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CE

CONSOL Energy Inc. (CEIX)·Q4 2023 Earnings Summary

Executive Summary

  • Q4 2023 was operationally solid with total revenue and other income up slightly YoY to $649.4M as export markets and CMT throughput offset a softer domestic backdrop; net income and EPS fell YoY to $157.1M and $5.05, respectively, but EPS rose sequentially from Q3’s $3.11 .
  • Adjusted EBITDA was $239.9M, essentially flat vs Q4’22 ($240.3M), and free cash flow was $165.0M; 85% of Q4 FCF was returned via buybacks, retiring 1.4M shares at ~$100 average price .
  • 2024 guidance introduced: PAMC sales 25–27Mt, realized price/ton $62.50–$66.50 (assumes ~$105 API2), PAMC cash cost/ton $36.50–$38.50; Itmann sales 600–800kt with $120–$140 cash cost/ton; capex $175–$200M. Management is ~85% contracted (midpoint) for 2024 PAMC volumes, with upside tied to export/crossover markets .
  • Stock reaction catalysts: strong capital returns and a larger forward contract book (22Mt in 2024; 13Mt in 2025), export mix durability, and AI/data-center driven domestic power demand vs near-term Q1’24 production headwinds from three planned longwall moves and lower 2024 price realization assumptions .

What Went Well and What Went Wrong

  • What Went Well

    • Export execution and terminal leverage: CMT throughput rose to 4.7Mt in Q4 (vs 3.6Mt LY), driving terminal revenue to $25.4M and CMT Adj. EBITDA to $21.0M; full-year CMT revenue hit a record $106.2M with 19.0Mt throughput and $80.3M Adj. EBITDA .
    • Robust cash generation and returns: Q4 FCF $165.0M; 85% allocated to repurchases; through Jan-31-2024, 5.7M shares retired (~16% of YE22 float) .
    • Strategic diversification and forward visibility: 58% of Q4 recurring revenues came from non-power uses; 10% of PAMC volume went to crossover met; 22Mt contracted for 2024 and 13Mt for 2025 .
    • “We generated over $1 billion in adjusted EBITDA and $687 million in free cash flow during 2023,” with most of it returned to shareholders; export shift drove record CMT revenue/throughput .

  • What Went Wrong

    • Price and cost pressure at PAMC: Average realized/ton fell YoY ($74.64 vs $75.92) and cash cost/ton rose ($36.28 vs $34.89), compressing cash margin/ton vs LY ($38.36 vs $41.03) .
    • Itmann ramp constraints: Q4 sales improved to 159kt (vs 123kt in Q3), but operations were hindered by equipment delivery issues and higher turnover; 2024 cash cost guidance remains high ($120–$140/ton) during mains development and ramp .
    • 2024 pricing reset: Guidance embeds lower realized price/ton due to lower API2 and roll-off of high-price contracts, while Q1’24 volumes face three longwall moves (sequential headwind) .

Financial Results

P&L snapshot vs prior quarter and prior year

MetricQ4 2022Q3 2023Q4 2023
Total Revenue & Other Income ($M)$637.2 $569.9 $649.4
Net Income ($M)$193.0 $100.7 $157.1
Diluted EPS ($)$5.39 $3.11 $5.05
Adjusted EBITDA ($M)$240.3 $185.5 $239.9

PAMC operating metrics

MetricQ4 2022Q3 2023Q4 2023
Sales Volume (Mt)6.2 6.1 6.8
Avg Realized Coal Revenue/ton ($/t)$75.92 $70.34 $74.64
Avg Cash Cost of Coal Sold/ton ($/t)$34.89 $38.36 $36.28

CONSOL Marine Terminal (CMT)

MetricQ4 2022Q3 2023Q4 2023
Throughput (Mt)3.6 4.3 4.7
Terminal Revenue ($M)$20.9 $22.7 $25.4
CMT Adjusted EBITDA ($M)$14.4 $14.9 $21.0

Itmann Complex

MetricQ4 2022Q3 2023Q4 2023
Sales (k tons, incl. 3rd-party)n/a123 159

Select KPIs

KPIQ4 2023
Net Cash from Operating Activities ($M)$219.1
Free Cash Flow ($M)$165.0
Liquidity ($M)$525.0
Net Cash Position ($M)$88.4 (incl. ST investments)
Non-Power Share of Recurring Revenue (%)58%
Crossover Met Share of PAMC Volume (%)10%
2024 Contracted PAMC Tons (Mt)22.0
2025 Contracted PAMC Tons (Mt)13.0

Estimates vs Actuals

  • S&P Global consensus estimates were unavailable via our tool for CEIX this quarter; estimates comparison is therefore not included. Values would normally be retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
PAMC Sales Volume (Mt)FY 2024n/a25.0–27.0New
PAMC Avg Realized Coal Rev/ton ($/t)FY 2024n/a$62.50–$66.50New
PAMC Avg Cash Cost/ton ($/t)FY 2024n/a$36.50–$38.50New
Itmann Sales (kt)FY 2024n/a600–800New
Itmann Avg Cash Cost/ton ($/t)FY 2024n/a$120–$140New
Total Capital Expenditures ($M)FY 2024n/a$175–$200New

Management context on guidance:

  • Pricing assumptions reflect lower API2 (~$105 midpoint) and roll-off of high fixed-price contracts; 2024 is ~85% contracted at midpoint, with remaining tons expected to skew export/crossover (spot) .
  • Q1’24 production/shipments pressured by three planned longwall moves; only one further move expected in Q3’24, implying stronger Q2/Q4 cadence .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2’23, Q3’23)Current Period (Q4’23)Trend
AI/data centers & U.S. load growthNot highlighted in Q2/Q3AI/data centers, EVs, and industrial demand lifting U.S. load forecasts; PJM ~2.5% annual growth through decade Emerging positive driver
Supply chain & staffingItmann delayed by geology/equipment; staffing improving (Q2) Q3: staffing challenges persist Q4: equipment delivery issues and higher turnover at Itmann
Export pivot & diversification78% of recurring revenue from exports in Q2; new markets (India/SEA/China) 71% YTD exports in Q3; larger forward book 70% FY recurring revenue from exports; 10% Q4 crossover met; 22Mt/13Mt 2024/2025 contracted
Regional demandIndia cement growth, SEA crossover demand (Q2) Europe restocking likely, ARA inventories declining (Q3) Expanding into South America/Asia for crossover; Europe/lNG dynamics supportive
Regulatory/policyn/an/a“Not so Fast” campaign advocating pragmatic energy policy and coal’s role
Itmann rampQ2 near-complete install but slower ramp; strong interest Q3 production up; 123kt sales Q4 159kt sales; 571kt contracted for 2024; $170–$180/t pricing expectation
Terminal capacityQ2 quarterly throughput record 5.4Mt Q3 4.3Mt; strong EBITDA Q4 4.7Mt; record FY revenue/throughput/EBITDA

Management Commentary

  • “More importantly, we generated over $1 billion dollars in adjusted EBITDA and $687 million in free cash flow during 2023. The majority of this free cash flow was deployed toward returning value to our shareholders.” – CEO Jimmy Brock .
  • “Demand for our product remains strong… we finished the year with 26.6 million tons sold… 16.2 million tons moving into the export market, the highest annual level in our history.” – CFO/President Mitesh Thakkar .
  • “We expect our 5 longwall complex as having a base production level of 26 million tons with optionality to ramp up or pull back… average realized revenue per ton $62.50–$66.50, assuming $105 API2.” – CFO/President Mitesh Thakkar .
  • “We were proud to introduce our Not so Fast campaign… to educate about the truth involved in many of the myths being spoken about coal.” – CEO Jimmy Brock .

Q&A Highlights

  • 2024 cost/SG&A: Expect further SG&A decline as legacy stock-based comp rolls off; ongoing cost focus across operations .
  • CMT outlook: Modeling ~16–17Mt throughput starting point for 2024, with upside if more PAMC tons pivot to export; terminal flexibility is a strategic advantage .
  • API2 exposure and floors: ~6.5Mt tied to API2; ~50% at floors at current low/mid-90s API2; all floors hit in mid/upper-80s API2; upside sensitivity ~+$0.18 per $1 API2 across portfolio .
  • Contract book breakdown: ~22Mt contracted for 2024 with ~13Mt domestic (~2.5Mt power-linked) and the balance export; open position expected to place 2–3Mt into crossover with ~$70–$80/t netbacks depending on basin .
  • Itmann detail: 2024 sales 600–800kt with blended $170–$180/t expectation at midpoint; cash costs high near term due to mains development and staffing, expected to improve with volume and equipment deliveries .
  • 2024 cadence: Three planned longwall moves in Q1’24 imply lower Q1 volumes and higher cost; only one move thereafter in Q3; 2Q and 4Q expected to be stronger quarters .

Estimates Context

  • S&P Global (Capital IQ) consensus estimates for CEIX Q4 2023 were unavailable via our tool due to a CIQ mapping limitation; as a result, we cannot provide a consensus vs. actuals comparison for revenue/EPS this quarter. Estimates would normally be sourced from S&P Global.

Key Takeaways for Investors

  • Export-led model with terminal leverage is intact: record CMT metrics and a larger export mix underpin resilience even when domestic power demand is softer .
  • 2024 price reset is known and largely contracted: realized price per ton guided to mid-$60s on ~$105 API2 with significant floor protection and convexity to any API2 upside .
  • Near-term operational cadence matters: three Q1’24 longwall moves shift strength to Q2/Q4; watch quarterly shipment rhythm and cost per ton .
  • Capital return remains a core pillar: with a net cash balance sheet and strong FCF, management prioritized buybacks (85% of Q4 FCF) and has retired ~16% of the YE22 float through Jan-31-2024 .
  • Itmann is a 2024–2025 improvement story: expect volume growth and cost normalization post-mains; pricing remains attractive with balanced domestic/export exposure .
  • Domestic power could become a positive surprise: AI/data centers/industrial load growth and PJM’s higher demand outlook may support coal burn at surviving plants, aiding domestic pricing/utilization .
  • Contracting momentum provides visibility: 22Mt/13Mt sold into 2024/2025 reduce earnings volatility and enable disciplined capital allocation .