CONSOL Energy (US:CEIX)2021-11-02 21:07Financial Data and Key Metrics Changes - CONSOL Energy reported a net loss of $113.8 million or $3.30 per diluted share for Q3 2021, compared to a loss of $7.2 million or $0.28 per diluted share in Q3 2020 [36] - Adjusted EBITDA for Q3 2021 was $66.6 million, slightly down from $68.3 million in the same quarter last year [36] - Free cash flow generation was nearly $35 million in Q3 2021, bringing the year-to-date total to $162 million [29][38] - The cash balance increased by approximately $12 million during Q3 2021, totaling $162 million in unrestricted cash and cash equivalents [31] Business Line Data and Key Metrics Changes - Coal production at the Pennsylvania mining complex increased to 5.3 million tons in Q3 2021 from 4.5 million tons in Q3 2020, driven by recovering demand [14] - Average cash cost of coal sold per ton rose to $30.64 in Q3 2021 from $28.64 in Q3 2020 due to operational challenges and increased maintenance costs [15] - The CONSOL Marine terminal throughput volume increased to 2.8 million tons in Q3 2021 from 2 million tons in the prior year [16] Market Data and Key Metrics Changes - Henry Hub natural gas spot prices averaged $4.35 per million BTU in Q3 2021, a 118% increase compared to Q3 2020 [20] - API2 spot prices for seaborne thermal coal ended Q3 2021 at $151 per ton, a 193% improvement versus Q3 2020 [21] - U.S. coal demand in 2021 is expected to increase by 110 million tons, while production is projected to improve by only 59 million tons, leading to tight supply [25] Company Strategy and Development Direction - The company aims to reduce Scope 1 and 2 greenhouse gas emissions by 50% by 2026 and achieve net zero emissions by 2040, emphasizing its commitment to ESG [6][7] - Development of the 5th longwall at the Enlow Fork mine is set to recommence due to improved market conditions and demand [9] - The Itmann mine and preparation plant are progressing as planned, with commissioning targeted for the second half of 2022 [12][40] Management's Comments on Operating Environment and Future Outlook - Management highlighted a significant supply-demand imbalance in the coal market, expecting robust market conditions to continue [24] - The company is optimistic about its ability to generate free cash flow and reduce debt levels, especially with improved coal markets [43] - Management noted ongoing operational challenges but expressed confidence in overcoming geological issues and ramping up production [71] Other Important Information - The company has secured contracts for 20.2 million tons in 2022 and 5.8 million tons in 2023, reflecting strong demand and market positioning [23] - The company is focused on balancing domestic and export markets, with approximately 50% of total sales volume shipped to the export market year-to-date [46] Q&A Session Summary Question: Can you elaborate on the capital costs for the 5th longwall project? - Management indicated that the upfront investment would be in the single-digits of millions, primarily for rebuilding existing equipment [54][56] Question: What pricing for 2022-2023 have you locked in under fixed-price contracts? - The average price for the 20.2 million tons contracted for 2022 is expected to be in the low $50s, with approximately 6 million tons sold for export [60][63] Question: Can you elaborate on the logistics issues faced during the quarter? - Management acknowledged rail issues but noted improvements are expected, with hiring efforts underway to meet increased demand [66] Question: How do you see costs trending in 2022? - Management anticipates small inflationary pressures and aims to keep inflation below 5% while addressing labor market challenges [71] Question: What is the expected production from the Itmann mine in 2022? - The Itmann project is expected to ramp up to an annual run rate of approximately 900,000 tons in the latter part of 2022 [76] Question: How will you utilize free cash flow moving forward? - The company aims to reduce outstanding debt and considers various initiatives for capital allocation, including the Itmann project [101]