Edgar Filing: CONSOL Energy Inc

Document

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 September 30, 2016



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 October 17, 2016
Common stock, $0.01 par value		229,440,368

TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION

ITEM 1.	Condensed Financial Statements
	Consolidated Statements of Income for the three and nine months ended September 30, 2016 and 2015	3
	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2016 and 2015	4
	Consolidated Balance Sheets at September 30, 2016 and December 31, 2015	5
	Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2016	7
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015	8
	Notes to Unaudited Consolidated Financial Statements	9

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	85

ITEM 4.	Controls and Procedures	86

PART II OTHER INFORMATION

ITEM 1.	Legal Proceedings	86

ITEM 1A.	Risk Factors	87

ITEM 4.	Mine Safety Disclosures	88

ITEM 5.	Other Information	88

ITEM 6.	Exhibits	88

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						Nine Months Ended
(Unaudited)	September 30,						September 30,
Revenues and Other Income:	2016			2015			2016			2015
Natural Gas, NGLs and Oil Sales	$	205,913		$	157,538		$	555,101		$	541,630
Gain on Commodity Derivative Instruments	198,192			143,606			53,872			251,073
Coal Sales	267,685			323,171			744,411			1,026,596
Other Outside Sales	4,714			5,129			20,687			24,596
Purchased Gas Sales	12,086			2,535			28,633			7,649
Freight-Outside Coal	9,392			2,436			33,949			10,204
Miscellaneous Other Income	32,393			38,475			114,159			111,279
Gain on Sale of Assets	15,203			48,043			13,541			54,329
Total Revenue and Other Income	745,578			720,933			1,564,353			2,027,356
Costs and Expenses:
Exploration and Production Costs
Lease Operating Expense	22,602			29,452			73,996			96,229
Transportation, Gathering and Compression	94,796			89,965			279,753			248,682
Production, Ad Valorem, and Other Fees	9,027			8,475			23,732			24,605
Depreciation, Depletion and Amortization	101,257			92,083			312,122			269,377
Exploration and Production Related Other Costs	384			3,332			5,036			7,695
Purchased Gas Costs	11,940			1,921			28,692			5,939
Other Corporate Expenses	21,760			20,953			65,980			47,088
Impairment of Exploration and Production Properties	—			—			—			828,905
Selling, General, and Administrative Costs	26,198			23,919			74,067			80,396
Total Exploration and Production Costs	287,964			270,100			863,378			1,608,916
PA Mining Operations Costs
Operating and Other Costs	182,717			137,759			521,277			564,604
Depreciation, Depletion and Amortization	42,370			43,459			125,334			136,536
Freight Expense	9,392			2,436			33,949			10,204
Selling, General, and Administrative Costs	7,653			9,044			20,207			34,231
Total PA Mining Operations Costs	242,132			192,698			700,767			745,575
Other Costs
Miscellaneous Operating Expense	40,085			(3,078		)	127,531			70,554
Selling, General, and Administrative Costs	4,569			6,173			10,173			9,946
Depreciation, Depletion and Amortization	8,085			11,302			4,463			21,219
Loss on Debt Extinguishment	—			—			—			67,751
Interest Expense	47,317			48,558			144,609			150,185
Total Other Costs	100,056			62,955			286,776			319,655
Total Costs And Expenses	630,152			525,753			1,850,921			2,674,146
Income (Loss) From Continuing Operations Before Income Tax	115,426			195,180			(286,568		)	(646,790		)
Income Taxes	52,858			65,868			(71,798		)	(251,181		)
Income (Loss) From Continuing Operations	62,568			129,312			(214,770		)	(395,609		)
Loss From Discontinued Operations, net	(34,975		)	(3,842		)	(322,747		)	(3,192		)
Net Income (Loss)	27,593			125,470			(537,517		)	(398,801		)
Less: Net Income Attributable to Noncontrolling Interest	2,248			6,490			4,541			6,490
Net Income (Loss) Attributable to CONSOL Energy Shareholders	$	25,345		$	118,980		$	(542,058	)	$	(405,291	)

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

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(CONTINUED)



	Three Months Ended						Nine Months Ended
(Dollars in thousands, except per share data)	September 30,						September 30,
(Unaudited)	2016			2015			2016			2015
Earnings (Loss) Per Share
Basic
Income (Loss) from Continuing Operations	$	0.26		$	0.54		$	(0.96	)	$	(1.75	)
Loss from Discontinued Operations	(0.15		)	(0.02		)	(1.40		)	(0.02		)
Total Basic Earnings (Loss) Per Share	$	0.11		$	0.52		$	(2.36	)	$	(1.77	)
Dilutive
Income (Loss) from Continuing Operations	$	0.26		$	0.54		$	(0.96	)	$	(1.75	)
Loss from Discontinued Operations	(0.15		)	(0.02		)	(1.40		)	(0.02		)
Total Dilutive Earnings (Loss) Per Share	$	0.11		$	0.52		$	(2.36	)	$	(1.77	)

Dividends Declared Per Share	$	—		$	0.0100		$	0.0100		$	0.1350

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	Three Months Ended						Nine Months Ended
(Dollars in thousands)	September 30,						September 30,
(Unaudited)	2016			2015			2016			2015
Net Income (Loss)	$	27,593		$	125,470		$	(537,517	)	$	(398,801	)
Other Comprehensive Loss:
Actuarially Determined Long-Term Liability Adjustments (Net of tax: ($1,043), $29,720, ($5,369), $24,935)	1,305			(49,353		)	6,866			(40,036		)
Reclassification of Cash Flow Hedges from OCI to Earnings (Net of tax: $7,139, $11,807, $19,284, $35,123)	(12,458		)	(20,602		)	(33,475		)	(60,720		)

Other Comprehensive Loss	(11,153		)	(69,955		)	(26,609		)	(100,756		)

Comprehensive Income (Loss)	16,440			55,515			(564,126		)	(499,557		)

Less: Comprehensive Income Attributable to Noncontrolling Interests	2,248			6,490			4,541			6,490

Comprehensive Income (Loss) Attributable to CONSOL Energy Inc. Shareholders	$	14,192		$	49,025		$	(568,667	)	$	(506,047	)

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

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



	(Unaudited)
(Dollars in thousands)	September 30, 2016		December 31, 2015
ASSETS
Current Assets:
Cash and Cash Equivalents	$	80,247	$	72,574
Accounts and Notes Receivable:
Trade	163,955		151,383
Other Receivables	80,490		121,735
Inventories	62,622		66,792
Recoverable Income Taxes	—		13,887
Prepaid Expenses	125,490		297,287
Current Assets of Discontinued Operations	2,111		81,106
Total Current Assets	514,915		804,764
Property, Plant and Equipment:
Property, Plant and Equipment	13,920,715		13,794,907
Less—Accumulated Depreciation, Depletion and Amortization	5,506,096		5,062,201
Property, Plant and Equipment of Discontinued Operations, Net	—		936,670
Total Property, Plant and Equipment—Net	8,414,619		9,669,376
Other Assets:
Deferred Income Taxes	149,680		—
Investment in Affiliates	257,423		237,330
Other	228,857		214,388
Other Assets of Discontinued Operations	—		4,044
Total Other Assets	635,960		455,762
TOTAL ASSETS	$	9,565,494	$	10,929,902

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)	September 30, 2016			December 31, 2015
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable	$	197,479		$	250,609
Current Portion of Long-Term Debt	4,470			4,988
Short-Term Notes Payable	354,000			952,000
Accrued Income Taxes	5,485			—
Other Accrued Liabilities	508,144			421,827
Current Liabilities of Discontinued Operations	664			51,514
Total Current Liabilities	1,070,242			1,680,938
Long-Term Debt:
Long-Term Debt	2,734,004			2,708,320
Capital Lease Obligations	29,805			34,884
Long-Term Debt of Discontinued Operations	—			5,001
Total Long-Term Debt	2,763,809			2,748,205
Deferred Credits and Other Liabilities:
Deferred Income Taxes	—			74,629
Postretirement Benefits Other Than Pensions	613,233			630,892
Pneumoconiosis Benefits	117,586			111,903
Mine Closing	216,232			227,339
Gas Well Closing	164,115			163,842
Workers’ Compensation	68,587			69,812
Salary Retirement	89,305			91,596
Reclamation	—			25
Other	172,218			166,957
Deferred Credits and Other Liabilities of Discontinued Operations	—			107,988
Total Deferred Credits and Other Liabilities	1,441,276			1,644,983
TOTAL LIABILITIES	5,275,327			6,074,126
Stockholders’ Equity:
Common Stock, $.01 Par Value; 500,000,000 Shares Authorized, 229,438,910 Issued and Outstanding at September 30, 2016; 229,054,236 Issued and Outstanding at December 31, 2015	2,298			2,294
Capital in Excess of Par Value	2,453,275			2,435,497
Preferred Stock, 15,000,000 shares authorized, None issued and outstanding	—			—
Retained Earnings	2,033,849			2,579,834
Accumulated Other Comprehensive Loss	(342,207		)	(315,598		)
Total CONSOL Energy Inc. Stockholders’ Equity	4,147,215			4,702,027
Noncontrolling Interest	142,952			153,749
TOTAL EQUITY	4,290,167			4,855,776
TOTAL LIABILITIES AND EQUITY	$	9,565,494		$	10,929,902

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

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY



(Dollars in thousands, except per share data)	Common Stock		Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Total CONSOL Energy Inc. Stockholders’ Equity			Non- Controlling Interest			Total Equity
Balance at December 31, 2015	$	2,294	$	2,435,497		$	2,579,834		$	(315,598	)	$	4,702,027		$	153,749		$	4,855,776
(Unaudited)
Net (Loss) Income	—		—			(542,058		)	—			(542,058		)	4,541			(537,517		)
Other Comprehensive Loss	—		—			—			(26,609		)	(26,609		)	—			(26,609		)
Comprehensive (Loss) Income	—		—			(542,058		)	(26,609		)	(568,667		)	4,541			(564,126		)
Issuance of Common Stock	4		—			—			—			4			—			4
Treasury Stock Activity	—		—			(1,633		)	—			(1,633		)	—			(1,633		)
Tax Cost From Stock-Based Compensation	—		(5,144		)	—			—			(5,144		)	—			(5,144		)
Amortization of Stock-Based Compensation Awards	—		22,922			—			—			22,922			903			23,825
Distributions to Noncontrolling Interest	—		—			—			—			—			(16,241		)	(16,241		)
Dividends ($0.01 per share)	—		—			(2,294		)	—			(2,294		)	—			(2,294		)
Balance at September 30, 2016	$	2,298	$	2,453,275		$	2,033,849		$	(342,207	)	$	4,147,215		$	142,952		$	4,290,167

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

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS



(Dollars in thousands)	Nine Months Ended
(Unaudited)	September 30,
Operating Activities:	2016			2015
Net Loss	$	(537,517	)	$	(398,801	)
Adjustments to Reconcile Net Loss to Net Cash Provided By Operating Activities:
Net Loss from Discontinued Operations	322,747			3,192
Depreciation, Depletion and Amortization	441,919			427,132
Impairment of Exploration and Production Properties	—			828,905
Non-Cash Other Post-Employment Benefits	—			(151,871		)
Stock-Based Compensation	23,825			19,849
Gain on Sale of Assets	(13,541		)	(54,329		)
Loss on Debt Extinguishment	—			67,751
Gain on Commodity Derivative Instruments	(53,872		)	(251,073		)
Net Cash Received in Settlement of Commodity Derivative Instruments	203,303			116,868
Deferred Income Taxes	(72,866		)	(273,497		)
Equity in Earnings of Affiliates	(41,239		)	(38,838		)
Return on Equity Investment	22,268			31,111
Changes in Operating Assets:
Accounts and Notes Receivable	4,555			119,064
Inventories	4,169			(9,922		)
Prepaid Expenses	71,423			103,466
Changes in Other Assets	(14,241		)	22,483
Changes in Operating Liabilities:
Accounts Payable	(12,654		)	(123,171		)
Accrued Interest	35,985			63,879
Other Operating Liabilities	(21,370		)	(105,692		)
Changes in Other Liabilities	(2,620		)	(12,360		)
Other	11,937			9,369
Net Cash Provided by Continuing Operating Activities	372,211			393,515
Net Cash Provided by Discontinued Operating Activities	14,427			10,768
Net Cash Provided by Operating Activities	386,638			404,283
Investing Activities:
Capital Expenditures	(179,389		)	(864,262		)
Proceeds from Sales of Assets	38,977			83,044
Net Investments in Equity Affiliates	(4,555		)	(70,224		)
Net Cash Used in Continuing Investing Activities	(144,967		)	(851,442		)
Net Cash Provided by (Used in) Discontinued Investing Activities	366,251			(30,894		)
Net Cash Provided by (Used in) Investing Activities	221,284			(882,336		)
Financing Activities:
(Payments on) Proceeds from Short-Term Borrowings	(598,000		)	945,000
Payments on Miscellaneous Borrowings	(6,222		)	(1,523		)
Payments on Long-Term Notes, including Redemption Premium	—			(1,263,719		)
Net Proceeds from Revolver - CNX Coal Resources LP	23,000			180,000
Proceeds from Sale of MLP Interest	—			148,359
Distributions to Noncontrolling Interest	(16,241		)	—
Proceeds from Issuance of Long-Term Notes	—			492,760
Tax Benefit from Stock-Based Compensation	—			208
Dividends Paid	(2,294		)	(30,991		)
Issuance of Common Stock	4			8,288
Purchases of Treasury Stock	—			(71,674		)
Debt Issuance and Financing Fees	(482		)	(22,586		)
Net Cash (Used in) Provided by Continuing Financing Activities	(600,235		)	384,122
Net Cash Used in Discontinued Financing Activities	(14		)	(39		)
Net Cash (Used in) Provided by Financing Activities	(600,249		)	384,083
Net Increase (Decrease) in Cash and Cash Equivalents	7,673			(93,970		)
Cash and Cash Equivalents at Beginning of Period	72,574			176,985
Cash and Cash Equivalents at End of Period	$	80,247		$	83,015

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 and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for future periods.

The Consolidated Balance Sheet at December 31, 2015 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, 2015 included in CONSOL Energy Inc.'s Annual Report on Form 10-K.

During the nine months ended September 30, 2016, CONSOL Energy Inc. ("CONSOL Energy" or "the Company") made certain adjustments to the financial statements to reflect the sale of the Buchanan Mine and the Fola and Miller Creek Mining Complexes, which are now reflected under discontinued operations. Additionally, CONSOL Energy made reclassifications within its financial statements to better align the Company's financial reporting with its peer group. These reclassifications impacted the Lease Operating Expense, Transportation, Gathering and Compression, Direct Administrative and Selling, Production Royalty Interests and Purchased Gas Sales, Production Royalty Interests and Purchased Gas Costs, Operating and Other Costs and Selling, General and Administrative Costs line items on the Company's Consolidated Statements of Income. These changes are reflected in CONSOL Energy's current and historic Consolidated Statements of Income, with no effect on previously reported net income or stockholders’ equity.

Basic earnings per share are computed by dividing net income attributable to CONSOL Energy Shareholders 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, 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 and performance share 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 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:



	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2016	2015	2016	2015
Anti-Dilutive Options	2,989,610	3,650,864	6,230,099	3,650,864
Anti-Dilutive Restricted Stock Units	3,455	785,585	645,302	1,394,115
Anti-Dilutive Performance Share Units	1,659,014	—	2,326,120	—
Anti-Dilutive Performance Stock Options	802,804	802,804	802,804	802,804
	5,454,883	5,239,253	10,004,325	5,847,783

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



	For the Three Months Ended September 30,		For the Nine Months Ended September 30,
	2016	2015	2016	2015
Options	—	—	—	363,620
Restricted Stock Units	5,920	90,055	574,310	576,562
Performance Share Units	—	—	—	497,134
	5,920	90,055	574,310	1,437,316

No options were exercised during the three and nine months ended September 30, 2016 or during the three months ended September 30, 2015. The weighted average exercise price per share of the options exercised during the nine months ended September 30, 2015 was $22.78.

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



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2016			2015			2016			2015
Income (Loss) from Continuing Operations	$	62,568		$	129,312		$	(214,770	)	$	(395,609	)
Loss from Discontinued Operations	(34,975		)	(3,842		)	(322,747		)	(3,192		)
Net Income (Loss)	$	27,593		$	125,470		$	(537,517	)	$	(398,801	)
Net Income Attributable to Noncontrolling Interest	2,248			6,490			4,541			6,490
Net Income (Loss) Attributable to CONSOL Energy Shareholders	$	25,345		$	118,980		$	(542,058	)	$	(405,291	)
Weighted Average Shares of Common Stock Outstanding:
Basic	229,438,612			229,036,172			229,369,309			229,230,571
Effect of Stock-Based Compensation Awards	2,079,973			315,955			—			—
Dilutive	231,518,585			229,352,127			229,369,309			229,230,571
Income (Loss) per Share:
Basic (Continuing Operations)	$	0.26		$	0.54		$	(0.96	)	$	(1.75	)
Basic (Discontinued Operations)	(0.15		)	(0.02		)	(1.40		)	(0.02		)
Total Basic	$	0.11		$	0.52		$	(2.36	)	$	(1.77	)

Dilutive (Continuing Operations)	$	0.26		$	0.54		$	(0.96	)	$	(1.75	)
Dilutive (Discontinued Operations)	(0.15		)	(0.02		)	(1.40		)	(0.02		)
Total Dilutive	$	0.11		$	0.52		$	(2.36	)	$	(1.77	)

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



	Gains on Cash Flow Hedges			Postretirement Benefits			Total
Balance at December 31, 2015	$	43,470		$	(359,068	)	$	(315,598	)
Other Comprehensive Loss before Reclassifications	—			(13,912		)	(13,912		)
Amounts reclassified from Accumulated Other Comprehensive Loss	(33,475		)	20,778			(12,697		)
Current period Other Comprehensive (Loss) Income	(33,475		)	6,866			(26,609		)
Balance at September 30, 2016	$	9,995		$	(352,202	)	$	(342,207	)

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



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2016			2015			2016			2015
Derivative Instruments (Note 14)
Natural Gas Price Swaps and Options	$	(19,597	)	$	(32,409	)	$	(52,759	)	$	(95,843	)
Tax Expense	7,139			11,807			19,284			35,123
Net of Tax	$	(12,458	)	$	(20,602	)	$	(33,475	)	$	(60,720	)
Actuarially Determined Long-Term Liability Adjustments* (Note 5 and Note 6)
Amortization of Prior Service Costs	$	(148	)	$	(133,851	)	$	(443	)	$	(203,159	)
Recognized Net Actuarial Loss	6,332			41,755			17,549			80,497
Curtailment Loss	—			5			—			5
Settlement Loss	3,651			3,132			17,347			3,132
Total	9,835			(88,959		)	34,453			(119,525		)
Tax (Benefit) Expense	(3,664		)	33,436			(12,861		)	44,923
Net of Tax	$	6,171		$	(55,523	)	$	21,592		$	(74,602	)

*Excludes amounts related to the remeasurement of the Actuarially Determined Long-Term Liabilities. Also excludes $815, net of tax, of reclassifications out of Accumulated Other Comprehensive Income related to discontinued operations for the nine months ended September 30, 2016.

NOTE 2—DISCONTINUED OPERATIONS:

In August, 2016, CONSOL Energy completed the sale of its Miller Creek Mining Complex and Fola Mining Complex subsidiaries. In the transaction, the buyer acquired the Miller Creek and Fola assets and assumed the Miller Creek and Fola mine closing and reclamation liabilities; in order to equalize the value exchange, CONSOL Energy paid $28,271 cash at closing, which included property taxes associated with the properties sold and other closing costs (a portion of which will be held in escrow for purposes of obtaining the surety bonds required for the the permits to transfer). These amounts were included in Net Cash Provided by Discontinued Investing Activities on the Consolidated Statements of Cash Flow. In addition, CONSOL Energy will pay a total of $17,200 in installments over the next four years. The net loss on sale of $53,130, excluding the related impairment charge discussed below, was included in Loss from Discontinued Operations, net on the Consolidated Statements of Income. Prior to the closing, the Miller Creek and Fola Mining Complexes were classified as held for sale in discontinued operations and in accordance with the accounting guidance for Property, Plant and Equipment, assets held for sale are measured at the lower of the carrying value or fair value less costs to sell. Upon meeting the assets held for sale criteria, the Company determined the carrying value of the Fola and Miller Creek mining complexes exceeded the fair value less costs to sell. As a result, an impairment charge of $355,681 was recorded during the nine months ended September 30, 2016. This impairment is included in the Loss from Discontinued Operations, net on the Consolidated Statements of Income.

On March 31, 2016, CONSOL Energy completed the sale of its membership interests in CONSOL Buchanan Mining Company, LLC (BMC), which owned and operated the Buchanan Mine located in Mavisdale, Virginia; various assets relating to the Amonate Mining Complex located in Amonate, Virginia; Russell County, Virginia coal reserves and Pangburn Shaner Fallowfield coal reserves located in Southwestern, Pennsylvania to Coronado IV LLC ("Coronado"). Various CONSOL Energy assets were excluded from the sale including coalbed methane, natural gas and minerals other than coal, current assets of BMC, certain coal seams, certain surface rights, and the Amonate Preparation Plant. Coronado assumed only specified liabilities and various CONSOL Energy liabilities were excluded and not assumed. The excluded liabilities included BMC’s indebtedness, trade payables and liabilities arising prior to closing, as well as the liabilities of the subsidiaries other than BMC which are parties to the sale. In addition, the buyer agreed to pay CONSOL Energy for Buchanan Mine coal sold outside the U.S. and Canada during the five years following closing a royalty of 20% of any excess of the gross sales price per ton over the following amounts: (1) year one, $75.00 per ton; (2) year two, $78.75 per ton; (3) year three, $82.69 per ton; (4) year four, $86.82 per ton; (5) year five, $91.16 per ton. At closing, the parties entered into several agreements including, among others, agreements relating to the coordination and conduct of gas operations at the mines, an option to purchase the Amonate Preparation Plant and transition services. Cash proceeds of $402,799 were received at closing and are included in Net Cash Provided by Discontinued Investing Activities on the Consolidated Statements of Cash Flow. The net loss on the sale was $38,364 and was included in Loss from Discontinued Operations, net on the Consolidated Statements of Income.

For all periods presented in the accompanying Consolidated Statements of Income, BMC along with the various other assets and the Fola and Miller Creek Mining Complexes are classified as discontinued operations.

The following table details selected financial information for the divested business included within discontinued operations:



	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2016			2015			2016			2015
Coal Sales	$	6,974		$	80,432		$	102,904		$	286,557
Freight-Outside Coal	305			783			1,322			3,791
Miscellaneous Other Income	2,204			3			2,237			33
Gain (Loss) on Sale of Assets	(53,119		)	80			(91,372		)	274
Total Revenue and Other Income	$	(43,636	)	$	81,298		$	15,091		$	290,655
Total Costs	11,789			92,865			124,865			302,055
Loss From Operations Before Income Taxes	$	(55,425	)	$	(11,567	)	$	(109,774	)	$	(11,400	)
Impairment on Assets Held for Sale	—			—			355,681			—
Income Tax Benefit	(20,450		)	(7,725		)	(142,708		)	(8,208		)
Loss From Discontinued Operations, net	$	(34,975	)	$	(3,842	)	$	(322,747	)	$	(3,192	)

The major classes of assets and liabilities of discontinued operations:



	September 30, 2016		December 31, 2015
Assets:
Accounts Receivable - Trade	$	2,107	$	49,125
Inventories	—		30,646
Prepaid Expense	—		970
Other Current Assets	4		365
Total Current Assets	$	2,111	$	81,106
Property, Plant and Equipment, Net	—		936,670
Other Assets	—		4,044
Total Assets of Discontinued Operations	$	2,111	$	1,021,820
Liabilities:
Accounts Payable	$	303	$	20,786
Other Current Liabilities	361		30,728
Total Current Liabilities	$	664	$	51,514
Long Term Debt	—		5,001
Pneumoconiosis Benefits	—		1,129
Mine Closing	—		71,941
Reclamation	—		34,126
Other liabilities	—		792
Total Liabilities of Discontinued Operations	$	664	$	164,503

NOTE 3—ACQUISITIONS AND DISPOSITIONS:

In September 2015, CONSOL Energy sold its 49% interest in Western Allegheny Energy (WAE), a joint venture with Rosebud Mining Company engaged in coal mining activities in Pennsylvania. At closing, CONSOL Energy received $76,297 in cash and a $2,136 reduction in certain liabilities. During the quarter, CONSOL Energy also received a cash distribution of $10,780 from WAE. The net gain on the sale was $48,468 and was included in the Gain on Sale of Assets in the Consolidated Statements of Income.

In December 2014, CNX Gas Company LLC (CNX Gas Company), wholly-owned subsidiary of CONSOL Energy, finalized an agreement with Columbia Energy Ventures (CEVCO) to sublease from CEVCO 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 was to be paid by CONSOL Energy over a five year period, as drilling occurs, in addition to royalties. CONSOL Energy made payments of $9,000 to CEVCO in the nine months ended September 30, 2016 while $50,970 of payments were made for the nine months ended September 30, 2015. At September 30, 2016, the amounts recorded in Other Current Liabilities and Other Long-Term Liabilities were $3,947 and $26,461, respectively. At December 31, 2015, the amounts recorded in Other Current Liabilities and Other Long-Term Liabilities were $8,349 and $29,333, respectively.

NOTE 4—MISCELLANEOUS OTHER INCOME:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Equity in Earnings of Affiliates - CONE	$	14,153	$	12,733	$	36,709	$	29,770
Rental Income	8,983		9,439		27,258		28,437
Gathering Revenue	2,602		1,426		7,998		7,379
Royalty Income - Non-Operated Coal	2,011		4,847		6,664		12,989
Purchased Coal Sales	1,908		—		2,512		1,596
Equity in Earnings of Affiliates - Other	1,202		2,855		4,530		9,068
Interest Income	214		361		975		1,868
Right of Way Issuance	149		5,252		17,952		13,202
Coal Contract Buyout	—		—		6,288		—
Other	1,171		1,562		3,273		6,970
Total Miscellaneous Other Income	$	32,393	$	38,475	$	114,159	$	111,279

NOTE 5—COMPONENTS OF PENSION AND OTHER POST-EMPLOYMENT BENEFIT (OPEB) PLANS NET PERIODIC BENEFIT COSTS:

Components of net periodic benefit costs are as follows:



	Pension Benefits												Other Post-Employment Benefits
	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2016			2015			2016			2015			2016		2015			2016		2015
Service Cost	$	482		$	2,162		$	1,445		$	6,862		$	—	$	—		$	—	$	—
Interest Cost	5,895			8,042			19,578			25,202			6,060		6,677			18,181		20,561
Expected Return on Plan Assets	(11,195		)	(12,903		)	(34,933		)	(38,282		)	—		—			—		—
Amortization of Prior Service Credits	(148		)	(166		)	(443		)	(518		)	—		(133,685		)	—		(202,641		)
Recognized net Actuarial Loss	2,743			5,335			6,975			19,215			4,792		37,713			14,376		65,161
Settlement Loss	3,651			3,132			17,347			3,132			—		—			—		—
Curtailment Loss	—			5			—			5			—		—			—		—
Net Periodic Benefit Cost (Credit)	$	1,428		$	5,607		$	9,969		$	15,616		$	10,852	$	(89,295	)	$	32,557	$	(116,919	)

For the nine months ended September 30, 2016 and 2015, $1,964 and $8,366 was paid to the pension trust from operating cash flows, respectively. Additional contributions to the pension trust are not expected to be material for the remainder of 2016.

According to the Defined Benefit Plans Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification, if the lump sum distributions made during a plan year, which for CONSOL Energy is January 1 to December 31, exceed the total of the projected service cost and interest cost for the plan year, settlement accounting is required. Lump sum payments exceeded this threshold during the three and nine months ended September 30, 2016. Accordingly, CONSOL Energy recognized settlement expense of $3,651 and $17,347 for the three and nine months ended September 30, 2016, respectively, in Other Costs - Miscellaneous Operating Expense in the Consolidated Statements of Income. The settlement charges resulted in remeasurements of the pension plan at September 30, 2016 and June 30, 2016, which increased the pension liability by $7,486 and $6,203, respectively.

Lump sum payments also exceeded the settlement threshold during the three and nine months ended September 30, 2015. Accordingly, settlement expense of $3,132 was recognized for the three and nine months ended September 30, 2015 in Other Costs - Miscellaneous Operating Expense in the Consolidated Statements of Income. Settlement accounting was triggered in July 2015, resulting in a remeasurement of the pension plan at July 31. This remeasurement reduced the pension liability by $1,328.

On August 31, 2015, the qualified pension plan was remeasured to reflect an announced plan amendment that reduced accruals of pension benefits as of January 1, 2016. The plan amendment called for a hard freeze of the qualified defined benefit

pension plan on January 1, 2016 for all remaining participants in the plan. The modifications to the pension plan resulted in a $26,352 reduction in the pension liability. The amendment resulted in a remeasurement of the qualified pension plan at August 31, 2015. The remeasurement increased the pension liability by $17,793.

In the third quarter of 2015, CONSOL Energy remeasured its pension plan as a result of the previously discussed plan amendment. In conjunction with this remeasurement, the method used to estimate the service and interest components of net periodic benefit cost for pension was changed. This change was also made to other postretirement benefits during the fourth quarter during the annual remeasurement of that plan. This change compared to the previous method resulted in a decrease in the service and interest components for pension cost in the third quarter. Historically, CONSOL Energy estimated these service and interest cost components utilizing a single weighted-average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. CONSOL Energy has elected to utilize a full yield curve approach in the estimation of these components by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flows. This change was made to provide a more precise measurement of service and interest costs by improving the correlation between projected benefit cash flows to the corresponding spot yield curve rates. This change does not affect the measurement of the total benefit obligations or the annual net periodic benefit cost as the change in the service and interest costs is completely offset in the actuarial (gain) loss reported. CONSOL Energy has accounted for this change as a change in accounting estimate that is inseparable from a change in accounting principle and accordingly has accounted for it prospectively.

On May 31, 2015, the Salaried OPEB and Production and Maintenance (P&M) OPEB plans were remeasured to reflect a plan amendment which eliminated Salaried and P&M OPEB benefits at December 31, 2015. The amendment to the OPEB plan resulted in a $43,598 reduction in the OPEB liability.The amendment resulted in a remeasurement of the OPEB plan at May 31, 2015 which decreased the liability by $1,070.

CONSOL Energy does not expect to contribute to the other post-employment benefit plan in 2016. The Company intends to pay benefit claims as they become due. For the nine months ended September 30, 2016 and 2015, $35,120 and $40,547 of other post-employment benefits have been paid, respectively.

NOTE 6—COMPONENTS OF COAL WORKERS’ PNEUMOCONIOSIS (CWP) AND WORKERS’ COMPENSATION NET PERIODIC BENEFIT COSTS:

Components of net periodic benefit costs are as follows:



	CWP												Workers' Compensation
	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2016			2015			2016			2015			2016			2015			2016			2015
Service Cost	$	1,041		$	1,623		$	3,285		$	4,868		$	1,904		$	2,347		$	5,713		$	7,042
Interest Cost	1,053			1,279			3,230			3,837			638			799			1,913			2,396
Amortization of Actuarial Gain	(1,188		)	(1,394		)	(3,759		)	(4,182		)	(101		)	(8		)	(303		)	(23		)
State Administrative Fees and Insurance Bond Premiums	—			—			—			—			792			888			2,491			2,764
Curtailment Gain	—			—			(1,307		)	—			—			—			—			—
Net Periodic Benefit Cost	$	906		$	1,508		$	1,449		$	4,523		$	3,233		$	4,026		$	9,814		$	12,179

Expense (income) attributable to discontinued operations included in the CWP net periodic cost above was $74 for the three months ended September 30, 2015, and $(1,290) and $223 for the nine months ended September 30, 2016 and 2015, respectively.

On March 31, 2016, CONSOL Energy completed the sale of its membership interests in BMC (See Note 2 - Discontinued Operations). As a result of the sale, certain obligations of the CWP plan were transferred to the buyer. This transfer triggered a curtailment gain of $1,307. The curtailment resulted in a plan remeasurement increasing plan liabilities by $5,014 at March 31, 2016.

CONSOL Energy does not expect to contribute to the CWP plan in 2016. The Company intends to pay benefit claims as they become due. For the nine months ended September 30, 2016 and 2015, $8,519 and $8,369 of CWP benefit claims have been paid, respectively.

CONSOL Energy does not expect to contribute to the workers’ compensation plan in 2016. The Company intends to pay benefit claims as they become due. For the nine months ended September 30, 2016 and 2015, $11,547 and $12,540 of workers’ compensation benefits, state administrative fees and surety bond premiums have been paid, respectively.

NOTE 7—INCOME TAXES:

The effective tax rate for the three and nine months ended September 30, 2016 was 46.7% and 24.7%, respectively. The effective tax rate is different from the U.S. federal statutory rate of 35% primarily due to charges to record state valuation allowances and the effects of the 2010-2013 Federal tax audit still in progress, partially offset by a larger anticipated book loss and the income tax benefit for excess percentage depletion.

The effective tax rate for the three and nine months ended September 30, 2015 was 34.9% and 38.4%, respectively. The effective tax rate is different from the U.S. federal statutory rate of 35% primarily due to impairment charges recorded in June 2015. In addition, as the Company's loss for the nine months ended September 30, 2015 exceeded the anticipated ordinary loss for the full year, the tax benefit recognized for the nine months ended September 30, 2015 was limited to the amount that would be recognized if the year-to-date ordinary loss were the anticipated ordinary loss for the full year. Another item contributing to the benefit is the deduction for percentage depletion in excess of cost depletion related to the Company's coal operations.

The total amount of uncertain tax positions at September 30, 2016 and December 31, 2015 were $15,536 and $12,702, respectively. If these uncertain tax positions were recognized, approximately $2,834 would affect CONSOL Energy's effective tax rate at September 30, 2016. There would be no effect on the Company's effective tax rate at December 31, 2015. There was an increase of $2,834 to the liability for unrecognized tax benefits during the nine months ended September 30, 2016.

CONSOL Energy recognizes accrued interest related to uncertain tax positions in interest expense. As of September 30, 2016 and December 31, 2015, the Company reported an accrued interest liability relating to uncertain tax positions of $242 and $53, respectively, in Other Liabilities on the Consolidated Balance Sheets. The accrued interest liability includes $189 of accrued interest expense that is reflected in the Company's Consolidated Statements of Income for the nine months ended September 30, 2016.

CONSOL Energy recognizes penalties accrued related to uncertain tax positions in its income tax expense. As of September 30, 2016 and December 31, 2015, CONSOL Energy had no accrued liabilities for tax penalties related to uncertain tax positions.

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 conclude its audit of tax years 2010 through 2013 in the fourth quarter of 2016.

NOTE 8—INVENTORIES:

Inventory components consist of the following:



	September 30, 2016		December 31, 2015
Coal	$	8,367	$	4,660
Supplies	54,255		62,132
Total Inventories	$	62,622	$	66,792

Inventories are stated at the lower of cost or net realizable value. 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. The cost of supplies inventory is determined by the average cost method and includes operating and maintenance supplies to be used in the Company's natural gas and coal operations.

NOTE 9—ACCOUNTS RECEIVABLE SECURITIZATION:

CONSOL Energy and certain of its U.S. subsidiaries were party to a trade accounts receivable facility with financial institutions for the sale on a continuous basis of eligible trade accounts receivable. This facility was terminated on July 7, 2015.

CNX Funding Corporation, a wholly owned, special purpose, bankruptcy-remote subsidiary, bought and sold eligible trade receivables generated by certain subsidiaries of CONSOL Energy. Under the receivables facility, CONSOL Energy and certain

subsidiaries, irrevocably and without recourse, sold all of their eligible trade accounts receivable to CNX Funding Corporation, who in turn sold 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 was included in Accounts and Notes Receivable-Trade in the Consolidated Balance Sheets, was 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 were part of this program, the fair value of its retained interest approximated the total amount of the designated pool of accounts receivable. CONSOL Energy serviced the sold trade receivables for the financial institutions for a fee based upon market rates for similar services.

NOTE 10—PROPERTY, PLANT AND EQUIPMENT:



	September 30, 2016		December 31, 2015
E&P Property, Plant and Equipment
Intangible drilling cost	$	3,515,485	$	3,452,989
Proved gas properties	1,933,211		1,922,602
Unproved gas properties	1,429,905		1,421,083
Gas gathering equipment	1,133,840		1,147,173
Gas wells and related equipment	819,902		785,744
Other gas assets	127,984		125,691
Gas advance royalties	15,265		19,745
Total E&P Property, Plant and Equipment	$	8,975,592	$	8,875,027
Less: Accumulated Depreciation, Depletion and Amortization	3,002,288		2,695,674
Total E&P Property, Plant and Equipment - Net	$	5,973,304	$	6,179,353

PA Mining Operations Property, Plant and Equipment
Coal and other plant and equipment	$	2,300,650	$	2,284,175
Coal properties and surface lands	457,372		456,044
Airshafts	368,031		351,870
Mine development	326,153		326,153
Coal advance mining royalties	16,294		16,263
Leased coal lands	26,569		26,402
Total PA Mining Operations and Other Property, Plant and Equipment	$	3,495,069	$	3,460,907
Less: Accumulated Depreciation, Depletion and Amortization	1,728,423		1,603,642
Total PA Mining Operations and Other Property, Plant and Equipment - Net	$	1,766,646	$	1,857,265

Other Property, Plant and Equipment
Coal and other plant and equipment	561,575		569,261
Coal properties and surface lands	481,371		313,493
Airshafts	10,002		10,002
Mine development	17,987		18,145
Coal advance mining royalties	314,537		312,452
Leased coal lands	64,582		235,620
Total Other Property, Plant and Equipment	$	1,450,054	$	1,458,973
Less: Accumulated Depreciation, Depletion and Amortization	775,385		762,885
Total Other Property, Plant and Equipment - Net	$	674,669	$	696,088

Total Company Property, Plant and Equipment	$	13,920,715	$	13,794,907
Less - Total Company Accumulated Depreciation, Depletion and Amortization	5,506,096		5,062,201
Total Property, Plant and Equipment of Continuing Operations - Net	$	8,414,619	$	8,732,706

Impairment of Proved Properties

CONSOL Energy performs a quantitative annual impairment test, during the fourth quarter of each year, over proved properties using the published NYMEX forward prices, timing, methods and other assumptions consistent with historical periods. During interim periods, management updates these annual tests whenever events or changes in circumstances indicate that a property’s

carrying amount may not be recoverable. Throughout the first six months of 2015, spot prices and forward curves for natural gas continued to decline from December 31, 2014 prices, which together with other macro-economic factors in the exploration and production industry were deemed indicators of impairment for all of the Company's proved natural gas properties. Impairment tests require that the Company first compare future undiscounted cash flows by asset group to their respective carrying values. If the carrying amount exceeds the estimated undiscounted future cash flows, a reduction of the carrying amount of the natural gas properties to their estimated fair values is required, which is determined based on discounted cash flow techniques using a market-specific weighted average cost of capital.

During the quarter ended June 30, 2015, certain of the Company’s proved properties, primarily shallow oil and gas assets, failed the undiscounted cash flow portion of the test. After performing the discounted cash flow portion of the test, CONSOL Energy recorded an impairment of $824,742 in the Impairment of Exploration and Production Properties in the Consolidated Statement of Income. Valuation of the impaired assets is a Level 3 measurement as it incorporates significant unobservable inputs, such as future production levels and operating costs, within the discounted cash flow analysis. The impairment related to approximately 95% of the Company’s shallow oil and gas assets in West Virginia and Pennsylvania. No such impairments were recorded during the three or nine months ended September 30, 2016.

Impairment of Unproved Properties

CONSOL Energy evaluates capitalized costs of unproved gas properties for recoverability on a prospective basis. Indicators of potential impairment include potential shifts in business strategy, overall economic factors and historical experience. For the quarter ended June 30, 2015, unproved property impairments relating to the determination that the properties will not yield proved reserves were $4,163 and are included in the Impairment of Exploration and Production Properties in the Consolidated Statement of Income. Valuation of the impaired assets is a Level 3 measurement as it incorporates significant unobservable inputs, such as future production levels and operating costs, within the discounted cash flow analysis. This impairment primarily related to the court ruling in June 2015 in the state of New York that officially bans hydraulic fracturing. No such impairments were recorded during the three or nine months ended September 30, 2016.

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 is party to a joint development agreement with Hess Ohio Developments, LLC (Hess) with respect to approximately 155 thousand 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 September 30, 2016, Hess’ remaining carry obligation is $6,193.

CNX Gas Company is party to a joint development agreement with Noble Energy, Inc. (Noble) with respect to approximately 700 thousand net Marcellus Shale natural gas and oil 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, until November 1, 2014 at which time natural gas prices had fallen below $4.00/MMbtu for three consecutive months. The carry remains suspended. Limitations also include a $400,000 annual maximum on Noble Energy's carried cost obligation. As of September 30, 2016, Noble Energy’s remaining carry obligation is $1,624,448.

NOTE 11—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 syndication agent and approved by the required number of lenders in good faith by calculating a value of CONSOL Energy's proved natural 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. In April 2016, the facility was amended to require that the Company must: (i) prepay outstanding loans under the revolving credit facility to the extent that cash on hand exceeds $150,000 for two consecutive business days; (ii) mortgage 85% of its proved reserves and 80% of its proved developed producing reserves, in each case, which are included in the borrowing base; (iii) maintain applicable deposit, securities and commodities accounts with the lenders or affiliates thereof; and (iv) enter into control agreements with respect to such applicable accounts. In addition, the Company pledged the equity interest it holds in CONE Gathering, LLC, and CONE Midstream Partners, LP as collateral to secure loans under the credit agreement.

The facility also requires that CONSOL Energy maintain 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 no less than 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, measured quarterly. At September 30, 2016, the interest coverage ratio was 3.99 to 1.00 and the current ratio was 2.73 to 1.00. Further, the credit facility allows unlimited investments in joint ventures for the development and operation of natural gas gathering systems and permits CONSOL Energy to separate its E&P 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. The calculation of all of the ratios exclude CNX Coal Resources LP ("CNXC").

At September 30, 2016, the $2,000,000 facility had $354,000 of borrowings outstanding and $323,761 of letters of credit outstanding, leaving $1,322,239 of unused capacity. At December 31, 2015, the $2,000,000 facility had $952,000 of borrowings outstanding and $258,177 of letters of credit outstanding, leaving $789,823 of unused capacity.

NOTE 12—LONG-TERM DEBT:



	September 30, 2016			December 31, 2015
Debt:
Senior Notes due April 2022 at 5.875% (Principal of $1,850,000 plus Unamortized Premium of $4,953 and $5,617, respectively)	$	1,854,953		$	1,855,617
Senior Notes due April 2023 at 8.00% (Principal of $500,000 less Unamortized Discount of $5,882 and $6,561, respectively)	494,118			493,439
Revolving Credit Facility - CNX Coal Resources LP	208,000			185,000
MEDCO Revenue Bonds in Series due September 2025 at 5.75%	102,865			102,865
Senior Notes due April 2020 at 8.25%, Issued at Par Value	74,470			74,470
Senior Notes due March 2021 at 6.375%, Issued at Par Value	20,611			20,611
Advance Royalty Commitments (16.35% Weighted Average Interest Rate)	3,482			3,964
Other Long-Term Note Maturing in 2018 (Principal of $2,146 and $3,096 less Unamortized Discount of $162 and $327, respectively)	1,984			2,769
Less: Unamortized Debt Issuance Costs	29,028			33,017
	2,731,455			2,705,718
Net Amounts Due in One Year and Current Unamortized Debt Issuance Costs*	(2,549		)	(2,602		)
Long-Term Debt	$	2,734,004		$	2,708,320

* Represents $1,873 and $1,820 due in one year, less $4,422 of unamortized debt issuance costs at September 30, 2016 and December 31, 2015, respectively. Excludes current portion of Capital Lease Obligations of $7,019 and $7,590 at September 30, 2016 and December 31, 2015, respectively.

In March 2015, CONSOL Energy closed on the private placement of $500,000 of 8.00% senior notes due in 2023 (the "Notes") less $7,240 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 in 2020 and $229,176 of its outstanding 6.375% senior notes due in 2021. As part of this transaction, $67,734 was included in Loss on Debt Extinguishment on the Consolidated Statements of Income.

Also in April 2015, CONSOL Energy purchased $2,508 of its outstanding 8.25% senior notes due in 2020 and $213 of its outstanding 6.375% senior notes due in 2021. As part of this transaction, $17 was included in Loss on Debt Extinguishment on the Consolidated Statements of Income.

In July 2015, CNXC, entered into a Credit Agreement for a $400,000 revolving credit facility. As of September 30, 2016 and December 31, 2015, CNXC had $208,000 and $185,000 of outstanding borrowings on the facility, respectively. CONSOL Energy is not a guarantor of CNXC's revolving credit facility. See Note 18 - Related Party Transactions for more information.

NOTE 13—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 $642,852.

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 a Renewed Motion for Class Certification, and on June 23, 2015 CNX Gas Company filed its Opposition to same. The Court held a hearing on the Motion on September 18, 2015 and has not yet ruled. 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 U.S. 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 to 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 a Renewed Motion for Class Certification, and on June 23, 2015 CNX Gas Company filed its Opposition to same. The Court held a hearing on the Motion on September 18, 2015 and has not yet ruled. 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.

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 Elimination System (NPDES) 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 (PA DEP) 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. After negotiations, the parties reached an agreement in principle on the terms of a Consent

Decree naming CONSOL Energy Inc., Consol Pennsylvania Coal Company LLC and CNX Coal Resources LP as defendants. On August 4, 2016, EPA and PA DEP filed a Complaint and Notice of Lodging of the proposed Consent Decree in the U.S. District Court for the Western District of Pennsylvania. No comments were received on the Consent Decree before the public comment period closed. On September 14, 2016, the Court signed the Consent Decree and entered final judgment in this matter. The Consent Decree imposed on defendants a civil penalty of $3,000 and various compliance requirements. The Company has established an accrual to cover its liability in this matter. This accrual is immaterial to the overall financial position of CONSOL Energy and is included in Other Accrued Liabilities on the Consolidated Balance Sheets.

The following royalty and land rights 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 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 three lawsuits naming Consolidation Coal Company (CCC), Island Creek Coal Company (ICCC), CNX Gas Company, and/or CONSOL Energy. The lawsuits were filed in the U.S. District Court for the Western District of Virginia. On October 26, 2015, the trial court granted summary judgment in favor of the defendants in two of the actions upon its finding that plaintiffs' claims are barred by the applicable statutes of limitation. Plaintiffs have appealed both cases to the U.S. Court of Appeals for the Fourth Circuit, where oral argument is scheduled for December 8, 2016. The third case remains pending in the trial court. On January 26, 2016, six mine void lawsuits that have twice before been filed and voluntarily dismissed, were refiled for a third time in state court but have not been served. The Complaints seek damages and injunctive relief in connection with the transfer of water from mining activities at Buchanan Mine into void spaces in inactive ICCC mines adjacent to the Buchanan operations, 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, oil/gas or other mineral estates. The suits allege 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.

At September 30, 2016, 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 of total 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	$	82,273	$	54,574	$	27,699	$	—	$	—
Environmental	998		998		—		—		—
Other	240,490		37,477		203,013		—		—
Total Letters of Credit	323,761		93,049		230,712		—		—
Surety Bonds:
Employee-Related	112,810		111,760		1,050		—		—
Environmental	528,430		523,868		4,562		—		—
Other	22,522		21,371		1,149		2		—
Total Surety Bonds	663,762		656,999		6,761		2		—
Guarantees:
Coal	8,350		8,350		—		—		—
Other	77,622		41,693		18,386		13,860		3,683
Total Guarantees	85,972		50,043		18,386		13,860