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CONSOL Energy Inc. : CONSOL Energy Reports First Quarter Results; Blacksville and Buchanan Longwalls Scheduled for May 1 Re-Start

04/26/2012 | 07:05am US/Eastern
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PITTSBURGH, April 26, 2012 /PRNewswire/ -- CONSOL Energy Inc. (NYSE: CNX), the leading diversified fuel producer in the Eastern United States, reported net income for the quarter ended March 31, 2012 of $97 million, or $0.42 per diluted share, compared to $192 million, or $0.84 per diluted share from the year-earlier quarter. EBITDA(1), a non-GAAP financial measure, was $324 million for the quarter ended March 31, 2012. This compared to $466 million in the year-earlier quarter.

(Logo: http://photos.prnewswire.com/prnh/20120416/NE87957LOGO )

"We have been managing our way through this challenging environment," commented J. Brett Harvey, chairman and CEO. "The very warm winter, weakened economy, and low natural gas prices have quickly turned a tight coal environment into a surplus. Fortunately, CONSOL Energy began 2012 with all of our thermal coal contracted for the year at favorable pricing, nearly one-half of our expected gas production hedged at $5.25 per Mcf, and nearly $400 million of cash on the balance sheet. I believe that CONSOL Energy is well-positioned to capture the next upcycle, as our lower cost mines remain well capitalized and our inventory levels only grew modestly."

Despite this environment, CONSOL has several important 2012 catalysts that drive future profitability improvements: 1) our exciting Utica Shale exploration play with 22 (gross) wells planned for the year, 2) our liquids-rich Marcellus Shale play with 39 (gross) wells planned, and 3) our Baltimore Terminal expansion in the third quarter which will continue driving our long term expectations for rising thermal and met coal exports.

CONSOL Energy is re-starting the longwall at its Blacksville Mine on May 1. The company has largely concluded negotiations with thermal coal customers concerning deferred shipments, enabling us to resume our thermal guidance for the second quarter and beyond. CONSOL believes that it is effectively capturing the economic value of those deferrals for its shareholders.

"A similar situation exists in the coking coal markets," continued Mr. Harvey, "where overseas steelmakers have been taking advantage of a lull in the strong longer term market to pressure coal producers into accepting prices lower than the benchmark."

CONSOL idled its longwall at Buchanan, effective March 9, in an effort to refrain from selling its premium hard coking coal at a discount. As a result of extensive negotiations, CONSOL has now come to terms with its customers and, as a result, will re-start the longwall at Buchanan on May 1. Updated low-vol guidance also appears later in this release.

Cash flow from operations in the quarter was $229 million, as compared to $435 million in the year-earlier quarter. CONSOL continues to invest in its future, in both coal and gas, by spending $306 million in the 2012 first quarter on capital projects. In coal, CONSOL saw first production (but not sales) from its Amonate Mining Complex during the first quarter.

In gas, CONSOL Energy is exploring for oil and liquids in the Ohio Utica Shale, where CONSOL and its JV partner plan to drill 22 (gross) wells this year. Similarly in the Marcellus Shale, the company and its JV partner are maximizing value by drilling 39 (gross) wells in the liquids-rich area of the play. The results from the first 5 of these Marcellus Shale wells are due to be released during the first week in June. Many of the remaining 60 (gross) Marcellus Shale wells are being drilled on 100%-net revenue interest acreage, which enables the joint venture to earn an economic return at the current NYMEX gas strip.

There were several discrete items during the quarter including an impairment from the enactment of the Pennsylvania Marcellus Shale impact fee, and the gain from the sale of some non-core properties. The net effect of these items on earnings was negligible.

CONSOL has taken proactive steps to reduce costs. Full-year 2012 annual administrative and support service expenses is expected to remain flat with 2011 levels from hiring limitations, executive and corporate salary freezes, and other cost cutting measures. Our purchasing team has worked with suppliers and vendors to reduce price increases as well as reduce costs. We expect this process to continue throughout the year.

(1) The term "EBITDA" is a non-GAAP financial measure, which is defined and reconciled to the GAAP net income below, under the caption "Non-GAAP Financial Measures."

Coal Division Results:

COAL DIVISION RESULTS BY PRODUCT CATEGORY - Quarter-To-Quarter Comparison

                                                       Low-Vol              Low-Vol     High-Vol          High-Vol     Thermal Thermal
                                                       Quarter              Quarter      Quarter          Quarter      Quarter Quarter
                                                        Ended                Ended        Ended            Ended        Ended   Ended
                                                      March 31,           March 31,    March 31,         March 31,  March 31, March 31,
                                                               2012             2011         2012                 2011         2012    2011
                                                               ----             ----         ----                 ----         ----    ----
    Sales - Company Produced     (millions of tons)             1.0                  1.4                           1.0                 1.1       13.3   14.2
    Coal Production (millions of tons)                          1.0                  1.5                           1.0                 1.1       13.7   14.6
    Average Realized Price Per Ton - Company Produced               $157.78                       $165.49                           $66.28            $77.40 $61.39 $57.82
    Less:
    Operating Costs Per Ton                                          $70.86                        $52.26                           $40.43            $30.21 $40.61 $33.08
    Non-Operating Charges Per Ton                                    $11.80                         $8.34                            $5.34             $4.79  $5.34  $5.48
    DD&A Per Ton                                                      $9.80                         $5.75                            $5.85             $5.01  $5.87  $5.12
    Total Cost Per Ton - Company Produced                            $92.46                        $66.35                           $51.62            $40.01 $51.82 $43.68
    Average Margin Per Ton                                           $65.32                        $99.14                           $14.66            $37.39  $9.57 $14.14
    Addback DD&A Per Ton                                              $9.80                         $5.75                            $5.85             $5.01  $5.87  $5.12
    Average Margin Per Ton, before DD&A                              $75.12                       $104.89                           $20.51            $42.40 $15.44 $19.26
    Cash Flow before Cap. Ex and DD&A                                   $75                          $147                              $21               $47   $205   $273
    Ending Inventory (MM tons)                                  0.2                  0.2                           N/A          N/A               2.0    2.5

Sales and production include CONSOL Energy's portion from equity affiliates. Operating costs include items such as labor, supplies, power, preparation costs, project expenses, subsidence costs, gas well plugging costs, charges for employee benefits (including Combined Fund premiums), royalties, and production and property taxes. Non-operating charges include items such as charges for long-term liabilities, and direct administration. The treatment of general and administrative has changed; it has been removed from the costs shown in this table for both the current quarter and the year-earlier quarter. Management has decided to allocate G&A to the coal division and the gas division, but will no longer allocate G&A beyond that. Sales times Average Margin Per Ton, before DD&A is meant to approximate the amount of cash generated for the low-vol, high-vol, and thermal coal categories. This cash generation will be offset by maintenance of production (MOP) capital expenditures. N/A means not applicable; there is no inventory in the High-Vol segment.

Total costs per ton, across all of CONSOL Energy's coal production in the quarter ended March 31, 2012 were $54.40, or an increase of $8.97, or 20%, over the quarter ended March 31, 2011. The March idling of Blacksville and Buchanan mines accounted for $1.43 of this increase, so that total costs per ton were $52.97 excluding the idling costs. This was actually a decrease, however, from the December 2011 quarter. All of these costs now exclude general and administrative, which management has decided not to allocate to coal (and gas) categories from this point forward.

In the high-vol category, average operating costs per ton increased due to the mix of mines shipping coal in this category. Specifically, the company had more Central Appalachian mines shipping high-vol tons. These mines have higher cost structures than the Northern Appalachian mines that shipped exclusively in the year-earlier quarter.

Coal production in the quarter consisted of 1.0 million tons of low-vol, 1.0 million tons of high-vol, and 13.7 million tons of thermal, for a total of 15.7 million tons.

Of the thermal coal production,12.5 million tons were from Northern Appalachia and 1.2 million tons were from Central Appalachia.

During the first quarter, thermal coal inventory was increased by 0.4 million tons, when compared to the quarter ended December 31, 2011.

Coal Marketing Update:

Low-Vol: CONSOL reached agreements with steelmakers to re-price 457,000 tons of its premium low-vol coal, while contracting 224,000 tons of new sales. CONSOL will be receiving $119 per short ton, FOB Buchanan Mine for this coal, which translates into an FOB (Australian) Terminal price per metric ton of approximately $185.

High-Vol: Softness in the Asian met markets during the quarter has affected the realized high-vol price. Pricing in other high-vol markets, though, remained relatively stable. The net effect is that realized pricing was below the low end of the previously estimated range of $68 - $75 per ton, FOB mine.

U.S. Thermal: CONSOL's thermal coal continues to be sold out for 2012. Due to the factors cited earlier, however, thermal customers have requested deferrals on about 5 million tons, because their inventories are very high. CONSOL is working to re-schedule deliveries, some of which will occur beyond 2012. Because of the lack of clarity for 2013, discussions for new thermal sales have not yet begun.

Global Thermal: CONSOL has reacted to softness in the European thermal market, its traditional overseas thermal market, by successfully initiating sales to India during the quarter. For the second quarter, vessels have been contracted to continue to supply both the Indian and Chinese thermal markets. These incremental markets are providing CONSOL with the sales volume needed to re-start the longwall at Blacksville #2 Mine.

Gas Division Results:
The table below summarizes the key metrics for the Gas Division:

GAS DIVISION RESULTS -- Quarter-to-Quarter Comparison

                            Quarter                Quarter
                             Ended                  Ended
                         March 31, 2012         March 31, 2011
                         --------------         --------------
    Total Revenue and
     Other Income ($ MM)                 $190.0                $198.7
    Net Income                             $7.5                 $14.6
    Net Cash from
     Operating
     Activities ($ MM)                    $54.4                 $97.0
    Total Period
     Production (Bcf)               37.7                              35.9
    Average Daily
     Production (MMcf)               415                               399
    Capital Expenditures
     ($ MM)                               $98.5                $150.6

Production results are net of royalties.

Coalbed Methane (CBM): Total production was 22.7 Bcf, an increase of 1% from the 22.4 Bcf produced in the year-earlier quarter.

Marcellus Shale: Total production was 6.7 Bcf, an increase of 40% from the 4.8 Bcf produced in the year-earlier quarter. After reducing the year-earlier quarter's production by the 2.4 Bcf attributable to the subsequent sales to Antero and Noble Energy, the adjusted increase was an impressive 180%.

Conventional: Total production was 7.6 Bcf, a decrease of 8% from the 8.2 Bcf produced in the year-earlier quarter. The company has been shifting rigs and capital toward higher potential return Marcellus and Utica drilling prospects.

Other: A miscellaneous category had production of 0.7 Bcf, up slightly from 0.5 Bcf in the year-earlier quarter.

PRICE AND COST DATA PER MCF -- Quarter-to-Quarter Comparison

Despite 13% higher adjusted gas volumes, the company experienced reduced profitability within the Gas Division when compared with the quarter ended March 31, 2011. Unit gas margins fell, primarily due to a $0.67 decrease in realized unit gas prices. Total unit gas costs declined, as did each subcategory, due in part to the increased emphasis on low cost Marcellus Shale drilling, where the company has been drilling longer laterals on multi-well pads. Unit DD&A was lower due to higher proved reserves. The table excludes all retroactive Marcellus Shale impact fees from wells drilled prior to 2012.

                                            Quarter        Quarter
                                             Ended          Ended
                                        March 31, 2012 March 31, 2011
                                        -------------- --------------
    Average Sales Price                               $4.26          $4.93
    Costs - Production
    Lifting                                           $0.62          $0.59
    Ad Valorem, Severance and Other
     Taxes                                            $0.17          $0.18
    DD&A                                              $1.09          $1.14
    Total Production Costs                            $1.88          $1.91

    Costs - Gathering
    Operating Costs                                   $0.59          $0.61
    Transportation                                    $0.34          $0.31
    DD&A                                              $0.20          $0.24
    Total Gathering Costs                             $1.13          $1.16

    Gas Direct Administrative Selling &
     Other                                            $0.35          $0.44

    Total Costs                                       $3.36          $3.51

    Margin                                            $0.90          $1.42
                                                      =====          =====

Note: Costs -"Gas Direct Administration, Selling, & Other" excludes general administration, incentive compensation, and other corporate expenses.

CONSOL Energy 2012 Production Guidance
CONSOL Energy expects its net gas production to be between 157 - 159 Bcf for the year. Second quarter gas production, net to CONSOL, is expected to be approximately 37 - 38 Bcf.

Total hedged gas production in the 2012 second quarter is 19.1 Bcf, at an average price of $5.25 per Mcf. The annual gas hedge position for three years is shown in the table below:

GAS DIVISION GUIDANCE

                                   2012  2013  2014
                                   ----  ----  ----
    Total Yearly Production
     (Bcf)                      157-159   N/A   N/A
    Volumes Hedged (Bcf),as of
     4/17/12                       76.9  50.8  44.0
    Average Hedge Price ($/Mcf)   $5.25 $5.06 $5.20

COAL DIVISION GUIDANCE

                   2Q 2012                2012        2013        2014
                   -------                ----        ----        ----
     Estimated
     Coal
     Sales
     (millions
     of
     tons)     14.2 - 14.9         58.9 - 60.9 59.4 - 61.4 63.5 - 65.5
     Est.
     Low-
     Vol
     Met
     Sales       0.7 - 0.9           4.1 - 4.2   4.5 - 4.7   4.3 - 4.5
     Tonnage:
     Firm              0.4                 2.2         0.2           -
     Avg.
     Price:
     Sold
     (Firm)                $185.02                 $174.13             $107.01 $      -
     Price:
     Estimated
     (For
     open
     tonnage)          N/A                 N/A         N/A         N/A
     Est.
     High-
     Vol
     Met
     Sales        1.2 -1.3           4.5 - 4.7   5.0 - 5.1   5.6 - 5.8
     Tonnage:
     Firm              0.8                 2.4         0.3         0.3
     Avg.
     Price:
     Sold
     (Firm)                 $73.32                  $72.66              $71.69   $75.53
     Price:
     Estimated
     (For
     open
     tonnage)          N/A                 N/A         N/A         N/A
     Est.
     Thermal
     Sales     12.1 - 12.7         50.0 - 51.7 49.3 - 51.0 53.0 - 54.6
     Tonnage:
     Firm             12.4                50.0        22.8        15.6
     Avg.
     Price:
     Sold
     (Firm)                 $61.63                  $62.32              $63.16   $64.63
     Price:
     Estimated
     (For
     open
     tonnage)          N/A                 N/A         N/A         N/A

Note: N/A means not available or not forecast. CONSOL has chosen not to forecast prices for open tonnage due to ongoing customer negotiations. In the thermal sales category, the open tonnage includes 4.7 million collared tons in 2013, with a ceiling of $59.78 per ton and a floor of $51.63 per ton. For 2014, the open tonnage in the thermal sales category includes 7.0 million tons, with a ceiling of $60.13 per ton and a floor of $46.76 per ton. Total estimated coal sales for 2012, 2013, and 2014 include 0.3, 0.6, and 0.6 million tons, respectively, from Amonate. The Amonate tons are not included in the category breakdowns. None of the Amonate tons has yet been sold.

Liquidity
Total company liquidity as of March 31, 2012 was $2.7 billion.

As of March 31, 2012, CONSOL Energy had $1.6 billion in total liquidity, which is comprised of $119.6 million of cash, $39.2 million available to be borrowed under the accounts receivable securitization facility, and $1,398.9 million available to be borrowed under its $1.5 billion bank facility. CONSOL Energy also has outstanding letters of credit of $261.9 million.

As of March 31, 2012, CNX Gas Corporation had $1,097.5 million in total liquidity, which is comprised of $167.7 million of cash and $929.8 million available to be borrowed under its $1.0 billion bank facility. CNX Gas' credit facility has no borrowings thereunder, and outstanding letters of credit of $70.2 million.

CONSOL Energy Inc., the leading diversified fuel producer in the Eastern U.S., is a member of the Standard & Poor's 500 Equity Index and the Fortune 500. It has 12 bituminous coal mining complexes in four states and reports proven and probable coal reserves of 4.5 billion tons. It is also a leading Eastern U.S. gas producer, with proved reserves of 3.5 trillion cubic feet. Additional information about CONSOL Energy can be found at its web site: www.consolenergy.com.

Non-GAAP Financial Measures

Definition: EBIT is defined as earnings before deducting net interest expense (interest expense less interest income) and income taxes. EBITDA is defined as earnings before deducting net interest expense (interest expense less interest income), income taxes and depreciation, depletion and amortization. Although EBIT and EBITDA are not measures of performance calculated in accordance with generally accepted accounting principles, management believes that it is useful to an investor in evaluating CONSOL Energy because it is widely used to evaluate a company's operating performance before debt expense and its cash or as a substitute for measures of performance in accordance with generally accepted accounting principles. In addition, because all companies do not calculate EBIT or EBITDA identically, the presentation here may not be comparable to similarly titled measures of other companies.

Reconciliation of EBIT, EBITDA and earnings to financial Net Income is as follows:

                   Three Months Ended

                       March, 31
                       ---------

                                      2012                                    2011
                                      ----                                    ----
    Net
     Income                                         $97,196          $192,149

    Add:
     Interest
     Expense                                58,120           66,482
    Less:
     Interest
     Income                                (8,532)             (381)
    Add:
     Income
     Taxes                                  21,381           58,928

     Earnings
     Before
     Interest
     &
     Taxes
     (EBIT)                                168,165          317,178

    Add:
     Depreciation,
     Depletion
     &
     Amortization                          155,347          149,062

     Earnings
     Before
     Interest,
     Taxes
     and
     DD&A
     (EBITDA)                                      $323,512          $466,240
                                                   ========          ========

Forward-Looking Statements
We are including the following cautionary statement in this document to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of us. With the exception of historical matters, the matters discussed in this document are forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934) 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 document speak only as of the date of this document; we disclaim any obligation to update these statements, and we caution you not to rely on them unduly. 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: deterioration in global economic conditions in any of the industries in which our customers operate, or sustained uncertainty in financial markets cause conditions we cannot predict; a significant or extended decline in prices we receive for our coal and natural gas affecting our operating results and cash flows; our customers extending existing contracts or entering into new long-term contracts for coal; our reliance on major customers; our inability to collect payments from customers if their creditworthiness declines; the disruption of rail, barge, gathering, processing and transportation facilities and other systems that deliver our coal and natural gas to market; a loss of our competitive position because of the competitive nature of the coal and natural gas industries, or a loss of our competitive position because of overcapacity in these industries impairing our profitability; our inability to maintain satisfactory labor relations; coal users switching to other fuels in order to comply with various environmental standards related to coal combustion emissions; the impact of potential, as well as any adopted regulations relating to greenhouse gas emissions on the demand for coal and natural gas; foreign currency fluctuations could adversely affect the competitiveness of our coal abroad; the risks inherent in coal and natural gas operations being subject to unexpected disruptions, including geological conditions, equipment failure, timing of completion of significant construction or repair of equipment, fires, explosions, accidents and weather conditions which could impact financial results; decreases in the availability of, or increases in, the price of commodities or capital equipment used in our mining and natural gas operations; decreases in the availability of, an increase in the prices charged by third party contractors or, failure of third party contractors to provide quality services to us in a timely manner could impact our profitability; obtaining and renewing governmental permits and approvals for our coal and natural gas operations; the effects of government regulation on the discharge into the water or air, and the disposal and clean-up of, hazardous substances and wastes generated during our coal and natural gas operations; the effects of stringent federal and state employee health and safety regulations, including the ability of regulators to shut down a mine or well; the potential for liabilities arising from environmental contamination or alleged environmental contamination in connection with our past or current coal and gas operations; the effects of mine closing, reclamation, gas well closing and certain other liabilities; uncertainties in estimating our economically recoverable coal and gas reserves; costs associated with perfecting title for coal or gas rights on some of our properties; the outcomes of various legal proceedings, which are more fully described in our reports filed under the Securities Exchange Act of 1934; the impacts of various asbestos litigation claims; increased exposure to employee related long-term liabilities; our accruals for obligations for long-term employee benefits are based upon assumptions which, if inaccurate, could result in our being required to expend greater amounts than anticipated; due to our participation in an underfunded multi-employer pension plan, we have exposure under that plan that extends beyond what our obligation would be with respect to our employees and in the future we may have to make additional cash contributions to fund the pension plan or incur withdrawal liability; lump sum payments made to retiring salaried employees pursuant to our defined benefit pension plan exceeding total service and interest cost in a plan year; acquisitions and joint ventures that we recently have completed or entered into or may make in the future including the accuracy of our assessment of the acquired businesses and their risks, achieving any anticipated synergies, integrating the acquisitions and unanticipated changes that could affect assumptions we may have made and divestitures we anticipate may not occur or produce anticipated proceeds including joint venture partners paying anticipated carry obligations; the terms of our two significant existing gas joint ventures restrict our flexibility and actions taken by the other party in our gas joint ventures may impact our financial position; the anti-takeover effects of our rights plan could prevent a change of control; risks associated with our debt; replacing our natural gas reserves, which if not replaced, will cause our gas reserves and gas production to decline; our ability to find adequate water sources for use in gas drilling, or our ability to dispose of water used or removed from strata in connection with our gas operations at a reasonable cost and within applicable environmental rules; our hedging activities may prevent us from benefiting from price increases and may expose us to other risks; and other factors discussed in the 2011 Form 10-K under "Risk Factors," as updated by any subsequent Form 10-Qs, which are on file at the Securities and Exchange Commission.

                                                                                                                                                                             CONSOL ENERGY INC. AND SUBSIDIARIES
                                                                                                                                                                                                                                                                                                                                                                                          
                                                                                                                                                                                  SPECIAL INCOME STATEMENT
                                                                                                                                                                                         (unaudited)
                                                                                                                                                                                    (Dollars in millions)
                                                                                                                                                                                                                                                                                                                                                                                          
                                                                                                                                                                                                                                                                                                                                                                                                                               Three Months Ended March 31, 2012
                                                                                                                                                                                                                                                                                                                                                                                                                               ---------------------------------
                                                                                                                                                                                                                                                                                                                                                                                          Produced          Other     Total                                        Total
                                                                                                                                                                                                                                                                                                                                                                                            Coal            Coal      Cost      Gas          Other     Company
                                                                                                                                                                                                                                                                                                                                                                                            ----            ----      ----      ---          -----     -------
                                                                                                                                                                                                                                                                                                                                                                                                    $1,046               $9          $1,055               $162              $97        $1,314
    Sales
    Gas Royalty Interest                                                                                                                                                                                                                                                                                                                                                                         -              -         -      12              -          12
    Freight Revenue                                                                                                                                                                                                                                                                                                                                                                              -             49        49       -              -          49
    Other Income                                                                                                                                                                                                                                                                                                                                                                                 5             27        32      16              4          52
    Total Revenue and Other Income                                                                                                                                                                                                                                                                                                                                                           1,051             85     1,136     190            101       1,427
                                                                                                                                                                                                                                                                                                                                                                                                                                
    Cost of Goods Sold                                                                                                                                                                                                                                                                                                                                                                         661             42       703     100            102         905
    Gas Royalty Interests' Costs                                                                                                                                                                                                                                                                                                                                                                 -              -         -      10              -          10
    Freight Expense                                                                                                                                                                                                                                                                                                                                                                              -             49        49       -              -          49
    Selling, General & Admin.                                                                                                                                                                                                                                                                                                                                                                    -             41        41      10            (12)         39
    DD&A                                                                                                                                                                                                                                                                                                                                                                                        96              4       100      49              6         155
    Interest Expense                                                                                                                                                                                                                                                                                                                                                                             -              -         -       1             57          58
    Taxes Other Than Income                                                                                                                                                                                                                                                                                                                                                                     70             10        80       8              4          92
    Total Costs                                                                                                                                                                                                                                                                                                                                                                                827            146       973     178            157       1,308
                                                                                                                                                                                                                                                                                                                                                                                                                                
    Earnings Before Income Taxes                                                                                                                                                                                                                                                                                                                                                                      $224             $(61)           $163                $12             $(56)         $119
                                                                                                                                                                                                                                                                                                                                                                                                      ----             ----            ----                ---             ----          ----
                                                                                                                                                                                                                                                                                                                                                                                                                                
    Income Tax                                                                                                                                                                                                                                                                                                                                                                                                                  $22
                                                                                                                                                                                                                                                                                                                                                                                                                                ---
                                                                                                                                                                                                                                                                                                                                                                                                                                
    Net Income                                                                                                                                                                                                                                                                                                                                                                                                                  $97
                                                                                                                                                                                                                                                                                                                                                                                                                                ===
                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
                                                             CONSOL ENERGY INC. AND SUBSIDIARIES
                                                              CONSOLIDATED STATEMENTS OF INCOME
                                                                         (Unaudited)
                                                        (Dollars in thousands, except per share data)
                                                                                                                                                                                                                   
                                                                                                                                                                            Three Months Ended,
                                                                                                                                                                               March 31, 2011
                                                                                                                                                                               --------------
                                                                                                                                                                 2012                        2011
                                                                                                                                                                 ----                        ----
    Sales-Outside                                                                                                                                                      $1,311,471                     $1,385,478
    Sales-Gas Royalty Interests                                                                                                                                12,206                      18,835
    Sales-Purchased Gas                                                                                                                                           839                         980
    Freight-Outside                                                                                                                                            49,293                      36,868
    Other Income                                                                                                                                               52,961                      23,216
                                                                                                                                                               ------                      ------
    Total Revenue and Other Income                                                                                                                          1,426,770                   1,465,377
    Cost of Goods Sold and Other
     Operating Charges (exclusive of
     depreciation, depletion and
     amortization shown below)                                                                                                                                904,041                     813,709
    Gas Royalty Interests Costs                                                                                                                                10,249                      16,807
    Purchased Gas Costs                                                                                                                                           517                         676
    Freight Expense                                                                                                                                            49,293                      36,679
    Selling, General and Administrative
     Expenses                                                                                                                                                  38,999                      40,196
    Depreciation, Depletion and
     Amortization                                                                                                                                             155,347                     149,062
    Interest Expense                                                                                                                                           58,120                      66,482
    Taxes Other Than Income                                                                                                                                    91,627                      90,689
                                                                                                                                                               ------                      ------
    Total Costs                                                                                                                                             1,308,193                   1,214,300
                                                                                                                                                            ---------                   ---------
    Earnings Before Income Taxes                                                                                                                              118,577                     251,077
    Income Taxes                                                                                                                                               21,381                      58,928
                                                                                                                                                               ------                      ------
    Net Income                                                                                                                                                            $97,196                       $192,149
                                                                                                                                                                          =======                       ========
    Earnings Per Share:
    Basic                                                                                                                                                                   $0.43                          $0.85
                                                                                                                                                                            =====                          =====
    Dilutive                                                                                                                                                                $0.42                          $0.84
                                                                                                                                                                            =====                          =====
    Weighted Average Number of Common
     Shares Outstanding:
    Basic                                                                                                                                                 227,269,269                 226,350,594
                                                                                                                                                          ===========                 ===========
    Dilutive                                                                                                                                              230,124,011                 228,814,838
                                                                                                                                                          ===========                 ===========
    Dividends Paid Per Share                                                                                                                                               $0.125                         $0.100
                                                                                                                                                                           ======                         ======
                                                                                                                                                                                                                              

                                                                  CONSOL ENERGY INC. AND SUBSIDIARIES
                                                            CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                                                              (Unaudited)
                                                                        (Dollars in thousands)
                                                                                                                                                                    
                                                                                                                                                                                   Three Months Ended
                                                                                                                                                                                        March 31,
                                                                                                                                                                                        ---------
                                                                                                                                                                        2012            2011
                                                                                                                                                                        ----            ----
    Net Income                                                                                                                                                                 $97,196                     $192,149
                                                                                                                                                                                                                         
    Other Comprehensive Income:
    Treasury Rate Lock (Net of tax: $-,
     $12)                                                                                                                                                                  -                       (20)
    Actuarially Determined Long-Term Liability Adjustments
    Change in Prior Service Cost (Net of
     tax: ($30,295), $-)                                                                                                                                              50,276                         -
    Amortization of Prior Service Cost
     (Net of tax: $4,552, $4,583)                                                                                                                                     (7,554)                   (7,365)
    Amortization of Net Loss (Net of tax:
     ($10,154), ($9,766))                                                                                                                                             16,851                    15,692
    Net Increase in the Value of Cash Flow
     Hedge (Net of tax: ($49,008),
     ($2,814))                                                                                                                                                        76,076                     4,371
    Reclassification of Cash Flow Hedges
     from OCI to Earnings (Net of tax:
     $31,380, $12,615)                                                                                                                                              (47,941)                  (18,840)
                                                                                                                                                                     -------                   -------
    Other Comprehensive Income:                                                                                                                                       87,708                    (6,162)
                                                                                                                                                                      ------                    ------
    Comprehensive Income                                                                                                                                                      $184,904                     $185,987
                                                                                                                                                                              ========                     ========
                                                                                                                                                                                                                                 
                                                                          CONSOL ENERGY INC. AND SUBSIDIARIES
                                                                              CONSOLIDATED BALANCE SHEETS
                                                                                 (Dollars in thousands)
                                                                                                                                                                                     
                                                                                                                                                                                                                 (Unaudited)
                                                                                                                                                                                     March 31,                 December
                                                                                                                                                                                                                  31,
                                                                                                                                                                                           2012                    2011
                                                                                                                                                                                           ----                      --
    ASSETS
    Current Assets:
    Cash and Cash Equivalents                                                                                                                                                                       $287,313                               $375,736
    Accounts and Notes
     Receivable:
    Trade                                                                                                                                                                               463,258                             462,812
    Notes
     Receivable                                                                                                                                                                         314,514                             314,950
    Other
     Receivables                                                                                                                                                                        126,931                             105,708
    Inventories                                                                                                                                                                         284,997                             258,335
     Deferred
     Income
     Taxes                                                                                                                                                                              128,904                             141,083
     Prepaid
     Expenses                                                                                                                                                                           260,818                             239,353
                                                                                                                                                                                        -------                                  --
    Total
     Current
     Assets                                                                                                                                                                           1,866,735                           1,897,977
    Property, Plant and
     Equipment:
    Property, Plant and Equipment                                                                                                                                                    14,357,246                          14,087,319
    Less-
     Accumulated
     Depreciation,
     Depletion
     and
     Amortization                                                                                                                                                                     4,915,809                           4,760,903
                                                                                                                                                                                      ---------                                  --
    Total
     Property,
     Plant
     and
     Equipment-
     Net                                                                                                                                                                              9,441,437                           9,326,416
    Other Assets:
    Deferred Income Taxes                                                                                                                                                               467,753                             507,724
     Restricted
     Cash                                                                                                                                                                                22,158                              22,148
     Investment
     in
     Affiliates                                                                                                                                                                         200,221                             182,036
    Notes
     Receivable                                                                                                                                                                         300,382                             300,492
    Other                                                                                                                                                                               296,925                             288,907
                                                                                                                                                                                        -------                                  --
    Total
     Other
     Assets                                                                                                                                                                           1,287,439                           1,301,307
                                                                                                                                                                                      ---------                                  --
    TOTAL
     ASSETS                                                                                                                                                                                      $12,595,611                            $12,525,700
                                                                                                                                                                                                    ========                               ========
                                                                                                                                                                                                                                                                    

                                                                                   CONSOL ENERGY INC. AND SUBSIDIARIES
                                                                                       CONSOLIDATED BALANCE SHEETS
                                                                              (Dollars in thousands, except per share data)
                                                                                                                                                                                                      
                                                                                                                                                                                                                                 (Unaudited)
                                                                                                                                                                                                      March 31,                December
                                                                                                                                                                                                                                  31,
                                                                                                                                                                                                           2012                    2011
                                                                                                                                                                                                           ----                     ---
    LIABILITIES AND EQUITY
    Current Liabilities:
    Accounts Payable                                                                                                                                                                                                $471,921                               $522,003
    Current
     Portion
     of
     Long-
     Term
     Debt                                                                                                                                                                                                20,879                              20,691
    Accrued
     Income
     Taxes                                                                                                                                                                                               50,313                              75,633
    Other
     Accrued
     Liabilities                                                                                                                                                                                        856,858                             770,070
                                                                                                                                                                                                        -------                                 ---
    Total
     Current
     Liabilities                                                                                                                                                                                      1,399,971                           1,388,397
    Long-Term Debt:
    Long-Term Debt                                                                                                                                                                                    3,122,234                           3,122,234
    Capital
     Lease
     Obligations                                                                                                                                                                                         54,484                              55,189
                                                                                                                                                                                                         ------                                 ---
    Total
     Long-
     Term
     Debt                                                                                                                                                                                             3,176,718                           3,177,423
    Deferred Credits and Other
     Liabilities:
    Postretirement Benefits Other Than Pensions                                                                                                                                                       2,976,181                           3,059,671
     Pneumoconiosis
     Benefits                                                                                                                                                                                           174,559                             173,553
    Mine
     Closing                                                                                                                                                                                            409,778                             406,712
    Gas
     Well
     Closing                                                                                                                                                                                            125,557                             124,051
     Workers'
     Compensation                                                                                                                                                                                       150,377                             151,034
    Salary
     Retirement                                                                                                                                                                                         242,727                             269,069
    Reclamation                                                                                                                                                                                          36,148                              39,969
    Other                                                                                                                                                                                               129,483                             124,936
                                                                                                                                                                                                        -------                                 ---
    Total
     Deferred
     Credits
     and
     Other
     Liabilities                                                                                                                                                                                      4,244,810                           4,348,995
                                                                                                                                                                                                      ---------                                 ---
    TOTAL
     LIABILITIES                                                                                                                                                                                      8,821,499                           8,914,815
    Stockholders' Equity:
    Common Stock, $.01 Par Value; 500,000,000 Shares Authorized,
     227,542,426 Issued and 227,507,671 Outstanding at March 31,
     2012; 227,289,426 Issued and 227,056,212 Outstanding at
     December 31, 2011                                                                                                                                                                                    2,275                               2,273
    Capital
     in
     Excess
     of Par
     Value                                                                                                                                                                                            2,250,516                           2,234,775
     Preferred
     Stock,
     15,000,000
     authorized,
     None
     issued
     and
     outstanding                                                                                                                                                                                              -                                   -
     Retained
     Earnings                                                                                                                                                                                         2,235,776                           2,184,737
     Accumulated
     Other
     Comprehensive
     Loss                                                                                                                                                                                             (713,846)                            (801,554)
    Common
     Stock                                                                                                                                                                                             2012
     in                                                                                                                                                                                                and
     Treasury,                                                                                                                                                                                         233,214
     at                                                                                                                                                                                                Shares
     Cost-                                                                                                                                                                                             at
     34,755                                                                                                                                                                                            December
     Shares                                                                                                                                                                                            31,
     at                                                                                                                                                                                                2011
     March
     31,                                                                                                                                                                                                   (609)                             (9,346)
                                                                                                                                                                                                           ----                                 ---
    Total
     Stockholders'
     Equity                                                                                                                                                                                           3,774,112                           3,610,885
                                                                                                                                                                                                      ---------                                 ---
    TOTAL
     LIABILITIES
     AND
     EQUITY                                                                                                                                                                                                      $12,595,611                            $12,525,700
                                                                                                                                                                                                                   =========                              =========
                                                                                                                                                                                                                                                                                    

           CONSOL ENERGY INC. AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
      (Dollars in thousands, except per share data)
                                                                                     Common                         Capital in                         Retained           Accumulated            Common                           Total
                                                                                      Stock                           Excess                           Earnings              Other              Stock in                      Stockholders'
                                                                                                                      of Par                          (Deficit)          Comprehensive          Treasury                          Equity
                                                                                                                      Value                                                  Income
                                                                                                                                                                             (Loss)
                                                                                                                                                                              ---
    Balance
     at
     December
     31,
     2011                                                                                            $2,273                                                                 $2,234,775                                                           $2,184,737                $(801,554)                   $(9,346)          $3,610,885
                                                                                                     ======                                                                        ===                                                                  ===                      ===                        ===                  ===
    (Unaudited)
    Net
     Income                                                                                      -                                          -                                                            97,196                                           -            -                    97,196
    Other Comprehensive Income                                                                   -                                          -                                                                 -                                      87,708            -                    87,708
                                                                                               ---                                        ---                                                               ---                                         ---          ---                       ---
    Comprehensive Income                                                                         -                                          -                                                            97,196                                      87,708            -                   184,904
    Issuance of Treasury Stock                                                                   -                                          -                                                           (17,770)                                          -        8,737                    (9,033)
    Issuance of Common Stock                                                                     2                                         52                                                                 -                                           -            -                        54
    Tax Cost From Stock-Based Compensation                                                       -                                       (563)                                                                -                                           -            -                      (563)
    Amortization of Stock-BaCompensation Awards                                                  -                                     16,252                                                                 -                                           -            -                    16,252
    Dividends ($0.125 per share)                                                                 -                                          -                                                           (28,387)                                          -            -                   (28,387)
                                                                                               ---                                        ---                                                               ---                                         ---          ---                       ---
    Balance at March 31, 2012                                                                        $2,275                                                                 $2,250,516                                                           $2,235,776                $(713,846)                     $(609)          $3,774,112
                                                                                                     ======                                                                        ===                                                                  ===                      ===                        ===                  ===
                                                                                                                                                                                                                                                                                                                                                                          
                                                                                      Three Months Ended
                                                                                          March 31,
                                                                                          ---------

                                                                                                         2012                                         2011
                                                                                                         ----                                         ----
    Operating Activities:
    Net Income                                                                                                            $97,196            $192,149
    Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:
    Depreciation, Depletion and Amortization                                                                    155,347             149,062
    Stock-Based Compensation                                                                                     16,252              13,446
    Gain on Sale of Assets                                                                                      (19,713)               (323)
    Amortization of Mineral Leases                                                                                1,886               2,468
    Deferred Income Taxes                                                                                        (2,265)             23,099
    Equity in Earnings of Affiliates                                                                             (7,935)             (5,481)
    Changes in Operating Assets:
    Accounts and Notes Receivable                                                                               (17,990)            (26,901)
    Inventories                                                                                                 (26,662)            (29,435)
    Prepaid Expenses                                                                                              6,231               7,585
    Changes in Other Assets                                                                                      10,837               9,449
    Changes in Operating Liabilities:
    Accounts Payable                                                                                            (39,312)              7,279
    Other Operating Liabilities                                                                                  62,233              75,863
    Changes in Other Liabilities                                                                                 (8,928)             13,521
    Other                                                                                                         2,309               3,463
                                                                                                                  -----               -----
    Net Cash Provided by Operating Activities                                                                   229,486             435,244
                                                                                                                -------             -------
    Investing Activities:
    Capital Expenditures                                                                                      (306,446)           (254,778)
    Proceeds from Sales of Assets                                                                                28,611                 300
    Distributions, net of Investments In, from Equity Affiliates                                                (10,250)              1,470
                                                                                                                -------               -----
    Net Cash Used in Investing Activities                                                                     (288,085)           (253,008)
                                                                                                               --------            --------
    Financing Activities:
    Payments on Short-Term Borrowings                                                                                 -           (113,500)
    Payments on Miscellaneous Borrowings                                                                         (2,330)             (3,698)
    Payments on Securitization Facility                                                                               -           (200,000)
    Proceeds from Issuance of Long-Term Notes                                                                         -             250,000
    Tax Benefit from Stock-Based Compensation                                                                       750               3,306
    Dividends Paid                                                                                              (28,387)            (22,625)
    Issuance of Common Stock                                                                                         54                   -
    Issuance of Treasury Stock                                                                                      109               3,699
    Debt Issuance and Financing Fees                                                                                (20)             (4,517)
                                                                                                                    ---              ------
    Net Cash Used in Financing Activities                                                                       (29,824)            (87,335)
    Net (Decrease) Increase in Cash and Cash Equivalents                                                        (88,423)             94,901
    Cash and Cash Equivalents at Beginning of Period                                                            375,736              32,794
                                                                                                                -------              ------
    Cash and Cash Equivalents at End of Period                                                                           $287,313            $127,695
                                                                                                                         ========            ========


SOURCE CONSOL Energy Inc.

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