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, 2017



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,” “smaller reporting company,” and “emerging growth 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

Emerging Growth Company o If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 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 16, 2017
Common stock, $0.01 par value		230,103,982

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, 2017 and 2016	4
	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2017 and 2016	5
	Consolidated Balance Sheets at September 30, 2017 and December 31, 2016	6
	Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2017	8
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2017 and 2016	9
	Notes to Unaudited Consolidated Financial Statements	10

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	42

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	82

ITEM 4.	Controls and Procedures	83

PART II OTHER INFORMATION

ITEM 1.	Legal Proceedings	83

ITEM 1A.	Risk Factors	84

ITEM 4.	Mine Safety Disclosures	84

ITEM 6.	Exhibits	85

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 - those hydrocarbons in natural gas that are separated from the gas as liquids through the process.

Net - “Net” natural gas or “net” acres are determined by adding the fractional ownership working interests the Company has in gross wells or acres.

Proved reserves - Quantities of oil, natural gas, and NGLs which, by analysis of geological and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods and government regulations prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation.

Proved developed reserves - Proved reserves which can be expected to be recovered through existing wells with existing equipment and operating methods.

Proved undeveloped reserves (PUDs) - Proved reserves that can be estimated with reasonable certainty to be recovered from new wells on undrilled proved acreage or from existing wells where a relatively major expenditure is required for completion.

Reservoir - A porous and permeable underground formation containing a natural accumulation of producible natural gas and/or oil that is confined by impermeable rock or water barriers and is separate from other reservoirs.

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:	2017			2016			2017		2016
Natural Gas, NGLs and Oil Sales	$	234,443		$	205,913		$	812,511	$	555,101
Gain on Commodity Derivative Instruments	19,183			198,192			80,508		53,872
Coal Sales	279,245			267,685			899,400		744,411
Other Outside Sales	16,959			4,714			45,986		20,687
Purchased Gas Sales	13,384			12,086			32,678		28,633
Freight-Outside Coal	21,803			9,392			51,847		33,949
Miscellaneous Other Income	41,036			32,393			115,669		114,159
Gain on Sale of Assets	45,230			15,203			197,343		13,541
Total Revenue and Other Income	671,283			745,578			2,235,942		1,564,353
Costs and Expenses:
Exploration and Production Costs
Lease Operating Expense	21,754			22,602			64,459		73,996
Transportation, Gathering and Compression	98,768			94,796			279,699		279,753
Production, Ad Valorem, and Other Fees	5,919			9,027			19,854		23,732
Depreciation, Depletion and Amortization	101,585			101,257			288,220		312,122
Exploration and Production Related Other Costs	4,479			384			33,980		5,036
Purchased Gas Costs	13,142			11,940			32,231		28,692
Other Corporate Expenses	26,844			21,760			68,172		65,980
Impairment of Exploration and Production Properties	—			—			137,865		—
Selling, General, and Administrative Costs	20,328			26,198			62,490		74,067
Total Exploration and Production Costs	292,819			287,964			986,970		863,378
PA Mining Operations Costs
Operating and Other Costs	207,772			182,717			608,678		521,277
Depreciation, Depletion and Amortization	41,638			42,370			125,341		125,334
Freight Expense	21,803			9,392			51,847		33,949
Selling, General, and Administrative Costs	18,664			7,653			50,637		20,207
Total PA Mining Operations Costs	289,877			242,132			836,503		700,767
Other Costs
Miscellaneous Operating Expense	35,518			39,658			117,007		126,580
Selling, General, and Administrative Costs	2,896			4,996			9,182		11,124
Depreciation, Depletion and Amortization	5,545			8,085			1,047		4,463
Loss on Debt Extinguishment	2,019			—			1,233		—
Interest Expense	41,502			47,317			129,367		144,609
Total Other Costs	87,480			100,056			257,836		286,776
Total Costs And Expenses	670,176			630,152			2,081,309		1,850,921
Earnings (Loss) From Continuing Operations Before Income Tax	1,107			115,426			154,633		(286,568		)
Income Tax Expense (Benefit)	26,758			52,858			39,962		(71,798		)
(Loss) Income From Continuing Operations	(25,651		)	62,568			114,671		(214,770		)
Loss From Discontinued Operations, net	—			(34,975		)	—		(322,747		)
Net (Loss) Income	(25,651		)	27,593			114,671		(537,517		)
Less: Net Income Attributable to Noncontrolling Interest	790			2,248			10,567		4,541
Net (Loss) Income Attributable to CONSOL Energy Shareholders	$	(26,441	)	$	25,345		$	104,104	$	(542,058	)

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

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(CONTINUED)



(Dollars in thousands, except per share data)	Three Months Ended						Nine Months Ended
(Unaudited)	September 30,						September 30,
(Loss) Earnings Per Share	2017			2016			2017		2016
Basic
(Loss) Income from Continuing Operations	$	(0.11	)	$	0.26		$	0.45	$	(0.96	)
Loss from Discontinued Operations	—			(0.15		)	—		(1.40		)
Total Basic (Loss) Earnings Per Share	$	(0.11	)	$	0.11		$	0.45	$	(2.36	)
Dilutive
(Loss) Income from Continuing Operations	$	(0.11	)	$	0.26		$	0.45	$	(0.96	)
Loss from Discontinued Operations	—			(0.15		)	—		(1.40		)
Total Dilutive (Loss) Earnings Per Share	$	(0.11	)	$	0.11		$	0.45	$	(2.36	)

Dividends Declared Per Share	$	—		$	—		$	—	$	0.01

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	Three Months Ended						Nine Months Ended
(Dollars in thousands)	September 30,						September 30,
(Unaudited)	2017			2016			2017		2016
Net (Loss) Income	$	(25,651	)	$	27,593		$	114,671	$	(537,517	)
Other Comprehensive Income (Loss) :
Actuarially Determined Long-Term Liability Adjustments (Net of tax: ($2,034), ($1,043), ($6,121), ($5,369))	3,464			1,305			10,430		6,866
Reclassification of Cash Flow Hedges from OCI to Earnings (Net of tax: $7,139, $19,284)	—			(12,458		)	—		(33,475		)

Other Comprehensive Income (Loss)	3,464			(11,153		)	10,430		(26,609		)

Comprehensive (Loss) Income	(22,187		)	16,440			125,101		(564,126		)

Less: Comprehensive Income Attributable to Noncontrolling Interest	779			2,248			10,533		4,541

Comprehensive (Loss) Income Attributable to CONSOL Energy Inc. Shareholders	$	(22,966	)	$	14,192		$	114,568	$	(568,667	)

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, 2017		December 31, 2016
ASSETS
Current Assets:
Cash and Cash Equivalents	$	285,708	$	60,475
Accounts and Notes Receivable:
Trade	193,778		220,222
Other Receivables	77,746		69,901
Inventories	63,182		65,461
Recoverable Income Taxes	105,432		116,851
Prepaid Expenses	79,437		93,146
Current Assets of Discontinued Operations	—		83
Total Current Assets	805,283		626,139
Property, Plant and Equipment:
Property, Plant and Equipment	13,738,388		13,771,388
Less—Accumulated Depreciation, Depletion and Amortization	5,939,426		5,630,949
Total Property, Plant and Equipment—Net	7,798,962		8,140,439
Other Assets:
Deferred Income Taxes	—		4,290
Investment in Affiliates	190,154		190,964
Other	185,169		222,149
Total Other Assets	375,323		417,403
TOTAL ASSETS	$	8,979,568	$	9,183,981

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, 2017			December 31, 2016
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable	$	303,196		$	241,616
Current Portion of Long-Term Debt	10,971			12,000
Other Accrued Liabilities	540,672			680,348
Current Liabilities of Discontinued Operations	5,353			6,050
Total Current Liabilities	860,192			940,014
Long-Term Debt:
Long-Term Debt	2,500,782			2,722,995
Capital Lease Obligations	31,530			39,074
Total Long-Term Debt	2,532,312			2,762,069
Deferred Credits and Other Liabilities:
Deferred Income Taxes	44,720			—
Postretirement Benefits Other Than Pensions	649,565			659,474
Pneumoconiosis Benefits	106,837			108,073
Mine Closing	198,764			218,631
Gas Well Closing	223,446			223,352
Workers’ Compensation	66,165			67,277
Salary Retirement	100,510			112,543
Other	125,822			151,660
Total Deferred Credits and Other Liabilities	1,515,829			1,541,010
TOTAL LIABILITIES	4,908,333			5,243,093
Stockholders’ Equity:
Common Stock, $.01 Par Value; 500,000,000 Shares Authorized, 230,090,909 Issued and Outstanding at September 30, 2017; 229,443,008 Issued and Outstanding at December 31, 2016	2,305			2,298
Capital in Excess of Par Value	2,486,071			2,460,864
Preferred Stock, 15,000,000 shares authorized, None issued and outstanding	—			—
Retained Earnings	1,825,547			1,727,789
Accumulated Other Comprehensive Loss	(382,092		)	(392,556		)
Total CONSOL Energy Inc. Stockholders’ Equity	3,931,831			3,798,395
Noncontrolling Interest	139,404			142,493
TOTAL EQUITY	4,071,235			3,940,888
TOTAL LIABILITIES AND EQUITY	$	8,979,568		$	9,183,981

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

CONSOL ENERGY INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY



(Dollars in thousands)	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, 2016	$	2,298	$	2,460,864	$	1,727,789		$	(392,556	)	$	3,798,395		$	142,493		$	3,940,888
(Unaudited)
Net Income	—		—		104,104			—			104,104			10,567			114,671
Other Comprehensive Income (Loss) (Net of ($6,121) Tax)	—		—		—			10,464			10,464			(34		)	10,430
Comprehensive Income	—		—		104,104			10,464			114,568			10,533			125,101
Issuance of Common Stock	7		852		—			—			859			—			859
Treasury Stock Activity	—		—		(6,346		)	—			(6,346		)	(1,009		)	(7,355		)
Amortization of Stock-Based Compensation Awards	—		24,355		—			—			24,355			3,790			28,145
Distributions to Noncontrolling Interest	—		—		—			—			—			(16,403		)	(16,403		)
Balance at September 30, 2017	$	2,305	$	2,486,071	$	1,825,547		$	(382,092	)	$	3,931,831		$	139,404		$	4,071,235

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,
Cash Flows from Operating Activities:	2017			2016
Net Income (Loss)	$	114,671		$	(537,517	)
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided By Operating Activities:
Net Loss from Discontinued Operations	—			322,747
Depreciation, Depletion and Amortization	414,608			441,919
Impairment of Exploration and Production Properties	137,865			—
Stock-Based Compensation	28,145			23,825
Gain on Sale of Assets	(197,343		)	(13,541		)
Loss on Debt Extinguishment	1,233			—
Gain on Commodity Derivative Instruments	(80,508		)	(53,872		)
Net Cash (Paid) Received in Settlement of Commodity Derivative Instruments	(61,717		)	203,303
Deferred Income Taxes	42,888			(72,866		)
Equity in Earnings of Affiliates	(34,810		)	(41,239		)
Return on Equity Investment	—			22,268
Changes in Operating Assets:
Accounts and Notes Receivable	18,231			4,555
Inventories	1,974			4,169
Prepaid Expenses	1,869			71,423
Changes in Other Assets	37,357			(14,241		)
Changes in Operating Liabilities:
Accounts Payable	23,700			(10,985		)
Accrued Interest	31,093			35,985
Other Operating Liabilities	(13,423		)	(21,370		)
Changes in Other Liabilities	(31,221		)	(2,620		)
Other	38,226			11,937
Net Cash Provided by Continuing Operating Activities	472,838			373,880
Net Cash (Used in) Provided by Discontinued Operating Activities	(614		)	14,427
Net Cash Provided by Operating Activities	472,224			388,307
Cash Flows from Investing Activities:
Capital Expenditures	(450,620		)	(179,389		)
Proceeds from Sales of Assets	426,878			38,977
Net Distributions from (Investments in) Equity Affiliates	35,620			(4,555		)
Net Cash Provided by (Used in) Continuing Investing Activities	11,878			(144,967		)
Net Cash Provided by Discontinued Investing Activities	—			366,251
Net Cash Provided by Investing Activities	11,878			221,284
Cash Flows from Financing Activities:
Payments on Short-Term Borrowings	—			(598,000		)
Payments on Miscellaneous Borrowings	(8,944		)	(6,222		)
Payments on Long-Term Notes	(213,728		)	—
Net (Payments on) Proceeds from Revolver - CNX Coal Resources LP	(13,000		)	23,000
Distributions to Noncontrolling Interest	(16,403		)	(16,241		)
Dividends Paid	—			(2,294		)
Issuance of Common Stock	859			4
Treasury Stock Activity	(7,355		)	(1,669		)
Debt Repurchase and Financing Fees	(298		)	(482		)
Net Cash Used in Continuing Financing Activities	(258,869		)	(601,904		)
Net Cash Used in Discontinued Financing Activities	—			(14		)
Net Cash Used in Financing Activities	(258,869		)	(601,918		)
Net Increase in Cash and Cash Equivalents	225,233			7,673
Cash and Cash Equivalents at Beginning of Period	60,475			72,574
Cash and Cash Equivalents at End of Period	$	285,708		$	80,247

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, 2017 are not necessarily indicative of the results that may be expected for future periods.

The Consolidated Balance Sheet at December 31, 2016 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, 2016 included in CONSOL Energy Inc.'s Annual Report on Form 10-K.

Certain amounts in prior periods have been reclassified to conform with the report classifications of the year ended December 31, 2016, with no effect on previously reported net income or stockholders' equity.

In March 2016, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update on stock compensation that was intended to simplify and improve the accounting and statement of cash flow presentation for income taxes at settlement, forfeitures, and net settlements for withholding tax. The guidance is effective for public entities for fiscal years beginning after December 15, 2016. In accordance with this Update, $64 and $4,629 of additional income tax expense was recognized in the Consolidated Statements of Income for the three and nine months ended September 30, 2017, respectively. Also in accordance with this Update, the value of shares withheld for employee tax withholding purposes of $7,355 and $1,669 for the nine months ended September 30, 2017 and 2016, respectively, were reclassified between Net Cash Provided by Operating Activities and Net Cash Used in Financing Activities of the Consolidated Statements of Cash Flows. As permitted by this Update, the Company has elected to account for forfeitures of stock compensation as they occur. The cumulative effect of the policy election to recognize forfeitures as they occur was nominal.

Basic earnings per share are computed by dividing net income attributable to CONSOL Energy Inc. ("CONSOL Energy" or the "Company") 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.

The table below sets forth the share-based awards that have been excluded from the computation of 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,
	2017	2016	2017	2016
Anti-Dilutive Options	5,407,465	2,989,610	2,731,362	6,230,099
Anti-Dilutive Restricted Stock Units	1,102,180	3,455	183,479	645,302
Anti-Dilutive Performance Share Units	1,793,302	1,659,014	—	2,326,120
Anti-Dilutive Performance Stock Options	802,804	802,804	802,804	802,804
	9,105,751	5,454,883	3,717,645	10,004,325

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,
	2017	2016	2017	2016
Options	17,048	—	107,510	—
Restricted Stock Units	14,776	5,920	349,037	574,310
Performance Share Units	—	—	560,936	—
	31,824	5,920	1,017,483	574,310

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,
	2017			2016			2017		2016
Numerator:
(Loss) Income from Continuing Operations	$	(25,651	)	$	62,568		$	114,671	$	(214,770	)
Less: Net Income Attributable to Non-Controlling Interest	790			2,248			10,567		4,541
Net (Loss) Income from Continuing Operations Attributable to CONSOL Energy Shareholders	$	(26,441	)	$	60,320		$	104,104	$	(219,311	)
Loss from Discontinued Operations	—			(34,975		)	—		(322,747		)
Net (Loss) Income Attributable to CONSOL Energy Shareholders	$	(26,441	)	$	25,345		$	104,104	$	(542,058	)

Denominator:
Weighted-average shares of common stock outstanding	230,080,797			229,438,612			229,986,428		229,369,309
Effect of dilutive shares	—			2,079,973			1,473,392		—
Weighted-average diluted shares of common stock outstanding	230,080,797			231,518,585			231,459,820		229,369,309
(Loss) Earnings per Share:
Basic (Continuing Operations)	$	(0.11	)	$	0.26		$	0.45	$	(0.96	)
Basic (Discontinued Operations)	—			(0.15		)	—		(1.40		)
Total Basic	$	(0.11	)	$	0.11		$	0.45	$	(2.36	)

Dilutive (Continuing Operations)	$	(0.11	)	$	0.26		$	0.45	$	(0.96	)
Dilutive (Discontinued Operations)	—			(0.15		)	—		(1.40		)
Total Dilutive	$	(0.11	)	$	0.11		$	0.45	$	(2.36	)

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



	Long-Term Liabilities
Balance at December 31, 2016	$	(392,556	)
Amounts Reclassified from Accumulated Other Comprehensive Loss	10,430
Add: Other Comprehensive Loss Attributable to Non-Controlling Interest	34
Balance at September 30, 2017	$	(382,092	)

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,
	2017			2016			2017			2016
Derivative Instruments (Note 13)
Natural Gas Price Swaps and Options	$	—		$	(19,597	)	$	—		$	(52,759	)
Tax Expense	—			7,139			—			19,284
Net of Tax	$	—		$	(12,458	)	$	—		$	(33,475	)
Actuarially Determined Long-Term Liability Adjustments* (Note 5 and Note 6)
Amortization of Prior Service Costs	$	(749	)	$	(148	)	$	(2,247	)	$	(443	)
Recognized Net Actuarial Loss	6,247			6,332			18,798			17,549
Settlement Loss	—			3,651			—			17,347
Total	5,498			9,835			16,551			34,453
Less: Tax Benefit	2,034			3,664			6,121			12,861
Net of Tax	$	3,464		$	6,171		$	10,430		$	21,592

*Excludes amounts related to the remeasurement of the Actuarially Determined Long-Term Liabilities for the nine months ended September 30, 2016.

NOTE 2—DISCONTINUED OPERATIONS:

In August 2016, CONSOL Energy completed the sale of the Miller Creek and Fola Mining Complexes. 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 of 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 permits to transfer). This amount was included in Net Cash Provided by Discontinued Investing Activities on the Consolidated Statements of Cash Flows for the nine months ended September 30, 2016. CONSOL Energy will also pay a total of $13,700 in remaining installments over the next three years, ending in January 2020. The net loss on the 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 required to be measured at the lower of 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 Miller Creek and Fola 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 was included in Loss from Discontinued Operations, net on the Consolidated Statements of Income.

In March 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 and certain surface rights and properties. 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 were 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. Total royalty income recognized under this agreement was $61 and $6,485 for the three and nine months ended September 30, 2017, respectively, and was included in Miscellaneous Other Income on the Consolidated Statements of Income. 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 Flows for the nine months ended September 30, 2016. 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 the nine months ended September 30, 2016.

For all periods presented in the accompanying Consolidated Statements of Income, BMC along with the various other assets and the Miller Creek and Fola 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			For the Nine Months Ended
	September 30, 2016			September 30, 2016
Coal Sales	$	6,974		$	102,904
Freight-Outside Coal	305			1,322
Miscellaneous Other Income	2,204			2,237
Loss on Sale of Assets	(53,119		)	(91,372		)
Total Revenue and Other Income	$	(43,636	)	$	15,091
Total Costs	11,789			124,865
Loss From Operations Before Income Taxes	$	(55,425	)	$	(109,774	)
Impairment on Assets Held for Sale	—			355,681
Income Tax Benefit	(20,450		)	(142,708		)
Loss From Discontinued Operations, net	$	(34,975	)	$	(322,747	)

The following table details the major classes of assets and liabilities of discontinued operations:



	September 30, 2017		December 31, 2016
Assets:
Accounts Receivable - Trade	$	—	$	83
Total Current Assets	$	—	$	83
Total Assets of Discontinued Operations	$	—	$	83
Liabilities:
Accounts Payable	$	—	$	36
Other Current Liabilities	5,353		6,014
Total Current Liabilities	$	5,353	$	6,050
Total Liabilities of Discontinued Operations	$	5,353	$	6,050

NOTE 3—ACQUISITIONS AND DISPOSITIONS:

In September 2017, CONSOL Energy closed on the sale of approximately 22,000 acres of surface land in Colorado. CONSOL Energy received net cash proceeds of $23,703 which is included in the cash flows from investing activities. The net gain on the sale was $18,758 and was included in the Gain on Sale of Assets in the Consolidated Statements of Income.

In a two part closing in July and September 2017, CONSOL Energy executed the sale of approximately 7,500 net undeveloped acres of the Marcellus Shale in Allegheny and Westmoreland counties, Pennsylvania. CONSOL Energy received total cash proceeds of $36,649 which is included in the cash flows from investing activities. The net gain on the sale of these assets was $15,251 and was included in the Gain on Sale of Assets in the Consolidated Statements of Income.

In June 2017, CONSOL Energy closed on the sale of approximately 11,100 net undeveloped acres of the Marcellus and Utica Shale in Allegheny, Washington, and Westmoreland counties, Pennsylvania. CONSOL Energy received total cash proceeds of $83,500 which is included in cash flows from investing activities. The net gain on the sale of these assets was $58,541 and was included in the Gain on Sale of Assets in the Consolidated Statements of Income.

In June 2017, the Company finalized the sale of 12 producing wells, 15 drilled but uncompleted wells (DUCs), and approximately 11,000 net developed and undeveloped Marcellus and Utica acres in Doddridge and Wetzel counties in West Virginia that were previously classified as held for sale. CONSOL Energy received total cash proceeds of $129,651 which is included in cash flows from investing activities, as well as undeveloped acreage. The net loss on the sale was $8,591 and was included in the Gain on Sale of Assets in the Consolidated Statements of Income.

In May 2017, CONSOL Energy finalized the sale of approximately 6,300 net undeveloped acres of the Utica-Point Pleasant Shale in Jefferson, Belmont and Guernsey counties, Ohio that were previously classified as held for sale. CONSOL Energy received total cash proceeds of $76,585 which is included in cash flows from investing activities. The net gain on the sale of these assets was $72,346 and was included in the Gain on Sale of Assets in the Consolidated Statements of Income.

In April 2017, CONSOL Energy finalized the sale of its Knox Energy LLC and Coalfield Pipeline Company subsidiaries that were previously classified as held for sale. At closing, CONSOL Energy received net cash proceeds of $18,944 which is included in cash flows from investing activities. The net gain on the sale of these assets was $606 and was included in the Gain on Sale of Assets in the Consolidated Statements of Income.

NOTE 4—MISCELLANEOUS OTHER INCOME:



	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Equity in Earnings of Affiliates - CONE*	$	12,035	$	14,153	$	33,969	$	36,709
Coal Contract Buyout	8,410		—		8,410		6,288
Purchased Coal Sales	3,568		1,908		9,667		2,512
Royalty Income - Non-Operated Coal	3,512		2,011		15,795		6,664
Gathering Revenue	2,575		2,602		8,276		7,998
Rental Income	1,991		8,983		13,666		27,258
Right of Way Issuance	1,888		149		3,660		17,952
Interest Income	1,306		214		9,382		975
Equity in Earnings of Affiliates - Other	390		1,202		841		4,530
Other	5,361		1,171		12,003		3,273
Miscellaneous Other Income	$	41,036	$	32,393	$	115,669	$	114,159

*Includes the Company's ownership interest in both CONE Gathering LLC and CONE Midstream Partners LP. See Note 17- Related Party for more information.

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

Components of Net Periodic Benefit (Credit) Cost 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,
	2017			2016			2017			2016			2017			2016		2017			2016
Service Cost	$	846		$	482		$	2,537		$	1,445		$	—		$	—	$	—		$	—
Interest Cost	6,428			5,895			19,285			19,578			5,986			6,060		17,958			18,181
Expected Return on Plan Assets	(10,596		)	(11,195		)	(31,787		)	(34,933		)	—			—		—			—
Amortization of Prior Service Credits	(148		)	(148		)	(443		)	(443		)	(601		)	—		(1,804		)	—
Recognized Net Actuarial Loss	2,351			2,743			7,052			6,975			5,778			4,792		17,334			14,376
Settlement Loss	—			3,651			—			17,347			—			—		—			—
Net Periodic Benefit (Credit) Cost	$	(1,119	)	$	1,428		$	(3,356	)	$	9,969		$	11,163		$	10,852	$	33,488		$	32,557

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

Components of Net Periodic Benefit Cost 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,
	2017			2016			2017			2016			2017			2016			2017			2016
Service Cost	$	1,129		$	1,041		$	3,388		$	3,285		$	1,463		$	1,904		$	4,389		$	5,713
Interest Cost	1,013			1,053			3,038			3,230			592			638			1,776			1,913
Amortization of Actuarial Gain	(1,908		)	(1,188		)	(5,724		)	(3,759		)	(153		)	(101		)	(458		)	(303		)
Administrative Fees	151			—			454			—			138			792			413			2,491
State Administrative Fees and Insurance Bond Premiums	—			—			—			—			621			—			2,009			—
Curtailment Gain	—			—			—			(1,307		)	—			—			—			—
Net Periodic Benefit Cost	$	385		$	906		$	1,156		$	1,449		$	2,661		$	3,233		$	8,129		$	9,814

Income attributable to discontinued operations included in the CWP net periodic cost above was $1,290 for the nine months ended September 30, 2016 and was included in 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 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 which was included in Loss from Discontinued Operations, net on the Consolidated Statements of Income. The curtailment resulted in a plan remeasurement which increased the plan liabilities by $7,713 at March 31, 2016.

NOTE 7—INCOME TAXES:

The effective tax rate for the three and nine months ended September 30, 2017 was 8,441.0% and 27.7%, respectively. The effective tax rate differs from the U.S. federal statutory rate of 35% primarily due to the income tax benefit for excess percentage depletion.

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 differs 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 in 2016, partially offset by a larger anticipated book loss and the income tax benefit for excess percentage depletion.

The total amount of uncertain tax positions at September 30, 2017 and December 31, 2016 was $8,437 and $9,103, respectively. If these uncertain tax positions were recognized, there would be no effect on CONSOL Energy's effective tax rate at September 30, 2017 and December 31, 2016.

CONSOL Energy recognizes accrued interest related to uncertain tax positions in interest expense. As of September 30, 2017 and December 31, 2016, the Company reported an accrued interest liability relating to uncertain tax positions of $539 and $305, respectively, in Other Liabilities on the Consolidated Balance Sheets. The accrued interest liability includes $234 of accrued interest expense that is reflected in the Company's Consolidated Statements of Income for the nine months ended September 30, 2017.

CONSOL Energy recognizes penalties accrued related to uncertain tax positions in its income tax expense. As of September 30, 2017 and December 31, 2016, 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 tax 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 2015. The Joint Committee on Taxation concluded its review of the audit of tax years 2010 through 2014 in the third quarter of 2017.

NOTE 8—INVENTORIES:

Inventory components consist of the following:



	September 30, 2017		December 31, 2016
Coal	$	9,905	$	7,800
Supplies	53,277		57,661
Total Inventories	$	63,182	$	65,461

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 E&P and coal operations.

NOTE 9—PROPERTY, PLANT AND EQUIPMENT:



	September 30, 2017		December 31, 2016
E&P Property, Plant and Equipment
Intangible drilling cost	$	3,663,552	$	3,583,565
Proved gas properties	1,950,232		2,016,916
Unproved gas properties	1,031,555		1,116,282
Gas gathering equipment	1,131,982		1,138,299
Gas wells and related equipment	825,201		791,996
Other gas assets	190,400		190,406
Gas advance royalties	13,323		13,762
Total E&P Property, Plant and Equipment	$	8,806,245	$	8,851,226
Less: Accumulated Depreciation, Depletion and Amortization	3,317,180		3,106,296
Total E&P Property, Plant and Equipment - Net	$	5,489,065	$	5,744,930

PA Mining Operations Property, Plant and Equipment
Coal and other plant and equipment	$	2,352,826	$	2,307,668
Coal properties and surface lands	460,688		458,398
Airshafts	378,296		371,752
Mine development	326,152		326,152
Coal advance mining royalties	16,136		16,224
Leased coal lands	26,556		26,566
Total PA Mining Operations and Other Property, Plant and Equipment	$	3,560,654	$	3,506,760
Less: Accumulated Depreciation, Depletion and Amortization	1,890,856		1,768,712
Total PA Mining Operations and Other Property, Plant and Equipment - Net	$	1,669,798	$	1,738,048

Other Property, Plant and Equipment
Coal and other plant and equipment	$	494,842	$	532,919
Coal properties and surface lands	476,281		481,126
Airshafts	10,003		10,003
Mine development	17,989		17,988
Coal advance mining royalties	311,538		310,530
Leased coal lands	60,836		60,836
Total Other Property, Plant and Equipment	$	1,371,489	$	1,413,402
Less: Accumulated Depreciation, Depletion and Amortization	731,390		755,941
Total Other Property, Plant and Equipment - Net	$	640,099	$	657,461

Total Company Property, Plant and Equipment - Continuing Operations	$	13,738,388	$	13,771,388
Less - Total Company Accumulated Depreciation, Depletion and Amortization	5,939,426		5,630,949
Total Property, Plant and Equipment of Continuing Operations - Net	$	7,798,962	$	8,140,439

Impairment of Long-Lived Assets

In February 2017, the Company approved a plan to sell subsidiaries Knox Energy LLC and Coalfield Pipeline Company (collectively, “Knox”). Knox met all of the criteria to be classified as held for sale in February 2017. The sale of Knox closed in the second quarter of 2017 (See Note 3 - Acquisitions and Dispositions for more information). The disposal of Knox did not represent a strategic shift that would have had a major effect on the Company’s operations and financial results and was, therefore, not classified as a discontinued operation in accordance with ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant and Equipment (Topic 360). As part of the required evaluation under the held for sale guidance, Knox’s book value was evaluated and it was determined that the approximate fair value less costs to sell Knox was less than the carrying value of the net assets to be sold. The resulting impairment of $137,865 was included in Impairment of Exploration and Production Properties within the Other Gas segment of the Consolidated Statements of Income in the nine months ended September 30, 2017.

Industry Participation Agreements

CONSOL Energy had 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 was 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 December 31, 2016, Hess' entire carry obligation has been met.

CNX Gas Company was party to a joint development agreement with Noble Energy, Inc. (Noble) with respect to approximately 700 thousand net Marcellus Shale oil and gas acres in West Virginia and Pennsylvania, in which each party owned a 50% undivided interest. In October 2016, CNX Gas entered into an Exchange Agreement with Noble Energy, which terminated the joint development agreement related to the jointly owned gas assets held in connection with the joint venture with Noble and divided such jointly owned gas assets among CNX Gas and Noble Energy. The transactions contemplated by the Exchange Agreement were closed on December 1, 2016 with an effective date of October 1, 2016. As part of the exchange: each party now owns and operates a 100% interest in properties and wells in two separate operating areas; each party has independent control and flexibility with respect to the scope and timing of future development over its operating area; and all acreage operated by CONSOL Energy and Noble Energy, Inc. in their respective operating areas will remain fully dedicated to CONE Midstream Partners LP. The exchange was accounted for as a mineral conveyance, thus no gain or loss was recorded in connection with the transaction. In June 2017, Noble Energy announced that it has closed on a transaction divesting its upstream assets in northern West Virginia and southern Pennsylvania to HG Energy II Appalachia, LLC, a portfolio company of Quantum Energy Partners.

NOTE 10—SHORT-TERM NOTES PAYABLE:

CONSOL Energy's 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 also request an additional $500,000 increase in the aggregate borrowing limit amount.

The 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 no less than 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, 2017, the interest coverage ratio was 5.46 to 1.00 and the current ratio was 3.09 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, 2017, the $2,000,000 facility had no borrowings outstanding and $314,260 of letters of credit outstanding, leaving $1,685,740 of unused capacity. At December 31, 2016, the $2,000,000 facility had no borrowings outstanding and $325,676 of letters of credit outstanding, leaving $1,674,324 of unused capacity.

NOTE 11—LONG-TERM DEBT:



	September 30, 2017		December 31, 2016
Debt:
Senior Notes due April 2022 at 5.875% (Principal of $1,730,975 and $1,850,000 plus Unamortized Premium of $3,804 and $4,731, respectively)	$	1,734,779	$	1,854,731
Senior Notes due April 2023 at 8.00% (Principal of $500,000 less Unamortized Discount of $4,977 and $5,656, respectively)	495,023		494,344
Revolving Credit Facility - CNX Coal Resources LP	188,000		201,000
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
Senior Notes due March 2021 at 6.375%, Issued at Par Value	—		20,611
Advance Royalty Commitments (7.73% Weighted Average Interest Rate)	2,678		2,678
Other Note Maturing in 2018 (Principal of $692 and $1,789, respectively, less Unamortized Discount of $117 at December 31, 2016)	692		1,672
Less: Unamortized Debt Issuance Costs	22,265		27,699
	2,501,772		2,724,672
Less: Amounts Due in One Year*	990		1,677
Long-Term Debt	$	2,500,782	$	2,722,995

* Excludes current portion of Capital Lease Obligations of $9,981 and $10,323 at September 30, 2017 and December 31, 2016, respectively.

During the three and nine months ended September 30, 2017, CONSOL Energy called the remaining $74,470 balance on its 8.25% senior notes due in April 2020 and the remaining $20,611 balance on its 6.375% senior notes due in March 2021. The call price was $101.375 for the 8.25% senior notes due in April 2020 and $102.125 for the 6.375% senior notes due in March 2021.

During the nine months ended September 30, 2017, CONSOL Energy purchased $119,025 of its outstanding 5.875% senior notes due in April 2022.

As part of these transactions, a loss of $2,019 and $1,233 was included in Loss on Debt Extinguishment on the Consolidated Statements of Income for the three and nine months ended September 30, 2017, respectively.

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 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 force-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, which CNX opposed. On March 29, 2017, the Court issued an Order certifying four issues for class treatment: (1) allegedly excessive deductions; (2) royalties based on purported improperly low prices; (3) deduction of severance taxes; and (4) Plaintiffs' request for an accounting. On April 13, 2017, CNX filed a Petition for Allowance of Appeal with the Fourth Circuit, and on May 22, 2017 the Petition was denied. The case is now back in the trial court for further proceedings. 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. 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, which CNX opposed. On March 29, 2017, the Court issued an Order denying class certification in this matter. CONSOL Energy 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.

The following royalty, land rights and other lawsuits and claims include those for which a loss is reasonably possible, but not probable, and accordingly, an accrual has not 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.

Fitzwater Litigation: Three nonunion retired coal miners have sued CONSOL Energy Inc., Fola Coal Company (AMVEST), Consolidation Coal Company and CONSOL of Kentucky Inc. (COK) in West Virginia Federal Court alleging ERISA violations in the termination of retiree health care benefits. The Plaintiffs contend they relied to their detriment on oral statements and promises of "lifetime health benefits" allegedly made by various members of management during Plaintiffs' employment and that they were allegedly denied access to Summary Plan Documents that clearly reserved to the Company the right to modify or terminate the CONSOL Energy Inc. Retiree Health and Welfare Plan. Pursuant to plaintiffs' amended complaint filed on April 24, 2017, plaintiffs

request that retiree health benefits be reinstated and seek to represent a class of all nonunion retirees who were associated with AMVEST and COK areas of operation.The Company believes it has meritorious defense and intends to vigorously defend this suit.

Casey Litigation: This lawsuit against CONSOL Energy Inc., Consolidation Coal Company and CONSOL Buchanan Mining Company has been filed on August 23, 2017 by the same lawyers, in the same court, and raises the same issues and seeks the same relief as the Fitzwater Litigation. Filed on behalf of two nonunion retired coal miners, plaintiffs seek to represent a class of all nonunion retirees that were employed by CONSOL subsidiaries that operated in McDowell and Mercer Counties, West Virginia and Buchanan and Tazewell Counties, Virginia. Like Fitzwater, the Company believes it has meritorious defenses and intends to vigorously defend this suit.

At September 30, 2017, 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	$	83,836	$	46,214	$	37,622	$	—	$	—
Environmental	998		998		—		—		—
Other	229,426		45,590		183,836		—		—
Total Letters of Credit	314,260		92,802		221,458		—		—
Surety Bonds:
Employee-Related	109,660		106,980		2,680		—		—
Environmental	482,516		473,289		9,227		—		—
Other	17,252		16,136		1,115		1		—
Total Surety Bonds	609,428		596,405		13,022		1		—
Guarantees:
Other	36,314		9,752		15,858		9,875		829
Total Guarantees	36,314		9,752		15,858		9,875		829
Total Commitments	$	960,002	$	698,959	$	250,338	$	9,876	$	829

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 September 30, 2017 and December 31, 2016, the fair value of these guarantees was $1,130 and $1,362, respectively, and is 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.

As part of the sale of the Buchanan Mine (See Note 2 - Discontinued Operations), CONSOL Energy has guaranteed certain equipment lease obligations that were assumed by Coronado. In the event that Coronado would default on the obligations defined in the agreements, CONSOL Energy would be required to perform under the guarantees.

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 September 30, 2017, the purchase obligations for each of the next five years and beyond were as follows:



Obligations Due	Amount
Less than 1 year	$	188,085
1 - 3 years	268,866
3 - 5 years	243,787
More than 5 years	540,809
Total Purchase Obligations	$	1,241,547

NOTE 13—DERIVATIVE INSTRUMENTS:

CONSOL Energy enters into financial derivative instruments to manage its exposure to commodity price volatility. These natural gas and NGL commodity hedges are accounted for on a mark-to-market basis with changes in fair value recorded in current period earnings.

CONSOL Energy is exposed to credit risk in the event of non-performance 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 positions. 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 instruments in a liability 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.

The total notional amounts of production of CONSOL Energy's derivative instruments at September 30, 2017 and December 31, 2016 were as follows:



	September 30,	December 31,	Forecasted to
	2017	2016	Settle Through
Natural Gas Commodity Swaps (Bcf)	898.4	744.7	2021
Natural Gas Basis Swaps (Bcf)	578.9	482.0	2021
Propane Commodity Swaps (Mbbls)	—	126.0	—

The gross fair value of CONSOL Energy's derivative instruments at September 30, 2017 and December 31, 2016 was as follows:



Asset Derivative Instruments					Liability Derivative Instruments
	September 30,		December 31,			September 30,		December 31,
	2017		2016			2017		2016
Commodity Swaps:
Prepaid Expense	$	19,840	$	16	Other Accrued Liabilities	$	45,097	$	209,980
Other Assets	40,105		29,596		Other Liabilities	47,109		67,139
Total Asset	$	59,945	$	29,612	Total Liability	$	92,206	$	277,119

Basis Only Swaps:
Prepaid Expense	$	25,252	$	56,916	Other Accrued Liabilities	$	33,077	$	21,593
Other Assets	14,119		35,603		Other Liabilities	19,963		11,575
Total Asset	$	39,371	$	92,519	Total Liability	$	53,040	$	33,168

The effect of derivative instruments on CONSOL Energy's Consolidated Statements of Income was as follows:



	For the Three Months Ended					For the Nine Months Ended
	September 30,					September 30,
	2017			2016		2017			2016
Cash Received (Paid) in Settlement of Commodity Derivative Instruments:
Commodity Swaps:
Natural Gas	$	(312	)	$	28,175	$	(40,428	)	$	201,624
Propane	—			22		(1,216		)	(92		)
Natural Gas Basis Swaps	17,983			10,440		(20,073		)	1,771
Total Cash Received (Paid) in Settlement of Commodity Derivative Instruments	17,671			38,637		(61,717		)