CONSOL Energy Inc. Common Stock

Good day and welcome to the Consul Energy first quarter 2023 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 star and then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Nathan Tucker, Director of Finance and Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to Consol Energy's first quarter 2023 earnings conference call. Any forward-looking statements or comments we make about future events are subject to risk. 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 8K, which is also posted on our website. Additionally, we followed our quarterly report on Form 10-Q for the quarter-ended March 31, 2023, with the SEC this morning. You can find additional information regarding the company on our website, www.consolenergy.com, which also includes a supplemental slide deck that was posted this morning. On the call with me today are Jimmy Brock, our Chief Executive Officer, Mitesh Jakar, our President and Chief Financial Officer, Bob Braithwaite, our Senior Vice President of Marketing and Sales, and Dan Connell, our Senior Vice President of Strategy. In his prepared remarks, Jimmy will provide a recap of our first quarter 2023 achievements and a detailed discussion of our operations. Mitesh will then provide an update on our marketing, financial, and sustainability initiatives and our 2023 outlook. In his closing comments, Jimmy will lay out our key priorities for the remainder of 2023 and provide an update on our shareholder return program. After the prepared remarks, there will be a Q&A session in which Bob and Dan will also participate. With that, let me turn it over to Jimmy.

Thank you, Nate, and good morning, everyone. Consol Energy finished Q123 with record quarterly performances on many fronts, including net income, earnings per share, and adjusted EBITDA. And we have the lowest net debt level in our history. At the PAMC, we achieved our highest realized revenue per ton sold and average cash margin per ton sold. At the Consol Marine Terminal, we set new records for quarterly throughput volume, revenue, and CMT adjusted EBITDA. This strong performance on multiple fronts also enabled us to set a new quarterly record for what we view as one of our most important metrics, free cash flow generation. We have a robust capital allocation strategy, and our free cash flow generation has allowed us to further advance some of our key strategic goals. In fact, Since we announced our Enhanced Shareholder Return Program at the end of the second quarter of 2022, we have deployed nearly every dollar of free cash flow that we've generated toward creating long-term value for our shareholders, whether it was in the form of dividends, share buybacks, or debt reductions. Since the end of Q2 2022, we have generated $444 million of free cash flow. Yet, Our total cash position has risen by only $9 million. Of the approximately $435 million deployed, $238 million went toward retiring our outstanding debt, $110 million towards dividends, and $88 million toward retiring approximately 4% of CEIX common stock. We also fine-tuned our capital allocation process over time. heavily focused on debt reduction in our early years, starting in late 2017, and then gradually pivoting more and more toward return of our shareholder capital over time. This has been evidenced by the continued growth in the percentage of our free cash flow return to shareholders each quarter since implementing the Shareholder Return Program. In fact, Q123 more of our free cash flow generation was directed toward shareholder returns versus debt repayments. As we've moved closer and closer to our gross debt target, our shareholder return allocation has gradually increased. As such, we are pleased to announce this morning that we are again shifting the scale up by allocating approximately 75% of quarterly free cash flows for our shareholder return program. which will now emphasize share buybacks over dividends. I will provide a more detailed update on this shortly. Let's now discuss our operational performance. On the safety front, our Bailey Preparation Plant, Ipman Preparation Plant, and Consol Marine Terminal each had zero employee recordable incidents during the first quarter of 2023. The PAMC finished the quarter with a total recordable incident rate of 1.78, which continued to track well below the national average for underground coal mines. Coal production at the Pennsylvania Mining Complex came in at 7 million tons in Q1 23, an increase compared to 6.4 million tons in the prior year period. Production improved this quarter compared to Q1 22, due to the restart of the second longwall at the Enloe Fort mine in mid-December 2022, which brought us back to our full operational capacity of five longwalls at the PMC. Q123 marked the first quarter since Q121 in which all five longwalls were fully operational and in which we mined at least 7 million tons. From a productivity standpoint, measured as tons per employee hour, the PAMC ended the quarter improved by 3% compared to its full-year 2022 average. On the cost front, our PAMC average cash cost of coal sold per ton for Q1-23 was $33.61 compared to $29.91 in Q1-22. While the year-ago comparison reflects significant inflationary pressures on supplies and labor, which have been an issue globally over the last 12 months. We point out that our Q1 23 performance was improved by $1.28 per ton compared to Q4 of 22. This is due to the fixed cost leverage that comes with the fifth long wall. Now let's discuss our Ipman project. Progress continues and we remain focused on ramping up to full run rate production during 2023. following the adverse geological conditions and section equipment delivery delays that we experienced in the second half of 2022. We currently have two of our three continuous minor supersections operational and will be turning our attention to getting the third CM supersection up and running soon. Long-term underground construction work is 75% complete and staffing levels have improved throughout the quarter. We've also begun to see improvements in mine productivity and prep plant performance as we've turned our attention from project development to operational optimization this year. The Ipman Mining Complex produced 64,000 tons of coal during the first quarter of 2023 and sold 108,000 tons of Ipman and third-party coal in aggregate during the quarter. The Ipman product continues to be successfully marketed to both domestic and export customers. As we ramp up production, our focus is shifting towards securing new business with strategic partners. Moving to the Consol Marine Terminal. We had a record quarterly throughput volume of 4.6 million tons during Q123, representing an annualized rate above 18 million tons. compared to 3.6 million tons in the prior year period. This is exciting because we have been working hard to de-bottleneck the terminal in an effort to increase its operating capacity. Some of the key focused areas included in the inbound capacity and operational management. We have been working with our transportation partners to boost freight capacity and efficiencies on the inbound side of the terminal. We also have been focusing on optimizing our operations in areas such as stockpile efficiency, train turn times, and vessel loading rates, with a planned future focus on turn times between vessels. Through these efforts and our Q123 performance, we now believe the terminal throughput capacity could reach approximately 20 million tons annually. This is also important strategically. as we continue to focus on the export markets as the key growth opportunity for PAMC coal sales. Terminal revenues for the quarter came in at $26.7 million, and CMT operating cash costs were $5.9 million. CMT adjusted EBITDA finished Q123 at $20.6 million compared to $14.5 million in the prior year period. With that, I will turn the call over to Mitesh.