2008
Credit Suisse Energy Summit February 5, 2008 Vail, CO Filed by CONSOL Energy Inc. Pursuant to Rule 425 under the Securities Act of 1933 and deemed filed pursuant to Rule 14a-12 and Rule 14d-2(b) of the Securities Exchange Act of 1934 Subject Company: CNX Gas Corporation Commission File No. 001-32723 |
2 Cautionary Statements and Safe Harbor Disclosure This presentation contains certain financial measures, such as EBIT and EBITDA. As
required by Securities and Exchange Commission Regulation G, reconciliations
of these measures to amounts reported in CONSOL Energys consolidated financial statements are provided in its quarterly earnings releases. Various statements in this document, including those that express a belief, expectation, or intention, as well as those that are not statements of historical fact, are forward-looking statements (as defined in Section 21E of the Securities
Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995). The forward-looking statements may include projections and estimates
concerning the timing and success of specific projects (including statements relating to the timing of and satisfaction of conditions to the exchange offer and merger with CNX Gas and whether any of the anticipated benefits of the transaction will be realized), our future production, revenues, income and capital
spending. 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 unless required by securities law, 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. For additional information, please see our 2006 Form 10-K under
"Risk Factors," as updated by any subsequent Form 10-Qs, which are on file at the Securities and Exchange Commission and to be set forth in our Registration Statement on Form S-4 to be filed with the Securities and Exchange
Commission with respect to the exchange offer to CNX Gas' stockholders. IMPORTANT INFORMATION: In connection with the proposed exchange offer to the
stockholders of CNX Gas Corporation, CONSOL Energy expects to file a
registration statement on Form S-4 containing an exchange offer prospectus and related materials with the Securities and Exchange Commission. INVESTORS AND SECURITY HOLDERS OF CNX GAS CORPORATION ARE URGED TO READ THE EXCHANGE OFFER PROSPECTUS AND THE OTHER RELEVANT MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE OFFER AND CONSOL Energy. Investors and security holders may obtain a free copy of the exchange offer prospectus and other relevant materials (when they become available) and other documents filed by CONSOL Energy with the commission at the commission's website, www.sec.gov. Copies of the exchange offer prospectus and other relevant documents (when they become available) may also be obtained without charge from CONSOL Energy. Requests to CONSOL Energy should be made in writing to Thomas F. Hoffman, Senior Vice President - External Affairs, CONSOL Energy Inc., 1800 Washington Road, Pittsburgh, PA 15241, or by email at tomhoffman@consolenergy.com.
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3 CONSOL Energys Advantages Coal Reserves Large, contiguous blocks owned-in fee Heat content Location Transportation River transportation subsidiary Dual rail access at most mines Coal export terminal Gas Company |
4 Largest Coal Reserve Holder East of MS. River Northern Appalachia Reserves ~ 2.7 billion tons Production: 57.0 million tons Central Appalachia Reserves ~ 800 million tons Production: 10.9 million tons Illinois Basin Reserves ~ 700 million tons PRB Reserves ~ 300 million tons * 2007 production includes 1.0 million tons from Emery, UT. Reserves include 31 mmt assigned to UT and 129 mmt assigned to Western Canada. Profile of CONSOL Coal* Reserves ~ 4.5 BNt 2007 Production: 64.6 Mt Avg. Reserve Life: 25+ years Operating Mine Complexes: 15 |
5 Reserves Owned-in-fee Advantages of ownership: Leverage to higher pricing Ability to forecast and control future costs no LBA payments Coal Reserves Approx. Company (billions of tons) % Owned CONSOL Energy 4.5 70% Patriot Coal 1.2 55% Foundation Coal 1.6 45% Peabody excl. Patriot 8.8 42% Massey Energy 2.3 18% Arch Coal 2.9 13% Alpha Natural Resources 0.5 5% Source: Company filings with the Securities and Exchange Commission
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6 Heating Value 8,400 13,000 12,500 8,800 11,500 0 5,000 10,000 15,000 PRB PRB ILB CAPP NAPP 18 Btus per pound of coal Approx. 80% of CONSOLs coal production |
7 Close Proximity to Customers By year-end 2012, approx. 142 gigawatts East of MS. River are scheduled to be scrubbed 149% increase in market opportunity Nearly 60 generating units are within 50 miles of CONSOLs Pitt8 coal reserves How the numbers stack up: |
8 Percentage of Gigawatts Scrubbed by Year Since 2006, CONSOL has signed 6 multi-year, multi-million ton agreements with
domestic customers that in aggregate ~ 250 million tons of high-Btu coal 62% 28% 10% Thru 12/31/08 2009-2010 2011+ |
9 NAPP Pricing Has Converged with CAPP Source: EIA |
10 Margin Focused and Production Disciplined $2.45 $6.91 $10 $15 $20 $25 $30 $35 $40 2001 2002 2003 2004 2005 2006 2007 60 64 68 72 76 80 Avg. Production Cost Coal Margin Coal Production $35.61 $24.66 $26.76 $27.61 $30.06 $38.99 Avg. Realized Pricing $40. 66 As of December 31, 2007 |
11 Our Coal is Traveling Farther Export Duke (North Carolina) Santee Cooper (South Carolina) We Energies (Wisconsin) Overseas |
12 100% Ownership of Export Terminal Largest exporter of coal in the U.S. Only E. Coast terminal served by two rail lines Norfolk Southern CSX Transport Capacity Practical : 12 million tons Export Terminal at the Port of Baltimore Export Terminal at the Port of Baltimore Ground storage 1.2 million tons Coal exports For 2007, approx. 6.9 mm tons For 2008, up another ~25% Countries served Denmark, England, France, Germany, Ireland, Portugal |
13 Up Cycle Just Beginning? API #2 to ARA $- $20 $40 $60 $80 $100 $120 $140 Last up cycle for coal ~ 2 years Current price ~ $130 for delivery in first half of 2009 API #2 to ARA ($/metric tonne) 110 $ 130 $ 150 $ Implied pricing of 3.4# NAPP ($/short ton) 57 $ 72 $ 87 $ *assumes vessel rate to ARA of $35 |
14 Forecast: Coal Exports Up 20 million tons in 2 years Coal Exports 69.6 57.6 49.6 0 20,000 40,000 60,000 80,000 100,000 120,000 Sources: EIA, PIRA, company estimates. |
15 Long-Term Demand for Coal (Thru 2030) OECD Coal Consumption by Region 0 10 20 30 40 50 60 70 North America OECD Europe OECD Asia Total OECD 1980 2004 2015 2030 World Coal Consumption 0 50 100 150 200 250 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028 OECD Non-OECD Total Coal Consumption in China by Sector 0 20 40 60 80 100 Electricity Industrial Other Sectors Total 2004 2015 2030 Non-OECD Coal Consumption 0 20 40 60 80 100 120 140 160 Non-OECD Europe/Eurasia Non-OECD Asia Other Non-OECD Total Non-OECD 1980 2004 2015 2030 Quadrillion Btu |
16 Ability to Capitalize on Up Cycle 33.4 4.5 53.1 5.1 62.8 5.2 0 20 40 60 2009 2010 2011 Unpriced Steam Coal Unpriced Low-Vol Met Coal 2009 2010 2011 Production Guidance 70 74 76.6 80.6 76.7 80.7 (mm of Tons) |
17 Appalachian Brownfield Opportunities Longwall Face Extensions Birch Shoemaker Additional Longwalls Potential to grow Appalachian production through brownfield expansion by ~ 25 million tons over next 10 years |
18 River Transportation Subsidiary Assets on the inland waterways of Northern Appalachia 750 Barges 25 Tow Boats 5 Harbor Boats 24+ Million tons per year capability Alicia Dock |
19 Transportation Flexibility (Millions of tons) 2006 Northern Appalachia Production CSX NS Barge Rail-to-Barge Enlow Fork 10.7 X X X McElroy 10.5 X Bailey 10.2 X X X Loveridge 6.4 X X X Robinson Run 5.7 X X Blacksville 5.0 X X X Mine 84 3.5 X X Shoemaker 1.0 X X Central Appalachia Buchanan (metallurgical) 5.0 X X Amvest (~10% metallurgical) 4.9 X X X Jones Fork 3.1 X X Mill Creek 2.1 X X Southern WV Resources 1.2 X X Miller Creek 0.9 X X Amonate (metallurgical) 0.5 X X Western U.S. Emery 1.1 Railroads Truck-to-Rail Coal Delivery Options |
20 Unique Investment Proposition Coal Reserves Large, contiguous blocks owned-in fee Location Transportation River transportation subsidiary Coal export terminal Gas Company |
2008
Credit Suisse Energy Summit February 5, 2008 Vail, CO |
Safe
Harbor Disclosure Forward-Looking Statements Various statements in this document, including those that express a belief,
expectation, or intention, as well as those that are not statements of
historical fact, are forward-looking statements (as defined in Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995). The forward-looking
statements may include projections and estimates concerning the timing and success of specific projects (including statements relating to the timing of and satisfaction of conditions to the exchange offer and merger with CNX Gas and whether any of the
anticipated benefits of the transaction will be realized), our future
production, revenues, income and capital spending. 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 unless required by securities law, 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. For additional information, please see our 2006 Form 10-K under "Risk Factors," as updated by any
subsequent Form 10-Qs, which are on file at the Securities and Exchange
Commission and to be set forth in our Registration Statement on Form S-4 to be filed with the Securities and Exchange Commission with respect to the exchange offer to CNX Gas'
stockholders. IMPORTANT INFORMATION: In connection with the proposed
exchange offer to the stockholders of CNX Gas Corporation, CONSOL Energy
expects to file a registration statement on Form S-4 containing an exchange offer prospectus and related materials with the Securities and Exchange Commission. INVESTORS AND SECURITY HOLDERS OF CNX GAS CORPORATION ARE URGED TO READ THE EXCHANGE OFFER PROSPECTUS AND THE OTHER RELEVANT
MATERIALS WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE OFFER AND CONSOL Energy. Investors and security holders may obtain a free copy of the exchange offer prospectus and other relevant materials (when they become available) and other documents filed by
CONSOL Energy with the commission at the commission's website, www.sec.gov.
Copies of the exchange offer prospectus and other relevant documents (when
they become available) may also be obtained without charge from CONSOL Energy. Requests to CONSOL Energy should be made in writing to Thomas F. Hoffman, Senior Vice President - External Affairs, CONSOL Energy Inc., 1800 Washington Road, Pittsburgh, PA 15241, or by email at tomhoffman@consolenergy.com. |