CONSOL Energy Inc. Common Stock

Good morning, ladies and gentlemen, and welcome to the CIEX First Quarter 2024 Earnings Conference Call. At this time, all lines are in the listen-only mode. Following the presentation, we will conduct a -and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Tuesday, May 7, 2024. I would now like to turn the conference over to Nathan Tucker, Director of Finance and Investor Relations. Please go

ahead. Good morning, everyone, and thank you for joining us. Welcome to Consol Energy's First Quarter 2024 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 filing, 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 2024 First Quarter press release furnished to the SEC on Form 8K, which is also posted on our Web site. Additionally, we filed our 10Q for the quarter-ended March 31, 2024, with the SEC this morning. You can find additional information regarding the company on our Web site, .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 Dikhar, 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 First Quarter achievements and a detailed discussion of our operations. Mitesh will then provide an update on our marketing and financial progress and our updated 2024 guidance. In his closing comments, Jimmy will recap our capital allocation progress and lay out our key priorities for the remainder of the year. There will be a Q&A session followed by the prepared remarks in which Bob will also participate. With that, let me turn it over to Jimmy.

Thank you, Nate. Good morning, everyone. Consolenergy finished the first quarter with a strong operational performance and produced 6.5 million tons from the Pennsylvania mining complex, which was no small feat considering each of the three mines had a longwall move in the quarter. We're very proud of the PAMC team for their efforts during these moves and for completing them safely and efficiently. We continued our export shift and 65% of our Q1-24 total reoccurring revenues and other income was derived from sales into the export market. We also continued to execute our strategy of returning value to our shareholders through share buybacks and deployed 89% of our Q1-24 free cash flow toward retiring 440,000 shares of our common stock. Before I move to the operational update, let me address the situation at our Consol Marine terminal where vessel access to our terminal became blocked due to the collapse of the Francis Scott Key Bridge in Baltimore in late March. We'd like to again extend our condolences to all of those affected by this tragedy. This event has limited our ability to ship coal into the export market and per multiple agency officials, this restriction is expected to continue through the end of May. However, we have successfully developed alternative strategies to partially offset the impact. First, we've identified and worked with domestic customers to improve their shipment volumes. Second, our rail and logistic partners have stepped up and helped us quickly divert some of our export shipments to an alternative port in Virginia where we secured some incremental capacity which has allowed us to move approximately 50% of our planned export volumes. Until the permanent 50-foot draft shipping channel is reopened in the Port of Baltimore, we expect to be operationally constrained. The good news is that we are still shipping tons into the export market thanks to the cooperation of our rail and logistic partners which has helped us partially mitigate the financial impact of the bridge collapse on our business. Now, let's discuss our operational performance in detail. On the safety front, our Itman preparation plant had zero employee recordable incidents during the first quarter of 2024. 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 6.5 million tons in Q124 compared to 7 million tons in the prior year period. Production was lower due to the previously mentioned longwall moves in Q124 compared to zero moves in Q123. As a result of these longwall moves, as well as ongoing inflationary pressures, our PAMC average cash cost of coal sold per ton for Q124 was $40.29 compared to $33.61 in Q123. Looking ahead, we expect to have only one longwall move for the remainder of the year. Moving on to Itman. During the first quarter of 2024, sales from the complex improved to 193,000 tons of coal including third-party tons compared to 159,000 tons in Q423. During the first quarter, all three operating sections continued to mine additional height for mains development, which requires cutting additional rock and slows mining rates. Furthermore, we continued to be impacted by equipment delivery issues with a major supplier and high employee turnover, which led to the idling of several production shifts throughout the quarter. Given the recent pullback in metcoal markets, we expect that employee turnover and supply chain bottlenecks could ease if we begin to see some supply rationalization. Despite these setbacks, we expect to complete our long-term mains development during the second quarter, which will allow us to operate the mining sections at more efficient mining heights and improve production rates. Moving to the Consol Marine Terminal. Despite losing five days of potential vessel loadings, we achieved a throughput volume of 4.5 million tons during Q124 compared to 4.6 million tons in the prior quarter. Terminal revenues for the quarter came in at 24.5 million and CMT operating cash costs were 7.2 million. Accordingly, CMT adjusted EBITDA finished at 16.8 million compared to 20.6 million in the prior year period. With that, let me turn the call over to Mattesh to provide the marketing and financial updates.

Thank you, Jimmy, and good morning, everyone. Despite some demand softness, the power generation markets, due to mild winter weather during the first quarter, demand for our product remains strong in the export markets, specifically the industrial and crossover metallurgical markets. As such, we continue to take advantage of our high-quality product and sold nearly 60% of our total volumes into the export markets during the quarter. From a revenue perspective, sales into the export market accounted for 65% of our total recurring revenue and other income. Conversely, domestic power generation sales accounted for 30%. During 1Q24, we sold 6.1 million tons of PAMC coal at an average coal revenue per ton sold of $68.33 compared to 6.7 million tons at $84.32 in the year-ago period. We continue to see a lot of interest for our product in the export markets. This is evident in the fact that with the disruption caused by the temporary closure of the Baltimore port, most of our customers are focused on moving and deferring current shipments instead of canceling their shipments. So we believe the demand has been deferred, not lost. In the second half of 2024, we expect to increase the percentage of tons going into the export market compared to our projections when we begin the year. Our ability to sell our PAMC product into many different end-use markets gives us significant flexibility to pivot tons between markets depending on demand strength. We began 2024 initially forecasting to sell approximately 50% of our PAMC volume into the export markets. However, due to reduced domestic demand and our ability to pivot, we now expect to move 60% or more into the stronger international markets in 2024 despite the temporary port closure in Baltimore. In fact, the port closure has limited high CV thermal exports and improved CFR India prices along with API2 prices over the past several weeks. Specifically, we have seen Indian retail inventories tightened due to these reduced high CV exports from the US and with the monsoon season about to begin, we expect these inventories to remain low when the restocking season kicks off. This could result in strong demand and pricing once the monsoon season ends. On the crossover metallurgical front, we sold 508,000 tons of our PAMC product into this market during 1Q24 and continue to focus on penetrating new markets. Currently, we are seeing renewed interest for our crossover product particularly in Southeast Asia where demand is picking up. On the domestic front, despite the near-term coal demand weakness due to mild weather, there are long-term indicators for potential growth in domestic coal fire generation demand. The biggest driver for this demand in the US is expected growth in artificial intelligence on top of the already growing power demand for electric vehicles, heat pumps, and the manufacturing of microchips, EVs, and batteries. The Wall Street Journal reports that AI servers could consume 6% of total US electricity generation by 2026, up from 4% in 2022. The Journal also points out that a recent scientific study estimates that AI servers worldwide could consume as much power as a mid-sized economy like Sweden or the Philippines as early as 2027. Domestically, it has been reported that Samsung will double its semiconductor investments in Texas to $44 billion. Furthermore, a southeastern domestic utility has recently made the decision to build new power plants in order to serve the increased demand from new data center load. This new data center load will be serviced exclusively by natural gas, coal, and a small amount of batteries. The same utility has also delayed the retirement of some of its coal-fired power plants in order to service this increased demand. Consistent with these domestic demand trends, we recently completed a fixed-price three-year term deal in the domestic market for 950,000 tons running from 2026 through 2028. We are also currently in negotiations with another domestic utility for a long-term fixed-price deal. Now let me provide a quick update on our financial results before moving on to our 2024 guidance and outlook. This morning, we reported a strong first quarter 2024 financial performance. We generated net income of $102 million or $3.39 per dilutive share and adjusted a bid of $182 million. During the quarter, we spent $42 million in capex, which resulted in approximately $41 million of free cash flow. We also deployed $58 million to our share buybacks and reduced outstanding debt by $4 million. Our free cash flow was impacted negatively by approximately $81 million of working capital changes. Let me highlight a few items that resulted in this negative working capital impact. First, the timing of longwall moves in February and early March impaired our receivables collection during the quarter. Second, the closure of the Baltimore Port resulted in our inability to ship approximately 450,000 tons of coal at the end of the quarter, which is now sitting in inventory. Despite these issues, we ended the quarter with a net cash position of $65 million and total liquidity of $478 million. We continued to maintain strong liquidity of $502 million at the end of April as well. Our prudent capital allocation over the last few years, which prioritized debt repayment and bolstering liquidity, has significantly improved our ability to manage through a multi-month restriction on moving our export volumes. Since our spin-off, we have increased our unrestricted cash and short-term investments by more than $100 million and reduced our annual debt servicing cost by more than $60 million. In other words, we have significantly reduced the fixed cost in the business, while simultaneously improving our liquidity and financial flexibility, which gives us comfort in managing through the terminal disruption. Before moving on to guidance, let me provide some perspective around the impact of the Baltimore Port closure and how it will drive our outlook for 2024. As Jimmy mentioned, we are restricted in our ability to export coal. In working with our customers and logistics partners, we are currently able to move approximately 600 to 800,000 export tons per month from an alternate port compared to a typical 1.2 to 1.5 million tons per month of our PMC product through Baltimore. We expect this situation to continue through the end of May. Assuming there are no restrictions at the Baltimore Port beginning in June, we will work to not only resume our historical average throughput rate, but to potentially make up for the lost throughput tonnage from April and May. Accordingly, we are adjusting our production guidance to reflect that assumption. Starting with the PMC, due to the bridge collapse, we are reducing our 2024 sales volume to a range of 24 to 26 million tons from the previous range of 25 to 27 million tons. Our PMC mines were running very well until the bridge collapsed and continue to run well under current reduced schedules. The marketing team has also done a good job to quickly secure spare port capacity. In preparation for the port reopening, the CMT team has focused these past few weeks on completing their planned shutdown projects while we ship PMC tons to stockpile at the terminal. Our plan is for the CMT to then reduce the duration of its typical shutdown period and ship coal from the stockpile while the mines and railroads go through their summer maintenance shutdowns. On the pricing front, we are maintaining our average coal revenue per ton sold range of $62.50 to $66.50. Holding this range despite the increased shipping cost of the export tons that pivoted to a Virginia port reflects the improved API2 benchmark pricing compared to earlier this year when the guidance range was initially set. Given the reduced tonnage range and lower fixed cost distribution benefit in April and May, we are increasing our PMC average cash cost of coal sold guidance to $37.50 to $39.50 per ton, an increase of $1 per ton on each end of the range. For our Itman mining complex, we are increasing our sales volume guidance to a range of 700 to 900,000 tons from the previous range of 600 to 800,000 tons. On the cash cost front, we are suspending our average cash cost of coal sold per ton guidance at the Itman mining complex due to the continued significant equipment delivery delays, reduced manpower, and the evolving mix of mined, purchased, and processed coal at the complex. Lastly, on the capital expenditures front, in an effort to partially mitigate the effects of the bridge collapse, we are reducing our capex guidance range by approximately $20 million to a range of $155 to $180 million from the previous range of $175 to $200 million.

With

that, let me turn it

back

to Jimmy.

Thank you, Mitesh. Let me now provide an update on our shareholder returns progress. We deployed approximately 89% of the free cash flow generated during the first quarter towards repurchasing shares of our outstanding common stock. In total, through April 2024, we deployed $37 million of our Q1-24 free cash flow towards repurchasing 440,000 shares of CEIX common stock at a weighted average price of approximately $84 per share. Since restarting our share repurchase program in late 2022, we've retired 6.1 million shares, or approximately 18% of our public flow. As we have mentioned, we remain dedicated to returning value to our shareholders through our capital allocation framework. We continue to believe that the demand for our high-quality coal in the export industrial markets will be stronger for much longer than we're given credit for. We also believe that our long-term contracts provide us with strong revenue visibility. As such, we continue to believe that share buybacks are the best use of our capital. As always, we will continue to analyze this and prioritize the highest rate of return. Moving forward through the remainder of 2024, our major focus will be on mitigating as much of the reduced export tonnage due to the bridge collapse as possible. Customer demand in the export markets has remained strong and we have had constant communication with our customers to work through the delays and move shipments around. We continue to work closely with the Coast Guard and local authorities to open the shipping lane as soon as possible. As Mitesh mentioned, we have a plan to accelerate our summer maintenance work at the CMT in conjunction with pre-shipping coal to the terminal to allow it to hit the ground running when the shipping lane opens. This will also allow the CMT to continue shipping throughout the shutdown period when the railroads and mines will close for maintenance work. Before turning over the call, I want to thank our employees for their timely reaction to the accident in Baltimore. The CMT team jumped into action working with local authorities and developing plans to accelerate maintenance. Our mining operations quickly pivoted to maximizing efficiency and optimize their operating schedules. Our marketing team leveraged the strong relationships we built with our transportation partners to secure some incremental capacity at an alternative export facility as well as reroute trains to this port. Finally, the entire team across the board has been focused on managing as much spend as possible to help partially mitigate the financial impact until the port of Baltimore is reopened. It is our team's dedication and hard work that allow us to so quickly manage through these unforeseen challenges that inevitably happen in this business. With that, I will hand the call back over to Ney 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. Operator, could you please provide the instructions?

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by number one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by number two. If you're using a speakerphone, please leave the handphone on. Please leave the handset before pressing any keys. One moment for your first question. Your first question comes from the line of Lucas Pipes of B. Riley Securities. Your line is now open. Please ask your question.

Thank you very much. Good morning, everyone. Good job managing Q1 and also the impact of the tragedy. My first question is on the Q2 outlook. Mitesh, you mentioned a few moving pieces, cash and liquidity balances in April. I hadn't had the time to do the math on what this means for your cash flow here, but maybe you could walk us through various moving pieces both from a P&L perspective, volume perspective, cash flow perspective in Q2, and then also for the major of the year. Thank you.

Lucas, let me start out with the volume. So if you look at who we currently set, we moved about 1.4 million tons in the month of April. So if you assume close to the same in May and then some of the unknowns, if the port opens up earlier, obviously, we're given an opportunity to move more or if it's later, less, but just assume we hit the end of May and then we're on track for May. My estimate for volume and talking to the teams here daily is we should approach somewhere approximately near 5 million tons, providing the port of Baltimore does reopen at the end of May.

And Lucas, just on the cash flow perspective, we gave you some numbers to think about from a liquidity perspective. I think for the month of April, we generated about $20 million of free cash flow. Now, that does not include the inventory at the port of Baltimore is still there. We expect May to be a little bit lighter, but we are optimistic that we should be in a position to generate free cash flow, assuming the port opens in time. But a lot of moving parts on if there are any restrictions at the opening and those kind of things. So it's hard for me to give you exact guidance on Q2, but that's how I would think about it. We went into May with a little bit of a free cash flow generation in April. May might be a little bit lighter. June should recover.

Got it. Thank you. And just a quick follow up. So on the 5 million tons of volumes or so, does this assume a really quick restart at Baltimore? So shipping channel opens more or less back to normal, or does it assume kind of a gradual ramp into June as the port operations? Kind of gear up and otherwise.

Lucas, one of the things that we're taking advantage of while we have the port idle here is moving forward some of the maintenance things that we were planning on doing in the shutdown. So we'll have that terminal ready to go on June 1. And as Mattes mentioned, we have about 450,000 tons of inventory there that's ready to go. So if Bobby has our customers lined up in the shipment, I think we can start right out of the gate on June 1, moving everything that we planned. Now what we don't know, the unknown there, is what will happen and how will we be allowed to enter and exit the port? Will it be new safety restrictions? That we don't know. But we expect to ship normal in June out of the port.

And everything that we have learned so far from the authorities as well, it seems to be like normal shipment will resume first of June is what our thought process is. And remember, we don't have to, we are not constantly accessing the channel. Once the vessel pulls in for next, let's call it 30 to 40 hours, we are dumping coal in it and then it leaves. So it's not a constant access for us. That's something to think about as well.

Very helpful. Thank you all for that detail.

For my second question, I want to touch on your contract book and pricing in 2024 and 2025. Would you be able to provide a breakdown between your fixed and kind of variable pricing, volume commitments rather, again, 2024, 2025. How much do you expect to sell domestically versus exports? And what is the pricing sensitivity on the times that are not fully priced here on a fixed basis? Thank you very much.

Morning, Lucas. I'll give you the full breakdown for 2024. We have about 2.3 that's index linked to power. Exports of 11 and a half sitting here today, of which about 6.9 are linked to the indices. Mainly API2, we have small amount for Petcoke and then obviously our Highball B crossover index linked deals as well. And then about 9.1, our domestic and fixed price. I would tell you the balance of the tons we have left to sell. I would anticipate going into the export markets. We did just over 500,000 tons of crossover in Q1. Q2 will be a little lighter, mainly again, because of the channel issue, but I would expect to get back on that progress for Q3 and Q4. So sitting here today, we're looking at pricing, you know, call it mid 60s and we're basing that off of $110 API2 price for the April through December period. And based on what we have left to ship, the current sensitivity for every dollar changes about 12 cents per ton across the entire portfolio. Then when you move on to 2025, as you notice, we increased our book by about 500,000 tons since last quarter. All that is now was sold into the export market. So we now have two and a half link to power. 5.9 is domestic and fixed and 5.1 is export and all of it's tied to indices all has floors and ceilings associated with those as well. If you assume a 26 million production rate for 2025, which is typically been our midpoint, the current sensitivity there would be 14 cents for every dollar change in API2. And we're basing that off of a hundred dollar API2 price in 2025. With that said, with the volume we have 13 and a half million, our average pricing sitting here today is in the mid 60s.

Thank you. Thank you very much for that thought. The sensitivity of 14 cents for next year, does that make assumptions around where the remaining uncommitted volumes are going?

It does not. So right now that's just based on the 5.1 million tons that we currently have under contract. And then assuming the balance would be sold under a fixed price arrangement, whether it be export or domestic and again based on a 26 million ton midpoint range.

Got it. But if I were to assume, for example, that you double your exports under similar pricing arrangements, then would it be fair to some kind of double that sensitivity to API2 as well?

Correct.

Okay, that's very helpful. I really appreciate all the color. Best

of luck with the port reopening and keep up the good work. Thank you, Lucas.

Your next question comes from the line of Nathan Martin from the Benchmark Company. Your line is now open. Please ask your question.

Thanks, Alfredo. Good morning, guys. Great job on the quarter. Thank you. Let's talk about price first. Price for time in the first quarter, above full year guidance. Maybe can you talk about some of the drivers there? What led to that result?

Yeah, Nate, I mean, a couple things. Number one, we had a pretty strong January as it relates to our netback contracts that certainly had had boosted the pricing in Q1. API2 is slightly higher than what we had an original forecast. And then the balance would be just the mix of the volumes. We end up selling a little bit more into the crossover market than what we had originally projected. And as I mentioned, you know, our our thought going forward and Q3 and Q4 will continue on on that pace. If you think about where our pricing guidance, we have not changed that. You know, one thing I think is important to note is the volumes we're moving down through Norfolk today are costing us roughly about ten dollars more per ton. So the fact that we're moving all this volume through Norfolk, incurring the additional costs and still maintaining our guidance range, gives us a lot of confidence going forward on the tons that we have left to sell the crossover markets as they are today

and also where the API2 price is.

And Bob, you kind of touched on what was going to be my next question. So it sounds like again, you guys reiterated four year price for ten guidance, despite that higher transportation cost, which I think you said was ten dollars a ton. So if we think about how much price per ton would have actually increased versus prior guidance absent that drag, is that a way we can look at it? Just kind of pull that ten dollars per ton difference out?

Yeah, I mean, if you think about what Mitesh mentioned, we're moving roughly 600 to 800,000 tons a month through Norfolk. You know, so call it the midpoint 1.4 million tons, ten dollars, it's 14 million dollars. So we're losing, I wouldn't say losing, but the opportunity loss is roughly 14 million dollars there.

Okay, got it. Appreciate that, Bob. And maybe it's just a question on the cash return policy. Jimmy, you touched on this, obviously, in your prepared remarks, but returning 89% of first quarter free cash flow, the repurchases, I think it was 85% last quarter. Obviously, each quarter ahead of your target, which is around 75%. Is this a pace we should kind of expect you guys to continue or is this more of a case of just, I think, Jimmy, as you alluded to, returns looking better for buybacks right now versus other investments? This would be great to get your thoughts there as well.

Yeah, I think you kind of answered your own question, but what we do is we look at it and as we've said, we deploy that capital back to the highest rate of return. And today, as we look at the yields on both, it is share repurchase that's the highest rate of return. But that could change as far as the percentage goes. We've told everyone that we're going to imply 60 or 75% of our free cash flow toward share buybacks. As we look at the quarter and we look at where we are and opportunities that we had in the market, then that number could be higher as it was this last quarter, whenever we feel like our share price was undervalued, we took an opportunity of the excess free cash flow we had.

And

that'll

be the plan moving forward.

Perfect. And maybe one final one. I hate to be maybe a little bit more on the negative side, but as we think about the Baltimore terminal reopening, hopefully here by the end of May, if for whatever reason the schedule gets pushed out, what kind of contingencies you guys have in place if that main channel doesn't really work? We're going to be open for one week, two weeks, whatever the case may be beyond the end of May. You still have the alternative transportation in place going into June available to you. Just to be great to get some more color there.

Yeah, we do, Nate. You know, our transportation partners really stepped up during this time to really assist us. And they're there for us as long as we need them. Obviously, it's a better move to go from our Bailey Mine to Baltimore versus down to Norfolk, but they're here to support us. You know, we've had long term partnerships with them. Obviously, the longer the Baltimore port is out, the more we'll be constrained, but the 600 to 800,000 tons a month, I think, is still achievable through June should this port channel reopening be delayed. But the good news, too, as we mentioned, our terminal took advantage of the time to get their outbound maintenance done. So our goal, again, would be to make up as much volume as we possibly can into the first week of July when, you know, typically that would be our shutdown. So we'll continue to keep the terminal stuffed and, you know, the volume is still there. We haven't lost one vessel as we sit here today. So everything has been deferred. And we continue to get emails daily from our customers asking when this port is going to reopen because they want to get their vessels loaded ASAP. So again, good news there and we'll continue to utilize the Norfolk port so long as we need to.

All right. Thank you guys very much. I appreciate the info on the time. Best of luck in the second quarter.

Thank you. Thank you.

We don't have any further questions at this time. Presenters, please continue. We have a follow-up question from the line of Lucas pipes of the Riley securities. Your line is now open. Once again, Lucas pipes from the Riley securities. Your line is now open. Please ask your question.

Sorry about that. I was on mute. Thank you very much for taking the follow-up question. I want to ask on it, and if you could update us on the equipment delays, if there's an update from the vendor when that situation is expected to improve, then also kind of longer term, where would you expect those costs to shake out? Is the prior guidance still the best kind of yardstick or would you expect increases from there? Maybe you still see further improvements once the line is fully up and running, but we'd appreciate your thoughts on that. Thank you.

Yeah, so on the equipment delays, Lucas, we do have one thing that's going to help us. Hopefully here by the end of June or the first week in July, we do have some two pieces of rebuilt equipment coming back to us that should help us. Those are both CM units, but we keep getting delays on our new units that are coming, which we really need because by that time we're going to have the mains development complete and we could put those new machines in these gates. As far as the cost, we would do the guidance because we want to have more certainty around what we give. And there's two things that's really hurting it right now. One is the equipment and the second is the labor, is the manpower. So if we get those back to where we're not islanding these sections and we have the equipment, the people that are at work, then I think we can give guidance. My expectation is to be within the guidance that we provided earlier and it'd be very similar to what others are running in Central Out. I still feel really good about the project. It's a great quality. We just have to get labor there and equipment and it's been a challenge for us. I mean, we're working every day at it. We have job fairs and we are getting closer to where we want to be, but we're not there to where we can run 100% of the time. I mean, we're you know, we got anywhere from 25 to 40% of our shifts out. So it's hard to give guidance. Lucas, another variable

I would add is we are buying a lot of purchase coal as well. As you know, we built that prep plant with additional capacity. And if you look at the sales volume that we provided for the first quarter, I think there was a fair amount of purchase volume in it, probably 40 to 45%. And so from that perspective, I would say once we have a better view on how the purchase volume shakes out longer term as well, that will also determine that cost guidance.

Very helpful. Thank you. And then I want to go back on the pricing comments from earlier. And I wondered if you could maybe specifically comment on the domestic market and how the pricing is holding up there on the backdrop of acutely weaker gas prices. Curve is stronger, but how are those conversations going as you look out to 2025 and maybe beyond? What's the appetite to procure tons and how with those prices compared to the netbacks you could realize in the export market? Thank you for that perspective.

Yeah, I mean, there certainly was a lack of winter for sure this year again. And most of our customers are well stocked, you know, heading into the shorter months that we're experiencing now. But I will tell you that, you know, hearing from many, they are expecting a strong summer burn and that should translate into some strong demand the third quarter. I will tell you, as Miss Matesh mentioned, we did secure 950,000 tons into the domestic market. That volume was for 2026 through 2028. The pricing we secured there was pretty much in line with what the published marks are today. And we're also in negotiations for some additional volumes beginning in 2025 through 2028. So when you look at the gas forward curve, which is what we do, and I think a lot of our customers do as well, you know, you could kind of back calculate what a reasonable, I'll say, mine price is, which the forward curve, I think, is pretty spot on as it sits there today.

Thank you. Thank you very much. A higher level question to end from my side. The recent final rule on the Clean Power Plan. What do you think this means for US coal generation if it were to hold up in court? And how do you kind of square that with what you're seeing on the demand side from data centers and such? I would appreciate your thoughts on that. Thank you.

Well, the first one that has the greatest amount of concern is the Clean Power or the Clean Power 2.0 or carbon rule. Obviously, they have deadlines out there and you can either decide you're going to retire the coal-fired plant and run longer, or you can make the upgrades with the carbon capture and be allowed to run to a longer period. So to me, Lucas, the big thing is about where are we going to get the power needed if the rule goes in as is. My expectation is there'll be a lot of litigation. I know it's already been talked about among trade associations and others, but the American people that are listening should be really worried about this because we are headed for a grid collision. I mean, power demand is moving in the exact opposite way, and then we're forcing these coal-fired plants to retire at an accelerated rate if this Clean Power Plan goes through as the regulations have stated on April 24th. So to me, it has some concern, and I think it would be probably later in this decade before you started to see any of the direction it's going to go. So I think we have some time, but the way the rules are out today, it should not only be me worried, it should be all the American people about where they're going to get their electricity from with the demand rates coming as they are.

Jimmy, I really appreciate your

perspective. Again, keep up the good work and best of luck. Thanks, Lucas.

We do not have further questions at this time. Presenters, please continue.

Thank you. We'd like to thank you all for your participation this morning and for your support of Consol Energy. We hope we answered your questions, and we look forward to speaking with you on our next call. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.