CONSOL Energy Inc. Common Stock

Good morning and welcome to the Consol Energy second 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 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 Investment Relations.

Please go ahead. Thank you, and good morning, everyone. Welcome to Consol Energy's second quarter 2023 earnings conference call. Any forward-looking statements or comments we make about future events are subject to 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 June 30th, 2023 with the SEC this morning. You can find additional information regarding the company on our website, www.consolidate.com, which also includes the supplemental slide deck that was posted this morning. On the call with me today are Jimmy Brock, our Chief Executive Officer, Mitesh Dakar, our President and Chief Financial Officer, and Bob Braithwaite, our Senior Vice President of Marketing and Sales. In his prepared remarks, Jimmy will provide a recap of our second quarter 2023 achievements and a detailed discussion of our operations. Mitesh will then provide an update on our marketing and financial progress and our updated 2023 outlook. In his closing comments, Jimmy will lay out our key priorities for the remainder of the year. After the prepared remarks, there will be a Q&A session in which Bob will also participate. With that, let me turn it over to Jimmy.

Thank you, Nate, and good morning, everyone. During the second quarter, Consol Energy delivered strong results on multiple fronts. We achieved the second highest quarterly adjusted EBITDA and free cash flow levels in our history, fully retired our term loan B, achieved a net cash position for the first time in our history, added an incremental $95 million of capacity to our revolving credit facility, and using the free cash flow generated during the second quarter, repurchased roughly 2 million shares of our outstanding common stock. The PNC also achieved its second highest quarterly realized revenue per ton sold and average cash margin per ton sold during Q2 23. Last but not least, we ship more than 5 million tons through Arkansas Marine Thermal, which is also a quarterly record. In keeping with the theme of our robust capital allocation strategy since announcing our enhanced shareholder return program at the end of Q2 22, we again deployed every dollar of free cash flow that we generated in the second quarter of 2023, with the majority going toward share buybacks and most of the remainder toward retiring our outstanding debt. To further highlight this, consider the fact that we generated $625 million of free cash flow since the end of Q2 2022. Yet, our total cash position has remained largely unchanged since then. Also, as dictated by our capital allocation strategy, we've pivoted more towards shareholder returns in recent quarters as our debt neared target levels. This pivot, which is now specifically focused on share buybacks, has allowed us to retire nearly 10% of our public float through July 31st of 2023. Let's now discuss our operational performance. On the safety front, our Bailey preparation plan Itman Preparation Plant and Consol Marine Terminal each had zero employee recordable incidents during the second quarter of 2023. Our coal operations finished the quarter with a total recordable incident rate well below the national average for underground coal mines. Coal production at the Pennsylvania Mining Complex came in at 6.3 million tons in Q2 of 23, a reduction compared to 7 million tons in Q1 of 23. However, this was expected and telegraphed on our last earnings call and was driven by multiple long-wall moves at the PAMC in the second quarter compared to none in Q1. On the cost front, our PAMC average cash cost of coal sold per ton for Q2 23 was $36.33 compared to $33.61 in Q1 23. The increase was mostly due to the reduction in production tons associated with the previously mentioned longwall moves in the quarter, which impaired our fixed cost leverage compared to the prior quarter. The good news is, on a year-to-date basis, our average cash cost of coal sold per ton has tracked slightly below the midpoint of our guidance range. Moving on to IPMA. During the second quarter of 2023, the ramp up to full run rate production near completion. At the end of the quarter, all three continuous minor supersections were installed underground and long term construction work for our One West Main intersection was nearly complete. However, this ramp up was much slower than originally anticipated. We encountered challenging geology, such as sandstone intrusions in multiple CM sections, and water infiltration in section number three, which created difficult mining conditions during the first half of 2023 and expedited the need to transition to One West. Now, wrapping up, this construction work will enable the three supersections to produce in several different blocks of the reserve, targeting higher average production rates and balanced coal quality across the mine. Additionally, the labor markets continue to improve in Q2, which allowed us to increase staffing levels throughout the quarter. The Ipman Mining Complex produced 70,000 tons of coal during the second quarter of 2023 and sold 126,000 tons of Ipman and third-party coal in aggregate during the quarter. Year-to-date, the Ipman Mining Complex sold a combined 234,000 tons of Ipman and third-party coal. There continues to be strong interest for our Ipman product across a variety of markets, and we are actively marketing this product both domestically and abroad. Moving to the Consol Marine terminal. We achieved our second consecutive quarter throughput record with a volume of 5.4 million tons shipped during Q2 23, representing an annualized rate greater than 20 million tons. This compares to 4.6 million tons in Q123 and 3.8 million tons in the prior year quarter. On a year-to-date basis, we ship just shy of 10 million tons through our terminal, with 82% of that total coming from our Pennsylvania mining complex. These noteworthy achievements at the terminal provide tangible evidence that our de-bottlenecking efforts have been effective. and that our increased annual throughput capacity of up to 20 million tons is achievable. This added capacity translates to an increased ability to execute our longer-term strategy of moving more PAMC tons into growing export markets. The significant success that we achieved thus far toward our strategic goal of being more export-focused is due to a combination of factors, including the dedication of our CMT team members and debottlenecking efforts materializing at the terminal today and our strong relationship with our railroad partners. Terminal revenues for the quarter came in at a record $31.4 million and CMT operating cash costs were $7 million. CMT adjusted EBITDA, also a new quarterly record, finished at $23.9 million compared to $15.1 million in the prior year period. With that, I will turn the call over to Mitesh.

Thank you Jimmy and good morning everyone. Let me start with an update on the marketing front and our contracting progress. In a trend similar to the first quarter of this year, we continue to see weak domestic demand for our product as cold demand for the power generation market remain under pressure due to the overhang of a warm winter weather. This warmer than normal winter reduced heating demand in the first quarter, which in turn resulted in lower natural gas prices. Since then, Domestic customers have seen elevated stockpile levels and reduced restocking needs during the second quarter. However, due to the advantage of our high-quality product and assets, our marketing team once again was able to quickly respond and divert a significant number of additional tons into the export market during the second quarter, but the demand for our product remains strong, particularly in the industrial and crossover metallurgical markets. The largest industrial market we serve is the Indian cement market. Cement capacity in India has risen substantially in the past eight years, adding an incremental 160 million tons, a 50% increase, which brings total current capacity to nearly 550 million tons. Furthermore, due to rapid urbanization and higher government spending on infrastructure and housing, our customers in India are expecting to continue to grow their installed capacity. This is exciting for us. as our premium high heat content product is desired in this market. Global supply of high calorific value products continues to decline, while demand for our product in several growth markets continues to expand. On the crossover metallurgical front, we shipped approximately 650,000 tons during 2Q23, which is one of the highest quarterly levels we have achieved in recent years. With the commissioning of our fifth long wall at the Enloe Fork mine, which has lower sulfur content, we are seeing increased demand for our product. Additionally, the long-term markets we expect to serve, particularly in Latin America and certain Asian countries, are becoming more dependent on U.S. supplies as they move away from Russian coal. This should bode well for us as we continue to focus on taking additional market share moving forward. During QQ23, we sold 6.4 million tons of BMC coal at an average realized coal revenue per ton sold of $81.27 compared to 6.2 million tons at $72.18 in the year-ago period. For the second consecutive quarter, sales into the export industrial market outpaced sales into the domestic power generation market, which has only happened twice in our history. Overall sales into the export market during 2Q23 accounted for 78% of our total recurring revenues and other income, including 31% from the export industrial market and 12% from the export crossover metallurgical market. In fact, domestic power generation accounted for less than 20% of our recurring revenues and other income in 2Q23, which is a substantial shift in our sales mix in a short period and is a testament to the success of our marketing strategy. Furthermore, on a year-to-date basis, domestic power gen now only accounts for 23% of our recurring revenues and other income compared to more than 50% in full year 2017. This portfolio optimization of shifting a significant portion of our tons into the export market to offset weakness in the domestic market is a true differentiator for us and reduces our dependence on the shrinking domestic power generation market. During the quarter, despite a challenging market environment, our sales team opportunistically increased our forward sold position at the PMC by 4.4 million tons for delivery through 2026. The majority of these tons were sold into the export industrial market, where we continue to increase our market penetration in line with our strategic shift towards export demand growth. However, we should mention that a portion of these tons were sold into the domestic market as well under a fixed price arrangement through 2026 as domestic utilities still have an appetite to enter into long-term agreements with strategic suppliers. We remain near fully contracted for 2023 and have 17.6 million tons contracted for 2024, which puts us ahead of schedule for 2024 compared to where we have been at this point over the past several years. Contracting progress beyond 2024 remains robust as well, specifically in the export markets. Now let me provide an update on our recent revolver amendment and balance sheet management progress before discussing our financial results. During the second quarter of 2023, we successfully amended a revolving credit facility to add $95 million of incremental capacity which included commitments from multiple new lenders to the facility and upsize commitment from 60% of the existing lenders. As a reminder, in March of this year, our then $400 million revolver capacity was reduced to $260 million as several banks elected not to extend their commitments due to ESG pressures. At that time, we secured commitments from multiple new banking partners totaling more than $100 million, which partially offset the declines. These new partners elected to upsize their commitments in this latest round, and we once again brought in additional new banking partners. As such, the revolving credit facility now has a borrowing capacity of 355 million and maintains a July 2026 maturity. Furthermore, we were successful in easing certain restrictive governance, specifically around investments and shareholder returns, which provides us more flexibility to execute our capital allocation strategy. Majority of these covenants have been simplified and most covenants are now leverage and liquidity based moving forward. This upsizing is noteworthy given the current challenging banking environment and demonstrates ongoing capital market access for coal companies generally and for Consol Energy in particular. We believe this recent amendment highlights our significantly improved credit profile the strength of our high-quality asset base, and the prudence with which we operate our business. S&P Global Ratings also recognized our improved credit profile and increased our corporate credit rating to B-plus with a stable outlook, which ranks us at the top of the list for all publicly traded U.S. core companies. On the balance sheet management front, first, during 2Q23, we generated $181 million of free cash flow, approximately 32% of which was deployed towards reducing our gross debt level and executing our revolver amendment. During the quarter, we fully retired our term loan fee and redeemed $25 million of our second lien notes. Second, when factoring in our unrestricted cash and short-term investments, we are pleased to report that we achieved a net cash position for the first time in our history. As of June 30th, we had a net cash position of $62 million. Third, in conjunction with our successful revolver amendment, we finished the quarter with a robust liquidity position of $515 million. Fourth, I'm pleased to report that since the end of the second quarter, we made a $24 million discretionary redemption to fully retire our second lien notes. This brings our pro forma gross debt level to approximately $200 million which is comprised of our tax exempt municipal bonds at the Consolmarine Terminal and the Pennsylvania Mining Complex, plus various equipment finance leases. Most importantly, we believe that the remaining pieces of our debt are manageable in size and positioned in stable capital markets. Additionally, the maturities are separated by multiple years. Our CMT bonds mature in late 2025 and our PMC refuse disposal bonds mature in 2028. Now let me recap our financial results. This morning, we reported a strong second quarter 2023 financial performance with net income of 168 million or $4.94 per diluted share. Additionally, we finished 2Q23 with adjusted EBITDA of 276 million and generated 181 million of free cash flow. Let me put this free cash flow generation into perspective. During the second quarter, we paid near nearly $80 million in cash taxes compared to no payments in 1Q23, where we generated 221 million in free cash flow, which partially distorts the comparison. Now let me provide a quick update on our outlook for 2023. On the guidance front for the Pennsylvania mining complex, despite a significant decline in domestic demand year to date, we are reiterating our sales volume range of 25 to 27 million tons and cash cost guidance range of $34 to $36 per ton as we continue to optimize our portfolio and take advantage of export markets. However, due to reduced API2 forward prices, we are slightly reducing the top end of our expected average realized coal revenue per ton sold by $1 to a range of $76 to $80 per ton from the previous range of $76 to $81 per ton. For our Hitman mine, due to the slow As an expected ramp up during the second quarter, we are adjusting our 2023 production guidance range down to 400 to 500,000 tons from the previous range of 400 to 600,000 tons. Once Atman achieves stable operating results, we intend to provide more detailed guidance. We are disappointed by the gradual ramp up progress, which has in turn delayed our ability to provide detailed guidance to this point. We thank you for your patience, and we are confident that we are nearing full run rate production. Lastly, on the capital expenditures front, we are maintaining our guidance range of $160 to $185 million for 2023. With that, let me turn it back to Jimmy.

Thank you, Mitesh. Let me now provide an update on our shareholder return program. We deployed approximately 70% of the free cash flow generated during the second quarter toward repurchasing roughly 2 million shares of our outstanding common stock. This was accomplished through a combination of end-quarter repurchases and an approximate $50 million 10B51 plan put in place for the month of July. We also view 10B51s as a tool to be used when necessary to smooth out our share buybacks across potentially choppy monthly cash flows or to allow us to remain in the market during earnings blackout periods. In total, we deployed 124 million of our Q2 23 free cash flow towards repurchasing nearly 2 million shares of CEIX stock at a weighted average price of approximately $64 per share. This brings our year to date share repurchases as of the end of July to 3.1 million shares or nearly 10% of our public float as of year end Since introducing our enhanced shareholder return program in Q3 22, we've returned more than $10 per share to our shareholders via buybacks and dividends in an approximately 12 month period. As mentioned last quarter, we continue to view share buybacks as the most accretive form of shareholder returns right now and intend to prioritize buybacks over dividends moving forward. For the back half of 2023, we remain focused on a few key areas that we believe are crucial for our company. First, as we enter the post-summer contracting season, our sales team remains focused on leveraging our high-quality products to continue to build out our contract book and diversify our revenue streams, which has proven advantageous in the first half of 2023. We have made great strides on this front year to date. despite a challenging market backdrop, and our strong existing contract book will allow us to be patient and more opportunistic moving forward. The team is also focused on further optimizing our 2023 sales book as needed to deliver the highest possible arbitrage for the remainder of the year. Second, we will be laser focused on achieving a consistent production profile at our Ipman mine. The complex is fully staffed and all section equipment is installed and running. Although we're not pleased about the unexpected delays in wrapping up to full rate production, we remain very excited about the revenue diversification that this Ipman Lowball product will bring. Customer interest remains strong and we've had multiple successful test trials across a range of potential customers. Finally, now that our balance sheet is at target debt levels, we're focused on returning value to our shareholders. Since going public in 2017, our capital allocation strategy has always prioritized the highest rate of return and the most advantageous use of our capital. We continue to believe that share buybacks remain the most attractive and accretive form of shareholder returns, and we intend to continue that strategy moving forward. We believe that we have managed our capital allocation process well, and we remain dedicated to this active management approach. Therefore, we will continue to evaluate our strategy on a go-forward basis. Through our allocation process, we have created equity value of well over $1 billion. We have made debt repayments of more than $900 million since the beginning of 2018 and have returned nearly $350 million back to shareholders via share buybacks and dividends in just the past 12 months. Let me finish by acknowledging the hardworking employees across our organization that make these achievements possible. Our balance sheet is in its best shape in our history, which paved the way for us to return capital to our shareholders. This is due to the consistency of our operations, which is only made possible through the hard work and dedication of our employees across the company. The nature of what we do is not easy, but our employees show up and execute time after time. I am extremely proud to lead this team, and I thank all of our team members for their commitment to our core values. With that, I will hand the call back over to Nate for further instructions.

Thank you, Jimmy. We will now move to the Q&A session of our call. At this time, I'd like to ask our operator to please provide the instructions to our callers.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Lucas Pipes with B Reilly Securities. Please go ahead.

Thank you very much, operator. Good morning, everyone. Good job on the quarter and the pricing, and I want to ask my first question on the pricing front. How would you frame up the environment for pricing, both on the domestic and export markets, especially as you look out to 2024? Where could you book tons today on a net back basis? And as it relates to your contract book, could you maybe, maybe I missed it, just update us on the average price ideally broken out by export and domestic. Thank you very much.

Lucas, this is Bob. So, you know, as we mentioned on the call, we did contract forward 4.4 million tons. Of that, 3.6 million was in the export market. Those tons, majority of those were index-linked, whether they be toward Petcoke, API2, and then we also had some crossover volumes contracted as well, which is linked to Hyval B prices. But when you look at where pricing is today, you know, those tons are probably in about the mid-60s back to the mine. And that's based on Petcoke, you know, CFR India Petcoke prices around $120 today, Cal24 API2 prices around 120 and then Hyval B prices, you know, close to 190. So you're looking at call it mid to upper 60s there. As far as domestic is concerned, you did hear us talk about contracting 800,000 tons in the domestic market through 2026. And when we contract and bid on domestic business, you know, we're always looking at what power and gas prices are at the time. And, you know, at that time, we were able to secure volumes in the mid-60s as well for that domestic volume. So, you know, gas is off a little bit since the time we negotiated that deal. But I would tell you that the pricing that, you know, we're seeing for domestic business is off dollars, singular, not $5 or $10 from that number. So you're looking at, again, you know, everything with a six handle based on where it is today. For next year, I think that was kind of your question. So for next year, we now have 17.6 million tons, as we mentioned. To kind of give you a breakdown, we have about 2.5 linked to power. 6.6 is export volume, of which 5.2 are tied to indices. I can tell you that 100% of that volume tied to indices do have ceilings and floors associated. So we don't have any API2 hedges or anything like that. And then the balance are domestic and fixed. And when we originally modeled out 2024, we were assuming API 2 price of 105. And if you assume that, our pricing's in the mid-60s on the volume we have contracted for 2024 at this time.

Super helpful. Really appreciate that color. That was terrific. Now I wanted to ask kind of a longer term, bigger picture question. In terms of your growing exposure to the export market, what is the upper limit on the volume side going export? Are we there today? Is it still additional tons going to 100% CEIX volumes at Baltimore, for example? Would appreciate your color on that. Where your export balance could be.

Yeah, so Lucas, if you look at the first half of this year, our exports accounted for roughly 8.2 million tons, which is, you know, call it 63% of our total shipments. You know, we continue to find new homes in markets for that matter. In fact, we actually shipped additional cargoes to new end users just this quarter or the second quarter into India. into China and also in Indonesia. So we do see growing markets there. We've talked about the growing cement capacity in India. We talked about the growing cement capacity in Egypt. And we're also seeing more interest in our crossover product now that we have the lower sulfur coming from our Enloe fork wall. So I honestly would tell you sitting here today, I could see us, you know, exporting up to 18 million tons in the next couple of years, strictly out of PAMC. We've proven that our terminal can do, you know, over 5 million tons in a quarter. So that would, you know, tell you that the terminal could do north of 20 million tons. And to be frank with you, if we were shipping just 100% daily through that terminal, I think it'd be even more. So we'll continue to, you know, evaluate each and every year what's going on in domestic market. And, you know, we're not going to obviously abandon our core customers here in domestic market. I still personally think that Cool Fire Generation is going to be here for quite some time. So, you know, we'll look at that mix. As Jimmy mentioned on his remarks, you know, we're looking for the highest arbitrage, and also we're looking for win-wins with our domestic customers. So that's a long-winded answer to say I think we could get, you know, 18 million tons of exports. I think there's definitely demand out there for that.

But I wouldn't say we would be at the ceiling. You know, we continue to look for new homes, as Bobby said, and we know we have the capacity now through the terminal with what we just did with those debottlenecking efforts and things we did at the terminal. So we certainly will be looking for, you know, any place that we can ship the coal at the best arbitrage we can. And I really don't know what the ceiling is, but I do know that we will continue to grow that business because that's where the growth is.

I really appreciate the caller. I'll turn it over for now. Keep up the good work.

Thank you, Lucas. Again, if you have a question, please press star then 1. The next question is from Nathan Martin with the Benchmark Company. Please go ahead.

Thanks, operator. Good morning, guys. Congrats on the quarter. Thanks for taking my questions. Lucas hit a lot of my bigger questions, but maybe, you know, another strong quarter here, realized price per ton, you know, seemingly driven by, you know, some additional contract optimization. Sounds like there's still more opportunity there in the back half based on your prepared remarks. So should I assume you're still having those conversations with domestic utilities despite some of the recent warm weather we've had? And maybe how many additional tons have been pivoted to the export market so far this year versus the original plan? It would be great to get your thoughts there.

Yeah, so, Nate, you know, in the first two quarters, I would say about 3 million tons was kind of pivoted from domestic into export, and that's mainly because the domestic customers were slow in taking their contracted volumes. I really don't see that growing significantly in the second half of the year. Many of our customers are back and running their coal units, as you mentioned. You know, there has been some recent heat, so that certainly has helped, especially in the southeast. I will tell you that majority of those shortfalls have already been worked out with customers to ensure that we capture the full value of their contracts and in some cases, then some. The good news, as you mentioned, you know, we were able to take these tons into the export market and that certainly allowed us to grow our presence in the industrial space and in most cases, you know, optimize the portfolio. You know, another thing I think that it's important to look back on when you talk about the optimization that has been done, If you looked at the original guidance that we provided you all in February of 2023, we're now off, call it, $3 at the midpoint in our current guidance. But at the same time, if you took those sensitivities that we provided for power and API 2 and you assumed all else was equal, you know, we would have been off nearly $8 at the midpoint. So, again, I think that, again, shows our flexibility and the fact that we're able to pivot quickly, which is something many of our peers aren't able to do.

That's very helpful, Bob. And then maybe again, kind of related to price, obviously strong performance in the first half and realize price would then need to average down in the second half just to get you to the high end of your full year guidance range, which you guys did lower by a dollar. So it would be great to get your thoughts there. You know, what was kind of driving that perceived decrease in the second half?

Yeah, it's mainly API 2 prices. I mean, that's, that's, 90% of it. Some of it is, again, some of our domestic customers that have, you know, contracts lower than our midpoint of our guidance taking additional volumes or their contracted, full contracted volumes in the second half of the year. But, again, a lot of that's off. So, today, if you see API 2 prices increase, you know, that certainly is going to help. We assumed in our midpoint of our guidance called $110 API2 price today, I think prompt is closer to 115. So we'll see a little uplift there should that stay and continue to increase. But again, the volatility in the API2 market, you know, makes it really hard to really pinpoint a specific number today. But, you know, we'll continue to focus on layering in additional volumes. If we can get some additional production, that certainly would help as well. But that's really what's guiding us. the second half of the year down.

Got it. Makes sense. Thank you for that. And then maybe finally, you guys are clearly demonstrating your ability to increase your exposure to the export and the non-power gen markets. We've talked about that already here. So maybe it would be great to get your thoughts on the domestic market here in the intermediate term. And when talking with your customers, do you feel like Electricity demand will be increasing over the next several years. You know, should that help support your coal if that's the case? Any thoughts on regulations and potential regulations would be great as well. Thank you.

Well, when you look at the regulations, of course, there's a lot of proposed regulations right now. Obviously, outside agencies and including ourselves are commenting on those agencies. So, they're proposed at this time. I like to talk about the fact that the customers that we've targeted, domestically at least, none of those have announced retirements prior to 2028. So we feel pretty good about the customers we're supplying here. Obviously, we do think electricity demand will increase in the next few years. If you look at some of the data that's out there, it will say that. But for us, we want to go to those core customers that we've been with. Most of it is 90% repeat business. So we think we'll continue to have that. And depending on demand, you know, if winter shows up and summer comes up, It certainly increases, and we have those customers that we'd like to shift to, and we think they'll remain there for the foreseeable future.

I would just add that if you think about the evolution of our marketing strategy over the last several years, I think we are much more diversified in where our call goes than we were a few years ago. So that allows us to pivot to the market that has the most strength in any given year while maintaining a stable base, so to speak, whether it's domestic or export market.

And last, I'll just add to that. If you think about 2024, we already have between our net back or our power net back contracts and our domestic and fixed price contracts, 11 million tons contracted, right? So when we continue to talk about our export, you know, our growing export business, I'm not saying we don't have much more domestic business that we're going to contract. Obviously, we'll look for the highest arbitrage, but we feel pretty good about where our book stands today in terms of domestic. And even speaking with our customers, we are expecting some additional RFPs to come out in the fall for 2024. So, you know, we'll likely secure some more volume there, but we feel very good about where our contract book is today for 2024.

Thanks, guys. And Bob, that kind of reminded me of one other thing I wanted to ask. You just mentioned additional domestic RFPs towards the back half of the year. How about on the export side? How are you seeing things from a stockpile perspective? You know, in Europe, there's been some talk previously, I think maybe on the first quarter call that maybe they could be back into the market ahead of the winter, you know, 23, 24. Any updates there?

Yeah, I mean, if you look at where inventory levels stand today at ARA, you know, versus the end of Q1, they're actually down a bit now. You got to understand a lot of customers have liquidated some of their inventories, and that's mainly due to high financing inventory costs. However, you know, we believe, and as you mentioned, if Europe does experience a normal winter, we will expect European utilities to be back out in the market looking to restock, and that should bode very well for API 2 prices as well.

Great. Appreciate those comments. I'll leave it there, guys. Best of luck in the second half.

Thank you. Thanks, Nathan. Thank you, Nathan. This concludes our question and answer session. I would like to turn the conference back over to Nathan Tucker for any closing remarks.

Thank you, operator. We'd like to thank everyone for their participation this morning and for your support of Consol Energy, and we look forward to speaking with you on our next earnings call. Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.