CNX cuts offering price in the IPO for this coal-based master limited partnership

CNX Coal Resources LP has cut the total for the money to be raised in an IPO as a master limited partnership spin-off from CONSOL Energy (NYSE: CNX).

In a June 26 amendment of its prospectus filing at the SEC, the company said: “This is the initial public offering of common units representing limited partner interests in CNX Coal Resources LP. We were recently formed by CONSOL Energy Inc. (“CONSOL Energy” or our “sponsor”). We are offering 8,000,000 common units in this offering. The initial public offering price is $15.00 per common unit.”

That version of the offering number and price comes out to $120 million.

Said a June 15 amendment: “We are offering 10,000,000 common units in this offering. We expect that the initial public offering price will be between $19.00 and $21.00 per common unit.”

That June 15 version ranges between $190 million and $210 million raised.

CNX will get from CONSOL 20% of the Pennsylvania mining complex, which includes the Bailey mine, the Enlow Fork mine and the newly opened Harvey mine. These mines produce from the Pittsburgh No. 8 Coal Seam, which is a large contiguous formation of uniform, high-Btu thermal coal that is ideal for high productivity, low-cost longwall operations.

As of Dec. 31, 2014, the Pennsylvania mining complex included 785.6 million tons (157.1 million tons based on CNX’s 20% interest on a pro forma basis) of proven and probable coal reserves with an average gross heat content of approximately 13,000 Btu/lb and an average sulfur content of 2.37%. Based on current production capacity, these reserves are sufficient to support over 27 years of production.

In the June 26 filing, CNX said it expects its coal revenues for the twelve months ending June 30, 2016, will be approximately $285.2 million compared to about $323.4 million for the pro forma year ended Dec. 31, 2014, and approximately $317.9 million for the pro forma twelve months ended March 31, 2015. Its forecast is based primarily on the following assumptions:

  • CNX estimates that it will produce about 4.9 million tons of coal for the twelve months ending June 30, 2016, compared to the 5.2 million tons produced for the pro forma year ended Dec. 31, 2014, and the 5.2 million tons of coal produced for the pro forma year ended March 31, 2015. The decrease in production volumes compared to the pro forma year ended Dec. 31, 2014, and twelve months ended March 31, 2015, is primarily due to lower production at Bailey and Enlow Fork during the forecast period partially offset by a full twelve months of longwall production from the Harvey mine (which commenced longwall operations in March 2014) being reflected in the forecast period. During the year ended Dec. 31, 2014, and twelve months ended March 31, 2015, CNX/CONSOL ran an extra longwall at the Bailey mine and/or the Enlow Fork mine for about 14 weeks and 27 weeks, respectively, to meet sales commitments. The forecast assumes a four-day per week production schedule throughout the rest of 2015, followed by a five-day per week schedule during 2016 to match production with current and expected contract commitments. During the pro forma year ended Dec. 31, 2014, and twelve months ended March 31, 2015, the mines operated on a five-day per week production schedule.
  • CNX estimates that it will sell about 4.9 million tons of coal for the twelve months ending June 30, 2016, compared to the 5.2 million tons it sold for the pro forma year ended Dec. 31, 2014, and the 5.3 million tons of coal sold for the pro forma twelve months ended March 31, 2015. The estimated decrease in tons of coal sold compared to the pro forma year ended Dec. 31, 2014, and twelve months ended March 31, 2015, is primarily due to lower production at Bailey and Enlow Fork. CNX plans to sell around 4.79 million tons of coal in the thermal coal market compared to the 4.98 million tons sold in the thermal coal market for the pro forma year ended Dec. 31, 2014, and the 5.06 million tons sold in the thermal coal market for the pro forma twelve months ended March 31, 2015. CNX estimates that we will sell about 0.15 million tons in the metallurgical coal market compared to the 0.25 million tons sold in the met coal market for the pro forma year ended Dec. 31, 2014, and the 0.20 million tons sold in the met coal market for the pro forma twelve months ended March 31, 2015.
  • CNX estimates that its average sales price per ton will be about $57.75 for the twelve months ending June 30, 2016, compared to an average sales price per ton of $61.88 for the pro forma year ended Dec. 31, 2014, and an average sales price per ton of $60.44 for the pro forma twelve months ended March 31, 2015. The average sales price per ton sold in the thermal coal market is expected to be about $57.86 for the twelve months ending June 30, 2016, compared to the average sales price per ton sold in the thermal coal market of $61.99 for the pro forma year ended Dec. 31, 2014, and the average sales price per ton sold in the thermal coal market of $60.50 for the pro forma twelve months ended March 31, 2015. CNX estimates that its average sales price per ton sold in the met coal market will be about $54.31 for the twelve months ending June 30, 2016, compared to an average sales price per ton sold in the met coal market of $59.67 for the pro forma year ended Dec. 31, 2014, and an average sales price per ton sold in the met coal market of $59.04 for the pro forma twelve months ended March 31, 2015.
  • The estimate includes sales under committed and priced sales contracts to sell about 3.5 million tons, or about 70% of the forecasted sales volume, at a weighted average price of $60.36 per ton during the forecast period.
  • CNX estimates that it will sell around 1.4 million tons, or about 30% of the forecasted sales during the forecast period, to customers for which it does not currently have committed and priced sales contracts in place for a weighted average price per ton of $51.66. The estimated weighted average sales price for uncommitted tons assumes that it will be successful in selling these tons at prices that reflect management’s current estimates of market conditions and pricing trends. Management’s estimates are based on published indices, a review of recently completed transactions and conversations with customers and sales prospects.
  • CNX estimates that its average cash margin per ton for the twelve months ending June 30, 2016, will be $22.50 compared to $26.41 for the pro forma year ended Dec. 31, 2014, and $23.70 for the pro forma twelve months ended March 31, 2015. The forecasted decrease in average cash margin per ton is primarily due to lower average realized price during the forecast period. The forecasted average cash margin per ton could vary significantly because of a large number of variables.
About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.