CNX Coal Resources Updates 2017 Outlook
PITTSBURGH, Sept. 5, 2017 /PRNewswire/ -- CNX Coal Resources LP (NYSE: CNXC), announced today that it is adjusting its previously announced 2017 guidance ranges based on the third quarter results to date and expectations for the rest of the year. The revised 2017 outlook is as follows:
- Adjusted EBITDA1 of $95-$105 million
- Capital expenditure of $28-$30 million
Specifically, CNXC is reducing the top end of its adjusted EBITDA range to reflect ongoing mild weather trends in the third quarter of 2017 that have affected power demand in the PJM region. This reduced demand has resulted in lower pricing than forecasted in our contracts that are indexed to power prices. Crossover met coal sales to date have also been lower than expected resulting in somewhat lower realizations due to increasing discounts for our crossover product compared to the benchmark quality. Finally, our sales mix was also affected due to CSX-related logistics issues that we foreshadowed on our second quarter earnings call. We continue to work closely with our rail partners to effectuate improved efficiency.
On the operational front, the Enlow Fork mine encountered some unexpected geological conditions following a longwall move in the third quarter. The Bailey and Harvey mines have performed well during this time and Enlow Fork has been producing well since mid-August. As a result, we expect to be well within our sales guidance range of 6.4-6.9 million tons. While the Enlow Fork longwall has now moved out of the difficult geology and resumed a normal operational schedule, the resulting cash cost of coal sold is now expected to be modestly higher than previously anticipated, which also weighed on the EBITDA outlook. To reduce this adverse cost impact, CNXC has taken various steps including temporarily suspending the use of contractors, rationalizing other discretionary spending at the mine and lowering capital expenditures by approximately $3.0 million at the midpoint of the guidance range. Management is evaluating additional revenue enhancing and cost saving opportunities which it plans to discuss on its third quarter earnings call.
As of midnight last night, the Pennsylvania Department of Environmental Protection (DEP) has sought more time to review the technical merits of the permit submittal for continued longwall mining in the 4L panel at the company's Bailey Mine, in light of a recent Environmental Hearing Board decision. As a result, the longwall has been idled and workforce adjustments are being made. This is the first time in the 35-year history of the Bailey Mine that the company has failed to timely receive a needed mining permit. The company maintains that this permit meets the necessary criteria for approval, and the company is in ongoing communication with Pennsylvania Governor Wolf's office and the Secretary of the DEP asking that the permit be issued in order to enable the company to get its miners back to work and resume production. The Pennsylvania Mining Complex will lose approximately 25,000 tons of production per day as a result of this permit delay. While the company can make up some lost production in the fourth quarter, if the permit is not issued in the near future, additional layoffs will be likely and the impact on the company could be material. The EBITDA guidance provided above assumes that the permit is issued in the near future. The company hopes that the DEP resolves this matter quickly, and the company will provide updates as new information becomes available.
1 Adjusted EBITDA is a non-GAAP financial measure defined as (i) net income (loss) before net interest expense, depreciation, depletion and amortization, as adjusted for (ii) certain non-cash items, such as long-term incentive awards including phantom units under the CNX Coal Resources LP 2015 Long-Term Incentive Plan ("Unit Based Compensation"). At this time, CNXC is unable to provide a reconciliation of Adjusted EBITDA guidance to Net Income, the most comparable financial measure calculated in accordance with GAAP, due to the unknown effect, timing and potential significance of certain income statement items.
About CNX Coal Resources LP
CNX Coal Resources is a growth-oriented master limited partnership formed by Consol Energy Inc. (NYSE: CNX) to manage and further develop all of CONSOL's active coal operations in Pennsylvania. Its assets include a 25% undivided interest in, and operational control over, CONSOL's Pennsylvania mining complex, which consists of three underground mines and related infrastructure. More information is available on our website www.cnxlp.com.
Contacts:
Investor:
Mitesh Thakkar, (724) 485-3133
miteshthakkar@cnxlp.com
Media:
Zach Smith, (724) 485-4017
zacherysmith@cnxlp.com
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SOURCE CNX Coal Resources LP