other Income, Net / ton ($)


G&A/Corp/Other Income, Net

3
13

3
13

3
23

3
23

3
23

3
23

3
23

3
23

3
23

3
23

VA Ops EBITDA

16

16

30

121

121

121

121

121

121

121

Other Coal Ops Production (tons in millions)


Other Coal Ops Mine Level EBITDA

2
11

2
16

2
16

2
16

2
16

2
16

2
16

2
16

2
16

0
0

Other Coal Segment Non-Mine Level EBITDA

-35

-29

-23

-17

-11

-5

13

Other Division EBITDA

-18

-14

-10

-10

-10

-10

-10

-10

-10

-10

Total EBITDA
Total Capex
Cash Flow
Cash tax

-25
-35
-60
26

-9
-35
-44
22

13
-53
-39
25

111
-53
58
0

117
-53
64
-1

123
-53
70
-3

129
-53
76
-4

135
-53
82
-6

141
-53
88
-7

111
-41
70
-9

After tax cash flow

-34

-22

-15

58

63

67

72

76

81

62

VA Ops Reserves Remaining (tons in millions)


VA Ops Production (tons in millions)

D-2

CONSOL Energy - Met Coal and Other


Discounted Cash Flow
Base Case
($M unless otherwise noted)

2026
135

2027
128

2028
122

2029
115

2030
108

2031
101

2032
95

2033
88

2034
81

2035
74

VA Ops Revenues / ton ($)


VA Ops Revenues

65
439

65
439

65
439

65
439

65
439

65
439

65
439

65
439

65
439

65
439

VA Ops Mine Level Cash Opex / ton ($)


VA Ops Mine Level Cash Opex

44
294

44
294

44
294

44
294

44
294

44
294

44
294

44
294

44
294

44
294

3
23

3
23

3
23

3
23

3
23

3
23

3
23

3
23

3
23

3
23

121

121

121

121

121

121

121

121

121

121

Other Coal Ops Production (tons in millions)


Other Coal Ops Mine Level EBITDA

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

Other Coal Segment Non-Mine Level EBITDA

Other Division EBITDA

-10

-10

-10

-10

-10

-10

-10

-10

-10

-10

Total EBITDA
Total Capex
Cash Flow
Cash tax

111
-41
70
-9

111
-41
70
-9

111
-41
70
-9

111
-41
70
-9

111
-41
70
-9

111
-41
70
-9

111
-41
70
-9

111
-41
70
-9

111
-41
70
-9

111
-41
70
-9

62

62

62

62

62

62

62

62

62

62

VA Ops Reserves Remaining (tons in millions)


VA Ops Production (tons in millions)

VA Ops G&A/Corp/Other Income, Net / ton ($)


G&A/Corp/Other Income, Net
VA Ops EBITDA

After tax cash flow

D-3

CONSOL Energy - Met Coal and Other


Discounted Cash Flow
Base Case
($M unless otherwise noted)

2036
68

2037
61

2038
54

2039
47

2040
41

2041
34

2042
27

2043
20

2044
14

2045
7

2046
0

VA Ops Revenues / ton ($)


VA Ops Revenues

65
439

65
439

65
439

65
439

65
439

65
439

65
439

65
439

65
439

65
439

65
439

VA Ops Mine Level Cash Opex / ton ($)


VA Ops Mine Level Cash Opex

44
294

44
294

44
294

44
294

44
294

44
294

44
294

44
294

44
294

44
294

44
294

3
23

3
23

3
23

3
23

3
23

3
23

3
23

3
23

3
23

3
23

3
23

121

121

121

121

121

121

121

121

121

121

121

Other Coal Ops Production (tons in millions)


Other Coal Ops Mine Level EBITDA

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

0
0

Other Coal Segment Non-Mine Level EBITDA

Other Division EBITDA

-10

-10

-10

-10

-10

-10

-10

-10

-10

-10

-10

Total EBITDA
Total Capex
Cash Flow
Cash tax

111
-41
70
-9

111
-41
70
-9

111
-41
70
-9

111
-41
70
-9

111
-41
70
-9

111
-41
70
-9

111
-41
70
-9

111
-41
70
-9

111
-41
70
-9

111
-41
70
-9

111
-41
70
-9

62

62

62

62

62

62

62

62

62

62

62

VA Ops Reserves Remaining (tons in millions)


VA Ops Production (tons in millions)

VA Ops G&A/Corp/Other Income, Net / ton ($)


G&A/Corp/Other Income, Net
VA Ops EBITDA

After tax cash flow

D-4