CONSOL Energy Announces Results for the Fourth Quarter and Full Year 2022 and Announces Dividend of $1.10/Share

Tageszeitungen (Symbolbild). pixabay.com

PR Newswire

CANONSBURG, Pa., Feb. 7, 2023

CANONSBURG, Pa., Feb. 7, 2023 /PRNewswire/ -- Today, CONSOL Energy Inc. (NYSE: CEIX) reported financial and operating results for the fiscal quarter and year ended December 31, 2022.

Fourth Quarter 2022 Highlights Include:

GAAP net income of $193.0 million;
Quarterly adjusted EBITDA¹ of $240.3 million;
Announces dividend of $1.10/share, based on 4Q22 results, payable on February 28, 2023;
Increasing the planned shareholder return allocation to a range of 35-50% of free cash flow while continuing to reduce debt;
Repurchased 124 thousand shares of CEIX common stock at a weighted average price of $64.18 per share;
Net cash provided by operating activities of $151.3 million;
Quarterly free cash flow¹ of $116.0 million;
Restarted the fifth longwall at the Pennsylvania Mining Complex (PAMC) in mid-December;
2023 and 2024 contracted position improved to 23.9 million tons and 12.5 million tons, respectively; and
Debt repayments of $81.6 million during 4Q22, including $50.0 million of Term Loan B and $25.0 million of Second Lien Notes.

Full Year 2022 Highlights Include:

GAAP net income of $467.0 million;
Adjusted EBITDA¹ of $806.7 million;
Net cash provided by operating activities of $651.0 million;
Free cash flow¹ of $501.0 million;
PAMC coal shipments of 24.1 million tons;
Record annual terminal revenue and Adjusted EBITDA¹ at the CONSOL Marine Terminal;
Debt repayments of $292.3 million, while increasing total cash and cash equivalents by $128.7 million;
Initiated enhanced shareholder return program in 3Q22, returning approximately $80.0 million to shareholders;
Commissioned the Itmann Preparation Plant with ramp up to full production expected in 2023; and
Refinanced our revolving credit facility and accounts receivable securitization facility.

Management Comments

"During the fourth quarter of 2022, we delivered a strong operational and financial performance following challenging geological issues at the PAMC in the third quarter and finished the year with 24.1 million PAMC sales tons. We generated annual free cash flow¹of $501 million in 2022, which was used to accelerate our debt reduction strategy and underpinned the decision to initiate an enhanced shareholder return program during the year. In 2022, we made debt repayments of nearly $300 million, returned $80 million to shareholders via dividends and share repurchases and increased our cash position by approximately $130 million. Due to this significant progress, we are pleased to announce that we are increasing our planned capital allocation percentage for shareholder returns to a range of 35% to 50% of quarterly free cash flows. Operationally during the year, we completed the development of the fifth longwall at the PAMC in December, which is now fully operational, and we commissioned our Itmann preparation plant, which shipped its first train in 4Q22."

"On the safety front, our Bailey Preparation Plant and CONSOL Marine Terminal (CMT) each had ZERO employee recordable incidents during the full year of 2022. Our full-year total recordable incident rate of 1.72 at the PAMC continues to track significantly below the national average for underground bituminous coal mines, finishing the year approximately 63% below the national year-to-date average (based on the latest available MSHA data)."

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Pennsylvania Mining Complex Review and Outlook

PAMC Sales and Marketing

Our sales team sold 6.2 million tons of PAMC coal during the fourth quarter of 2022, generating coal revenue of $516.3 million for the PAMC segment. After adjusting for the effect of settlements of commodity derivatives, the PAMC generated an average realized coal revenue per ton sold¹ of $75.92. This compares to 5.6 million tons sold at an average realized coal revenue per ton sold¹ of $51.27 in the year-ago period. The improvement in the average realized coal revenue per ton sold¹ throughout 2022 was due to significant improvements in the coal, natural gas, and electric power markets versus the prior year.

In the domestic market, although the coal pricing environment remained robust during the fourth quarter of 2022, prices became very volatile. Warmer-than-normal weather for much of the quarter as well as increased natural gas inventories drove the volatility. However, coal had a strong finish to 2022 and stepped up meaningfully during the arctic blast that hit much of the U.S. in mid- to late-December. McCloskey estimates that coal burn reached 42.4 million tons during the month, an 8 million ton increase compared to December 2021 as coal again proved to be a reliable baseload power source. Warmer-than-normal temperatures gripped much of the U.S. in the month of January and have put downward pressure on domestic natural gas and power prices. However, incremental coal supply remained muted throughout 2022, and the Energy Information Administration expects an 11% decline in domestic coal production in 2023, which should keep the energy markets tight.

On the export front, similar to the domestic market, seaborne thermal coal markets remained strong through much of the fourth quarter of 2022. API2 spot prices averaged $237/metric ton in 4Q22 compared to $173/metric ton in the prior-year quarter. However, warmer-than-normal temperatures in Europe, which led to improved coal and natural gas inventory levels, have caused a lot of recent volatility in the European energy market. Fundamentally, high calorific value coal supplies remain tight, and natural gas market conditions in Europe remain constrained by the indefinite shutdown of the Russian Nord Stream 1 pipeline and delayed regulatory approval for Nord Stream 2 forcing Europe to be more reliant on imported LNG. Goldman Sachs suggests that a mild winter could relax constraints on European economic growth and industrial demand that were artificially curtailed in 2022 in order to balance the gas market, which could still drive increased energy demand in Europe in 2023.

During 4Q22, we strengthened our forward contract book at the PAMC, opportunistically increasing our sales book by an additional 8.3 million tons for delivery through 2025. As such, we have increased our 2023 and 2024 sold positions to 23.9 million tons and 12.5 million tons, respectively.

Operations Summary

During the fourth quarter of 2022, we ran our four operating longwalls at the Pennsylvania Mining Complex at a more normalized run rate after encountering multiple operational and geological issues during the third quarter. Furthermore, we completed the development of our fifth longwall at the complex toward the end of 4Q22, and it subsequently began producing coal in mid-December. The PAMC produced 6.1 million tons in 4Q22, compared to 5.6 million tons in the year-ago quarter. This brought total PAMC production to 23.9 million tons in 2022.

CEIX's total costs and expenses during the fourth quarter of 2022 were $401.8 million, compared to $318.0 million in the year-ago quarter, and CEIX's total coal revenue during the fourth quarter of 2022 was $537.0 million, compared to $288.1 million in the year-ago quarter. Total realized coal revenue¹ in 4Q22 was $489.3 million, after accounting for the settlements of commodity derivatives. The significant improvement in total realized coal revenue¹ in the quarter was mainly driven by a $24.65 improvement in average realized coal revenue per ton sold¹ at the Pennsylvania Mining Complex, as coal prices were much stronger compared to the prior-year period, as well as improved incremental sales volume. Average cash cost of coal sold per ton¹ at the PAMC for the fourth quarter of 2022 was $34.89, compared to $30.81 in the year-ago quarter. The increase was due to ongoing inflationary pressures on costs for supplies, maintenance, and contractor labor, increased power costs and added costs associated with the continued development work for the fifth longwall at the PAMC.

For 2022, CEIX's total costs and expenses were $1,533.5 million, compared to $1,223.5 million in the prior year. Our full-year 2022 average cash cost of coal sold per ton¹ at the PAMC came in at $34.56, compared to $28.25 for full-year 2021. The significant increase for the year was again due to persistent inflationary pressures, fifth longwall development costs and increased power expense compared to 2021.

		Three Months Ended		For the Year Ended
		December 31, 2022	December 31, 2021	December 31, 2022	December 31, 2021

Total Coal Revenue	thousands	$ 536,994	$ 288,095	$ 2,018,662	$ 1,092,022
Settlements of Commodity Derivatives	thousands	$ (47,742)	$ —	$ (289,228)	$ —
Total Realized Coal Revenue¹	thousands	$ 489,252	$ 288,095	$ 1,729,434	$ 1,092,022
Total Costs and Expenses	thousands	$ 401,791	$ 318,039	$ 1,533,500	$ 1,223,540
Total Cash Cost of Coal Sold¹	thousands	$ 215,990	$ 171,280	$ 834,405	$ 668,812
Coal Production	million tons	6.1	5.6	23.9	23.9
Coal Sales	million tons	6.2	5.6	24.1	23.7
Average Realized Coal Revenue per Ton Sold¹	per ton	$ 75.92	$ 51.27	$ 69.89	$ 45.75
Average Cash Cost of Coal Sold per Ton¹	per ton	$ 34.89	$ 30.81	$ 34.56	$ 28.25
Average Cash Margin per Ton Sold¹	per ton	$ 41.03	$ 20.46	$ 35.33	$ 17.50

CONSOL Marine Terminal Review

For the fourth quarter of 2022, throughput volumes at the CMT were 3.6 million tons, compared to 3.1 million tons in the year-ago period. The quarter-over-quarter increase was largely due to incremental PAMC sales volumes in 4Q22 that moved into the export market. Terminal revenues and CMT total costs and expenses were $20.9 million and $10.3 million, respectively, in 4Q22, compared to $15.5 million and $7.4 million, respectively, during the year-ago period. CMT operating cash costs¹ were $6.4 million in 4Q22, compared to $5.4 million in 4Q21. The increase in terminal revenue in the quarter was due to a $0.79 per ton increase in the average throughput rate as well as the additional throughput volume compared to the prior-year period. The increase in CMT operating cash costs was mainly due to increased supplies, services and power costs compared to 4Q21. CONSOL Marine Terminal net income and CONSOL Marine Terminal Adjusted EBITDA¹ were $11.7 million and $14.4 million, respectively, in the fourth quarter of 2022 compared to $10.4 million and $13.2 million, respectively, in the year-ago period. For the full year of 2022, CMT achieved terminal revenue of $78.9 million, the highest in its history. As such, 2022 CONSOL Marine Terminal net income and CONSOL Marine Terminal Adjusted EBITDA¹ were $41.2 million and $52.3 million, respectively, compared to $32.3 million and $43.5 million, respectively, in 2021.

Itmann Update

After achieving major milestones in the second half of 2022 with the commissioning of the Itmann preparation plant in September and the shipping of the first train of Itmann coal in October, Itmann production was impaired during 4Q22 due to equipment delivery delays, adverse geological conditions and a tight labor market. As a result, we now expect the ramp up to full run-rate production to occur around mid-year 2023. Although the ramp-up has been delayed, the underlying issues are expected to be relatively short-term in nature and are not expected to affect the long-term viability of the project. We shipped 9 trains of coal from the Itmann preparation plant during the 4^th quarter, and we sold 204 thousand tons of Itmann and 3^rd party coal in aggregate during 2022. The final continuous miner was delivered in December of 2022, and we believe we are past the geological challenges that were faced in 4Q22. On the marketing front, our Itmann product continues to be well-received, and we remain focused on securing new business with strategic customers in the domestic and export markets.

Shareholder Returns Update

In late December 2022, CEIX repurchased 124,454 shares of its common stock for $8.0 million at a weighted average price of $64.18 per share, which settled in early January 2023.

Today, at the discretion of the board of directors, CEIX announced a dividend of $1.10/share, representing approximately 34% of the free cash flow generated in the fourth quarter of 2022. The payment will amount to an aggregate of approximately $39.0 million, payable on February 28, 2023 to all shareholders of record as of February 17, 2023. When combined with the $8.0 million share repurchase, these in aggregate represent approximately 40% of the free cash flow generated in the fourth quarter.

Moving forward, CEIX announced an update and increase to its enhanced shareholder return program, which will become effective in the first quarter of 2023, that will return a planned aggregate range of approximately 35% to 50% of quarterly free cash flow in the form of dividends, subject to the discretion of the board of directors, and/or share repurchases, in any combination determined at the discretion of CEIX management.

CEIX expects to continue to aggressively reduce its outstanding gross debt by allocating the majority of its remaining free cash flow toward debt repayment with the goal of retiring its Term Loan B and Senior Secured Second Lien Notes. Once this goal is achieved, CEIX expects to consider further increasing the free cash flow allocation to its shareholder return program.

Debt Repurchases Update

During the fourth quarter of 2022, we continued to execute on our stated goal of reducing our total debt levels and made repayments of $50.0 million, $25.0 million and $6.6 million on our Term Loan B, second lien notes and equipment-financed and other debt, respectively. This brings our total debt repayments and repurchases in the quarter to $81.6 million (excluding the premium paid on the second lien notes).

For the year ended December 31, 2022, we made repayments of $175.7 million, $50.0 million, $41.3 million and $25.3 million on our Term Loan B, second lien notes, Term Loan A and equipment-financed and other debt, respectively. This brings our total debt payments and repurchases in the year to $292.3 million (excluding the premium paid on the second lien notes).

2023 Guidance and Outlook

Based on our current contracted position, estimated prices and production plans, we are providing the following financial and operating performance guidance for full fiscal year 2023:

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