CANONSBURG, Pa., Nov. 5, 2019 /PRNewswire/ -- CONSOL Coal
Resources LP (NYSE: CCR) (the "Partnership") today reported
financial and operating results for the quarter ended
September 30, 2019.
Third Quarter 2019 Results Include:
- Cash distribution of $0.5125
per unit;
- Net income of $7.0
million;
- Adjusted EBITDA1 of $20.0
million;
- Distribution coverage ratio1 of 0.6x;
- Net leverage ratio1 of 1.6x;
- Strongest third quarter production in the history of the
Pennsylvania Mining Complex (PAMC); and
- Maintaining full-year 2019 guidance.
Management Comments
"The third quarter is typically our weakest quarter of the year;
however, I am pleased to announce that the PAMC delivered record
third quarter production this year," said Jimmy Brock, Chief Executive Officer of CONSOL
Coal Resources GP LLC, the general partner of the Partnership.
"This strong performance was underscored by our contracted position
and the continued desirability of our product, which the equity
markets failed to recognize. Furthermore, we were able to grow our
total revenue by 3% this quarter compared to the year-ago period,
despite major coal price indices suffering double-digit
declines."
"This has been an increasingly tough year for our industry as
commodity markets have been challenging. The good news is that we
have positioned ourselves to weather this storm. On the revenue
front, we moved early to contract our coal and are now 82%
contracted for 2020 at attractive prices compared to the current
market. This gives our operations team good visibility as we plan
our production schedule heading into 2020."
Sales & Marketing
Our marketing team shipped 1.62 million tons of coal during the
third quarter of 2019 at an average revenue per ton of $46.59, compared to 1.56 million tons at an
average revenue per ton of $47.21 in
the year-ago period. Our coal revenue improved by $1.7 million compared to the year-ago period,
despite a 20% lower average PJM West day-ahead power price, a 42%
lower average API 2 prompt month coal price and a 19% lower average
Henry Hub natural gas spot price in the third quarter of 2019
versus the third quarter of 2018. This revenue improvement was
largely driven by a modest increase in sales volume and our robust
contracted position, which significantly reduced the variability in
our average revenue per ton.
During the quarter, we were successful in securing additional
coal sales contracts for 2020 and 2021, bringing our contracted
positions to 82% and 36%, respectively, assuming a 6.75 million ton
annual run rate. Additionally, during the second quarter of 2019,
one of our longwalls also transitioned to a new lower sulfur region
of the reserves with improved mining conditions. We believe the
resulting improvement in coal quality should help increase the
domestic and export marketability of the PAMC product, including
access to new markets.
According to the U.S. Energy Information Administration,
inventories at domestic utilities stood at approximately 111
million tons at the end of August, which is slightly higher
compared to year-ago levels. While low natural gas and power prices
weighed on broader coal demand, we continued to ship all the coal
we produced during the third quarter, highlighting the quality and
resilience of our customer base.
On the export front, API 2 spot prices for thermal coal
delivered to Europe have been
volatile throughout 2019. After a 44% decline in the first half of
2019, API 2 prompt month prices rebounded by 23% during the third
quarter of 2019. Our revenues were largely unaffected due to our
previously disclosed export contract, which runs through
December 2020 and has fixed volumes
with collared prices that nets us a floor price per ton above
$45.52. It is also important to note
that the forward curve for API 2 is in contango and currently sits
around $70 per ton in 2021.
Supply rationalization is another positive trend we are seeing
in the marketplace. Globally, several unhedged coal producers are
scaling back their thermal coal output. We are also noticing
similar trends on the metallurgical coal front, where producers are
idling high-cost operations or slowing expansion projects due to
recent softer prices and declining access to capital. As we head
into 2020, we will remain market-driven and operate our mines in
line with our contracted position and opportunities to capture
market share.
Operations Summary
CCR achieved a record-high third quarter production of 1.62
million tons, which compares to 1.59 million tons in the third
quarter of 2018. The slight increase in coal production was due to
the impact of one fewer longwall move in third quarter of 2019
versus the prior year period.
During the third quarter of 2019, our operations team overcame
several non-typical challenges including a roof fall and equipment
breakdowns. These geological and equipment-related issues resulted
in higher mine maintenance and project expenses. Accordingly, we
saw slight cost increases compared to year-ago levels. Total costs
during the third quarter were $70.4
million compared to $66.7
million in the year-ago quarter. Average cash cost of coal
sold per ton1 was $32.78
compared to $30.88 in the year-ago
quarter.
|
|
Three Months
Ended
|
|
|
September 30,
2019
|
|
September 30,
2018
|
Coal
Production
|
thousand
tons
|
1,623
|
|
1,593
|
Coal Sales
|
thousand
tons
|
1,618
|
|
1,561
|
Average Revenue Per
Ton
|
per ton
|
$46.59
|
|
$47.21
|
Average Cash Cost of
Coal Sold1
|
per ton
|
$32.78
|
|
$30.88
|
Average Cash Margin
Per Ton Sold1
|
per ton
|
$13.81
|
|
$16.33
|
|
|
|
|
|
|
|
Quarterly Distribution
During the third quarter of 2019, CCR generated net cash
provided by operating activities of $20.4 million and
distributable cash flow1 of $9.2 million,
yielding a distribution coverage ratio1 of 0.6x. During
the quarter, our net cash provided by operating activities was
impacted by lower net income offset by an improvement in working
capital. Our distribution coverage ratio calculation is based on
quarterly estimated maintenance capital expenditures of
$8.9 million, while our actual cash
maintenance capital expenditures for the third quarter
were $11.3 million. Based on our current outlook for the coal
markets and a year-to-date distribution coverage ratio1
of 1.0x, the board of directors of the general partner has elected
to pay a cash distribution of $0.5125 per unit to all limited partner
unitholders and the holder of the general partner interest. As
previously announced on October 30,
2019, the distribution to all unitholders of the Partnership
will be made on November 15, 2019, to such holders of
record at the close of business on November
11, 2019.
This press release is intended to be a qualified notice to
nominees as provided for under Treasury Regulation Section
1.1446-4(b). Brokers and nominees should treat one hundred percent
(100.0%) of CONSOL Coal Resources LP's distributions to non-U.S.
investors as being attributed to income that is effectively
connected with a United States trade or business.
Accordingly, CONSOL Coal Resources LP's distributions to non-U.S.
investors are subject to federal income tax withholding at the
highest applicable effective tax rate. Nominees, and not CONSOL
Coal Resources LP, are treated as withholding agents responsible
for withholding on the distributions received by them on behalf of
foreign investors.
2019 Guidance and Outlook
Based on our year-to-date results, current contracted position,
estimated prices and production plans, we are maintaining our
previously announced guidance ranges for 2019:
- Coal sales volumes - 6.70-6.95 million tons
- Average revenue per ton - $47.00-$48.00
- Average cash cost of coal sold per ton2 -
$30.40-$31.40
- Adjusted EBITDA2 - $95-$103
million
- Capital expenditures - $34-$38
million
Third Quarter Earnings Conference Call
A joint conference call and webcast with CONSOL Energy Inc.,
during which management will discuss the third quarter 2019
financial and operational results, is scheduled for November
5, 2019 at 11:00 AM ET. Prepared remarks by members of
management will be followed by a question and answer session.
Interested parties may listen via webcast on the Events page of our
website, www.ccrlp.com. An archive of the webcast will be
available for 30 days after the event.
Participant dial in (toll free) 1-888-348-6419
Participant international dial in 1-412-902-4235
Availability of Additional Information
Please refer to our website www.ccrlp.com for additional
information regarding the Partnership. Prior to the earnings
conference call, we will make available additional information in a
presentation slide deck to provide investors with further insights
into our financial and operating performance. This material can be
accessed through the "Events and Presentations" page of our
website, www.ccrlp.com. In addition, we may provide other
information about the company from time to time on our website.
We will also file our Form 10-Q with the Securities and Exchange
Commission (SEC), reporting our results for the quarter and nine
months ended September 30, 2019.
Investors seeking our detailed financial statements can refer to
the Form 10-Q once it has been filed with the SEC.
Footnotes:
1 "adjusted EBITDA", "distribution coverage
ratio", "distributable cash flow", "average cash cost of coal sold
per ton", "average cash margin per ton sold" and "net leverage
ratio" are non-GAAP financial measures, which are reconciled to the
most directly comparable GAAP financial measures immediately below
the caption "Reconciliation of Non-GAAP Financial Measures."
2 CCR is unable to provide a reconciliation of
adjusted EBITDA guidance to net income or average cash cost of coal
sold per ton guidance to total costs, the most comparable financial
measures calculated in accordance with GAAP, due to the unknown
effect, timing and potential significance of certain income
statement items.
About CONSOL Coal Resources LP
CONSOL Coal Resources LP (NYSE:CCR) is a master limited
partnership formed in 2015 to manage and further develop all of
CONSOL Energy Inc.'s (NYSE:CEIX) active coal operations in
Pennsylvania. CCR's assets include
a 25% undivided interest in, and operational control over, the
Pennsylvania Mining Complex, which consists of three underground
mines - Bailey, Enlow Fork and Harvey - and related infrastructure.
For its ownership interest, CCR has an effective annual production
capacity of 7.1 million tons of high-Btu North Appalachian thermal
and crossover metallurgical coal. More information is available on
our website www.ccrlp.com.
Contacts:
Investor:
Mitesh Thakkar, (724) 416-8335
miteshthakkar@consolenergy.com
Media:
Zach Smith, (724) 416-8291
zacherysmith@consolenergy.com
Reconciliation of Non-GAAP Financial Measures
We evaluate our cost of coal sold and cash cost of coal sold on
a cost per ton basis. Our cost of coal sold per ton represents our
costs of coal sold divided by the tons of coal we sell. We define
cost of coal sold as operating and other production costs related
to produced tons sold, along with changes in coal inventory, both
in volumes and carrying values. The cost of coal sold per ton
includes items such as direct operating costs, royalty and
production taxes, direct administration, and depreciation,
depletion and amortization costs on production assets. Our costs
exclude any indirect costs such as selling, general and
administrative costs, freight expenses, interest expenses,
depreciation, depletion and amortization costs on non-production
assets and other costs not directly attributable to the production
of coal. The GAAP measure most directly comparable to cost of coal
sold is total costs. The cash cost of coal sold includes cost of
coal sold less depreciation, depletion and amortization cost on
production assets. The GAAP measure most directly comparable to
cash cost of coal sold is total costs.
The following table presents a reconciliation of cost of coal
sold and cash cost of coal sold to total costs, the most directly
comparable GAAP financial measure, on a historical basis for each
of the periods indicated (in thousands).
|
Three Months Ended
September 30,
|
|
2019
|
|
2018
|
Total
Costs
|
$
|
70,411
|
|
|
$
|
66,669
|
|
Freight
Expense
|
(900)
|
|
|
(611)
|
|
Selling, General and
Administrative Expenses
|
(2,840)
|
|
|
(3,899)
|
|
Interest Expense,
Net
|
(1,587)
|
|
|
(1,560)
|
|
Other Costs
(Non-Production)
|
(983)
|
|
|
(1,545)
|
|
Depreciation,
Depletion and Amortization (Non-Production)
|
(519)
|
|
|
(542)
|
|
Cost of Coal
Sold
|
$
|
63,582
|
|
|
$
|
58,512
|
|
Depreciation,
Depletion and Amortization (Production)
|
(10,567)
|
|
|
(10,517)
|
|
Cash Cost of Coal
Sold
|
$
|
53,015
|
|
|
$
|
47,995
|
|
We define average cash margin per ton as average coal revenue
per ton, net of average cash cost of coal sold per ton. The GAAP
measure most directly comparable to average cash margin per ton is
total coal revenue.
The following table presents a reconciliation of average cash
margin per ton sold to coal revenue, the most directly comparable
GAAP financial measure, on a historical basis, for each of the
periods indicated (in thousands, except per ton information).
|
Three Months
Ended
September 30,
|
|
2019
|
|
2018
|
Total Coal
Revenue
|
$
|
75,385
|
|
|
$
|
73,700
|
|
Operating and Other
Costs
|
53,998
|
|
|
49,540
|
|
Less: Other Costs
(Non-Production)
|
(983)
|
|
|
(1,545)
|
|
Cash Cost of Coal
Sold
|
53,015
|
|
|
47,995
|
|
Add: Depreciation,
Depletion and Amortization
|
11,086
|
|
|
11,059
|
|
Less: Depreciation,
Depletion and Amortization (Non-Production)
|
(519)
|
|
|
(542)
|
|
Cost of Coal
Sold
|
$
|
63,582
|
|
|
$
|
58,512
|
|
Total Tons
Sold
|
1,618
|
|
|
1,561
|
|
Average Revenue Per
Ton Sold
|
$
|
46.59
|
|
|
$
|
47.21
|
|
Average Cash Cost of
Coal Sold Per Ton
|
32.78
|
|
|
30.88
|
|
Add: Depreciation,
Depletion and Amortization Costs Per Ton Sold
|
6.51
|
|
|
6.60
|
|
Average Cost of Coal
Sold Per Ton
|
39.29
|
|
|
37.48
|
|
Average Margin Per
Ton Sold
|
7.30
|
|
|
9.73
|
|
Add: Total
Depreciation, Depletion and Amortization Costs Per Ton
Sold
|
6.51
|
|
|
6.60
|
|
Average Cash
Margin Per Ton Sold
|
$
|
13.81
|
|
|
$
|
16.33
|
|
We define adjusted EBITDA as (i) net income (loss) before net
interest expense, depreciation, depletion and amortization, as
adjusted for (ii) certain non-cash items, such as long-term
incentive awards including phantom units under the CONSOL Coal
Resources LP 2015 Long-Term Incentive Plan ("unit-based
compensation"). The GAAP measure most directly comparable to
adjusted EBITDA is net income.
We define distributable cash flow as (i) net income (loss)
before net interest expense, depreciation, depletion and
amortization, as adjusted for (ii) certain non-cash items, such as
unit-based compensation, less net cash interest paid and estimated
maintenance capital expenditures, which is defined as those
forecasted average capital expenditures required to maintain, over
the long-term, the operating capacity of our capital assets. These
estimated capital expenditures do not reflect the actual cash
capital expenditures incurred in the period presented.
Distributable cash flow will not reflect changes in working capital
balances. The GAAP measures most directly comparable to
distributable cash flow are net income and net cash provided by
operating activities. We define distribution coverage ratio as a
ratio of the distributable cash flow to the distributions, which is
the $0.5125 per quarter distribution
for all limited partner units, including common and subordinated
units, issued for the periods presented.
The following table presents a reconciliation of adjusted EBITDA
to net income, the most directly comparable GAAP financial measure,
on a historical basis for each of the periods indicated. The
table also presents a reconciliation of distributable cash flow to
net income and operating cash flows, the most directly comparable
GAAP financial measures, on a historical basis for each of the
periods indicated (in thousands).
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
Net
Income
|
$
|
6,970
|
|
|
$
|
8,645
|
|
|
$
|
36,577
|
|
|
$
|
49,978
|
|
Plus:
|
|
|
|
|
|
|
|
Interest Expense,
Net
|
1,587
|
|
|
1,560
|
|
|
4,495
|
|
|
5,295
|
|
Depreciation,
Depletion and Amortization
|
11,086
|
|
|
11,059
|
|
|
33,639
|
|
|
33,769
|
|
Unit-Based
Compensation
|
344
|
|
|
503
|
|
|
1,082
|
|
|
1,370
|
|
Adjusted
EBITDA
|
$
|
19,987
|
|
|
$
|
21,767
|
|
|
$
|
75,793
|
|
|
$
|
90,412
|
|
Less:
|
|
|
|
|
|
|
|
Cash
Interest
|
1,832
|
|
|
2,107
|
|
|
5,522
|
|
|
5,265
|
|
Estimated Maintenance
Capital Expenditures
|
8,937
|
|
|
8,921
|
|
|
26,946
|
|
|
26,969
|
|
Distributable Cash
Flow
|
$
|
9,218
|
|
|
$
|
10,739
|
|
|
$
|
43,325
|
|
|
$
|
58,178
|
|
|
|
|
|
|
|
|
|
Net Cash Provided
by Operating Activities
|
$
|
20,427
|
|
|
$
|
16,921
|
|
|
$
|
67,505
|
|
|
$
|
95,134
|
|
Plus:
|
|
|
|
|
|
|
|
Interest Expense,
Net
|
1,587
|
|
|
1,560
|
|
|
4,495
|
|
|
5,295
|
|
Other, Including
Working Capital
|
(2,027)
|
|
|
3,286
|
|
|
3,793
|
|
|
(10,017)
|
|
Adjusted
EBITDA
|
$
|
19,987
|
|
|
$
|
21,767
|
|
|
$
|
75,793
|
|
|
$
|
90,412
|
|
Less:
|
|
|
|
|
|
|
|
Cash
Interest
|
1,832
|
|
|
2,107
|
|
|
5,522
|
|
|
5,265
|
|
Estimated Maintenance
Capital Expenditures
|
8,937
|
|
|
8,921
|
|
|
26,946
|
|
|
26,969
|
|
Distributable Cash
Flow
|
$
|
9,218
|
|
|
$
|
10,739
|
|
|
$
|
43,325
|
|
|
$
|
58,178
|
|
Minimum
Quarterly Distributions
|
$
|
14,405
|
|
|
$
|
14,350
|
|
|
$
|
43,214
|
|
|
$
|
43,044
|
|
Distribution
Coverage Ratio
|
0.6
|
|
|
0.7
|
|
|
1.0
|
|
|
1.4
|
|
We define net leverage ratio as the ratio of net debt to last
twelve month (LTM) earnings before interest expense, depreciation,
depletion and amortization, adjusted for certain non-cash items,
such as long-term incentive awards, amortization of debt issuance
and capitalized interest.
The following table presents a reconciliation of the net
leverage ratio to net income, the most directly comparable GAAP
financial measure on a historical basis for the period indicated
(in thousands).
|
Twelve Months
Ended
|
|
September 30,
2019
|
Net
Income
|
$
|
53,165
|
|
Plus:
|
|
Interest Expense,
Net
|
5,867
|
|
Depreciation,
Depletion and Amortization
|
44,612
|
|
Unit-Based
Compensation
|
1,554
|
|
Non-Cash Expense, Net
of Cash Payments for Legacy Employee Liabilities
|
1,227
|
|
Other Adjustments to
Net Income
|
2,077
|
|
EBITDA Per Affiliated
Company Credit Agreement
|
$
|
108,502
|
|
|
|
Borrowings under
Affiliated Company Credit Agreement
|
$
|
181,400
|
|
Finance
Leases
|
6,684
|
|
Total Debt
|
188,084
|
|
Less:
|
|
Cash on
Hand
|
10,611
|
|
Net Debt Per
Affiliated Company Credit Agreement
|
$
|
177,473
|
|
|
|
Net Leverage Ratio
(Net Debt/EBITDA)
|
1.6
|
|
Cautionary Statement Regarding Forward-Looking
Statements
Certain statements in this press release are "forward-looking
statements" within the meaning of the federal securities laws. With
the exception of historical matters, the matters discussed in this
press release are forward-looking statements (as defined in Section
21E of the Securities Exchange Act of 1934, as amended) that
involve risks and uncertainties that could cause actual results to
differ materially from results projected in or implied by such
forward-looking statements. 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 "anticipate," "believe,"
"could," "continue," "estimate," "expect," "intend," "may," "plan,"
"predict," "project," "should," "will," 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. 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. Specific risks, contingencies and
uncertainties are discussed in more detail in our filings with the
Securities and Exchange Commission. The forward-looking statements
in this press release speak only as of the date of this press
release and CCR disclaims any intention or obligation to update
publicly any forward-looking statements, whether in response to new
information, future events, or otherwise, except as required by
applicable law.
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SOURCE CONSOL Coal Resources LP