Core Natural Resources, Inc. — filing identity note
The supplied filing is a Form 10-Q for the quarter ended March 31, 2022, but the registrant named in the filing is CONSOL Energy Inc. (NYSE: CEIX), not Core Natural Resources, Inc. The summary below reflects the filing’s stated registrant and figures.
Business context and reporting period
CONSOL Energy operates the Pennsylvania Mining Complex (PAMC), the CONSOL Marine Terminal at the Port of Baltimore, and the developing Itmann Mine. This unaudited report covers the three months ended March 31, 2022, compared with the same period in 2021.
Financial and operating highlights
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Coal revenue | $476.4 million | $285.5 million |
| Terminal revenue | $21.4 million | $18.2 million |
| Freight revenue and expense | $38.4 million each | $27.0 million each |
| Total revenue and other income, after commodity derivative losses | $358.5 million | $342.2 million |
| Revenue from customer contracts, before derivative losses and other income | $536.2 million | $330.8 million |
| Net income (loss) | $(4.5) million; $(0.13) per diluted share | $26.4 million; $0.75 per diluted share |
| Adjusted EBITDA (non-GAAP) | $169.2 million | $106.7 million |
| Operating cash flow | $148.2 million | $78.0 million |
| Capital expenditures | $36.6 million | $13.8 million |
The $188.2 million net loss on commodity derivatives included $86.3 million of settled losses and $101.9 million of unrealized mark-to-market losses. The unrealized loss is a major reason reported revenue and GAAP earnings do not track the improvement in coal pricing and adjusted EBITDA.
PAMC shipments were 6.5 million tons versus 6.9 million; production was 6.4 million tons versus 7.0 million. Average realized coal revenue was $59.60 per ton versus $41.39, while average cash cost was $29.91 versus $24.44. Average cash margin increased to $29.69 per ton from $16.95. These per-ton measures are non-GAAP or derived from non-GAAP measures.
At March 31, cash and cash equivalents were $222.9 million. Management reported total liquidity of approximately $459 million, including $236.4 million of unused revolving credit capacity. Total long-term debt and finance lease obligations were approximately $627 million, including current portions. The company made $38.5 million of debt repayments and spent $26.4 million to retire $25 million principal amount of second-lien notes. First-lien gross leverage was 0.79x, total net leverage 0.99x, and fixed-charge coverage 2.09x; the company reported compliance with its financial covenants.
Material changes versus the prior comparable period
- Coal revenue and contract revenue rose substantially, reflecting stronger domestic and export pricing amid tight global coal supply and higher power and natural-gas prices.
- Adjusted EBITDA increased by about $62.5 million, while GAAP results shifted from profit to loss, principally reflecting the newly significant commodity-derivative losses.
- Cash from operations increased by $70.2 million. Higher adjusted EBITDA and working-capital changes contributed; receivables also increased materially during the quarter.
- Average cash cost per ton rose $5.47, which management attributed to inflation in labor, maintenance, supplies, contractors and project costs, fifth-longwall development, and lower sales volume.
- Capital spending increased, principally for construction of the Itmann preparation plant. Terminal throughput declined to 3.6 million tons from 4.1 million, although higher processing rates lifted terminal revenue.
Guidance, outlook, risks and contingencies
For 2022, management expected PAMC sales of 23–25 million tons, average realized coal revenue of $58–$61 per ton and average cash cost of $29–$31 per ton. Planned capital expenditures were $162–$195 million, including Itmann development. Itmann was expected to produce 0.3–0.5 million clean-coal-equivalent tons in 2022, mostly in the second half; full production depended on completing preparation-plant relocation and recommissioning during the second half. The per-ton guidance is non-GAAP, and the company said it could not reconcile it to GAAP measures.
Management cited Russia-Ukraine-related commodity volatility, inflation, COVID-19 and potential renewed restrictions, recession or weaker coal demand, logistics disruptions, customer concentration, and constrained financing and surety markets as risks. The company had not experienced a material adverse effect from the war as of the report date. Management said operating cash flow, cash on hand and credit facilities were expected to meet working-capital, capital-spending and debt-service needs.
Material matters to monitor include the UMWA 1992 Benefit Plan lawsuit, for which the court denied defendants’ motion to dismiss on March 29, 2022; the company said it would defend the claims. Management estimated annual servicing costs of certain legacy Coal Act and black-lung liabilities at approximately $10–$20 million for the next ten years. It also disclosed $193.3 million of letters of credit and $621.1 million of surety bonds as maximum commitments, generally not recorded as liabilities, and stated that it did not expect them to have a material adverse effect. The filing notes that aggregate future losses on legal claims cannot be reasonably estimated.
The revolving credit and Term Loan A facilities mature in March 2023; the Term Loan B matures in September 2024. Management noted that the future replacement of LIBOR could increase borrowing costs. No common shares were repurchased in Q1; the debt and stock repurchase program was authorized through December 31, 2022.
Most important facts for investors to verify
- Confirm the issuer identity: this filing is for CONSOL Energy Inc., despite the request metadata naming Core Natural Resources, Inc.
- Review derivative positions, settlement exposure and how mark-to-market changes affect GAAP results; the company held coal contracts to sell 1.3 million metric tons and buy 450,000 metric tons settling in 2022.
- Track whether 2022 sales, realized-price and cash-cost guidance is achieved, including the effects of inflation and shipment volumes.
- Verify Itmann preparation-plant timing, production ramp and capital requirements.
- Assess liquidity and refinancing needs around the March 2023 maturities, covenant headroom, and the availability and cost of credit and surety capacity.
- Monitor the UMWA litigation and legacy employee-benefit obligations, as well as environmental and other guarantees.