Consol Energy Reports Net Loss of $11 million, or ($0.05) per Diluted Share

PITTSBURGH, Oct. 25, 2012 /PRNewswire/ -- CONSOL Energy Inc. (NYSE: CNX), the leading diversified fuel producer in the Eastern United States, reported a net loss for the quarter ended September 30, 2012 of $11 million, or ($0.05) per diluted share, compared to net income of $167 million, or $0.73 per diluted share from the year-earlier quarter. Adjusted EBITDA¹, a non-GAAP financial measure, was $210 million for the quarter ended September 30, 2012, compared to $441 million in the year-earlier quarter.

¹The term "Adjusted EBITDA" is a non-GAAP financial measure, which is defined and reconciled to the GAAP net income below, under the caption "Non-GAAP Financial Measures."

Coal Division Results:

The Coal Division results table on the previous page has been re-formatted in order to increase transparency. The realization line has been replaced with a sales line. Inventory adjustments, which had flowed through realizations, are now included in costs. A table containing the recast historic quarterly comparisons for each quarter since the first quarter of 2011 is available on our website.

Certain costs were excluded from the table. For the low-vol category in the just-ended quarter, $7 million of Buchanan's costs are not included. For the thermal category, $42 million of Bailey/Enlow Fork's costs are excluded.

Excluding the impacts of Buchanan and Bailey/Enlow, noted earlier, CONSOL Energy's coal production costs in the quarter ended September 30, 2012 were $55.84 per ton, or an increase of $1.46, or 3%, from the quarter ended September 30, 2011. The majority of the cost increase was volume related, as there were four additional weeks of longwall idling that lowered volumes during the quarter.

Coal production in the quarter consisted of 0.8 million tons of low-vol, 0.7 million tons of high-vol, and 10.1 million tons of thermal, for a total of 11.6 million tons. (Amonate production of 53,000 tons is included in the low-vol category.)

Of the thermal coal production, 9.3 million tons were from Northern Appalachia and 0.8 million tons were from Central Appalachia.

During the third quarter, thermal coal inventory decreased by 0.8 million tons, when compared to the quarter ended June 30, 2012.

Coal Marketing Update:

Low-Vol: Low-vol coal continues to be oversupplied in a world economy that has weakened in the last six months. Steel utilization rates remain weak in Europe and Brazil, which are CONSOL's natural export markets. Benchmark settlements between major steel producers and coal suppliers recently settled at prices that, when adjusted for transportation, were lower than expected. Fourth quarter sales estimates range between 0.5 and 0.7 million tons.

High-Vol: We expect shipments to China will return to normal levels once a draw down of their inventories is complete. We expect a recovery to occur in the second quarter of 2013 as global steel production improves.

U.S. Thermal: Warm summer temperatures and Northern Appalachia production issues coupled with production cutbacks in other basins have contributed to reduced inventories at utility stockpiles.  Additionally, the potential return of normal winter weather and the strengthening natural gas price are catalysts for improving domestic thermal markets.  CONSOL has 96% of it's Northern Appalachia coal sold for 2013 and has recently completed pricing for over 3.5 million tons of our Bailey thermal product at or in excess of $60 per ton.

Global Thermal: CONSOL expects to continue to sell thermal coal into European markets under contract.

Gas Division Results:

Coalbed Methane (CBM): Total production was 21.7 Bcf, a decrease of 7% from the 23.3 Bcf produced in the year-earlier quarter.

Marcellus Shale: Total production was 10.1 Bcf, an increase of 16% from the 8.7 Bcf produced in the year-earlier quarter. Last year's Marcellus Shale production contained 4.5 Bcf that was subsequently sold to Noble Energy and Antero Resources. On a consistent basis, the company's Marcellus Shale production increased by 140% from the year-earlier quarter.

Shallow: Total production was 7.0 Bcf, a decrease of 10% from the 7.8 Bcf produced in the year-earlier quarter.   The company has been shifting rigs and capital toward higher potential return Marcellus and Utica drilling prospects.

Other: Our other category had production of 0.6 Bcf, unchanged from 0.6 Bcf in the year-earlier quarter.

The table below summarizes the key metrics for the Gas Division:

PRICE AND COST DATA PER MCF — Quarter-to-Quarter Comparison

The company experienced increased profitability within the Gas Division when compared with the quarter ended September 30, 2011.  Unit gas margins decreased despite the improvement in unit costs, as realized unit gas prices fell by $0.73 per Mcf. Total unit gas costs declined, due in part to the continued emphasis on low cost Marcellus Shale drilling, where the company has been drilling longer laterals on multi-well pads. All-in unit costs in the Marcellus Shale were $2.95 per Mcf in the just-ended quarter, a decrease of $0.10 from the $3.05 per Mcf in the year-earlier quarter. Total gathering costs were impaired by $0.13 per Mcf primarily due to increased transportation costs.

CONSOL Energy 2012 Production Guidance

CONSOL Energy expects its net gas production to be between 157 - 159 Bcf for the year. Fourth quarter gas production, net to CONSOL, is expected to be approximately 42.5 - 44.5 Bcf.

Total hedged gas production in the 2012 fourth quarter is 19.3 Bcf, at an average price of $5.25 per Mcf. The annual gas hedge position for three years is shown in the table below:

Liquidity

Total company liquidity as of September 30, 2012 was $2.6 billion.

As of September 30, 2012, CONSOL Energy had $1.477 billion in total liquidity, which is comprised of $39.6 million of cash, $39.2 million available to be borrowed under the accounts receivable securitization facility, and $1,399.7 million available to be borrowed under its $1.5 billion bank facility. CONSOL Energy's credit facility has no borrowings. Outstanding letters of credit are $261.1 million.

As of September 30, 2012, CNX Gas Corporation had $1.121 billion in total liquidity, which is comprised of $191.4 million of cash and $929.8 million available to be borrowed under its $1.0 billion bank facility.  CNX Gas' credit facility has no borrowings. Outstanding letters of credit are $70.2 million.

CONSOL Energy Inc., the leading diversified fuel producer in the Eastern U.S., is a member of the Standard & Poor's 500 Equity Index and the Fortune 500. It has 12 bituminous coal mining complexes in four states and reports proven and probable coal reserves of 4.5 billion tons. It is also a leading Eastern U.S. gas producer, with proved reserves of 3.5 trillion cubic feet.  Additional information about CONSOL Energy can be found at its web site: www.consolenergy.com.

Non-GAAP Financial Measures

Definition: EBIT is defined as  earnings before deducting net interest expense (interest expense less interest income) and income taxes.  EBITDA is defined as earnings before deducting net interest expense (interest expense less interest income), income taxes and depreciation, depletion and amortization.  Adjusted EBITDA is defined as EBITDA  after adjusting for the discrete items listed below. Although EBIT, EBITDA, and Adjusted EBITDA  are not measures of performance calculated in accordance with generally accepted accounting principles, management believes that it is useful to an investor in evaluating CONSOL Energy because it is widely used to evaluate a company's operating performance before debt expense and its cash or as a substitute for measures of performance in accordance with generally accepted accounting principles.  In addition, because all companies do not calculate EBIT, EBITDA, or Adjusted EBITDA identically, the presentation here may not be comparable to similarly titled measures of other companies.

Reconciliation of EBIT, EBITDA and Adjusted EBITDA to financial net income attributable to CONSOL Energy Shareholders is as follows (dollars in 000):

Forward-Looking Statements

We are including the following cautionary statement in this document 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 document are forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934) 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.  The forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending.  When we use the words "believe," "intend," "expect," "may," "should," "anticipate," "could," "estimate," "plan," "predict," "project," or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements.  When we describe strategy that involves risks or uncertainties, we are making forward-looking statements.  The forward-looking statements in this document speak only as of the date of this document; we disclaim any obligation to update these statements, and we caution you not to rely on them unduly.  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:  deterioration in global economic conditions in any of the industries in which our customers operate, or sustained uncertainty in financial markets cause conditions we cannot predict; a significant or  extended decline in prices we receive for our coal and natural gas affecting our operating results and cash flows; our customers extending existing contracts or entering into new long-term contracts for coal; our reliance on major customers; our inability to collect payments from customers if their creditworthiness declines; the disruption of rail, barge, gathering, processing and transportation facilities and other systems that deliver our coal and natural gas to market; a loss of our competitive position because of the competitive nature of the coal and natural gas industries, or a loss of our competitive position because of overcapacity in these industries impairing our profitability; our inability to maintain satisfactory labor relations; coal users switching to other fuels in order to comply with various environmental standards related to coal combustion emissions; the impact of potential, as well as any adopted regulations relating to greenhouse gas emissions on the demand for coal and natural gas; foreign currency fluctuations could adversely affect the competitiveness of our coal abroad; the risks inherent in coal and natural gas operations being subject to unexpected disruptions, including geological conditions, equipment failure, timing of completion of significant construction or repair of equipment, fires, explosions, accidents and weather conditions which could impact financial results; decreases in the availability of, or increases in, the price of commodities or capital equipment used in our mining and natural gas operations; decreases in the availability of, an increase in the prices charged by third party contractors or, failure of third party contractors to provide quality services to us in a timely manner could impact our profitability; obtaining and renewing governmental permits and approvals for our coal and natural gas operations; the effects of government regulation on the discharge into the water or air, and the disposal and clean-up of, hazardous substances and wastes generated during our coal and natural gas operations; the effects of stringent federal and state employee health and safety regulations, including the ability of regulators to shut down a mine or well; the potential for liabilities arising from environmental contamination or alleged environmental contamination in connection with our past or current coal and gas operations; the effects of mine closing, reclamation, gas well closing and certain other liabilities; uncertainties in estimating our economically recoverable coal and gas reserves; costs associated with perfecting title for coal or gas rights on some of our properties; the outcomes of various legal proceedings, which are more fully described in our reports filed under the Securities Exchange Act of 1934; the impacts of various asbestos litigation claims; increased exposure to employee related long-term liabilities; our accruals for obligations for long-term employee benefits are based upon assumptions which, if inaccurate, could result in our being required to expend greater amounts than anticipated; due to our participation in an underfunded multi-employer pension plan, we have exposure under that plan that extends beyond what our obligation would be with respect to our employees and in the future we may have to make additional cash contributions to fund the pension plan or incur withdrawal liability; lump sum payments made to retiring salaried employees pursuant to our defined benefit pension plan exceeding total service and interest cost in a plan year; acquisitions and joint ventures that we recently have completed or entered into or may make in the future including the accuracy of our assessment of the acquired businesses and their risks, achieving any anticipated synergies, integrating the acquisitions and unanticipated changes that could affect assumptions we may have made and divestitures we anticipate may not occur or produce anticipated proceeds including joint venture partners paying anticipated carry obligations; the terms of our two significant existing gas joint ventures restrict our flexibility and actions taken by the other party in our gas joint ventures may impact our financial position; the anti-takeover effects of our rights plan could prevent a change of control; risks associated with our debt; replacing our natural gas reserves, which if not replaced, will cause our gas reserves and gas production to decline; our ability to find adequate water sources for use in gas drilling, or our ability to dispose of water used or removed from strata in connection with our gas operations at a reasonable cost and within applicable environmental rules; our hedging activities may prevent us from benefiting from price increases and may expose us to other risks; and other factors discussed in the 2011 Form 10-K under "Risk Factors," as updated by any subsequent Form 10-Qs, which are on file at the Securities and Exchange Commission.