CONSOL Energy Inc. Common Stock

Good day and welcome to the Consol Energy First Quarter 2022 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press stars and one on your touchtone phone. To withdraw your question, please press stars and two. Please note, this event is being recorded. I would now like to turn the conference over to Nathan Tucker, Director of Finance and Investment Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to Consol Energy's first quarter 2022 earnings conference call. Any forward-looking statements or comments we make about future expectations are subject to some risks, certain of which we have outlined in our press release and in our SEC filings and are considered forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. We do not undertake any obligations of updating any forward-looking statements for future events or otherwise. We will also be discussing certain non-GAAP financial measures which are defined and reconciled to comparable GAAP financial measures in our press release and furnished to the SEC on Form 8-K, which is also posted on our website. Additionally, we filed our quarterly report on Form 10-Q for the quarter ended March 31, 2022 with the SEC this morning. You can find additional information regarding the company on our website, www.consolenergy.com, which includes a supplemental slide deck that was posted this morning. On the call with me today are Jimmy Brock, our Chief Executive Officer, Mitesh Dakar, our Chief Financial Officer, Dan Connell, our Senior Vice President of Strategy, and Bob Braithwaite, our Senior Vice President of Marketing and Sales. In his prepared remarks, Jimmy will provide a recap of our key achievements during the first quarter of 2022 and specific insights on operations and sales. Mattesh will then provide an update on our liability management initiatives, financial performance, and 2022 guidance. In his closing comments, Jimmy will lay out our key priorities for the remainder of 2022. After the prayer remarks, there will be a Q&A session in which Dan and Bob will also participate. With that, let me turn it over to our CEO, Jimmy Brock.

Thank you, Nate, and good morning, everyone. Consol Energy achieved very strong operational and financial performances in the first quarter of 2022 across all of our key business segments. The Pennsylvania Mining Complex shipped 6.5 million tons from its four available long walls in Q1 of 22 and achieved the highest quarterly average coal revenue per ton sold since becoming an independent public company in 2017. After adjusting for the effects of settlements of commodity derivative instruments, we achieved a net realized sales price of nearly $60 per ton. Additionally, in the quarter, we increased our PAMC contracted position by approximately 5 million tons for 2023. The Kinsaw Marine Terminal shipped 3.6 million tons in the quarter, generating its highest ever quarterly terminal revenue and adjusted EBITDA. Financially, CEIX achieved a Q1-22 adjusted EBITDA of $169 million and generated nearly $120 million in free cash flow. On the growth and diversification front, our Ipman project continues to progress as expected and remains on track for an expected startup in the second half of 2022. Given the strong market backdrop, We are very eager to complete this project and place our high-quality, low-volume MET product into the marketplace. Let's now discuss our operational performance in more detail. Coal production at the Pennsylvania Mining Complex came in at 6.4 million tons in Q1 2022, an impressive accomplishment considering we produce from just four of our five long walls, as our fifth wall is still in development mode after pulling back in 2020. Additionally, we benefited from moving past the operational challenges we encountered in the second half of 2021, and railroad performance steadily improved during the first quarter of 2022 as our transportation partners continued to increase their staffing levels. As a result, productivity at the PAMC in Q1-22 measured as tons per employee hour improved by 9% compared to Q4-21, And we accomplished this while achieving a total recordable incident rate at the Pennsylvania Mining Complex of 0.52, our lowest at the PAMC since 1989 when the Bailey Mine was the only active operation. On the cost front, our PAMC average cash cost of coal sold per ton for Q122 was $29.91. despite incurring ongoing development costs associated with the Fifth Longwall and continued inflationary pressures on goods and services. The development of the Fifth Longwall continues to progress as expected and will enhance our production optionality once completed later this year. The Consol Marine Terminal had a throughput volume of 3.6 million tons during Q1-22, compared to 4.1 million tons in the prior year period. Despite lower throughput volumes, terminal revenue for the quarter came in at $21.4 million, a significant increase over $18.2 million in Q1 of 21, as the throughput rate per ton was substantially improved due to increased export demand and commodity pricing strength. CMT operating cash cost came in at $5.9 million for the quarter, compared to $5.3 million in Q1 of 21. This resulted in CMT adjusted EBITDA of $14.5 million in Q1-22 compared to $12 million in the prior year period. Lastly, on the operations side, our Ipman project continued to progress as expected and on track in the quarter, with preparation plant commissioning and scale-up to full run rate production expected during the second half of 2022. Relocation of the existing prep plant to the Ipman site is proceeding on schedule. Disassembly of the existing plant is complete and roughly 80% of the structure and equipment have been transported to the Ipman site. The main plant building foundations are complete with structural steel erections, plant circuitry installation, and new rail siding and mainline construction activities well underway. We have continued to build out our workforce and mining equipment fleet in preparation for full production ramp-up. The Ipman mine produced approximately 44,000 tons of low-volume metallurgical coal on a clean coal equivalent basis and sold 19,000 tons in Q1 of 22. We have continued our marketing efforts to introduce Ipman to both domestic and international customers, and it has been well received. As such, The Ipman product is scheduled for its first export shipment through our Consol Marine terminal in the second quarter, and we are engaged in discussions regarding domestic trials of the product as well. We remain very optimistic that there will be strong and sustained demand for this product, both domestically and internationally. On the marketing front, the demand for our product remained elevated in the first quarter of 2022, due to the ongoing supply tightness across the energy landscape and improvements in the commodity markets as a whole. As such, we sold 6.5 million tons at an average realized coal revenue per ton at $59.60 in Q1-22, compared to 6.9 million tons at $41.39 in the year-ago period. Looking across the broader coal market, we expect coal demand to remain robust domestically as well as internationally due to tight supply. As such, we have witnessed elevated commodity prices across the board. Domestically, Henry Hub natural gas spot prices averaged $4.67 per million BTU, and PJM West day ahead power prices averaged approximately $56 per megawatt hour in the quarter, which are some of the highest quarterly levels we've seen since becoming a standalone public company. Internationally, prices have continued their upward trend with the API2 prices averaging $234 per ton during Q1 of 22. Although API2 prices have been elevated, they have remained extremely volatile propped up by the ongoing conflict between Russia and Ukraine. We saw API2 prices bounce from the mid-100s in late February to over $400 per ton by early March. And while we saw a retreat from those highs at the end of the first quarter, pricing has remained elevated due to increasing ban on Russian energy. Most recently, the European Union announced a ban on Russian coal imports, and it is expected that this dynamic, coupled with supply constraints, will extend the duration of the current market tightness as the UK looks to secure alternative energy supplies. Additionally, in the export market, we are excited to announce that we sold our first cargo into Turkey during the first quarter. In the midst of this market strength, our sales team opportunistically secured additional sales contracts. We remain nearly fully contracted for 2022 and have 16.3 million tons contracted for 2023. Let me pass the call over to Mattes to provide an update on our financial performance in the quarter.