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Marcellus Shale
Joint Venture Separation OCTOBER 31, 2016
Cautionary Language
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This presentation contains statements, estimates and projections which are forward-looking statements (as defined in Section 21E of the Securities
Exchange Act of 1934, as amended). Statements that are not historical, are forward-looking, and include our operational and strategic plans; estimates of
coal and gas reserves and resources; the projected timing and rates of return of future investments; and projections and estimates of future production,
revenues, income and capital spending. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially
from those statements, plans, estimates and projections. Accordingly, investors should not place undue reliance on forward-looking statements as a
prediction of future actual results. Factors that could cause future actual results to differ materially from the forward-looking statements are included in our
earnings release, and include risks, contingencies and uncertainties that relate to, among other matters, the following: we may not receive the prices we
expect to receive for our natural gas and coal; we may not obtain on a timely basis the permits required for drilling and mining; we may not accurately
estimate our economically recoverable natural gas, oil and condensate; we may encounter unexpected operational issues when we drill and mine, including
equipment failures, geological conditions and higher than expected costs for equipment, supplies, services and labor; we may not achieve the efficiencies we
expect to realize in our drilling and completion operations, and as a result, our projected cost savings may not be fully realized; our joint venture partners,
who operate assets in which we have a significant interest, may not perform as we expect; we may not be able to sell non-core assets on acceptable terms;
we may be unable to incur indebtedness on reasonable terms; failure by Murray Energy to satisfy liabilities it acquired from us, or failure to perform its
obligations under various arrangements, which we guaranteed, could materially or adversely affect our results of operations, financial position, and cash
flows; with respect to the sale of the Buchanan and Amonate mines and other coal assets to Coronado IV LLC - disruption to our business, including
customer, employee and supplier relationships resulting from this transaction, and the impact of the transaction on our future operating results; with respect
to the proposed termination of the joint venture with Noble, risks that the conditions to closing may not be satisfied and the transaction may not occur,
including our ability to obtain regulatory approvals on the proposed terms and schedule, disruption to our business, including customer and supplier
relationships resulting from this transaction, and the impact of the transaction on our future operating and financial results and liquidity and other factors,
many of which are beyond our control. Additional factors are described in detail under the captions "Forward Looking Statements" and "Risk Factors" in
CONSOL Energy Inc.’s annual report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission (SEC), as
updated by any subsequent quarterly reports on Form 10-Qs. The forward-looking statements in this presentation speak only as of the date of this
presentation; we disclaim any obligation to update the statements, and we caution you not to rely on them unduly.
The SEC permits oil and gas companies, in their filings with the SEC, to disclose only proved, probable and possible oil and gas reserves that a company
anticipates as of a given date to be economically and legally producible and deliverable by application of development projects to known accumulations. We
may use certain terms in this presentation, such as EUR (estimated ultimate recovery), unproved reserves and total resource potential, that the SEC's rules
strictly prohibit us from including in filings with the SEC. We caution you that the SEC views such estimates as inherently unreliable and these estimates may
be misleading to investors unless the investor is an expert in the natural gas industry. These measures are by their nature more speculative than estimates of
reserves prepared in accordance with SEC definitions and guidelines and accordingly are less certain. We also note that the SEC strictly prohibits us from
aggregating proved, probable and possible reserves in filings with the SEC due to the different levels of certainty associated with each reserve category.
Except for proved reserve data, the information included in this presentation is based on a summary review of the title to the gas rights we hold. As is
customary in the gas industry, prior to the commencement of gas drilling operations on our properties, we conduct a thorough title examination and perform
curative work with respect to significant defects. We are typically responsible for curing any title defects at our expense. As a result of our title review or
otherwise, we may be required to acquire property rights from third parties at our expense in order to effectively drill and produce the oil and gas rights we
control and third parties may participate in the wells we drill, thereby reducing our working interest in those wells.
This presentation does not constitute an offer to sell or a solicitation of offers to buy securities of CONSOL Energy Inc. or CNX Coal Resources LP.
Coal-E&P Revenue Split, 2012
E&P Revenues
Coal Revenues
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CONSOL Energy: Company Overview
December 5, 2013 – Transaction with Murray Energy Corp. in which we sold half of coal
assets and related assets
April 19, 2014 – CONSOL Energy 150th Anniversary
September 25, 2014 – IPO of CONE Midstream Partners LP (NYSE: CNNX)
July 1, 2015 – IPO of CNX Coal Resources (NYSE: CNXC)
July 28, 2015 – Announced first PA Dry Utica well result in Westmoreland County
March 31, 2016 – Sold Buchanan Mine and associated met reserves
August 2, 2016 – Divested Miller Creek and Fola Complexes in Central Appalachia
September 30, 2016 – Dropped down an additional 5% interest in PA Mining
Complex to CNXC for total consideration of $88.8 million
October 31, 2016 – Announced agreement to separate Marcellus Shale joint venture with
Noble Energy
Coal-E&P Revenue Split, 2014
E&P Revenues
Coal Revenues
Coal-E&P Revenue Split, 2015, excl. Buchanan
E&P Revenues
Coal Revenues
CONSOL Energy is now a pure-play E&P company
Journey Towards Becoming a Top Tier Appalachian E&P Company Complete
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Marcellus Joint Venture (JV) Exchange Agreement 1. Exchange agreement of jointly owned Oil & Gas properties,
consisting of:
Developed properties with associated current production of
1,070 MMcfe/d, net to the JV. CNX and NBL to receive net
production of ~620 and ~450 MMcfe/d, respectively
Undeveloped properties, including 75 drilled but uncompleted
locations (DUCs), and ~669,000 Marcellus Shale acres, net to
the JV - CNX to receive 53 DUCs and ~306,000 net Marcellus Shale acres
- NBL to receive 22 DUCs and ~363,000 net Marcellus Shale acres
CONSOL will receive a disproportionately greater value in the
property exchange, with the difference equal to ~$275 million
2. Cash payment from NBL to CNX equal to ~$205 million
3. Cancellation of remaining drilling “carry” obligation due from NBL
to CNX equal to $1.6 billion; “carry” was only to be paid when
Henry Hub natural gas price was equal to or greater than $4/MMBtu
for 3 consecutive months, with an annual limit of $400 million
4. Anticipate closing in Q4 2016; effective as of October 1, 2016
Firm Transportation (FT) and Processing Commitments:
NBL and CNX have agreed to work with the pipelines to reallocate
firm transportation to better align with the upstream assets
The targeted reallocation between CNX and NBL attempts to be
value neutral to both parties, while optimizing firm capacity to post-
alignment production expectations
No material changes to previous financial FT and processing
commitments - No NGL sales commitments were impacted by the NBL transaction
Post-Exchange Acreage Map
The transaction is designed to deliver approximately $480 million of value to CNX
in exchange for the cancellation of the drilling “carry” obligation
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Post-Exchange Agreement: Pro Forma Analysis
(1) The 2016E production increase is a result of 85 MMcfe/d of additional production associated with the exchange agreement, as well as continued productivity improvements.
(2) 7,000' laterals x 750' spacing.
Impact on Marcellus Shale Operations
CONSOL Energy Before
JV Exchange Agreement
After
JV Exchange Agreement
2016E Production(1) (Bcfe) 380-385 390-395
2016E Average per Unit Operating Expenses ($/Mcfe) $2.27 - $2.49 $2.27 - $2.49
Net Marcellus DUC Inventory (Wells) 37.5 53.0
Marcellus Joint Venture Assets
CONSOL Interest in
Total JV Assets
Before Exchange Agreement
JV Assets Held by CONSOL
After Exchange Agreement
Working Interest 50% 100%
Net Undeveloped Acres 335,000 306,000
Net Future Locations(2) 2,790 2,550
Net PDPs (Wells) 258 280
Net PDP Flowing Production (MMcfe/D) 535 620
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Strategic Overview Agreement to Separate Marcellus Shale Joint Venture
Full autonomy to develop, operate, or divest assets
- Flexibility to operate these assets as we choose
- Facilitates stacked pay development opportunities
- Unlocks development of assets
- Increases ability to execute asset sales
- Increases production
Increases interest in the highest return acreage
- Increase proved undeveloped reserves (PUDs) in the core areas of the Marcellus Shale
- Retain high return acreage
Further strengthens the balance sheet
- Expected to increase EBITDA and free cash flow
- Reduces debt and leverage ratio
- Increases DUCs providing additional production opportunity with little additional required capital
- Improves liquidity
Top-tier Appalachian E&P company
- The Marcellus assets retained provide growth opportunities in best-in-class areas, with low cost potential
- Completes the transformation of CONSOL to a pure-play E&P
The exchange agreement provides CONSOL more control in capital allocation
decisions and creates greater opportunities to grow shareholder value
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Marcellus Shale Footprint Before and After the Joint Venture Exchange Agreement with Noble Energy
(1) 7,000' laterals x 750' spacing.
JV Marcellus Footprint:
Before-Exchange
CNX Marcellus Footprint:
Post-Exchange 7
WI (%) 50
Net
Undeveloped
Acres
335,000
Net Future
Locations(1)
(Count)
2,790
Net PDP (Wells) 258
PDP Flowing
Production
(MMcfe/D)
535
Marcellus Shale
Before Exchange Agreement
WI (%) 100
Net
Undeveloped
Acres
306,000
Net Future
Locations(1)
(Count)
2,550
Net PDP (Wells) 280
PDP Flowing
Production
(MMcfe/D)
620
Marcellus Shale
After Exchange Agreement
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2016 Activity Overview and 2017 Drilled and Uncompleted Opportunity Set
E&P Activity Summary – 2016 Plan
E&P Operations: Pro Forma DUC Inventory
Note: Plan as of 9/30/2016.
Implied inventory exiting 2016 anticipated to consist of 70 Marcellus and Utica
Shale wells, of which CONSOL will have 100% WI in 65 wells
Expected New
Wells Drilled in
H2 2016
Drilled
Uncompleted
Inventory
Drilled
Completed
Inventory
2016 TIL's
Remaining
Implied
2017
Inventory
2016
Completions
Remaining
Marcellus
SW PA Operated - 12 8 6 14 -
SW PA Non-Op - - - - - -
WV Operated - 41 - - 41 -
WV Non-Op - - - - - -
Total Marcellus - 53 8 6 55 -
Utica
SW PA Operated - - - - - -
OH Operated 9 1 - - 10 -
OH Non-Op - 5 - - 5 -
Total Utica 9 6 - - 15 -
Total Gross Marcellus/Utica
Wells 9 59 8 6 70 -
In addition to the upstream
deal, CNX and NBL have
agreed to work with the
pipelines to reallocate firm
transportation to better
align with the upstream
assets
The targeted reallocation
attempts to be value neutral
to both parties, while
optimizing firm capacity to
post-alignment production
expectations
Remains subject to FERC
and pipeline approvals
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Gas Marketing Firm Transportation
FT reallocation retains low average cost and market exposure and improves
alignment of FT with current production and growth areas
$0.24 $0.25
$0.29 $0.30
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
2016 2017 2018 2019
Expected Avg. Demand per MMBtu:
2016E-2019E After Reallocation
Expected Firm Capacity by Pipeline After FT Reallocation
Charts also include transportation under precedent agreements
Pipeline YE 2016 YE 2018
ANR Pipeline 47 47
Columbia (TCO) 212 562
Dominion (DTI) 345 317
East Tennessee 282 202
Nexus - 115
TETCO 174 174
TETCO (via firm sales) 285 125
(1000s MMBtu/day) 1,345 1,542
Expected FT Capacities After Reallocation
TETCO
TETCO (via firm sales)
Dominion
East Tennessee
Columbia
ANR
NEXUS
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
Jan 16 Jan 17 Jan 18 Jan 19
1000s
MM
Btu
/da
y
10
Gas Marketing Natural Gas Sales: Expected Market Mix
Sales mix remains mostly unchanged after the transaction
MIDWEST TETCO M3
TETCO M2
EAST TENNESEE
TETCO ELA
TETCO WLA
TCO POOL
DOMINION SOUTH
Gas Sales 2016E 2017E
Columbia (TCO) 17% 17%
TETCO (M2) 29% 28%
TETCO (M3) 16% 15%
Dominion (DTI) 15% 15%
East Tennessee 10% 10%
TETCO ELA & WLA 8% 8%
Midwest (Chicago) 5% 7%
100% 100%
0
100
200
300
400
500
600
Jan 16 Jan 17 Jan 18 Jan 19
MM
cf/
da
y
MVC
CNX and NBL have also agreed to
work with processing
counterparties to realign processing
capacity with the upstream assets
After the swap of capacity, CNX’s
volume of firm processing capacity
and minimum volume commitment
will be roughly unchanged
CNX will retain the flexibility to
bypass processing with certain
“damp” gas to continue facilitating
optimization of that gas
No NGL sales commitments were
impacted by the NBL transaction
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Gas Marketing Natural Gas Processing and NGLs
Note: CONSOL Energy had processing capacity expansion rights of 110,000 Mcf/d.
Processing capacity is to be transferred in line with the asset areas it supports;
minimal impact to parties based on current volumes but gives
CNX additional flexibility in the future
CNX Expected Contracted Processing Capacity
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The exchange agreement provides CONSOL Energy the ability to drive NAV per share higher
through:
Greater flexibility in our capital allocation strategy and long-term development plan
- Optimize the development plan between the Marcellus and Utica horizons
- Should increase value in CONE Midstream Partners LP
Better control and flexibility to monetize E&P assets that were previously part of the JV
Pulls forward value for the JV “carry”
Quicker balance sheet de-levering and improves liquidity without issuing equity
Joint Venture Separation Drives Long-Term Value Growth
Key Takeaways of the Exchange Agreement
Completes the transformation of the company to a pure-play E&P