Edgar Filing: CONSOL Energy Inc

CNX-3.31.15-10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________________________________________

FORM 10-Q

__________________________________________________

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

For the quarterly period ended March 31, 2015



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-14901

__________________________________________________

CONSOL Energy Inc.

(Exact name of registrant as specified in its charter)



Delaware		51-0337383
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1000 CONSOL Energy Drive

Canonsburg, PA 15317-6506

(724) 485-4000

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

__________________________________________________

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Class		Shares outstanding as of April 17, 2015
Common stock, $0.01 par value		228,822,133

TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION

ITEM 1.	Condensed Financial Statements
	Consolidated Statements of Income for the three months ended March 31, 2015 and 2014.	3
	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2015 and 2014.	4
	Consolidated Balance Sheets at March 31, 2015 and December 31, 2014.	5
	Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2015.	7
	Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and 2014.	8
	Notes to Unaudited Consolidated Financial Statements	9

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	59

ITEM 4.	Controls and Procedures	60

PART II OTHER INFORMATION

ITEM 1.	Legal Proceedings	60

ITEM 1A.	Risk Factors	60

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64

ITEM 4.	Mine Safety Disclosures	64

ITEM 6.	Exhibits	65

GLOSSARY OF CERTAIN OIL AND GAS MEASUREMENT TERMS

The following are abbreviations of certain measurement terms commonly used in the oil and gas industry and included within this Form 10-Q:

Bbl - One stock tank barrel, or 42 U.S. gallons liquid volume, used in reference to oil or other liquid hydrocarbons.

Bcf - One billion cubic feet of natural gas.

Bcfe - One billion cubic feet of natural gas equivalents, with one barrel of oil being equivalent to 6,000 cubic feet of gas.

Btu - One British thermal unit.

Mbbls - One thousand barrels of oil or other liquid hydrocarbons.

Mcf - One thousand cubic feet of natural gas.

Mcfe - One thousand cubic feet of natural gas equivalents, with one barrel of oil being equivalent to 6,000 cubic feet of gas.

MMbtu - One million British Thermal units.

MMcfe - One million cubic feet of natural gas equivalents, with one barrel of oil being equivalent to 6,000 cubic feet of gas.

NGL - Natural gas liquids.

Tcfe - One trillion cubic feet of natural gas equivalents, with one barrel of oil being equivalent to 6,000 cubic feet of gas.

PART I : FINANCIAL INFORMATION


ITEM 1.	CONDENSED FINANCIAL STATEMENTS

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME



(Dollars in thousands, except per share data)	Three Months Ended
(Unaudited)	March 31,
Revenues and Other Income:	2015			2014
Natural Gas, NGLs and Oil Sales	$	254,580		$	266,298
Unrealized Gain on Commodity Derivative Instruments	60,004			—
Coal Sales	496,666			534,681
Other Outside Sales	13,130			69,287
Gas Royalty Interests and Purchased Gas Sales	18,456			30,219
Freight-Outside Coal	6,525			9,945
Miscellaneous Other Income	38,066			55,054
Gain on Sale of Assets	2,165			3,669
Total Revenue and Other Income	889,592			969,153
Costs and Expenses:
Exploration and Production Costs
Lease Operating Expense	31,612			29,243
Transportation, Gathering and Compression	78,744			53,782
Production, Ad Valorem, and Other Fees	9,192			10,187
Direct Administrative and Selling	14,667			11,653
Depreciation, Depletion and Amortization	85,104			71,729
Exploration and Production Related Other Costs	2,040			3,099
Production Royalty Interests and Purchased Gas Costs	16,127			26,096
Other Corporate Expenses	19,096			26,164
General and Administrative	15,142			17,364
Total Exploration and Production Costs	271,724			249,317
Coal Costs
Operating and Other Costs	311,583			333,810
Royalties and Production Taxes	22,317			26,488
Direct Administrative and Selling	8,983			11,542
Depreciation, Depletion and Amortization	65,483			56,866
Freight Expense	6,525			9,945
General and Administrative Costs	7,408			12,709
Other Corporate Expenses	8,895			19,295
Total Coal Costs	431,194			470,655
Other Costs
Miscellaneous Operating Expense	10,384			67,340
General and Administrative Costs	—			210
Depreciation, Depletion and Amortization	7			521
Loss on Debt Extinguishment	67,734			—
Interest Expense	55,122			50,931
Total Other Costs	133,247			119,002
Total Costs And Expenses	836,165			838,974
Earnings Before Income Tax	53,427			130,179
Income Taxes	(25,603		)	8,489
Income From Continuing Operations	79,030			121,690
Loss From Discontinued Operations, net	—			(5,687		)
Net Income	$	79,030		$	116,003

The accompanying notes are an integral part of these financial statements.

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(CONTINUED)



	Three Months Ended
(Dollars in thousands, except per share data)	March 31,
(Unaudited)	2015		2014
Earnings Per Share
Basic
Income from Continuing Operations	$	0.34	$	0.53
Loss from Discontinued Operations	—		(0.02		)
Total Basic Earnings Per Share	$	0.34	$	0.51
Dilutive
Income from Continuing Operations	$	0.34	$	0.53
Loss from Discontinued Operations	—		(0.03		)
Total Dilutive Earnings Per Share	$	0.34	$	0.50

Dividends Paid Per Share	$	0.0625	$	0.0625

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	Three Months Ended
(Dollars in thousands)	March 31,
(Unaudited)	2015			2014
Net Income	$	79,030		$	116,003
Other Comprehensive Loss:
Actuarially Determined Long-Term Liability Adjustments (Net of tax: $90, ($2,985))	(149		)	5,119
Net Decrease in the Value of Cash Flow Hedges (Net of tax: $0, $30,856)	—			(46,965		)
Reclassification of Cash Flow Hedges from OCI to Earnings (Net of tax: $11,213, ($10,951))	(19,314		)	16,313

Other Comprehensive Loss	(19,463		)	(25,533		)

Comprehensive Income	$	59,567		$	90,470

The accompanying notes are an integral part of these financial statements.

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



	(Unaudited)
(Dollars in thousands)	March 31, 2015		December 31, 2014
ASSETS
Current Assets:
Cash and Cash Equivalents	$	5,318	$	176,989
Accounts and Notes Receivable:
Trade	226,991		259,817
Other Receivables	263,490		347,146
Accounts Receivable - Securitized	32,669		—
Inventories	105,244		101,873
Deferred Income Taxes	74,725		66,569
Recoverable Income Taxes	20,566		20,401
Prepaid Expenses	203,711		193,555
Total Current Assets	932,714		1,166,350
Property, Plant and Equipment:
Property, Plant and Equipment	15,014,326		14,674,777
Less—Accumulated Depreciation, Depletion and Amortization	4,647,745		4,512,305
Total Property, Plant and Equipment—Net	10,366,581		10,162,472
Other Assets:
Investment in Affiliates	192,273		152,958
Other	289,828		277,750
Total Other Assets	482,101		430,708
TOTAL ASSETS	$	11,781,396	$	11,759,530

The accompanying notes are an integral part of these financial statements.

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



	(Unaudited)
(Dollars in thousands, except per share data)	March 31, 2015			December 31, 2014
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable	$	532,388		$	531,973
Current Portion of Long-Term Debt	13,242			13,016
Short-Term Notes Payable	760,500			—
Borrowings Under Securitization Facility	32,669			—
Other Accrued Liabilities	569,185			602,972
Total Current Liabilities	1,907,984			1,147,961
Long-Term Debt:
Long-Term Debt	2,561,681			3,236,422
Capital Lease Obligations	38,854			39,456
Total Long-Term Debt	2,600,535			3,275,878
Deferred Credits and Other Liabilities:
Deferred Income Taxes	304,303			325,592
Postretirement Benefits Other Than Pensions	696,327			703,680
Pneumoconiosis Benefits	117,608			116,941
Mine Closing	305,906			306,789
Gas Well Closing	178,680			175,369
Workers’ Compensation	74,725			75,947
Salary Retirement	107,637			109,956
Reclamation	33,394			33,788
Other	156,570			158,171
Total Deferred Credits and Other Liabilities	1,975,150			2,006,233
TOTAL LIABILITIES	6,483,669			6,430,072
Stockholders’ Equity:
Common Stock, $.01 Par Value; 500,000,000 Shares Authorized, 228,680,338 Issued and Outstanding at March 31, 2015; 230,265,463 Issued and Outstanding at December 31, 2014	2,291			2,306
Capital in Excess of Par Value	2,412,587			2,424,102
Preferred Stock, 15,000,000 shares authorized, None issued and outstanding	—			—
Retained Earnings	3,053,412			3,054,150
Accumulated Other Comprehensive Loss	(170,563		)	(151,100		)
Total CONSOL Energy Inc. Stockholders’ Equity	5,297,727			5,329,458
TOTAL LIABILITIES AND EQUITY	$	11,781,396		$	11,759,530

The accompanying notes are an integral part of these financial statements.

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY



(Dollars in thousands, except per share data)	Common Stock			Capital in Excess of Par Value			Retained Earnings (Deficit)			Accumulated Other Comprehensive Loss			Total CONSOL Energy Inc. Stockholders’ Equity
December 31, 2014	$	2,306		$	2,424,102		$	3,054,150		$	(151,100	)	$	5,329,458
(Unaudited)
Net Income	—			—			79,030			—			79,030
Other Comprehensive Loss	—			—			—			(19,463		)	(19,463		)
Comprehensive Income (Loss)	—			—			79,030			(19,463		)	59,567
Issuance of Common Stock	7			1,729			—			—			1,736
Retirement of Common Stock (2,213,100 shares)	(22		)	(17,683		)	(53,969		)	—			(71,674		)
Treasury Stock Activity	—			—			(11,399		)	—			(11,399		)
Tax Cost From Stock-Based Compensation	—			(3,042		)	—			—			(3,042		)
Amortization of Stock-Based Compensation Awards	—			7,481			—			—			7,481
Dividends ($0.0625 per share)	—			—			(14,400		)	—			(14,400		)
Balance at March 31, 2015	$	2,291		$	2,412,587		$	3,053,412		$	(170,563	)	$	5,297,727

The accompanying notes are an integral part of these financial statements.

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS



(Dollars in thousands)	Three Months Ended
(Unaudited)	March 31,
Operating Activities:	2015			2014
Net Income	$	79,030		$	116,003
Adjustments to Reconcile Net Income to Net Cash Provided By Continuing Operating Activities:
Net Loss from Discontinued Operations	—			5,687
Depreciation, Depletion and Amortization	150,594			129,116
Stock-Based Compensation	7,481			15,892
Gain on Sale of Assets	(2,165		)	(3,669		)
Loss on Debt Extinguishment	67,734			—
Unrealized Gain on Commodity Derivative Instruments	(60,004		)	—
Deferred Income Taxes	(21,200		)	8,149
Equity in Earnings of Affiliates	(11,323		)	(7,450		)
Changes in Operating Assets:
Accounts and Notes Receivable	26,523			(22,231		)
Inventories	(3,371		)	1,729
Prepaid Expenses	38,476			15,493
Changes in Other Assets	6,966			354
Changes in Operating Liabilities:
Accounts Payable	(17,720		)	16,595
Accrued Interest	42,719			51,233
Other Operating Liabilities	(68,711		)	18,260
Changes in Other Liabilities	(10,305		)	3,655
Other	3,646			1,125
Net Cash Provided by Continuing Operations	228,370			349,941
Net Cash Used in Discontinued Operating Activities	—			(13,839		)
Net Cash Provided by Operating Activities	228,370			336,102
Cash Flows from Investing Activities:
Capital Expenditures	(294,019		)	(451,009		)
Proceeds from Sales of Assets	2,108			125,528
Net Investments In Equity Affiliates	(27,992		)	(10,000		)
Net Cash Used in Investing Activities	(319,903		)	(335,481		)
Cash Flows from Financing Activities:
Proceeds from Short-Term Borrowings	760,500			—
Payments on Miscellaneous Borrowings	(2,478		)	(4,670		)
Payments on Long Term Notes, including Redemption Premium	(1,261,009		)	—
Proceeds from Securitization Facility	32,669			—
Proceeds from Issuance of Long-Term Notes	492,760			—
Tax Benefit from Stock-Based Compensation	15			92
Dividends Paid	(14,400		)	(14,351		)
Issuance of Common Stock	1,736			4,976
Treasury Stock Activity	—			(1		)
Purchases of Treasury Stock	(71,674		)	—
Debt Issuance and Financing Fees	(18,257		)	—
Net Cash Used in Financing Activities	(80,138		)	(13,954		)
Net Decrease in Cash and Cash Equivalents	(171,671		)	(13,333		)
Cash and Cash Equivalents at Beginning of Period	176,989			327,420
Cash and Cash Equivalents at End of Period	$	5,318		$	314,087

The accompanying notes are an integral part of these financial statements.

CONSOL ENERGY INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands, except per share data)

NOTE 1—BASIS OF PRESENTATION:

The accompanying Unaudited Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2015 are not necessarily indicative of the results that may be expected for future periods.

The balance sheet at December 31, 2014 has been derived from the Audited Consolidated Financial Statements at that date but does not include all the notes required by generally accepted accounting principles for complete financial statements. For further information, refer to the Consolidated Financial Statements and related notes for the year ended December 31, 2014 included in CONSOL Energy Inc.'s Form 10-K.

Certain amounts in prior periods have been reclassified to conform with the report classifications of the year ended December 31, 2014, with no effect on previously reported net income or stockholders' equity.

Basic earnings per share are computed by dividing net income by the weighted average shares outstanding during the reporting period. Dilutive earnings per share are computed similarly to basic earnings per share except that the weighted average shares outstanding are increased to include additional shares from stock options, performance stock options, CONSOL Energy stock units, and restricted stock units and performance share units, if dilutive. The number of additional shares is calculated by assuming that outstanding stock options and performance share options were exercised, that outstanding restricted stock units, performance share units, and CONSOL Energy stock units were released, and that the proceeds from such activities were used to acquire shares of common stock at the average market price during the reporting period. CONSOL Energy Inc. (CONSOL Energy or the Company) includes the impact of pro forma deferred tax assets in determining potential windfalls and shortfalls for purposes of calculating assumed proceeds under the treasury stock method. The table below sets forth the share-based awards that have been excluded from the computation of the diluted earnings per share because their effect would be anti-dilutive:



	Three Months Ended March 31,
	2015	2014
Anti-Dilutive Options	1,834,432	359,488
Anti-Dilutive Restricted Stock Units	85,018	—
Anti-Dilutive Performance Stock Options	802,804	—
	2,722,254	359,488

The table below sets forth the share-based awards that have been exercised or released:



	Three Months Ended March 31,
	2015	2014
Options	76,028	265,339
Restricted Stock Units	449,005	334,399
Performance Share Units	497,134	378,971
	1,022,167	978,709

The weighted average exercise price per share of the options exercised during the three months ended March 31, 2015 and 2014 was $22.75 and $18.74, respectively.

The computations for basic and dilutive earnings per share are as follows:



	Three Months Ended March 31,
	2015		2014
Income from Continuing Operations	$	79,030	$	121,690
Loss from Discontinued Operations	—		(5,687		)
Net Income	$	79,030	$	116,003
Weighted Average Shares of Common Stock Outstanding:
Basic	229,734,412		229,526,033
Effect of Stock-Based Compensation Awards	712,287		1,341,493
Dilutive	230,446,699		230,867,526
Earnings per Share:
Basic (Continuing Operations)	$	0.34	$	0.53
Basic (Discontinued Operations)	—		(0.02		)
Total Basic	$	0.34	$	0.51

Dilutive (Continuing Operations)	$	0.34	$	0.53
Dilutive (Discontinued Operations)	—		(0.03		)
Total Dilutive	$	0.34	$	0.50

Changes in Accumulated Other Comprehensive Loss by component, net of tax, were as follows:



	Gains and Losses on Cash Flow Hedges			Postretirement Benefits			Total
Balance at December 31, 2014	$	121,521		$	(272,621	)	$	(151,100	)
Amounts Reclassified from Accumulated Other Comprehensive Income	(19,314		)	(149		)	(19,463		)
Balance at March 31, 2015	$	102,207		$	(272,770	)	$	(170,563	)

The following table shows the reclassification of adjustments out of Accumulated Other Comprehensive Loss:



	Three Months Ended March 31,
	2015			2014
Derivative Instruments (Note 13)
Natural Gas Price Swaps and Options	$	(30,527	)	$	27,264
Tax Expense (Benefit)	11,213			(10,951		)
Net of Tax	$	(19,314	)	$	16,313
Actuarially Determined Long-Term Liability Adjustments (Note 4 and Note 5)
Amortization of Prior Service Costs	$	(14,812	)	$	(2,542	)
Recognized Net Actuarial Loss	14,573			10,646
Total	(239		)	8,104
Tax Expense (Benefit)	90			(2,985		)
Net of Tax	$	(149	)	$	5,119

NOTE 2—ACQUISITIONS AND DISPOSITIONS:

On December 29, 2014, CNX Gas Company LLC (CNX Gas Company), a wholly-owned subsidiary of CONSOL Energy, finalized an agreement with Columbia Energy Ventures (CEVCO) to sublease approximately 20,000 acres of Utica Shale and Upper Devonian gas rights in Greene and Washington Counties in Pennsylvania and Marshall and Ohio Counties in West Virginia. Up-front bonus consideration of up to $96,106 will be paid by CONSOL Energy over the next five years as drilling occurs in addition to royalties, of which $49,533 was recorded in Other Current Liabilities and $40,286 was recorded on a discounted basis in Other Long-term Liabilities. In the three months ended March 31, 2015, CONSOL Energy made payments to CEVCO totaling $15,216 which decreased the amount recorded in Other Current Liabilities to $34,317. As of March 31, 2015, the long-term portion of the liability remains unchanged at $40,286.

On December 12, 2014, CONSOL Energy completed the sale of its industrial supplies subsidiary, to an unrelated third party for net proceeds of approximately $51,000 of which $44,035 was received and included in cash flows from investing activities during the year ended December 31, 2014. In connection with the sale, CONSOL Energy signed a supply agreement under which, among other things, it will continue to purchase certain goods exclusively from the new entity for a period of at least three years. CONSOL Energy could also receive up to an additional $6,000 of cash consideration in the future, which has not been recognized in the consolidated financial statements as it is subject to future events. CONSOL Energy recorded a net loss on the sale of $30,845, which was included in Gain on Sale of Assets in the Consolidated Statement of Income.

In March 2014, CONSOL Energy completed a sale-leaseback of longwall shields for the Harvey Mine. Cash proceeds for the sale offset the basis of $75,357; therefore, no gain or loss was recognized on the sale. The five-year lease has been accounted for as an operating lease.

In December 2013, CONSOL Energy acquired the gas drilling rights to approximately 90,000 contiguous acres from Dominion Transmission, a unit of Dominion Resources Inc. The acreage, which is associated with Dominion’s Fink-Kennedy, Lost Creek, and Racket Newberne gas storage fields in West Virginia, lies in the northern portion of Lewis County and the southern portion of Harrison County. CONSOL Energy anticipates that over one-half of the acres will have wet gas. CONSOL Energy has acquired the gas rights to both the Marcellus Shale and the Upper Devonian formations in the storage fields. Consideration of up to $190,000 will be paid by CONSOL Energy in two installments: 50% was paid at closing and the remaining balance is due over time as the acres are drilled. In addition, CONSOL Energy will pay an overriding royalty to Dominion Resources based on a sliding scale. Finally, CONSOL Energy has committed to be an anchor shipper on Dominion’s transmission system, with the specific terms to be negotiated at a future date. CONSOL Energy paid $91,243 in 2013 related to this transaction. In the first quarter of 2014, CONSOL Energy made an additional bonus payment of $12,000 to Dominion Transmission. Noble Energy Inc., our joint venture partner, acquired 50% of the acres and reimbursed CONSOL Energy for 50% of the associated costs also in the first quarter of 2014.

In December 2013, CONSOL Energy completed the sale of its Consolidation Coal Company (CCC) subsidiary, which included all five of its longwall coal mines in West Virginia, to a subsidiary of Murray Energy Corporation (Murray Energy). CONSOL Energy retained an overriding royalty interests in certain reserves sold in the transaction. Murray Energy also assumed $2,050,656 of CONSOL Energy's employee benefit obligations valued as of December 5, 2013 and its UMWA 1974 Pension Trust obligations. Murray Energy is primarily liable for all 1993 Coal Act liabilities. Cash proceeds of $825,285 were received related to this transaction, which were net of $24,715 in transaction fees. A pre-tax gain of $1,035,346 was included in Income from Discontinued Operations on the Consolidated Statement of Income. In the first quarter of 2014, there was a pre-tax reduction in gain on sale of $7,044 related to the estimated working capital adjustment and various other miscellaneous items.

NOTE 3—MISCELLANEOUS OTHER INCOME:



	Three Months Ended
	March 31,
	2015		2014
Equity in Earnings of Affiliates	$	11,323	$	7,450
Rental Income	9,598		14,908
Gathering Revenue	6,095		18,730
Coal Royalty Income	4,545		5,279
Right of Way Issuance	2,528		1,900
Interest Income	1,143		624
Other	2,834		6,163
Total Other Income	$	38,066	$	55,054

NOTE 4—COMPONENTS OF PENSION AND OTHER POST-EMPLOYMENT BENEFIT (OPEB) PLANS NET PERIODIC BENEFIT COSTS:

Components of net periodic benefit costs for the three months ended March 31, 2015 and 2014 are as follows:



	Pension Benefits						Other Post-Employment Benefits
	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2015			2014			2015			2014
Service cost	$	2,350		$	4,308		$	—		$	2,331
Interest cost	8,580			9,151			6,995			12,097
Expected return on plan assets	(12,689		)	(12,747		)	—			—
Amortization of prior service credits	(176		)	(346		)	(14,636		)	(2,196		)
Recognized net actuarial loss	6,939			5,891			8,926			6,369
Net periodic benefit cost	$	5,004		$	6,257		$	1,285		$	18,601

For the three months ended March 31, 2015, $2,215 was paid to the pension trust from operating cash flows. Additional contributions to the pension trust are not expected to be significant for the remainder of 2015.

CONSOL Energy does not expect to contribute to the other post-employment benefit plan in 2015. The Company intends to pay benefit claims as they become due. For the three months ended March 31, 2015, $14,333 of other post-employment benefits have been paid.

NOTE 5—COMPONENTS OF COAL WORKERS’ PNEUMOCONIOSIS (CWP) AND WORKERS’ COMPENSATION NET PERIODIC BENEFIT COSTS:

Components of net periodic benefit costs for the three months ended March 31, 2015 and 2014 are as follows:



	CWP						Workers' Compensation
	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2015			2014			2015			2014
Service cost	$	1,623		$	1,419		$	2,347		$	2,445
Interest cost	1,279			1,384			799			894
Amortization of actuarial gain	(1,394		)	(1,549		)	(8		)	(95		)
State administrative fees and insurance bond premiums	—			—			903			1,111
Net periodic benefit cost	$	1,508		$	1,254		$	4,041		$	4,355

CONSOL Energy does not expect to contribute to the CWP plan in 2015. The Company intends to pay benefit claims as they become due. For the three months ended March 31, 2015, $2,653 of CWP benefit claims have been paid.

CONSOL Energy does not expect to contribute to the workers’ compensation plan in 2015. The Company intends to pay benefit claims as they become due. For the three months ended March 31, 2015, $5,306 of workers’ compensation benefits, state administrative fees and surety bond premiums have been paid.

NOTE 6—INCOME TAXES:

The effective tax rate for the three months ended March 31, 2015 and 2014 was (47.9)% and 6.5%, respectively.

The effective rate for the three months ended March 31, 2015 differs from the U.S. federal statutory rate of 35% primarily due to a $59,285 income tax benefit for excess percentage depletion.

The effective rate for the three months ended March 31, 2014 differs from the U.S. federal statutory rate of 35% primarily due to a $27,422 income tax benefit for excess percentage depletion, an $8,820 discrete income tax benefit related to the completion of the Internal Revenue Service audit of tax years 2008 and 2009, and a $7,766 discrete income tax benefit as a result of changes in estimates of excess percentage depletion and Domestic Production Activities Deduction related to the prior-year tax provision.

There were no uncertain tax positions at March 31, 2015. The total amount of uncertain tax positions at March 31, 2014 were $2,540. If these uncertain tax positions were recognized, approximately $1,651, would have an affect on CONSOL Energy’s effective tax rate. There were no additions to the liability for unrecognized tax benefits during the three months ended March 31, 2015 and 2014.

CONSOL Energy recognizes interest accrued related to uncertain tax positions in its interest expense. There was no accrued interest on uncertain tax positions as of March 31, 2015. As of March 31, 2014, the Company reported an accrued interest liability relating to uncertain tax positions of $1,351. The accrued interest liability included $4,849 of interest income that is reflected in the Company’s Consolidated Statements of Income for the three months ended March 31, 2014.

CONSOL Energy recognizes penalties accrued related to uncertain tax positions in its income tax expense. As of March 31, 2015 and 2014, CONSOL Energy had no accrued liability for tax penalties.

CONSOL Energy and its subsidiaries file federal income tax returns with the United States and returns within various states and Canadian jurisdictions. With few exceptions, the Company is no longer subject to United States federal, state, local, or non-U.S. income tax examinations by tax authorities for the years before 2010. The Company expects the Internal Revenue Service to begin its audit of tax years 2010 through 2013 in the second quarter of 2015.

NOTE 7—INVENTORIES:

Inventory components consist of the following:



	March 31, 2015		December 31, 2014
Coal	$	22,596	$	19,242
Supplies	82,648		82,631
Total Inventories	$	105,244	$	101,873

Inventories are stated at the lower of cost or market. The cost of coal inventories is determined by the first-in, first-out (FIFO) method. Coal inventory costs include labor, supplies, equipment costs, operating overhead, depreciation, depletion and amortization, and other related costs.

NOTE 8—ACCOUNTS RECEIVABLE SECURITIZATION:

CONSOL Energy and certain of its U.S. subsidiaries are party to a trade accounts receivable facility with financial institutions for the sale on a continuous basis of eligible trade accounts receivable. On March 27, 2015, this facility was amended to allow the Company to receive, on a revolving basis, up to $100,000 of short-term funding and letters of credit. The receivables facility expires in July 2015. CONSOL Energy may also issue letters of credit against the facility, which decreases the amount available to be drawn upon.

CNX Funding Corporation, a wholly owned, special purpose, bankruptcy-remote subsidiary, buys and sells eligible trade receivables generated by certain subsidiaries of CONSOL Energy. Under the receivables facility, CONSOL Energy and certain subsidiaries, irrevocably and without recourse, sell all of their eligible trade accounts receivable to CNX Funding Corporation, who in turn sells these receivables to financial institutions and their affiliates, while maintaining a subordinated interest in a portion of the pool of trade receivables. This retained interest, which is included in Accounts and Notes Receivable-Trade in the Consolidated Balance Sheets, is recorded at fair value. Due to a short average collection cycle for such receivables, CONSOL Energy's collection experience history and the composition of the designated pool of trade accounts receivable that are part of this program, the fair value of its retained interest approximates the total amount of the designated pool of accounts receivable. CONSOL Energy will continue to service the sold trade receivables for the financial institutions for a fee based upon market rates for similar services.

CONSOL Energy records transactions under the securitization facility as secured borrowings on the Consolidated Balance Sheets. The pledge of collateral is reported as Accounts Receivable - Securitized and the borrowings are classified as debt in Borrowings under Securitization Facility.

At March 31, 2015 and December 31, 2014, eligible accounts receivable totaled $77,500 and $77,800, respectively. After taking into account outstanding letters of credit of $49,431 and $60,230, and outstanding borrowings there remained no subordinated retained interest at March 31, 2015 and $17,570 in subordinated retained interest at December 31, 2014. CONSOL Energy's management believes that the letters of credit will expire without being funded, and therefore, the commitments will not have a material adverse effect on the Company's financial condition. No amounts related to these financial guarantees and letters of credit are recorded as liabilities on the financial statements.

Borrowings totaled $32,669 at March 31, 2015; there were no borrowings at December 31, 2014. These changes are reflected in the Net Cash Used in Financing Activities section of the Consolidated Statement of Cash Flows.

The cost of funds under this facility is based upon commercial paper rates or LIBOR, plus a charge for administrative services paid to the financial institutions. Costs associated with the receivables facility totaled $196 and $279 for the three months ended March 31, 2015 and 2014, respectively. These costs have been recorded as financing fees which are included in Other Costs - Miscellaneous Operating Expense in the Consolidated Statements of Income. No servicing asset or liability has been recorded at March 31, 2015.

NOTE 9—PROPERTY, PLANT AND EQUIPMENT:



	March 31, 2015		December 31, 2014
Coal and other plant and equipment	$	3,747,817	$	3,726,514
Intangible drilling cost	3,057,859		2,798,394
Proven gas properties	1,766,692		1,768,007
Unproven gas properties	1,554,505		1,540,835
Coal properties and surface lands	1,364,481		1,358,306
Gas gathering equipment	1,101,113		1,088,238
Gas wells and related equipment	754,918		716,748
Airshafts	467,455		468,924
Mine development	412,130		414,501
Coal advance mining royalties	389,175		386,245
Leased coal lands	253,615		263,946
Other gas assets	124,362		123,539
Gas advance royalties	20,204		20,580
Total Property Plant and Equipment	15,014,326		14,674,777
Less: Accumulated DD&A	4,647,745		4,512,305
Total Net PP&E	$	10,366,581	$	10,162,472

Industry Participation Agreements

CONSOL Energy has two significant industry participation agreements (referred to as "joint ventures" or "JVs") that provided drilling and completion carries for the Company's retained interests.

CNX Gas Company LLC (CNX Gas Company), a wholly owned subsidiary of CONSOL Energy, is party to a joint development agreement with Hess Ohio Developments, LLC (Hess) with respect to approximately 153,000 net Utica Shale acres in Ohio in which each party has a 50% undivided interest. Under the agreement, as amended, Hess is obligated to pay a total of approximately $335,000 in the form of a 50% drilling carry of certain CONSOL Energy working interest obligations as the acreage is developed. As of March 31, 2015, Hess’ remaining carry obligation is $76,401. For the quarters ending March 31, 2015 and March 31, 2014, Hess' carry payments to CNX Gas Company reduced capital expenditures by $18,600 and $15,869, respectively.

CNX Gas Company is party to a joint development agreement with Noble Energy, Inc. (Noble) with respect to approximately 702,000 net Marcellus Shale oil and gas acres in West Virginia and Pennsylvania, in which each party owns a 50% undivided interest. Under the agreement, as amended, Noble Energy is obligated to pay a total of approximately $1,846,000 in the form of a one-third drilling carry of certain of CONSOL Energy’s working interest obligations as the property is developed, subject to certain limitations. These limitations include the suspension of the carry if average Henry Hub natural gas prices are below $4.00 per million British thermal units (MMbtu) for three consecutive months. The carry was in effect from March 1, 2014, and remained in effect until November 1, 2014 when average natural gas prices fell below $4.00/MMbtu for three consecutive months. The carry continues to be suspended. Restrictions also include a $400,000 annual maximum on Noble Energy's carried cost obligation. As of March 31, 2015, Noble Energy’s remaining carry obligation is $1,626,135. For the quarter ending March 31, 2015 Noble's carry payments to CNX Gas Company reduced capital expenditures by $27,916. Payments received during the quarter ended March 31, 2015 were for expenditures made while the carry was in effect during 2014. For the quarter ending March 31, 2014 there was no carry related reductions to capital expenditures.

NOTE 10—SHORT-TERM NOTES PAYABLE:

CONSOL Energy's current senior secured credit agreement expires on June 18, 2019. The credit facility allows for up to $2,000,000 of borrowings, which includes a $750,000 letters of credit sub-limit. CONSOL Energy can request an additional $500,000 increase in the aggregate borrowing limit amount.

The current facility is secured by substantially all of the assets of CONSOL Energy and certain of its subsidiaries. Fees and interest rate spreads are based on the percentage of facility utilization, measured quarterly. Availability under the facility is limited to a borrowing base, which is determined by the lenders administrative agent and approved by the required number of lenders in good faith by calculating a value of CONSOL Energy's proved gas reserves.

The current facility contains a number of affirmative and negative covenants that limit the Company's ability to dispose of assets, make investments, purchase or redeem CONSOL Energy common stock, pay dividends, merge with another corporation and amend, modify or restate the senior unsecured notes. The facility also requires that CONSOL Energy maintains a minimum interest coverage ratio of 2.50 to 1.00 which is calculated as the ratio of Adjusted EBITDA to cash interest expense of CONSOL Energy and certain of its subsidiaries, measured quarterly. CONSOL Energy must also maintain a minimum current ratio of 1.00 to 1.00 which is calculated as the ratio of current assets, plus revolver availability, to current liabilities excluding borrowings under the revolver and accounts receivable securitization facility, measured quarterly. At March 31, 2015, the interest coverage ratio was 4.72 to 1.00 and the current ratio was 1.60 to 1.00. Further, the credit facility allows unlimited investments in joint ventures for the development and operation of gas gathering systems and permits CONSOL Energy to separate its gas and coal businesses if the leverage ratio (which is, essentially, the ratio of debt to EBITDA) of the E&P business immediately after the separation would not be greater than 2.75 to 1.00.

At March 31, 2015, the $2,000,000 facility had $760,500 of borrowings outstanding and $214,650 of letters of credit outstanding, leaving $1,024,850 of unused capacity. At December 31, 2014, the $2,000,000 facility had no borrowings outstanding and $244,418 of letters of credit outstanding, leaving $1,755,582 of unused capacity.

On March 9, 2015, Consol Pennsylvania Coal Company LLC (CPCC) and Conrhein Coal Company (Conrhein) which are wholly owned subsidiaries of the Company, entered into a $600,000 commitment for a senior secured term loan facility. If drawn, the maturity date of the term loan facility is March 9, 2018. The facility is secured by the thermal coal assets related to CONSOL Energy’s existing Pennsylvania operations along with CONSOL Energy providing a guarantee to the lenders and a pledge of its equity interests in CPCC and Conrhein. At March 31, 2015, the term loan facility is undrawn.

The term loan commitment will expire on the earlier of (1) December 31, 2015 or (2) the consummation of the CNX Coal Resources LP initial public offering. The term loan facility will contain affirmative and negative covenants that, among other things, limit the ability to dispose of assets, pay dividends, merge with another corporation and incur indebtedness. The term loans shall bear interest at a rate per annum equal to LIBOR plus 3.0% or Base Rate plus 2.0%.

NOTE 11—LONG-TERM DEBT:



	March 31, 2015		December 31, 2014
Debt:

Senior notes due April 2020 at 8.25%, issued at par value	$	76,978	$	1,014,800
Senior notes due March 2021 at 6.375%, issued at par value	20,824		250,000
Senior notes due April 2022 at 5.875%, including amortization of bond premium	1,856,283		1,856,506
Senior notes due April 2023 at 8.00%, including amortization of bond discount	492,760		—
MEDCO revenue bonds in series due September 2025 at 5.75%	102,865		102,865
Advance royalty commitments (7.91% weighted average interest rate for March 31, 2015 and December 31, 2014)	13,473		13,473
Other long-term note maturing in 2018 (total value of $4,129 and $4,473 less unamortized discount of $555 and $643 at March 31, 2015 and December 31, 2014, respectively).	3,574		3,830
	2,566,757		3,241,474
Less amounts due in one year *	5,076		5,052
Long-Term Debt	$	2,561,681	$	3,236,422

* Excludes current portion of Capital Lease Obligations of $8,166 and $7,964 at March 31, 2015 and December 31, 2014, respectively.

Accrued interest related to Long-Term Debt of $54,118 and $51,159 was included in Other Accrued Liabilities in the Consolidated Balance Sheets at March 31, 2015 and December 31, 2014, respectively.

On March 30, 2015, CONSOL Energy closed on the private placement of $500,000 of 8.00% senior notes due 2023 (the "Notes") less $7,000 of unamortized bond discount. The Notes are guaranteed by substantially all of CONSOL Energy's wholly-owned domestic restricted subsidiaries. CONSOL Energy used the net proceeds of the sale of the Notes, together with borrowings under its revolving credit facility, to purchase $937,822 of its outstanding 8.25% senior notes due 2020 and $229,176 of its outstanding 6.375% senior notes due 2021. As part of this transaction, $67,734 was included in Loss on Debt Extinguishment on the Consolidated Statement of Income.

NOTE 12—COMMITMENTS AND CONTINGENT LIABILITIES:

CONSOL Energy and its subsidiaries are subject to various lawsuits and claims with respect to such matters as personal injury, wrongful death, damage to property, exposure to hazardous substances, governmental regulations including environmental remediation, employment and contract disputes and other claims and actions arising out of the normal course of business. CONSOL Energy accrues the estimated loss for these lawsuits and claims when the loss is probable and can be estimated. The Company's current estimated accruals related to these pending claims, individually and in the aggregate, are immaterial to the financial position, results of operations or cash flows of CONSOL Energy. It is possible that the aggregate loss in the future with respect to these lawsuits and claims could ultimately be material to the financial position, results of operations or cash flows of CONSOL Energy; however, such amounts cannot be reasonably estimated. The amount claimed against CONSOL Energy is disclosed below when an amount is expressly stated in the lawsuit or claim, which is not often the case. The maximum aggregate amount claimed in those lawsuits and claims, regardless of probability, where a claim is expressly stated or can be estimated, exceeds the aggregate amounts accrued for all lawsuits and claims by approximately $389,011.

The following lawsuits and claims include those for which a loss is probable and an accrual has been recognized.

Hale Litigation: This class action lawsuit was filed on September 23, 2010 in the U.S. District Court in Abingdon, Virginia. The putative class consists of forced-pooled unleased gas owners whose ownership of the coalbed methane (CBM) gas was declared to be in conflict with rights of others. The lawsuit seeks a judicial declaration of ownership of the CBM and damages based on allegations CNX Gas Company failed to either pay royalties due to conflicting claimants, or deemed lessors or paid them less than required because of the alleged practice of improper below market sales and/or taking alleged improper post-production deductions. On September 30, 2013, the District Judge entered an Order certifying the class, and CNX Gas Company appealed the Order to the U.S. Fourth Circuit Court of Appeals. On August 19, 2014, the Fourth Circuit agreed with CNX Gas Company, reversed the Order certifying the class and remanded the case to the trial court for further proceedings consistent with the decision. On April 23, 2015, Plaintiffs filed their Renewed Motion for Class Certification, seeking to certify a class for purposes of an accounting of escrowed and suspended royalties. The Company’s opposition to the Renewed Motion is due on June 23, 2015, and the Court has set aside September 8 through 10, 2015 for a hearing. CONSOL Energy continues to believe this action cannot properly proceed as a class action in any form, believes the case has meritorious defenses, and intends to defend it vigorously. The Company has established an accrual to cover its estimated liability for this case. This accrual is immaterial to the overall financial position of CONSOL Energy and is included in Other Accrued Liabilities on the Consolidated Balance Sheets.

Addison Litigation: This class action lawsuit was filed on April 28, 2010 in the United States District Court in Abingdon, Virginia. The putative class consists of gas lessors whose gas ownership is in conflict. The lawsuit seeks a judicial declaration of ownership of the CBM and damages based on the allegations that CNX Gas Company failed to either pay royalties due these conflicting claimant lessors or paid them less than required because of the alleged practice of improper below market sales and/or taking alleged improper post-production deductions. On September 30, 2013, the District Judge entered an Order certifying the class, and CNX Gas Company appealed the Order to the U.S. Court of Appeals for the Fourth Circuit. On August 19, 2014, the Fourth Circuit agreed with CNX Gas Company, reversed the Order certifying the class and remanded the case to the trial court for further proceedings consistent with the decision. On April 23, 2015, Plaintiffs filed their Renewed Motion for Class Certification, seeking to certify a class for purposes of an accounting of escrowed and suspended royalties. The Company’s opposition to the Renewed Motion is due on June 23, 2015, and the Court has set aside September 8 through 10, 2015 for a hearing. CONSOL Energy continues to believe this action cannot properly proceed as a class action in any form, believes the case has meritorious defenses, and intends to defend it vigorously. The Company has established an accrual to cover its estimated liability for this case. This accrual is immaterial to the overall financial position of CONSOL Energy and was included in Other Accrued Liabilities on the Consolidated Balance Sheets.

Clean Water Act - Bailey Mine: The Company received from the U.S. EPA on April 8, 2011 a request for information relating to National Pollutant Discharge Element System Permit compliance at the Company's Bailey and Enlow Fork Mines. In response, CONSOL Pennsylvania Coal Company submitted water discharge monitoring and other data to the EPA. In early 2013, the case was referred to the U.S. Department of Justice (DOJ), and the Pennsylvania Department of Environmental Protection also became involved. On December 18, 2014, the DOJ provided the Company a proposed Consent Decree to resolve certain Clean Water Act and Clean Streams Law claims against CONSOL Energy Inc. and CONSOL Pennsylvania Coal Company with respect to the Bailey Mine Complex. The parties continue to negotiate the terms of the proposed Consent Decree. The Company has established an accrual to cover its estimated liability in this matter. This accrual is immaterial to the overall financial position of CONSOL Energy and was included in Other Accrued Liabilities on the Consolidated Balance Sheets.

The following royalty and land right lawsuits and claims include those for which a loss is reasonably possible, but not probable, and accordingly, an accrual may not have been recognized. These claims are influenced by many factors which prevent the estimation of a range of potential loss. These factors include, but are not limited to, generalized allegations of unspecified damages (such as improper deductions), discovery having not commenced or not having been completed, unavailability of expert reports on damages and non-monetary issues are being tried. For example, in instances where a gas lease termination is sought, damages would depend on speculation as to if and when the gas production would otherwise have occurred, how many wells would have been drilled on the lease premises, what their production would be, what the cost of production would be, and what the price of gas would be during the production period. An estimate is calculated, if applicable, when sufficient information becomes available.

Virginia Mine Void Litigation: The Company is currently defending five lawsuits naming Consolidation Coal Company (CCC), Island Creek Coal Company (ICCC), CNX Gas Company, and/or CONSOL Energy. Four of the lawsuits are pending in the U.S. District Court for the Western District of Virginia. The Complaints seek damages and injunctive relief in connection with the transfer of water from mining activities at the Company's Buchanan Mine into void spaces in inactive ICCC mines adjacent to the Buchanan operations, which are voids ostensibly underlying plaintiffs' properties. While some of the plaintiffs have an ownership interest in the coal, others have some interest in one or more of the fee, surface, coal, oil/gas or other mineral estates. The suits allege that the water storage precludes access to and has damaged coal, impeded coalbed methane gas production and was made without compensation to the property owners. Plaintiffs seek recovery in tort, contract and trespass assumpsit (quasi-contract). The suits each seek damages between $50,000 and in excess of $100,000 plus punitive damages. The Company intends to vigorously defend these suits. The Company has established an accrual to cover the low end of the estimated range of possible losses. This accrual is immaterial to the overall financial position of CONSOL Energy and was included in Other Accrued Liabilities on the Consolidated Balance Sheets.

Kennedy Litigation: The Company is a party to a case filed on March 26, 2008 captioned Earl Kennedy (and others) v. CNX Gas Company and CONSOL Energy in the Court of Common Pleas of Greene County, Pennsylvania. The lawsuit alleges that CNX Gas Company and CONSOL Energy trespassed and converted gas and other minerals allegedly belonging to the plaintiffs in connection with wells drilled by CNX Gas Company. The complaint, as amended, seeks injunctive relief, including removing CNX Gas Company from the property, and compensatory damages of $20,000. The suit also sought to overturn existing law as to the ownership of coalbed methane in Pennsylvania, but that claim was dismissed by the court. The suit further sought a determination that the Pittsburgh 8 coal seam does not include the “roof/rider” coal. The court held a bench trial on the “roof/rider” coal issue in November 2011 and ruled in favor of CNX Gas Company and CONSOL Energy. On March 3, 2014, the Company won summary judgment on Counts 1 through 10 of the Amended Complaint, each relating to the alleged trespass of horizontal CBM wells into strata other than the Pittsburgh 8 Seam. The last remaining Count, seeking to quiet title to approximately 40 acres of Pittsburgh Seam coal, was nonsuited by Plaintiffs, without prejudice, on March 26, 2014. On March 28, 2014, Plaintiffs filed Notices of Appeal with the Pennsylvania Superior Court. On April 22, 2015, the Superior Court ruled in favor of the Company on all issues and affirmed each of the trial court orders and judgments that was appealed.

Rowland Litigation: Rowland Land Company filed a complaint in May 2011 against CONSOL Energy, CNX Gas Company, Dominion Resources Inc., and EQT Production Company (EQT) in Raleigh County Circuit Court, West Virginia. Rowland is the lessor on a 33,000 acre oil and gas lease in southern West Virginia. EQT was the original lessee, but farmed out the development of the lease to Dominion Resources in exchange for an overriding royalty. Dominion Resources sold the indirect subsidiary that held the lease to a subsidiary of CONSOL Energy on April 30, 2010. Subsequent to that acquisition, the subsidiary that held the lease was merged into CNX Gas Company as part of an internal reorganization. Rowland alleges that (i) Dominion Resources' sale of the subsidiary to CONSOL Energy was a change in control that required its consent under the terms of the farmout agreement and lease, and/or (ii) the subsequent merger of the subsidiary into CNX Gas Company was an assignment that required its consent under the lease. The parties have reached a settlement in principle of this matter, which will be dismissed with prejudice.

At March 31, 2015, CONSOL Energy has provided the following financial guarantees, unconditional purchase obligations and letters of credit to certain third parties, as described by major category in the following table. These amounts represent the

maximum potential total of future payments that the Company could be required to make under these instruments. These amounts have not been reduced for potential recoveries under recourse or collateralization provisions. Generally, recoveries under reclamation bonds would be limited to the extent of the work performed at the time of the default. No amounts related to these financial guarantees and letters of credit are recorded as liabilities in the financial statements. CONSOL Energy management believes that these guarantees will expire without being funded, and therefore the commitments will not have a material adverse effect on financial condition.



	Amount of Commitment Expiration Per Period
	Total Amounts Committed		Less Than 1 Year		1-3 Years		3-5 Years		Beyond 5 Years
Letters of Credit:
Employee-Related	$	94,947	$	75,624	$	19,323	$	—	$	—
Environmental	4,786		4,186		600		—		—
Other	164,347		164,347		—		—		—
Total Letters of Credit	264,080		244,157		19,923		—		—
Surety Bonds:
Employee-Related	181,720		181,720		—		—		—
Environmental	553,656		545,391		8,265		—		—
Other	24,454		24,449		4		1
Total Surety Bonds	759,830		751,560		8,269		1		—
Guarantees:
Coal	108,550		83,500		25,050		—		—
Other	84,421		42,119		16,939		12,649		12,714
Total Guarantees	192,971		125,619		41,989		12,649		12,714
Total Commitments	$	1,216,881	$	1,121,336	$	70,181	$	12,650	$	12,714

Included in the above table are commitments and guarantees entered into in conjunction with the sale of Consolidation Coal Company and certain of its subsidiaries, which contain all five of its longwall coal mines in West Virginia, and its river operations to a subsidiary of Murray Energy Corporation (Murray Energy). As part of the sales agreement, CONSOL Energy has guaranteed certain equipment lease obligations and coal sales agreements that were assumed by Murray Energy. In the event that Murray Energy would default on the obligations defined in the agreements, CONSOL Energy would be required to perform under the guarantees. If CONSOL Energy would be required to perform, the stock purchase agreement provides various recourse actions. At March 31, 2015, the fair value of these guarantees was $1,275 and are included in Other Accrued Liabilities on the Consolidated Balance Sheets. The fair value of certain of the guarantees was determined using CONSOL Energy’s risk adjusted interest rate. Significant increases or decreases in the risk-adjusted interest rates may result in a significantly higher or lower fair value measurement. Coal sales agreement guarantees were valued based on an evaluation of coal market pricing compared to contracted sales price and includes an adjustment for nonperformance risk. No other amounts related to financial guarantees and letters of credit are recorded as liabilities in the financial statements. Significant judgment is required in determining the fair value of these guarantees. The guarantees of the leases and sales agreements are classified within Level 3 of the fair value hierarchy.

CONSOL Energy regularly evaluates the likelihood of default for all guarantees based on an expected loss analysis and records the fair value, if any, of its guarantees as an obligation in the consolidated financial statements.

CONSOL Energy and CNX Gas Company enter into long-term unconditional purchase obligations to procure major equipment purchases, natural gas firm transportation, gas drilling services and other operating goods and services. These purchase obligations are not recorded on the Consolidated Balance Sheets. As of March 31, 2015, the purchase obligations for each of the next five years and beyond were as follows:



Obligations Due	Amount
Less than 1 year	$	263,985
1 - 3 years	314,084
3 - 5 years	197,923
More than 5 years	626,620
Total Purchase Obligations	$	1,402,612

NOTE 13—DERIVATIVE INSTRUMENTS:

CONSOL Energy enters into economic derivative instruments to manage its exposure to commodity price volatility. CONSOL Energy de-designated all of its cash flow hedges on December 31, 2014 and accounts for all existing and future gas commodity hedges on a mark-to-market basis with changes in fair value recorded in current period earnings. In connection with this change, CONSOL Energy froze the balances recorded in Accumulated Other Comprehensive Income at December 31, 2014 and will reclassify balances to earnings as the underlying physical transactions occur, unless it is no longer probable that the physical transaction will occur at which time the related Other Comprehensive Income (OCI) will be immediately recorded in earnings. In November 2014, CONSOL Energy entered into basis only swaps that did not qualify for hedge accounting. These swaps were entered into to decrease the risk related to pricing differentials between local markets and NYMEX.

CONSOL Energy is exposed to credit risk in the event of nonperformance by counterparties. The creditworthiness of counterparties is subject to continuing review. The Company has not experienced any issues of non-performance by derivative counterparties.

None of the Company's counterparty master agreements currently require CONSOL Energy to post collateral for any of its hedges. However, as stated in the counterparty master agreements, if CONSOL Energy's obligations with one of its counterparties cease to be secured on the same basis as similar obligations with the other lenders under the credit facility, CONSOL Energy would have to post collateral for hedges in a liabilities position in excess of defined thresholds. All of the Company's derivative instruments are subject to master netting arrangements with our counterparties. CONSOL Energy recognizes all financial derivative instruments as either assets or liabilities at fair value on the Consolidated Balance Sheets on a gross basis.

Each of CONSOL Energy's counterparty master agreements allows, in the event of default, the ability to elect early termination of outstanding contracts. If early termination is elected, CONSOL Energy and the applicable counterparty would net settle all open hedge positions.

CONSOL Energy’s commodity derivative instruments accounted for a total notional amount of production of 213.3 bcf at March 31, 2015 and are forecasted to settle through 2017. At December 31, 2014, the commodity derivative instruments accounted for a total notional amount of production of 215.9 bcf. At March 31, 2015, the basis only swaps were for notional amounts of 8.0 bcf and are forecasted to settle through 2015. At December 31, 2014, the basis only swaps were for notional amounts of 10.6 bcf.

The gross fair value of CONSOL Energy's derivative instruments at March 31, 2015 and December 31, 2014 were as follows:



Asset Derivative Instruments					Liability Derivative Instruments
	March 31, 2015		December 31, 2014			March 31, 2015		December 31, 2014
Commodity Derivative Instruments
Prepaid Expense	$	138,772	$	123,676	Other Liabilities	$	272	$	—
Other Assets	85,463		68,656		Other Accrued Liabilities	526		—
Total Asset	$	224,235	$	192,332	Total Liability	$	798	$	—

Basis Only Swaps
Prepaid Expense	$	72	$	1,064	Other Accrued Liabilities	$	962	$	327

The commodity derivative instruments resulted in a gain of $61,631 being recorded in Unrealized Gain on Commodity Derivative Instruments on the Consolidated Statements of Income during the quarter ending March 31, 2015.

The basis only swaps resulted in a loss of $1,627 being recorded in Unrealized Gain on Commodity Derivative Instruments on the Consolidated Statements of Income during the quarter ending March 31, 2015.

The derivative instruments in which CONSOL Energy discontinued cash flow hedging had an effect on the Consolidated Statements of Income and the Consolidated Statements of Stockholders' Equity, net of tax, as follows:



	Three Months Ended March 31,
	2015		2014
Natural Gas Price Swaps and Options
Beginning Balance – Accumulated OCI	$	121,521	$	42,493
Loss recognized in Accumulated OCI	—		(46,965		)
Less: Gain (Loss) reclassified from Accumulated OCI (Net of tax: $11,213, ($10,951))	19,314		(16,313		)
Ending Balance – Accumulated OCI	$	102,207	$	11,841
Gain recognized in Outside Sales for ineffectiveness *	$	—	$	355

* No amounts were excluded from effectiveness testing of cash flow hedges.

CONSOL Energy expects to reclassify an additional $58,737, net of tax of $33,841, out of Accumulated Other Comprehensive Income over the remaining period ended December 31, 2015.

NOTE 14—FAIR VALUE OF FINANCIAL INSTRUMENTS:

CONSOL Energy determines the fair value of assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. The fair value hierarchy is based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources (including NYMEX forward curves, LIBOR-based discount rates and basis forward curves), while unobservable inputs reflect the Company's own assumptions of what market participants would use.

The fair value hierarchy includes three levels of inputs that may be used to measure fair value as described below.

Level One - Quoted prices for identical instruments in active markets.

Level Two - The fair value of the assets and liabilities included in Level Two are based on standard industry income approach models that use significant observable inputs, including NYMEX forward curves, LIBOR-based discount rates and basis forward curves.

Level Three - Unobservable inputs significant to the fair value measurement supported by little or no market activity. The significant unobservable inputs used in the fair value measurement of the Company's third party guarantees are the credit risk of the third party and the third party surety bond markets. A significant increase or decrease in these values, in isolation, would have a directionally similar effect resulting in higher or lower fair value measurement of the Company's Level Three guarantees.

In those cases when the inputs used to measure fair value meet the definition of more than one level of the fair value hierarchy, the lowest level input that is significant to the fair value measurement in its totality determines the applicable level in the fair value hierarchy.

The financial instruments measured at fair value on a recurring basis are summarized below:



	Fair Value Measurements at March 31, 2015						Fair Value Measurements at December 31, 2014
Description	(Level 1)		(Level 2)		(Level 3)		(Level 1)		(Level 2)		(Level 3)
Gas Derivatives	$	—	$	222,547	$	—	$	—	$	193,069	$	—
Murray Energy Guarantees	$	—	$	—	$	1,275	$	—	$	—	$	1,275

The following methods and assumptions were used to estimate the fair value for which the fair value option was not elected:

Cash and cash equivalents: The carrying amount reported in the Consolidated Balance Sheets for cash and cash equivalents approximates its fair value due to the short-term maturity of these instruments.

Short-term notes payable: The carrying amount reported in the Consolidated Balance Sheets for short-term notes payable approximates its fair value due to the short-term maturity of these instruments.

Borrowings under Securitization Facility: The carrying amount reported in the Consolidated Balance Sheets for borrowings under the securitization facility approximates its fair value due to the short-term maturity of these instruments.

Long-term debt: The fair value of long-term debt is measured using unadjusted quoted market prices or estimated using discounted cash flow analyses. The discounted cash flow analyses are based on current market rates for instruments with similar cash flows.

The carrying amounts and fair values of financial instruments for which the fair value option was not elected are as follows:



	March 31, 2015						December 31, 2014
	Carrying Amount			Fair Value			Carrying Amount			Fair Value
Cash and Cash Equivalents	$	5,318		$	5,318		$	176,989		$	176,989
Short-Term Notes Payable	$	(760,500	)	$	(760,500	)	$	—		$	—
Borrowings Under Securitization Facility	$	(32,669	)	$	(32,669	)	$	—		$	—
Long-Term Debt	$	(2,566,757	)	$	(2,398,682	)	$	(3,241,474	)	$	(3,169,154	)

Cash and cash equivalents represent highly-liquid instruments and constitute Level 1 fair value measurements. Certain of the Company’s debt is actively traded on a public market and, as a result, constitute Level 1 fair value measurements. The portion of the Company’s debt obligations that are not actively traded are valued through reference to the applicable underlying benchmark rate and, as a result, constitute Level 2 fair value measurements.

NOTE 15—SEGMENT INFORMATION:

CONSOL Energy consists of two principal business divisions: Exploration and Production (E&P) and Coal. The principal activity of the E&P division, which includes four reportable segments, is to produce pipeline quality natural gas for sale primarily to gas wholesalers. The E&P division's reportable segments are Marcellus, Utica, Coalbed Methane, and Other Gas. The Other Gas segment is primarily related to shallow oil and gas production as well as Upper Devonian Shale, and includes the Company's purchased gas activities and general and administrative activities, as well as various other activities assigned to the E&P division but not allocated to each individual well type.

The principal activities of the Coal division, which includes three reportable segments, are mining, preparation and marketing of thermal coal, sold primarily to power generators, and metallurgical coal, sold to metal and coke producers. The Coal division's reportable segments are Pennsylvania (PA) Operations, Virginia (VA) Operations, and Other Coal. Each of these reportable segments includes a number of operating segments (individual mines). For the three months ended March 31, 2015, the PA Operations aggregated segment includes the following mines: Bailey Mine, Enlow Fork Mine, and Harvey Mine and the corresponding preparation plant facilities. For the three months ended March 31, 2015, the VA Operations aggregated segment includes the Buchanan Mine and the corresponding preparation plant facilities. For the three months ended March 31, 2015, the Other Coal segment includes the Miller Creek Complex, coal terminal operations, the Company's purchased coal activities, idled mine activities and general and administrative activities, as well as various other activities assigned to the Coal division but not allocated to each individual mine.

CONSOL Energy’s All Other division includes expenses from various other corporate activities that are not allocated to the E&P or Coal divisions.

In the preparation of the following information, intersegment sales have been recorded at amounts approximating market. Operating profit for each segment is based on sales less identifiable operating and non-operating expenses. Assets are reflected at the division level for E&P and are not allocated between each individual E&P segment. These assets are not allocated to each individual segment due to the diverse asset base controlled by CONSOL Energy, whereby each individual asset may service more than one segment within the division. An allocation of such asset base would not be meaningful or representative on a segment by segment basis.

Industry segment results for the three months ended March 31, 2015 are:



	Marcellus Shale		Utica Shale			Coalbed Methane		Other Gas		Total E&P		PA Operations		VA Operations		Other Coal			Total Coal		All Other		Corporate, Adjustments & Eliminations			Consolidated
Sales—outside	$	137,360	$	18,603		$	74,984	$	23,633	$	254,580	$	384,437	$	80,515	$	31,714		$	496,666	$	—	$	—		$	751,246	(A)
Other outside sales	—		—			—		—		—		—		—		13,130			13,130		—		—			13,130
Sales—purchased gas	—		—			—		3,597		3,597		—		—		—			—		—		—			3,597
Sales—gas royalty interests	—		—			—		14,859		14,859		—		—		—			—		—		—			14,859
Freight—outside	—		—			—		—		—		2,369		—		4,156			6,525		—		—			6,525
Intersegment transfers	—		—			547		—		547		—		—		—			—		—		(547		)	—
Total Sales and Freight	$	137,360	$	18,603		$	75,531	$	42,089	$	273,583	$	386,806	$	80,515	$	49,000		$	516,321	$	—	$	(547	)	$	789,357
Earnings (Loss) Before Income Taxes	$	42,244	$	(5,053	)	$	14,732	$	24,068	$	75,991	$	98,402	$	22,567	$	(15,087	)	$	105,882	$	102	$	(128,548	)	$	53,427	(B)
Segment assets										$	7,530,979	$	2,100,349	$	344,098	$	1,583,303		$	4,027,750	$	78,553	$	144,114		$	11,781,396	(C)
Depreciation, depletion and amortization										$	85,104	$	44,850	$	11,975	$	8,658		$	65,483	$	7	$	—		$	150,594
Capital expenditures										$	250,303	$	32,936	$	6,234	$	1,671		$	40,841	$	2,875	$	—		$	294,019

(A) Included in the Coal segment are sales of $120,577 to Xcoal Energy & Resources and sales of $84,623 to Duke Energy, each comprising over 10% of sales.

(B) Includes equity in earnings of unconsolidated affiliates of $8,377, $2,938 and $8 for E&P, Coal and All Other, respectively.

Industry segment results for the three months ended March 31, 2014 are:



	Marcellus Shale		Utica		Coalbed Methane		Other Gas			Total E&P		PA Operations		VA Operations			Other Coal			Total Coal		All Other			Corporate, Adjustments & Eliminations			Consolidated
Sales—outside	$	124,957	$	7,031	$	96,071	$	38,239		$	266,298	$	412,081	$	84,505		$	38,095		$	534,681	$	—		$	—		$	800,979	(D)
Other outside sales	—		—		—		—			—		—		—			10,483			10,483		58,804			—			69,287
Sales—purchased gas	—		—		—		3,574			3,574		—		—			—			—		—			—			3,574
Sales—gas royalty interests	—		—		—		26,645			26,645		—		—			—			—		—			—			26,645
Freight—outside	—		—		—		—			—		7,430		358			2,157			9,945		—			—			9,945
Intersegment transfers	—		—		897		—			897		—		—			—			—		19,311			(20,208		)	—
Total Sales and Freight	$	124,957	$	7,031	$	96,968	$	68,458		$	297,414	$	419,511	$	84,863		$	50,735		$	555,109	$	78,115		$	(20,208	)	$	910,430
Earnings (Loss) Before Income Taxes	$	59,105	$	539	$	33,619	$	(13,519	)	$	79,744	$	132,790	$	(881	)	$	(21,510	)	$	110,399	$	(1,737	)	$	(58,227	)	$	130,179	(E)
Segment assets										$	6,521,994	$	2,027,866	$	372,745		$	1,865,849		$	4,266,460	$	193,679		$	602,342		$	11,584,475	(F)
Depreciation, depletion and amortization										$	71,729	$	35,162	$	11,712		$	9,992		$	56,866	$	521		$	—		$	129,116
Capital expenditures										$	265,970	$	174,194	$	6,242		$	3,647		$	184,083	$	976		$	—		$	451,029


(D)	Included in the Coal segment are sales of $118,884 to Xcoal Energy & Resources, which comprises over 10% of sales.


(E)	Includes equity in earnings of unconsolidated affiliates of $5,814, $2,860 and $(1,224) for E&P, Coal and All Other, respectively.

(F) Includes investments in unconsolidated equity affiliates of $223,874, $84,864 and $387 for E&P, Coal and All Other, respectively.

Reconciliation of Segment Information to Consolidated Amounts:

Earnings Before Income Taxes:



	For the Three Months Ended March 31,
	2015			2014
Segment Earnings Before Income Taxes for total reportable business segments	$	181,873		$	190,143
Segment Earnings Before Income Taxes for all other businesses	102			(1,737		)
Interest (expense), net (G)	(55,122		)	(50,931		)
Evaluation fees for non-core asset dispositions (G)	(788		)	—
Other corporate items (G)	(4,904		)	(7,296		)
Loss on debt extinguishment	(67,734		)	—
Earnings Before Income Taxes	$	53,427		$	130,179



Total Assets:	March 31,
Total Assets:	2015		2014
Segment assets for total reportable business segments	$	11,558,729	$	10,788,454
Segment assets for all other businesses	78,553		193,679
Items excluded from segment assets:
Cash and other investments (G)	5,252		300,090
Recoverable income taxes	20,567		4,434
Deferred tax assets	74,725		265,226
Bond issuance costs	43,570		32,592
Total Consolidated Assets	$	11,781,396	$	11,584,475

_________________________

(G) Excludes amounts specifically related to the E&P segment.

NOTE 16—GUARANTOR SUBSIDIARIES FINANCIAL INFORMATION:

The payment obligations under the $76,978, 8.250% per annum senior notes due April 1, 2020, the $20,824, 6.375% per annum senior notes due March 1, 2021, the $1,856,283, 5.875% per annum senior notes due April 15, 2022, and the $492,760, 8.000% per annum senior notes due April 1, 2023 issued by CONSOL Energy are jointly and severally, and also fully and unconditionally, guaranteed by substantially all subsidiaries of CONSOL Energy. In December 2014, the Company completed the sale of its industrial supplies subsidiary, which constituted the only significant non-guarantor subsidiary. Subsequent to this sale, the Parent Issuer does not have independent assets or operations and the remaining non-guarantor subsidiaries are minor. As a result, condensed consolidating financial statements are not required for the periods subsequent to December 31, 2014. In accordance with positions established by the Securities and Exchange Commission (SEC), the following financial information sets forth separate financial information with respect to the parent, CNX Gas, a guarantor subsidiary, the remaining guarantor subsidiaries and the non-guarantor subsidiaries for the periods prior to January 1, 2015. The principal elimination entries include investments in subsidiaries and certain intercompany balances and transactions. CONSOL Energy, the parent, and a guarantor subsidiary manage several assets and liabilities of all other wholly owned subsidiaries. These include, for example, deferred tax assets, cash and other post-employment liabilities. These assets and liabilities are reflected as parent company or guarantor company amounts for purposes of this presentation.

Income Statement for the Three Months Ended March 31, 2014 (unaudited):



	Parent Issuer		CNX Gas Guarantor		Other Subsidiary Guarantors		Non- Guarantors		Elimination			Consolidated
Revenues and Other Income:
Natural Gas, NGLs and Oil Sales	$	—	$	267,194	$	—	$	—	$	(896	)	$	266,298
Coal Sales	—		—		534,681		—		—			534,681
Other Outside Sales	—		—		10,483		58,804		—			69,287
Gas Royalty Interests and Purchased Gas Sales	—		30,219		—