BMO Metals and Mining Conference February 25-26, 2013
Cautionary Language This presentation contains statements, estimates and projections which are forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934, as amended). Such statements include estimates of reserves and resources, projections and estimates concerning the timing and rates of return of future projects, and our future production, revenues, income and capital spending. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those statements, estimates and projections. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of future actual results. Factors that could cause future actual results to differ from the forward-looking statements are described in detail under the captions "Forward Looking Statements" and "Risk Factors" in CONSOL Energy Inc. s annual report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission (SEC), as updated by any subsequent Form 10-Qs. The forwardlooking statements in this presentation speak only as of the date of this presentation; we disclaim any obligation to update the statements, and we caution you not to rely on them unduly. The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible oil and gas reserves that a company anticipates as of a given date to be economically and legally producible and deliverable by application of development projects to known accumulations. We may use certain terms in this press release, such as EUR (estimated ultimate recovery), unproved reserves and total resource potential, that the SEC's rules strictly prohibit us from including in filings with the SEC. These measures are by their nature more speculative than estimates of reserves prepared in accordance with SEC definitions and guidelines and accordingly are less certain. We also note that the SEC strictly prohibits us from aggregating proved, probable and possible reserves in filings with the SEC due to the different levels of certainty associated with each reserve category. Except for proved reserve data, the information this presentation is based on a summary review of the title to the gas rights we hold, as well as a summary review of the title to the coal from which many of our coalbed methane rights derive. As is customary in the gas industry, prior to the commencement of gas drilling operations on our properties, we conduct a thorough title examination and perform curative work with respect to significant defects. We are typically responsible for curing any title defects at our expense. This curative work may include the acquisition of additional property rights in order to perfect our ownership for development and production of the gas estate. This presentation does not constitute an offer to sell or a solicitation of offers to buy securities of CONSOL Energy Inc. 2
CONSOL Energy Overview The Leading Diversified Fuel Producer in the Eastern United States Ticker: CNX Headquartered in Pittsburgh, Pennsylvania Company Founded in 1860 Approx. 9,000 Employees Market Cap = $7.8 Billion (2) 2012 Revenue = $5.4 Billion (1) As of February 19, 2013. 3
CONSOL Energy Overview Core Values Safety In 2012, CONSOL s Coal Division saw safety exceptions drop 10%, from 150 to 134 In 2012, CONSOL s Gas Division worked the entire year without having recorded a lost-time incident CONSOL has invested approximately $1.2 billion since 2006 on coal-related safety projects Commitment to Absolute Zero Compliance Coal and Gas Divisions saw an improvement in compliance of 11% and 53%, respectively, in 2012 when compared to 2011 Corporate Responsibility Report : http://consolenergy.com/corporateresponsibilityreport/ Continuous Improvement Rebalancing portfolio: Approximately $350 million in asset sales for 2012 Production Average drilling lateral length increase and average cost per stage decrease Record gas production in 2012 Cost Improved coal costs in Q4 2012 4
Key Points Summary Since 2011, CONSOL generated >$1B in GAAP net income and $2.3B in operating cash flow CONSOL has executed at a high and consistent level both in both good and challenging times High quality Tier 1 energy assets - High quality low-vol coal - Versatile high-vol and high-btu thermal coal - In gas, our coalbed methane - Marcellus shale position - Utica shale position Organic production growth and expansion of our product mix in both coal and gas - Expect 5 million tons per year with the BMX Mine that will open in about 12 months - Gas production continues to grow at 8-15% per year - New potential in oil and liquids CONSOL s financial strength remains solid - Approximately $2.4 billion in liquidity - Expected net investment in 2013 around $850 million CONSOL should be a core holding for every energy investor 5
CONSOL Energy Overview Net (Decrease) / Increase in Cash - $MM Goal is to maintain our strong liquidity position Year Ending Y-to-Y Total 2011-2012 2011 Change 2012 Revenue - Outside $4,826 $5,661 ($835) $10,487 Net Income $388 $632 ($244) $1,021 Net Cash Provided by Operations $728 $1,528 ($800) $2,256 Net Investment (1) ($928) ($634) ($294) ($1,562) Proceeds From/(Payments on) Short-Term Debt (2) $5 ($496) $501 ($491) Dividends Paid (3) ($142) ($96) ($46) ($238) Other ($17) $41 ($58) $24 Net (Decrease)/Increase in Cash ($354) $343 ($697) ($11) Source: Company filings. (1) Net investment is defined as total capital expenditures less proceeds from asset sales. (2) Includes restricted cash. (3) Accelerated the declaration and payment of the dividend that shareholders normally would have received in February 2013. 6
CONSOL Energy Overview 2013 Capital Budget Expect annual coal investments to approach maintenance-of-production levels following BMX completion Assumes no carry from Noble for drilling in Marcellus, which is dependent on natural gas prices being at or above $4.00 per MMBtu for three consecutive months 2013 Net Investment Details ($ MM) Low High Coal Operations $410 $520 Gas Operations (1) $835 $935 Water Operations $45 $50 Total CapEx $1,290 $1,505 Less: Asset Sales (2) ($455) ($640) Net Investment $835 $865 (1) These figures are net of approximately $100 million in drilling carry from Hess Corporation for drilling in the Ohio Utica Shale. (2) Includes final annual installment of $328 million from Noble Energy. 7
CONSOL Energy Overview CONSOL Cost Metrics (per Mcfe) $6.0 Gas: Operating Costs per Mcfe (in US Dollars) $5.5 $5.0 $4.5 $4.0 $3.5 $3.0 $2.5 $2.0 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 CBM Marcellus Shallow Oil & Gas (per ton) $58 Active Coal Division (in US Dollars) $56 $54 $52 $50 $48 $46 $44 $42 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Quarterly average costs per ton Annual average costs per ton Source: Company filings. 8
Operations Overview Coal Why CNX Coal? CONSOL is participating in the growth of world coal markets Low-cost mines Dual rail service from Pittsburgh seam mines to Baltimore 100%-owned Baltimore terminal, with capacity increasing to 16 million tons Boots on the ground globally, through marketing partner X-Coal CONSOL ships to four continents In-house R&D lab with sensor-equipped coke oven 9
Operations Overview Coal Strength in Market Diversity CONSOL Ships To Four Continents Export Forecast For 2013: 5-10 MTs 10
Tons (MM) Operations Overview Coal Our Domestic Market Remains Solid PJM Coal Inventory 30 Trailing 12 Months 5 Year Average 25 20 15 10 5 - Feb 12 May 12 Aug 12 Nov 12 Source: EIA, PIRA, and CONSOL Analysis 11
Operations Overview Coal Marketing 1Q13 and 2013 Forecasts Sales Tons by Product Year 2013 3% 7% 1% 89% Thermal Low Vol High Vol Mid Vol 1st Quarter 2013 Year 2013 1st Quarter 2012 Year 2012 Thermal 11.9 50.1 13.2 49.2 Low Vol 0.9 3.9 1.0 3.7 High Vol 1.1 1.8 1.0 3.6 Mid Vol 0.1 0.5 0.0 0.0 Total 14.0 56.3 15.2 56.5 (1) (1) Includes revenue from the sale of 0.1 million tons of coal which were recovered during the reclamation process at idled facilities for the year ended December 31, 2012. 12
Operations Overview Coal BMX Mine Overview BMX Mine completion: mid Q1 2014 - Lowest cost CNX mine 13
Operations Overview Gas Gas Operations Summary Marcellus Shale Production has more than doubled in 2012 to ~135 MMcfe/d; 64 wells drilled and 51 wells completed in 2012 Well results better than anticipated Well and project costs are decreasing Noble Partner aligned and implementing best practices Utica Drilled 8 and completed 4 wells in 2012 Noble County: NBL 16A well completed with 16 stages and tested 12.0MMcfd and 768 BCPD Planning to drill 27 gross wells for 2013: - CONSOL expects to drill 11 wells, all in Noble County - Hess plans to drill 16 wells 14
Operations Overview Gas Drilling Results and Forecast - Adding Balance With Liquids Focus Gross Wells Drilled By Formation From 2010 Through 2013E Formation Region 2010 2011 2012 2013E Coalbed Methane Virginia 181 214 44 63 Total Shales: (Gross) 24 78 99 148-153 Marcellus Shales Central PA 4 19 13 5 Southwest PA (incl. NBL) 20 50 70 108-113 West Virginia 0 9 6 8 Totals 24 78 89 121-126 Utica Shale (incl. HES) 0 0 10 27 Shallow and Other 129 36 25 13 Totals (net to CONSOL) 334.0 328.0 118.5 150.0-152.5 % Shales Wells: Dry gas target 100% 100% 65% 24% % Shales Wells: Liquids target 0% 0% 35% 76% Total Production (Bcfe) 128 154 156 170-180 Total Capital ($MM) $420 $662 $528 $835-935 (1) (1) These figures are net of approximately $100 million in drilling carry from Hess Corporation for drilling in the Ohio Utica Shale. 15
Operations Overview Gas Marcellus Drilling and Completions Summary CNX Operated Wells Drilling Summary by Year 2011 2012 Wells TD'd 78 64 Lateral Ft 300,466' 328,428' Total MD 922,264' 794,098' Average Lateral 3,853' 5,514' Average TMD 11,824' 13,280' Average Drill Cost $180/ft $220/ft Average Lateral Cost $552/ft $529/ft Completions Summary by Year 2011 2012 Wells Completed 57 51 Lateral Ft Completed 188,800' 270,256' Total Stages 684 940 Average Stg/Well 12 18 Average Stage Cost $205k $184k 16
Operations Overview Gas 2012-2013 Marcellus Shale Drilling Program: 89 Wells OH PA NBL Operated 176,000 Gross Acres Large Acreage Position within Marcellus Fairway 87% of Acreage HBP Allowing for Development Flexibility 50% of 628,000 gross acres Average NRI of ~88% WV CONSOL Operated 452,000 Gross Acres MD Wet Gas Dry Gas VA CONSOL Wells Drilled: Dry Gas 2012 2013E Southwest PA 45 23 Central PA 13 5 Northern W.VA 6 8 CONSOL Marcellus Total 64 36 Noble Wells Drilled: Wet Gas 2012 2013E W.VA 25 85-90 17
Operations Overview Gas Price Uplift for Wet Gas: Nearly Doubles Value to Over $7 per Mcf of Wellhead Gas $/Mcf 8 $7.10 6 15 Bbl/MMcf condensate at 80% WTI 4 $3.60 50 Bbl/MMcf NGLs at 55% WTI 2 1,050 MMBtu 2% shrink 1,130 MMBtu residue gas (includes ethane) 10% shrink 0 Dry Gas Wet Gas Gas NGL Condensate Note: Calculations based on NG=$3.50/MMBtu and WTI=$90/Bbl. 18
Operations Overview Gas Ohio Utica Shale Acreage Update: Hess JV in the Ohio Utica Shale Core acres: ~70,000 gross acres; 35,000 net acres to CONSOL Core acres include the following counties: - Guernsey - Jefferson - Harrison - Belmont - Noble - Carroll Non-core acres: ~90,000 gross acres; 45,000 net acres to CONSOL 19
Operations Overview Gas A Leading Position in the Ohio Utica Shale CONSOL-Operated County Well Lateral Length Stages Results Tuscarawas TUSC 3A 5,020 17 400 Bbls of oil/day & 386 Mcfd gas TUSC 8A 7,568 24 Expected Completion: Q1 2013 Noble NBL 1A 4,394 14 10 BCPD & 9 MMcfd NBL 16A 4,793 16 768 BCPD & 12 MMcfd Portage PORT 2A 4,690 16 Completed but waiting on results Mahoning MAH 2A 2,785 9 MAH 7A 5,411 -- Expected Completion: Q2 2013 MAH 7C 5,290 -- Expected Completion: Q2 2013 Hess-Operated County Well Lateral Length Stages Results Harrison 1H-24 -- -- 1,056 BCPD & 13.9 MMcfd 1H-23 -- -- -- 1H-6 -- -- -- Utica 2013: 27 gross wells planned CONSOL plans to drill 11 wells, all in Noble County Hess plans to drill 16 joint horizontal wells Note: Results as of December 31, 2012. 20
Our Assets, Strategy, and People Create An Investment Opportunity Coal and gas operations are long-lived, low-cost, and provide solid growth Our well-capitalized assets and highly trained personnel provide more consistent operational execution Our emphasis on safety and compliance increases reliability Monetizing assets to drive shareholder value Executive management transition complete Balance sheet remains strong with $2.4 billion of liquidity 21
Appendix
Appendix: Key Highlights Asset Rich: Bringing $4.29 Billion in Value Forward Since 2010 In 2011, CONSOL sold the following assets for $3.94 billion (1) - Marcellus assets to Noble Energy - Utica assets to Hess Corporation - Royalty interest to Antero In 2012, we sold non-core, non-revenue producing assets for $350 million - Assets sold include: coal reserves and/or resources from Central Appalachia, the Powder River Basin, and western Canada In 2013, we are looking to: - Continue selling non-core, non-revenue producing assets - We have also begun a process to monetize some assets, such as Midstream, that we are currently operating but that supplement our core businesses - Our goal, when evaluating assets sales, is to enter into transactions that can narrow the gap between our share price and the value of all of our assets (1) Marcellus assets to Noble and Utica assets to Hess both include expected aggregate payments of cash and carry; Utica assets to Hess are based on recent adjustments with respect to record title issues on 36,000 acres: $593 million less $146 million (the allocated transaction value) equals $447 million. 23
Appendix: Management Transition Complete The New Team Bill Lyons and Bob Pusateri: Dedicated leaders that have successfully navigated the company through tumultuous times - Bill has been steadfast in maintaining our financial discipline through the cycles - Bob has expanded our global sales footprint in recent years Jerry Richey has also been a key member of CONSOL s senior management team - Jerry served as a trusted advisor, assembled a first rate legal team, and brought a sharper focus on ethics to the company From a financial, market, and legal perspective, CONSOL continues to be in very good shape David Khani will be assuming the role as Chief Financial Officer - CONSOL will benefit from his vast industry expertise - David is committed to increasing shareholder value Jim Grech is the Chief Commercial Officer - Jim is strengthening our internal view on global markets - Looking for innovative ways to partner with customers Steve Johnson is the Chief Legal Officer - Steve has performed in an exemplary manner for us at both CNX Gas and CONSOL - Steve has a proven track record of success as a key player in numerous major transactions 24
Appendix Revolving Credit Facilities Debt Covenants CONSOL Energy and CNX Gas currently maintain strong leverage ratios Both facilities are well within debt covenants CONSOL Energy Revolver: Limit December 31, 2012 Maximum Leverage Ratio > 4.75 to 1.0 2.50 to 1.0 Minimum Interest Coverage Ratio < 2.50 to 1.0 5.31 to 1.0 Senior Secured Leverage Ratio > 2.00 to 1.0 0.08 to 1.0 CNX Gas Revolver: Maximum Leverage Ratio > 3.50 to 1.0 0.54 to 1.0 Minimum Interest Coverage Ratio < 3.00 to 1.0 46.98 to 1.0 25
CONSOL Energy Overview Strong Liquidity Position of $2.4 Billion Cash on hand of $22 million Accounts receivable securitization and revolving credit facilities of over $2.3 billion Amount/ Amount Letters Amount December 31, 2012 ($MM) Capacity Drawn of Credit Available Cash and Cash Equivalents $22 $0 $0 $22 Accounts Receivable Securitization $200 $38 $162 $0 Revolving Credit Facilities $2,500 $0 $170 $2,330 TOTAL $2,722 $38 $333 $2,351 Note: Letters of Credit and Amount Available do not sum due to rounding. 26
Appendix Asset Sales 2011 Marcellus Shale JV with Noble Energy: $3.3 billion in expected aggregate payments of cash and carry 2011 Antero Resources ORRI sale: $193 million in cash 2011 Utica Shale JV with Hess Corporation: $447 (1) million in expected aggregate payments of cash and carry 2012 misc. asset sales: $54 million in cash 2012 sale of Youngs Creek reserves/resources: $170 million in cash, plus 8% royalty 2012 sale of coal assets in Alberta, Canada: $127 million for two separate transactions (1) Based on recent adjustments with respect to record title issues on 36,000 acres: $593 million less $146 million (the allocated transaction value) equals $447 million. 27