Filing summary
Registrant and period: The supplied filing is CONSOL Energy Inc.’s unaudited Form 10-Q for the quarter ended September 30, 2021, filed November 2, 2021. It is not a filing under the name Core Natural Resources, Inc.; investors should confirm the intended issuer. Unless indicated otherwise, dollar figures below are in millions.
Business context
CONSOL produces bituminous coal through the Pennsylvania Mining Complex (PAMC) and operates the CONSOL Marine Terminal at the Port of Baltimore. It is also developing the Itmann metallurgical coal mine. The December 2020 merger with CONSOL Coal Resources made that business wholly owned; this affects comparability with 2020 results and share counts.
Financial and operating results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Coal revenue | $258.6 | $184.4 | $803.9 | $542.1 |
| Revenue from customer contracts | $292.0 | $214.3 | $926.0 | $610.7 |
| Total revenue and other income, including derivative mark-to-market | $149.0 | $243.2 | $778.3 | $697.0 |
| Net loss attributable to CONSOL stockholders | $(113.8) | $(7.2) | $(83.2) | $(22.8) |
| Basic and diluted loss per share | $(3.30) | $(0.28) | $(2.42) | $(0.88) |
| Operating cash flow | Not stated for quarter | Not stated for quarter | $253.1 | $62.4 |
| Capital expenditures | Not stated for quarter | Not stated for quarter | $103.3 | $66.0 |
- Q3 shipments were 5.4 million tons versus 4.5 million; average revenue was $47.46 per ton versus $40.55. Average cash cost was $30.64 per ton, producing a reported cash margin of $16.82 per ton.
- Nine-month sales were 18.1 million tons versus 12.8 million. Average revenue per ton rose to $44.05 from $42.35, while average cash cost fell to $27.45 from $29.88; cash margin increased to $16.60 from $12.47 per ton.
- Adjusted EBITDA, a non-GAAP measure, was $66.6 million in Q3 versus $68.3 million; nine-month adjusted EBITDA was $257.7 million versus $165.5 million. The filing cautions that this measure is not a substitute for GAAP results.
- Commodity derivatives generated unrealized losses of $147.3 million in Q3 and $167.7 million for the nine months. These non-cash mark-to-market losses were a major factor in the reported net loss; the company said its API2 hedges were intended to reduce price volatility for a portion of 2022 export sales.
- At September 30, cash and cash equivalents were $162.0 million, with restricted cash of $50.3 million. Current assets were $384.2 million and current liabilities $515.7 million. Total liabilities were $2.105 billion and equity $484.6 million.
- Debt and finance lease obligations totaled about $682 million, including $47 million of current long-term debt. The company had no revolver borrowings and $240.3 million of unused capacity under its $400 million revolving facility, after letters of credit. The receivables facility had no unused capacity.
Changes, outlook, and management commentary
- Coal revenue and volumes rose as demand recovered from the COVID-19 downturn and domestic and export pricing improved. Production increased, though Q3 output was affected by acute operational and geological issues, transportation delays, and planned maintenance; management said the issues were mitigated in Q4 2021.
- Management’s 2021 guidance was PAMC sales of approximately 23.5–24.5 million tons, average cash cost of coal sold of $27.50–$28.50 per ton, and capital expenditures of $150–$170 million, including Itmann. As of November 2, the company said 2021 was fully contracted and 2022 contracted volume was 20.2 million tons.
- Management expected adequate liquidity from operating cash flow and the revolver for at least the 12 months following the filing. Itmann’s preparation plant was planned for completion in the second half of 2022; the mine was expected to produce about 900,000 tons annually when fully operational.
- The company remained exposed to COVID-19-related demand and logistics disruption, coal-price volatility, customer concentration and contract performance, operational and geological risks, and higher insurance and surety costs. Management also highlighted inflation and supply-chain pressures.
- The company was in compliance with its financial covenants at quarter-end. Reported covenant ratios were 1.12x first-lien gross leverage, 1.64x total net leverage, and 1.67x fixed-charge coverage.
- Contingencies include retiree-benefit litigation and potential legacy obligations. Management said accrued amounts for pending claims were immaterial, but could not reasonably estimate possible aggregate future losses. The filing also estimated annual servicing costs of certain Coal Act and black-lung liabilities at $10–$20 million for the next ten years.
- CONSOL announced targets to reduce direct operational greenhouse gas emissions 50% from 2019 levels by the end of 2026 and to aim for net-zero Scope 1 and 2 emissions by 2040.
Most important facts to verify
- Confirm that CONSOL Energy Inc., rather than Core Natural Resources, Inc., is the intended issuer and that the 2021 reporting period is correct.
- Review the derivative positions, settlement timing, and sensitivity: the filing states a hypothetical $1 increase in indexed commodity prices would reduce pretax earnings by $2 million.
- Check cash availability separately from restricted cash, letters of credit, and the limited availability under the receivables securitization facility.
- Track performance against 2021 sales, cost, and capital-spending guidance, plus Itmann’s construction schedule and expected production.
- Monitor covenant headroom, debt maturities and interest costs, required cash-flow-based debt repayments, and the unresolved retiree-benefit and legacy-liability matters.