Edgar Filing: CNX Resources Corp

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 June 30, 2018



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

__________________________________________________

CNX Resources Corporation

(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.)

CNX Center

1000 CONSOL Energy Drive Suite 400

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, a smaller reporting company or an emerging growth 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 July 17, 2018
Common stock, $0.01 par value		213,059,169

TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION

ITEM 1.	Condensed Financial Statements
	Consolidated Statements of Income for the three and six months ended June 30, 2018 and 2017	4
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2018 and 2017	5
	Consolidated Balance Sheets at June 30, 2018 and December 31, 2017	6
	Consolidated Statement of Stockholders’ Equity for the six months ended June 30, 2018	8
	Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017	9
	Notes to Unaudited Consolidated Financial Statements	10

ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34

ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	67

ITEM 4.	Controls and Procedures	68

PART II OTHER INFORMATION

ITEM 1.	Legal Proceedings	68

ITEM 1A.	Risk Factors	69

ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69

ITEM 6.	Exhibits	70

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.

Bbtu - One billion British Thermal units.

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 CNX Resources Corporation and its subsidiaries have 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

CNX RESOURCES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME



(Dollars in thousands, except per share data)	Three Months Ended						Six Months Ended
(Unaudited)	June 30,						June 30,
Revenues and Other Operating Income:	2018			2017			2018			2017
Natural Gas, NGLs and Oil Revenue	$	334,517		$	260,306		$	740,140		$	578,069
Gain on Commodity Derivative Instruments	25,660			83,788			60,747			61,325
Purchased Gas Revenue	9,930			10,316			27,985			19,294
Midstream Revenue	23,483			—			49,737			—
Other Operating Income	8,534			16,658			19,244			32,308
Total Revenue and Other Operating Income	402,124			371,068			897,853			690,996
Costs and Expenses:
Operating Expense
Lease Operating Expense	25,338			21,074			62,148			42,705
Transportation, Gathering and Compression	75,767			86,599			162,028			180,931
Production, Ad Valorem, and Other Fees	7,703			4,606			16,936			13,935
Depreciation, Depletion and Amortization	119,087			91,640			243,754			187,318
Exploration and Production Related Other Costs	3,699			19,717			6,079			29,502
Purchased Gas Costs	9,747			10,194			26,801			19,089
Impairment of Exploration and Production Properties	—			—			—			137,865
Impairment of Other Intangible Assets	18,650			—			18,650			—
Selling, General, and Administrative Costs	34,909			21,754			66,258			43,556
Other Operating Expense	17,786			24,106			33,832			42,282
Total Operating Expense	312,686			279,690			636,486			697,183
Other (Income) Expense
Other Expense (Income)	575			5,475			(5,917		)	9,550
Gain on Asset Sales	(3,280		)	(134,581		)	(14,622		)	(138,577		)
Gain on Previously Held Equity Interest	—			—			(623,663		)	—
Loss (Gain) on Debt Extinguishment	23,413			36			39,048			(786		)
Interest Expense	38,438			40,683			76,989			82,289
Total Other Expense (Income)	59,146			(88,387		)	(528,165		)	(47,524		)
Total Costs And Expenses	371,832			191,303			108,321			649,659
Earnings From Continuing Operations Before Income Tax	30,292			179,765			789,532			41,337
Income Tax (Benefit) Expense	(31,102		)	57,958			182,592			10,536
Income From Continuing Operations	61,394			121,807			606,940			30,801
Income From Discontinued Operations, net	—			47,703			—			99,743
Net Income	61,394			169,510			606,940			130,544
Less: Net Income Attributable to Noncontrolling Interest	19,380			—			37,363			—
Net Income Attributable to CNX Resources Shareholders	$	42,014		$	169,510		$	569,577		$	130,544

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

CNX RESOURCES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(CONTINUED)



(Dollars in thousands, except per share data)	Three Months Ended				Six Months Ended
(Unaudited)	June 30,				June 30,
Earnings Per Share	2018		2017		2018		2017
Basic
Income from Continuing Operations	$	0.19	$	0.53	$	2.60	$	0.13
Income from Discontinued Operations	—		0.21		—		0.44
Total Basic Earnings Per Share	$	0.19	$	0.74	$	2.60	$	0.57
Dilutive
Income from Continuing Operations	$	0.19	$	0.52	$	2.57	$	0.13
Income from Discontinued Operations	—		0.21		—		0.43
Total Dilutive Earnings Per Share	$	0.19	$	0.73	$	2.57	$	0.56

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

CNX RESOURCES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME



	Three Months Ended				Six Months Ended
(Dollars in thousands)	June 30,				June 30,
(Unaudited)	2018		2017		2018		2017
Net Income	$	61,394	$	169,510	$	606,940	$	130,544
Other Comprehensive Income:
Actuarially Determined Long-Term Liability Adjustments (Net of tax: ($687), ($2,034), ($781), ($4,086))	1,812		3,464		1,982		6,966

Comprehensive Income	63,206		172,974		608,922		137,510

Less: Comprehensive Income Attributable to Noncontrolling Interest	19,380		—		37,363		—

Comprehensive Income Attributable to CNX Resources Shareholders	$	43,826	$	172,974	$	571,559	$	137,510

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

CNX RESOURCES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



	(Unaudited)
(Dollars in thousands)	June 30, 2018		December 31, 2017
ASSETS
Current Assets:
Cash and Cash Equivalents	$	54,846	$	509,167
Accounts and Notes Receivable:
Trade	132,016		156,817
Other Receivables	17,421		48,908
Supplies Inventories	10,499		10,742
Recoverable Income Taxes	27,780		31,523
Prepaid Expenses	56,431		95,347
Current Assets Held for Sale	20,153		—
Total Current Assets	319,146		852,504
Property, Plant and Equipment:
Property, Plant and Equipment	8,941,426		9,316,495
Less—Accumulated Depreciation, Depletion and Amortization	2,399,555		3,526,742
Property, Plant and Equipment of Assets Held for Sale, Net	230,593		—
Total Property, Plant and Equipment—Net	6,772,464		5,789,753
Other Assets:
Investment in Affiliates	22,347		197,921
Goodwill	796,359		—
Other Intangible Assets	106,476		—
Other	190,966		91,735
Total Other Assets	1,116,148		289,656
TOTAL ASSETS	$	8,207,758	$	6,931,913

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

CNX RESOURCES CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS



	(Unaudited)
(Dollars in thousands, except per share data)	June 30, 2018			December 31, 2017
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable	$	186,397		$	211,161
Current Portion of Long-Term Debt	6,915			7,111
Other Accrued Liabilities	227,871			223,407
Current Liabilities Held for Sale	53,808			—
Total Current Liabilities	474,991			441,679
Long-Term Debt:
Long-Term Debt	2,330,780			2,187,026
Capital Lease Obligations	16,846			20,347
Total Long-Term Debt	2,347,626			2,207,373
Deferred Credits and Other Liabilities:
Deferred Income Taxes	235,407			44,373
Asset Retirement Obligations	7,606			198,768
Other	103,205			139,821
Total Deferred Credits and Other Liabilities	346,218			382,962
TOTAL LIABILITIES	3,168,835			3,032,014
Stockholders’ Equity:
Common Stock, $.01 Par Value; 500,000,000 Shares Authorized, 213,420,535 Issued and Outstanding at June 30, 2018; 223,743,322 Issued and Outstanding at December 31, 2017	2,138			2,241
Capital in Excess of Par Value	2,372,650			2,450,323
Preferred Stock, 15,000,000 shares authorized, None issued and outstanding	—			—
Retained Earnings	1,940,507			1,455,811
Accumulated Other Comprehensive Loss	(6,494		)	(8,476		)
Total CNX Resources Stockholders’ Equity	4,308,801			3,899,899
Noncontrolling Interest	730,122			—
TOTAL STOCKHOLDERS' EQUITY	5,038,923			3,899,899
TOTAL LIABILITIES AND EQUITY	$	8,207,758		$	6,931,913

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

CNX RESOURCES CORPORATION 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 CNX Resources Corporation Stockholders’ Equity			Non- Controlling Interest			Total Stockholders' Equity
Balance at December 31, 2017	$	2,241		$	2,450,323		$	1,455,811		$	(8,476	)	$	3,899,899		$	—		$	3,899,899
(Unaudited)
Net Income	—			—			569,577			—			569,577			37,363			606,940
Other Comprehensive Income (Net of ($781) Tax)	—			—			—			1,982			1,982			—			1,982
Comprehensive Income	—			—			569,577			1,982			571,559			37,363			608,922
Issuance of Common Stock	7			1,556			—			—			1,563			—			1,563
Purchase and Retirement of Common Stock (11,086,082 shares)	(110		)	(88,578		)	(80,031		)	—			(168,719		)	—			(168,719		)
Shares Withheld for Taxes	—			—			(4,850		)	—			(4,850		)	(347		)	(5,197		)
Acquisition of CNX Gathering, LLC	—			—			—			—			—			718,577			718,577
Amortization of Stock-Based Compensation Awards	—			9,349			—			—			9,349			1,269			10,618
Distributions to CNXM Noncontrolling Interest Holders	—			—			—			—			—			(26,740		)	(26,740		)
Balance at June 30, 2018	$	2,138		$	2,372,650		$	1,940,507		$	(6,494	)	$	4,308,801		$	730,122		$	5,038,923

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

CNX RESOURCES CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS



(Dollars in thousands)	Six Months Ended
(Unaudited)	June 30,
Cash Flows from Operating Activities:	2018			2017
Net Income	$	606,940		$	130,544
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:
Net Income from Discontinued Operations	—			(99,743		)
Depreciation, Depletion and Amortization	243,754			187,318
Amortization of Deferred Financing Costs	4,821			—
Impairment of Exploration and Production Properties	—			137,865
Impairment of Other Intangible Assets	18,650			—
Stock-Based Compensation	10,618			7,917
Gain on Sale of Assets	(14,622		)	(138,577		)
Gain on Previously Held Equity Interest	(623,663		)	—
Loss (Gain) on Debt Extinguishment	39,048			(786		)
(Gain) Loss on Commodity Derivative Instruments	(60,747		)	(61,325		)
Net Cash Paid in Settlement of Commodity Derivative Instruments	(307		)	(79,388		)
Deferred Income Taxes	190,194			10,536
Equity in Earnings of Affiliates	(3,447		)	(22,385		)
Changes in Operating Assets:
Accounts and Notes Receivable	44,156			6,661
Recoverable Income Taxes	3,743			6,492
Supplies Inventories	243			328
Prepaid Expenses	1,327			6,480
Changes in Operating Liabilities:
Accounts Payable	(3,198		)	20,813
Accrued Interest	(3,358		)	795
Other Operating Liabilities	1,504			699
Changes in Other Liabilities	(5,374		)	13,516
Other	648			44,572
Net Cash Provided by Continuing Operating Activities	450,930			172,332
Net Cash Provided by Discontinued Operating Activities	—			128,140
Net Cash Provided by Operating Activities	450,930			300,472
Cash Flows from Investing Activities:
Capital Expenditures	(496,659		)	(249,962		)
CNX Gathering LLC Acquisition, Net of Cash Acquired	(299,272		)	—
Proceeds from Asset Sales	153,420			328,167
Net Distributions from Equity Affiliates	3,650			24,700
Net Cash (Used in) Provided by Continuing Investing Activities	(638,861		)	102,905
Net Cash Provided by Discontinued Investing Activities	—			(6,380		)
Net Cash (Used in) Provided by Investing Activities	(638,861		)	96,525
Cash Flows from Financing Activities:
Payments on Miscellaneous Borrowings	(3,748		)	(5,973		)
Payments on Long-Term Notes	(723,419		)	(117,185		)
Net Payments on CNXM Revolving Credit Facility	(138,500		)	—
Proceeds from CNX Revolving Credit Facility	422,000			—
Proceeds from Issuance of CNXM Senior Notes	394,000			—
Distributions to CNXM Noncontrolling Interest Holders	(26,740		)	—
Proceeds from Issuance of Common Stock	1,563			723
Shares Withheld for Taxes	(5,197		)	(7,093		)
Purchases of Common Stock	(166,720		)	—
Debt Repurchase and Financing Fees	(19,629		)	(298		)
Net Cash Used in Continuing Financing Activities	(266,390		)	(129,826		)
Net Cash Used in Discontinued Financing Activities	—			(21,935		)
Net Cash Used in Financing Activities	(266,390		)	(151,761		)
Net (Decrease) Increase in Cash and Cash Equivalents	(454,321		)	245,236
Cash and Cash Equivalents at Beginning of Period	509,167			46,299
Cash and Cash Equivalents at End of Period	$	54,846		$	291,535

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

CNX RESOURCES CORPORATION 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 six months ended June 30, 2018 are not necessarily indicative of the results that may be expected for future periods.

The Consolidated Balance Sheet at December 31, 2017 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, 2017 included in CNX Resources Corporation's ("CNX," the "Company," "we," "us," or "our") Annual Report on Form 10-K as filed with the Securities and Exchange Commission on February 7, 2018.

Certain amounts in prior periods have been reclassified to conform to the current period presentation. On November 28, 2017, the Company spun-off the coal operations previously held by CNX, which were comprised of the Pennsylvania Mining Complex, Baltimore Marine Terminal, its direct and indirect ownership interest in CONSOL Coal Resources LP, formerly known as CNXC Coal Resources LP, and other related coal assets. The financial position, results of operations and cash flows of the coal operations are reflected as discontinued operations for all periods presented through the date of the spin-off. See Note 5 - Discontinued Operations for further details regarding the spin-off.

The Consolidated Balance Sheet at June 30, 2018 reflects the full consolidation of CNX Gathering LLC's assets and liabilities as a result of the acquisition by CNX Gas Company LLC (CNX Gas), an indirect wholly owned subsidiary of CNX of NBL Midstream, LLC's interest on January 3, 2018 (See Note 6 - Acquisitions and Dispositions for more information). The purchase accounting remains preliminary as contemplated by Generally Accepted Accounting Principles (GAAP) and, as a result, there may be upon further review future changes to the value, as well as allocation, of the acquired assets and liabilities, associated amortization expense, goodwill and the gain on the previously held equity interest. These changes may be material.

NOTE 2—EARNINGS PER SHARE:

Basic earnings per share are computed by dividing net income attributable to CNX 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. CNX Midstream Partners LP's (CNXM) dilutive units did not have a material impact on the Company's earnings per share calculations for the period from January 3, 2018 through June 30, 2018.

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 antidilutive:



	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2018	2017	2018	2017
Antidilutive Options	2,300,785	2,360,197	2,300,785	2,360,197
Antidilutive Restricted Stock Units	—	194,071	7,828	190,658
Antidilutive Performance Share Units	—	1,284,924	178,189	1,284,924
Antidilutive Performance Stock Options	927,268	802,804	927,268	802,804
	3,228,053	4,641,996	3,414,070	4,638,583

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



	For the Three Months Ended June 30,		For the Six Months Ended June 30,
	2018	2017	2018	2017
Options	73,583	28,838	227,301	90,462
Restricted Stock Units	7,260	221	178,397	334,261
Performance Share Units	—	—	357,597	560,936
	80,843	29,059	763,295	985,659

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



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017
Income from Continuing Operations	$	61,394	$	121,807	$	606,940	$	30,801
Less: Net Income Attributable to Non-Controlling Interest	19,380		—		37,363		—
Net Income from Continuing Operations Attributable to CNX Resources Shareholders	$	42,014	$	121,807	$	569,577	$	30,801
Income from Discontinued Operations	—		47,703		—		99,743
Net Income Attributable to CNX Resources Shareholders	$	42,014	$	169,510	$	569,577	$	130,544

Weighted-average shares of common stock outstanding	215,991,490		230,058,422		218,944,422		229,938,462
Effect of dilutive shares	2,938,470		2,139,974		2,701,442		2,286,571
Weighted-average diluted shares of common stock outstanding	218,929,960		232,198,396		221,645,864		232,225,033

Earnings per Share:
Basic (Continuing Operations)	$	0.19	$	0.53	$	2.60	$	0.13
Basic (Discontinued Operations)	—		0.21		—		0.44
Total Basic	$	0.19	$	0.74	$	2.60	$	0.57

Dilutive (Continuing Operations)	$	0.19	$	0.52	$	2.57	$	0.13
Dilutive (Discontinued Operations)	—		0.21		—		0.43
Total Dilutive	$	0.19	$	0.73	$	2.57	$	0.56

NOTE 3—CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS:

Changes in Accumulated Other Comprehensive Loss related to pension obligations, net of tax, were as follows:




Balance at December 31, 2017	$	(8,476	)
Other Comprehensive Income before Reclassifications	1,643
Amounts Reclassified from Accumulated Other Comprehensive Loss, net of tax	339
Current Period Other Comprehensive Income	1,982
Balance at June 30, 2018	$	(6,494	)

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



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Actuarially Determined Long-Term Liability Adjustments*
Amortization of Prior Service Costs	$	(90	)	$	(749	)	$	(181	)	$	(1,498	)
Recognized Net Actuarial Loss	354			6,247			708			12,550
Total	264			5,498			527			11,052
Less: Tax Benefit	94			2,034			188			4,086
Net of Tax	$	170		$	3,464		$	339		$	6,966

*Excludes amounts related to the remeasurement of the Actuarially Determined Long-Term Liabilities for the three and six months ended June 30, 2018.

NOTE 4—REVENUE FROM CONTRACTS WITH CUSTOMERS:

On January 1, 2018, the Company adopted Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers and all the related amendments (“new revenue standard”) using the modified retrospective method, which did not result in any changes to previously reported financial information. The updates related to the new revenue standard were applied only to contracts that were not complete as of January 1, 2018.

Revenue from Contracts with Customers

Revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company has elected to exclude all taxes from the measurement of transaction price.

Nature of Performance Obligations

At contract inception, the Company assesses the goods and services promised in its contracts with customers and identifies a performance obligation for each promised good or service that is distinct. To identify the performance obligations, the Company considers all of the goods or services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices.

For natural gas, NGLs and oil, and purchased gas revenue, the Company generally considers the delivery of each unit (MMBtu or Bbl) to be a separate performance obligation that is satisfied upon delivery. Payment terms for these contracts typically require payment within 25 days of the end of the calendar month in which the hydrocarbons are delivered. A significant number of these contracts contain variable consideration because the payment terms refer to market prices at future delivery dates. In these situations, the Company has not identified a standalone selling price because the terms of the variable payments relate specifically to the Company’s efforts to satisfy the performance obligations. A portion of the contracts contain fixed consideration (i.e. fixed price contracts or contracts with a fixed differential to NYMEX or index prices). The fixed consideration is allocated to each performance obligation on a relative standalone selling price basis, which requires judgment from management. For these contracts, the Company generally concludes that the fixed price or fixed differentials in the contracts are representative of the standalone selling price. Revenue associated with natural gas, NGLs and oil as presented on the accompanying Consolidated Statement of Income represent the Company’s share of revenues net of royalties and excluding revenue interests owned by others. When selling natural gas, NGLs and oil on behalf of royalty owners or working interest owners, the Company is acting as an agent and thus reports the revenue on a net basis.

Midstream revenue consists of revenues generated from natural gas gathering activities. The gas gathering services are interruptible in nature and include charges for the volume of gas actually gathered and do not guarantee access to the system. Volumetric based fees are based on actual volumes gathered. The Company generally considers the interruptible gathering of each unit (MMBtu) of natural gas represent a separate performance obligation. Payment terms for these contracts typically require payment within 25 days of the end of the calendar month in which the hydrocarbons are gathered.

Transaction price allocated to remaining performance obligations

Accounting Standards Codifiation (ASC) 606 requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied. However, the guidance provides certain practical expedients that limit this requirement, including when variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct good or service that forms part of a series.

A significant portion of our natural gas, NGLs and oil and purchased gas revenue is short-term in nature with a contract term of one year or less. For those contracts, we have utilized the practical expedient in ASC 606-10-50-14 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

For revenue associated with contract terms greater than one year, a significant portion of the consideration in those contracts is variable in nature and the Company allocates the variable consideration in its contract entirely to each specific performance obligation to which it relates. Therefore, any remaining variable consideration in the transaction price is allocated entirely to wholly unsatisfied performance obligations. As such, the Company has not disclosed the value of unsatisfied performance obligations pursuant to the practical expedient.

For revenue associated with contract terms greater than one year with a fixed price component, the aggregate amount of the transaction price allocated to remaining performance obligations was $185,984 as of June 30, 2018. The Company expects to recognize net revenue of $55,304 in the next 12 months and $42,227 over the following 12 months, with the remainder recognized thereafter.

For revenue associated with our midstream contracts, which also have terms greater than one year, we have utilized the practical expedient in ASC 606-10-50-14 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under our midstream contracts, the interruptible gathering of each unit of natural gas represents a separate performance obligation; therefore, future volumes are wholly unsatisfied and disclosure of the transaction price allocated to remaining performance obligations is not required.

Prior-period performance obligations

We record revenue in the month production is delivered to the purchaser. However, settlement statements for certain natural gas and NGL revenue may not be received for 30 to 90 days after the date production is delivered, and as a result, we are required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. We record the differences between our estimates and the actual amounts received in the month that payment is received from the purchaser. We have existing internal controls for our revenue estimation process and related accruals, and any identified differences between our revenue estimates and actual revenue received historically have not been significant. For the three and six months ended June 30, 2018 and 2017, revenue recognized in the reporting period related to performance obligations satisfied in prior reporting periods was not material.

Disaggregation of Revenue

The following table is a disaggregation of our revenue by major sources:



	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2018		2017		2018		2017
Revenue from Contracts with Customers
Natural Gas Revenue	$	289,294	$	233,723	$	636,642	$	507,270
NGLs Revenue	39,557		21,637		90,441		60,920
Condensate Revenue	4,996		3,885		11,499		8,189
Oil Revenue	670		1,061		1,558		1,690
Total Natural Gas, NGLs and Oil Revenue	334,517		260,306		740,140		578,069

Purchased Gas Revenue	9,930		10,316		27,985		19,294
Midstream Revenue	23,483		—		49,737		—

Other Sources of Revenue and Other Operating Income
Gain on Commodity Derivative Instruments	25,660		83,788		60,747		61,325
Other Operating Income	8,534		16,658		19,244		32,308
Total Revenue and Other Operating Income	$	402,124	$	371,068	$	897,853	$	690,996

The disaggregated revenue information corresponds with the Company’s segment reporting.

Contract balances

We invoice customers once our performance obligations have been satisfied, at which point payment is unconditional. Accordingly, our contracts with customers do not give rise to contract assets or liabilities under ASC 606. The Company has no contract assets recognized from the costs to obtain or fulfill a contract with a customer.

The opening and closing balances of the Company’s receivables related to contracts with customers were $156,817 and $132,016, respectively. Included in the opening balance are receivables related to the January 3, 2018 acquisition of $9,353 (see Note 6 - Acquisitions and Dispositions for more information).

NOTE 5—DISCONTINUED OPERATIONS:

On November 28, 2017, CNX announced that it had completed the tax-free spin-off of its coal business resulting in two independent, publicly traded companies: (i) a coal company, CONSOL Energy, formerly known as CONSOL Mining Corporation and (ii) CNX, a natural gas exploration and production company. Following the separation, CONSOL Energy and its subsidiaries hold the coal assets previously held by CNX, including its Pennsylvania Mining Complex, Baltimore Marine Terminal, its direct and indirect ownership interest in CONSOL Coal Resources LP, formerly known as CNX Coal Resources LP, and other related coal assets previously held by CNX. As of the close of business on November 28, 2017, CNX's shareholders received one share of CONSOL Energy common stock for every eight shares of CNX's common stock held as of November 15, 2017. The coal business has been reclassified to discontinued operations for all periods presented.

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



	For the Three Months Ended		For the Six Months Ended
	June 30, 2017		June 30, 2017
Coal Revenue	$	303,707	$	620,155
Other Outside Sales	14,856		27,742
Freight-Outside Coal	17,763		30,045
Miscellaneous Other Income	8,934		26,330
Gain on Sale of Assets	5,581		13,536
Total Revenue and Other Income	$	350,841	$	717,808
Total Costs	289,790		605,620
Income From Operations Before Income Taxes	$	61,051	$	112,188
Income Tax Expense	9,035		2,668
Less: Net Income Attributable to Noncontrolling Interest	4,313		9,777
Income From Discontinued Operations, net	$	47,703	$	99,743

There were no remaining major classes of assets or liabilities of discontinued operations at June 30, 2018 and December 31, 2017.

NOTE 6—ACQUISITIONS AND DISPOSITIONS:

On May 2, 2018 CNX closed on an Asset Exchange Agreement (the “AEA”), with HG Energy II Appalachia, LLC (“HG Energy”), pursuant to which, among other things, HG Energy (i) paid to CNX approximately $7,000 and (ii) assigned to CNX certain undeveloped Marcellus and Utica acreage in Southwest Pennsylvania, in exchange for CNX (x) assigning its interest in certain non-core midstream assets and surface acreage and (y) releasing certain HG Energy oil and gas acreage from dedication under a gathering agreement that is partially held, indirectly, by CNX. In connection with the transaction, CNX also agreed to certain transactions with CNXM, including the amendment of the existing gas gathering agreement between CNX and CNXM to increase the existing well commitment by an additional forty wells. The net gain on the sale was $286 and is included in the Gain on Asset Sales line of the Consolidated Statements of Income.

As a result of the AEA, CNX determined that the carrying value of a portion of the customer relationship intangible assets that were acquired in connection with the Midstream acquisition discussed below (see also Note 19 - Goodwill and Other Intangible Assets) exceeded their fair value, and recognized an impairment of approximately $18,650 which is included in the Impairment of Other Intangible Assets line of the Consolidated Statements of Income.

On March 30, 2018, CNX Gas completed the sale of substantially all of its shallow oil and gas assets and certain Coalbed Methane (CBM) assets in Pennsylvania and West Virginia for $89,296 in cash consideration. In connection with the sale, the buyer assumed approximately $196,514 of asset retirement obligations. The net gain on the sale was $4,751 and is included in the Gain on Asset Sales line of the Consolidated Statements of Income.

On December 14, 2017, CNX Gas entered into a purchase agreement with NBL Midstream, LLC (Noble), pursuant to which CNX Gas acquired Noble’s 50% membership interest in CONE Gathering LLC (CNX Gathering), for a cash purchase price of $305,000 and the mutual release of all outstanding claims (the "Midstream Acquisition"). CNX Gathering owns a 100% membership interest in CONE Midstream GP LLC (the general partner), which is the general partner of CONE Midstream Partners LP (CNXM or the Partnership), which is a publicly traded master limited partnership formed in May 2014 by CNX Gas and Noble. In conjunction with the Midstream Acquisition, which closed on January 3, 2018, the general partner, the Partnership and CONE Gathering LLC changed their names to CNX Midstream GP LLC, CNX Midstream Partners LP, and CNX Gathering LLC, respectively.

Prior to the Midstream Acquisition, the Company accounted for its 50% interest in CNX Gathering LLC as an equity method investment as the Company had the ability to exercise significant influence, but not control, over the operating and financial policies of the midstream operations. In conjunction with the Midstream Acquisition, the Company obtained a controlling interest in CNX Gathering LLC and, through CNX Gathering's ownership of the general partner, control over the Partnership. Accordingly, the Midstream Acquisition has been accounted for as a business combination using the acquisition method of accounting pursuant to ASC Topic 805, Business Combinations, or ASC 805. ASC 805 requires that, in such business combination achieved in stages (or step acquisition), previously held equity interests are remeasured at fair value and any difference between the fair value and the carrying value of the equity interest held be recognized as a gain or loss on the statement of income.

The fair value assigned to the previously held equity interest in CNX Gathering and CNXM for purposes of calculating the gain or loss was $799,033 and was determined using the income approach, based on a discounted cash flow methodology. The resulting gain on remeasurement to fair value of the previously held equity interest in CNX Gathering and CNXM of $623,663 is included in the Gain on Previously Held Equity Interest line of the Consolidated Statements of Income.

The fair values of the previously held equity interests were based on inputs that are not observable in the market and therefore represent Level 3 inputs (See Note 14 - Fair Value of Financial Instruments). These fair values were measured using valuation techniques that convert future cash flows into a single discounted amount. Significant inputs to the valuation included estimates of: (i) gathering volumes; (ii) future operating costs; and (iii) a market-based weighted average cost of capital. These inputs required significant judgments and estimates by management, are still under review, and are subject to change. These inputs have a significant impact on the valuation of the previously held equity interests and future changes may occur.

The estimated fair value of midstream facilities and equipment, generally consisting of pipeline systems and compression stations, were estimated using the cost approach. Significant unobservable inputs in the estimate of fair value include management's assumptions about the replacement costs for similar assets, the relative age of the acquired assets and any potential economic or functional obsolescence associated with the acquired assets. As a result, the estimated fair value of the midstream facilities and equipment represents a Level 3 fair value measurement.

As part of the preliminary purchase price allocation, the Company identified intangible assets for customer relationships with third party customers. The fair value of the identified intangible assets was determined using the income approach which requires a forecast of the expected future cash flows generated and an estimated market-based weighted average cost of capital. Significant unobservable inputs in the determination of fair value include future revenue estimates, future cost assumptions, and estimated customer retention rates. As a result, the estimated fair value of the identified intangible assets represents a Level 3 fair value measurement. Differences between the preliminary purchase price allocation and the final purchase price allocation may change the amount of intangible assets and goodwill ultimately recognized in conjunction with the Midstream Acquisition.

The noncontrolling interest in the acquired business is comprised of the limited partner units in CNXM, which were not acquired by the Company. The CNXM limited partner units are actively traded on the New York Stock Exchange, and were valued based on observable market prices as of the transaction date and therefore represent a Level 1 fair value measurement.

Allocation of Purchase Price (Midstream Acquisition)

The following table summarizes the purchase price and estimated values of assets and liabilities assumed based on the fair value as of January 3, 2018, with any excess of the purchase price over the estimated fair value of the identified net assets acquired recorded as goodwill. The preliminary purchase price allocation will be subject to further refinement, which may result in material changes.

Estimated Fair Value of Consideration Transferred:



Cash Consideration	$	305,000
CNX Gathering Cash on Hand at January 3, 2018 Distributed to Noble	2,620
Fair Value of Previously Held Equity Interest	799,033
Total Estimated Fair Value of Consideration Transferred	$	1,106,653

The following is a summary of the preliminary estimated fair values of the net assets acquired:



Fair Value of Assets Acquired:
Cash and Cash Equivalents	$	8,348
Accounts and Notes Receivable	21,199
Prepaid Expense	2,006
Other Current Assets	163
Property, Plant and Equipment, Net	1,043,340
Intangible Assets	128,781
Other	593
Total Assets Acquired	1,204,430

Fair Value of Liabilities Assumed:
Accounts Payable	26,059
CNXM Revolving Credit Facility	149,500
Total Liabilities Assumed	175,559

Total Identifiable Net Assets	1,028,871
Fair Value of Noncontrolling Interest in CNXM	(718,577		)
Goodwill	796,359
Net Assets Acquired	$	1,106,653

Post-Acquisition Operating Results (Midstream Acquisition)

The Midstream Acquisition contributed the following to the Company's Midstream segment for the three and six months ended June 30, 2018.



	Three Months Ended		Six Months Ended
	June 30, 2018		June 30, 2018
Midstream Revenue	$	61,325	$	125,503
Earnings From Continuing Operations Before Income Tax	$	27,795	$	63,329

Unaudited Pro Forma Information (Midstream Acquisition)

The following table presents unaudited pro forma combined financial information for the three and six months ended June 30, 2017, which presents the Company’s results as though the Midstream Acquisition had been completed at January 1, 2017. The pro forma combined financial information has been included for comparative purposes and is not necessarily indicative of the results that might have actually occurred had the acquisition been completed at January 1, 2017; furthermore, the financial information is not intended to be a projection of future results.



	Pro Forma
(in thousands, except per share data) (unaudited)	Three Months Ended June 30, 2017		Six Months Ended June 30, 2017
Pro Forma Total Revenue and Other Operating Income	$	395,774	$	740,411
Pro Forma Net Income from Continuing Operations	$	150,789	$	92,979
Less: Pro Forma Net income Attributable to Noncontrolling Interests	$	18,720	$	38,134
Pro Forma Net Income from Continuing Operations Attributable to CNX	$	132,069	$	54,845
Pro Forma Income per Share from Continuing Operations (Basic)	$	0.58	$	0.24
Pro Forma Income per Share from Continuing Operations (Diluted)	$	0.58	$	0.24

NOTE 7—COMPONENTS OF PENSION PLAN NET PERIODIC BENEFIT COST:

Components of Net Periodic Benefit Cost are as follows:



	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Service Cost	$	96		$	149		$	193		$	193
Interest Cost	300			476			600			619
Amortization of Prior Service Credits	(90		)	(143		)	(181		)	(186		)
Recognized Net Actuarial Loss	373			604			746			786
Curtailment Gain	(416		)	—			(416		)	—
Net Periodic Benefit Cost	$	263		$	1,086		$	942		$	1,412

During June 2018, a plan amendment was announced that freezes the benefits for the Defined Contribution Restoration Plan effective July 1, 2018. Employees hired after this date will not be eligible for this benefit plan. In addition, current participants will receive no further compensation credits after that date, with the last award year being 2017. Annual interest credits will continue to be made in accordance with the terms of the plan. This amendment triggered a curtailment gain of $416. The curtailment resulted in a plan remeasurement, decreasing the plan liabilities by $2,235 at June 30, 2018.

NOTE 8—INCOME TAXES:

The effective tax rates for the three and six months ended June 30, 2018 were (102.7)% and 23.1%, respectively. The effective tax rate for the six months ended June 30, 2018 differs from the U.S. federal statutory rate of 21% primarily due to a benefit from the filing of a Federal 10-year net operating loss ("NOL") carryback which resulted in the Company being able to utilize previously valued tax attributes at a tax rate differential of 14%, as well as non-controlling interest. The benefits were partially offset by increases for both state income taxes and state valuation allowances.

The effective tax rates for the three and six months ended June 30, 2017 were 32.2% and 25.5%, respectively. The effective rate for the six months ended June 30, 2017 differs from the U.S. federal statutory rate of 35% primarily due to state income taxes and equity compensation.

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the "Act") which, among other things, lowered the U.S. Federal corporate income tax rate from 35% to 21%, repealed the corporate alternative minimum tax ("AMT"), and provided for a refund of previously accrued AMT credits. The Company recorded a net tax benefit to reflect the impact of the Act as of December 31, 2017, as it is required to reflect the change in the period in which the law is enacted. Largely, the benefits recorded in the period ending December 31, 2017 related to the Act are in recognition of the revaluation of deferred tax assets and liabilities, a benefit of $115,291, and a benefit for the reversal of a valuation allowance previously recorded against a deferred tax asset for AMT credits which are now refundable, a benefit of $154,384.

The net benefits for the Act, as recorded as provisional amounts, as of June 30, 2018 represent the Company's best estimate using information available to the Company as of June 30, 2018. The Company anticipates U.S. regulatory agencies will issue further regulations over the next year which may alter this estimate. The Company is still evaluating, among other things, the application of limitations for executive compensation related to contracts existing prior to November 2, 2017, and provisions in the Act addressing the deductibility of interest expense after January 1, 2018. The Company will refine its estimates to incorporate new or better information as it comes available through the filing date of its 2017 U.S. income tax returns in the fourth quarter of 2018. During the second quarter, the company filed a Federal NOL carryback resulting in a financial statement benefit of $20,000 through the realization of the Federal NOLs at a 35% tax rate as a carryback versus the current 21% tax rate as a carryforward.

The total amount of uncertain tax positions at June 30, 2018 and December 31, 2017 were $39,953 and $37,813, respectively. If these uncertain tax positions were recognized, approximately $31,516 and $29,376 would affect CNX's effective tax rate at June 30, 2018 and December 31, 2017, respectively. There was a $2,140 change to the unrecognized tax benefits during the six months ended June 30, 2018.

CNX recognizes accrued interest related to uncertain tax positions in interest expense. As of June 30, 2018 and December 31, 2017, the Company reported an accrued interest liability relating to uncertain tax positions of $814 and $644, respectively, in Other Liabilities on the Consolidated Balance Sheets. The accrued interest liability includes $169 of accrued interest expense that is reflected in the Company's Consolidated Statements of Income for the six months ended June 30, 2018.

CNX recognizes penalties accrued related to uncertain tax positions in its income tax expense. As of June 30, 2018 and December 31, 2017, CNX had no accrued liabilities for tax penalties related to uncertain tax positions.

CNX 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 years before 2014. The Joint Committee on Taxation concluded its review of the audit of tax year 2015 on March 21, 2018. The audit resulted in a $108,651 reduction to CNX's net operating loss, primarily due to a reduction in the depreciation as an offset to the bonus depreciation taken in the 2010-2013 IRS audit. There was no cash impact from the audit.

NOTE 9—PROPERTY, PLANT AND EQUIPMENT:



	June 30, 2018		December 31, 2017
Property, Plant and Equipment
Intangible drilling cost	$	3,772,658	$	3,849,689
Proved gas properties	937,243		1,999,891
Gas gathering equipment	2,017,836		1,182,234
Unproved gas properties	1,093,985		919,733
Gas wells and related equipment	743,752		834,120
Surface land and other equipment	309,894		309,602
Other gas assets	66,058		221,226
Total Property, Plant and Equipment	8,941,426		9,316,495
Less: Accumulated Depreciation, Depletion and Amortization	2,399,555		3,526,742
Total Property, Plant and Equipment Assets Held for Sale - Net	230,593		—
Total Property, Plant and Equipment - Net	$	6,772,464	$	5,789,753

Property, Plant and Equipment Held for Sale

CNX is party to an industry participation agreement (referred to as a "joint venture" or "JV") that provided drilling and completion carries for the Company's retained interests. This joint development agreement is with Hess Ohio Developments, LLC (Hess) with respect to approximately 125 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 CNX working interest obligations as the acreage is developed. As of December 31, 2016, Hess' entire carry obligation had been satisfied.

In June 2018, the Company entered into an agreement to sell substantially all of its Ohio Utica joint venture ("JV") assets in the wet gas Utica Shale areas of Belmont, Guernsey, Harrison, and Noble counties, which includes approximately 26,000 net undeveloped acres for net cash proceeds of approximately $400,000. CNX received a deposit from the seller of approximately $40,000 in the second quarter, which was included in Assets Held for Sale on the Consolidated Balance Sheet and Proceeds from Asset Sales within the Consolidated Statements of Cash Flow. As part of the required evaluation under the held for sale accounting guidance, the Company determined that the approximate fair value less costs to sell exceeded the carrying value of the net assets and thus no impairment charge was recorded. The Company anticipates completing the sale of these assets during the third quarter of 2018.

Property, Plant and Equipment Impairment

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 potential disposal of Knox did not represent a strategic shift that would have a major effect on the Company's operations and financial results and was, therefore, not classified as discontinued operations 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, the asset's book value was evaluated and adjusted to the lower of its carrying amount or fair value less cost to sell. The Company determined that the approximate fair value less costs to sell Knox was less than the carrying value of the net assets which resulted in an impairment of $137,865 in February 2017, included in Impairment of Exploration and Production Properties within the Consolidated Statements of Income. The sale of Knox closed in the second quarter of 2017.

NOTE 10—REVOLVING CREDIT FACILITIES:

CNX Resources Corporation (CNX)

On March 8, 2018, CNX amended and restated its senior secured revolving credit facility, which expires on March 8, 2023.

The amended and restated credit facility increased lenders' commitments from $1,500,000 to $2,100,000 with an accordion feature that allows the Company to increase the commitments to $3,000,000. The initial borrowing base increased from $2,000,000 to $2,500,000, and the letters of credit aggregate sub-limit remained unchanged at $650,000. The credit facility matures on March 8, 2023, provided that if the aggregate principal amount of our existing 5.875% Senior Notes due 2022, 8.00% Senior Notes due 2023 and certain other publicly traded debt securities outstanding 91 days prior to the earliest maturity of such debt (such date, the "Springing Maturity Date") is greater than $500,000, then the credit facility will mature on the Springing Maturity Date.

The facility is secured by substantially all of the assets of CNX 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 CNX's proved natural gas reserves.

The facility contains a number of affirmative and negative covenants that include, among others, covenants that, except in certain circumstances, limit the Company and the subsidiary guarantors' ability to create, incur, assume or suffer to exist indebtedness, create or permit to exist liens on properties, dispose of assets, make investments, purchase or redeem CNX common stock, pay dividends, merge with another corporation and amend the senior unsecured notes. The Company must also mortgage 80% of the value of its proved reserves and 80%of the value of its proved developed producing reserves, in each case, which are included in the borrowing base, maintain applicable deposit, securities and commodities accounts with the lenders or affiliates thereof, and enter into control agreements with respect to such applicable accounts.

The facility also requires that CNX maintain a maximum net leverage ratio of no greater than 4.00 to 1.00, which is calculated as the ratio of debt less cash on hand to consolidated EBITDA, measured quarterly. CNX 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. The calculation of all of the ratios exclude CNXM. CNX was in compliance with all financial covenants as of June 30, 2018.

At June 30, 2018, the $2,100,000 facility had $422,000 of borrowings outstanding and $251,342 of letters of credit outstanding, leaving $1,426,658 of unused capacity. At December 31, 2017, the $1,500,000 facility had no borrowings outstanding and $239,072 of letters of credit outstanding, leaving $1,260,928 of unused capacity.

CNX Midstream Partners LP (CNXM)

On March 8, 2018, CNXM entered into a new $600,000 senior secured revolving credit facility that matures on March 8, 2023. The new revolving credit facility replaced its prior $250,000 senior secured revolving credit facility.

The facility includes restrictions on the ability of CNXM, its subsidiary guarantors and certain of its non-guarantor, non-wholly-owned subsidiaries, except in certain circumstances, to: (i) create, incur, assume or suffer to exist indebtedness; (ii) create or permit to exist liens on their properties; (iii) prepay certain indebtedness unless there is no default or event of default under the facility; (iv) make or pay any dividends or distributions in excess of certain amounts; (v) merge with or into another person, liquidate or dissolve; or acquire all or substantially all of the assets of any going concern or going line of business or acquire all or a substantial portion of another person’s assets; (vi) make particular investments and loans; (vii) sell, transfer, convey, assign or dispose of its assets or properties other than in the ordinary course of business and other select instances; (viii) deal with any affiliate except in the ordinary course of business on terms no less favorable to CNXM than it would otherwise receive in an arm’s length transaction; (ix) amend in any material manner its certificate of incorporation, bylaws, or other organizational documents without giving prior notice to the lenders and, in some cases, obtaining the consent of the lenders.

In addition, CNXM is obligated to maintain at the end of each fiscal quarter (x) a maximum total leverage ratio of no greater than between 4.75 to 1.00 ranging to no greater than 5.50 to 1.00 in certain circumstances; (y) a maximum secured leverage ratio of no greater than 3.50 to 1.00 and (z) a minimum interest coverage ratio of no less than 2.50 to 1.00. CNXM was in compliance with all financial covenants as of June 30, 2018.

The facility also contains customary events of default, including, but not limited to, a cross-default to certain other debt, breaches of representations and warranties, change of control events and breaches of covenants. The obligations under the facility are secured by substantially all of the assets of CNXM and its wholly-owned subsidiaries. CNX is not a guarantor under the facility.

At June 30, 2018, the $600,000 facility had $11,000 of borrowings outstanding.

NOTE 11—LONG-TERM DEBT:



	June 30, 2018		December 31, 2017
Debt:
Senior Notes due April 2022 at 5.875% (Principal of $1,314,307 and $1,705,682 plus Unamortized Premium of $2,416 and $3,544, respectively)	$	1,316,723	$	1,709,226
CNX Revolving Credit Facility	422,000		—
CNX Midstream Partners LP Senior Notes due March 2026 at 6.50% (Principal of $400,000 less Unamortized Discount of $5,750 at June 30, 2018)	394,250		—
Senior Notes due April 2023 at 8.00% (Principal of $200,000 and $500,000 less Unamortized Discount of $1,720 and $4,751, respectively)	198,281		495,249
CNX Midstream Partners LP Revolving Credit Facility	11,000		—
Other Note Maturing in 2018 (Principal of $358 less Unamortized Discount of $8 at December 31, 2017)	—		350
Less: Unamortized Debt Issuance Costs	11,474		17,536
	2,330,780		2,187,289
Less: Amounts Due in One Year*	—		263
Long-Term Debt	$	2,330,780	$	2,187,026

* Excludes current portion of Capital Lease Obligations of $6,915 and $6,848 at June 30, 2018 and December 31, 2017, respectively.

During the six months ended June 30, 2018, CNXM completed a private offering of $400,000 of 6.50% senior notes due in March 2026 less $6,000 of unamortized bond discount. CNX is not a guarantor of CNXM's 6.50% senior notes due in March 2026 or CNXM's senior secured revolving credit facility.

During the six months ended June 30, 2018, CNX purchased $391,375 of its outstanding 5.875% senior notes due in April 2022. As part of this transaction, a loss of $15,635 was included in Loss (Gain) on Debt Extinguishment on the Consolidated Statements of Income.

During the three and six months ended June 30, 2018, CNX purchased $300,000 of its outstanding 8.00% senior notes due in April 2023. As part of this transaction, a loss of $23,413 was included in Loss (Gain) on Debt Extinguishment on the Consolidated Statements of Income.

During the three and six months ended June 30, 2017, CNX purchased $19,069 and $119,025, respectively, of its outstanding 5.875% senior notes due in 2022. As part of this transaction, a loss of $36 and a gain of $786, respectively, were included in Loss (Gain) on Debt Extinguishment on the Consolidated Statements of Income.

NOTE 12—COMMITMENTS AND CONTINGENT LIABILITIES:

CNX 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. CNX 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 CNX. 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 CNX; however, such amounts cannot be reasonably estimated. The amount claimed against CNX 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 that CNX Gas failed either to 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 appealed the Order to the U.S. Fourth Circuit Court of Appeals. On August 19, 2014, the Fourth Circuit agreed with CNX Gas, 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. CNX and plaintiffs’ counsel have reached an agreement in principal to settle the certified class claims. On March 20, 2018, the Court preliminarily approved the class settlement, and on August 23, 2018, the Court will conduct a hearing to consider final approval of the proposed Settlement Agreement and Class Counsels’ request for attorneys’ fees. No class member has opted out of, or objected to, the settlement and the time for doing so has passed. The Company has paid the settlement into an escrow account from which it will be disbursed upon final court approval (or returned to CNX).

At June 30, 2018, CNX 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 unconditional purchase obligations and letters of credit are recorded as liabilities in the financial statements. CNX management believes that these commitments will expire without being funded, and therefore 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:
Firm Transportation	$	251,057	$	251,057	$	—	$	—	$	—
Other	285		285		—		—		—
Total Letters of Credit	251,342		251,342		—		—		—
Surety Bonds:
Employee-Related	1,850		1,850		—		—		—
Environmental	25,973		25,914		59		—		—
Other	12,315		10,805		1,510		—		—
Total Surety Bonds	40,138		38,569		1,569		—		—
Total Commitments	$	291,480	$	289,911	$	1,569	$	—	$	—

Excluded from the above table are commitments and guarantees, that relate to discontinued operations, entered into in conjunction with the spin-off of the Company's coal business (See Note 5 - Discontinued Operations). Although CONSOL Energy has agreed to indemnify us to the extent that we are called upon to pay any of these liabilities, there is no assurance that CONSOL Energy will satisfy its obligations to indemnify us in these situations.

CNX uses various leased facilities and equipment in its operations. Future minimum lease payments under operating leases at June 30, 2018 are as follows:



Operating Lease Obligations Due	Amount
Less than 1 year	$	9,607
1 - 3 years	13,325
3 - 5 years	10,756
More than 5 years	38,477
Total Operating Lease Obligations	$	72,165

CNX enters 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 June 30, 2018, the purchase obligations for each of the next five years and beyond were as follows:



Obligations Due	Amount
Less than 1 year	$	207,148
1 - 3 years	419,091
3 - 5 years	306,479
More than 5 years	620,806
Total Purchase Obligations	$	1,553,524

NOTE 13—DERIVATIVE INSTRUMENTS:

CNX 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.

CNX 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 CNX to post collateral for any of its positions. However, as stated in the counterparty master agreements, if CNX'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, CNX 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. CNX recognizes all financial derivative instruments as either assets or liabilities at fair value on the Consolidated Balance Sheets on a gross basis.

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

The total notional amounts of production of CNX's derivative instruments at June 30, 2018 and December 31, 2017 were as follows:



	June 30,	December 31,	Forecasted to
	2018	2017	Settle Through
Natural Gas Commodity Swaps (Bcf)	1,064.1	1,067.2	2023
Natural Gas Basis Swaps (Bcf)	775.5	688.1	2023

The gross fair value of CNX's derivative instruments at June 30, 2018 and December 31, 2017 was as follows:



Asset Derivative Instruments					Liability Derivative Instruments
	June 30,		December 31,			June 30,		December 31,
	2018		2017			2018		2017
Commodity Swaps:
Prepaid Expense	$	27,226	$	62,369	Other Accrued Liabilities	$	26,943	$	5,985
Other Assets	132,594		59,281		Other Liabilities	10,381		42,419
Total Asset	$	159,820	$	121,650	Total Liability	$	37,324	$	48,404

Basis Only Swaps:
Prepaid Expense	$	10,932	$	14,965	Other Accrued Liabilities	$	26,969	$	35,306
Other Assets	35,101		24,223		Other Liabilities	20,557		17,179
Total Asset	$	46,033	$	39,188	Total Liability	$	47,526	$	52,485

The effect of derivative instruments on the Company's Consolidated Statements of Income was as follows:



	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2018			2017			2018			2017
Cash Received (Paid) in Settlement of Commodity Derivative Instruments:
Commodity Swaps:
Natural Gas	$	17,058		$	(15,509	)	$	16,624		$	(40,116	)
Propane	—			—			—			(1,216		)
Natural Gas Basis Swaps	(374		)	(16,776		)	(16,931		)	(38,056		)
Total Cash Received (Paid) in Settlement of Commodity Derivative Instruments	16,684			(32,285		)	(307		)	(79,388		)

Unrealized Gain (Loss) on Commodity Derivative Instruments:
Commodity Swaps:
Natural Gas	46,450			70,282			49,250			232,886
Propane	—			—			—			1,147
Natural Gas Basis Swaps	(37,474		)	45,791			11,804			(93,320		)
Total Unrealized Gain on Commodity Derivative Instruments	8,976			116,073			61,054			140,713

Gain (Loss) on Commodity Derivative Instruments:
Commodity Swaps:
Natural Gas	63,508			54,773			65,874			192,770
Propane	—			—			—			(69		)
Natural Gas Basis Swaps	(37,848		)	29,015			(5,127		)	(131,376		)
Total Gain on Commodity Derivative Instruments	$	25,660		$	83,788		$	60,747		$	61,325

The Company also enters into fixed price natural gas sales agreements that are satisfied by physical delivery. These physical commodity contracts qualify for the normal purchases and sales exception and are not subject to derivative instrument accounting.

NOTE 14—FAIR VALUE OF FINANCIAL INSTRUMENTS:

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

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

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

Level Two - The fair value of the assets and liabilities included in Level 2 are based on standard industry income approach models that use significant observable inputs, including NYMEX forward curves, LIBOR-based discount rates and basis forward curves.

Level Three - Unobservable inputs significant to the fair value measurement supported by little or no market activity.

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

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



	Fair Value Measurements at June 30, 2018						Fair Value Measurements at December 31, 2017
Description	(Level 1)		(Level 2)		(Level 3)		(Level 1)		(Level 2)			(Level 3)
Gas Derivatives	$	—	$	121,003	$	—	$	—	$	59,949		$	—
Put Option	$	—	$	—	$	—	$	—	$	(3,500	)	$	—

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

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

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

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



	June 30, 2018				December 31, 2017
	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Cash and Cash Equivalents	$	54,846	$	54,846	$	509,167	$	509,167
Long-Term Debt	$	2,342,254	$	2,329,810	$	2,204,825	$	2,281,282

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

NOTE 15—VARIABLE INTEREST ENTITIES:

The Company determined CNXM, of which the company owns approximately 34%, to be a variable interest entity. Upon completion of the Midstream Acquisition (see Note 6 - Acquisitions and Dispositions) through the Company's ownership and control of CNXM's general partner (CNX Midstream GP LLC), the Company has the power to direct the activities that most significantly impact CNXM's economic performance. In addition, through its limited partner interest and incentive distribution rights, or IDRs, in CNXM, the Company has the obligation to absorb the losses of CNXM and the right to receive benefits in accordance with such interests. As the Company has a controlling financial interest and is the primary beneficiary of CNXM, the Company consolidates CNXM commencing January 3, 2018.

The risks associated with the operations of CNXM are discussed in its Annual Reports on Form 10-K for the year ended December 31, 2017 filed with the SEC on February 7, 2018.

The following table presents amounts included in the Company's Consolidated Balance Sheet that were for the use or obligation of CNXM as of June 30, 2018:



	June 30, 2018
Assets:
Cash	$	707
Receivables - Related Party	12,072
Receivables - Third Party	7,546
Other Current Assets	2,726
Property, Plant and Equipment, net	792,513
Other Assets	3,494
Total Assets	$	819,058
Liabilities:
Accounts Payable	$	38,327
Accounts Payable - Related Party	3,211
Revolving Credit Facility	11,000
Long-Term Debt	393,169
Total Liabilities	$	445,707

The following table summarizes CNXM's Consolidated Statements of Operations and Cash Flows for the three and six months ended June 30, 2018, inclusive of affiliate amounts:



	For the Three Months Ended			For the Six Months Ended
	June 30, 2018			June 30, 2018
Revenue
Gathering Revenue - Related Party	$	37,576		$	75,306
Gathering Revenue - Third Party	23,438			49,577
Total Revenue	61,014			124,883
Expenses
Operating Expense - Related Party	5,079			9,514
Operating Expense - Third Party	7,406			15,874
General and Administrative Expense - Related Party	3,619			7,232
General and Administrative Expense - Third Party	2,320			4,868
(Gain) Loss on Asset Sales	(254		)	2,501
Depreciation Expense	5,443			11,299
Interest Expense	7,119			9,608
Total Expense	30,732			60,896
Net Income	$	30,282		$	63,987

Net Cash Provided by Operating Activities	$	53,674		$	95,541
Net Cash Used in Investing Activities	$	(24,969	)	$	(35,125	)
Net Cash Used in Financing Activities	$	(29,964	)	$	(62,903	)

In March 2018, CNXM closed its previously announced acquisition of CNX's remaining 95% interest in the gathering system and related assets commonly referred to as the Shirley-Penns System, in exchange for cash consideration in the amount of $265,000. CNXM funded the cash consideration with proceeds from the issuance of 6.5% senior notes due 2026 (See Note 11 - Long-Term Debt).

Prior to the acquisition of Noble's interest on January 3, 2018, CNX accounted for its interests in CNX Gathering and CNXM as an equity-method investment.

The following is a summary of the Company's Investment in Affiliates balances included within the Consolidated Balance Sheets associated with CNX Gathering and CNXM, respectively:



	CNX Gathering