PITTSBURGH, Jan. 29 /PRNewswire-FirstCall/ -- CNX Gas Corporation
(NYSE: CXG) reported net income for the quarter ended December 31,
2008 of $57.5 million, or $0.38 per diluted share. This is nearly
double the net income of $29.9 million, or $0.20 per share for the
quarter ended December 31, 2007. For the year ended December 31,
2008, CNX Gas had record net income of $239.1 million, or $1.58 per
share. This was 76% higher than $135.7 million of net income, or
$0.90 per share, in 2007. Quarterly production was a record 22.2
billion cubic feet (Bcf), or an average of 241.8 million cubic feet
(MMcf) per day, for the quarter ended December 31, 2008, or 53%
higher than the 14.5 Bcf, or 157.8 MMcf per day, for the year-ago
quarter. Annual production in 2008 was a record 76.6 Bcf, or 32%
higher than the 57.9 Bcf produced in 2007. J. Brett Harvey,
chairman and chief executive officer, said, "CNX Gas continued to
gain production momentum in the fourth quarter. We achieved record
production from each coalbed methane development play. In the
Marcellus Shale, we achieved a peak daily flow rate of 6.5 MMcf
from our first horizontal well. Even more remarkable is that this
flow rate was achieved after the well had already produced more
than 100 MMcf. Mr. Harvey continued, "In looking ahead to 2009, the
future for CNX Gas has never been brighter. Despite challenging
economic times, I believe that CNX Gas is poised to substantially
outperform its competitors because of our great prospects, minimal
debt, low unit cost structure, and industry-leading unit margins.
Our 41.9 Bcf of production hedged at $9.74 per Mcf in 2009 enables
us to self fund production growth in 2009. Not many companies have
this ability." At December 31, 2008 the company had cash on hand of
$1.9 million, while $72.7 million was drawn on its credit facility.
Capital expenditures for the quarter were $154.5 million and annual
return on capital employed was 18.5%, on after-tax basis. TABLE 1
FINANCIAL AND OPERATIONAL RESULTS - Period-To-Period Quarter Ended
Quarter Ended Year Ended Year Ended December 31, December 31,
December 31, December 31, 2008 2007 2008 2007 ---- ---- ---- ----
Total Revenue and Other Income $206.1 $119.7 $789.4 $479.5 Net
Income $57.5 $29.9 $239.1 $135.7 Earnings per Share - Diluted $0.38
$0.20 $1.58 $0.90 Net Cash from Operating Activities $140.5 $61.4
$447.4 $272.4 EBITDA $113.7 $62.6 $470.2 $271.4 EBIT $94.1 $50.0
$400.1 $222.5 Total Period Production (Bcf) 22.2 14.5 76.6 57.9
Average Daily Production (MMcf) 241.8 157.8 209.2 158.7 Capital
Expenditures $154.5 $92.1 $560.7 $357.2 Financial results are in
millions of dollars except per share amounts. Production results
are net of royalties. The average price realized for the company's
gas production, including the effects of hedging, was $8.35 per Mcf
for the quarter ended December 31, 2008, or up $1.26 per Mcf when
compared to the $7.09 per Mcf received for the quarter ended
December 31, 2007. Unit costs for company production, exclusive of
royalties, were $4.39 per Mcf in the just-ended quarter, or up
$0.32 per Mcf from the $4.07 per Mcf for the quarter ended December
31, 2007. As a result, pre-tax unit margins for company production
were $3.96 per Mcf in the December 31, 2008 quarter, an increase of
$0.94 from $3.02 per Mcf in the December 31, 2007 quarter.
Administration costs for the quarter ended December 31, 2008 were
affected by $9 million (pre-tax) in stock-based compensation,
versus $1 million (pre-tax) for the quarter ended December 31,
2007. The remaining increase in administration costs was due to
higher staffing added as a result of the on-going growth of the
company. TABLE 2 PRICE AND COST DATA PER NET MCF -
Period-To-Period** Quarter Ended Quarter Ended Year Ended Year
Ended December 31, December 31, December 31, December 31, 2008 2007
2008 2007 ---- ---- ---- ---- Average Sales Price $8.35 $7.09 $8.99
$7.20 Costs - Production Lifting $0.60 $0.69 $0.63 $0.46 Production
Taxes $0.19 $0.22 $0.26 $0.22 DD&A $0.67 $0.57 $0.66 $0.54
----- ----- ----- ----- Total Production Costs $1.46 $1.48 $1.55
$1.22 Costs - Gathering Operating Costs $0.92 $0.89 $0.94 $0.90
Transportation $0.19 $0.16 $0.15 $0.16 DD&A $0.21 $0.30 $0.25
$0.30 ----- ----- ----- ----- Total Gathering Costs $1.32 $1.35
$1.34 $1.36 ----- ----- ----- ----- Total Operating Costs $2.78
$2.83 $2.89 $2.58 Exploration Expense $0.14 $0.05 $0.06 $0.04
Administration $1.33 $1.09 $1.05 $0.95 Other Non Operating* $0.14
$0.10 $0.11 $0.09 ----- ----- ----- ----- Total Costs $4.39 $4.07
$4.11 $3.66 ----- ----- ----- ----- Margin $3.96 $3.02 $4.88 $3.54
*Note: Other non operating costs include interest expense, other
costs, and minority interest. ** Includes the proportional
consolidation of Knox Energy in 2007. Operations Update During the
fourth quarter, CNX Gas employees worked another quarter without
incurring a lost time accident. This raises the cumulative time
worked by employees without a lost time incident to over 3.5
million hours. CNX Gas continued to add to its acreage position
during the quarter. Gross acres were 4.2 million at December 31,
2008, including over 1 million acres in the Eastern shales. Also
during the quarter, CNX Gas drilled 73 vertical frac wells in its
Virginia CBM Operations. This raised the yearly total to a record
315 vertical frac wells. Virginia CBM Operations also continued its
heightened efforts in performing workovers of older wells, with 261
having been performed in the quarter. Legacy frac production (from
wells online prior to January 1, 2007) increased by 0.4 Bcf in the
quarter, when compared to the year-earlier quarter. The Mountaineer
CBM play in Northern Appalachia saw 29 horizontal wells drilled
during the quarter, and 114 during all of 2008. This exceeded the
yearly goal of 100 wells, and the previous year's 62 wells. In
Nittany, the company's vertical CBM play in central Pennsylvania,
31 wells were drilled during the quarter, and 106 during all of
2008. This exceeded the yearly goal of 100 wells, and the previous
year's 14 wells. During the fourth quarter, CNX Gas drilled its
first four shallow conventional wells in eastern Ohio, in a play
known as Buckeye. So far, one well has been stimulated. CNX Gas
holds 80,000 net acres in this area. In the shales, CNX Gas had
continued success in the quarter. In the Marcellus Shale, as
earlier reported, CNX Gas announced daily production from its first
horizontal well of 6.5 MMcf. The company's second and third
horizontal wells were drilled to total depth in December. The
second well was fraced on January 20, while the third well will be
fraced soon. In the company's Knox Operations, which contains the
Chattanooga Shale program in Tennessee and the Huron Shale program
in eastern Kentucky, CNX Gas drilled 9 wells during the quarter and
20 wells during 2008. Six of these wells were connected in 2008
along with one well drilled in late 2007. Financial Update The
company ended the year with $72.7 million drawn on its credit
facility. Capital expenditures were $154.5 million during the
fourth quarter. CNX Gas also has $14.9 million of outstanding
letters of credit against its $200 million credit facility.
Investor Day CNX Gas will be hosting an investor day in New York
City on the morning of February 24. The company will be providing a
comprehensive review of its current and planned activity in the
Marcellus and Chattanooga shales, as well as its coalbed methane
development plays. Institutional investors are encouraged to
register on the investor relations portion of the company's web
site, at http://www.cnxgas.com/. Space is limited. Guidance CNX Gas
is maintaining its 2009 production guidance of 85 Bcf and its 2010
production guidance of 100 Bcf and initiating 2011 production
guidance of 115 Bcf. The company is altering its usual practice of
issuing an annual capital expenditure projection. Instead, CNX Gas
expects to self fund its production growth as long as it can earn a
meaningful spread over its cost of capital. TABLE 3 GUIDANCE -
Three-Year 2009 2010 2011 Total Yearly Production (Bcf) 85 100 115
Volumes Hedged (Bcf) 41.9 23.3 0 Average Hedge Price ($/Mcf) $9.74
$9.59 N/A CNX Gas will host a conference call today at 10:00 a.m.
Eastern time to discuss the company's fourth quarter and 2008
results. The teleconference can be heard "live" at the investor
relations portion of the company web site: http://www.cnxgas.com/.
Contact: Dan Zajdel Vice President - Investor Relations (412)
200-6719 Laural Ziemba, (412) 200-6758 http://www.cnxgas.com/
Definition: EBIT is defined as earnings (excluding cumulative
effect of accounting change) before deducting net interest expense
(interest expense less interest income) and income taxes. EBITDA is
defined as earnings (excluding cumulative effect of accounting
change) before deducting net interest expense (interest expense
less interest income), income taxes, and depreciation, depletion
and amortization. Although EBIT and EBITDA are not measures of
performance calculated in accordance with generally accepted
accounting principles, management believes that they are useful to
an investor in evaluating CNX Gas because they are widely used to
evaluate a company's operating performance before debt expense and
its cash flow. EBIT and EBITDA do not purport to represent cash
generated by operating activities and should not be considered in
isolation or as a substitute for measures of performance in
accordance with generally accepted accounting principles. In
addition, because all companies do not calculate EBIT and EBITDA
identically, the presentation here may not be comparable to
similarly titled measures of other companies. Reconciliation of
EBITDA and EBIT to the income statement is as follows: CNX Gas EBIT
& EBITDA Reconciliation (000) Omitted Quarter Quarter Ended
Ended Year Ended Year Ended December 31, December 31, December 31,
December 31, 2008 2007 2008 2007 ---- ---- ---- ---- Net Income
$57,482 $29,898 $239,073 $135,678 Add: Interest Expense 2,253 1,920
7,820 5,606 Less: Interest Income 42 430 400 3,793 Add: Income
Taxes 34,369 18,574 153,656 84,961 Earnings Before ------ ------
------- ------ Interest & Taxes (EBIT) 94,062 49,962 400,149
222,452 Add: Depreciation, Depletion, & Amortization 19,670
12,636 70,010 48,961 ------ ------ ------ ------ EBITDA $113,732
$62,598 $470,159 $271,413 ======== ======= ======== ======== CNX
Gas Capital Employed and Return on Capital Employed (000) Omitted
Capital employed is a measure of net investment. When viewed from
the perspective of how the capital is used, it includes CNX Gas'
property, plant, and equipment and other assets less liabilities.
As of As of Capital Employed December 31, December 31, 2008 2007
------------ ------------ Total assets $2,124,973 $1,380,703 Less
liabilities: Total current liabilities (other than indebtedness)
(199,888) (56,865) Total long-term liabilities (other than
indebtedness) (384,367) (227,833) --------- --------- Total Capital
Employed $1,540,718 $1,096,005 ========== ========== Return on
average capital employed (ROCE) is a performance measure ratio.
ROCE is defined as net income plus after-tax interest expense,
divided by average capital employed. Below are calculations of ROCE
for the years ended December 31, 2008 and 2007. Year Ended Year
Ended Return on Capital Employed December 31, December 31, 2008
2007 ---- ---- Net Income $239,073 $135,678 Financing costs
(after-tax) (4,760) (3,131) ------- ------- Earnings excluding
financing costs $243,833 $138,809 Average capital employed
$1,318,362 $1,021,345 Return on average capital employed 18.5%
13.6% Management believes that ROCE is a useful measure because it
indicates the return on all capital, which includes equity and
debt, employed in the business. Management believes that ROCE is an
additional measure of efficiency when considered in conjunction
with return on equity, which measures the return on only the
shareholders' equity component of total capital employed.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS Various
statements in this release, including those that express a belief,
expectation, or intention, as well as those that are not statements
of historical fact, are forward-looking statements (as defined in
Section 21E of the Securities Exchange Act of 1934). These
statements involve risks and uncertainties that could cause actual
results to differ materially from projected results. Accordingly,
investors should not place undue reliance on forward-looking
statements as a prediction of actual results. We have based these
forward-looking statements on our current expectations and
assumptions about future events. While our management considers
these expectations and assumptions to be reasonable, they are
inherently subject to significant business, economic, competitive,
regulatory and other risks, contingencies and uncertainties, most
of which are difficult to predict and many of which are beyond our
control. These risks, contingencies and uncertainties relate to,
among other matters, the following: our business strategy; our
financial position; our cash flow and liquidity; declines in the
prices we receive for our gas affecting our operating results and
cash flow; uncertainties in estimating our gas reserves; replacing
our gas reserves; uncertainties in exploring for and producing gas;
our inability to obtain additional financing necessary in order to
fund our operations, capital expenditures and to meet our other
obligations; disruptions, capacity constraints in or other
limitations on the pipeline systems which deliver our gas;
competition in the gas industry; the availability of personnel and
equipment; increased costs; the effects of government regulation
and permitting and other legal requirements; legal uncertainties
regarding the ownership of the coalbed methane estate; costs
associated with perfecting title for gas rights in some of our
properties; our need to use unproven technologies to extract
coalbed methane in some properties; our relationships and
arrangements with CONSOL Energy; factors affecting CONSOL Energy's
coal mining operations, such as changes in the coal market, the
risk inherent in coal mining, and compliance with laws, and other
factors discussed under "Risk Factors" in the 10-K for the year
ended December 31, 2007 and other factors discussed in the 10-Qs
filed during 2008. We are including this cautionary statement in
this release to make applicable and take advantage of the safe
harbor provisions of the Private Securities Litigation Reform Act
of 1995 for any forward-looking statements made by, or on behalf,
of us. CNX GAS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS
OF INCOME (Unaudited) (Dollars in thousands, except per share data)
For the Three For the Twelve Months Ended Months Ended December 31,
December 31, ---------------- --------------- 2008 2007 2008 2007
---- ---- ---- ---- Revenue and Other Income: Outside Sales
$184,169 $98,220 $678,793 $404,835 Related Party Sales 1,497 4,638
9,532 11,618 Royalty Interest Gas Sales 17,381 9,745 79,302 46,586
Purchased Gas Sales 1,604 4,331 8,464 7,628 Other Income 1,401
2,810 13,330 8,815 ----- ----- ------ ----- Total Revenue and Other
Income 206,052 119,744 789,421 479,482 Costs and Expenses: Lifting
Costs 17,477 13,104 67,653 38,721 Gathering and Compression Costs
24,718 15,205 83,752 61,798 Royalty Interest Gas Costs 14,984 8,275
74,041 40,011 Purchased Gas Costs 1,568 4,175 8,175 7,162 Other
3,986 201 4,995 1,759 General and Administrative 29,545 15,756
80,246 54,825 Depreciation, Depletion and Amortization 19,670
12,636 70,010 48,961 Interest Expense 2,253 1,920 7,820 5,606 -----
----- ----- ----- Total Costs and Expenses 114,201 71,272 396,692
258,843 ------- ------ ------- ------- Earnings Before Income Taxes
91,851 48,472 392,729 220,639 Income Taxes 34,369 18,574 153,656
84,961 ------ ------ ------- ------ Net Income $57,482 $29,898
$239,073 $135,678 ======= ======= ======== ======== Earnings Per
Share: Basic $0.38 $0.20 $1.58 $0.90 ===== ===== ===== =====
Dilutive $0.38 $0.20 $1.58 $0.90 ===== ===== ===== ===== Weighted
Average Number Of Common Shares Outstanding: Basic 150,971,636
150,914,225 150,947,516 150,886,433 =========== ===========
=========== =========== Dilutive 151,240,785 151,241,316
151,331,953 151,133,520 =========== =========== ===========
=========== CNX Gas Corporation CONSOLIDATED BALANCE SHEETS
(Dollars in thousands - except per share data) (Unaudited) December
31, December 31, 2008 2007 ASSETS ---- ---- ------ Current Assets:
Cash and Cash Equivalents $1,926 $32,048 Accounts and Notes
Receivable: Trade 61,764 38,680 Related Parties 1,022 Other
Receivables 3,080 1,406 Recoverable Income Taxes 30,302 972
Derivatives 150,564 10,711 Other 2,222 3,148 ----- ----- Total
Current Assets 249,858 87,987 Property, Plant and Equipment:
Property, Plant and Equipment 2,111,383 1,509,060 Less -
Accumulated Depreciation, Depletion and Amortization 322,470
254,154 ------- ------- Total Property, Plant and Equipment - Net
1,788,913 1,254,906 Other Assets: Investment in Affiliates 25,204
28,284 Derivatives 55,945 Other 5,053 9,526 ----- ----- Total Other
Assets 86,202 37,810 ------ ------ TOTAL ASSETS $2,124,973
$1,380,703 ========== ========== CNX Gas Corporation CONSOLIDATED
BALANCE SHEETS (Dollars in thousands - except per share data)
(Unaudited) December December 31, 31, 2008 2007 ---- ----
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------ Current Liabilities: Accounts
Payable $100,565 $30,263 Accrued Royalties 20,301 12,896 Accrued
Severance Taxes 3,672 2,620 Related Parties 2,234 Short-Term Notes
Payable 72,700 Deferred Income Taxes 55,000 1,269 Current Portion
of Long-Term Debt 8,462 5,819 Other Current Liabilities 18,116
9,817 ------ ----- Total Current Liabilities 281,050 62,684
Long-Term Debt: Long-Term Debt 15,386 5,799 Capital Lease
Obligations 59,296 61,150 ------ ------ Total Long-Term Debt 74,682
66,949 Deferred Credits and Other Liabilities: Derivatives 1,092
Deferred Income Taxes 331,338 188,415 Asset Retirement Obligations
7,401 3,981 Postretirement Benefits Other Than Pensions 2,728 2,700
Other 42,900 31,645 ------ ------ Total Deferred Credits and Other
Liabilities 384,367 227,833 Total Liabilities 740,099 357,466
Stockholders' Equity: Common Stock, $.01 par value; 200,000,000
Shares Authorized, 150,971,636 Issued and Outstanding at December
31, 2008 and 150,915,198 Issued And Outstanding at December 31,
2007 1,510 1,509 Capital in Excess of Par Value 789,625 785,575
Preferred Stock, 5,000,000 Shares Authorized; None Issued and
Outstanding - - Retained Earnings 468,955 229,962 Other
Comprehensive Income 124,784 6,191 ------- ----- Total
Stockholders' Equity 1,384,874 1,023,237 --------- --------- TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY $2,124,973 $1,380,703
========== ========== CNX GAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
(Dollars in Thousands - except per share data) Accumulated Capital
Other In Compre- Total Excess hensive Stock- Common of Par Retained
Income holders' Stock Value Earnings (Loss) Equity ------ --------
-------- ------ ---------- Balance-December 31, 2007 $1,509
$785,575 $229,962 $6,191 $1,023,237 ------ -------- -------- ------
---------- (Unaudited) Net Income 239,073 239,073 Gas Cash Flow
Hedge (Net of ($77,291) tax) 118,646 118,646 Issuance of Common
Stock 1 1 Amortization of Prior Service Costs and Actuarial Losses
(Net of $52 tax) (83) (83) FAS 158 Pension Adjustment (Net of $38
tax) (59) (59) FAS 158 OPEB Adjustment (Net of ($70) tax) 109 109
------ -------- -------- ------ ---------- Comprehensive Income
(Loss) 1 239,073 118,613 357,687 Cumulative Effect of FAS 158
Measurement Adoption (Net of $64 tax) (80) (20) (100) Stock Options
Exercised 292 292 Tax Benefit from Stock Based Compensation 380 380
Amortization of Stock Based Compensation Awards 3,378 3,378 ------
-------- -------- ------ ---------- Balance - December 31, 2008
$1,510 $789,625 $468,955 $124,784 $1,384,874 ====== ========
======== ======= ========== CNX GAS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in
thousands) For the Twelve Months Ended December 31, ------------
2008 2007 ---- ---- Operating Activities: Net Income $239,073
$135,678 Adjustments to Reconcile Net Income to Net Cash Provided
by Operating Activities: Depreciation, Depletion and Amortization
70,010 48,961 Stock-based Compensation 3,378 3,260 Deferred Income
Taxes 117,870 70,352 Equity in Earnings of Affiliates (551) (2,174)
Changes in Operating Assets: Accounts Receivable (21,789) 8,267
Related Party Receivable 3,256 1,723 Other Current Assets 191 770
Changes in Other Assets 3,861 2,294 Changes in Operating
Liabilities: Accounts Payable 33,531 2,732 Income Taxes (28,515)
(4,171) Other Current Liabilities 16,668 3,193 Changes in Other
Liabilities 10,611 1,968 Other (219) (405) --- --- Net Cash
Provided by Operating Activities 447,375 272,448 Investing
Activities: Capital Expenditures (524,663) (295,422) Acquisition of
Knox Energy (36,000) Acquisition of Mineral Rights (61,777)
Investment in Equity Affiliates 1,081 2,785 Proceeds From Sales of
Assets 450 187 --- --- Net Cash Used in Investing Activities
(559,132) (354,227) Financing Activities: Capital Lease Payments
(2,769) (2,552) Proceeds from Variable Interest Equity Debt 11,032
8,851 Proceeds from Short-Term Borrowings 72,700 Exercise of Stock
Options 292 302 Tax Benefit from Stock Based Compensation 380 53
--- -- Net Cash Provided by Financing Activities 81,635 6,654 Net
Decrease in Cash and Cash Equivalents (30,122) (75,125) Cash and
Cash Equivalents at Beginning of Period 32,048 107,173 ------
------- Cash and Cash Equivalents at End of Period $1,926 $32,048
====== ======= DATASOURCE: CNX Gas Corporation CONTACT: Dan Zajdel,
Vice President, Investor Relations, +1-412-200-6719, , or Laural
Ziemba, +1-412-200-6758, both of CNX Gas Corporation
Copyright