Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CONSOL Energy Inc (CEIX, Financial) achieved strong financial and operational performance despite the nearly two-month closure of the Port of Baltimore.
- The company generated approximately $59 million of free cash flow in the quarter.
- Safety performance was commendable with zero employee recordable incidents at key facilities.
- CONSOL Energy Inc (CEIX) successfully managed reduced production schedules and maximized stockpile capacity.
- The company increased the bottom end of its average core revenue per ton sold range and sales volume guidance for 2024.
Negative Points
- Coal production at the Pennsylvania Mining Complex was lower compared to the prior year period.
- PMC average cash cost of coal sold per ton increased due to reduced fixed cost leverage.
- Sales from the Itmann Mining complex were impaired due to equipment delivery delays and the bridge collapse.
- Terminal revenues and adjusted EBITDA at the CMT were significantly lower compared to the prior year period.
- The company incurred incremental transportation costs of approximately $10 per ton due to the need to redirect shipments to an alternative port.
Q & A Highlights
Q: Can you explain the drivers behind the price per ton being above full-year guidance despite the $2 per ton impact due to alternative transportation?
A: A lot of it was mix-related. The average price of our domestic tons exceeds our export tons. We focused on shipping as much domestic tons during the bridge out as we could, which boosted our price in the second quarter. Additionally, we shipped a significant amount to the crossover metallurgical market, particularly to China.
Q: Why does the second half realization imply a step down in price per ton despite the increased guidance?
A: We are near fully contracted for the year, with close to 25 million tons secured. The channel opened ahead of schedule, and the balance of the open tons sold at higher prices than anticipated. Our midpoint pricing guidance is based on a $110 API2 price, and current prices are closer to $120, which could imply an additional uplift.
Q: Can you provide an update on the contracting progress for 2025?
A: We have 14.5 million tons contracted for 2025, with 2.5 million linked to power, 6.9 million domestic and fixed, and the balance export. Most of the export tons are index-linked with ceilings and floors. We are in the middle of some domestic negotiations and are being patient on the export side due to current market conditions.
Q: What is the average price of the contracted business for 2025 with a $100 per metric ton API2 assumption?
A: The average price is in the low 60s. The sensitivity is about $0.14 for every dollar change in API2 based on a 26 million ton production rate.
Q: How do you plan to manage capital returns in the second half of the year?
A: Our vision remains to maximize cash flow generation, maintain a strong balance sheet, and return capital to shareholders. We are considering several capital and market opportunities, including refinancing bonds, upsizing our revolver, and renewing the securitization facility, which could impact our ability to buy back shares. However, our goal to return capital to shareholders remains unchanged.
Q: Can you provide an update on the Itmann Mining complex and its cost curve?
A: We aim to increase production at Itmann. We have achieved near full staffing levels and expect to receive delayed equipment in Q3, which should improve production. We will provide better cost guidance once we have steady production, but we are seeing improvements.
Q: What is the impact of the recent PJM auction results on your contracting strategy?
A: The PJM auction results indicate improving long-term demand in the domestic market, which should boost prices. We are prioritizing post-summer contracting and expect to secure more volume in both domestic and export markets.
Q: How did the temporary closure of the Port of Baltimore impact your financial results and operations?
A: The closure created unprecedented challenges, but we demonstrated agility by securing alternative port capacity. We sold approximately 5.8 million tons of PMC product, including 2.9 million tons into the export market. We generated $59 million of free cash flow, showcasing the resiliency of our business model.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
