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CNX Resources Corp - Quarter Report: 2020 March (Form 10-Q)



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 __________________________________________________
FORM 10-Q
  __________________________________________________ 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2020
OR
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)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of exchange on which registered
Common Stock ($.01 par value) CNX New York Stock Exchange
Preferred Share Purchase Rights -- New York Stock Exchange
 __________________________________________________ 
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      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes      No  
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   Accelerated filer Non-accelerated filer Smaller Reporting Company
Emerging Growth Company 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.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
ClassShares outstanding as of April 15, 2020
Common stock, $0.01 par value187,058,569






TABLE OF CONTENTS

  Page
PART I FINANCIAL INFORMATION
ITEM 1.Unaudited Condensed Consolidated Financial Statements
Consolidated Statements of Income for the three months ended March 31, 2020 and 2019
Consolidated Statements of Comprehensive Income for the three months ended March 31, 2020 and 2019
Consolidated Balance Sheets at March 31, 2020 and December 31, 2019
Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2020 and 2019
Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019
ITEM 2.
ITEM 3.
ITEM 4.
PART II OTHER INFORMATION
ITEM 1.
ITEM 1A.Risk Factors
ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds
ITEM 6.





GLOSSARY OF CERTAIN OIL AND GAS TERMS

        The following are certain terms and abbreviations 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.
BBtu - One billion British Thermal Units.
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.
Tcfe - One trillion 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.
TIL - turn-in-line; a well turned to sales.
blending - process of mixing dry and damp gas in order to meet downstream pipeline specifications.
lease operating expense - costs of operating wells and equipment on a producing lease, many of which are recurring. Includes items such as water disposals, repairs and maintenance, equipment rental, and operating supplies, among others.
proved reserves - quantities of oil, natural gas, and NGL 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 (PDPs) - 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.
development well - a well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive.
exploratory well - a well drilled to find a new field or to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir. Generally, an exploratory well is any well that is not a development well, an extension well, a service well or a stratigraphic test well.
gob well - a well drilled or vent hole converted to a well which produces or is capable of producing coalbed methane or other natural gas from a distressed zone created above and below a mined-out coal seam by any prior full seam extraction of the coal.
service well - a well drilled or completed for the purpose of supporting production in an existing field. Specific purposes of service wells include, among other things, gas injection, water injection and salt-water disposal.
play - a proven geological formation that contains commercial amounts of hydrocarbons.
royalty interest - the land owner’s share of oil or gas production, historically 1/8.
throughput - the volume of natural gas transported or passing through a pipeline, plant, terminal, or other facility during a particular period. 
transportation, gathering and compression - cost incurred related to transporting natural gas to the ultimate point of sale. These costs also include costs related to physically preparing natural gas, natural gas liquids and condensate for ultimate sale which include costs related to processing, compressing, dehydrating and fractionating, among others.
working interest - an interest that gives the owner the right to drill, produce and conduct operating activities on a property and receive a share of any production.
wet gas - natural gas that contains significant heavy hydrocarbons, such as propane, butane and other liquid hydrocarbons.




PART I : FINANCIAL INFORMATION
 
ITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)Three Months Ended
(Unaudited) March 31,
Revenue and Other Operating Income:20202019
Natural Gas, NGL and Oil Revenue$251,494  $435,946  
Gain (Loss) on Commodity Derivative Instruments115,142  (195,376) 
Purchased Gas Revenue26,359  16,221  
Midstream Revenue18,406  18,443  
Other Operating Income4,958  3,197  
Total Revenue and Other Operating Income416,359  278,431  
Costs and Expenses:
Operating Expense
Lease Operating Expense10,033  18,627  
Transportation, Gathering and Compression83,242  79,409  
Production, Ad Valorem, and Other Fees6,162  6,946  
Depreciation, Depletion and Amortization129,164  125,161  
Exploration and Production Related Other Costs3,888  3,258  
Purchased Gas Costs
24,998  16,214  
Impairment of Exploration and Production Properties
61,849  —  
Impairment of Goodwill
473,045  —  
Selling, General, and Administrative Costs
30,238  35,738  
Other Operating Expense
20,681  23,474  
Total Operating Expense843,300  308,827  
Other Expense (Income)
Other Expense (Income)5,186  (579) 
(Gain) Loss on Asset Sales and Abandonments(12,055) 3,085  
(Gain) Loss on Debt Extinguishment(11,263) 7,537  
Interest Expense48,995  35,771  
Total Other Expense30,863  45,814  
Total Costs and Expenses874,163  354,641  
Loss Before Income Tax(457,804) (76,210) 
Income Tax Benefit(152,582) (11,559) 
Net Loss(305,222) (64,651) 
Less: Net Income Attributable to Noncontrolling Interest23,864  22,686  
Net Loss Attributable to CNX Resources Shareholders$(329,086) $(87,337) 
Loss per Share
Basic $(1.76) $(0.44) 
Diluted $(1.76) $(0.44) 
Dividends Declared$—  $—  




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

4



CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 Three Months Ended
(Dollars in thousands)March 31,
(Unaudited)20202019
Net Loss$(305,222) $(64,651) 
Other Comprehensive Income:
  Actuarially Determined Long-Term Liability Adjustments (Net of tax: ($40), ($15))112  44  
Comprehensive Loss(305,110) (64,607) 
Less: Comprehensive Income Attributable to Noncontrolling Interest23,864  22,686  
Comprehensive Loss Attributable to CNX Resources Shareholders$(328,974) $(87,293) 





































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

5


CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
 
(Unaudited)
(Dollars in thousands)March 31,
2020
December 31,
2019
ASSETS
Current Assets:
Cash and Cash Equivalents$31,833  $16,283  
Restricted Cash853  —  
Accounts and Notes Receivable:
Trade, net91,477  133,480  
Other Receivables, net10,839  13,679  
Supplies Inventories10,266  6,984  
Recoverable Income Taxes115,261  62,425  
Derivative Instruments312,749  247,794  
Prepaid Expenses12,775  17,456  
Total Current Assets586,053  498,101  
Property, Plant and Equipment:
Property, Plant and Equipment10,691,516  10,572,006  
Less—Accumulated Depreciation, Depletion and Amortization3,622,413  3,435,431  
Total Property, Plant and Equipment—Net7,069,103  7,136,575  
Other Assets:
Operating Lease Right-of-Use Assets159,521  187,097  
Investment in Affiliates16,549  16,710  
Derivative Instruments258,111  314,096  
Goodwill323,314  796,359  
Other Intangible Assets95,009  96,647  
Restricted Cash5,340  —  
Other15,950  15,221  
Total Other Assets873,794  1,426,130  
TOTAL ASSETS$8,528,950  $9,060,806  





















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

6


CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(Unaudited)
(Dollars in thousands, except per share data)March 31,
2020
December 31,
2019
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable$171,890  $202,553  
Derivative Instruments49,058  41,466  
Current Portion of Finance Lease Obligations7,200  7,164  
Current Portion of Long-Term Debt20,451  —  
Current Portion of Operating Lease Obligations54,622  61,670  
Other Accrued Liabilities197,130  216,086  
Total Current Liabilities500,351  528,939  
Non-Current Liabilities:
Long-Term Debt2,640,148  2,754,443  
Finance Lease Obligations6,095  7,706  
Operating Lease Obligations92,463  110,466  
Derivative Instruments163,898  115,862  
Deferred Income Taxes376,401  476,108  
Asset Retirement Obligations64,387  63,377  
Other40,497  41,596  
Total Non-Current Liabilities3,383,889  3,569,558  
TOTAL LIABILITIES3,884,240  4,098,497  
Stockholders’ Equity:
Common Stock, $.01 Par Value; 500,000,000 Shares Authorized, 187,035,851 Issued and Outstanding at March 31, 2020; 186,642,962 Issued and Outstanding at December 31, 2019
1,874  1,870  
Capital in Excess of Par Value2,205,941  2,199,605  
Preferred Stock, 15,000,000 shares authorized, None issued and outstanding—  —  
Retained Earnings1,641,009  1,971,676  
Accumulated Other Comprehensive Loss(12,493) (12,605) 
Total CNX Resources Stockholders’ Equity3,836,331  4,160,546  
Noncontrolling Interest808,379  801,763  
TOTAL STOCKHOLDERS' EQUITY4,644,710  4,962,309  
TOTAL LIABILITIES AND EQUITY$8,528,950  $9,060,806  















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

7


CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common
Stock
Capital in
Excess
of Par
Value
Retained
Earnings
(Deficit)
Accumulated
Other
Comprehensive
Income
(Loss)
Total
CNX Resources
Stockholders’
Equity
Non-
Controlling
Interest
Total
Equity
December 31, 2019$1,870  $2,199,605  $1,971,676  $(12,605) $4,160,546  $801,763  $4,962,309  
(Unaudited)
Net (Loss) Income—  —  (329,086) —  (329,086) 23,864  (305,222) 
Issuance of Common Stock —  —  —   —   
Shares Withheld for Taxes—  —  (1,581) —  (1,581) (309) (1,890) 
Amortization of Stock-Based Compensation Awards—  6,336  —  —  6,336  504  6,840  
Other Comprehensive Income—  —  —  112  112  —  112  
Distributions to CNXM Noncontrolling Interest Holders—  —  —  —  —  (17,443) (17,443) 
March 31, 2020$1,874  $2,205,941  $1,641,009  $(12,493) $3,836,331  $808,379  $4,644,710  
December 31, 2018$1,990  $2,264,063  $2,071,809  $(7,904) $4,329,958  $751,785  $5,081,743  
(Unaudited)
Net (Loss) Income—  —  (87,337) —  (87,337) 22,686  (64,651) 
Issuance of Common Stock 94  —  —  99  —  99  
Purchase and Retirement of Common Stock(31) (24,937) (8,529) —  (33,497) —  (33,497) 
Shares Withheld for Taxes—  —  (4,045) —  (4,045) (664) (4,709) 
Amortization of Stock-Based Compensation Awards—  10,291  —  —  10,291  612  10,903  
Other Comprehensive Income—  —  —  44  44  —  44  
Distributions to CNXM Noncontrolling Interest Holders—  —  —  —  —  (15,123) (15,123) 
March 31, 2019$1,964  $2,249,511  $1,971,898  $(7,860) $4,215,513  $759,296  $4,974,809  






















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

8



CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)Three Months Ended
Dollars in ThousandsMarch 31,
Cash Flows from Operating Activities:20202019
Net Loss$(305,222) $(64,651) 
Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities:
Depreciation, Depletion and Amortization129,164  125,161  
Amortization of Deferred Financing Costs2,447  1,707  
Impairment of Exploration and Production Properties61,849  —  
Impairment of Goodwill473,045  —  
Stock-Based Compensation6,840  10,903  
(Gain) Loss on Asset Sales and Abandonments(12,055) 3,085  
(Gain) Loss on Debt Extinguishment(11,263) 7,537  
(Gain) Loss on Commodity Derivative Instruments(115,142) 195,376  
Loss on Other Derivative Instruments10,639  —  
Net Cash Received (Paid) in Settlement of Commodity Derivative Instruments151,161  (41,382) 
Deferred Income Taxes(99,746) (11,559) 
Equity in Loss (Earnings) of Affiliates161  (503) 
Return on Equity Investment—  1,306  
Changes in Operating Assets:
Accounts and Notes Receivable43,639  94,480  
Recoverable Income Taxes(52,836) 35,888  
Supplies Inventories(3,282) (6,927) 
Prepaid Expenses4,710  3,961  
Changes in Other Assets692  (6) 
Changes in Operating Liabilities:
Accounts Payable2,322  (5,962) 
Accrued Interest(5,063) 2,180  
Other Operating Liabilities(13,626) (34,434) 
Changes in Other Liabilities(1,047) (7,508) 
Net Cash Provided by Operating Activities267,387  308,652  
Cash Flows from Investing Activities:
Capital Expenditures(152,049) (299,138) 
Proceeds from Asset Sales13,975  5,806  
Net Cash Used in Investing Activities(138,074) (293,332) 
Cash Flows from Financing Activities:
Payments on Miscellaneous Borrowings(1,792) (1,747) 
Payments on Long-Term Notes(59,880) (405,876) 
Net Proceeds from CNXM Revolving Credit Facility35,250  52,650  
Payments on CNX Revolving Credit Facility
(224,000) (98,000) 
Proceeds from Issuance of CNX Senior Notes—  500,000  
Net Proceeds from CSG Non-Revolving Credit Facilities173,250  —  
Distributions to CNXM Noncontrolling Interest Holders(17,443) (15,123) 
Proceeds from Issuance of Common Stock 99  
Shares Withheld for Taxes(1,890) (4,709) 
Purchases of Common Stock—  (32,498) 
Debt Issuance and Financing Fees(11,069) (3,342) 
Net Cash Used in Financing Activities(107,570) (8,546) 
Net Increase in Cash, Cash Equivalents and Restricted Cash21,743  6,774  
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period16,283  17,198  
Cash, Cash Equivalents, and Restricted Cash at End of Period$38,026  $23,972  



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

9


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 months ended March 31, 2020 are not necessarily indicative of the results that may be expected for future periods.

The Consolidated Balance Sheet at December 31, 2019 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, 2019 included in CNX Resources Corporation's ("CNX," "CNX Resources," the "Company," "we," "us," or "our") Annual Report on Form 10-K as filed with the Securities and Exchange Commission (SEC) on February 10, 2020.

Certain amounts in prior periods have been reclassified to conform to the current period presentation.

Cash, Cash Equivalents, and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash to amounts shown in the statement of cash flows:
March 31,
20202019
Cash and Cash Equivalents$31,833  $23,972  
Restricted Cash, Current Portion853  —  
Restricted Cash, Less Current Portion 5,340  —  
Total Cash, Cash Equivalents, and Restricted Cash$38,026  $23,972  

Restricted Cash

Consists of cash that the Company is contractually obligated to maintain in accordance with the terms of the Cardinal States Gathering LLC and CSG Holdings II LLC Credit Agreement dated March 13, 2020 (See Note 9 - Long-Term Debt for more information).

Receivables

On January 1, 2020, CNX adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. CNX adopted Topic 326 using the prospective transition method.

Prior to adopting Topic 326, CNX reserved for specific accounts receivable when it was probable that all or a part of an outstanding balance would not be collected, such as customer bankruptcies. Collectability was determined based on terms of sale, credit status of customers and various other circumstances. CNX regularly reviewed collectability and established or adjusted the allowance as necessary using the specific identification method. Account balances were charged off against the allowance after all means of collection had been exhausted and the potential for recovery was considered remote. Reserves for uncollectable amounts were not material in the periods presented.
Under Topic 326 management records an allowance for credit losses related to the collectability of third-party customers receivables using the historical aging of the customer receivable balance. The collectability is determined based on past events, including historical experience, customer credit rating, as well as current market conditions. CNX monitors customer ratings

10


and collectability on an on-going basis. Account balances will be charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The allowance for credit losses are as follows:
March 31,December 31,
20202019
Accounts Receivable - Trade$91,608  $133,480  
Allowance for Credit Losses(131) —  
Accounts Receivable - Trade, net$91,477  $133,480  
Other Receivables$15,868  $16,142  
Allowance for Credit Losses(5,029) (2,463) 
Other Receivables, net$10,839  $13,679  

NOTE 2—EARNINGS PER SHARE:

Basic earnings per share is computed by dividing net income attributable to CNX shareholders by the weighted average shares outstanding during the reporting period. Diluted earnings per share is computed similarly to basic earnings per share, except that the weighted average shares outstanding are increased to include, if dilutive, additional shares from stock options, performance stock options, restricted stock units and performance share units. 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 three months ended March 31, 2020 or March 31, 2019.

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 March 31,
 20202019
Anti-Dilutive Options4,274,552  4,756,292  
Anti-Dilutive Restricted Stock Units2,007,960  1,708,610  
Anti-Dilutive Performance Share Units457,746  540,400  
Anti-Dilutive Performance Stock Options927,268  927,268  
7,667,526  7,932,570  

The table below sets forth the share-based awards that have been exercised or released:
 For the Three Months Ended March 31,
 20202019
Options—  13,748  
Restricted Stock Units340,883  457,969  
Performance Share Units274,716  342,882  
615,599  814,599  











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The computations for basic and diluted loss per share are as follows:
For the Three Months Ended March 31,
 20202019
Net Loss$(305,222) $(64,651) 
      Less: Net Income Attributable to Non-Controlling Interest
23,864  22,686  
Net Loss Attributable to CNX Resources Shareholders
$(329,086) $(87,337) 
Weighted-Average Shares of Common Stock Outstanding
186,918,361  197,475,702  
Effect of Diluted Shares*
—  —  
Weighted-Average Diluted Shares of Common Stock Outstanding
186,918,361  197,475,702  
Loss per Share:
Basic$(1.76) $(0.44) 
Diluted$(1.76) $(0.44) 
*During periods in which the Company incurs a net loss, diluted weighted average shares outstanding are equal to basic weighted average shares outstanding because the effect of all equity awards is antidilutive.

NOTE 3—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.

For natural gas, NGL 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, NGL and oil as presented on the accompanying Consolidated Statements of Income represent the Company’s share of revenues net of royalties and excluding revenue interests owned by others. When selling natural gas, NGL 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 as 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.














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Disaggregation of Revenue

The following table is a disaggregation of revenue by major source:
For the Three Months Ended March 31,
20202019
Revenue from Contracts with Customers
Natural Gas Revenue$229,599  $403,687  
NGL Revenue19,412  29,766  
Condensate Revenue1,901  2,327  
Oil Revenue582  166  
Total Natural Gas, NGL and Oil Revenue251,494  435,946  
Purchased Gas Revenue26,359  16,221  
Midstream Revenue18,406  18,443  
Other Sources of Revenue and Other Operating Income
Gain (Loss) on Commodity Derivative Instruments115,142  (195,376) 
Other Operating Income4,958  3,197  
Total Revenue and Other Operating Income$416,359  $278,431  

The disaggregated revenue corresponds with the Company’s segment reporting found in Note 14 - Segment Information.

Contract Balances

CNX invoices its customers once a performance obligation has been satisfied, at which point payment is unconditional. Accordingly, CNX's 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 $133,480 and $91,477, respectively, as of March 31, 2020.

Transaction Price Allocated to Remaining Performance Obligations

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 CNX's natural gas, NGL and oil and purchased gas revenue is short-term in nature with a contract term of one year or less. For those contracts, CNX has 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 $145,670 as of March 31, 2020. The Company expects to recognize net revenue of $41,981 in the next 12 months and $48,783 over the following 12 months, with the remainder recognized thereafter.

For revenue associated with CNX's midstream contracts, which also have terms greater than one year, 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.



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Prior-Period Performance Obligations

CNX records 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, the Company is required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. CNX records the differences between the estimate and the actual amounts received in the month that payment is received from the purchaser. The Company has existing internal controls for its revenue estimation process and the related accruals, and any identified differences between its revenue estimates and the actual revenue received historically have not been significant. For the three months ended March 31, 2020 and 2019, revenue recognized in the current reporting period related to performance obligations satisfied in a prior reporting period was not material.

NOTE 4—INCOME TAXES:

The effective tax rates for the three months ended March 31, 2020 and 2019 were 33.3% and 15.2%, respectively. The effective tax rate for the three months ended March 31, 2020 differs from the U.S. federal statutory rate of 21% primarily due to the impact of noncontrolling interest, equity compensation and state taxes.

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act (the "Act") which, among other things; removed the 80% taxable income limitation for utilization of net operating losses generated in tax years 2018 through 2020, allowing for 5-year net operating loss carrybacks, increased the adjusted taxable income limitation for the disallowance of interest expense from 30% to 50%, and provided for refunds of any remaining alternative minimum tax (“AMT”) credits. As a result of the Act, the Company recorded AMT refunds of $102,482 in Recoverable Income Taxes on the Consolidated Balance Sheets in anticipation of the AMT refund being received in 2020. The impact of other tax implications of the Act on the financial statements and related disclosures are immaterial.

In December 2019, the FASB issued Accounting Standards Update (ASU) 2019-12 - Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740), which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. This ASU removes the following exceptions: (1) exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items; (2) exception to the requirement to recognize a deferred tax liability for equity method investments when a foreign subsidiary becomes an equity method investment; (3) exception to the ability not to recognize a deferred tax liability for a foreign subsidiary when a foreign equity method investment becomes a subsidiary; and (4) exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year. The amendments in this ASU also improve consistency and simplify other areas of Topic 740 by clarifying and amending existing guidance. The amendments in this ASU will be applied using different approaches depending on what the specific amendment relates to and, for public entities, are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company early adopted ASU 2019-12 as of January 1, 2020.

The total amount of uncertain tax positions at March 31, 2020 and December 31, 2019 was $31,516. If these uncertain tax positions were recognized, approximately $31,516 would affect CNX's effective tax rate at March 31, 2020 and December 31, 2019 . There were no changes in unrecognized tax benefits during the three months ended March 31, 2020.

CNX recognizes accrued interest and penalties related to uncertain tax positions in interest expense and income tax expense, respectively. As of March 31, 2020 and December 31, 2019, CNX had no accrued liabilities for interest and penalties related to uncertain tax positions.
CNX and its subsidiaries file federal income tax returns with the United States and tax returns within various state 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 2016. The Company expects the Internal Revenue Service and the Joint Committee on Taxation to conclude its audit of tax years 2016 through 2017 during 2020.










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NOTE 5—PROPERTY, PLANT AND EQUIPMENT:
March 31,
2020
December 31,
2019
Intangible Drilling Cost$4,764,284  $4,688,497  
Gas Gathering Equipment2,477,889  2,463,866  
Proved Gas Properties1,209,521  1,208,046  
Gas Wells and Related Equipment1,067,318  1,042,000  
Unproved Gas Properties756,151  755,590  
Surface Land and Other Equipment225,074  226,285  
Other191,279  187,722  
Total Property, Plant and Equipment10,691,516  10,572,006  
Less: Accumulated Depreciation, Depletion and Amortization3,622,413  3,435,431  
Total Property, Plant and Equipment - Net$7,069,103  $7,136,575  

Impairment of Proved Property

CNX performs a quantitative impairment test whenever events or changes in circumstances indicate that an asset group's carrying amount may not be recoverable, over proved properties using the published NYMEX forward prices, timing, methods and other assumptions consistent with historical periods. When indicators of impairment are present, tests require that the Company first compare expected future undiscounted cash flows by asset group to their respective carrying values. If the carrying amount exceeds the estimated undiscounted future cash flows, a reduction of the carrying amount of the natural gas properties to their estimated fair values is required, which is determined based on discounted cash flow techniques using significant assumptions including projected revenues, future commodity prices, and a market-specific weighted average cost of capital which are affected by expectations about future market and economic conditions.

During the three months ended March 31, 2020, CNX recognized certain indicators of impairments specific to our Southwest Pennsylvania (SWPA) CBM asset group and determined that carrying value of that asset group was not recoverable. The fair value of the asset group was estimated by using level 3 inputs which consisted of discounting the estimated future cash flows using discount rates and other assumptions that market participants would use in their estimates of fair value. As a result, an impairment of $61,849 was recognized and is included in Impairment of Exploration and Production Properties in the Consolidated Statements of Income. The impairment was related to an economic decision to temporarily idle certain wells and the related processing facility during the quarter.

NOTE 6—GOODWILL AND OTHER INTANGIBLE ASSETS:

In December 2017, CNX Gas entered into a purchase agreement with Noble Energy, pursuant to which CNX Gas acquired Noble’s 50% membership interest in CNX Gathering (then named "CONE Gathering LLC"), for a cash purchase price of $305,000 (the "Midstream Acquisition"). 

Prior to the Midstream Acquisition, the Company accounted for its 50% interest in CNX Gathering 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 and control over the Partnership. Accordingly, the Midstream Acquisition was 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 circumstances where a business combination is achieved in stages (or step acquisition), previously held equity interests are remeasured at fair value. The fair value assigned to the previously held equity interest in CNX Gathering and CNXM was $799,033 and was determined using the income approach, based on a discounted cash flow methodology.

As part of the allocation of purchase price and in connection with the fair value of consideration transferred at closing on January 3, 2018, CNX recorded $796,359 of goodwill and $128,781 of other intangible assets which are comprised of customer relationships.





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Impairment of Goodwill

All goodwill is attributed to the Midstream reportable segment. Goodwill is evaluated for impairment at least annually and whenever events or changes in circumstance indicate that the fair value of a reporting unit is less than its carrying amount. In connection with the evaluation of goodwill for impairment, CNX may first consider qualitative factors to assess whether there are indicators that it is more likely than not that the fair value of a reporting unit may not exceed its carrying amount. If after assessing such factors or circumstances, CNX determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then a quantitative assessment is not required. If CNX chooses to bypass the qualitative assessment, or if it chooses to perform a qualitative assessment but is unable to qualitatively conclude that no impairment has occurred, then CNX will perform a quantitative assessment If the estimated fair value of a reporting unit is less than its carrying value, an impairment charge is recognized for the excess of the reporting unit's carrying value over its fair value. The Company uses a combination of the income approach (generally a discounted cash flow method) and market approach (which may include the guideline public company method and/or the guideline transaction method) to estimate the fair value of a reporting unit.

During the first quarter of 2020, the Company identified indicators of impairment in the form of deteriorating macroeconomic conditions, and the decline in the observable market value of CNXM securities both in relation to the COVID-19 pandemic and the overall decline in the MLP market space. Management concluded that these factors presented indications that the fair value of the midstream reporting unit was more likely than not below the reporting unit’s carrying value. CNX bypassed the qualitative assessment and performed a quantitative test that utilized a combination of the income and market approaches as described above to estimate the fair value of the Midstream reporting unit. As a result of this assessment, CNX concluded that the carrying value exceeded its estimated fair value, and a corresponding impairment of $473,045 was recorded, which was included in Impairment of Goodwill in the accompanying Consolidated Statements of Income. Any additional adverse changes in the future could reduce the underlying cash flows used to estimate fair values and could result in a decline in fair value that could trigger future impairment charges relating to the Midstream reporting unit.

In estimating the fair value of the midstream reporting unit, the Company used the income approach’s discounted cash flow method, which applies significant inputs not observable in the public market (Level 3), including estimates and assumptions related to the use of an appropriate discount rate, future throughput volumes, operating costs and capital spending, discounted to present value using an industry rate adjusted for company-specific risk, which management feels reflects the overall level of inherent risk of the reporting unit. These assumptions are affected by expectations about future market, industry and economic conditions. Cash flow projections were derived from board approved budgeted amounts, a five-year operating forecast and an estimate of future cash flows. Subsequent cash flows were developed using growth or contraction rates that management believes are reasonably likely to occur. The Company used the market approach’s comparable company method. The comparable company method evaluates the value of a company using metrics of other businesses of similar size and industry.

The estimates of future cash flows and EBITDA are subjective in nature and are subject to impacts from business risks as described in “Item 1A. Risk Factors” in CNX's 2019 Annual Report on Form 10-K as filed with the SEC on February 10, 2020 ("2019 Form 10-K"). The fair value estimation process requires considerable judgment and determining the fair value is sensitive to changes in assumptions impacting management’s estimates of future financial results. Although CNX believes the estimates and assumptions used in estimating the fair value are reasonable and appropriate, different assumptions and estimates could materially impact the estimated fair value. Future results could differ from our current estimates and assumptions.

Changes in the carrying amount of goodwill consist of the following activity:

Amount
December 31, 2019$796,359  
Impairment473,045  
March 31, 2020$323,314  








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Other Intangible Assets

The carrying amount and accumulated amortization of other intangible assets consist of the following:
March 31,
2020
December 31,
2019
Other Intangible Assets
Gross Amortizable Asset - Customer Relationships $109,752  $109,752  
Less: Accumulated Amortization - Customer Relationships14,743  13,105  
Total Other Intangible Assets, net$95,009  $96,647  

The customer relationship intangible asset is being amortized on a straight-line basis over approximately 17 years. Amortization expense related to other intangible assets was $1,638 for the three months ended March 31, 2020 and 2019. The estimated annual amortization expense is expected to approximate $6,552 per year for each of the next five years.

NOTE 7—REVOLVING CREDIT FACILITIES:
CNX Resources Corporation (CNX)
In April 2019, CNX amended its senior secured revolving credit facility ("Credit Facility") and extended its maturity to April 2024. The lenders' commitments remained unchanged at $2,100,000, with an accordion feature that allows the Company to increase the commitments to $3,000,000. The borrowing base was reaffirmed at $2,100,000, including a $650,000 letters of credit aggregate sub-limit. In addition, the Cumulative Credit Basket for dividends and distributions was replaced with a basket for dividends and distributions subject to a pro forma net leverage ratio of at least 3.00 to 1.00 and availability under the credit facility of at least 15% of the aggregate commitments. If the aggregate principal amount of the existing 5.875% Senior Notes due in April 2022 and certain other publicly traded debt securities outstanding 91 days prior to the earliest maturity of such debt (the "Springing Maturity Date") is greater than $500,000, then the Credit Facility will mature on the Springing Maturity Date. In April 2020, as part of the semi-annual borrowing base redetermination, both the lenders' commitments and borrowing base decreased to $1,900,000.

Under the terms of the amended agreement, borrowings under the revolving credit facility will bear interest at CNX's option at either:
the base rate, which is the highest of (i) the federal funds open rate plus 0.50%, (ii) PNC Bank, N.A.’s prime rate, or (iii) the one-month LIBOR rate plus 1.0%, in each case, plus a margin ranging from 0.25% to 1.25%; or
the LIBOR rate, which is the LIBOR rate plus a margin ranging from 1.25% to 2.25%.

The CNX Credit Facility is secured by substantially all of the assets of CNX and certain of its subsidiaries (excluding the Excluded Subsidiaries, which includes Cardinal States Gathering LLC, CNX Midstream GP LLC and CNXM and their respective subsidiaries). Fees and interest rate spreads are based on the percentage of facility utilization, measured quarterly. Availability under the Credit 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 CNX Credit Facility contains a number of affirmative and negative covenants including those 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 CNX Credit Facility 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 CNX Credit 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 March 31, 2020.

17



At March 31, 2020, the CNX Credit Facility had $437,000 of borrowings outstanding and $204,839 of letters of credit outstanding, leaving $1,458,161 of unused capacity. At December 31, 2019, the CNX Credit Facility had $661,000 of borrowings outstanding and $204,726 of letters of credit outstanding, leaving $1,234,274 of unused capacity.

CNX Midstream Partners LP (CNXM)
In April 2019, CNXM amended its senior secured revolving credit facility and extended its maturity to April 2024. The lenders’ commitments remained unchanged at $600,000, with an accordion feature that allows CNXM to increase the available borrowings by up to an additional $250,000 under certain terms and conditions. Among other things, the revolving credit facility now includes (i) the addition of a restricted payment basket permitting cash repurchases of Incentive Distribution Rights (IDRs) subject to a pro forma secured leverage ratio of 3.00 to 1.00, a pro forma total leverage ratio of 4.00 to 1.00 and pro forma availability of 20% of commitments and (ii) a restricted payment basket for the repurchase of LP units not to exceed Available Cash (as defined in the partnership agreement) in any quarter, of up to $150,000 per year and up to $200,000 during the life of the facility.

Under the terms of the amended agreement, borrowings under the revolving credit facility will bear interest at CNXM's option at either:
the base rate, which is the highest of (i) the federal funds open rate plus 0.50%, (ii) PNC Bank, N.A.’s prime rate, or (iii) the one-month LIBOR rate plus 1.0%, in each case, plus a margin ranging from 0.50% to 1.50%; or
the LIBOR rate, plus a margin ranging from 1.50% to 2.50%.
Fees and interest rate spreads under the CNXM credit facility are based on the total leverage ratio, measured quarterly. The CNXM credit facility includes the ability to issue letters of credit up to $100,000 in the aggregate.

The CNXM revolving credit facility contains a number of affirmative and negative covenants that include, among others, covenants that, except in certain circumstances, restrict 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 revolving 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; and (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 (w) for so long as at least $150,000 of the CNXM senior notes are outstanding, a maximum total leverage ratio of no greater than 5.25 to 1.00 (which increases to no greater than 5.50 to 1.00 during qualifying acquisition periods); (x) if less than $150,000 of the CNXM senior notes are outstanding, a maximum total leverage ratio of no greater than 4.75 to 1.00 (which increases to no greater than 5.25 to 1.00 during qualifying acquisition periods); (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 March 31, 2020.

The CNXM revolving credit 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 revolving credit facility are secured by substantially all of the assets of CNXM and its wholly-owned subsidiaries. CNX is not a guarantor under the revolving credit facility.

At March 31, 2020, the CNXM credit facility had $347,000 of borrowings outstanding. CNXM had the maximum amount of revolving credit available for borrowing at March 31, 2020, or $253,000. At December 31, 2019, the CNXM credit facility had $311,750 of borrowings outstanding. CNXM had the maximum amount of revolving credit available for borrowing at December 31, 2019, or $288,250.





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NOTE 8—OTHER ACCRUED LIABILITIES:
March 31,
2020
December 31,
2019
Royalties$70,803  $74,061  
Accrued Interest25,800  30,862  
Transportation Charges22,355  16,533  
Deferred Revenue12,123  13,964  
Accrued Other Taxes9,385  9,115  
Accrued Payroll & Benefits6,209  6,248  
Short-Term Incentive Compensation2,626  21,030  
Other41,145  37,610  
Current Portion of Long-Term Liabilities:
Asset Retirement Obligations5,076  5,076  
Salary Retirement1,608  1,587  
Total Other Accrued Liabilities$197,130  $216,086  


NOTE 9—LONG-TERM DEBT:
March 31,
2020
December 31,
2019
Senior Notes due April 2022 at 5.875% (Principal of $822,973 and $894,307
plus Unamortized Premium of $822 and $1,001, respectively)
$823,795  $895,308  
Senior Notes due March 2027 at 7.25%, Issued at Par Value500,000  500,000  
CNX Revolving Credit Facility437,000  661,000  
CNX Midstream Partners LP Senior Notes due March 2026 at 6.50% (Principal of $400,000 less Unamortized Discount of $4,438 and $4,625, respectively)*395,562  395,375  
CNX Midstream Partners LP Revolving Credit Facility*347,000  311,750  
Cardinal States Gathering Company Credit Facility maturing in March 2028 (Principal of $125,000 less Unamortized Discount of $1,243)123,757  —  
CSG Holdings II LLC Credit Facility maturing in December 2026 (Principal of $50,000 less Unamortized Discount of $497)49,503  —  
Less: Unamortized Debt Issuance Costs16,018  8,990  
2,660,599  2,754,443  
Less: Amounts Due in One Year 20,451  —  
Long-Term Debt$2,640,148  $2,754,443  
*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 three months ended March 31, 2020, CNX's wholly-owned subsidiary Cardinal States Gathering Company LLC (Cardinal States) entered into a $125,000 non-revolving credit facility agreement (the Cardinal States Facility). The Cardinal States Facility matures in 2028, has an interest rate of 3-month LIBOR + 450 basis points and includes an excess cash flow sweep in an amount required to achieve a quarterly targeted debt balance. The facility is secured by substantially all of the Cardinal States assets, requires a minimum level of hedging of the variable interest rate exposure and is non-recourse to CNX.

Additionally, during the three months ended March 31, 2020, CNX's wholly-owned subsidiary CSG Holdings II LLC (CSG Holdings) entered into a $50,000 non-revolving credit facility agreement (the CSG Holdings Facility). The CSG Holdings Facility matures in 2026, has interest rate of 3-month LIBOR + 675 basis points and includes a full excess cash sweep. The facility is secured by substantially all of the CSG Holding assets, requires a minimum level of hedging of the variable interest rate exposure and is non-recourse to CNX.

During the three months ended March 31, 2020, CNX purchased and retired $71,334 of its outstanding 5.875% senior notes due in April 2022. As part of this transaction, a gain of $11,263 was included in (Gain) Loss on Debt Extinguishment in the Consolidated Statements of Income.

During the three months ended March 31, 2019, CNX completed a private offering of $500,000 of 7.25% senior notes due

19


in March 2027. The notes are guaranteed by most of CNX's subsidiaries but do not include CNXM's general partner or CNXM.

During the three months ended March 31, 2019, CNX purchased $400,000 of its outstanding 5.875% senior notes due in April 2022. As part of this transaction, a loss of $7,537 was included in (Gain) Loss on Debt Extinguishment in the Consolidated Statements of Income.

NOTE 10—COMMITMENTS AND CONTINGENT LIABILITIES:
CNX and its subsidiaries are subject to various lawsuits and claims with respect to such matters as personal injury, royalty accounting, damage to property, climate change, governmental regulations including environmental violations and 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.
At March 31, 2020, 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 tables. 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 the commitments in the following table 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 Years3-5 YearsBeyond
5  Years
Letters of Credit:
Firm Transportation$197,889  $196,917  $972  $—  $—  
Other6,950  6,950  —  —  —  
Total Letters of Credit204,839  203,867  972  —  —  
Surety Bonds:
Employee-Related2,600  2,600  —  —  —  
Environmental12,480  10,605  1,875  —  —  
Financial Guarantees81,670  81,670  —  —  —  
Other9,322  8,129  1,193  —  —  
Total Surety Bonds106,072  103,004  3,068  —  —  
Total Commitments$310,911  $306,871  $4,040  $—  $—  

Excluded from the above table are commitments and guarantees entered into in conjunction with the spin-off of the Company's coal business in November 2017. Although CONSOL Energy has agreed to indemnify CNX to the extent that CNX would be called upon to pay any of these liabilities, there is no assurance that CONSOL Energy will satisfy its obligations to indemnify CNX in the event that CNX is so called upon.

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 in the Consolidated Balance Sheets. As of March 31, 2020, the purchase obligations for each of the next five years and beyond were as follows:
Obligations DueAmount
Less than 1 year$249,924  
1 - 3 years475,567  
3 - 5 years398,180  
More than 5 years1,033,218  
Total Purchase Obligations$2,156,889  

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NOTE 11—DERIVATIVE INSTRUMENTS:

CNX enters into interest rate swap agreements to manage its exposure to interest rate volatility. These swaps change the variable-rate cash flow exposure on the debt obligations to fixed cash flows. The change in fair value of the interest rate swap agreements are accounted for on a mark-to-market basis with the changes in fair value recorded in current period earnings.

In March 2020, CNX entered into interest rate swap related to $175,000 of borrowings under the Cardinal States Facility and CSG Holdings Facility (See Note 9 - Long-Term Debt). In order to manage exposure to interest rate volatility, each respective entity entered into an interest rate swap for the full outstanding principal amounts inclusive of a put option at 25 basis points. The underlying notional for each swap and put option reduces over time based upon an expected amortization profile for each respective credit facility. In addition, CSG Holdings entered into a call option commencing March 31, 2023.

In June 2019, CNX entered into an interest rate swap agreement related to $160,000 of borrowings under CNX’s senior secured revolving credit facility (See Note 7 - Revolving Credit Facilities) which has the economic effect of modifying the variable-interest obligation into a fixed-interest obligation over a three-year period. In March 2020, this swap was blended and extended via a new interest rate swap, effective April 3, 2020, of a new four-year interest rate swap inclusive of a put option at zero basis points. Also executed in March 2020 was a new four-year $250,000 interest rate swap inclusive of a put option at zero basis points, effective April 3, 2020. Consistent with the previous interest rate swap agreement, the $250,000 interest rate swap was entered into to manage CNX's exposure to interest rate volatility.

CNX enters into financial derivative instruments to manage its exposure to commodity price volatility. These natural gas 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 in 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 CNX's derivative instruments were as follows:
March 31,December 31,Forecasted to
20202019Settle Through
Natural Gas Commodity Swaps (Bcf)1,387.1  1,460.6  2025
Natural Gas Basis Swaps (Bcf)1,235.9  1,290.4  2025
Interest Rate Swaps$585,000  $160,000  2028















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The gross fair value of CNX's derivative instruments was as follows:
March 31,December 31,
20202019
Current Assets:
  Commodity Derivative Instruments:
     Commodity Swaps$296,834  $234,238  
     Basis Only Swaps15,718  13,556  
  Interest Rate Swaps197  —  
Total Current Assets$312,749  $247,794  
Other Assets:
  Commodity Derivative Instruments:
     Commodity Swaps$244,501  $288,543  
     Basis Only Swaps12,396  25,553  
  Interest Rate Swaps1,214  —  
Total Other Assets$258,111  $314,096  
Current Liabilities:
  Commodity Derivative Instruments:
     Commodity Swaps$5,028  $345  
     Basis Only Swaps41,069  40,626  
  Interest Rate Swaps2,961  495  
Total Current Liabilities$49,058  $41,466  
Non-current Liabilities:
  Commodity Derivative Instruments:
     Commodity Swaps$23,018  $9,693  
     Basis Only Swaps130,572  105,445  
  Interest Rate Swaps10,308  724  
Total Non-current Liabilities$163,898  $115,862  
























22


The effect of commodity derivative instruments on the Company's Consolidated Statements of Income was as follows:
For the Three Months Ended
March 31,
20202019
Cash Received (Paid) in Settlement of Commodity Derivative Instruments:
  Natural Gas:
Commodity Swaps$157,579  $(26,950) 
Basis Swaps(6,418) (14,432) 
Total Cash Received (Paid) in Settlement of Commodity Derivative Instruments151,161  (41,382) 
Unrealized Gain (Loss) on Commodity Derivative Instruments:
  Natural Gas:
Commodity Swaps545  (50,761) 
Basis Swaps(36,564) (103,233) 
Total Unrealized Loss on Commodity Derivative Instruments(36,019) (153,994) 
Gain (Loss) on Commodity Derivative Instruments:
  Natural Gas:
Commodity Swaps158,124  (77,711) 
Basis Swaps(42,982) (117,665) 
Total Gain (Loss) on Commodity Derivative Instruments$115,142  $(195,376) 

During the three months ended March 31, 2020, cash of $57 was paid in settlement of interest rate swaps, and an unrealized loss of $10,639 was recognized, resulting in a total loss on interest rate swaps of $10,696, which is included in Interest Expense in the Consolidated Statements of Income.

Cash Received in Settlement of Commodity Derivative Instruments for the three months ended March 31, 2020 includes$54,982 related the monetization of certain NYMEX commodity swaps.. The monetization resulted from reducing the contract swap prices of certain 2022, 2023, and 2024 NYMEX natural gas swap contracts. The notional quantities of the contracts were not changed by the monetization. Net proceeds received from the monetization are classified as operating cash flows in the Consolidated Statements of Cash Flows

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 normal sales exception and are not subject to derivative instrument accounting.

NOTE 12—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 1 - Quoted prices for identical instruments in active markets.
Level 2 - 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.

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Level 3 - 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 instrument measured at fair value on a recurring basis is summarized below:
 Fair Value Measurements at March 31, 2020Fair Value Measurements at December 31, 2019
DescriptionLevel 1Level 2Level 3Level 1Level 2Level 3
Gas Derivatives$—  $369,762  $—  $—  $405,781  $—  
Interest Rate Swaps$—  $(11,858) $—  $—  $(1,219) $—  

The carrying amounts and fair values of financial instruments for which the fair value option was not elected are as follows:
 March 31, 2020December 31, 2019
 Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Cash and Cash Equivalents$31,833  $31,833  $16,283  $16,283  
Long-Term Debt (Excluding Debt Issuance Costs)$2,676,617  $2,308,846  $2,763,433  $2,619,676  
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 13—VARIABLE INTEREST ENTITIES:

The Company determined CNXM to be a variable interest entity. The Company has the power through its ownership and control of CNXM's general partner (CNX Midstream GP LLC) to direct the activities that most significantly impact CNXM's economic performance. In addition, through its limited partner interest 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.

The risks associated with the operations of CNXM are discussed in its Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 10, 2020 and its other periodic reports filed thereafter.

On January 29, 2020, CNX and CNXM executed definitive agreements to eliminate CNXM's incentive distribution rights, or IDRs, held by its general partner and to convert the 2.0% general partner interest in CNXM into a non-economic general partnership interest (collectively, the "IDR Elimination Transaction").

Pursuant to the IDR Elimination Transaction agreements, CNX received the following consideration in exchange for the cancellation of the IDRs and conversion of the 2.0% general partner interest:

26 million CNXM common units;
3 million new CNXM Class B units. The newly issued Class B units will not receive or accrue distributions until January 1, 2022 at which time they will automatically convert into CNXM common units on a one-for-one basis; and
$135,000 to be paid in three installments as follows: $50,000 due December 31, 2020, $50,000 due December 31, 2021 and $35,000 due December 31, 2022.

After giving effect to the IDR Elimination Transaction, CNX now owns 47.7 million common units, or approximately 53%, of the outstanding limited partner interests in CNXM, excluding the Class B units. Prior to the IDR Elimination Transaction, the Company owned approximately 34% of the outstanding limited partner interest and 100% of the general partner interest. Upon conversion of the Class B units to CNXM common units on January 1, 2022, CNX's ownership will increase to 50.7 million common units or approximately 56.5% of the outstanding limited partner interest in CNXM on a proforma basis.



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The following table presents amounts included in the Company's Consolidated Balance Sheets that were for the use or obligation of CNXM:
March 31,December 31,
20202019
Assets:
     Cash$5,235  $31  
     Receivables - Related Party21,714  21,076  
     Receivables - Third Party4,980  7,935  
     Other Current Assets2,064  1,976  
     Property, Plant and Equipment, net1,200,544  1,195,591  
     Operating Lease ROU Asset3,225  4,731  
     Other Assets2,945  3,262  
Total Assets$1,240,707  $1,234,602  
Liabilities:
     Accounts Payable and Accrued Liabilities$32,223  $67,290  
     Accounts Payable - Related Party51,688  4,787  
     Revolving Credit Facility347,000  311,750  
     Long-Term Debt394,399  394,162  
     Long-Term Liabilities - Related Party85,000  —  
Total Liabilities$910,310  $777,989  

The following table summarizes CNXM's Consolidated Statements of Operations and Cash Flows, inclusive of affiliate amounts:
 For the Three Months Ended March 31,
20202019
Revenue
Gathering Revenue - Related Party
$62,178  $53,776  
Gathering Revenue - Third Party
17,953  18,443  
Miscellaneous Income65  —  
Total Revenue80,196  72,219  
Expenses
Operating Expense - Related Party
3,828  5,548  
Operating Expense - Third Party
8,596  5,974  
General and Administrative Expense - Related Party
2,857  3,967  
General and Administrative Expense - Third Party
2,765  1,536  
(Gain) Loss on Asset Sales and Abandonments
(11) 7,229  
Depreciation Expense
7,578  5,650  
Interest Expense
8,793  7,339  
Total Expense34,406  37,243  
Net Income$45,790  $34,976  
Net Cash Provided by Operating Activities
$40,123  $49,913  
Net Cash Used in Investing Activities$(32,659) $(78,557) 
Net Cash (Used in) Provided by Financing Activities$(2,260) $24,748  

At March 31, 2020 and December 31, 2019, excluding amounts related to the IDR Elimination Transaction, CNX had a net payable of $20,085 and $16,362 respectively, due to CNX Gathering and CNXM, primarily for accrued but unpaid gathering services.



25


NOTE 14—SEGMENT INFORMATION:
CNX consists of two principal business divisions: Exploration and Production (E&P) and Midstream. The principal activity of the E&P Division, which includes four reportable segments, is to produce pipeline quality natural gas for sale primarily to gas wholesalers. The E&P Division's reportable segments are Marcellus Shale, Utica Shale, Coalbed Methane, and Other Gas. The Other Gas Segment is primarily related to shallow oil and gas production which is not significant to the Company. It also includes the Company's purchased gas activities, unrealized gain or loss on commodity derivative instruments, realized gain on commodity derivative instruments that were partially monetized prior to their settlement dates, exploration and production related other costs, impairments of exploration and production properties, as well as various other operating activities assigned to the E&P Division but not allocated to each individual segment.
CNX's Midstream Division's principal activity is the ownership, operation, development and acquisition of natural gas gathering and other midstream energy assets of CNX Gathering and CNXM, which provide natural gas gathering services for the Company's produced gas, as well as for other independent third-parties in the Marcellus Shale and Utica Shale in Pennsylvania and West Virginia. Excluded from the Midstream Division are the gathering assets and operations of CNX that have not been contributed to CNX Gathering and CNXM. CNX owns and controls 100% of CNX Gathering, making CNXM a single-sponsor master limited partnership and thus the Company consolidates CNXM. The Midstream Division is comprised of a single Midstream segment.
The Company's unallocated expenses include other income/expense, gain on asset sales related to non-core assets, gain/loss on debt extinguishment and income taxes.
In the preparation of the following information, intersegment sales have been recorded at amounts approximating market prices. Operating profit for each segment is based on sales less identifiable operating and non-operating expenses. Assets are reflected at the division level for E&P and are not allocated between each individual E&P segment. These assets are not allocated to each individual segment due to the diverse asset base controlled by CNX, whereby each individual asset may service more than one segment within the division. An allocation of such asset base would not be meaningful or representative on a segment by segment basis.

26


Industry segment results for the three months ended March 31, 2020:
 
Marcellus
Shale
Utica ShaleCoalbed MethaneOther
Gas
Total
E&P
MidstreamUnallocatedIntercompany EliminationsConsolidated
Natural Gas, NGL and Oil Revenue$179,044  $41,450  $30,723  $277  $251,494  $—  $—  $—  $251,494  (A)
Purchased Gas Revenue—  —  —  26,359  26,359  —  —  —  26,359    
Midstream Revenue—  —  —  —  —  80,341  —  (61,935) 18,406    
Gain on Commodity Derivative Instruments 68,452  18,000  9,687  19,003  115,142  —  —  —  115,142  
Other Operating Income—  —  —  5,466  5,466  —  —  (508) 4,958  (B)
Total Revenue and Other Operating Income$247,496  $59,450  $40,410  $51,105  $398,461  $80,341  $—  $(62,443) $416,359    
Total Operating Expense$183,172  $48,817  $34,254  $138,585  $404,828  $500,915  $—  $(62,443) $843,300  (C)
Earnings (Loss) Before Income Tax
$64,324  $10,633  $6,156  $(127,666) $(46,553) $(429,544) $18,293  $—  $(457,804) 
Segment Assets$6,785,652  $1,754,819  $147,094  $(158,615) $8,528,950  (D)
Depreciation, Depletion and Amortization
$119,152  $10,012  $—  $—  $129,164    
Capital Expenditures$119,393  $32,656  $—  $—  $152,049    

(A)  Included in Total Natural Gas, NGL and Oil Revenue are sales of $45,656 to Direct Energy Business Marketing LLC and $32,176 to NJR Energy Services Company, each of which comprises over 10% of revenue from contracts with external customers for the period.
(B) Includes equity in loss of unconsolidated affiliates of $161 for Total E&P.
(C) Included in Marcellus and Utica are $59,176 and $2,759, respectively of intercompany gathering fees. Included in Midstream is a goodwill impairment charge of $473,045 (See Note 6 - Goodwill and Other Intangible Assets for more information).
(D) Includes investments in unconsolidated equity affiliates of $16,549 for Total E&P.

        Industry segment results for the three months ended March 31, 2019:
 
Marcellus
Shale
Utica ShaleCoalbed MethaneOther
Gas
Total
E&P
MidstreamUnallocatedIntercompany EliminationsConsolidated
Natural Gas, NGL and Oil Revenue$293,257  $92,951  $49,835  $(97) $435,946  $—  $—  $—  $435,946  (D)
Purchased Gas Revenue—  —  —  16,221  16,221  —  —  —  16,221    
Midstream Revenue—  —  —  —  —  72,569  —  (54,126) 18,443    
Loss on Commodity Derivative Instruments (27,458) (9,601) (4,302) (154,015) (195,376) —  —  —  (195,376) 
Other Operating Income—  —  —  3,258  3,258  —  —  (61) 3,197  (E)
Total Revenue and Other Operating Income$265,799  $83,350  $45,533  $(134,633) $260,049  $72,569  $—  $(54,187) $278,431    
Total Operating Expense$178,868  $50,333  $32,634  $76,217  $338,052  $24,962  $—  $(54,187) $308,827  (F)
Earnings (Loss) Before Income Tax
$86,931  $33,017  $12,899  $(239,277) $(106,430) $32,584  $(2,364) $—  $(76,210) 
Segment Assets$6,638,207  $2,011,616  $137,564  $(10,026) $8,777,361  (G)
Depreciation, Depletion and Amortization
$117,075  $8,086  $—  $—  $125,161    
Capital Expenditures$223,791  $75,347  $—  $—  $299,138    

(D)  Included in Total Natural Gas, NGL and Oil Revenue are sales of $67,769 to Direct Energy Business Marketing LLC and $66,001 to NJR Energy Services Company, each of which comprises over 10% of revenue from contracts with external customers for the period.
(E) Includes equity in earnings of unconsolidated affiliates of $503 for Total E&P.
(F) Included in Marcellus and Utica are $53,462 and $664, respectively of intercompany gathering fees.
(G) Includes investments in unconsolidated equity affiliates of $17,860 for Total E&P.

27


Reconciliation of Segment Information to Consolidated Amounts:

Revenue and Other Operating Income
For the Three Months Ended March 31,
20202019
Total Segment Revenue from Contracts with External Customers$296,259  $470,610  
Gain (Loss) on Commodity Derivative Instruments115,142  (195,376) 
Other Operating Income4,958  3,197  
Total Consolidated Revenue and Other Operating Income$416,359  $278,431  

Loss Before Income Tax: 
For the Three Months Ended March 31,
20202019
Segment Earnings (Loss) Before Income Taxes for Reportable Business Segments:
E&P$(46,553) $(106,430) 
Midstream(429,544) 32,584  
Total Segment Earnings (Loss) Before Income Taxes for Reportable Business Segments$(476,097) $(73,846) 
Unallocated Expenses:
Other (Expense) Income(5,013) 1,030  
Gain on Certain Asset Sales12,043  4,143  
Gain (Loss) on Debt Extinguishment11,263  (7,537) 
Loss Before Income Tax$(457,804) $(76,210) 

Total Assets:
March 31,
20202019
Segment Assets for Total Reportable Business Segments:
E&P$6,785,652  $6,638,207  
Midstream1,754,819  2,011,616  
Intercompany Eliminations(158,615) (10,026) 
Items Excluded from Segment Assets:
Cash and Cash Equivalents
31,833  23,972  
Recoverable Income Taxes
115,261  113,592  
Total Consolidated Assets$8,528,950  $8,777,361  


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NOTE 15—STOCK REPURCHASE:
Since the October 30, 2017 inception of the current stock repurchase program, CNX's Board of Directors has approved in total a $750,000 stock repurchase program, which is not subject to an expiration date. The repurchases may be affected from time-to-time through open market purchases, privately negotiated transactions, Rule 10b5-1 plans, accelerated stock repurchases, block trades, derivative contracts or otherwise in compliance with Rule 10b-18. The timing of any repurchases will be based on a number of factors, including available liquidity, the Company's stock price, the Company's financial outlook, and alternative investment options. The stock repurchase program does not obligate the Company to repurchase any dollar amount or number of shares and the Board may modify, suspend, or discontinue its authorization of the program at any time. The Board of Directors will continue to evaluate the size of the stock repurchase program based on CNX's free cash flow position, leverage ratio, and capital plans. During the three months ended March 31, 2019, 3,121,054 shares were repurchased and retired at an average price of $10.71 per share for a total cost of $33,497. There were no shares repurchased and retired during the three months ended March 31, 2020.

NOTE 16—RECENT ACCOUNTING PRONOUNCEMENTS:

In March 2020, the FASB issued ASU 2020-04 - Reference Rate Reform - Facilitation of the Effects of Reference Rate Reform on Financial Reporting (Topic 848). This ASU provides optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates (IBORs) and, particularly, the risk of cessation of the London Interbank Offered Rate (LIBOR), regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is still evaluating the effect of adopting this guidance.

In March 2020, the FASB issued ASU 2020-03 - Codification Improvements to Financial Instruments. This ASU improves and clarifies various financial instruments topics, including the CECL standard (see Note 1 - Basis of Presentation for more information). The ASU includes seven different issues that describe the areas of improvement and the related amendments to GAAP, intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications. The amendments in this ASU have different effective dates. The adoption of this guidance is not expected to have a material impact on the Company's financial statements.

NOTE 17—SUBSEQUENT EVENTS:

CNX is closely monitoring the impact of the coronavirus COVID-19 ("COVID-19") pandemic on all aspects of our business and geographies, including how it may impact our customers, employees, vendors and contractors. While we did not incur significant disruptions during the three months ended March 31, 2020 from COVID-19, we are unable to predict the impact that the COVID-19 pandemic will have on our financial position, operating results and ability to obtain future financing due to numerous uncertainties.

The federal Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted on March 27, 2020. CNX continues to assess the potential impacts of this recently enacted legislation on its financial position and results of operations.

In April 2020, the Company repurchased $7,625 of its outstanding 5.875% senior notes due in April 2022 at an average price equal to 91.9% of the principal amount.





29


ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this Form 10-Q. The information provided below supplements, but does not form part of, CNX's financial statements. This discussion contains forward-looking statements that are based on the current views and beliefs of management, as well as assumptions and estimates made by management. Actual results could differ materially from any such forward-looking statements as a result of various risk factors, including those that may not be in the control of management. For further information on items that could impact future operating performance or financial condition, please see “Part II. Item 1A. Risk Factors” and the section entitled “Forward-Looking Statements” and the “Risk Factors” contained in our Annual Report on Form 10-K for the year ended December 31, 2019, which we filed with the SEC on February 10, 2020. CNX does not undertake any obligation to publicly update any forward-looking statements except as otherwise required by applicable law.

General

CNX is closely monitoring the current and potential impacts of the coronavirus COVID-19 ("COVID-19") pandemic on all aspects of our business and geographies, including how it has impacted, and may in the future impact our operations, financial results, liquidity, contractors, customers, employees and vendors. The Company continues to monitor a number of factors that may cause actual results of operations to differ from our historical results or current expectations. These factors include: the impact of the COVID-19 pandemic and the related economic downturn, the historically low natural gas and natural gas liquids prices and ramifications of the crude oil price war between the Organization of Petroleum Exporting Countries ("OPEC") /Saudi Arabia and Russia that occurred in March. While OPEC agreed in April to cut production, downward pressure on prices has continued and could continue for the foreseeable future, particularly given concerns over available storage capacity for refined products such as crude, and refinery inputs including condensate, c5+ and butane. These and other factors could affect the Company’s operations, earnings and cash flows for any period and could cause such results to not be comparable to those of the same period in previous years. The results presented in this Form 10-Q are not necessarily indicative of future operating results.

While CNX did not incur significant disruptions to operations during the three months ended March 31, 2020 as a result of the COVID-19 pandemic, CNX is unable to predict the impact that the COVID-19 pandemic will have on us, including our financial position, operating results, liquidity and ability to obtain financing in future reporting periods, due to numerous uncertainties. These uncertainties include the severity of the virus, the duration of the outbreak, governmental or other actions taken to combat the virus (which could include limitations on our operations or the operations of our customers and vendors), and the effect that the COVID-19 pandemic and the current oil price wars have on the demand for natural gas and natural gas liquids. The health of our employees, contractors and vendors, and our ability to meet staffing needs in our operations and certain critical functions cannot be predicted and is vital to our operations. Further, the impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets as well as other unanticipated consequences remain unknown. In addition, CNX cannot predict the impact that COVID-19 will have on our customers, vendors and contractors; however, any material effect on these parties could adversely impact CNX. For instance, in the short term, CNX is starting to see a reduction in overall service and materials costs, due to oversupply of those services and costs, since industrial production has waned. However, if services providers to our industry are forced into bankruptcy or otherwise consolidate due to weakening economic conditions, demand could outpace supply in the long-term and cause these costs to increase. The situation surrounding COVID-19 remains fluid and unpredictable, and CNX is actively managing our response in collaboration with our contractors, customers, employees and vendors and assessing potential impacts to our financial position and operating results, as well as any adverse developments that could impact our business.

CNX has also taken, and is continuing to take, proactive steps to manage any disruption in our business caused by COVID-19. For instance, even though our operations were not required to close, CNX was an early adopter in employing a work-from-home system, even before any government mandate on non-essential businesses was enacted. CNX increased its technology platform, infrastructure and security to allow for a work-from-home environment ahead of the actual need, and therefore, once the hypothetical became a reality, we believe CNX was ahead of many companies in this respect. CNX has also deployed additional safety protocols at our field sites in order to keep our employees and contractors safe and to keep our operations running without material disruption.

For further information regarding the impact of COVID-19 see Risk factors in Item 1A of this Form 10-Q.







30


Marketing Update:

The markets for natural gas, NGL, and crude oil remain volatile, and prices may continue to fluctuate in response to, among other things: Geopolitical factors, such as events that may reduce or increase production from particular oil-producing regions and/or from members of OPEC, and global events, such as the ongoing COVID-19 outbreak. Since the beginning of 2020, NYMEX oil prices have moved downward due in part to concerns about COVID-19 and its impact on near-term worldwide oil demand and due to the increase in oil production by certain members of OPEC. This oversupply of oil has caused historically low oil prices, which has compounded the impact of the domestic oversupply of NGLs as well as current export constraints and has driven NGL prices to historic lows. While OPEC agreed in April to cut production, downward pressure on prices has continued and could continue for the foreseeable future, particularly given concerns over available storage capacity for refined products such as crude, and refinery inputs including condensate, c5+ and butane, that could result in temporary reductions in CNX’s wet gas production. During the three months ended March 31, 2020, liquids comprised seven percent of CNX’s revenue from external customers.

Continued strength in natural gas production, along with reduced heating demand for natural gas as a result of relatively mild winter temperatures throughout most of the United States, accounted for relatively higher inventory levels. Despite an April 12 agreement by the OPEC and it’s allies to reduce global production by approximately 10%, the economic slowdown and stay-at-home orders has continued to decrease demand for natural gas. The U.S. Energy Information Administration’s (“EIA”) Short-Term Energy Outlook for April 2020 forecasts are subject to heightened uncertainty because of the economic slowdown and significant changes in energy markets recently.

For the first quarter of 2020 and 2019, CNX's average sales price for natural gas, natural gas liquids (NGL), oil, and condensate was $2.59 per Mcfe and $2.97 per Mcfe, respectively. The average realized price for all liquids for the first quarter of 2020 was $15.14 per barrel compared to $27.41 per barrel in 2019 quarter.

CNX's weighted average differential from NYMEX in the first quarter of 2020 was negative $0.26 per MMBtu. CNX's average sales price for natural gas before hedging decreased 14.5% to $1.83 per Mcf compared with the average sales price of $2.14 per Mcf in the fourth quarter of 2019. This decrease results from a lower Henry Hub price offset in part by improved basis pricing. Including the impact of cash settlements from hedging and excluding cash from hedge monetization, CNX's average sales price for natural gas was $0.13 per Mcf, or 5.0%, higher than the three months ended December 31, 2019, and $0.28 per Mcf, or 9.7%, lower than the three months ended March 31, 2019.

During the first quarter of 2020, CNX sold 134.4 Bcfe of produced natural gas, an increase of 1.1% from the 133.0 Bcfe sold in the year-earlier quarter, primarily due to an increase in Marcellus Shale volumes. The increase was offset, in part, by a decrease in Utica Shale volumes. Total quarterly production costs decreased to $1.98 per Mcfe, compared to the year-earlier quarter of $1.99 per Mcfe, driven primarily by a decrease in lease operating expenses offset, in part, by an increase in transportation, gathering and compression. Capital expenditures decreased to $152 million in the first quarter of 2020, compared to $299 million of spend in the first quarter of 2019.

CNX Guidance:

Total hedged natural gas production in the 2020 second quarter is 113.5 Bcf. The annual gas hedge position is shown in the table below:
20202021
Volumes Hedged (Bcf), as of 4/21/20*451.1  433.5  
*Includes actual settlements of 155.5 Bcf.

CNX's hedged gas volumes include a combination of NYMEX financial hedges, index (NYMEX and basis) financial hedges, and physical fixed price sales. In addition, to protect the NYMEX hedge volumes from basis exposure, CNX enters into basis-only financial hedges and physical sales with fixed basis at certain sales points.

In March 2020, CNX monetized and repriced a portion of its 2022, 2023, and 2024 NYMEX natural gas hedge portfolio generating $55.0 million of net proceeds, which are included in Gain (Loss) on Commodity Derivative Instruments in the Consolidated Statements of Income for the three months ended March 31, 2020. Notional quantities were not affected by the restructuring. 2022 swap contracts with a notional quantity of 113.2 million MMBtus and a weighted average price of $2.80 per MMBtu were repriced to a contract price of $2.40 per MMBtu, 2023 swap contracts with a notional quantity of 51.1 million MMBtus and a weighted average price of $2.69 per MMBtu were repriced to a contract price of $2.48 per MMBtu, and 2024 swap contracts with a notional quantity of 19.2 million MMBtus and a weighted average price of $2.62 per MMBtu were

31


repriced to a contract price of $2.54 per MMBtu. The net proceeds from the monetization are expected to be used to reduce the Company’s absolute debt.

In April 2020, CNX monetized and terminated approximately 39 million MMBtus of NYMEX natural gas hedges and a similar quantity of financial basis hedges that were to settle at various times through May to November of 2020. In connection with these monetizations, CNX received $29 million of net proceeds.

Results of Operations - Three Months Ended March 31, 2020 Compared with Three Months Ended March 31, 2019

Net Loss Attributable to CNX Resources Shareholders
CNX reported a net loss attributable to CNX Resources shareholders of $329 million, or a loss per diluted share of $1.76, for the three months ended March 31, 2020, compared to a net loss attributable to CNX Resources shareholders of $87 million, or a loss per diluted share of $0.44, for the three months ended March 31, 2019.
 For the Three Months Ended March 31,
(Dollars in thousands)20202019Variance
Net Loss$(305,222) $(64,651) $(240,571) 
Less: Net Income Attributable to Noncontrolling Interest23,864  22,686  1,178  
Net Loss Attributable to CNX Resources Shareholders$(329,086) $(87,337) $(241,749) 

CNX consists of two principal business divisions: Exploration and Production (E&P) and Midstream. The operating results of the Company's reportable segments were as follows for the three months ended March 31, 2020 and 2019:
For the Three Months Ended March 31, 2020
(Dollars in millions)E&P DivisionMidstream DivisionIntercompany EliminationsConsolidated
Natural Gas, NGL and Oil Revenue$251  $—  $—  $251  
Gain on Commodity Derivative Instruments115  —  —  115  
Purchased Gas Revenue26  —  —  26  
Midstream Revenue - Related Party—  62  (62) —  
Midstream Revenue - Third Party—  18  —  18  
Other Operating Income —  —   
Total Revenue and Other Operating Income398  80  (62) 416  
Operating Expense:
   Lease Operating Expense10  —  —  10  
   Transportation, Gathering and Compression133  12  (62) 83  
   Production, Ad Valorem, and Other Fees —  —   
   Depreciation, Depletion and Amortization119  10  —  129  
Impairment of Exploration and Production Properties62  —  —  62  
Impairment of Goodwill—  473  —  473  
   Exploration and Production Related Other Costs —  —   
   Purchased Gas Costs25  —  —  25  
   Other Operating Expense21  —  —  21  
   Selling, General and Administrative Costs25   —  30  
Total Operating Costs and Expenses405  500  (62) 843  
   Interest Expense40   —  49  
Total Division Costs445  509  (62) 892  
Loss Before Income Tax$(47) $(429) $—  $(476) 



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For the Three Months Ended March 31, 2019
(Dollars in millions)E&P DivisionMidstream DivisionIntercompany EliminationsConsolidated
Natural Gas, NGL and Oil Revenue$436  $—  $—  $436  
Loss on Commodity Derivative Instruments(195) —  —  (195) 
Purchased Gas Revenue16  —  —  16  
Midstream Revenue - Related Party—  54  (54) —  
Midstream Revenue - Third Party—  19  —  19  
Other Operating Income —  —   
Total Revenue and Other Operating Income260  73  (54) 279  
Operating Expense:
   Lease Operating Expense19  —  —  19  
   Transportation, Gathering and Compression122  12  (54) 80  
   Production, Ad Valorem, and Other Fees —  —   
   Depreciation, Depletion and Amortization117   —  125  
   Exploration and Production Related Other Costs —  —   
   Purchased Gas Costs16  —  —  16  
   Other Operating Expense23  —  —  23  
   Selling, General and Administrative Costs31   —  37  
Total Operating Costs and Expenses338  26  (54) 310  
   Interest Expense28   —  35  
   Loss on Asset Sales and Abandonments, net—   —   
Total Division Costs366  40  (54) 352  
(Loss) Earnings Before Income Tax$(106) $33  $—  $(73) 

The principal activity of the E&P Division is to produce pipeline quality natural gas for sale primarily to gas wholesalers. The E&P Division's reportable segments are Marcellus Shale, Utica Shale, Coalbed Methane, and Other Gas.

CNX's E&P Division had a loss before income tax of $47 million for the three months ended March 31, 2020, compared to a loss before income tax of $106 million for the three months ended March 31, 2019. Included in the loss for the three months ended March 31, 2020 was a $62 million non-cash impairment charge related to exploration and production properties and an unrealized loss on commodity derivative instruments of $36 million. Included in the loss for the three months ended March 31, 2019 was an unrealized loss on commodity derivative instruments of $154 million.

CNX's Midstream Division's principal activity is the ownership, operation, development and acquisition of natural gas gathering and other midstream energy assets, through CNX Gathering and CNXM, which provide natural gas gathering services for the Company's produced gas, as well as for other independent third-parties in the Marcellus Shale and Utica Shale in Pennsylvania and West Virginia. Excluded from the Midstream Division are the gathering assets and operations of CNX that have not been contributed to CNX Gathering and CNXM. CNX's Midstream Division had a loss before income tax of $429 million for the three months ended March 31, 2020, compared to earnings before income tax of $33 million for the three months ended March 31, 2019.









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E&P Division Summary
Sales volumes, average sales prices (including the effects of settled derivative instruments and excluding monetization), and average costs for the E&P Division were as follows: 
For the Three Months Ended March 31,
20202019VariancePercent Change
Sales Volumes (Bcfe)134.4133.01.40  1.1 %
Average Sales Price - Gas (per Mcf)
$1.83  $3.21  $(1.38) (43.0)%
Gain (Loss) on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)*
$0.77  $(0.33) $1.10  333.3 %
Average Sales Price - NGL (per Mcfe)**
$2.34  $4.46  $(2.12) (47.5)%
Average Sales Price - Oil (per Mcfe)**
$7.87  $—  $7.87  — %
Average Sales Price - Condensate (per Mcfe)**
$6.28  $6.50  $(0.22) (3.4)%
Average Sales Price (per Mcfe)
$2.59  $2.97  $(0.38) (12.8)%
Lease Operating Expense (per Mcfe)
0.07  0.14  (0.07) (50.0)%
Production, Ad Valorem, and Other Fees (per Mcfe)
0.05  0.05  —  — %
Transportation, Gathering and Compression (per Mcfe)
0.99  0.92  0.07  7.6 %
Depreciation, Depletion and Amortization (DD&A) (per Mcfe)
0.87  0.88  (0.01) (1.1)%
Average Costs (per Mcfe)
$1.98  $1.99  $(0.01) (0.5)%
Average Margin (per Mcfe)
$0.61  $0.98  $(0.37) (37.8)%

* Excluding gain from hedge monetization
**NGL and Condensate are converted to Mcfe at the rate of one barrel equals six Mcf based upon the approximate relative energy content of oil and natural gas, which is not indicative of the relationship of oil, NGL, condensate, and natural gas prices.

Natural gas, NGL, and oil revenue was $251 million for the three months ended March 31, 2020, compared to $436 million for the three months ended March 31, 2019. The decrease was primarily due to the 12.8% decrease in the average sales price driven by lower natural gas and NGL prices.

The decrease in average sales price was primarily the result of the $1.38 per Mcf decrease in general natural gas prices, when excluding the impact of hedging, in the markets in which CNX sells its natural gas. There was also a $0.03 per Mcfe decrease in NGL and condensate sales volumes when excluding the impact of hedging. Both decreases were offset, in-part, by the $1.10 per Mcf increase in the realized gain (loss) on commodity derivative instruments related to the Company's hedging program.

Changes in the average costs per Mcfe were primarily related to the following items:
Lease operating expense decreased on a per unit basis primarily due to a decrease in water disposal costs in the period-to-period comparison due to an increase in the reuse of produced water in well completions in the current period.
Transportation, gathering, and compression expense increased on a per unit basis primarily due to an increase in CNXM gathering fees related to an increase in our Marcellus production and an increase in firm transportation expense, primarily as a result of new contracts that give CNX the ability to move and sell natural gas outside of the Appalachian basin. The decrease in production from CNX's lower cost dry Utica volumes also contributed to the increase on a per unit basis.











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The following table presents a breakout of net liquid and natural gas sales information and settled derivative information to assist in the understanding of the Company’s natural gas production and sales portfolio and information regarding settled commodity derivatives:
For the Three Months Ended March 31,
 in thousands (unless noted)20202019VariancePercent Change
LIQUIDS
NGL:
Sales Volume (MMcfe)8,301  6,681  1,620  24.2 %
Sales Volume (Mbbls)1,383  1,113  270  24.3 %
Gross Price ($/Bbl)$14.04  $26.76  $(12.72) (47.5)%
Gross Revenue$19,412  $29,766  $(10,354) (34.8)%
Oil:
Sales Volume (MMcfe)74  23  51  221.7 %
Sales Volume (Mbbls)12    200.0 %
Gross Price ($/Bbl)$47.22  $43.56  $3.66  8.4 %
Gross Revenue$582  $166  $416  250.6 %
Condensate:
Sales Volume (MMcfe)303  358  (55) (15.4)%
Sales Volume (Mbbls)50  60  (10) (16.7)%
Gross Price ($/Bbl)$37.68  $39.00  $(1.32) (3.4)%
Gross Revenue$1,901  $2,327  $(426) (18.3)%
GAS
Sales Volume (MMcf)125,685  125,938  (253) (0.2)%
Sales Price ($/Mcf) $1.83  $3.21  $(1.38) (43.0)%
  Gross Revenue$229,599  $403,687  $(174,088) (43.1)%
Hedging Impact ($/Mcf) $0.77  $(0.33) $1.10  (333.3)%
Gain (Loss) on Commodity Derivative Instruments - Cash Settlement*96,179  (41,382) 137,561  (332.4)%
* Excluding gain from hedge monetization

Selling, General and Administrative ("SG&A") - Total Company

SG&A costs include costs such as overhead, including employee labor and benefit costs, short-term incentive compensation, costs of maintaining our headquarters, audit and other professional fees, and legal compliance expenses. SG&A costs also include non-cash long-term equity-based compensation expense.
 For the Three Months Ended March 31,
 (in millions)20202019VariancePercent
Change
SG&A
Long-Term Equity-Based Compensation (Non-Cash)$ $11  $(4) (36.4)%
Salaries and Wages 11  (3) (27.3)%
Short-Term Incentive Compensation   (2) (50.0)%
Other13  10   30.0 %
Total SG&A$30  $36  $(6) (16.7)%

Long-term equity-based compensation decreased $4 million in the period-to-period comparison due to the acceleration of vesting of certain restricted stock units and performance share units held by certain employees related to a change in control event that occurred in the second quarter of 2019.
Salaries and Wages decreased $3 million due to an overall reduction in employee costs.
Short-term incentive compensation decreased $2 million due to lower projected payouts in the current period.





35


Unallocated Expense

Certain costs and expenses, such as other expense (income), gain on asset sales related to non-core assets, (gain) loss on debt extinguishment and income taxes are unallocated expenses and therefore are excluded from the per unit costs above as well as segment reporting. Below is a summary of these costs and expenses:

Other Expense (Income)
 For the Three Months Ended March 31,
 (in millions)20202019VariancePercent
Change
Other Income
Royalty Income$—  $ $(3) (100.0)%
Right of Way Sales—   (1) (100.0)%
Interest Income—   (1) (100.0)%
Other —   100.0 %
Total Other Income$ $ $(3) (60.0)%
Other Expense
Professional Services$ $—  $ 100.0 %
Bank Fees  —  — %
Other Corporate Expense  —  — %
Total Other Expense$ $ $ 75.0 %
       Total Other Expense (Income)$ $(1) $ 600.0 %

Gain on Asset Sales and Abandonments, net
A gain on asset sales of $12 million related to non-core assets was recognized in the three months ended March 31, 2020 compared to a gain of $4 million in the three months ended March 31, 2019.

Also refer to the discussion of Loss on Asset Sales and Abandonments contained in the section "Total Midstream Division Analysis" of this Form 10-Q for additional items that are not part of Unallocated Expense.

(Gain) Loss on Debt Extinguishment

A gain on debt extinguishment of $11 million was recognized in the three months ended March 31, 2020 compared to a loss on debt extinguishment of $8 million in the three months ended March 31, 2019. During the three months ended March 31, 2020, CNX purchased $71 million of its 5.875% Senior notes due in April 2022 at an average price equal to 83.9% of the principal amount. During the three months end March 31, 2019 CNX purchased $400 million of its 5.875% Senior notes due in April 2022 at an average price equal to 101.5% of the principal amount. See Note 9 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.

Income Taxes

The effective income tax rate was 33.3% for the three months ended March 31, 2020 compared to 15.2% for the three months ended March 31, 2019. The effective rate for the three months ended March 31, 2020 and 2019 differs from the U.S. federal statutory rate of 21% primarily due to the impact of noncontrolling interest, equity compensation and state income taxes.

See Note 4 - Income Taxes in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.
 For the Three Months Ended March 31,
(in millions)20202019VariancePercent
Change
Total Company Loss Before Income Tax $(458) $(76) $(382) 502.6 %
Income Tax Benefit$(153) $(12) $(141) 1,175.0 %
Effective Income Tax Rate33.3 %15.2 %18.1 %


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TOTAL E&P DIVISION ANALYSIS for the three months ended March 31, 2020 compared to the three months ended March 31, 2019:
The E&P division had a loss before income tax of $47 million for the three months ended March 31, 2020 compared to a loss before income tax of $106 million for the three months ended March 31, 2019. Variances by individual operating segment are discussed below.
For the Three Months EndedDifference to Three Months Ended
 March 31, 2020March 31, 2019
 (in millions)MarcellusUticaCBMOther
Gas
Total E&PMarcellusUticaCBMOther
Gas
Total
E&P
Natural Gas, NGL and Oil Revenue$179  $41  $31  $—  $251  $(114) $(52) $(19) $—  $(185) 
Gain on Commodity Derivative Instruments68  18  10  19  115  95  28  14  173  310  
Purchased Gas Revenue—  —  —  26  26  —  —  —  10  10  
Other Operating Income—  —  —    —  —  —    
Total Revenue and Other Operating Income247  59  41  51  398  (19) (24) (5) 186  138  
Lease Operating Expense   (1) 10  (4) (3) —  (2) (9) 
Production, Ad Valorem, and Other Fees   —   —  —  (1) —  (1) 
Transportation, Gathering and Compression115   11  (2) 133  11  —   (2) 11  
Depreciation, Depletion and Amortization59  36  19   119  (3)     
Impairment of Exploration and Production Properties
—  —  —  62  62  —  —  —  62  62  
Exploration and Production Related Other Costs—  —  —    —  —  —    
Purchased Gas Costs—  —  —  25  25  —  —  —    
Other Operating Expense—  —  —  21  21  —  —  —  (2) (2) 
Selling, General and Administrative Costs
—  —  —  25  25  —  —  —  (6) (6) 
Total Operating Costs and Expenses183  48  35  139  405   (2)  63  67  
Interest Expense—  —  —  40  40  —  —  —  12  12  
Total E&P Division Costs183  48  35  179  445   (2)  75  79  
Earnings (Loss) Before Income Tax$64  $11  $ $(128) $(47) $(23) $(22) $(7) $111  $59  
Note: Included in the table above is a related party transportation, gathering and compression charge of $62 million that is offset in the Midstream Division in Midstream Revenue - Related Party. Of this charge, $59 million related to Marcellus and $3 million related to Utica. See Note 14 - Segment Information in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-Q for additional information.

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MARCELLUS SEGMENT
The Marcellus segment had earnings before income tax of $64 million for the three months ended March 31, 2020 compared to earnings before income tax of $87 million for the three months ended March 31, 2019.
 For the Three Months Ended March 31,
 20202019VariancePercent
Change
Marcellus Gas Sales Volumes (Bcf)87.6  81.6  6.0  7.4 %
NGL Sales Volumes (Bcfe)*8.3  6.7  1.6  23.9 %
Oil Sales Volumes (Bcfe)*0.1  —  0.1  100.0 %
Condensate Sales Volumes (Bcfe)*0.3  0.4  (0.1) (25.0)%
Total Marcellus Sales Volumes (Bcfe)*96.3  88.7  7.6  8.6 %
Average Sales Price - Gas (per Mcf)$1.80  $3.20  $(1.40) (43.8)%
Gain (Loss) on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)$0.78  $(0.34) $1.12  329.4 %
Average Sales Price - NGL (per Mcfe)*$2.34  $4.45  $(2.11) (47.4)%
Average Sales Price - Oil (per Mcfe)*$7.75  $—  $7.75  100.0 %
Average Sales Price - Condensate (per Mcfe)*$6.13  $6.50  $(0.37) (5.7)%
Total Average Marcellus Sales Price (per Mcfe)$2.57  $3.00  $(0.43) (14.3)%
Average Marcellus Lease Operating Expenses (per Mcfe)0.05  0.11  (0.06) (54.5)%
Average Marcellus Production, Ad Valorem, and Other Fees (per Mcfe)0.03  0.05  (0.02) (40.0)%
Average Marcellus Transportation, Gathering and Compression Costs (per Mcfe)1.19  1.17  0.02  1.7 %
Average Marcellus Depreciation, Depletion and Amortization Costs (per Mcfe)0.63  0.69  (0.06) (8.7)%
   Total Average Marcellus Costs (per Mcfe)$1.90  $2.02  $(0.12) (5.9)%
   Average Margin for Marcellus (per Mcfe)$0.67  $0.98  $(0.31) (31.6)%
* NGLs, Oil and Condensate are converted to Mcfe at the rate of one barrel equals six Mcf based upon the approximate relative energy content of oil and natural gas, which is not indicative of the relationship of oil, NGL, condensate, and natural gas prices.

The Marcellus segment had natural gas, NGL and oil revenue of $179 million for the three months ended March 31, 2020 compared to $293 million for the three months ended March 31, 2019. The $114 million decrease was due primarily to a 43.8% decrease in the average sale price for natural gas and a 47.4% decrease in the average sale price of NGLs.

The decrease in the total average Marcellus sales price was primarily due to a $1.40 per Mcf decrease in the average sales price for natural gas and a $2.11 per Mcfe decrease in the average NGL sales price, offset in part by a $1.12 per Mcf increase in the realized gain (loss) on commodity derivative instruments resulting from the Company's hedging program. The notional amounts associated with these financial hedges represented approximately 82.5 Bcf of the Company's produced Marcellus gas sales volumes for the three months ended March 31, 2020 at an average gain of $0.83 per Mcf. For the three months ended March 31, 2019, these financial hedges represented approximately 55.3 Bcf at an average loss of $0.50 per Mcf.

Total operating costs and expenses for the Marcellus segment were $183 million for the three months ended March 31, 2020 compared to $179 million for the three months ended March 31, 2019. The increase in total dollars and decrease in unit costs for the Marcellus segment were due to the following items:

Marcellus lease operating expenses were $5 million for the three months ended March 31, 2020 compared to $9 million for the three months ended March 31, 2019. The decrease in total dollars was primarily due to a decrease in water disposal costs in the current period due to an increase in the reuse of produced water in well completions activity. The decrease in unit costs was driven by the decrease in total dollars, along with the 8.6% increase in total Marcellus sales volumes.

Marcellus transportation, gathering and compression costs were $115 million for the three months ended March 31, 2020 compared to $104 million for the three months ended March 31, 2019. The increase in total dollars was primarily related to an increase in both CNX Midstream fees as well as an increase in utilized firm transportation expense. The increase in CNXM fees was due to the annual rate escalation as well as additional compression. The increase in firm transportation total

38


dollars was related to the higher gas sales volumes. These increases were offset by lower processing costs due to a drier production mix. The increase in unit costs was driven by the increased total dollars described above.
Depreciation, depletion and amortization costs attributable to the Marcellus segment were $59 million for the three months ended March 31, 2020 compared to $62 million for the three months ended March 31, 2019. These amounts included depletion on a unit of production basis of $0.61 per Mcfe and $0.69 per Mcfe, respectively. The decrease in units of production depreciation, depletion and amortization rate in the current period are the result of positive reserve revisions within our core development area and lower costs reserves added in our core development area from the 2019 development program. The remaining depreciation, depletion and amortization costs were either recorded on a straight-line basis or related to asset retirement obligations.

         UTICA SEGMENT

The Utica segment had earnings before income tax of $11 million for the three months ended March 31, 2020 compared to earnings before income tax of $33 million for the three months ended March 31, 2019.
 For the Three Months Ended March 31,
 20202019VariancePercent
Change
Utica Gas Sales Volumes (Bcf)24.8  30.6  (5.8) (19.0)%
Average Sales Price - Gas (per Mcf)$1.67  $3.03  $(1.36) (44.9)%
Gain (Loss) on Commodity Derivative Instruments - Cash Settlement- Gas (per Mcf)$0.73  $(0.31) $1.04  335.5 %
Total Average Utica Sales Price (per Mcfe)$2.40  $2.72  $(0.32) (11.8)%
Average Utica Lease Operating Expenses (per Mcfe)0.07  0.15  (0.08) (53.3)%
Average Utica Production, Ad Valorem, and Other Fees (per Mcfe)0.05  0.04  0.01  25.0 %
Average Utica Transportation, Gathering and Compression Costs (per Mcfe)0.37  0.28  0.09  32.1 %
Average Utica Depreciation, Depletion and Amortization Costs (per Mcfe)
1.48  1.17  0.31  26.5 %
   Total Average Utica Costs (per Mcfe)$1.97  $1.64  $0.33  20.1 %
   Average Margin for Utica (per Mcfe)$0.43  $1.08  $(0.65) (60.2)%

The Utica segment had natural gas revenue of $41 million for the three months ended March 31, 2020 compared to $93 million for the three months ended March 31, 2019. The $52 million decrease was due to the 19.0% decrease in total Utica sales volumes and a 44.9% decrease in the average sales price for natural gas. The decrease in total Utica sales volumes was primarily due to normal production declines in the dry Utica wells.

The decrease in total average Utica sales price was due to a $1.36 per Mcf decrease in average gas sales price. This was offset in part by a $1.04 per Mcf increase in the realized gain (loss) on commodity derivative instruments. The notional amounts associated with these financial hedges represented approximately 21.7 Bcf of the Company's produced Utica gas sales volumes for the three months ended March 31, 2020 at an average gain of $0.83 per Mcf. For the three months ended March 31, 2019, these financial hedges represented approximately 19.6 Bcf at an average loss of $0.49 per Mcf.

Total operating costs and expenses for the Utica segment were $48 million for the three months ended March 31, 2020 compared to $50 million for the three months ended March 31, 2019. The decrease in total dollars and increase in unit costs for the Utica segment were due to the following items:

Utica lease operating expense was $2 million for the three months ended March 31, 2020 compared to $5 million for the three months ended March 31, 2019. The decrease in total dollars was primarily due to a decrease in water disposal costs due to lower production volumes, an increase in reuse of produced water in well completions and a reduction in well operating costs due to the overall decrease in Utica volumes. The decrease in unit costs was driven by the decrease in total dollars.

Utica transportation, gathering and compression costs remained consistent at $9 million for both the three months ended March 31, 2020 and 2019. The $0.09 per Mcfe increase in unit costs was driven by the overall decrease in Utica volumes.


39


Depreciation, depletion and amortization costs attributable to the Utica segment were $36 million for the three months ended March 31, 2020 compared to $35 million for the three months ended March 31, 2019. These amounts included depletion on a unit of production basis of $1.49 per Mcfe and $1.17 per Mcfe, respectively. The increase in the units of production depreciation, depletion and amortization rate was due to negative reserve revisions in the current period and higher cost reserves added from the 2019 development program. The remaining depreciation, depletion and amortization costs were either recorded on a straight-line basis or related to asset retirement obligations.

COALBED METHANE (CBM) SEGMENT
The CBM segment had earnings before income tax of $6 million for the three months ended March 31, 2020 compared to earnings before income tax of $13 million for the three months ended March 31, 2019.
 For the Three Months Ended March 31,
 20202019VariancePercent
Change
CBM Gas Sales Volumes (Bcf)13.2  13.7  (0.5) (3.6)%
Average Sales Price - Gas (per Mcf)$2.32  $3.64  $(1.32) (36.3)%
Gain (Loss) on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)$0.73  $(0.31) $1.04  335.5 %
Total Average CBM Sales Price (per Mcf)$3.05  $3.32  $(0.27) (8.1)%
Average CBM Lease Operating Expenses (per Mcf)0.27  0.31  (0.04) (12.9)%
Average CBM Production, Ad Valorem, and Other Fees (per Mcf)0.11  0.14  (0.03) (21.4)%
Average CBM Transportation, Gathering and Compression Costs (per Mcf)0.82  0.69  0.13  18.8 %
Average CBM Depreciation, Depletion and Amortization Costs (per Mcf)1.38  1.24  0.14  11.3 %
   Total Average CBM Costs (per Mcf)$2.58  $2.38  $0.20  8.4 %
   Average Margin for CBM (per Mcf)$0.47  $0.94  $(0.47) (50.0)%

The CBM segment had natural gas revenue of $31 million for the three months ended March 31, 2020 compared to $50 million for the three months ended March 31, 2019. The $19 million decrease was due to the 3.6% decrease in total CBM sales volumes and the 36.3% decrease in the average sales price for natural gas. The decrease in CBM sales volumes was primarily due to normal well declines.

The total average CBM sales price decreased $0.27 per Mcf due to a $1.32 per Mcf decrease in average gas sales price, offset in part by a $1.04 per Mcf increase in the gain (loss) on commodity derivative instruments resulting from the Company's hedging program. The notional amounts associated with these financial hedges represented approximately 11.7 Bcf of the Company's produced CBM sales volumes for the three months ended March 31, 2020 at an average gain of $0.83 per Mcf. For the three months ended March 31, 2019, these financial hedges represented approximately 8.8 Bcf at an average loss of $0.49 per Mcf.

Total operating costs and expenses for the CBM segment were $35 million for the three months ended March 31, 2020 compared to $33 million for the three months ended March 31, 2019. The increase in total dollars and increase in unit costs for the CBM segment were due to the following items:

CBM transportation, gathering and compression costs were $11 million for the three months ended March 31, 2020 compared to $9 million for the three months ended March 31, 2019. The $2 million increase in total dollars as well as the $0.13 per Mcf increase in unit costs were primarily related to increases in electrical power expense, measurement and non-routine repairs.

Depreciation, depletion and amortization costs attributable to the CBM segment were at $19 million for the three months ended March 31, 2020 compared to $18 million for the three months ended March 31, 2019. These amounts included depletion on a unit of production basis of $0.72 per Mcfe and $0.70 per Mcfe, respectively. The increase in the units of production depreciation, depletion and amortization rate was due to negative reserve revisions. The remaining depreciation, depletion and amortization costs were either recorded on a straight-line basis or related to asset retirement obligations.


40



OTHER GAS SEGMENT

The Other Gas segment had a loss before income tax of $128 million for the three months ended March 31, 2020 compared to a loss before income tax of $239 million for the three months ended March 31, 2019.
 For the Three Months Ended March 31,
 20202019VariancePercent
Change
Other Gas Sales Volumes (Bcf)0.1  —  0.1  100.0 %

The Other Gas segment includes activity not assigned to the Marcellus, Utica, or CBM segments. This segment also includes unrealized gain or loss on commodity derivative instruments, realized gain on commodity derivative instruments that were partially monetized prior to their settlement dates, purchased gas activity, exploration and production related other costs and other operational activity not assigned to a specific segment.

There was nominal natural gas revenue related to the Other Gas segment for the three months ended March 31, 2020 and March 31, 2019. Total operating costs and expenses related to these other gas sales volumes were nominal for the three months ended March 31, 2020 compared to $3 million for the three months ended March 31, 2019.

Gain or Loss on Commodity Derivative Instruments and Monetization

For the three months ended March 31, 2020, the Other Gas segment recognized an unrealized loss on commodity derivative instruments of $36 million as well as cash settlements received of $55 million for commodity derivative instruments that were partially monetized prior to their settlement dates. For the three months ended March 31, 2019, the Other Gas segment recognized an unrealized loss on commodity derivative instruments of $154 million. The unrealized loss on commodity derivative instruments represents changes in the fair value of all of the Company's existing commodity hedges on a mark-to-market basis.

In March 2020, CNX monetized and repriced a portion of its 2022, 2023, and 2024 NYMEX natural gas hedge portfolio resulting in $55 million of net proceeds for the three months ended March 31, 2020. Notional quantities were not affected by the restructuring. 2022 swap contracts with a notional quantity of 113.2 million MMBtu and a weighted average price of $2.80 per MMBtu were repriced to a contract price of $2.40 per MMBtu, 2023 swap contracts with a notional quantity of 51.1 million MMBtu and a weighted average price of $2.69 per MMBtu were repriced to a contract price of $2.48 per MMBtu, and 2024 swap contracts with a notional quantity of 19.2 million MMBtu and a weighted average price of $2.62 per MMBtu were repriced to a contract price of $2.54 per MMBtu. The net proceeds from the monetization are expected to be used to reduce the Company's absolute debt.

Purchased Gas

Purchased gas volumes represent volumes of gas purchased at market prices from third-parties and then resold in order to fulfill contracts with certain customers and to balance supply. Purchased gas revenues were $26 million for the three months ended March 31, 2020 compared to $16 million for the three months ended March 31, 2019. Purchased gas costs were $25 million for the three months ended March 31, 2020 compared to $16 million for the three months ended March 31, 2019. The period-to-period increase in purchased gas revenue was due to an increase in purchased gas sales volumes, offset in part by a decrease in averages sales price.
 For the Three Months Ended March 31,
 20202019VariancePercent
Change
Purchased Gas Sales Volumes (in Bcf)14.4  5.4  9.0  166.7 %
Average Sales Price (per Mcf)$1.83  $3.00  $(1.17) (39.0)%
Average Cost (per Mcf)$1.74  $3.00  $(1.26) (42.0)%








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Other Operating Income

Other operating income was $6 million for the three months ended March 31, 2020 compared to $3 million for the three months ended March 31, 2019. The $3 million increase was due to the following items:
For the Three Months Ended March 31,
(in millions)20202019VariancePercent
Change
Water Income$ $—  $ 100.0 %
Gathering Income  —  — %
Other —   100.0 %
Total Other Operating Income$ $ $ 100.0 %

Water income increased $2 million due to increased sales of freshwater to third-parties for hydraulic fracturing in the 2020 period.

Impairment of Exploration and Production Properties

During the three months ended March 31, 2020, CNX recognized certain indicators of impairments specific to our Southwest Pennsylvania (SWPA) CBM asset group and determined that carrying value of that asset group was not recoverable. The fair value of the asset group was estimated by discounting the estimated future cash flows using discount rates and other assumptions that market participants would use in their estimates of fair value. As a result, an impairment of $62 million was recognized and is included in Impairment of Exploration and Production Properties in the Consolidated Statements of Income. The impairment was related to an economic decision to temporarily idle certain wells and the related processing facility during the quarter.

Exploration and Production Related Other Costs

Exploration and production related other costs were $4 million for the three months ended March 31, 2020 compared to $3 million for the three months ended March 31, 2019. The $1 million increase was due to the following items:
 For the Three Months Ended March 31,
(in millions)20202019VariancePercent
Change
Lease Expiration Costs$ $ $—  — %
Land Rentals  —  — %
Other —   100.0 %
Total Exploration and Production Other Costs$ $ $ 33.3 %

Other Operating Expense

Other operating expense was $21 million for the three months ended March 31, 2020 compared to $23 million for the three months ended March 31, 2019. The $2 million decrease was due to the following items:
 For the Three Months Ended March 31,
 20202019VariancePercent
Change
Unutilized Firm Transportation and Processing Fees$13  $13  $—  — %
Idle Equipment and Service Charges  (2) (40.0)%
Insurance Expense  —  — %
Other  —  — %
Total Other Operating Expense$21  $23  $(2) (8.7)%

Selling, General and Administrative

SG&A costs represent direct charges for the management and operation of CNX's E&P division. SG&A costs were $25 million for the three months ended March 31, 2020 compared to $31 million for the three months ended March 31, 2019. Refer to the discussion of total company SG&A costs contained in the section "Net Loss Attributable to CNX Resources Shareholders" of this Form 10-Q for a detailed cost explanation.


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Interest Expense
        
Interest expense of $40 million was recognized in the three months ended March 31, 2020 compared to $28 million in the three months ended March 31, 2019. The $12 million increase was primarily due to an unrealized loss on interest rate swap agreements during the three months ended March 31, 2020 and the addition of $500 million of 7.25% senior notes due March 2027 during the three months ended March 31, 2019. These increases were offset in part by the purchase of $400 million of the outstanding 5.875% senior notes due in April 2022 throughout 2019, as well as lower borrowings on the CNX credit facility. See Note 9 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.

TOTAL MIDSTREAM DIVISION ANALYSIS for the three months ended March 31, 2020 compared to the three months ended March 31, 2019:

CNX's Midstream Division's principal activity is the ownership, operation, development and acquisition of natural gas gathering and other midstream energy assets of CNX Gathering and CNXM, which provide natural gas gathering services for the Company's produced gas, as well as for other independent third-parties in the Marcellus Shale and Utica Shale in Pennsylvania and West Virginia. Excluded from the Midstream Division are the gathering assets and operations of CNX that have not been contributed to CNX Gathering and CNXM.

Prior to the IDR Elimination Transaction, CNX Gathering held all of the interests in CNX Midstream GP LLC, which held both the general partner and limited partner interests in CNXM. Subsequent to the IDR Elimination Transaction, CNX owns and controls 100% of CNX Gathering LLC, making CNXM a single-sponsor master limited partnership and thus the Company consolidates CNXM.
For the Three Months Ended March 31,
 (in millions)20202019Variance
Midstream Revenue - Related Party$62  $54  $ 
Midstream Revenue - Third Party18  19  (1) 
Total Revenue$80  $73  $ 
Transportation, Gathering and Compression$12  $12  $—  
Depreciation, Depletion and Amortization10    
Impairment of Goodwill 473  —  473  
Selling, General, and Administrative Costs
  (1) 
Total Operating Costs and Expenses
500  26  474  
Loss on Asset Sales and Abandonments, net—   (7) 
Interest Expense   
Total Midstream Division Costs509  40  469  
(Loss) Earnings Before Income Tax$(429) $33  $(462) 

Midstream Revenue

Midstream revenue consists of revenue related to volumes gathered on behalf of CNX and other third-party natural gas producers. CNXM charges a higher fee for natural gas that is shipped on its wet system compared to gas shipped through its dry system. CNXM revenue can also be impacted by the relative mix of gathered volumes by area, which may vary depending upon delivery point and may change dynamically depending on commodity prices at time of shipment. Total Midstream revenue increased $7 million primarily due to a 32.6% increase in gathered volumes of dry gas in the period-to-period comparison.

The table below summarizes volumes gathered by gas type:
For the Three Months Ended March 31,
20202019Variance
Dry Gas (BBtu/d) (*)1,106  839  267  
Wet Gas (BBtu/d) (*)597  700  (103) 
Other (BBtu/d) (*)(**)299  134  165  
Total Gathered Volumes 2,002  1,673  329  

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(*) Classification as dry or wet is based upon the shipping destination of the related volumes. Because CNXM's customers have the option to ship a portion of their natural gas to destinations associated with either our wet system or our dry system, due to any number of factors, volumes may be classified as “wet” in one period and as “dry” in the comparative period.
(**) Includes condensate handling and third-party volumes under high-pressure short-haul agreements.

Transportation, Gathering and Compression 

Transportation, Gathering and Compression costs were $12 million for both the three months ended March 31, 2020 and March 31, 2019, and are comprised of items directly related to the cost of gathering natural gas at the wellhead and transporting it to interstate pipelines or other local sales points. These costs include items such as electrically-powered compression, compressor rental, repairs and maintenance, supplies, treating and contract services.

Selling, General and Administrative Expense    

SG&A expense is comprised of direct charges for the management and operation of CNXM assets. SG&A costs were $5 million for the three months ended March 31, 2020 compared to $6 million for the three months ended March 31, 2019. Refer to the discussion of total Company SG&A costs contained in the section "Net Loss Attributable to CNX Resources Shareholders" of this Form 10-Q for a detailed cost explanation.

Depreciation, Depletion and Amortization Expense   
 
Depreciation expense is recognized on gathering and other equipment on a straight-line basis, with useful lives ranging from 25 years to 40 years.

Impairment of Goodwill

In connection with the Midstream Acquisition that closed on January 3, 2018, CNX recorded $796 million of goodwill.

Goodwill is tested for impairment annually during the fourth quarter, or more frequently if recent events or prevailing conditions indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. If it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount using the qualitative assessment, a quantitative impairment test is performed. From time to time, CNX may also bypass the qualitative assessment and proceed directly to the quantitative impairment test.

In connection with CNX's assessment of goodwill in the first quarter of 2020 in relation to the deteriorating macroeconomic conditions, and the decline in the observable market value of CNXM securities both in relation to the COVID-19 pandemic and the overall decline in the MLP market space, CNX bypassed the qualitative assessment and performed a quantitative test that utilized a combination of the income and market approaches to estimate the fair value of the Midstream reporting unit. As a result of this assessment, CNX concluded that the carrying value exceed its estimated fair value, and as a result, an impairment of $473 million was included in Impairment of Goodwill in the Consolidated Statement of Income. No such transactions occurred in the prior period. See Note 6 - Goodwill and Other Intangible Assets in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.

Loss on Asset Sales and Abandonments, net

CNXM continues to evaluate projects as CNX's and third-party customer development plans change in order to optimize system design and to actively manage capital investments. During the three months ended March 31, 2019, CNXM abandoned the construction of a compressor station that was designed to support additional production within certain areas of what is referred to as their "Anchor Systems," incurring a loss of $7 million that is included in (Gain) Loss on Asset Sales and Abandonments, net in the Consolidated Statements of Income. No such transactions occurred in the current period.

Interest Expense
        
Interest expense is comprised of interest on the outstanding balance under CNXM's senior notes due 2026 and its revolving credit facility. Interest expense was $9 million for the three months ended March 31, 2020 compared to $7 million for the three months ended March 31, 2019. The increase in the period-to-period comparison was due to additional borrowings on the revolving credit facility.


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Liquidity and Capital Resources

CNX generally has satisfied its working capital requirements and funded its capital expenditures and debt service obligations with cash generated from operations and proceeds from borrowings. CNX currently believes that cash generated from operations, asset sales and the Company's borrowing capacity will be sufficient to meet the Company's working capital requirements, anticipated capital expenditures (other than major acquisitions), scheduled debt payments, anticipated dividend payments and to provide required letters of credit for the next fiscal year. Nevertheless, the ability of CNX to satisfy its working capital requirements, to service its debt obligations, to fund planned capital expenditures, or to pay dividends will depend upon future operating performance, which will be affected by prevailing economic conditions in the natural gas industry and other financial and business factors, including the current COVID 19 pandemic, some of which are beyond CNX’s control.
From time to time, CNX is required to post financial assurances to satisfy contractual and other requirements generated in the normal course of business. Some of these assurances are posted to comply with federal, state or other government agencies' statutes and regulations. CNX sometimes uses letters of credit to satisfy these requirements and these letters of credit reduce the Company's borrowing facility capacity.
CNX continuously reviews its liquidity and capital resources. If market conditions were to change, for instance due to the the significant decline in oil prices or uncertainty created by the COVID-19 pandemic, and our revenue was reduced significantly or operating costs were to increase significantly, our cash flows and liquidity could be reduced.
As of March 31, 2020, CNX was in compliance with all of its debt covenants. After considering the current and potential effect of the significant decline in oil prices and uncertainty created by the COVID-19 pandemic on its operations, CNX currently expects to remain in compliance with its debt covenants.

In order to manage the market risk exposure of volatile natural gas prices in the future, CNX enters into various physical natural gas supply transactions with both gas marketers and end users for terms varying in length. CNX has also entered into various natural gas swap and option transactions, which exist parallel to the underlying physical transactions. The fair value of these contracts was a net asset of $370 million at March 31, 2020 and a net asset of $406 million at December 31, 2019. The Company has not experienced any issues of non-performance by derivative counterparties.
CNX frequently evaluates potential acquisitions. CNX has funded acquisitions with cash generated from operations and a variety of other sources, depending on the size of the transaction, including debt and equity financing. There can be no assurance that additional capital resources, including debt and equity financing, will be available to CNX on terms which CNX finds acceptable, or at all.


Cash Flows (in millions)
 For the Three Months Ended March 31,
 20202019Change
Cash Provided by Operating Activities$267  $309  $(42) 
Cash Used in Investing Activities$(138) $(293) $155  
Cash Used in Financing Activities$(108) $(9) $(99) 

Cash flows from operating activities changed in the period-to-period comparison primarily due to the following items:

Net income decreased $241 million in the period-to-period comparison.
Adjustments to reconcile net income to cash provided by operating activities primarily consisted of a $473 million impairment of goodwill, a $62 million impairment of exploration and production properties, an $88 million change in deferred income taxes, a $118 million net change in commodity derivative instruments, and a $19 million increase in the gain on debt extinguishment.

Cash flows from investing activities changed in the period-to-period comparison primarily due to the following items:

Capital expenditures decreased $147 million in the period-to-period comparison primarily due to decreased expenditures in the Utica and Marcellus Shale plays resulting from decreased drilling and completions activity. CNXM's capital expenditures decreased due to less spend in order to align with CNX's and third-party customer development plans as well as the current major projects completed in 2019.
Proceeds from asset sales increased $8 million mainly due to increased surface sales in the three months ended March 31, 2020.

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Cash flows from financing activities changed in the period-to-period comparison primarily due to the following items:

During the three months ended March 31, 2020, CNX paid $60 million to purchase $71 million of the senior notes due in 2022 at 83.9% of the principal amount. During the three months ended March 31, 2019, CNX paid $406 million to purchase $400 million of the senior notes due in 2022 at 101.5% of the principal amount. See Note 9 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.
In the three months ended March 31, 2020, there were $35 million of net proceeds from the CNXM credit facility compared to $53 million of net proceeds during the three months ended March 31, 2019.
In the three months ended March 31, 2020, there were $224 million of net payments on the CNX credit facility compared to $98 million of net payments during the three months ended March 31, 2019.
During the three months ended March 31, 2019, CNX received proceeds of $500 million from the issuance of senior notes due in 2027. See Note 9 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.
In the three months ended March 31, 2020 there were $173 million of net proceeds from the Cardinal States Gathering LLC and CSG Holdings II LLC non-revolving credit facilities. See Note 9 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.
In the three months ended March 31, 2019, CNX repurchased $32 million of its common stock on the open market compared to no purchases in the three months ended March 31, 2020.
Debt issuance and financing fees increased $8 million primarily due to the fees associated with the borrowings on the Cardinal States Gathering LLC and CSG Holdings II LLC non-revolving credit facilities.

The following is a summary of the Company's significant contractual obligations at March 31, 2020 (in thousands):
 Payments due by Year
 Less Than
1 Year
1-3 Years3-5 YearsMore Than
5 Years
Total
Purchase Order Firm Commitments$2,082  $1,452  $162  $—  $3,696  
Gas Firm Transportation and Processing247,842  474,115  398,018  1,033,218  2,153,193  
Long-Term Debt20,451  870,424  830,624  955,118  2,676,617  
Interest on Long-Term Debt144,219  261,801  158,273  105,214  669,507  
Finance Lease Obligations7,200  5,634  461  —  13,295  
Interest on Finance Lease Obligations666  217  53  —  936  
Operating Lease Obligations54,622  60,123  7,198  25,142  147,085  
Interest on Operating Lease Obligations5,103  5,006  3,121  4,466  17,696  
Long-Term Liabilities—Employee Related (a)1,812  3,887  4,431  31,852  41,982  
Other Long-Term Liabilities (b)206,745  17,438  12,998  33,951  271,132  
Total Contractual Obligations (c)$690,742  $1,700,097  $1,415,339  $2,188,961  $5,995,139  
 _________________________
(a)Employee related long-term liabilities include salaried retirement contributions and work-related injuries and illnesses.
(b)Other long-term liabilities include royalties and other long-term liability costs.
(c)The significant obligation table does not include obligations to taxing authorities due to the uncertainty surrounding the ultimate settlement of amounts and timing of these obligations.

Debt
At March 31, 2020, CNX had total long-term debt of $2,677 million, including the current portion of long-term debt of $20 million and excluding unamortized debt issuance costs. This long-term debt consisted of:
An aggregate principal amount of $823 million of 5.875% Senior Notes due in April 2022 plus $1 million of unamortized bond premium. Interest on the notes is payable April 15 and October 15 of each year. Payment of the principal and interest on the notes is guaranteed by most of CNX's subsidiaries but does not include CNXM or CSG Holdings III LLC (or its subsidiaries).
An aggregate principal amount of $500 million of 7.25% Senior Notes due in March 2027. Interest on the notes is payable March 14 and September 14 of each year. Payment of the principal and interest on the notes is guaranteed by most of CNX's subsidiaries but does not include CNXM or CSG Holdings III LLC (or its subsidiaries).
An aggregate principal amount of $437 million in outstanding borrowings under the CNX Revolving Credit Facility.

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An aggregate principal amount of $400 million of 6.50% Senior Notes due in March 2026 issued by CNXM, less $5 million of unamortized bond discount. Interest on the notes is payable March 15 and September 15 of each year. Payment of the principal and interest on the notes is guaranteed by certain of CNXM's subsidiaries. CNX is not a guarantor of these notes.
An aggregate principal amount of $347 million in outstanding borrowings under the CNXM revolver. CNX is not a guarantor of CNXM's revolving credit facility.
Cardinal States Gathering Company Credit Facility of $125 million less $1 million of unamortized discount. Interest and a portion of the obligation are paid quarterly.
CSG Holdings II LLC Credit Facility of $50 million less a nominal unamortized discount. Interest and a portion of the obligation are paid quarterly.

Total Equity and Dividends
CNX had total equity of $4,645 million at March 31, 2020 compared to $4,962 million at December 31, 2019. See the Consolidated Statements of Stockholders' Equity in Item 1 of this Form 10-Q for additional details.
The declaration and payment of dividends by CNX is subject to the discretion of CNX's Board of Directors, and no assurance can be given that CNX will pay dividends in the future. CNX's Board of Directors determines whether dividends will be paid quarterly. CNX suspended its quarterly dividend in March 2016 to further reflect the Company's increased emphasis on growth. The determination to pay dividends in the future will depend upon, among other things, general business conditions, CNX's financial results, contractual and legal restrictions regarding the payment of dividends by CNX, planned investments by CNX, and such other factors as the Board of Directors deems relevant. The Company's Credit Facility limits CNX's ability to pay dividends in excess of an annual rate of $0.10 per share when the Company's net leverage ratio exceeds 3.00 to 1.00 and is subject to availability under the Credit Facility of at least 15% of the aggregate commitments. The net leverage ratio was 2.30 to 1.00 at March 31, 2020. The Credit Facility does not permit dividend payments in the event of default. The indentures to the 5.875% Senior Notes due in April 2022 and the 7.25% Senior Notes due in March 2027 limit dividends to $0.50 per share annually unless several conditions are met. These conditions include no defaults, ability to incur additional debt and other payment limitations under the indentures. There were no defaults in the three months ended March 31, 2020.

On April 27, 2020 the Board of Directors of CNX Midstream GP LLC, the general partner of CNX Midstream Partners LP, announced the declaration of a cash distribution of $0.0829 per unit with respect to the first quarter of 2020. The distribution will be made on May 15, 2020 to unitholders of record as of the close of business on May 7, 2020.
Off-Balance Sheet Transactions

CNX does not maintain off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that are reasonably likely to have a material current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources which are not disclosed in the Notes to the Unaudited Consolidated Financial Statements. CNX uses a combination of surety bonds, corporate guarantees and letters of credit to secure the Company's financial obligations for employee-related, environmental, performance and various other items which are not reflected in the Consolidated Balance Sheet at March 31, 2020. Management believes these items will expire without being funded. See Note 10 - Commitments and Contingent Liabilities in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional details of the various financial guarantees that have been issued by CNX.


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Forward-Looking Statements

We are including the following cautionary statement in this Quarterly Report on Form 10-Q to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for any forward-looking statements made by, or on behalf of us. With the exception of historical matters, the matters discussed in this Quarterly Report on Form 10-Q are forward-looking statements (as defined in Section 21E of the Exchange Act) that involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. The forward-looking statements may include projections and estimates concerning the timing and success of specific projects and our future production, revenues, income and capital spending. When we use the words “believe,” “intend,” “expect,” “may,” “should,” “anticipate,” “could,” “estimate,” “plan,” “predict,” “project,” "will," or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe strategy that involves risks or uncertainties, we are making forward-looking statements. The forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the date of this Quarterly Report on Form 10-Q; we disclaim any obligation to update these statements unless required by securities law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following:

prices for natural gas and natural gas liquids are volatile and can fluctuate widely based upon a number of factors beyond our control including oversupply relative to the demand for our products, weather and the price and availability of alternative fuels;
our dependence on gathering, processing and transportation facilities and other midstream facilities owned by CNX Midstream Partners LP (NYSE: CNXM) (CNXM) and others;
uncertainties in estimating our economically recoverable natural gas reserves, and inaccuracies in our estimates;
the high-risk nature of drilling and developing natural gas wells;
our identified drilling locations are scheduled out over multiple years, making them susceptible to uncertainties that could materially alter the occurrence or timing of their drilling;
challenges associated with strategic determinations, including the allocation of capital and other resources to strategic opportunities;
the substantial capital expenditures required for our development and exploration projects, as well as CNXM’s midstream system development;
the impact of potential, as well as any adopted, environmental regulations, including those relating to greenhouse gas emissions;
environmental regulations can increase costs and introduce uncertainty that could adversely impact the market for natural gas with potential short and long-term liabilities;
decreases in the availability of, or increases in the price of, required personnel, services, equipment, parts and raw materials in sufficient quantities or at reasonable costs to support our operations;
if natural gas prices decrease or drilling efforts are unsuccessful, we may be required to record write-downs of our proved natural gas properties;
the availability of storage capacity for refined products such as crude, and refinery inputs including condensate, c5+ and butane;
changes in assumptions impacting management’s estimates of future financial results as well as other assumptions such as movement in our stock price, weighted-average cost of capital, terminal growth rates and industry multiples, could cause goodwill and other intangible assets we hold to become impaired and result in material non-cash charges to earnings;
a loss of our competitive position because of the competitive nature of the natural gas industry, consolidation within the industry or overcapacity in the industry adversely affecting our ability to sell our products and midstream services;
deterioration in the economic conditions in any of the industries in which our customers operate, a domestic or worldwide financial downturn, or negative credit market conditions;
the impact of outbreaks of communicable diseases such as the novel highly transmissible and pathogenic coronavirus (“COVID-19”) on business activity, the Company’s operations and national and global economic conditions, generally;
hedging activities may prevent us from benefiting from price increases and may expose us to other risks;
existing and future government laws, regulations and other legal requirements and judicial decisions that govern our business may increase our costs of doing business and may restrict our operations;

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significant costs and liabilities may be incurred as a result of pipeline operations and related increase in the regulation of gas gathering pipelines;
our ability to find adequate water sources for our use in shale gas drilling and production operations, or our ability to dispose of, transport or recycle water used or removed in connection with our gas operations at a reasonable cost and within applicable environmental rules;
failure to successfully estimate the rate of decline or existing reserves or to find or acquire economically recoverable natural gas reserves to replace our current natural gas reserves;
risks associated with our current long-term debt obligations;
a decrease in our borrowing base, which could decrease for a variety of reasons including lower natural gas prices, declines in natural gas proved reserves, asset sales and lending requirements or regulations;
changes in federal or state income tax laws;
cyber-incidents could have a material adverse effect on our business, financial condition or results of operations;
construction of new gathering, compression, dehydration, treating or other midstream assets by CNXM may not result in revenue increases and may be subject to regulatory, environmental, political, legal and economic risks;
our success depends on key members of our management and our ability to attract and retain experienced technical and other professional personnel;
terrorist activities could materially adversely affect our business and results of operations;
we may operate a portion of our business with one or more joint venture partners or in circumstances where we are not the operator, which may restrict our operational and corporate flexibility and we may not realize the benefits we expect to realize from a joint venture;
acquisitions and divestitures, we anticipate may not occur or produce anticipated benefits;
the outcomes of various legal proceedings, including those which are more fully described in our reports filed under the Exchange Act;
there is no guarantee that we will continue to repurchase shares of our common stock under our current or any future share repurchase program at levels undertaken previously or at all;
negative public perception regarding our industry could have an adverse effect on our operations;
CONSOL Energy may not be able to satisfy its indemnification obligations in the future and such indemnities may not be sufficient to hold us harmless from the full amount of liabilities for which CONSOL Energy will be allocated responsibility; and
other factors discussed in this 2019 Form 10-K under “Risk Factors,” as updated by any subsequent Forms 10-Q, which are on file with the Securities and Exchange Commission.


ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

In addition to the risks inherent in operations, CNX is exposed to financial, market, political and economic risks. The following discussion provides additional detail regarding CNX's exposure to the risks of changing commodity prices, interest rates and foreign exchange rates.

CNX is exposed to market price risk in the normal course of selling natural gas and liquids. CNX uses fixed-price contracts, options and derivative commodity instruments to minimize exposure to market price volatility in the sale of natural gas. Under our risk management policy, it is not our intent to engage in derivative activities for speculative purposes.

CNX has established risk management policies and procedures to strengthen the internal control environment of the marketing of commodities produced from its asset base. All of the derivative instruments without other risk assessment procedures are held for purposes other than trading. They are used primarily to mitigate uncertainty and volatility and cover underlying exposures. The Company's market risk strategy incorporates fundamental risk management tools to assess market price risk and establish a framework in which management can maintain a portfolio of transactions within pre-defined risk parameters.

CNX believes that the use of derivative instruments, along with our risk assessment procedures and internal controls, mitigates our exposure to material risks. The use of derivative instruments without other risk assessment procedures could materially affect the Company's results of operations depending on market prices; however, we believe that use of these instruments will not have a material adverse effect on our financial position or liquidity due to our risk assessment procedures and internal controls.

For a summary of accounting policies related to derivative instruments, see Note 1—Significant Accounting Policies in the Notes to the Audited Consolidated Financial Statements in Item 8 of CNX's 2019 Annual Report on Form 10-K.


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At March 31, 2020 and December 31, 2019, our open gas derivative instruments were in a net asset position with a fair value of $370 million and $406 million, respectively. A sensitivity analysis has been performed to determine the incremental effect on future earnings related to open derivative instruments at March 31, 2020 and December 31, 2019. A hypothetical 10 percent increase in future natural gas prices would have decreased the fair value by $376 million and $383 million at March 31, 2020 and December 31, 2019, respectively. A hypothetical 10 percent decrease in future natural gas prices would have increased the fair value by $356 million and $402 million at March 31, 2020 and December 31, 2019, respectively.
CNX's interest expense is sensitive to changes in the general level of interest rates in the United States. The Company uses derivative instruments to manage risk related to interest rates. At March 31, 2020 and December 31, 2019, CNX had $1,725 million and $1,797 million, respectively, aggregate principal amount of debt outstanding under fixed-rate instruments, including unamortized debt issuance costs of $8 million and $9 million, respectively. At March 31, 2020 and December 31, 2019, CNX had $949 million and $973 million, respectively, of debt outstanding under variable-rate instruments, including unamortized debt issuance costs of $8 million at March 31, 2020 . CNX’s primary exposure to market risk for changes in interest rates relates to our Credit Facility, under which there were $437 million of borrowings at March 31, 2020 and $661 million at December 31, 2019, CNXM's revolving credit facility, under which there were $347 million of borrowings at March 31, 2020 and $312 million at December 31, 2019, and CNX's CSG Loan, under which there were $175 million of borrowings at March 31, 2020. A hypothetical 100 basis-point increase in the average rate for CNX's variable-rate instruments would decrease pre-tax future earnings as of March 31, 2020 and December 31, 2019 by $10 million on an annualized basis.

All of the Company’s transactions are denominated in U.S. dollars and, as a result, it does not have material exposure to currency exchange-rate risks.

Natural Gas Hedging Volumes

As of April 21, 2020, our hedged volumes for the periods indicated are as follows:
 For the Three Months Ended 
 March 31,June 30,September 30,December 31,Total Year
2020 Fixed Price Volumes
Hedged BcfN/A114.5  104.7  118.0  337.2  
Weighted Average Hedge Price per McfN/A$2.53  $2.47  $2.53  $2.51  
2021 Fixed Price Volumes
Hedged Bcf114.4  112.6  114.0  111.2  449.2*  
Weighted Average Hedge Price per Mcf$2.49  $2.39  $2.39  $2.40  $2.41  
2022 Fixed Price Volumes
Hedged Bcf76.5  76.5  77.3  74.5  304.8  
Weighted Average Hedge Price per Mcf$2.32  $2.29  $2.29  $2.26  $2.29  
2023 Fixed Price Volumes
Hedged Bcf42.5  42.9  43.4  43.4  172.2  
Weighted Average Hedge Price per Mcf$2.27  $2.23  $2.23  $2.26  $2.25  
2024 Fixed Price Volumes
Hedged Bcf39.5  37.2  37.6  37.6  150.1*  
Weighted Average Hedge Price per Mcf$2.39  $2.31  $2.31  $2.31  $2.32  
2025 Fixed Price Volumes
Hedged Bcf14.4  14.6  14.8  14.8  58.6  
Weighted Average Hedge Price per Mcf$2.12  $2.12  $2.12  $2.12  $2.12  
*Quarterly volumes do not add to annual volumes inasmuch as a discrete condition in individual quarters, where basis hedge volumes exceed NYMEX hedge volumes, does not exist for the year taken as a whole.


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ITEM 4.CONTROLS AND PROCEDURES

Disclosure controls and procedures. CNX, under the supervision and with the participation of its management, including CNX’s principal executive officer and principal financial officer, evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, CNX’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures are effective as of March 31, 2020 to ensure that information required to be disclosed by CNX in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and includes controls and procedures designed to ensure that information required to be disclosed by CNX in such reports is accumulated and communicated to CNX’s management, including CNX’s principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in internal controls over financial reporting. There were no changes in the Company's internal controls over financial reporting that occurred during the fiscal quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II: OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS
The first paragraph of Note 10—Commitments and Contingent Liabilities in the Notes to the Unaudited Consolidated Financial Statements included in Item 1 of this Form 10-Q is incorporated herein by reference.

Environmental Proceedings

From time to time, CNX and the Pennsylvania Department of Environmental Protection ("PA DEP") enter into agreements regarding notices of violation issued by the PA DEP. With respect to the subsurface pressure anomaly experienced at one of our Utica wells in January 2019, CNX and the PA DEP are negotiating a consent assessment and civil penalty, which will be immaterial to CNX’s financial statements.

ITEM 1A.  RISK FACTORS
CNX is also subject to additional risks and hazards due to the nature of the business activities it conducts. For a discussion of these risks, see “Item 1A. Risk Factors” in CNX's 2019 Annual Report on Form 10-K as filed with the SEC on February 10, 2020 ("2019 Form 10-K"). The risks described in the 2019 Form 10-K could materially and adversely affect CNX's business, financial condition, cash flows, and results of operations. Other than as set forth below, there have been no additional material changes to the risks described in the 2019 Form 10-K. CNX may experience additional risks and uncertainties not currently known; or, as a result of developments occurring in the future, conditions that are currently deemed to be immaterial may also materially and adversely affect CNX's business, financial condition, cash flows, and results of operations.

Events beyond our control, including a global or domestic health crisis, may result in unexpected adverse operating and financial results.

The recent outbreak of the coronavirus pandemic (COVID-19) has affected, and may materially and adversely affect, our business, operating and financial results and liquidity. The severity, magnitude and duration of the current COVID-19 outbreak is uncertain, rapidly changing and hard to predict. While the full impact of this virus and the long-term worldwide reaction to it and impact from it remains unknown at this time, government reaction to the pandemic and restrictions and limitations applied by the government as a result, continued widespread growth in infections, travel restrictions, quarantines, or site closures as a result of the virus could, among other things, impact the ability of our employees and contractors to perform their duties, cause increased technology and security risk due to extended and company-wide telecommuting, lead to disruptions in our supply chain (including necessary contractors), lead to a disruption in our resource acquisition or permitting activities and cause disruption in our relationship with our customers. Additionally, the COVID-19 outbreak has significantly impacted economic activity and markets around the world, and COVID-19 or another similar outbreak could negatively impact our business in numerous ways, including, but not limited to, the following:

our revenue may be reduced if the outbreak results in an economic downturn or recession, as many experts predict, to the extent it leads to a prolonged decrease in the demand for natural gas and liquefied natural gas ("LNG") and, to a lesser extent, NGLs and oil;

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our operations may be disrupted or impaired, thus lowering our production level, if a significant portion of our employees or contractors are unable to work due to illness or if our field operations are suspended or temporarily shut-down or restricted due to control measures designed to contain the outbreak;
the operations of our midstream service providers, on whom we rely for the transmission, gathering and processing of a significant portion of our produced natural gas, NGLs and oil, may be disrupted or suspended in response to containing the outbreak, and/or the difficult economic environment may lead to the bankruptcy or closing of the facilities and infrastructure of our midstream service providers, which may result in substantial discounts in the prices we receive for our produced natural gas, NGLs and oil or result in the shut-in of producing wells or the delay or discontinuance of development plans for our properties; and
the disruption and instability in the financial markets and the uncertainty in the general business environment may affect our ability to find attractive asset monetization opportunities and successfully execute our plan to deleverage our business on the timeframe previously anticipated or at all; for example, the market value of the assets to be monetized may be reduced and the financial condition or prospects of prospective purchasers and other counterparties, and such parties’ access to financing on acceptable terms, may be adversely affected.

In addition, the COVID-19 pandemic has increased volatility and caused negative pressure in the capital and credit markets. As a result, we may experience difficulty accessing the capital or financing needed to fund our exploration and production operations, which have substantial capital requirements, or refinance our upcoming maturities on satisfactory terms or at all. We typically fund our capital expenditures with existing cash and cash generated by operations (which is subject to a number of variables, including many beyond our control) and, to the extent our capital expenditures exceed our cash resources, from borrowings under our revolving credit facility and other external sources of capital, we could be required to curtail our operations and the development of our properties, which in turn could lead to a decline in our reserves and production, and could adversely affect our business, results of operations and financial position.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks set forth in Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019 and in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, such as those relating to our financial performance and debt obligations. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on our business, which will depend on numerous evolving factors and future developments that we are not able to predict, including the length of time that the pandemic continues, its effect on the demand for natural gas, LNG, NGLs and oil, the response of the overall economy and the financial markets as well as the effect of governmental actions taken in response to the pandemic.demand for our products. Any of these outcomes could have a material adverse effect on our business, operations, financial results and liquidity.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no issuer purchases of equity securities in the first quarter of fiscal year 2020. Since the October 30, 2017 inception of the current stock repurchase program, CNX's Board of Directors has approved a $750 million stock repurchase program, which is not subject to an expiration date. As of March 31, 2020, approximately $148.5 million remained available under the stock repurchase program. The stock repurchase program does not obligate the Company to repurchase any dollar amount or number of shares and the Board may modify, suspend, or discontinue its authorization of the program at any time. See Note 15 - Stock Repurchase in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for more information.

See Part III. Item 12. "Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters" included in CNX Resources Corporation's Annual Report on Form 10-K as filed with the Securities and Exchange Commission (SEC) on February 10, 2020 for information relating to CNX's equity compensation plans.

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ITEM 6.EXHIBITS
10.1  


31.1*  
31.2*    
32.1    
32.2    
101.INS  XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH*  XBRL Taxonomy Extension Schema Document.
101.CAL*  XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*  XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*  XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*  XBRL Taxonomy Extension Presentation Linkbase Document.
* Filed herewith

In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.


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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: April 27, 2020
 
CNX RESOURCES CORPORATION
By:  
/S/  NICHOLAS J. DEIULIIS    
 Nicholas J. DeIuliis
 Director, Chief Executive Officer and President
(Duly Authorized Officer and Principal Executive Officer)
By:  
/S/    DONALD W. RUSH    
 Donald W. Rush
 Chief Financial Officer and Executive Vice President
(Duly Authorized Officer and Principal Financial Officer)
By:  
/S/    ALAN K. SHEPARD 
 Alan K. Shepard
 Chief Accounting Officer and Vice President
(Duly Authorized Officer and Principal Accounting Officer)
By:
/S/    JASON L. MUMFORD 
Jason L. Mumford
Vice President and Controller


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