PITTSBURGH, April 25, 2016 /PRNewswire/ -- CNX Coal
Resources LP (NYSE: CNXC) today reported financial and operating
results for the quarter ended March 31,
2016.
First Quarter 2016 Results
Highlights of the CNXC first quarter of 2016 results
include:
- Cash distribution of $0.5125
per unit
- Net income of $2.5
million
- Adjusted EBITDA1 of $13.1
million
- Achieved its lowest cost of coal sales in last six
years
- Increased 2016 adjusted EBITDA guidance by $2.0 million
- Reduced 2016 capital expenditures guidance by $7.0 million
Management Comments
"The CNXC team delivered excellent operational performance
during the first quarter of 2016 and helped offset declining cash
margins in the face of challenging coal markets and further
deterioration in coal prices." said Jimmy
Brock, Chief Executive Officer of CNX Coal Resources GP LLC
(the "General Partner"). "Specifically, the cash cost per ton
in the first quarter was the lowest since first quarter of 2009,
despite the inconsistent customer shipments that we noted in
January. Our performance not only highlights the ability of the
Pennsylvania mining complex to
adapt in a challenging commodity price environment, but also to
remain competitive as the U.S. coal market continues to reshape. As
expected, the first quarter of 2016 began with abnormally low
shipment volumes in January and February. However, we saw some
improvements in March, which allowed us to have near-record
production at some of our longwalls. Our cost structure allowed us
to continue to remain profitable in spite of less than favorable
pricing during the quarter."
"On the safety and compliance side, we had a mixed first
quarter. While we were able to reduce the severity of the incidents
compared to the same period last year, there was an increase in the
number of recordable incidents. We continue to remain focused on
our core values of safety and compliance and continue our efforts
to improve on both of these key measures."
1"Adjusted EBITDA" and
"Distributable Cash Flow" are non-GAAP financial measures, which
are reconciled to GAAP net income and net cash provided by
operating activities, under the caption "Non-GAAP Financial
Measures"
Sales & Marketing
Despite the challenging coal market backdrop and high customer
inventories, our marketing team was successful in improving overall
coal shipments throughout the quarter. As expected, some customer
deliveries have been slower than usual but our marketing team
continues to work with those accounts. In the first quarter
of 2016, we successfully tested Bailey coal at two new customer
plants and are currently in active negotiations for additional term
business. During the first quarter of 2016, we sold 1.1
million tons to 39 different end users domestically and
internationally. For the remainder of 2016, we continue
to expect a gradual recovery in shipments at some of our customers
as they normalize their inventories while competing with low
natural gas prices. This could result in us selling some coal
in the spot market, which could weigh on our realizations due to
the changing customer mix. According to the most recent estimates
published by the EIA in its short term energy outlook, U.S. coal
demand declined approximately 15%, while industry-wide coal
production declined almost 31% in the first quarter of 2016
compared to year-earlier quarter. We believe that given a
normal summer, this decline in industry-wide production may help
normalize inventory and set the stage for a recovery in coal
prices. In the interim, we will continue to focus on building our
contract book and running our mines as safely and efficiently as
possible. To that extent and including our expectations of
carryover tons from 2016, CNXC has solid contractual sales
positions for 2017 and 2018 of 70% and 52%, respectively, based on
a 5.2 million ton production run rate.
Organizational Appointment
CNXC has named Jim McCaffrey to
lead our Coal Sales & Marketing team. In this role, Mr.
McCaffrey will have sole responsibility for the coal sales and
marketing for the Pennsylvania
mining complex. Mr. McCaffrey has led the marketing efforts for
coal from the Pennsylvania mining
complex since 2009. Mr. McCaffrey joined CONSOL Energy Inc. in 1976
and spent 27 years in operations before transitioning to the
corporate coal sales and marketing team in 2003.
Operational Update and Outlook
In January 2016, we returned to
running our mines on a more consistent schedule to achieve
productivity improvements, even if it resulted in some lower-priced
sales in the export markets. Our strategy worked as expected,
leading to improved mine consistency and improving margins as the
quarter advanced, with exports being able to absorb surplus mine
production. During the first quarter of 2016, CNXC also made
several operational adjustments including idling of one longwall,
reducing staffing levels and realigning employee benefits. All of
these steps resulted in a more consistent operating schedule at the
mines, reduced labor cost and improved productivity. Productivity
for the first quarter, as measured by tons per employee-hour,
improved by 14% compared to the year-ago period, despite the
reduced number of longwalls in operation. Looking forward, CNXC
expects slight improvement in the coal shipments in the second
quarter coupled with a slight increase in cost of coal sold,
compared to the first quarter, due to four scheduled longwall
moves.
Quarterly Distribution
During first quarter of 2016, CNXC generated distributable cash
flow1 of $4.4 million and
distribution coverage of 0.36x. The Board of Directors of our
General Partner declared a cash distribution
of $0.5125 per unit to all unitholders for the first
quarter of 2016. The distribution will be made on May 12, 2016 to unitholders of record at the
close of business on May 5, 2016.
First Quarter Summary
For its 20% undivided interest in the Pennsylvania mining complex, CNXC sold 1.1
million tons of coal during the first quarter of 2016. Total
production declined to 1.1 million tons compared to 1.3 million
tons produced in the same quarter of 2015 as CNXC aligned
production with market conditions. During the first quarter, CNXC
sold approximately 0.3 million tons of coal in export market
compared to 0.4 million tons in same quarter of 2015. As previously
announced overall sales were impacted by weak winter burn and
reduced coal generation weighing on the timing of shipments. Our
total unit costs for coal sold in the quarter were $33.16 per ton, compared to $42.62 per ton in the year-earlier quarter. The
improved cost performance was driven by improved productivity,
reduced staffing levels and realignment of employee benefits,
offset by lower production due to inconsistent shipment
schedules.
|
|
Three Months
Ended
|
|
|
March 31,
2016
|
|
March 31,
2015
|
Coal
Production
|
million
tons
|
1.1
|
|
1.3
|
Coal Sales
|
million
tons
|
1.1
|
|
1.3
|
Average Realized
Price
|
per ton
|
$42.99
|
|
$58.82
|
Average Cost of Coal
Sold
|
per ton
|
$33.16
|
|
$42.62
|
Guidance and Outlook
Based on its current expectations, CNXC is providing the
following updated 2016 outlook for coal sales, adjusted EBITDA and
maintenance capital expenditures.
- Coal sales of 4.5-5.1 million tons
- Adjusted EBITDA of $59-$69
million
- Maintenance capital expenditures of $18-$20 million
First Quarter Earnings Conference Call
A conference call and webcast, during which management will
discuss the first quarter of 2016 financial and operational
results, is scheduled for April 25,
2016 at 5:00 PM ET. Prepared
remarks by members of management will be followed by a question and
answer session. Interested parties may listen via webcast on the
Events page of our website, www.cnxlp.com. An archive of the
webcast will be available for 30 days after the event.
Participant dial in
(toll free)
|
1-855-656-0928
|
Participant
international dial in
|
1-412-902-4112
|
About CNX Coal Resources LP
CNX Coal Resources is a growth-oriented master limited
partnership recently formed by CONSOL Energy Inc. (NYSE: CNX) to
manage and further develop all of CONSOL's active thermal coal
operations in Pennsylvania. Its initial assets include a 20%
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:
Brian Aiello, (724) 485-3078
brianaiello@cnxlp.com
Non-GAAP Financial Measures
Adjusted EBITDA and distributable cash flow are not Generally
Accepted Accounting Principles ("GAAP") measures. Adjusted EBITDA
is defined as (i) net income (loss) before net interest expense,
depreciation, depletion and amortization, as adjusted for (ii)
material nonrecurring and other items which may not reflect the
trend of our future results. Management believes that the
presentation of adjusted EBITDA in this report provides information
useful to investors in assessing our financial condition and
results of operations. The GAAP measure most directly
comparable to adjusted EBITDA is net income. Adjusted EBITDA
should not be considered an alternative to net income or any other
measure of financial performance or liquidity presented in
accordance with GAAP. Adjusted EBITDA excludes some, but not
all, items that affect net income and our presentation of adjusted
EBITDA may vary from that presented by other companies. As a
result, adjusted EBITDA as presented below may not be comparable to
similarly titled measures of other companies. Distributable
cash flow is defined as adjusted EBITDA less net cash interest paid
and estimated maintenance capital expenditures. Management
believes that the presentation of distributable cash flow in this
report provides information useful to investors in assessing our
financial condition and results of operations. The GAAP measures
most directly comparable to distributable cash flow are net income
and net cash provided by operating activities. Distributable
cash flow should not be considered an alternative to net income,
net cash provided by (used in) operating activities or any other
measure of financial performance or liquidity presented in
accordance with GAAP. Distributable cash flow excludes some,
but not all, items that affect net income or net cash, and our
presentation may vary from the presentations of other
companies. As a result, our distributable cash flow may not
be comparable to similarly titled measures of other companies.
The following table presents a reconciliation of adjusted EBITDA
to net income, the most directly comparable GAAP financial measure,
on a historical basis for each period indicated. The table
also presents a reconciliation of distributable cash flow to net
income and operating cash flows, the most directly comparable GAAP
financial measures, on a historical basis for each period
indicated.
(Dollars in
thousands)
|
|
Three Months
Ended
March 31, 2016
|
Net
income
|
|
$
|
2,499
|
Plus:
|
|
|
Interest
expense
|
|
1,994
|
Depreciation,
depletion and amortization
|
|
8,253
|
Stock/Unit based
compensation
|
|
308
|
Adjusted
EBITDA
|
|
$
|
13,054
|
Less:
|
|
|
Cash
Interest
|
|
1,967
|
Estimated Maintenance
Capital Expenditures
|
|
6,700
|
Distributable Cash
Flow
|
|
$
|
4,387
|
|
|
Net Cash Provided
by Operating Activities
|
|
$
|
2,285
|
Less:
|
|
|
Interest Expense,
Net
|
|
1,994
|
Other, Including
Working Capital
|
|
(12,763)
|
Adjusted
EBITDA
|
|
$
|
13,054
|
Less:
|
|
|
Cash
Interest
|
|
1,967
|
Estimated Maintenance
Capital Expenditures
|
|
6,700
|
Distributable Cash
Flow
|
|
$
|
4,387
|
Cautionary Statements
Various statements in this release, including those that express
a belief, expectation or intention, may be considered
forward-looking statements under federal securities laws including
Section 21E of the Securities Exchange Act of 1934 (the "Exchange
Act") 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 press release, if any, speak only as of the date of this
press release; we disclaim any obligation to update these
statements. 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:
generation of sufficient distributable cash flow to support the
payment of minimum quarterly distributions; estimated adjusted
EBITDA and distributable cash flow are subject to various inherent
uncertainties; our acquiring additional undivided interests in the
Pennsylvania mining complex or
other assets from our sponsor may not occur; uncertainties exist in
estimating our economically recoverable coal reserves; our ability
to acquire additional coal reserves that are economically
recoverable; deterioration in the global economic conditions in any
of the industries in which our customers operate, a worldwide
financial downturn or negative credit market conditions; decreases
in demand for electricity and changes in coal consumption patterns
of U.S. electric power generators; a substantial or extended
decline in prices we receive for our coal due to volatility,
oversupply, weather, availability of alternative fuels or other
factors; increased competition within the coal industry, a loss of
our competitive position or foreign currency fluctuations affecting
the competitiveness of our coal abroad; the risks inherent in coal
operations, including the occurrence of unexpected disruptions,
geological conditions, environmental hazards, equipment failure,
fires, explosions, accidents, security breaches or terroristic acts
and weather conditions and we may not be insured or fully insured
against such the losses from events; our mines being part of a
single mining complex and located in a single geographic area; the
delay or disruption of rail services transporting our coal or
increased transportation costs for our coal; the occurrence of
significant downtime of our major pieces of mining equipment
including our preparation plant; our customers extending existing
contracts or entering into new long-term contracts for coal; the
loss of or significant reduction in purchases by our largest
customers; provisions in our multi-year sales contracts may provide
limited protection to us during adverse economic conditions, may
result in economic penalties to us or permit customer termination
of these contracts; our inability to collect payments from
customers if their creditworthiness declines; our ability to raise
on satisfactory terms the capital or financing needed for our
portion of the substantial capital expenditures associated with our
mines; our inability to obtain equipment, parts and raw materials
in timely manner, in sufficient quantities or at reasonable costs
in our coal mining and transportation operations; our inability to
integrate future acquisitions and achieve anticipated benefits;
restrictions in our revolving credit facility could adversely
affect our business, financial condition, results of operation and
ability to make quarterly cash distributions; future debt we incur
may limit our flexibility to obtain financing and pursue other
business opportunities; increases in interest rates; our ability to
make distributions depends upon our cash flow; we may have to
coordinate our mining operations with oil and natural gas
drillers; we may incur additional costs and delays associated
with perfecting title for our coal rights; we rely upon our general
partner and employees of our sponsor for management; our mines are
operated by a work force that is employed exclusively by our
sponsor and our sponsors employees could unionize; we depend upon
cash flow generated by our subsidiaries; terrorist attacks or cyber
incidents could result in information theft, data corruption and/or
financial loss; the impact of potential, as well as any adopted
regulations, relating to greenhouse gas emissions on the market for
coal, on our operating costs and on the value of our coal assets;
electric power generators and other coal users switching to
alternative fuels in order to comply with various environmental
standards related to coal combustion emissions or due to various
incentives to generate electricity from renewable energy sources;
our costs could increase and our coal operations could be
restricted by the effects of existing and future government
environmental regulation; the potential for liabilities arising
from environmental contamination or alleged environmental
contamination in connection with our past or current coal
operations; our obtaining and renewing governmental permits and
approvals for our coal operations; the effects of stringent federal
and state employee health and safety regulations of our mines,
including the ability of regulators to shut down a mine; the
effects of our mine closing and reclamation obligations; any
termination of our tax treatment as a partnership including as a
result of a sale of 50% or more of our capital and profits
interests during any 12 month period; our tax positions; the
elimination of current U.S. federal income tax preferences
available for coal exploration and development; and other factors
discussed in the "Risk Factors" section of the prospectus
included in our registration statement on Form S-1, in the form
last filed with the SEC, as well as any periodic report on Forms
10-K and 10-Q that we file with the SEC.
CNX COAL RESOURCES
LP
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(Dollars in
thousands, except unit data)
|
(unaudited)
|
|
|
|
Three Months
Ended
March 31,
|
|
2016
|
|
2015
|
Coal
Revenue
|
$
|
45,233
|
|
$
|
76,887
|
Freight
Revenue
|
2,615
|
|
474
|
Other Income
(Loss)
|
(9)
|
|
231
|
Total Revenue and
Other Income
|
47,839
|
|
77,592
|
|
|
|
|
Operating and Other
Costs
|
30,794
|
|
46,114
|
Depreciation,
Depletion and Amortization
|
8,253
|
|
9,149
|
Freight
Expense
|
2,615
|
|
474
|
Selling, General and
Administrative Expenses
|
1,684
|
|
2,125
|
Interest
Expense
|
1,994
|
|
2,381
|
Total
Costs
|
45,340
|
|
60,243
|
Net
Income
|
$
|
2,499
|
|
$
|
17,349
|
|
|
|
|
Calculation of
Limited Partner Interest in Net Income:
|
|
|
|
Net Income
Attributable to General and Limited Partner Ownership Interest in
CNX Coal Resources
|
$
|
2,499
|
|
N/A
|
Less: General Partner
Interest in Net Income
|
51
|
|
N/A
|
Limited Partner
Interest in Net Income
|
$
|
2,448
|
|
N/A
|
|
Net Income per
Limited Partner Unit - Basic
|
$
|
0.11
|
|
N/A
|
Net Income per
Limited Partner Unit - Diluted
|
$
|
0.11
|
|
N/A
|
|
|
|
|
Limited Partner Units
Outstanding - Basic
|
23,222,134
|
|
N/A
|
Limited Partner Units
Outstanding - Diluted
|
23,223,540
|
|
N/A
|
|
|
|
|
Cash Distributions
Declared per Unit
|
$
|
0.5125
|
|
N/A
|
Effective first quarter of 2016, CNXC will report selling
related expense as part of selling, general & administrative
expenses. For historical reconciliation of this change, please
refer to the investor section of our website.
CNX COAL RESOURCES
LP
|
CONSOLIDATED
BALANCE SHEETS
|
(Dollars in
thousands)
|
|
|
|
(Unaudited)
|
|
|
|
March 31,
2016
|
|
December 31,
2015
|
ASSETS
|
|
|
|
Current
Assets:
|
|
|
|
Cash
|
$
|
9,095
|
|
$
|
6,531
|
Trade
Receivables
|
19,145
|
|
15,518
|
Other
Receivables
|
372
|
|
377
|
Inventories
|
10,901
|
|
9,791
|
Prepaid
Expenses
|
3,643
|
|
4,080
|
Total Current
Assets
|
43,156
|
|
36,297
|
Property, Plant and
Equipment:
|
|
|
|
Property, Plant and
Equipment
|
694,369
|
|
692,482
|
Less—Accumulated
Depreciation, Depletion and Amortization
|
328,783
|
|
320,729
|
Total Property,
Plant and Equipment—Net
|
365,586
|
|
371,753
|
Other
Assets:
|
|
|
|
Other
|
16,021
|
|
14,079
|
Total Other
Assets
|
16,021
|
|
14,079
|
TOTAL
ASSETS
|
$
|
424,763
|
|
$
|
422,129
|
|
LIABILITIES AND
PARTNERS' CAPITAL
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
Accounts
Payable
|
$
|
12,645
|
|
$
|
14,023
|
Accounts
Payable—Related Party
|
1,280
|
|
3,452
|
Other Accrued
Liabilities
|
29,969
|
|
29,978
|
Total Current
Liabilities
|
43,894
|
|
47,453
|
Long-Term
Debt:
|
|
|
|
Revolver, net of debt
issuance and financing fees
|
196,170
|
|
180,946
|
Capital Lease
Obligations
|
95
|
|
100
|
Total Long-Term
Debt
|
196,265
|
|
181,046
|
Deferred Credits and
Other Liabilities:
|
|
|
|
Pneumoconiosis
Benefits
|
1,701
|
|
1,547
|
Workers'
Compensation
|
2,395
|
|
2,343
|
Asset Retirement
Obligations
|
6,943
|
|
6,799
|
Other
|
552
|
|
571
|
Total Deferred
Credits and Other Liabilities
|
11,591
|
|
11,260
|
TOTAL
LIABILITIES
|
251,750
|
|
239,759
|
Partners'
Capital:
|
|
|
|
Common Units
(11,611,067 Units Outstanding at March 31, 2016 and December 31,
2015)
|
149,890
|
|
154,309
|
Subordinated Units
(11,611,067 Units Outstanding at March 31, 2016 and December 31,
2015)
|
1,461
|
|
6,188
|
General Partner
Interest
|
12,890
|
|
13,081
|
Accumulated Other
Comprehensive Income
|
8,772
|
|
8,792
|
Total Partners'
Capital
|
173,013
|
|
182,370
|
TOTAL LIABILITIES
AND PARTNERS' CAPITAL
|
$
|
424,763
|
|
$
|
422,129
|
CNX COAL RESOURCES
LP
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(Dollars in
thousands)
|
(unaudited)
|
|
|
|
Three Months Ended
March 31,
|
|
2016
|
|
2015
|
Cash Flows from
Operating Activities:
|
|
|
|
Net Income
|
$
|
2,499
|
|
$
|
17,349
|
Adjustments to
Reconcile Net Income to Net Cash Provided By Operating
Activities:
|
|
|
|
Depreciation,
Depletion and Amortization
|
8,253
|
|
9,149
|
(Gain) Loss on Sale
of Assets
|
10
|
|
(15)
|
Unit Based
Compensation
|
308
|
|
—
|
Other Adjustments to
Net Income
|
221
|
|
38
|
Changes in Operating
Assets:
|
|
|
|
Accounts and Notes
Receivable
|
(3,622)
|
|
(726)
|
Inventories
|
(1,110)
|
|
422
|
Prepaid
Expenses
|
437
|
|
299
|
Changes in Other
Assets
|
(1,942)
|
|
(123)
|
Changes in Operating
Liabilities:
|
|
|
|
Accounts
Payable
|
(736)
|
|
1,115
|
Accounts
Payable—Related Party
|
(2,172)
|
|
—
|
Other Operating
Liabilities
|
(7)
|
|
726
|
Changes in Other
Liabilities
|
146
|
|
(790)
|
Net Cash Provided by
Operating Activities
|
2,285
|
|
27,444
|
Cash Flows from
Investing Activities:
|
|
|
|
Capital
Expenditures
|
(2,581)
|
|
(6,510)
|
Proceeds from Sales
of Assets
|
14
|
|
19
|
Net Cash Used in
Investing Activities
|
(2,567)
|
|
(6,491)
|
Cash Flows from
Financing Activities:
|
|
|
|
Payments for
Miscellaneous Borrowings
|
(10)
|
|
(8)
|
Proceeds from
Revolver, Net of Payments
|
15,000
|
|
—
|
Payments for
Unitholder Distributions
|
(12,144)
|
|
—
|
Debt Issuance and
Financing Fees
|
—
|
|
(2,401)
|
Net Change in Parent
Advances
|
—
|
|
(18,543)
|
Net Cash Used In
Financing Activities
|
2,846
|
|
(20,952)
|
Net Increase in
Cash
|
2,564
|
|
1
|
Cash at Beginning of
Period
|
6,531
|
|
3
|
Cash at End of
Period
|
$
|
9,095
|
|
$
|
4
|
Logo -
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SOURCE CNX Coal Resources LP