CNX Reports First Quarter Results and Provides Strategic Lon

|Apr 27|magazine99 min read

PITTSBURGH, April 27, 2020 /PRNewswire/ -- CNX Resources Corporation (NYSE: CNX) ("CNX" or "the company") reports the following financial results, which are in accordance with generally accepted accounting principles (GAAP) in the U.S.:

During the first quarter of 2020:

  • Reported a Net loss attributable to CNX shareholders of $329 million, or a loss of $1.76 per diluted share compared to a first quarter 2019 Net loss attributable to CNX shareholders of $87 million, or a loss of $0.44 per diluted share. The first quarter 2020 included non-cash impairment charges of $473 million for goodwill attributable to the midstream reporting unit and $62 million related to Southwestern Pennsylvania coalbed methane operations. First quarter 2020 and 2019 unrealized losses on commodity derivative instruments were $36 million and $154 million, respectively.
  • Net cash provided by operating activities was $267 million and capital expenditures were $152 million compared to first quarter 2019 Net cash provided by operating activities of $309 million and capital expenditures of $299 million.
  • Proceeds from asset sales were $14 million compared to $6 million for the first quarter of 2019.

First Quarter Highlights

  • Consolidated free cash flow (FCF)(a non-GAAP measure)(1) of $129 million, or an increase of 760% from the $15 million in the first quarter of 2019.
  • Received $55 million from restructuring portion of 2022-2024 NYMEX hedges.
  • Completed $175 million project financing for the Cardinal States Gathering (CSG) system at 6.5% interest rate.
  • Repurchased $71 million of senior secured 5.875% notes due in 2022, and following the end of the quarter, repurchased an additional $8 million of notes.
    • As of April 7, 2020, the company repurchased a total of $79 million of notes at an average discount to par of 85, which has allowed CNX to further de-lever.
  • Accelerated $51 million of our expected 2021 income tax refund into 2020, which the company expects to receive in the second half of 2020. This brings total expected tax refunds in 2020 to $115 million.

"Although the times may be unprecedented, CNX has remained steadfast in its philosophy and approach," commented Nicholas J. DeIuliis, president and CEO. "First and foremost, we focus on optimizing the long-term NAV per share of the company. Second, the best way we optimize NAV per share is to generate free cash flow and then allocate that cash into the best risk-adjusted internal rates of return. Currently, paying down debt across our various tranches looks compelling on the risk-reward spectrum when compared to other capital allocation alternatives."

Mr. DeIuliis continued, "This approach, over the past few years, during Q1, and today is what differentiates CNX. Our hedging, numerous strategic transactions, focus on being a low cost producer, reining in overhead spend and capital allocation have delivered a business model where CNX is a steady, substantial free cash flow generator over the next seven years, year in and year out. Our owners now enjoy the prospects of CNX generating $300 million in consolidated free cash flow(a) in 2020, $400 million in 2021, and over $3 billion cumulatively over the next seven years. Those cash flows, which are driven by a modest maintenance of production plan, will create a fortress balance sheet and allow for exciting capital allocation opportunities for years to come."

(1) The Non-GAAP financial measures referenced throughout are defined and reconciled under the caption "Non-GAAP Financial Measures" below.

Guidance Update:(a)

2020 Guidance Update:

In 2020, CNX is optimizing the production profile due to a combination of low NGL, condensate, and gas pricing this summer and higher pricing this winter, which optimizes NAV per share. CNX is updating 2020 production volumes to 490-530 Bcfe, compared to the previous guidance of 525-555 Bcfe. 

Adjusted EBITDAX(1)


Previous


Updated



2020E


2020E

($ in millions, except per share data)


Low


High


Low


High

Stand-Alone (Including Distributions)(2)


$765

-

$810


$715

-

$755

Consolidated


$885

-

$950


$830

-

$900


(1) Updated EBITDAX based on NYMEX forward strip as of April 21, 2020.

(2) Includes approximately $32 million of projected distributions from ownership interests in CNXM and

a $50 million payment associated with the IDR Elimination Transaction.


Capital Expenditures


Previous


Updated



2020E


2020E

($ in millions)


Low


High


Low


High

Drilling & Completion (D&C)


$360

-

$410


$330

-

$380

Non-D&C


$90

-

$100


$75

-

$85

Total Stand-Alone Capital


$450

-

$510


$405

-

$465

CNX Midstream LP Capital


$80

-

$100


$65

-

$85

Total Consolidated Capital


$530

-

$610


$470

-

$550

In 2020, CNX expects consolidated FCF(a) of approximately $300 million. Due to the CNXM distribution reduction, standalone adjusted EBITDAX(a) guidance decreased by $50 million; however, despite the distribution reduction, CNX was able to increase standalone FCF(a) expectations by $50 million. This FCF will be utilized to pay down debt. By year-end 2020, the company expects to only have approximately $350 million balance remaining on its outstanding 2022 senior notes, of which it will be easily addressed with additional expected future free cash flow before its maturity.  

2021 Guidance Update:

The decisions we make in 2020 as we manage production will positively impact 2021 results. We project 2021 to deliver the following results: production volumes of approximately 550 Bcfe, E&P stand-alone capital expenditures of approximately $400 million, consolidated capital expenditures of approximately $440 million, consolidated EBITDAX(a) of approximately $920 million, and consolidated FCF(a) of approximately $400 million. If 2021 gas prices strengthen, the company could produce approximately 600 Bcfe. The company anticipates that the bulk of the FCF in 2021, like 2020, will be used to reduce the company's absolute debt and leverage ratio. 

2022-2026 Guidance:

Following 2021, CNX expects to shift to a maintenance of production (MOP) plan in 2022-2026. Over this time period, the company expects average production volumes of approximately 560 Bcfe by turning-in-line 25 wells each year on average. CNX expects total E&P stand-alone capital expenditures in 2022-2026 to average approximately $270 million and consolidated capital expenditures to average approximately $300 million. This should generate expected annual consolidated FCF(a) for 2022-2026 that averages $500 million each year, or about $2.5 billion in total.

2020-2026 Cumulative:

Mr. DeIuliis concluded, "Q1's results and strong free cash flow were a harbinger of things to come. Going-forward activity pace and capital investment, largely driven by a maintenance of production approach, for the next seven years will leave years of core SWPA Marcellus and CPA Utica inventory remaining for post-2026 development. CNX expects to be free cash flow positive in each and every one of those seven years, with cumulative consolidated free cash flow(a) exceeding $3.0 billion. That free cash flow, when coupled with our ownership in the strategic and free cash flow positive CNXM midstream business, creates the basin's low cost producer, a best-in-class balance sheet and a powerful platform for NAV-per-share enhancing capital allocation."

(a) CNX is unable to provide a reconciliation of projected financial results contained in this release, including FCF, adjusted EBITDAX, fully burdened cash costs and other metrics to their respective comparable financial measure calculated in accordance with GAAP. This is due to our inability to calculate the comparable GAAP projected metrics, including operating income and total production costs, given the unknown effect, timing, and potential significance of certain income statement items.

First Quarter Financial Results:

The following table represents certain non-GAAP financial measures used by the company:1



Quarter


Quarter




Quarter


Quarter





Ended


Ended




Ended


Ended





March 31,
2020


March 31,
2019




March 31,
2020


March 31,
2019



(Dollars in millions,
except per share data)


Stand-alone


%
Increase/(Decrease)


Consolidated


%
Increase/(Decrease)

Adjusted Net Income


$

193



$

28



589.3

%


$

113



$

67



68.7

%

Adjusted EBITDAX


$

248



$

224



10.7

%


$

291



$

268



8.6

%

Capital Expenditures2


$

121



$

223



(45.7)

%






%


1The Non-GAAP financial measures in the table above are defined and reconciled to GAAP net income, under the caption "Non-GAAP Financial Measures" below.

2Capital expenditures exclude $31.4 million and $75.9 million of total capital investment net to CNXM in the first quarter of 2020 and 2019, respectively, as reported in CNXM First Quarter Results.

Operations:

During the quarter, CNX used up to two horizontal rigs and drilled 10 wells. The company currently has two rigs in operation along with one frac crew. During the quarter, the company utilized one all-electric frac crew to complete 13 wells, which included 10 Marcellus Shale wells and three Utica Shale wells. In the first quarter, CNX turned-in-line 14 wells.

The following table highlights operating cash margins and fully burdened cash margins:



Quarter


Quarter



Ended


Ended

(Per Mcfe)


March 31, 2020


March 31, 2019

Average Sales Price - E&P


$

2.59



$

2.97


Total Production Cash Costs1


1.11



1.11


Operating Cash Margin


$

1.48



$

1.86


Operating Cash Margin (%)


57

%


63

%






Total Fully Burdened Cash Costs2


$

1.66



$

1.61


Fully Burdened Cash Margin


$

0.93



$

1.36


Fully Burdened Cash Margin (%)


36

%


46

%


1See the "Price and Cost Data Per Mcfe" table below for reconciliation to Total Production Costs.  

2Fully burdened cash costs include production cash costs, selling, general and administrative

(SG&A) cash costs, other operating cash expense, other cash (income) expense, and interest

expense. Q1 2020 and Q1 2019 total fully burdened cash costs exclude a gain on asset sales of

$0.09 per Mcfe and $0.03 per Mcfe, respectively. Q1 2020 also excludes unrealized losses on

interest rate swaps of $0.08 per Mcfe.

 

PRICE AND COST DATA PER MCFE — Quarter-to-Quarter Comparison:



Quarter


Quarter


Quarter



Ended


Ended


Ended

(Per Mcfe)


March 31,
2020


March 31,
2019


December 31,
2019

Average Sales Price - Gas


$

1.83



$

3.21



$

2.14


Average Gain (Loss) on Commodity Derivative Instruments -
Cash Settlement- Gas*


$

0.77



$

(0.33)



$

0.33


Average Sales Price - Oil**


$

7.87



$



$


Average Sales Price - NGLs**


$

2.34



$

4.46



$

3.20


Average Sales Price - Condensate**


$

6.28



$

6.50



$

7.45









Average Sales Price - E&P


$

2.59



$

2.97



$

2.54









Lease Operating Expense (LOE)


$

0.07



$

0.14



$

0.09


Production, Ad Valorem, and Other Fees


0.05



0.05



0.05


Transportation, Gathering and Compression


0.99



0.92



0.97


Depreciation, Depletion and Amortization (DD&A)


0.87



0.88



0.86


Total Production Costs


$

1.98



$

1.99



$

1.97









Total Production Cash Costs, before DD&A


$

1.11



$

1.11



$

1.11


Cash Margin, before DD&A


$

1.48



$

1.86



$

1.43



*Excluding gain from hedge monetization in Q1 2020.

**NGLs, Oil, and Condensate are converted to Mcfe at the rate of one barrel equals six Mcf based upon the approximate

relative energy content of oil and natural gas, which is not indicative of the relationship of oil, NGLs, condensate, and natural gas prices.

Note: "Total Production Costs" excludes Selling, General, and Administration and Other Operating Expenses.

In the first quarter of 2020, total production costs were lower compared to the year-earlier quarter, due to improvements to LOE and DD&A, offset in part by increased transportation, gathering, and compression costs. The primary driver to the improvement to LOE was a decrease in water disposal costs due to an increase in the reuse of produced water in well completions activity. The increased transportation, gathering, and compression costs were driven primarily by higher CNXM fees.

Marketing:

Total hedged natural gas production in the 2020 second quarter is 113.5 Bcf. The annual gas hedge position is shown in the table below:



2020


2021

Volumes Hedged (Bcf), as of 4/21/20


451.1*


433.5



*Includes actual settlements of 155.5 Bcf.

In March 2020, CNX monetized and repriced a portion of its 2022, 2023, and 2024 NYMEX natural gas hedge portfolio generating $55.0 million of net proceeds, which are included in Gain (Loss) on Commodity Derivative Instruments in the Consolidated Statements of Income for the three months ended March 31, 2020. Notional quantities were not affected by the transaction.

In April 2020, CNX monetized and terminated approximately 39 million MMBtus of NYMEX natural gas hedges and a similar quantity of financial basis hedges that were to settle at various times from May through November of 2020. In connection with these monetizations, CNX received $29 million of net proceeds. This move gives CNX additional flexibility to move production to higher price periods while immediately taking the proceeds from these hedges.

CNX's hedged gas volumes include a combination of NYMEX financial hedges, index (NYMEX and basis) financial hedges, and physical fixed price sales. In addition, to protect the NYMEX hedge volumes from basis exposure, CNX enters into basis-only financial hedges and physical sales with fixed basis at certain sales points. CNX's gas hedge position through 2024 as of April 21, 2020 reflecting the monetization transactions is shown in the table below.



Q2 2020


2020


2021


2022


2023


2024

NYMEX Only Hedges













Volumes (Bcf)


110.7



439.2



411.7



265.5



135.1



138.7


Average Prices ($/Mcf)


$

2.98



$

2.95



$

2.90



$

2.83



$

2.80



$

2.91


Physical Fixed Price Sales and Index Hedges













Volumes (Bcf)


2.8



11.9



21.8



14.3



27.8



11.0


Average Prices ($/Mcf)


$

2.43



$

2.44



$

2.47



$

2.59



$

2.15



$

2.28


Total Volumes Hedged (Bcf)1


113.5



451.1



433.5



279.8



162.9



149.7




























NYMEX + Basis (fully-covered volumes)2













Volumes (Bcf)


113.5



451.1



433.5



279.8



162.9



149.7


Average Prices ($/Mcf)


$

2.53



$

2.55



$

2.41



$

2.29



$

2.25



$

2.32


NYMEX Only Hedges Exposed to Basis













Volumes (Bcf)













Average Prices ($/Mcf)


$



$



$



$



$



$


Total Volumes Hedged (Bcf)1


113.5



451.1



433.5



279.8



162.9



149.7



1Excludes basis hedges in excess of NYMEX hedges in Q2 2020, 2020, 2021, 2022, 2023, and 2024 of 1.0 Bcf, 8.1 Bcf, 15.7 Bcf, 25.0 Bcf, 9.3 Bcf, and 0.4 Bcf, respectively.

2Includes physical sales with fixed basis in Q2 2020, 2020, 2021, 2022, 2023, and 2024 of 20.3 Bcf, 86.1 Bcf, 75.8 Bcf, 23.6 Bcf, 1.7 Bcf, and 12.3 Bcf, respectively.

During the first quarter of 2020, CNX added additional NYMEX natural gas hedges of 5.1 Bcf and 23.8 Bcf for 2024 and 2025, respectively and additional index hedges of 13.6 Bcf for 2025.  To help mitigate basis exposure on NYMEX hedges, in the first quarter CNX added 0.8 Bcf, 0.9 Bcf, and 37.4 Bcf of basis hedges for 2020, 2021, and 2025, respectively.

Finance:

At March 31, 2020, CNX's Stand-alone net debt to trailing-twelve-months (TTM) adjusted Stand-alone EBITDAX (including distributions from CNXM) (a non-GAAP measure)(1) was 2.4x. On a consolidated basis, CNX's net debt to TTM adjusted EBITDAX (a non-GAAP measure)(1) was 2.7x.

At March 31, 2020, CNX's credit facility had $437 million of borrowings outstanding and $205 million of letters of credit outstanding. In addition, CNX holds 47.7 million CNXM common limited partnership units, with a market value of approximately $550 million as of April 20, 2020. This does not include the additional 3.0 million class B limited partnership units that will convert to CNXM common units on January 1, 2022.

Following the end of the quarter, the company completed its scheduled semi-annual borrowing base redetermination under its revolving credit facility, resulting in the lending group decreasing CNX's borrowing base from $2.3 billion to $1.9 billion. The decrease is related to lowered bank price decks and two significant transactions the company completed during the quarter that reduced the engineering value of the borrowing base: The CSG project financing for approximately $175 million, and the company monetized $55 million in hedges. The lenders' commitments decreased to $1.9 billion, or a 10% reduction from the previous $2.1 billion in commitments.

No shares were repurchased during the first quarter of 2020.

As of March 31, 2020, CNX repurchased $71 million of its senior secured 5.875% notes due in 2022. Following the end of the quarter, the company purchased an additional $8 million of notes. As of April 7, 2020, the company repurchased a total of $79 million notes at an 85% average discount to par value, which has allowed CNX to further de-lever.

Similar to CNX, CNXM is following the same FCF optimization approach and is reducing distributions to pay down debt. This decision ensures the company maintains a best-in-class balance sheet through the COVID 19 pandemic, while de-risking significant and sustainable FCF generation for several years. These prudent actions create substantial capital allocation flexibility and opportunity for years to come.

About CNX

CNX Resources Corporation (NYSE: CNX) is one of the largest independent natural gas exploration, development and production companies, with operations centered in the major shale formations of the Appalachian basin. The company deploys an organic growth strategy focused on responsibly developing its resource base. As of December 31, 2019, CNX had 8.4 trillion cubic feet equivalent of proved natural gas reserves. The company is a member of the Standard & Poor's Midcap 400 Index. Additional information may be found at www.cnx.com.

Non-GAAP Financial Measures

CNX's management uses certain non-GAAP financial measures for planning, forecasting and evaluating business and financial performance, and believes that they are useful for investors in analyzing the company. Stand-alone results include both CNX's Exploration & Production (E&P) and Unallocated segments (but not the Midstream segment) plus distributions CNX receives from CNXM. CNX believes that providing stand-alone results provides investors with more transparency and a better ability to compare CNX's financial results to those of our peer group. The term "consolidated" includes 100% of the results of CNX, CNX Gathering LLC, and CNXM on a consolidated basis.

Definitions: EBIT is defined as earnings before deducting net interest expense (interest expense less interest income) and income taxes.  EBITDAX is defined as earnings before deducting net interest expense (interest expense less interest income), income taxes, depreciation, depletion and amortization, and exploration. Adjusted EBITDAX consolidated is defined as EBITDAX after adjusting for the discrete items listed below. Stand-alone EBITDAX is defined as the adjusted EBITDAX related to both CNX's E&P and Unallocated segments (See Note 24 - Segment Information in CNX's Annual Report on Form 10-K as filed with the Securities and Exchange Commission for more information) plus the distributions CNX receives during the current period from CNXM related to its limited partnership units (including general partner units, and incentive distribution rights (IDRs) prior to the IDR elimination transaction in the first quarter of 2020). Although EBIT, EBITDAX, Stand-alone EBITDAX and adjusted EBITDAX consolidated are not measures of performance calculated in accordance with generally accepted accounting principles, management believes that they are useful to an investor in evaluating CNX Resources because they are widely used to evaluate a company's operating performance. We exclude stock-based compensation from adjusted EBITDAX because we do not believe it accurately reflects the actual operating expense incurred during the relevant period and may vary widely from period to period irrespective of operating results. Investors should not view these metrics as a substitute for measures of performance that are calculated in accordance with generally accepted accounting principles.  In addition, because all companies do not calculate EBIT, EBITDAX, Stand-alone EBITDAX or adjusted EBITDAX consolidated identically, the presentation here may not be comparable to similarly titled measures of other companies. Adjusted EBITDAX per outstanding share, adjusted net income per outstanding share, Stand-alone EBITDAX and adjusted EBITDAX consolidated, with shares measured as of April 15, 2020, are not measures of performance calculated in accordance with generally accepted accounting principles. Management believes that these financial measures are useful to an investor in evaluating CNX Resources because (i) analysts utilize these metrics when evaluating company performance and, (ii) given that we have an active share repurchase program, analysts have requested this information as of a recent practicable date, and we want to provide updated information to investors. 

Reconciliation of EBIT, EBITDAX, adjusted EBITDAX consolidated, Stand-alone EBITDAX, adjusted net income, net debt, organic free cash flow, free cash flow and TTM EBITDAX to the most directly comparable GAAP financial measures is as follows:


Three Months Ended


March 31, 2020

Dollars in thousands

Stand-alone1


Midstream


Total Company

Net Income (Loss)

$

124,322



$

(429,544)



$

(305,222)


Interest Expense

40,186



8,809



48,995


Interest Income

(92)





(92)


Income Tax Benefit

(152,582)





(152,582)


Earnings Before Interest & Taxes (EBIT)

$

11,834



$

(420,735)



$

(408,901)


Depreciation, Depletion & Amortization

119,152



10,012



129,164


Exploration Expense

3,818



70



3,888


Earnings Before Interest, Taxes, DD&A and Exploration (EBITDAX)

$

134,804



$

(410,653)



$

(275,849)


Adjustments:






Unrealized Loss on Commodity Derivative Instruments

$

36,019



$



$

36,019


Impairment of Goodwill



473,045



473,045


Impairment of Exploration and Production Properties

61,849





61,849


Gain on Debt Extinguishment

(11,263)





(11,263)


Stock-Based Compensation

6,336



504



6,840


Severance Expense

105





105


Total Pre-tax Adjustments

$

93,046



$

473,549



$

566,595


Adjusted EBITDAX Consolidated

$

227,850



$

62,896



$

290,746


Midstream Distributions

19,759



N/A



N/A


Stand-alone EBITDAX

$

247,609



N/A



N/A



1 Stand-alone includes both CNX's E&P and Unallocated segments. See Note 24 - Segment Information in CNX's Annual Report on Form 10-K for the fiscal

year ended December 31, 2019, as filed with the Securities and Exchange Commission, for more information.

 


Three Months Ended


March 31, 2019

Dollars in thousands

Stand-alone1


Midstream


Total Company

Net (Loss) Income

$

(97,235)



$

32,584



$

(64,651)


Interest Expense

28,432



7,339



35,771


Interest Income

(722)





(722)


Income Tax Benefit

(11,559)





(11,559)


Earnings Before Interest & Taxes (EBIT)

$

(81,084)



$

39,923



$

(41,161)


Depreciation, Depletion & Amortization

117,075



8,086



125,161


Exploration Expense

3,258





3,258


Earnings Before Interest, Taxes, DD&A and Exploration (EBITDAX)

$

39,249



$

48,009



$

87,258


Adjustments:






Unrealized Loss on Commodity Derivative Instruments

$

153,994



$



$

153,994


(Gain) Loss on Certain Asset Sales and Abandonments

(3,665)



7,229



3,564


Loss on Debt Extinguishment

7,537





7,537


Stock-Based Compensation

10,291



612



10,903


Shaw Event

4,305





4,305


Total Pre-tax Adjustments

$

172,462



$

7,841



$

180,303


Adjusted EBITDAX Consolidated

$

211,711



$

55,850



$

267,561


Midstream Distributions

12,145



N/A



N/A


Stand-alone EBITDAX

$

223,856



N/A



N/A



1 Stand-alone includes both CNX's E&P and Unallocated segments. See Note 24 - Segment Information in CNX's Annual Report on Form 10-K for fiscal

year ended December 31, 2019, as filed with the Securities and Exchange Commission, for more information.

 

Reconciliation of Adjusted Net Income


Three Months Ended


Three Months Ended


March 31,


March 31,


2020


2019


2020


2019

Dollars in thousands

Stand-alone1


Stand-alone1


Total Company


Total Company

Net Income (Loss) from EBITDAX Reconciliation

$

124,322



$

(97,235)



$

(305,222)



$

(64,651)


Adjustments:








Total Pre-tax Adjustments from EBITDAX Reconciliation

93,046



172,462



566,595



180,303


Tax Effect of Adjustments

(24,315)



(46,810)



(148,063)



(48,899)


Adjusted Net Income

$

193,053



$

28,417



$

113,310



$

66,753



1 Stand-alone includes both CNX's E&P and Unallocated segments. See Note 24 - Segment Information in CNX's Annual Report on Form 10-K for the fiscal

year ended December 31, 2019, as filed with the Securities and Exchange Commission, for more information.

 

Management uses net debt to determine the company's outstanding debt obligations that would not be readily satisfied by its cash and cash equivalents on hand. Management believes that using net debt attributable to CNX Resources shareholders is useful to investors in determining the company's leverage ratio since the company could choose to use its cash and cash equivalents to retire debt.

Net Debt

March 31, 2020


Stand-alone1


Midstream


Total Company

Total Long-Term Debt (GAAP)2

$

1,919,200



$

741,399



$

2,660,599


Less: Cash and Cash Equivalents

31,692



6,334



38,026


Net Debt (Non-GAAP)

$

1,887,508



$

735,065



$

2,622,573



1Stand-alone includes both CNX's E&P and Unallocated segments.

2Includes current portion. 

 

Reconciliation of Trailing-Twelve-Months (TTM) EBITDAX by Quarter


Three Months

Ended


Twelve
Months
Ended


June 30,


September 30,


December 31,


March 31,


March 31,

Dollars in thousands

2019


2019


2019


2020


2020

Net Income (Loss)

$

192,694



$

143,960



$

(240,055)



$

(305,222)



$

(208,623)


Interest Expense

40,152



38,405



37,051



48,995



164,603


Interest Income

(71)



(1,078)



(78)



(92)



(1,319)


Income Tax Expense (Benefit)

40,791



48,902



(50,398)



(152,582)



(113,287)


Earnings Before Interest & Taxes (EBIT)

$

273,566



$

230,189



$

(253,480)



$

(408,901)



$

(158,626)


Depreciation, Depletion & Amortization

128,999



120,459



133,844



129,164



512,466


Exploration Expense

5,567



6,075



29,480



3,888



45,010


Earnings Before Interest, Taxes, DD&A,
and Exploration (EBITDAX)

$

408,132



$

356,723



$

(90,156)



$

(275,849)



$

398,850


Adjustments:










Unrealized (Gain) Loss on Commodity
Derivative Instruments

$

(210,909)



$

(156,872)



$

(92,538)



$

36,019



$

(424,300)


Impairment of Exploration and
Production Properties





327,400



61,849



389,249


Impairment of Unproved Properties and
Expirations





119,429





119,429


Impairment of Goodwill







473,045



473,045


Severance Expense

1,182



1,999



113



105



3,399


Stock Based Compensation

23,873



1,781



1,868



6,840



34,362


Loss (Gain) on Debt Extinguishment

77







(11,263)



(11,186)


Shaw Insurance Recovery





(2,159)





(2,159)


Total Pre-tax Adjustments

$

(185,777)



$

(153,092)



$

354,113



$

566,595



$

581,839


Adjusted EBITDAX Consolidated TTM

$

222,355



$

203,631



$

263,957



$

290,746



$

980,689


 

Reconciliation of Stand-alone EBITDAX Trailing-Twelve-Months (TTM)


Twelve Months Ended March 31, 2020

Dollars in thousands

Stand-alone1


Midstream


Total Company

Net Income (Loss)

$

86,852



$

(295,475)



$

(208,623)


Interest Expense

132,808



31,795



164,603


Interest Income

(1,307)



(12)



(1,319)


Income Tax Benefit

(113,287)





(113,287)


Earnings Before Interest & Taxes  (EBIT)

$

105,066



$

(263,692)



$

(158,626)


Depreciation, Depletion & Amortization

476,428



36,038



512,466


Exploration Expense

44,897



113



45,010


Earnings Before Interest, Taxes, DD&A, and Exploration (EBITDAX)

$

626,391



$

(227,541)



$

398,850


Adjustments:






Unrealized Gain on Commodity Derivative Instruments

$

(424,300)



$



$

(424,300)


Impairment of Exploration and Production Properties

389,249





389,249


Impairment of Unproved Properties and Expirations

119,429





119,429


Impairment of Goodwill



473,045



473,045


Severance Expense

2,963



436



3,399


Stock Based Compensation

32,590



1,772



34,362


Gain on Debt Extinguishment

(11,186)





(11,186)


Shaw Insurance Recovery

(2,159)





(2,159)


Total Pre-tax Adjustments

$

106,586



$

475,253



$

581,839


Adjusted EBITDAX Consolidated TTM

$

732,977



$

247,712



$

980,689


Midstream Distributions

59,543



N/A



N/A


Stand-alone EBITDAX TTM

$

792,520



N/A



N/A



1 Stand-alone includes both CNX's E&P and Unallocated Segments.

Organic free cash flow is defined as net cash provided by operating activities less capital expenditures.  Free cash flow is defined as net cash provided by operating activities less capital expenditures plus proceeds from asset sales. Organic free cash flow and free cash flow are non-GAAP supplemental financial measures that the Company's management and external users of its consolidated financial statements, such as industry analysts, lenders and ratings agencies use to assess the Company's liquidity. The Company believes that the measures provide useful information to management and investors in assessing the Company's ability to generate cash flow in excess of capital requirements and return cash to shareholders. Organic free cash flow and free cash flow should not be considered as alternatives to net cash provided by operating activities or any other measure of liquidity presented in accordance with GAAP.

The tables below reconcile organic free cash flow and free cash flow with net cash provided by operating activities, the most comparable financial measure calculated in accordance with GAAP, as derived from the Statements of Condensed Consolidated Cash Flows to be included in the Company's report on Form 10-Q for the quarter ended March 31, 2020.

Organic Free Cash Flow

Dollars in thousands

Three Months
Ended March 31,
2020


Three Months
Ended March 31,
2019

Net Cash Provided by Operating Activities

$

267,387



$

308,652


Capital Expenditures

(152,049)



(299,138)


Organic Free Cash Flow

$

115,338



$

9,514


 

Free Cash Flow

Dollars in thousands

Three Months
Ended March 31,
2020


Three Months
Ended March 31,
2019

Net Cash Provided by Operating Activities

$

267,387



$

308,652


Capital Expenditures

(152,049)



(299,138)


Proceeds from Asset Sales

13,975



5,806


Free Cash Flow

$

129,313



$

15,320


Cautionary Statements

We are including the following cautionary statement in this press release to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of us.  With the exception of historical matters, the matters discussed in this press release are forward-looking statements (as defined in 21E of the Securities Exchange Act of 1934 (the "Exchange Act")) that involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. These 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 "believe," "intend," "expect," "may," "should," "anticipate," "could," "estimate," "plan," "predict," "project," "will," or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe a strategy that involves risks or uncertainties, we are making forward-looking statements. The forward-looking statements in this press release speak only as of the date of this press release; we disclaim any obligation to update these 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. These risks, contingencies and uncertainties relate to, among other matters, the following: prices for natural gas and NGLs are volatile and can fluctuate widely based upon a number of factors beyond our control including oversupply relative to the demand for our products, weather and the price and availability of alternative fuels; the impact that the COVID-19 pandemic may have on us, our vendors and customers, including our financial position, operating results and ability to obtain future financing; our dependence on gathering, processing and transportation facilities and other midstream facilities owned by CNX Midstream Partners LP (NYSE: CNXM) (CNXM) and others; uncertainties in estimating our economically recoverable natural gas reserves, and inaccuracies in our estimates; the high-risk nature of drilling, developing and operating natural gas wells; our identified drilling locations are scheduled out over multiple years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their development or drilling; challenges associated with strategic determinations, including the allocation of capital and other resources to strategic opportunities; the substantial capital expenditures required for our development and exploration projects, as well as CNXM's midstream system development; the impact of potential, as well as any adopted, environmental regulations, including those relating to greenhouse gas emissions; environmental regulations can increase costs and introduce uncertainty that could adversely impact the market for natural gas with potential short and long-term liabilities; decreases in the availability of, or increases in the price of, required personnel, services, equipment, parts and raw materials in sufficient quantities or at reasonable costs to support our operations; if natural gas prices decrease or drilling efforts are unsuccessful, we may be required to record write-downs of our proved natural gas properties, and; changes in assumptions impacting management's estimates of future financial results as well as other assumptions such as movement in our stock price, weighted-average cost of capital, terminal growth rates and industry multiples, could cause goodwill and other intangible assets we hold to become impaired and result in material non-cash charges to earnings; a loss of our competitive position because of the competitive nature of the natural gas industry, consolidation within the industry or overcapacity in the industry adversely affecting our ability to sell our products and midstream services; deterioration in the economic conditions in any of the industries in which our customers operate, a domestic or worldwide financial downturn, or negative credit market conditions; hedging activities may prevent us from benefiting from price increases and may expose us to other risks; existing and future government laws, regulations and other legal requirements and judicial decisions that govern our business may increase our costs of doing business and may restrict our operations; significant costs and liabilities may be incurred as a result of pipeline operations and related increase in the regulation of gas gathering pipelines; our ability to find adequate water sources for our use in shale gas drilling and production operations, or our ability to dispose of, transport or recycle water used or removed in connection with our gas operations at a reasonable cost and within applicable environmental rules; failure to successfully estimate the rate of decline or existing reserves or to find or acquire economically recoverable natural gas reserves to replace our current natural gas reserves; risks associated with our current long-term debt obligations; a decrease in our borrowing base, which could decrease for a variety of reasons including lower natural gas prices, declines in natural gas proved reserves, asset sales and lending requirements or regulations; changes in federal or state income tax laws, cyber incidents could have a material adverse effect on our business, financial condition or results of operations; construction of new gathering, compression, dehydration, treating or other midstream assets by CNXM may not result in revenue increases and may be subject to regulatory, environmental, political, legal and economic risks; our success depends on key members of our management and our ability to attract and retain experienced technical and other professional personnel; terrorist activities could materially adversely affect our business and results of operations; we may operate a portion of our business with one or more joint venture partners or in circumstances where we are not the operator, which may restrict our operational and corporate flexibility and we may not realize the benefits we expect to realize from a joint venture; acquisitions and divestitures, we anticipate may not occur or produce anticipated benefits; the outcomes of various legal proceedings, including those which are more fully described in our reports filed under the Exchange Act; there is no guarantee that we will continue to repurchase shares of our common stock under our current or any future share repurchase program at levels undertaken previously or at all; negative public perception regarding our industry could have an adverse effect on our operations; and CONSOL Energy may not be able to satisfy its indemnification obligations in the future and such indemnities may not be sufficient to hold us harmless from the full amount of liabilities for which CONSOL Energy will be allocated responsibility. Additional factors are described in detail under the captions "Forward Looking Statements" and "Risk Factors" in our annual report on Form 10-K for the year ended December 31, 2019 filed with the Securities and Exchange Commission, as supplemented by our quarterly reports on Form 10-Q.

 

CNX RESOURCES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME


(Dollars in thousands, except per share data)

Three Months Ended

(Unaudited)

March 31,

Revenue and Other Operating Income:

2020


2019

Natural Gas, NGL and Oil Revenue

$

251,494



$

435,946


Gain (Loss) on Commodity Derivative Instruments

115,142



(195,376)


Purchased Gas Revenue

26,359



16,221


Midstream Revenue

18,406



18,443


Other Operating Income

4,958



3,197


Total Revenue and Other Operating Income

416,359



278,431


Costs and Expenses:




Operating Expense




Lease Operating Expense

10,033



18,627


Transportation, Gathering and Compression

83,242



79,409


Production, Ad Valorem, and Other Fees

6,162



6,946


Depreciation, Depletion and Amortization

129,164



125,161


Exploration and Production Related Other Costs

3,888



3,258


Purchased Gas Costs

24,998



16,214


Impairment of Exploration and Production Properties

61,849




Impairment of Goodwill

473,045




Selling, General, and Administrative Costs

30,238



35,738


Other Operating Expense

20,681



23,474


Total Operating Expense

843,300



308,827


Other Expense (Income)




Other Expense (Income)

5,186



(579)


(Gain) Loss on Asset Sales and Abandonments

(12,055)



3,085


(Gain) Loss on Debt Extinguishment

(11,263)



7,537


Interest Expense

48,995



35,771


Total Other Expense

30,863



45,814


Total Costs and Expenses

874,163



354,641


Loss Before Income Tax

(457,804)



(76,210)


Income Tax Benefit

(152,582)



(11,559)


Net Loss

(305,222)



(64,651)


Less: Net Income Attributable to Noncontrolling Interest

23,864



22,686


Net Loss Attributable to CNX Resources Shareholders

$

(329,086)



$

(87,337)






Loss per Share




Basic

$

(1.76)



$

(0.44)


Diluted

$

(1.76)



$

(0.44)






Dividends Declared

$



$


 

 

CNX RESOURCES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME       



Three Months Ended

(Dollars in thousands)

March 31,

(Unaudited)

2020


2019

Net Loss

$

(305,222)



$

(64,651)


Other Comprehensive Income:




  Actuarially Determined Long-Term Liability Adjustments (Net of tax: ($40), ($15))

112



44






Comprehensive Loss

(305,110)



(64,607)






Less: Comprehensive Income Attributable to Noncontrolling Interest

23,864



22,686






Comprehensive Loss Attributable to CNX Resources Shareholders

$

(328,974)



$

(87,293)


 

 

CNX RESOURCES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



(Unaudited)



(Dollars in thousands)

March 31,
2020


December 31,
2019

ASSETS




Current Assets:




Cash and Cash Equivalents

$

31,833



$

16,283


Restricted Cash

853




Accounts and Notes Receivable:




Trade, net

91,477



133,480


Other Receivables, net

10,839



13,679


Supplies Inventories

10,266



6,984


Recoverable Income Taxes

115,261



62,425


Derivative Instruments

312,749



247,794


Prepaid Expenses

12,775



17,456


Total Current Assets

586,053



498,101


Property, Plant and Equipment:




Property, Plant and Equipment

10,691,516



10,572,006


Less—Accumulated Depreciation, Depletion and Amortization

3,622,413



3,435,431


Total Property, Plant and Equipment—Net

7,069,103



7,136,575


Other Assets:




Operating Lease Right-of-Use Assets

159,521



187,097


Investment in Affiliates

16,549



16,710


Derivative Instruments

258,111



314,096


Goodwill

323,314



796,359


Other Intangible Assets

95,009



96,647


Restricted Cash

5,340




Other

15,950



15,221


Total Other Assets

873,794



1,426,130


TOTAL ASSETS

$

8,528,950



$

9,060,806


 

 

CNX RESOURCES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



(Unaudited)



(Dollars in thousands, except per share data)

March 31,
2020


December 31,
2019

LIABILITIES AND EQUITY




Current Liabilities:




Accounts Payable

$

171,890



$

202,553


Derivative Instruments

49,058



41,466


Current Portion of Finance Lease Obligations

7,200



7,164


Current Portion of Long-Term Debt

20,451




Current Portion of Operating Lease Obligations

54,622



61,670


Other Accrued Liabilities

197,130



216,086


Total Current Liabilities

500,351



528,939


Non-Current Liabilities:




Long-Term Debt

2,640,148



2,754,443


Finance Lease Obligations

6,095



7,706


Operating Lease Obligations

92,463



110,466


Derivative Instruments

163,898



115,862


Deferred Income Taxes

376,401



476,108


Asset Retirement Obligations

64,387



63,377


Other

40,497



41,596


Total Non-Current Liabilities

3,383,889



3,569,558


TOTAL LIABILITIES

3,884,240



4,098,497


Stockholders' Equity:




Common Stock, $.01 Par Value; 500,000,000 Shares Authorized, 187,035,851
Issued and Outstanding at March 31, 2020; 186,642,962 Issued and Outstanding
at December 31, 2019

1,874



1,870


Capital in Excess of Par Value

2,205,941



2,199,605


Preferred Stock, 15,000,000 shares authorized, None issued and outstanding




Retained Earnings

1,641,009



1,971,676


Accumulated Other Comprehensive Loss

(12,493)



(12,605)


Total CNX Resources Stockholders' Equity

3,836,331



4,160,546


Noncontrolling Interest

808,379



801,763


TOTAL STOCKHOLDERS' EQUITY

4,644,710



4,962,309


TOTAL LIABILITIES AND EQUITY

$

8,528,950



$

9,060,806


 

 

CNX RESOURCES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY



Common
Stock


Capital in
Excess of Par
Value


Retained
Earnings
(Deficit)


Accumulated
Other
Comprehensive
Income (Loss)


Total CNX
Resources
Stockholders'
Equity


Non-
Controlling
Interest


Total
Equity

December 31, 2019

$

1,870



$

2,199,605



$

1,971,676



$

(12,605)



$

4,160,546



$

801,763



$

4,962,309


(Unaudited)














Net (Loss) Income





(329,086)





(329,086)



23,864



(305,222)


Issuance of Common Stock

4









4





4


Shares Withheld for Taxes





(1,581)





(1,581)



(309)



(1,890)


Amortization of Stock-Based
Compensation Awards



6,336







6,336



504



6,840


Other Comprehensive Income







112



112





112


Distributions to CNXM Noncontrolling
Interest Holders











(17,443)



(17,443)


March 31, 2020

$

1,874



$

2,205,941



$

1,641,009



$

(12,493)



$

3,836,331



$

808,379



$

4,644,710
















December 31, 2018

$

1,990



$

2,264,063



$

2,071,809



$

(7,904)



$

4,329,958



$

751,785



$

5,081,743


(Unaudited)














Net (Loss) Income





(87,337)





(87,337)



22,686



(64,651)


Issuance of Common Stock

5



94







99





99


Purchase and Retirement of Common
Stock

(31)



(24,937)



(8,529)





(33,497)





(33,497)


Shares Withheld for Taxes





(4,045)





(4,045)



(664)



(4,709)


Amortization of Stock-Based
Compensation Awards



10,291







10,291



612



10,903


Other Comprehensive Income







44



44





44


Distributions to CNXM Noncontrolling
Interest Holders











(15,123)



(15,123)


March 31, 2019

$

1,964



$

2,249,511



$

1,971,898



$

(7,860)



$

4,215,513



$

759,296



$

4,974,809


 

 

CNX RESOURCES AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 


(Dollars in thousands)

Three Months Ended

(Unaudited)

March 31,

Cash Flows from Operating Activities:

2020


2019

Net Loss

$

(305,222)



$

(64,651)


Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities:




Depreciation, Depletion and Amortization

129,164



125,161


Amortization of Deferred Financing Costs

2,447



1,707


Impairment of Exploration and Production Properties

61,849




Impairment of Goodwill

473,045




Stock-Based Compensation

6,840



10,903


(Gain) Loss on Asset Sales and Abandonments

(12,055)



3,085


(Gain) Loss on Debt Extinguishment

(11,263)



7,537


(Gain) Loss on Commodity Derivative Instruments

(115,142)



195,376


Loss on Other Derivative Instruments

10,639




Net Cash Received (Paid) in Settlement of Commodity Derivative Instruments

151,161



(41,382)


Deferred Income Taxes

(99,746)



(11,559)


Equity in Loss (Earnings) of Affiliates

161



(503)


Return on Equity Investment



1,306


Changes in Operating Assets:




Accounts and Notes Receivable

43,639



94,480


Recoverable Income Taxes

(52,836)



35,888


Supplies Inventories

(3,282)



(6,927)


Prepaid Expenses

4,710



3,961


Changes in Other Assets

692



(6)


Changes in Operating Liabilities:




Accounts Payable

2,322



(5,962)


Accrued Interest

(5,063)



2,180


Other Operating Liabilities

(13,626)



(34,434)


Changes in Other Liabilities

(1,047)



(7,508)


Net Cash Provided by Operating Activities

267,387



308,652


Cash Flows from Investing Activities:




Capital Expenditures

(152,049)



(299,138)


Proceeds from Asset Sales

13,975



5,806


Net Cash Used in  Investing Activities

(138,074)



(293,332)


Cash Flows from Financing Activities:




Payments on Miscellaneous Borrowings

(1,792)



(1,747)


Payments on Long-Term Notes

(59,880)



(405,876)


Net Proceeds from CNXM Revolving Credit Facility

35,250



52,650


Payments on CNX Revolving Credit Facility

(224,000)



(98,000)


Proceeds from Issuance of CNX Senior Notes



500,000


Net Proceeds from CSG Non-Revolving Credit Facilities

173,250




Distributions to CNXM Noncontrolling Interest Holders

(17,443)



(15,123)


Proceeds from Issuance of Common Stock

4



99


Shares Withheld for Taxes

(1,890)



(4,709)


Purchases of Common Stock



(32,498)


Debt Issuance and Financing Fees

(11,069)



(3,342)


Net Cash Used in Financing Activities

(107,570)



(8,546)


Net Increase in Cash, Cash Equivalents, and Restricted Cash

21,743



6,774


Cash, Cash Equivalents, and Restricted Cash at Beginning of Period

16,283



17,198


Cash, Cash Equivalents, and Restricted Cash at End of Period

$

38,026



$

23,972


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SOURCE CNX Resources Corporation