Business context and reporting period
The supplied filing is CONSOL Energy Inc.’s Form 10-Q for the quarter ended September 30, 2022 (filed November 1, 2022; ticker CEIX), not a filing under the name Core Natural Resources, Inc. The figures below summarize the filing provided and should not be attributed to Core Natural Resources without verification. CONSOL operates the Pennsylvania Mining Complex (PAMC), the CONSOL Marine Terminal, and the developing Itmann metallurgical coal mine.
Financial and operating performance
Amounts are in millions of dollars, except per-share and per-ton data. “Nine months” means the period ended September 30.
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Total revenue and other income | $561.6 | $149.0 | $1,464.8 | $778.3 |
| Net income (loss) | $152.1 | $(113.8) | $274.0 | $(83.2) |
| Diluted EPS | $4.25 | $(3.30) | $7.68 | $(2.42) |
| Adjusted EBITDA | $180.9 | $66.6 | $566.5 | $257.7 |
| Operating cash flow | Quarterly amount not separately shown in the cash-flow statement | $499.7 | $253.1 |
- Q3 coal revenue was $472.6 million, versus $258.6 million; nine-month coal revenue was $1,481.7 million, versus $803.9 million. Contract revenue, including coal, terminal and freight, was $530.1 million in Q3 and $1,671.1 million for nine months.
- Reported revenue and other income include commodity-derivative results: a $0.1 million net loss in Q3 2022 versus a $147.3 million loss in Q3 2021, and a $256.6 million loss for nine months 2022 versus a $167.7 million loss in 2021. These volatile items materially affect reported comparisons.
- PAMC sold 5.3 million tons in Q3 and 17.9 million tons year to date, slightly below the respective 5.4 million and 18.1 million tons in 2021. Q3 realized coal revenue was $72.83 per ton and cash cost was $39.77 per ton; nine-month figures were $67.81 and $34.46.
- Capital expenditures were $134.5 million for nine months, compared with $103.3 million. Cash used in investing was $116.3 million; financing activities used $260.9 million, including debt repayments and $34.9 million of dividends.
- At September 30, cash and cash equivalents were $268.9 million; total current assets were $558.3 million and current liabilities $515.0 million. Management reported total liquidity of approximately $542 million, including cash, $272 million of unused revolving capacity and about $1 million of securitization capacity.
- The filing states total long-term debt and finance-lease obligations of approximately $458 million, including $26 million of current debt. Debt and finance-lease balances declined from year-end 2021; the company made substantial term-loan and other debt repayments.
Material changes versus the prior comparable period
- Net income moved from a loss to profit in both Q3 and the nine-month period. Higher coal prices and improved PAMC performance were key contributors; adjusted EBITDA rose to $180.9 million in Q3 and $566.5 million year to date.
- Higher realized pricing reflected tight global coal supply, stronger power prices and elevated demand. These gains were partly offset by derivative settlements: losses of $81.3 million in Q3 and $241.5 million for nine months.
- Cash cost per ton increased year over year, reflecting inflation in supplies and maintenance, equipment failures, higher power costs and PAMC fifth-longwall development. Transportation expense and freight revenue both rose, with freight revenue fully offset by freight expense.
- Operating cash flow increased by $246.5 million year over year for nine months. Capital spending rose, while financing outflows increased due to debt reduction and the special dividend.
- The Itmann preparation plant was commissioned in late September 2022. The first train shipped October 12; management anticipated ramping up a third miner section in Q4.
Outlook, commentary, risks and unusual items
- 2022 guidance: PAMC sales of 24.0–25.0 million tons; average realized coal revenue of $67–$69 per ton; average cash cost of $33–$35 per ton; capital expenditures of $160–$185 million, including Itmann development; and Itmann production of 0.2–0.3 million tons. Per-ton guidance is non-GAAP and the company said it could not provide a GAAP reconciliation.
- At full run rate, management anticipated approximately 900,000 tons annually from Itmann; the plant also has capacity to process an additional 750,000–1 million third-party saleable tons annually.
- Management expected elevated coal demand and prices to support cash generation, debt reduction and potential shareholder returns, while cautioning that actual results are subject to market and operating risks. The company said it had not experienced a material adverse impact from the Russia-Ukraine war as of the filing date.
- Key risks include coal-price and demand volatility, inflation, mine geology and equipment disruptions, rail and other transportation constraints, customer concentration and credit risk, environmental and regulatory obligations, insurance and surety availability, and restricted access to capital related to ESG considerations. COVID-19 and possible renewed restrictions were also identified as uncertainties.
- The revolving facility was amended in July 2022: $260 million of commitments extend to July 2026, while the available limit is scheduled to reduce from $400 million in March 2023 to $260 million. The company reported covenant compliance at September 30, with first-lien gross leverage of 0.23x, total net leverage of 0.28x and fixed-charge coverage of 2.55x.
- Legal accruals for pending claims were described as immaterial, though future aggregate losses could be material and not reasonably estimable. A coal-retiree benefit-plan lawsuit was considered possible but not probable, so no accrual was recorded. The filing also lists substantial letters of credit and surety bonds supporting employee, environmental and other obligations; amounts may overlap other commitments.
- After quarter-end, the company announced a $1.05-per-share dividend, approximately $37 million, payable November 23, 2022, and gave notice of a $25 million partial redemption of 11% Second Lien Notes at 102.75%.
Important facts for investors to verify
- Confirm the intended issuer: the supplied document is CONSOL Energy Inc.’s 2022 Q3 10-Q, not a Core Natural Resources filing.
- Review the derivative settlements and mark-to-market accounting when assessing earnings, realized pricing and cash generation.
- Check whether PAMC production, per-ton costs and full-year guidance were achieved, and assess the operational ramp-up and economics of Itmann.
- Verify debt reduction, revolver availability after its scheduled March 2023 step-down, covenant headroom and the cost of floating-rate debt.
- Assess the scale and timing of retiree, environmental, reclamation, surety and litigation exposures, including commitments not recorded as balance-sheet liabilities.
- Confirm the post-quarter dividend and note redemption were completed and consider their effect on liquidity and capital-return capacity.