UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________________________
FORM 10-K
__________________________________________________
(Mark One)
☒
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2020
OR
For the transition period from to
Commission file number: 001-14901
__________________________________________________
CNX Resources Corporation
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
51-0337383
(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)
Preferred Share Purchase Rights
CNX
--
New York Stock Exchange
New York Stock Exchange
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Securities registered pursuant to Section 12(g) of the Act: None
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, if any, 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal
control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared
or issued its audit report. ☒
/
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of voting stock held by nonaffiliates of the registrant as of June 30, 2020, the last business day of the registrant's most
recently completed second fiscal quarter, based on the closing price of the common stock on the New York Stock Exchange on such date was
$1,111,264,635.
The number of shares outstanding of the registrant's common stock as of January 20, 2021 is 219,707,417 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of CNX's Proxy Statement for the Annual Meeting of Shareholders to be held on May 6, 2021, are incorporated by reference in Items 10, 11, 12,
13 and 14 of Part III.
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TABLE OF CONTENTS
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
PART I
PART II
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Selected Financial Data
Management's Discussion and Analysis of Financial Condition and Results of Operations
ITEM 1.
ITEM 1A.
ITEM 1B.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 7A.
Quantitative and Qualitative Disclosures About Market Risk
ITEM 8.
ITEM 9.
ITEM 9A.
ITEM 9B.
ITEM 10.
ITEM 11.
ITEM 12.
ITEM 13.
ITEM 14.
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
Controls and Procedures
Other Information
Directors, Executive Officers and Corporate Governance
Executive Compensation
PART III
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions and Director Independence
Principal Accountant Fees and Services
ITEM 15.
ITEM 16.
SIGNATURES
Exhibits and Financial Statement Schedules
Form 10-K Summary
PART IV
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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-K:
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 of absorption,
condensation or other methods in gas processing plants.
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.
NYMEX - New York Mercantile Exchange.
basis – when referring to commodity pricing, the difference between the futures price for a commodity and the corresponding sales price at
various regional sales points. The differential commonly is related to factors such as product quality, location, transportation capacity
availability and contract pricing.
blending - process of mixing dry and damp gas in order to meet downstream pipeline specifications.
condensate - a mixture of hydrocarbons that exists in the gaseous phase at original reservoir temperature and pressure, but that, when
produced, is in the liquid phase at surface pressure and temperature.
conventional play - a term used in the oil and natural gas industry to refer to an area believed to be capable of producing crude oil and
natural gas occurring in discrete accumulations in structural and stratigraphic traps utilizing conventional recovery methods.
developed reserves - developed reserves are reserves that can be expected to be recovered: (i) through existing wells with existing
equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well; and
(ii) through installed extraction equipment and infrastructure operational at the time of the reserves estimate if the extraction is by means not
involving a well.
development well - a well drilled within the proved area of an oil or natural 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 natural
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.
exploration costs - costs incurred in identifying areas that may warrant examination and in examining specific areas that are considered to
have prospects of containing oil and natural gas reserves, including costs of drilling exploratory wells and exploratory-type stratigraphic test
wells. Exploration costs may be incurred both before acquiring the related property (sometimes referred to in part as prospecting costs) and
after acquiring the property. Principal types of exploration costs, which include depreciation and applicable operating costs of support
equipment and facilities and other costs of exploration activities, are: (i) costs of topographical, geographical and geophysical studies and
the rights to access the properties in order to conduct those studies, (ii) costs of carrying and retaining undeveloped properties, such as delay
rentals and the maintenance of land and lease records, (iii) dry hole contributions (iv) costs of drilling and equipping exploratory wells, and
(v) costs of drilling exploratory-type stratigraphic test wells.
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.
gross acres - the total acres in which a working interest is owned.
gross wells - the total wells in which a working interest is owned.
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.
net acres - the number of acres an owner has out of a particular number of gross acres.
net wells - the percentage ownership interest in a well that an owner has based on the working interest.
play - a proven geological formation that contains commercial amounts of hydrocarbons.
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production costs - costs incurred to operate and maintain wells and related equipment and facilities, including depreciation and applicable
operating costs of support equipment and facilities, which become part of the cost of oil and natural gas produced.
proved reserves - quantities of oil, natural gas, and NGLs which, by analysis of geological and engineering data, can be estimated with
reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic
conditions, operating methods and government regulations prior to the time at which contracts providing the right to operate expire, unless
evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the
estimation.
proved developed reserves (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.
royalty interest - an interest in an oil and natural gas lease that gives the owner of the interest the right to receive a portion of the production
from the leased acreage (or of the proceeds of the sale thereof), but generally does not require the owner to pay any portion of the costs of
drilling or operating the wells on the leased acreage. Royalties may be either landowners' royalties, which are reserved by the owner of the
leased acreage at the time the lease is granted, or overriding royalties, which are usually reserved by an owner of the leasehold in connection
with a transfer to a subsequent owner.
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.
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.
unconventional formations - a term used in the oil and gas industry to refer to a play in which the targeted reservoirs generally fall into one
of three categories: (1) tight sands, (2) coal beds or (3) shales. The reservoirs tend to cover large areas and lack the readily apparent traps,
seals and discrete hydrocarbon-water boundaries that typically define conventional reservoirs. These reservoirs generally require fracture
stimulation treatments or other special recovery processes in order to achieve economic flow rates.
undeveloped reserves - undeveloped reserves are reserves that are expected to be recovered from new wells on undrilled acreage, or from
existing wells where a relatively major expenditure is required. Reserves on undrilled acreage are limited to those directly offsetting
development spacing areas that are reasonably certain of production when drilled, unless evidence exists that establishes reasonable
certainty of economic producibility at greater distances. Undrilled locations can be classified as having undeveloped reserves only if a
development plan has been adopted indicating that they are scheduled to be drilled within five years, unless the specific circumstances
justify a longer time. Under no circumstances shall estimates for undeveloped reserves be attributable to any acreage for which an
application of fluid injection or other improved recovery technique is contemplated, unless such techniques have been proved effective by
actual projects in the same reservoir or an analogous reservoir, or by other evidence using reliable technology establishing reasonable
certainty.
unproved properties - properties with no proved reserves.
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.
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FORWARD-LOOKING STATEMENTS
We are including the following cautionary statement in this Annual Report on Form 10-K (Form 10K) 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 Form 10-K are forward-looking statements (as
defined in Section 21E of the Securities Exchange Act of 1934, as amended (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 Form 10-K speak only as
of the date of this Form 10-K; 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;
unsuccessful drilling efforts or continued natural gas price decreases requiring write downs of our proved natural gas properties, or
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;
hedging activities may prevent us from benefiting from price increases and may expose us to other risks;
negative public perception regarding our Company or industry could have an adverse effect on our operations, financial results or
stock price;
events beyond our control, including a global or domestic health crisis;
dependence on gathering, processing and transportation facilities and other midstream facilities owned by others, and disruption of,
capacity constraints in, or proximity to pipeline, and any decrease in availability of pipelines or other midstream facilities;
uncertainties in estimating our economically recoverable natural gas reserves and inaccuracies in our estimates;
the high-risk nature of drilling, developing and operating 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 development or drilling;
the substantial capital expenditures required for our development and exploration projects, as well as midstream system
development;
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;
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 of existing reserves or to find or acquire economically recoverable natural gas
reserves to replace our current natural gas reserves;
losses incurred as a result of title defects in the properties in which we invest or the loss of certain leasehold or other rights related
to our midstream activities;
the impact of climate change legislation, litigation and potential, as well as any adopted, environmental regulations, including those
relating to greenhouse gas emissions;
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•
•
•
•
•
•
•
•
•
•
•
•
environmental regulations can increase costs and introduce uncertainty that could adversely impact the market for natural gas with
potential short and long-term liabilities;
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;
significant costs and liabilities may be incurred as a result of pipeline operations and related increase in the regulation of natural gas
gathering pipelines;
changes in federal or state income tax laws or rates;
the outcomes of various legal proceedings, including those which are more fully described in our reports filed under the Exchange
Act;
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;
Risks associated with our convertible senior notes due May 2026 (the “Convertible Notes”), including the potential impact that the
Convertible Notes may have on our reported financial results, potential dilution, our ability to raise funds to repurchase the
Convertible Notes, and that provisions of the Convertible Notes could delay or prevent a beneficial takeover of the Company;
the potential impact of the capped call transaction undertaken in tandem with the Convertible Notes issuance, including
counterparty risk;
challenges associated with strategic determinations, including the allocation of capital and other resources to strategic
opportunities;
acquisitions and divestitures, we anticipate may not occur or produce anticipated benefits;
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;
•
• 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;
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 may be allocated responsibility;
cyber-incidents could have a material adverse effect on our business, financial condition or results of operations;
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; and
other factors discussed in this 2020 Form 10-K under “Risk Factors,” as updated by any subsequent Forms 10-Q, which are on file
with the Securities and Exchange Commission.
•
•
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•
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ITEM 1.
Business
General
PART I
CNX Resources Corporation (“CNX”, the “Company,” or “we,” “us,” or “our”) is an independent oil and natural gas company
engaged in the exploration, development, production and acquisition of natural gas properties primarily in the Appalachian Basin. The
majority of our operations are centered on unconventional shale formations, primarily the Marcellus Shale and Utica Shale, in Pennsylvania,
Ohio and West Virginia. Additionally, we operate and develop Coal Bed Methane (“CBM”) properties in Virginia. We believe that our
extensive held-by-production acreage position and development inventory combined with our regional operating expertise, extensive data
set from development and non-op participation wells, midstream infrastructure ownership, low-cost operations and legacy surface acreage
position provide us with significant competitive advantages that position us for long-term value creation.
CNX's Strategy and Corporate Values
CNX's strategy is to increase shareholder value through the development and growth of our existing natural gas assets and the selective
acquisition of natural gas acreage leases within our operating footprint. Our mission is to empower our team to embrace and drive
innovative change that creates long-term per share value for our investors, enhances our communities and delivers energy solutions for today
and tomorrow.
CNX defines itself through its corporate values that serve as our road map and guide every aspect of our business as we strive to
achieve our corporate mission:
•
Responsibility: Be a safe and compliant operator; be a trusted community partner and respected corporate citizen; act with
pride and integrity;
• Ownership: Be accountable for our actions and learn from our outcomes, both positive and negative; be calculated risk-takers
•
and seek creative ways to solve problems; and
Excellence: Be prudent capital allocators; be a lean, efficient, nimble organization; be a disciplined, reliable, performance-
driven company.
These values are the foundation of CNX's identity and are the basis for how management defines continued success. We believe CNX's
rich resource base, coupled with these core values, allows management to create long-term per share value. CNX believes that natural gas is
central to a low-cost, reliable, secure, lower-carbon energy future. Widespread and immediate fuel switching to natural gas is the fastest and
most cost-effective means to addressing climate concerns, improving air quality in the developing world and meeting the increasing demand
for cleaner forms of energy. Natural gas is more than a short-term “bridge” fuel that is useful in the transition from more carbon-intensive
energy sources to renewables, it is inextricably linked to the long-term success of renewable energy.
2020 Operational Highlights and Outlook
• Over the past ten years, CNX's natural gas production has grown by approximately 300% to a total of 511.1 net Bcfe in
2020.
Total average production of 1,396,371 Mcfe per day;
94% Natural Gas, 6% Liquids; and
90% Shale, 10% coalbed methane.
•
•
•
At December 31, 2020, our proved natural gas, NGL, condensate and oil reserves (collectively, "natural gas reserves") had the
following characteristics:
•
•
•
•
• A reserve life ratio of 18.69 years (based on 2020 production).
9.5 Tcfe of proved reserves;
94.6% natural gas;
54.4% proved developed;
98.7% operated; and
In 2021, CNX expects capital expenditures of approximately $430 million to $470 million. The Company continuously evaluates
multiple factors to determine activity throughout the year, and as such, may update guidance accordingly.
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DETAIL OF OPERATIONS
Our operations include the following plays:
Shale
Our Shale properties represent our primary operating and growth area in terms of reserves, production, and capital investment. We
have the rights to extract natural gas from Shale formations in Pennsylvania, West Virginia, and Ohio from approximately 524,000 net
Marcellus Shale acres and approximately 610,000 net Utica Shale acres at December 31, 2020. Approximately 349,000 Utica Shale acres
coincide with Marcellus Shale acreage in Pennsylvania, West Virginia, and Ohio.
The Upper Devonian Shale formation, which includes both the Burkett Shale and Rhinestreet Shale, lies above the Marcellus Shale
formation in southwestern Pennsylvania and northern West Virginia. The Company holds approximately 52,000 acres of incremental Upper
Devonian acres; however, these acres have historically not been disclosed separately as they generally coincide with our Marcellus acreage
and we have no current drilling program targeting this formation.
Coalbed Methane (CBM)
We have the rights to extract CBM in Virginia from approximately 283,000 net CBM acres in Central Appalachia. We produce CBM
natural gas primarily from the Pocahontas #3 seam and still have a nominal drilling program. The CBM natural gas we extract would
otherwise be vented into the atmosphere during normal mining operations.
We also have the rights to extract CBM from approximately 1,896,000 net CBM acres in other states including West Virginia,
Pennsylvania, Ohio, Illinois, Indiana, and New Mexico with no current plans to drill CBM wells in these areas.
Other Gas
We have the rights to extract natural gas from other shale and shallow oil and gas positions primarily in Illinois, Indiana, New York,
Ohio, Pennsylvania, Virginia, and West Virginia from approximately 1,017,000 net acres at December 31, 2020. The majority of our shallow
oil and gas leasehold position is held by third-party production and all of it is extensively overlain by existing third-party natural gas
gathering and transmission infrastructure.
Summary of Properties as of December 31, 2020
Estimated Net Proved Reserves (MMcfe)
8,443,926
1,099,627
6,205
9,549,758
Percent Developed (1)
Net Producing Wells (including oil and gob wells)
52 %
491
71 %
3,852
100 %
57
54 %
4,400
Shale
Segment
CBM
Segment
Other Gas
Segment
Total
Net Acreage Position:
Net Proved Developed Acres
Net Proved Undeveloped Acres
Net Unproved Acres(2)
Total Net Acres(3)
77,369
43,713
716,581
837,663
235,388
—
1,943,671
2,179,059
38,780
—
977,730
1,016,510
351,537
43,713
3,637,982
4,033,232
_________
(1) Percent developed is calculated as net proved developed reserves divided by net proved reserves, measured in MMcfe.
(2) Net acres include acreage attributable to our working interests in the properties. Additional adjustments (either increases or decreases)
may be required as we further develop title to and further confirm our rights with respect to our various properties in anticipation of
development. We believe that our assumptions and methodology in this regard are reasonable.
(3) Acreage amounts are only included under the target strata CNX expects to produce with the exception of certain CBM acres governed
by separate leases.
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Producing Wells and Acreage
Most of our development wells and proved acreage are located in Virginia, West Virginia, Ohio and Pennsylvania. Some leases are
beyond their primary term, but these leases are extended in accordance with their terms as long as certain drilling commitments or other
term commitments are satisfied.
The following table sets forth, at December 31, 2020, the number of producing wells, developed acreage and undeveloped acreage:
Producing Gas Wells (including gob wells) - Working Interest
Producing Oil Wells - Working Interest
Producing Gas Wells - Royalty Interest
Producing Oil Wells - Royalty Interest
Net Acreage Position:
Proved Developed Acreage
Proved Undeveloped Acreage
Unproved Acreage
Total Acreage
Gross(1)
Net(2)
4,712
—
1,810
152
4,401
—
—
—
351,537
43,713
351,537
43,713
4,986,196
3,637,982
5,381,446
4,033,232
_________
(1) All of our acreage identified as proved developed and undeveloped is controlled fully by CNX through ownership of a 100% working
interest.
(2) Net acres include acreage attributable to our working interests in the properties. Additional adjustments (either increases or decreases)
may be required as we further develop title to and further confirm our rights with respect to our various properties in anticipation of
development. We believe that our assumptions and methodology in this regard are reasonable.
The following table represents the terms under which we hold these acres:
Held by Production/Fee
Expiration Within 2 Years
Expiration Beyond 2 Years
Total Acreage
Gross Unproved
Acres
Net Unproved
Acres
Gross Proved
Undeveloped Acres
Net Proved
Undeveloped Acres
4,889,527
3,578,943
55,298
41,370
30,429
28,610
4,986,195
3,637,982
30,594
4,732
8,387
43,713
30,594
4,732
8,387
43,713
The leases reflected above as Gross and Net Unproved Acres with expiration dates are included in our current drill plan or active land
program. Leases with expiration dates within two years represent approximately 1% of our total net unproved acres and leases with
expiration dates beyond two years represent approximately 1% of our total net unproved acres. In each case, we deemed this acreage to not
be material to our overall acreage position. Additionally, based on our current drill plans and lease management we do not anticipate any
material impact to our consolidated financial statements from the expiration of such leases.
Development Wells (Net)
During the years ended December 31, 2020, 2019 and 2018, we drilled 29.0, 75.7 and 83.9 net development wells, respectively. Gob
wells and wells drilled by operators other than our primary joint venture partners at that time are excluded from net development wells and
represents less than 0.5 net wells for each year. In 2020, there were 17.0 net development wells and no exploratory wells drilled but
uncompleted. The Company includes drilled and uncompleted net development wells in proved undeveloped reserves and the Company
intends to complete and turn-in-line the wells within five years of the initial disclosure. There were no net dry development wells in 2020 or
2018 and 1.0 net dry development well in 2019. As of December 31, 2020, there are 24.0 gross completed developmental wells ready to be
turned in-line.
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The following table illustrates the net wells drilled by well classification type:
Shale Segment
CBM Segment
Other Gas Segment
Total Development Wells (Net)
Exploratory Wells (Net)
For the Year
Ended December 31,
2020
2019
2018
25.0
4.0
—
29.0
64.7
11.0
—
75.7
77.9
6.0
—
83.9
There were 2.0 and 5.0 net exploratory wells drilled during the years ended December 31, 2020 and 2019, respectively. There were no
net exploratory wells drilled during the year ended December 31, 2018. As of December 31, 2020, there is 1.0 net exploratory well in
process. The following table illustrates the exploratory wells drilled by well classification type:
For the Year Ended December 31,
2020
Producing
Dry
Still Eval*.
Producing
2019
Dry
Still Eval.
Producing
Dry
Still Eval.
2018
— —
— —
— —
— —
2.0
—
—
2.0
4.0 —
— —
— —
4.0 —
1.0
—
—
1.0
— —
— —
— —
— —
—
—
—
—
Shale Segment
CBM Segment
Other Gas Segment
Total Exploratory Wells
(Net)
_________
* Still evaluating in 2020 includes two wells that were drilled, completed, and were in process of being connected to production facilities at
the end of the year and were turned in-line in early 2021. The company is still currently evaluating the partially constructed 2019 well to
determine the most economic approach to access the natural gas reserves. The company expects to make a determination in 2021 to either
finalize the well or to access the natural gas reserves from an alternative location.
Reserves
The following table shows our estimated proved developed and proved undeveloped reserves. Reserve information is net of royalty
interest. Proved developed and proved undeveloped reserves are reserves that could be commercially recovered under current economic
conditions, operating methods and government regulations. Proved developed and proved undeveloped reserves are defined by the
Securities and Exchange Commission (SEC).
Net Reserves (Million of Cubic Feet Equivalent)
Proved Developed Reserves
Proved Undeveloped Reserves
Total Proved Developed and Undeveloped Reserves (1)
As of December 31,
2020
2019
2018
5,199,748
4,350,010
4,838,858
3,586,809
4,494,878
3,386,457
9,549,758
8,425,667
7,881,335
___________
(1) For additional information on our reserves, see Other Supplemental Information–Supplemental Gas Data (unaudited) to the
Consolidated Financial Statements in Item 8 of this Form 10-K.
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Discounted Future Net Cash Flows
The following table shows our estimated future net cash flows and total standardized measure of discounted future net cash flows at
10%:
Future Net Cash Flows
Total PV-10 Measure of Pre-Tax Discounted Future Net Cash Flows (1)
Total Standardized Measure of After-Tax Discounted Future Net Cash Flows
____________
As of December 31,
2020
2019
2018
(Dollars in millions)
$
$
$
6,313 $
3,603 $
2,636 $
7,744 $
13,132
4,176 $
3,070 $
6,172
4,655
(1) We calculate our present value at 10% (PV-10) in accordance with the following table. Management believes that the presentation of
the non-Generally Accepted Accounting Principles (GAAP) financial measure of PV-10 provides useful information to investors
because it is widely used by professional analysts and sophisticated investors in evaluating oil and gas companies. Because many
factors that are unique to each individual company impact the amount of future income taxes estimated to be paid, the use of a pre-tax
measure is valuable when comparing companies based on reserves. PV-10 is not a measure of the financial or operating performance
under GAAP. PV-10 should not be considered as an alternative to the standardized measure as defined under GAAP. We have
included a reconciliation of the most directly comparable GAAP measure-after-tax discounted future net cash flows.
Reconciliation of PV-10 to Standardized Measure
NYMEX Natural Gas Prices (MMbtu)
Future Cash Inflows
Future Production Costs
Future Development Costs (including Abandonments)*
Future Net Cash Flows (pre-tax)
10% Discount Factor
PV-10 (Non-GAAP Measure)
Undiscounted Income Taxes
10% Discount Factor
Discounted Income Taxes
Standardized GAAP Measure
As of December 31,
2020
2019
2018
(Dollars in millions)
1.985 $
2.578 $
3.100
16,578 $
19,490 $
26,610
$
$
(6,072)
(1,958)
8,548
(4,945)
3,603
(2,235)
1,268
(967)
(7,903)
(1,121)
10,466
(6,290)
4,176
(2,721)
1,615
(1,106)
(7,730)
(1,600)
17,280
(11,108)
6,172
(4,147)
2,630
(1,517)
$
2,636 $
3,070 $
4,655
*Future development costs for 2020 include $402 million of plugging and abandonment costs and $287 million of Midstream capital on an
undiscounted pre-tax basis. On a PV-10 pre-tax discounted basis, these amounts equate to $18 million and $232 million, respectively. The
addition of Midstream capital is the result of the Merger that occurred on September 28, 2020 (See Note 4 - Acquisitions and Dispositions in
the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K).
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Gas Production
The following table sets forth net sales volumes produced for the periods indicated:
Natural Gas
Sales Volume (MMcf)
Shale
CBM
Other
Total
NGL
Sales Volume (Mbbls)
Shale
Other
Total
Oil and Condensate
Sales Volume (Mbbls)
Shale
Other
Total
Total Sales Volume (MMcfe)
Shale
CBM
Other
Total
For the Year
Ended December 31,
2020
2019
2018
428,679
52,609
138
449,669
55,445
241
403,244
60,268
4,714
481,426
505,355
468,226
4,675
2
4,677
5,428
—
5,428
6,080
1
6,081
250
14
264
195
8
203
364
35
399
458,231
52,609
232
483,413
55,445
291
441,907
60,268
4,929
511,072
539,149
507,104
*Oil, NGLs, 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.
Note: 2018 production includes approximately 27 Bcfe of production related to assets that were sold during that year. For additional information, see Note 4
- Acquisitions and Dispositions in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K, which is incorporated herein by
reference.
CNX expects 2021 annual natural gas production volumes to be approximately 540-570 Bcfe.
Average Sales Price and Average Lifting Cost
The following table sets forth the total average sales price and the total average lifting cost for all of our natural gas and NGL
production for the periods indicated. Total lifting cost is the cost of raising gas to the gathering system and does not include depreciation,
depletion or amortization. See Part II. Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" in
this Form 10-K for a breakdown by segment.
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Average Sales Price - Gas (Mcf)
Gain (Loss) on Commodity Derivative Instruments - Cash Settlement- Gas (Mcf)*
Average Sales Price - NGLs (Mcfe)**
Average Sales Price - Oil (Mcfe)**
Average Sales Price - Condensate (Mcfe)**
Total Average Sales Price (per Mcfe) Including Effect of Derivative Instruments*
Total Average Sales Price (per Mcfe) Excluding Effect of Derivative Instruments
Average Lifting Costs Excluding Ad Valorem and Severance Taxes (per Mcfe)
Average Sales Price - NGLs (Bbl)
Average Sales Price - Oil (Bbl)
Average Sales Price - Condensate (Bbl)
*Excludes the effect of hedge monetizations.
For the Year
Ended December 31,
2020
2019
2018
1.71 $
2.48 $
2.97
0.78 $
0.14 $ (0.15)
2.29 $
3.20 $
6.55 $
8.13 $
5.85 $
7.47 $
2.49 $
2.66 $
1.75 $
2.53 $
0.08 $
0.12 $
4.55
9.89
8.43
2.97
3.11
0.19
$
$
$
$
$
$
$
$
$ 13.74 $ 19.20 $ 27.30
$ 39.30 $ 48.78 $ 59.34
$ 35.10 $ 44.82 $ 50.58
**Oil, NGLs, 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.
Sales of NGLs, condensates and oil enhance our reported natural gas equivalent sales price. Across all volumes, when excluding the
impact of hedging, sales of liquids added $0.04 per Mcfe, $0.05 per Mcfe, and $0.14 per Mcfe for 2020, 2019, and 2018, respectively, to
average gas sales prices. CNX expects to continue to realize a liquids uplift benefit as additional wells are turned-in-line, primarily in the
liquid-rich areas of the Marcellus Shale. We continue to sell the majority of our NGLs through the large midstream companies that process
our natural gas. This approach allows us to take advantage of the processors’ transportation efficiencies and diversified markets. Certain of
CNX’s processing contracts provide for the ability to take our NGLs “in-kind” and market them directly if desired. The processed purity
products are ultimately sold to industrial, commercial and petrochemical markets.
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. Reserves and production estimates are believed to be
sufficient to satisfy these obligations. In the past, we have delivered quantities required under these contracts. CNX also enters into various
financial natural gas swap transactions to manage the market risk exposure to in-basin and out-of-basin pricing. These transactions exist
parallel to the underlying physical transactions and represented approximately 461.1 Bcf of our produced gas sales volumes for the
year ended December 31, 2020 at an average price of $2.57 per Mcf. The notional volumes associated with these gas swaps represented
approximately 389.2 Bcf of our produced natural gas sales volumes for the year ended December 31, 2019 at an average price of $2.70 per
Mcf. As of January 7, 2021, these physical and swap transactions represent approximately 472.1 Bcf of our estimated 2021 production at
an average price of $2.50 per Mcf, 391.3 Bcf of our estimated 2022 production at an average price of $2.34 per Mcf, 284.8 Bcf of our
estimated 2023 production at an average price of $2.22 per Mcf, approximately 263.1 Bcf of our estimated 2024 production at an average
price of $2.28 per Mcf, and approximately 103.0 Bcf of our estimated 2025 production at an average price of $2.10 per Mcf.
CNX's hedging strategy and information regarding derivative instruments used are outlined in Part II. Item 7A. "Qualitative and
Quantitative Disclosures About Market Risk" and in Note 19 - Derivative Instruments in the Notes to the Audited Consolidated Financial
Statements in Item 8 of this Form 10-K.
Midstream Gas Services
CNX designs, builds and operates natural gas gathering systems to move gas from the wellhead to interstate pipelines or other local
sales points. In addition, over time CNX has acquired extensive gathering assets through acquisitions. CNX now owns or operates
approximately 2,600 miles of natural gas gathering pipelines as well as a number of natural gas processing facilities.
As a result of the Merger that occurred on September 28, 2020 (See Note 4 - Acquisitions and Dispositions in the Notes to the Audited
Consolidated Financial Statements in Item 8 of this Form 10-K), CNX owns substantially all of its Shale gathering
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systems in Pennsylvania and West Virginia. With respect to CNX's Shale wells in Ohio, CNX primarily contracts with third-party gathering
services. CNX also provides natural gas gathering services to third-parties.
CNX has developed a diversified portfolio of firm transportation capacity options to support its production. CNX plans to selectively
acquire firm capacity on an as-needed basis, while minimizing transportation costs and long-term financial obligations. Optimization of our
firm transportation portfolio may also include, from time to time and as appropriate, releasing firm transportation to others. CNX also
benefits from the strategic location of our primary production areas in southwestern Pennsylvania, northern West Virginia and eastern Ohio.
These areas are currently served by a large concentration of major pipelines that provide us with access to major gas markets without the
necessity of transporting our natural gas out of the region, and it is expected that recently-approved and pending pipeline projects will
increase the take-away capacity from our region. In addition to firm transportation capacity, CNX has developed a processing portfolio to
support produced volumes from its wet gas production areas and has the operational and contractual flexibility to potentially convert a
portion of currently processed wet gas volumes to be marketed as dry gas volumes, or vice-versa, as economically appropriate.
CNX has the advantage of having natural gas production from lower Btu wells in close proximity to higher Btu wells. Separately, the
low Btu natural gas and the high Btu natural gas may need processing in order to meet downstream pipeline specifications. The geographic
proximity and interconnected gathering system servicing these wells, allow CNX to blend this gas together and in some cases eliminate the
need for the costly processing of natural gas that does not meet pipeline specification. This allow us more flexibility in bringing wells online
at qualities that meet interstate pipeline specifications.
Marketing
Substantially all of our natural gas is sold at market prices primarily under short-term sales contracts and is subject to seasonal price
swings. The principal markets for our natural gas are in the Appalachian Basin where we sell natural gas to industrial customers, local
distribution companies, gas marketers and power generation facilities. Our extensive hedge position mitigates unpredictability in pricing on
hedged volumes.
We also incur gathering, processing and transportation expenses to move our natural gas production from the wellhead to our principal
markets in the United States. Although we own midstream facilities, we also gather, process and transport our natural gas to market by
utilizing pipelines and facilities owned by others where we have long-term contractual capacity arrangements or use purchaser-owned
capacity under both long-term and short-term sales contracts.
To date, we have not experienced significant difficulty in transporting or marketing our natural gas production as it becomes available;
however, there is no assurance that we will always be able to transport and market all of our production.
CNX expects natural gas to continue to be a significant contributor to the domestic electric generation mix in the long term, as well as
to fuel industrial growth in the U.S. economy. Continued demand for CNX's natural gas and the prices that CNX obtains are affected by
natural gas use in the production of electricity, pipeline capacity, weather, U.S. manufacturing and the overall strength of the economy,
environmental and government regulation, technological developments, the availability and price of competing alternative fuel supplies, and
national and regional supply and demand dynamics.
Natural Gas Competition
CNX gas operations are primarily located in the eastern United States, specifically the Appalachian Basin, which is highly fragmented
and not dominated by any single producer. We believe that competition among producers is based primarily on acreage position, drilling and
operating costs as well as pipeline transportation availability to the various markets. CNX competes with other large producers, as well as a
myriad of smaller producers and marketers. CNX also competes for pipeline capacity and other services to deliver its products to customers.
Non-Core Mineral Assets and Surface Properties
CNX owns significant natural gas assets that are not in our short-term or medium-term development plans. We continually explore the
monetization of these non-core assets by means of sale, lease, contribution to joint ventures or a combination of the foregoing in order to
bring the value of these assets forward for the benefit of our shareholders. We also control a significant amount of surface acreage. This
surface acreage is valuable to us in the development of the gathering system for our Shale production. We also derive value from this surface
control by granting rights of way or development rights to third-parties when we are able to derive appropriate value for our shareholders.
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Water Division
CNX also supplies turn-key solutions for water sourcing, delivery and disposal for our natural gas operations and supplies solutions for
water sourcing as well as delivery and disposal for third parties. In coordination with our midstream operations, CNX works to develop
solutions that coincide with our midstream operations to offer gas natural gathering and water delivery solutions in one package to third
parties.
Human Capital Management
At December 31, 2020, CNX had 451 employees, none of whom are subject to a collective bargaining agreement. CNX recognizes that
our future success depends on the services of our key employees. CNX, is emphatic about the health and safety of not only our employees
and service providers, but also the communities in which we operate.
Training and Education. CNX has a variety of programs dedicated to ensuring our employee and contractor workforce are appropriately
trained and aligned on expectations regarding safety and environmental performance. These programs utilize behavior-based techniques
which embrace a partnership among management, employees and the service provider workforce to continually focus attention and actions
on daily safety behavior. This is accomplished through an evergreen approach with constant evaluation and adaptation for employee, safety
and business needs. Fundamentally, the daily safety meetings, job safety analyses (JSA) and empowerment to stop work foster a culture of
Health, Safety, and Environmental (HSE) awareness and accountability embraced at all levels of CNX; from individual contributors and
service providers to management and executive leadership. In addition to our culture of continual assessment, CNX expects all employees
and service providers to meet HSE expectations and CNX empowers our employees to make adjustments or stop work as needed in order to
correct, or prevent, adverse safety or environmental conditions. CNX expects all of our service providers to meet the training requirements
outlined by OSHA and other governing agencies. The safety training content is published on the corporate website to allow service
providers constant access to CNX’s message of empowerment and accountability.
Diversity and Inclusion. CNX values diversity throughout the organization. We recognize that a diverse, extensive talent pool provides
the best opportunity to acquire unique perspectives, experiences, ideas and solutions that help drive our business forward. Though no
significant hiring occurred during an extraordinary 2020, we replaced a departing Section 16 officer with a diverse candidate, maintaining
30 percent diversity within our executive management team, the highest proportion among our peer group. Of the limited new hires in 2020,
38 percent were diverse.
Employee Attraction and Retention. CNX recognizes the importance of attracting and retaining the best employees to make the most of
its assets. While there is great talent in the current pool of industry workers, CNX sees the value in tapping into the potential of recent
graduates within the region as well. In recent years, CNX has gone to great lengths to establish relationships with local colleges and
universities, increasing interest in our organization and industry amongst upcoming graduates. The continued success of CNX is not only
contingent upon seeking out the best possible candidates, but retaining and developing the talent that lies within the organization as well.
CNX is proud to offer opportunities for employees to improve their skills to achieve their career goals, including continuing education
assistance for employees pursuing advanced education, certifications, or skill building. Goal attainment and outstanding achievements
contribute to the year-end discretionary incentive pay awarded to employees that perform above expectations. Additionally, our Human
Resources department retains personalized career development plans for every CNX employee aimed at outlining career goals and paths to
reach those goals, as well as career ladders to outline growth paths for each role in the organization.
Quality Management Systems. CNX is committed to fostering a culture of accountability and continuous improvement. In 2019, CNX
began the implementation of a new Quality Management System (QMS), which strengthens accountability across the enterprise, and
reinforces our core values of Responsibility, Ownership, and Excellence. The QMS provides all employees, visitors, contractors and
subcontractors who operate on our behalf with a practical, easily accessible system that defines clear expectations, responsibilities and
standards of accountability for quality and excellence in all aspects of our business. The Quality Management System allows for continual
identification, development of documentation control, and standardization of all processes and procedures throughout the organization. The
QMS includes CNX’s robust ISO (International Organization of Standardization) conforming Health and Safety, and Environmental
Management Systems. The elements of health, safety, environmental and quality control are housed in a unified system that allows for
widespread utilization and measurement. By taking ownership of our actions, CNX has formalized our approach in these areas to deliver
results that are consistently safe, predictable and environmentally responsible. CNX will conduct regular internal and external audits to
ensure compliance, adherence to best-in-class processes and continuous improvement, as we relentlessly strive to be the most responsible
and
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efficient operator in the industry. CNX’s management expectation is that the QMS will serve as the platform through which the senior
leadership manages and measures excellence in all operational aspects.
Health and Safety. No job or activity is considered a success if we compromise the safety of our employees. Everyone working at CNX
locations is empowered to stop work if they feel their safety or that of a coworker is at risk. CNX’s approach to employee stop work
empowerment, while reactive when necessary, includes proactive measures such as procedural enhancements and communication. We
promote empowerment through new employee on-boarding, CNX Hazard Training and reinforcement, including an employee recognition
program. Our safety professionals provide support throughout all phases of operation with education, training, policy development, audits
and emergency preparedness and response. The evaluation of our health and safety performance is an ongoing, daily discussion. Key
performance indicators are constantly monitored and analyzed for trends across operations. As trends are identified, CNX utilizes the
information to amend policies, training and company-wide communication. The safety department, referred to as Operational Excellence,
falls under the direction of the Chief Excellence Officer. The team takes a hybrid approach where a traditional safety group has been merged
with an operation field compliance team to form the Operational Excellence department. The Vice President Operational Excellence briefs
the Chief Excellence Officer on safety related issues, policy updates and performance trends regularly. Additionally, Operations executive
management is kept up to date on safety-related items during weekly scheduled meetings. The HSE Committee of the Board of Directors is
kept apprised of safety related matters as needed and with monthly updates and quarterly meetings. CNX employs safety and health
professionals with a variety of safety certifications such as occupational health nurses, emergency medical technicians and emergency
medical responders.
Emergency Preparedness and Response. Emergency response plans are developed for all CNX locations and operations. The plans are
reviewed for effectiveness biannually and are communicated to affected employees through safety meetings and training. Drills and
emergency exercises are conducted to ensure all employees understand their roles and responsibilities during an actual event. These
exercises range from tabletop exercises to internal drills, up to and including events involving external resources. CNX works hand-in-hand
with local municipalities and emergency responders to ensure they are fluent in our plan and procedures. CNX provides emergency
responder training to volunteer fire departments, and county emergency management, including tours of various phases of operation they
may encounter during an event. This helps to familiarize emergency response resources with CNX personnel, facilities and operations. This
proactive approach gives emergency responders the opportunity to ask questions and understand CNX protocols so they are prepared in the
case of an emergency.
Industry Segments
Financial information concerning industry segments, as defined by GAAP, for the years ended December 31, 2020, 2019 and 2018 is
included in Note 21 - Segment Information in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K and
is incorporated herein by reference.
Laws and Regulations
General
Our operations are subject to various federal, state and local (including county and municipal level) laws and regulations, with a heavy
emphasis placed on compliance with environmental laws and regulations as a result of the nature of our business. These laws and
regulations cover virtually every aspect of our operations including, among other things: transportation and use of public roads; construction
of well pads, impoundments, tanks and roads; pooling and unitizations; water withdrawal and procurement for well stimulation purposes;
well drilling, casing and hydraulic fracturing; stormwater management; well production; well plugging; venting or flaring of natural gas;
pipeline construction and the compression and transmission of natural gas and liquids; reclamation and restoration of properties after natural
gas operations are completed; handling, storage, transportation and disposal of materials used or generated by natural gas operations; the
calculation, reporting and payment of taxes on gas production; gathering of natural gas production. In addition to a variety of laws and
regulations governing our natural gas operations, we are also subject to laws and regulations with respect to our employees, including health
and safety regulations, and various financial and regulatory laws and regulations relating to our status as a public company, and our
participation in derivative markets.
Additionally, the electric power generation industry, which consumes significant quantities of natural gas, remains subject to extensive
regulation regarding the environmental impact of its power generation activities, which could impact demand for our natural gas.
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In 2010, Congress adopted comprehensive financial reform legislation that established federal oversight and regulation of the OTC
derivative market and entities, such as the Company, that participate in that market. The legislation, known as the Dodd-Frank Wall Street
Reform and Consumer Protection Act (the Dodd-Frank Act), required the CFTC, the SEC and other regulatory agencies to promulgate rules
and regulations implementing this legislation. The CFTC has adopted and implemented final rules that impose regulatory obligations on all
market participants, including the Company, such as recordkeeping, certain reporting obligations and other regulations relevant to natural
gas hedging activities. However, it is still not possible at this time to predict the full extent of the impact of the regulations on the Company's
hedging program or regulatory compliance obligations.
We endeavor to conduct our natural gas and midstream operations in compliance with all applicable federal, state and local laws and
regulations. However, because of extensive and comprehensive regulatory requirements against a backdrop of variable geologic and
seasonal conditions, exceedances and violations of permits and other regulatory requirements during operations can and do occur. Such
exceedances and violations generally result in fines or penalties but could make it more difficult for us to obtain necessary permits in the
future. The possibility exists that new legislation or regulations may be adopted which would have a significant impact on our operations or
on our customers' ability to use our natural gas and may require us or our customers to change our or their operations significantly or incur
substantial costs. See “Risk Factors -- Existing and future governmental 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” for additional discussion
regarding additional laws and regulations affecting our business, operations and industry.
The Company anticipates that compliance with existing laws and regulations governing the Company and its current operations will
not have a material adverse effect upon its capital expenditures, earnings or competitive position. Additional proposals that affect the oil and
natural gas industry are regularly considered by Congress, the states, regulatory agencies and the courts. The Company cannot predict when
or whether any such proposals may become effective or the effect that such proposals may have on the Company.
Environmental Laws
Many of the laws and regulations referred to above are state-level environmental laws and regulations, which vary according to the
state where we are operating. Our natural gas and midstream operations are also subject to numerous federal level environmental laws and
regulations.
In addition to routine reviews and inspections by regulators to confirm compliance with applicable regulatory requirements, CNX has
established protocols for ongoing assessments to identify potential environmental exposures. These assessments take into account industry
and internal best management practices and evaluate compliance with laws and regulations and include reviews of our third-party service
providers, including, for instance, waste management transporters and facilities.
Hydraulic Fracturing Activities. Hydraulic fracturing is typically regulated by state oil and natural gas commissions and similar
agencies, but the U.S. Environmental Protection Agency (“EPA”) has asserted certain regulatory authority over hydraulic fracturing and has
moved forward with various regulatory actions, including the issuance of regulations requiring green completions for hydraulically fractured
wells, and has disclosed its intent to develop regulations to require companies to disclose information regarding the chemicals used in
hydraulic fracturing. Some states, including states in which we operate, have adopted regulations that could impose more stringent
disclosure and/or well construction requirements on hydraulic fracturing operations, or otherwise seek to ban some or all of these activities.
Additionally, these and other federal requirements and proposals may be subject to further review and revision by the EPA.
Scrutiny of hydraulic fracturing activities also continues in other ways at the federal and local levels. For example, in June 2015, the
EPA issued its draft report on the potential impacts of hydraulic fracturing on drinking water and groundwater. The draft report found no
systemic negative impacts from hydraulic fracturing. In December 2016, the EPA released its final report on the impacts of hydraulic
fracturing on drinking water. While the language was changed and included the possibility of negative impacts from hydraulic fracturing, it
also included the guidance to industry and regulators on how the process can be performed safely. We cannot predict whether any other
legislation or regulations will be enacted and, if so, what its provisions will be.
Clean Air Act. The federal Clean Air Act and corresponding state laws and regulations regulate air emissions primarily through
permitting and/or emissions control requirements. This affects natural gas production and processing operations. Various activities in our
operations are subject to air quality regulation, including pipeline compression, venting and flaring of
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natural gas and hydraulic fracturing and completion processes, as well as fugitive emissions from operations. We obtain permits, typically
from state or local authorities, to conduct these activities. Additionally, we are required to obtain pre-approval for construction or
modification of certain facilities, to meet stringent air permit requirements, or to use specific equipment, technologies or best management
practices to control emissions. Further, some states and the federal government have proposed that emissions from certain proximate and
related sources should be aggregated to provide for regulation and permitting of a single, major source. Federal and state governmental
agencies continue to investigate the potential for emissions from oil and natural gas activities and further regulation could increase our cost
or temporarily restrict our ability to produce. For example, the EPA sets National Ambient Air Quality Standards for certain pollutants and
changes to such standards could cause us to make additional capital expenditures or alter our business operations in some manner. See “Risk
Factors - Climate change legislation, litigation and regulation of greenhouse gas emissions at the federal or state level may increase our
operating costs and reduce the value of our natural gas assets and such regulation, as well as uncertainty concerning such regulation and
public policy pressures that may arise, could adversely impact the market for natural gas, as well as for our securities” for additional
discussion regarding certain laws and regulations related to air emissions and related matters.
Clean Water Act. The federal Clean Water Act (“CWA”) and corresponding state laws affect our natural gas operations by regulating
storm water or other regulated substance discharges, including pollutants, sediment and spills and releases of oil, brine and other substances,
into surface waters (and under some state statutory schemes groundwater) and in certain instances imposing requirements to dispose of
produced wastes and other oil and natural gas wastes at approved disposal facilities. The discharge of pollutants into jurisdictional waters is
prohibited, except in accordance with the terms of a permit issued by the EPA, the U.S. Army Corps of Engineers, or a delegated state
agency. These permits require regular monitoring and compliance with effluent limitations and reporting requirements and govern the
discharge of pollutants into regulated waters. Federal and state regulatory agencies can impose administrative, civil and/or criminal penalties
for non-compliance with discharge permits or other requirements of the CWA and analogous state laws and regulations. See “Risk Factors -
Environmental regulations can increase costs and introduce uncertainty that could adversely impact the market for natural gas with
potential short and long-term liabilities” for additional discussion regarding certain laws and regulations related to clean water, the disposal
or use of water and related matters.
Endangered Species Act. The Endangered Species Act and related state regulation protect plant and animal species that are threatened
or endangered. Some of our operations are located in areas that are or may be designated as protected habitats for endangered or threatened
species, including the Northern Long-Eared and Indiana bats, which has a seasonal impact on our construction activities and operations.
New or additional species that may be identified as requiring protection or consideration may lead to delays in permits and/or other
restrictions on construction and development.
Safety of Gas Transmission and Gathering Pipelines. Natural gas pipelines serving our operations are subject to regulation by the U.S.
Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (“PHMSA”) pursuant to the Natural Gas Pipeline
Safety Act of 1968, (“NGPSA”), as amended by the Pipeline Safety Act of 1992, the Accountable Pipeline Safety and Partnership Act of
1996, the Pipeline Safety Improvement Act of 2002 (“PSIA”), the Pipeline Inspection, Protection, Enforcement and Safety Act of 2006 and
the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (the “2011 Pipeline Safety Act”). The NGPSA regulates safety
requirements in the design, construction, operation and maintenance of natural gas pipeline facilities, while the PSIA establishes mandatory
inspections for all U.S. oil and natural gas transmission pipelines in high-consequence areas. Additionally, certain states, such as West
Virginia, also maintain jurisdiction over intrastate natural gas lines. These statutes and related regulations may be revised or amended which
may lead to additional safety requirements. See “Risk Factors -- CNX may incur significant costs and liabilities as a result of pipeline
operations and/or increases in the regulation of gas gathering pipelines” for additional discussion regarding gas transmission and gathering
pipelines.
Resource Conservation and Recovery Act. The federal Resource Conservation and Recovery Act (RCRA) and corresponding state
laws and regulations affect natural gas operations by imposing requirements for the management, treatment, storage and disposal of
hazardous and non-hazardous wastes, including wastes generated by natural gas operations. Facilities at which hazardous wastes have been
treated, stored or disposed of are subject to corrective action orders issued by the EPA that could adversely affect our financial results,
financial condition and cash flows. On December 28, 2016 the EPA entered into a consent order to resolve outstanding litigation brought by
environmental and citizen groups regarding the applicability of RCRA to wastes from oil and gas development activities. In April 2019, the
EPA issued a report concluding that revisions to the federal regulations for the management of exploration and production wastes under
RCRA were not necessary at the time the report was issued. We cannot predict whether the EPA may change its conclusion at some point, or
whether any other legislation or regulations will be enacted and if so, what its provisions will be.
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Federal Regulation of the Sale and Transportation of Natural Gas
Federal Energy Regulatory Commission. Regulations and orders issued by the Federal Energy Regulatory Commission (FERC) impact
our natural gas business to a certain degree. Although the FERC does not currently directly regulate our natural gas production activities, the
FERC has stated that it intends for certain of its orders to foster increased competition within all phases of the natural gas industry.
Additionally, the FERC has jurisdiction over the transportation of natural gas in interstate commerce, and regulates the terms, conditions of
service and rates for the interstate transportation of our natural gas production. The FERC possesses regulatory oversight over natural gas
markets, including anti-market manipulation regulation. The FERC has the ability to assess civil penalties, order disgorgement of profits and
recommend criminal penalties for violations of the Natural Gas Act or the FERC’s regulations and policies thereunder.
Section 1(b) of the Natural Gas Act exempts natural gas gathering facilities from regulation by the FERC. However, the distinction
between federally unregulated gathering facilities and FERC-regulated transmission facilities is a fact-based determination, and the
classification of such facilities may be the subject of dispute and, potentially, litigation. We own certain natural gas pipeline facilities that we
believe meet the traditional tests which the FERC has used to establish a pipeline's status as a gatherer not subject to the FERC jurisdiction.
Natural gas prices are currently unregulated, but Congress historically has been active in the area of natural gas regulation. We cannot
predict whether new legislation to regulate natural gas sales might be enacted in the future or what effect, if any, any such legislation might
have on our operations.
Health and Safety Laws
Occupational Safety and Health Act. Our natural gas operations are subject to regulation under the federal Occupational Safety and
Health Act (OSHA) and comparable state laws in some states, all of which regulate health and safety of employees at our natural gas
operations. Additionally, OSHA's hazardous communication standard, the EPA community right-to-know regulations under Title III of the
federal Superfund Amendment and Reauthorization Act and comparable state laws require that information be maintained about hazardous
materials used or produced by our natural gas operations and that this information be provided to employees, state and local governments
and the public.
Climate Change Laws and Regulations
Climate change continues to be a legislative and regulatory focus. There are a number of proposed and final laws and regulations that
limit greenhouse gas emissions, and regulations that restrict emissions could increase our costs should the requirements necessitate the
installation new equipment or the purchase of emission allowances. These laws and regulations could also impact our customers, including
the electric generation industry, making alternative sources of energy more competitive. Additional regulation could also lead to permitting
delays and additional monitoring and administrative requirements, as well as to impacts on electricity generating operations. See “Risk
Factors - Regulation of greenhouse gas emissions at the federal or state level may increase our operating costs and reduce the value of our
natural gas assets and such regulation, as well as uncertainty concerning such regulation, could adversely impact the market for natural
gas, as well as for our securities” for additional discussion regarding certain laws and regulations related to climate change, greenhouse gas
and related matters.
Title to Properties
CNX acquires ownership or leasehold rights to oil and natural gas properties prior to conducting operations on those properties. The
legal requirements of such ownership or leasehold rights generally are established by state statutory or common law. As is customary in the
natural gas industry, we have generally conducted only a summary review of the title to oil and gas rights that are not yet in our development
plans, but which we believe we control. This summary review is conducted at the time of acquisition or as part of a review of our land
records. Prior to the commencement of development operations on natural gas and CBM properties, we conduct a thorough title examination
and perform curative work with respect to significant title defects. Our discovering title defects which we are unable to cure may adversely
impact our ability to develop those properties and we may have to reduce our estimated gas reserves including our proved undeveloped
reserves. In accordance with the foregoing, we have completed title work on substantially all of our natural gas and CBM properties that are
currently producing and believe that we have satisfactory title to our producing properties in accordance with standards generally accepted
in the industry. See “Risk Factors - We may incur losses as a result of title defects in the properties in which we invest or the loss of certain
leasehold or other rights related to our midstream activities.”
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Available Information
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed
pursuant to Sections 13(a) and 15(d) of the Exchange Act, are filed with the Securities and Exchange Commission (the SEC). We are subject
to the informational requirements of the Exchange Act, and we file or furnish reports, proxy statements and other information with the SEC.
Such reports and other information we file with the SEC are available free of charge at our website www.cnx.com when such reports are
available on the SEC’s website. The SEC maintains a website that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC at www.sec.gov. CNX periodically provides other information for investors on
corporate website, including press releases and other information about financial performance, information on corporate governance and
presentations. Our references to website URLs are intended to be inactive textual references only. The information found on, or that can be
accessed from or that is hyperlinked to, our website does not constitute part of, and is not incorporated into, this Form 10-K.
Information About Our Executive Officers
Incorporated by reference into this Part I is the information set forth in Part III. Item 10 under the caption “Information About Our
Executive Officers” (included herein pursuant to Item 401(b) of Regulation S-K).
Risk Factors Summary
The following is a summary of the principal risks that could adversely affect our business, operations and financial results. Please refer
to Item 1A “Risk Factors” of this Form 10-K below for additional discussion of the risks summarized in this Risk Factors Summary.
Risks Related to Economic Conditions and our Industry
•
•
•
Prices for natural gas and NGLs are volatile, and an extended decline in the prices we receive for our natural gas and NGLs will
adversely affect our business, operating results, financial condition and cash flows.
If natural gas prices decrease or drilling efforts are unsuccessful, we may be required to record write-downs of our proved natural
gas properties.
Competition and consolidation within the natural gas industry may adversely affect our ability to sell our products and midstream
services, or other parts of the business.
• 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 may have a material adverse effect on our liquidity, results of operations, business
and financial condition that CNX cannot predict.
• Our hedging activities may prevent us from benefiting from price increases and may expose us to other risks.
• Negative public perception regarding our company or industry could have an adverse effect on our operations, financial results or
•
stock price.
Events beyond our control, including a global or domestic health crisis, may result in unexpected adverse operating and financial
results.
Risks Related to our Business Operations
•
The disruption of, capacity constraints in, or proximity to pipeline systems could limit sales of our natural gas and NGLs and cash
flows from operations.
• Uncertainties exist in the estimation of economical recovery of natural gas and natural gas liquid reserves.
• Developing, producing, and operating natural gas wells is a high-risk activity, and is subject to operating risks and hazards that
could increase expenses, decrease our production levels and expose us to losses or liabilities.
• Our identified drilling locations are scheduled over multiple future years, making them susceptible to uncertainties that could
materially alter the occurrence or timing of their actual development.
• Our development and exploration projects, as well as our midstream development projects, require substantial capital expenditures
•
•
and are subject to regulatory, environmental, political, legal and economic risks.
CNX may not be able to obtain required personnel, services, equipment, parts and raw materials in a timely manner, in sufficient
quantities or at reasonable costs to support our operations.
If CNX cannot find adequate sources of water for our use or we are unable to dispose of or recycle water produced from our
operations at a reasonable cost and within applicable environmental rules, our ability to produce natural gas economically and in
sufficient quantities could be impaired.
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•
Failure to successfully replace our current natural gas and natural gas liquid reserves through economic development of our
existing or acquired assets or through acquisition of additional producing assets, would lead to a decline in our natural gas and
natural gas liquid production levels and reserves.
• We may incur losses as a result of title defects in the properties in which we invest or the loss of certain leasehold or other rights
related to our midstream activities.
Legal, Environmental and Regulatory Risks
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•
•
•
•
•
Climate change risk, legislation, litigation and regulation of greenhouse gas emissions at the federal or state level may increase our
operating costs and reduce the value of our natural gas assets and such regulation, as well as uncertainty concerning such regulation
and public policy pressures that may arise, could adversely impact the market for natural gas, as well as for our securities.
Environmental regulations can increase costs and introduce uncertainty that could adversely impact the market for natural gas with
potential short and long-term liabilities.
Existing and future governmental 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.
CNX may incur significant costs and liabilities as a result of pipeline operations and/or increases in the regulation of natural gas
gathering pipelines.
Changes in federal or state tax laws focused on natural gas exploration and development could cause our financial position and
profitability to deteriorate.
CNX and its subsidiaries are subject to various legal proceedings and investigations, which may have an adverse effect on our
business.
Financing, Investment and Indebtedness Risks
• Our current long-term debt obligations, and the terms of the agreements that govern that debt, and the risks associated therewith,
could adversely affect our business, financial condition, liquidity and results of operations.
• Our borrowing base under our senior secured credit facility 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.
The accounting method for convertible debt securities that may be settled in cash, such as the Convertible Notes, could have a
material effect on our reported financial results.
The capped call transactions may affect the value of the Convertible Notes and our common stock.
•
• We are subject to counterparty performance risk with respect to the capped call transactions.
•
Conversion of the Convertible Notes may dilute the ownership interest of existing stockholders or may otherwise depress the price
of our common stock.
• We may be unable to raise the funds necessary to repurchase the Convertible Notes for cash following a fundamental change, or to
pay any cash amounts due upon conversion.
The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and
operating results.
Provisions of our Convertible Notes could delay or prevent an otherwise beneficial takeover of us.
•
•
Risks Related to Strategic Transactions
•
Strategic determinations, including the allocation of capital and other resources to strategic opportunities, are subject to risks and
uncertainties.
• We do not completely control the timing of divestitures that we plan to engage in, and they may not provide anticipated benefits.
•
There is no guarantee that CNX 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.
CNX 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.
In connection with the separation of our coal business, CONSOL Energy has agreed to indemnify us for certain liabilities, and we
have agreed to indemnify CONSOL Energy for certain liabilities.
•
•
Other General Risks
•
Cyber-incidents targeting our systems, oil and natural gas industry systems and infrastructure, or the systems of our third party
service providers could materially adversely affect our business, financial condition or results of operations.
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• 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.
•
ITEM 1A.
Risk Factors
Investment in our securities is subject to various risks, including risks and uncertainties inherent in our business. In addition to the other
information contained in this Form 10-K, the following risk factors related to our business, operations, investments, financial position or
future financial performance or cash flows should be considered in evaluating our company. If any of the following risks were to occur, it
could cause an investment in our securities to decline and result in a loss.
Risks Related to Economic Conditions and our Industry
Prices for natural gas and NGLs are volatile and can fluctuate widely based upon a number of factors beyond our control. An extended
decline in the prices we receive for our natural gas and NGLs will adversely affect our business, operating results, financial condition
and cash flows.
Our financial results are significantly affected by the prices we receive for our natural gas and NGLs. Natural gas, NGLs, oil and
condensate prices are very volatile and can fluctuate widely based upon supply from energy producers relative to demand for these products
and other factors beyond our control. In particular, the U.S. natural gas industry continues to face concerns of oversupply due to the success
of domestic shale development, associated natural gas produced by oil producers, and other North American shale gas plays that impact
domestic pricing. The oversupply of natural gas, beginning in 2012, has resulted in depressed domestic prices. Henry Hub average spot
prices for 2020 were $1.97 per MMBtu lower than for 2011. Industry drilling has continued in these plays, despite these lower gas prices, as
producers continued to become more efficient. Domestic settled natural gas prices have continued to decrease, and continued volatility
remains a strong possibility.
Our producing properties are geographically concentrated in the Appalachian Basin, which exacerbates the impact of regional supply
and demand factors on our business, including the pricing of our natural gas. Not all of the natural gas produced in this region can be
consumed by regional demand and must, therefore, be exported to other regions, which causes natural gas produced and sold locally to be
priced at a discount to many other market hubs, such as the benchmark Henry Hub price. This discount, or negative basis, to the Henry Hub
price is forecasted to continue in future years for Appalachian Basin producers. While we expect planned interstate pipeline projects to
reduce this discount, it could widen further if production in the basin continues to grow and these expected projects to move gas out of the
basin are cancelled, delayed or denied for any reason, such as permitting and regulatory issues or environmental lawsuits. During 2020, the
Atlantic Coast Pipeline project, which was to move produced natural gas out of the northeast, was cancelled by its partners after nearly six
years of work. An extended period of lower natural gas prices can reduce cash flow, which decreases funds available for capital expenditures
to replace reserves or increase production.
Our drilling plans also include some activity in areas of shale formations that may also contain NGLs, condensate and/or oil. The prices
for NGLs, condensate and oil are also volatile for reasons similar to those described above, for natural gas. Although the Company is able to
hedge natural gas benchmarks and local basis differentials, it has not found acceptable instruments to hedge its relatively minor quantities of
NGL, condensate and oil. In addition, similar to the oversupply of natural gas, increased drilling activity by third-parties in formations
containing NGLs has led to a significant decline in the price we receive for our NGLs. Further, an oversupply of NGLs in the local market
where we operate requires excess NGLs to be transported out of our region and into the broader market, including international exports.
NGLs are transported by a variety of methods, including pipeline, rail, and truck. Any disruption in those means of transportation could have
a further detrimental impact on the price we receive for our NGLs. Our results of operations may be adversely affected by a continued
depressed level of, or further downward fluctuations in, NGLs, condensate and oil prices.
Apart from issues with respect to the supply of products we produce, demand can fluctuate widely due to a number of matters beyond
our control, including:
•
•
•
•
•
•
weather conditions in our markets that affect the demand for natural gas;
changes in the consumption pattern of industrial consumers, electricity generators and residential users of electricity and
natural gas;
with respect to natural gas, the price and availability of alternative fuel sources used by electricity generators;
technological advances affecting energy consumption and conservation measures reducing demand;
the costs, availability and capacity of transportation infrastructure;
proximity and capacity of natural gas pipelines and other transportation facilities;
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•
•
changes in levels of international demand and tariffs associated with international export; and
the impact of domestic and foreign governmental laws and regulations, including environmental and climate change
regulations and delays.
If natural gas prices decrease or drilling efforts are unsuccessful, we may be required to record write-downs of our proved natural gas
properties. Additionally, changes in assumptions impacting management’s estimates of future financial results as well as other
assumptions related to the Company's 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.
Lower natural gas prices or wells that produce less than expected quantities of natural gas may reduce the amount of natural gas that
CNX can produce economically. This may result in our having to make substantial downward adjustments to our estimated proved reserves.
If this occurs, or if our estimates of development costs increase, production data factors change or our exploration results deteriorate,
accounting rules may require us to write down, as a non-cash charge to earnings, the carrying value of our natural gas properties. We are
required to perform impairment tests on our assets at least annually or whenever events or changes in circumstances lead to a reduction of
the estimated useful life or estimated future cash flows that would indicate that the carrying amount may not be recoverable or whenever
development plans change with respect to those assets. In the past we have had to record an impairment charge related to certain assets and
CNX may incur impairment charges in the future, which could have an adverse effect on our results of operations in the period taken.
For the year ended December 31, 2020, CNX recognized certain indicators of impairments specific to our Southwest Pennsylvania
(SWPA) CBM asset group and determined that the 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 CBM wells and the related processing facility during the first quarter of 2020.
Future acquisitions may lead to the acquisition of additional goodwill or other intangible assets. At least annually, or whenever events
or changes in circumstances indicate a potential impairment in the carrying value as defined by GAAP, we will evaluate this goodwill and
other intangible assets for impairment by first assessing qualitative factors to determine whether the existence of events or circumstances
leads to a determination that it is more likely than not that the fair value of the reporting unit is less than the carrying amount. Estimated fair
values could change if, for example, there are changes in the business climate, unanticipated changes in the competitive environment,
adverse legal or regulatory actions or developments, changes in capital structure, cost of debt, interest rates, capital expenditure levels,
operating cash flows, or market capitalization. The future impairment of these assets could require material non-cash charges to our results
of operations, which could materially adversely affect our reported earnings and results of operations for the affected periods.
Competition and consolidation within the natural gas industry may adversely affect our ability to sell our products and midstream
services or other parts of the business. Increased competition or a loss of our competitive position could adversely affect our sales of, or
our prices for, our products, which could impair our profitability.
The natural gas, exploration, production and midstream industries are intensely competitive with companies from various regions of
the United States, and increasingly face competition in international markets. The industry has been experiencing increased competitive
pressures as a result of both consolidation within the exploration and production space, along with the continued proliferation of stand-alone
midstream companies. Midstream, transmission and processing consolidation in the industry could lead to a less competitive environment
for CNX to find partners for projects needed to support development, which could increase costs. Many of the companies with which we
compete are larger and if we are unable to compete, our company, our operating results, financial position or other parts of the business. may
be adversely affected. In addition, we compete with larger companies to acquire new natural gas properties for future exploration, limiting
our ability to replace the natural gas we produce or to grow our production. There is also increased competition within the industry as a
result of oil-focused drilling, where natural gas is produced as an ancillary byproduct and may be sold at prices below market. Some of such
“byproduct” gas could be transported to our key markets, thereby affecting regional supply. The industry also faces competition from
alternative energy sources. The highly competitive environment in which we operate may negatively impact our ability to acquire additional
properties at prices or upon terms we view as favorable. Any reduction in our ability to compete in current or future natural gas markets
could materially adversely affect our business, financial condition, results of operations and cash flows.
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In addition, potential third-party customers who are significant producers of natural gas and condensate may develop their own
midstream systems in lieu of using our systems. All of these competitive pressures could materially adversely affect our business, results of
operations, financial condition and cash flows.
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 may have a material adverse effect on our liquidity, results of operations, business and
financial condition that CNX cannot predict.
Economic conditions in a number of industries in which our customers operate, such as electric power generation, have experienced
substantial deterioration in the past, resulting in reduced demand for natural gas. Renewed or continued weakness in the economic
conditions of any of the industries we serve or that are served by our customers could adversely affect our business, financial condition,
results of operation and liquidity in a number of ways. For example:
•
•
•
•
•
•
demand for natural gas and electricity in the United States is impacted by industrial production, which if weakened would
negatively impact the revenues, margins and profitability of our natural gas business;
A decrease in international demand for natural gas or NGLs produced in the United States could adversely affect the
pricing for such products, which could adversely affect our results of operations and liquidity;
the tightening of credit or lack of credit availability to our customers could adversely affect our liquidity, as our ability to
receive payment for our products sold and delivered depends on the continued creditworthiness of our customers;
our ability to refinance our existing senior notes may be limited and the terms on which we are able to do so may be less
favorable to us depending on the strength of the capital markets, our credit ratings;
our ability to access the capital markets may be restricted at a time when CNX would like, or need, to raise capital for our
business including for exploration and/or development of our natural gas reserves; and
a decline in our creditworthiness may require us to post letters of credit, cash collateral, or surety bonds to secure certain
obligations, all of which would have an adverse effect on our liquidity.
In addition, the 2020 outbreak of the coronavirus pandemic (COVID-19) has materially and adversely impacted many businesses,
industries and economies. For further detail regarding the risks to our business resulting from COVID-19, see Risk Factor titled “Events
beyond our control, including a global or domestic health crisis, may result in unexpected adverse operating and financial results.”
Our hedging activities may prevent us from benefiting from price increases and may expose us to other risks.
To manage our exposure to fluctuations in the price of natural gas, we enter into hedging arrangements with respect to a portion of our
expected production. As of January 7, 2021, we expect these transactions will represent approximately 472.1 Bcf of our estimated 2021
production at an average price of $2.50 per Mcf, 391.3 Bcf of our estimated 2022 production at an average price of $2.34 per Mcf, 284.8 Bcf
of our estimated 2023 production at an average price of $2.22 per Mcf, 263.1 Bcf of our estimated 2024 production at an average price of
$2.28 per Mcf, and 103.0 Bcf of our estimated 2025 production at an average price of $2.10 per Mcf. To the extent that we engage in
hedging activities, CNX may be prevented from realizing the near-term benefits of price increases above the levels of the hedges. If we
choose not to engage in or otherwise reduce our future use of hedging arrangements or are unable to engage in hedging arrangements due to
lack of acceptable counterparties, CNX may be more adversely affected by changes in natural gas prices than we have historically
performed, and then our competitors who engage in hedging arrangements to a greater extent than we do. Increases or decreases in forward
market prices could result in material unrealized (non-cash) losses or gains on commodity derivative instruments resulting in volatility in
reported earnings. Future legislation regarding derivatives could have an adverse effect on our ability to use derivative instruments to reduce
the effect of commodity price risks associated with our business.
In addition, such transactions may expose us to the risk of financial loss in certain circumstances, including instances in which:
•
•
•
•
•
our production is less than expected;
market prices for natural gas rise significantly in excess of our derivative hedge price resulting in significant cash
payments to our hedge counterparties;
we are unable to find available counterparties in the future with which to enter into hedges and counterparties able to enter
into basis hedge contracts;
the creditworthiness of our counterparties or their guarantors is substantially impaired; and
counterparties have credit limits that may constrain our ability to hedge additional volumes.
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Negative public perception regarding our Company or industry could have an adverse effect on our operations, financial results or stock
price.
Negative public perception regarding our Company or industry resulting from, among other things, operational incidents or concerns
raised by advocacy groups, related to environmental, health, or community impacts could result in increased regulatory scrutiny, which
could then result in additional laws, regulations, guidelines and enforcement interpretations, at the federal or state level. These actions may
cause operational delays or restrictions, increased operating costs, additional regulatory burdens and an increased risk of litigation that may
negatively impact our future financial results or our stock price. Moreover, governmental authorities exercise considerable discretion in the
timing and scope of permit issuance and the public may engage in the permitting process, including through intervention in the courts.
Negative public perception could cause the permits we need to conduct our operations to be withheld, delayed, or burdened by requirements
that restrict our ability to profitably conduct our business.
Events beyond our control, including a global or domestic health crisis, may result in unexpected adverse operating and financial
results.
While CNX did not incur significant disruptions to operations during the year ended December 31, 2020 as a direct result of the
COVID-19 pandemic. The outbreak of the coronavirus pandemic (COVID-19) may materially and adversely affect, our business, operating
and financial results and liquidity in the future. The severity, magnitude and duration of the current COVID-19 outbreak and the efforts to
reduce its spread remain uncertain, but continues to be 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 and materials), 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, 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;
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; and
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, oil and condensate, 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, oil and condensate or result in the shut-in of producing wells or the delay or
discontinuance of development plans for our properties.
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 this Risk Factors section of our Form 10-K, 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
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for natural gas, LNG, NGLs, oil and condensate, the response of the overall economy and the financial markets as well as the effect of
governmental actions taken in response to the pandemic. Any of these outcomes could have a material adverse effect on our business,
operations, financial results and liquidity.
Risks Related to our Business Operations
Our business depends on gathering, processing and transportation facilities and other midstream facilities owned by others. The
disruption of, capacity constraints in, or proximity to pipeline systems could limit sales of our natural gas and NGLs and cash flows from
operations, and any decrease in availability of pipelines or other midstream facilities could adversely affect our operations.
Although we own midstream facilities, we also gather, process and transport our natural gas to market by utilizing processing facilities
and pipelines owned by others. If pipeline or processing facility capacity is limited or is unexpectedly disrupted for any reason, our sales of
natural gas and/or NGLs could be reduced, which could negatively affect our profitability. If we cannot access processing facilities and
pipeline transportation, we may have to reduce our production of natural gas, reducing our sales and revenues, and causing our unit costs to
increase. If pipeline quality standards change or we cannot meet applicable standards, we might be required to install additional processing
equipment which could increase our costs. Pipelines could also curtail our flows until the natural gas delivered to their pipeline is in
compliance with predetermined gas quality specifications. Any reduction in our production of natural gas or increase in our costs could
materially adversely affect our business, financial condition, results of operations and cash flows.
Further, a significant portion of our natural gas is sold on or through two pipeline systems, Texas Eastern Transmission and Columbia
Gas Transmission, which could experience capacity issues, operational disruptions and unexpected downtime, with either no or little
alternative transportation options are available for our natural gas. Reductions in capacity on the pipelines, which have occurred in the past,
may result in curtailments and reduce our production of natural gas. A reduction in capacity on any downstream pipelines could also reduce
the demand for our natural gas, which would reduce the price we receive for our production.
We have various third-party firm transportation, natural gas processing, gathering and other agreements in place, many of which have
minimum volume delivery commitments that obligate us to pay fees on minimum volumes regardless of actual volume throughput.
Reductions in our drilling program may result in insufficient production to utilize our full firm transportation and processing capacity,
reducing our cash flow from operations, which may require us to reduce or delay our planned investments and capital expenditures or seek
alternative means of financing, all of which may have a material adverse effect our business, financial condition, results of operations and
cash flows.
Our investment in midstream infrastructure development and maintenance programs is intended, among other items, to connect our
wells to other existing gathering and transmission pipelines and can involve significant risks, including those relating to timing, cost
overruns and operational efficiency. Significant portions of our natural gas production are dependent on a small number of key compression
and processing stations. An operational issue at any of those stations would materially impact our production, cash flow and results of
operation. Our midstream facilities connect to other pipelines or facilities owned and operated by unaffiliated third parties, the continuing
operation of which is not within our control. These third-party pipelines and facilities may become unavailable because of testing,
turnarounds, line repair, maintenance, changes to operating conditions, delivery or receipt parameters, unavailability of firm transportation,
lack of operating capacity, force majeure events, regulatory requirements and curtailments of receipt or deliveries due to insufficient
capacity or because of damage from severe weather conditions or other operational issues.
Uncertainties exist in the estimation of economical recovery of natural gas and natural gas liquid reserves. With these uncertainties,
estimates of revenues, operating and development costs and profitability may be inaccurate.
Natural gas reserves are economically recoverable when the price at which they are expected to be sold exceeds their expected cost of
development and production. Reserves require estimates of underground accumulations of oil and natural gas, and the use of assumptions
concerning natural gas and natural gas liquid prices, production levels, recoverable reserve quantities and operating and development costs.
For example, a significant amount of our proved oil and natural gas reserves are identified as proved undeveloped reserves and may be more
susceptible to positive and negative changes in reserve estimates than our proved developed reserves. A portion of the proved undeveloped
reserves booked during the last ten years were due to the addition of undeveloped wells on our Shale acreage more than one offset location
away from existing production through the use of reliable, industry standard applications. Also, we make certain assumptions regarding
natural gas and liquids prices, production levels and operating and development costs that may prove to be incorrect. Any significant
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variance from these assumptions to actual figures could greatly affect our estimates of our natural gas and natural gas liquid reserves, the
economically recoverable quantities of natural gas and natural gas liquids attributable to any particular group of properties, the
classifications of natural gas reserves based on risk of recovery and estimates of the future net cash flows. The PV-10 measure of pre-tax
discounted future net cash flows and the standardized measure of after-tax discounted future net cash flows from our proved reserves
included within this Annual Report on Form 10-K are not necessarily the same as the current market value of our estimated natural gas and
liquid reserves. We base the estimated discounted future net cash flows from our proved natural gas and natural gas liquid reserves on
historical average prices and costs. However, actual future net cash flows from our proved and unproved natural gas and natural gas liquid
properties may also be affected by factors such as:
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geological conditions;
our acreage position, and our ability to acquire additional acreage, including purchases and third-party swaps to develop
our position efficiently;
changes in governmental regulations and taxation;
the amount and timing of actual production;
future prices and our hedging position;
future operating costs;
operational risks and results; and
capital costs of drilling, completion and gathering assets.
The timing of both our production and our incurrence of expenses in connection with the development and production of natural gas
and natural gas liquid properties will affect the timing of actual future net cash flows from proved reserves and thus their actual present
value. In addition, the 10% discount factor we use when calculating discounted future net cash flows may not be the most appropriate
discount factor based on interest rates in effect from time to time and risks associated with us or the oil and natural gas industry in general.
If natural gas prices decline by $0.10 per Mcf, then the pre-tax present value using a 10% discount rate of our proved natural gas reserves as
of December 31, 2020 would decrease from $3.60 billion to $3.33 billion.
Developing, producing and operating natural gas wells is a high-risk activity, and is subject to operating risks and hazards that could
increase expenses, decrease our production levels and expose us to losses or liabilities.
Our financial results are materially dependent upon the success of our development program. The development of natural gas involves
numerous risks, including the risk that an encountered well does not produce in sufficient quantities to make the well economically viable.
The cost of drilling, completing and operating wells is substantial and uncertain, and our operations may be curtailed, delayed or canceled as
a result of a variety of factors beyond our control. Our future development activities may not be successful, and if they are unsuccessful,
such failure will have an adverse effect on our future results of operations and financial condition. CNX may be unable to development
identified or budgeted wells within our expected time frame, or at all for various reasons, and a final determination with respect to the
development of any scheduled or budgeted wells will be dependent on a number of factors, including:
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the results of delineation efforts and the acquisition, review and analysis of data, including seismic data;
the availability of sufficient capital resources to us and any other participants in a well for the development of the well;
whether we are able to acquire on a timely basis all of the leasehold interests required for the well, including through swap
transactions with other operators;
whether we are able to obtain, on a timely basis or at all, the permits required for the development of wells;
whether production levels align with estimates; and
economic and industry conditions at the time of development, including prevailing and anticipated prices for natural gas
and oil and the availability and cost of oilfield services.
Our business strategy focuses on horizontal drilling and production in unconventional shale formations, primarily the Marcellus Shale
and Utica Shale in the Appalachian Basin. Drilling and stimulating horizontal wells is technologically complex, expensive and involves a
higher risk of failure when compared to vertical wells. Due to the higher costs, the risks of our development program are spread over a
smaller number of wells, and in order to be profitable, each horizontal well will need to produce at higher levels. In addition, we use multi-
well pads instead of single-well sites. The use of multi-well pad drilling increases some operational risks because problems affecting the
pad, or a single well could adversely affect production from all of the wells on the pad. Pad development can also make our overall
production, and therefore our revenue and cash flows, more volatile, because production from multiple wells on a pad will typically
commence simultaneously. While we believe that we are better served by drilling horizontal wells using multi-well pads, the risk component
involved in such development will be increased in some respects, with the result that CNX might find it more difficult to achieve economic
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success in our development program.
The exploration, production, and transporting of natural gas involves numerous operational risks. The cost of developing and operating
a shale gas well, a shallow oil and gas well or a coalbed methane (CBM) well is often uncertain, and a number of factors can delay, suspend,
or prevent development operations, decrease production and/or increase the cost of our natural gas operations at particular sites for varying
lengths of time. The operational factors that are most likely to negatively impact our operations include unexpected development and
production conditions (pressure or irregularities in geologic formations or wells, material and equipment failures, fires, ruptures, loss of well
control, landslides, mine subsidence, explosions or other accidents and environmental concerns and adverse weather conditions), which
conditions and risks may be amplified as we increase the vertical and horizontal length of drilling endeavors; similar operational or design
issues relating to pipelines, compressor stations, pump stations, related equipment and surrounding properties; challenges relating to
transportation, pipeline infrastructure and capacity for treatment or disposal of waste water generated in operations and failure to obtain, or
delays in the issuance of, permits at the state or local level and the resolution of regulatory concerns.
The realization of any of these risks could adversely affect our ability to conduct our operations, materially increase our costs, or result
in substantial loss to us as a result of claims for:
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personal injury or loss of life;
damage to and destruction of property, natural resources and equipment, including our properties and our natural gas
production or transportation facilities;
pollution and other environmental damage to our properties or the properties of others;
potential legal liability and monetary losses;
damage to our reputation within the industry or with customers;
regulatory investigations and penalties;
suspension of our operations; and
repair and remediation costs.
The occurrence of any operational event that prevents delivery of natural gas to a customer and is not excusable as a force majeure
event under our supply agreement, could result in economic penalties, suspension or ultimately termination of the supply agreement.
Although we maintain insurance for a number of risks and hazards, we may not be adequately insured against the losses or liabilities
that could arise from a significant accident or disruption in our operations. The occurrence of an event that is not fully covered by insurance,
such as pollution or environmental issues, could materially adversely affect our business, financial condition, results of operations and cash
flows.
Our identified development locations are scheduled over multiple future years, making them susceptible to uncertainties that could
materially alter the occurrence or timing of their actual development.
Our management team has specifically identified and scheduled certain locations as an estimation of our future multi-year development
activities on our existing acreage. These locations represent a significant part of our development strategy. Our ability to develop these
locations may be dependent on a number of factors, including natural gas and oil prices, the availability and cost of capital, drilling and
production costs, the acquisition on acceptable terms of any leasehold interests we do not control but that are necessary to complete the
drilling unit, including potentially through third-party swap transactions, availability of drilling services and equipment, drilling results,
lease expirations, transportation constraints, regulatory and zoning approvals and other factors. Because of these uncertain factors, we do not
know if the numerous development locations we have identified will ever be drilled. CNX may require significant additional capital over a
prolonged period in order to pursue the development of these locations, and we may not be able to raise or generate the capital required to
do so. Any development activities we are able to conduct on these locations may not be successful or result in our ability to add additional
proved reserves or may result in a downward revision of our estimated proved reserves, which could materially adversely affect our business
and results of operations.
Our development and exploration projects, as well as our midstream development projects, require substantial capital expenditures and
are subject to regulatory, environmental, political, legal and economic risks and if we fail to generate sufficient cash flow, obtain
required capital or financing on satisfactory terms or deal with the regulatory and political environment, our natural gas reserves may
decline and our operations and financial results may suffer.
As part of our strategic determinations, we expect to continue to make substantial capital expenditures in the development and
acquisition of natural gas reserves and maintenance, purchase or construction of midstream systems. If we are unable to
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make sufficient or effective capital expenditures, we will be unable to maintain and grow our business. The gas gathering agreements that
we have with third-parties may impose obligations on us to invest capital in our midstream systems which are not fully protected against
volumetric risks associated with lower-than-forecast volumes flowing through our gathering systems. To the extent our customers are not
contractually obligated to, and determine not to, develop their properties in the areas covered by these acreage dedications, or otherwise sell,
exchange, farm-out or otherwise dispose of all of, or an undivided interest in, the development of the dedicated acreage, the resulting
decrease in the development of reserves by our midstream customers could result in reduced volumes serviced by us and a commensurate
decline in revenues and cash flows.
Additionally, the construction of additions or modifications to our existing midstream systems involves numerous regulatory,
environmental, political and legal uncertainties beyond our control and may require the expenditure of significant amounts of capital. If
these projects are undertaken, they may not be completed on schedule, at the budgeted cost or at all. The construction of additions to our
existing assets may require us to obtain new land rights and regulatory permits prior to constructing new pipelines or facilities, which may
not be obtained in a timely fashion or in a way that allows us to connect new natural gas supplies to existing gathering pipelines or capitalize
on other attractive expansion opportunities. It may also become more expensive to obtain new rights-of-way or to expand or renew existing
rights-of-way. If the cost of renewing or obtaining new rights-of-way increases, cash flows could be adversely affected. Also, these
midstream assets may not be able to attract enough throughput to achieve the expected investment return.
Revenues may not increase immediately (or at all) upon the expenditure of funds on a particular project. There is no assurance that we
will have sufficient cash from operations, borrowing capacity under our credit facilities, or the ability to raise additional funds in the capital
markets to meet our capital requirements. If cash flow generated by our operations or available borrowings under our credit facilities are not
sufficient to meet our capital requirements, or we are unable to obtain additional financing, we could be required to curtail the pace of the
development of our natural gas properties and midstream activities, which in turn could lead to a decline in our reserves and production, and
could adversely affect our business, financial condition and results of operations.
CNX may not be able to obtain required personnel, services, equipment, parts and raw materials in a timely manner, in sufficient
quantities or at reasonable costs to support our operations.
We rely on third-party contractors to provide key services and equipment for our operations. CNX contracts with third-parties for well
services, related equipment and qualified experienced field personnel to drill wells, construct pipelines and conduct field operations. We also
utilize third-party contractors to provide land acquisition and related services to support our land operational needs. The demand for these
services, equipment and field personnel to drill wells, construct pipelines and conduct field operations and other professionals in the oil and
natural gas industry can fluctuate significantly, often in correlation with natural gas and oil prices, causing periodic shortages. Weather may
also play a role with respect to the relative availability of certain materials. Historically, there have been shortages of drilling and work-over
rigs, pipe, compressors and other equipment as demand for rigs and equipment has increased along with the number of wells being drilled.
The costs and delivery times of equipment and supplies are substantially greater in periods of peak demand, including increased demand for
plays outside of our area of geographic focus. In addition, accelerated levels of inflation may lead to price increases beyond CNX’s control
that could lead to CNX incurring increased costs for contractors and/or materials. Accordingly, CNX cannot be assured that we will be able
to obtain necessary services, drilling equipment and supplies in a timely manner or on satisfactory terms, and CNX may experience
shortages of, or increases in the costs of, drilling equipment, crews and associated supplies, equipment and field services in the future.
Shortages may lead to escalating prices, poor service and inefficient drilling operations and increase the possibility of accidents due to
the hiring of less experienced personnel and overuse of equipment by contractors. A decrease in the availability of these services, equipment
or personnel could lead to a decrease in our natural gas production levels, increase our costs of natural gas production, and decrease our
anticipated profitability. Such shortages could delay or cause us to incur significant expenditures that are not provided for in our capital
budget, which events could materially adversely affect our business, financial condition, results of operations, or cash flows.
We attempt to mitigate the risks involved with increased natural gas production activity by entering into “take or pay” contracts with
well service providers which commit them to provide field services to us at specified levels and commit us to pay for field services at
specified levels even if we do not use those services. However, these types of contracts expose us to economic risk during a downturn in
demand or during periods of oversupply. Having to pay for services we do not use decreases our cash flow and increases our costs.
In addition, the 2020 outbreak of the coronavirus pandemic (COVID-19) has materially and adversely impacted many businesses,
industries and economies. For further detail regarding the risks to our business resulting from COVID-19, see Risk Factor titled “Events
beyond our control, including a global or domestic health crisis, may result in unexpected adverse operating and financial results.”
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If CNX cannot find adequate sources of water for our use or we are unable to dispose of or recycle water produced from our operations
at a reasonable cost and within applicable environmental rules, our ability to produce natural gas economically and in sufficient
quantities could be impaired.
As part of our drilling and production in shale formations, we use hydraulic fracturing processes that require access to adequate sources
of water, which may not be available in proximity to our operations or at certain times of the year. To ensure adequate water for our
operations, CNX may be required to invest substantial amounts of capital in water pipelines which are used for relatively short periods of
time. Increased regulation of these water pipelines could cause us to invest additional capital, alter our disposal or transportation method or
affect our operations in other manners. Alternatively, CNX may be required to truck water, and CNX may not be able to contract for
sufficient water hauling trucks to meet our needs.
Further, our operations generate significant volumes of wastewater that must be treated, reused or disposed. This waste can be generated
from various aspects of our operations, including from drilling fluids, completions activities and normal production over the life of the well,
and are associated with all types of natural gas wells, including CBM wells and shale wells. A significant portion of this water can be
recycled for use in other hydraulic fracturing operations. To the extent we must dispose of water rather than recycle it, our costs may
increase, which will detrimentally affect our cash flows. We attempt to minimize the expense associated with the transportation of
wastewater by optimizing the transportation between the sources of wastewater and locations where the wastewater can be reused or
disposed. Various interruptions in our planned transportation of this wastewater, including operational issues and regulatory matters, could
increase our operating costs, which would detrimentally affect our cash flows. The risk of pollution also exists while handling, transferring,
storing and disposing wastewater and other wastes, as well as in development or production of a well.
Our inability to obtain sufficient amounts of water with respect to our Shale operations or to dispose of or recycle water and other
wastes produced from our Shale and our CBM operations in an economically efficient manner, could increase our costs and delay our
operations, which will adversely impact our cash flow and results of operations.
Failure to successfully replace our current natural gas and natural gas liquid reserves through economic development of our existing or
acquired assets or through acquisition of additional producing assets, would lead to a decline in our natural gas and natural gas liquid
production levels and reserves.
Producing natural gas reservoirs generally are characterized by declining production rates that vary depending upon reservoir
characteristics and other factors. The rate of decline can change if production from our existing wells is different than what has been
estimated, operating conditions change or other circumstances arise that affect our ability to produce the wells. Thus, our future natural gas
and natural gas liquid reserves and production and, therefore, our cash flow and income are highly dependent on our estimates and our
success in efficiently developing and selling our current reserves and economically finding or acquiring additional economically recoverable
reserves. CNX may not be able to develop, find or acquire additional economically recoverable reserves to replace our current and future
production at acceptable costs.
In addition, the level of natural gas, NGL and condensate volumes handled through our midstream systems depends on the level of
production from natural gas wells feeding into such midstream systems, which may be less than expected and which will naturally decline
over time. In order to maintain or increase throughput levels on our midstream systems, we must supply natural gas, NGLs and condensate
from new wells on acreage in close proximity to our midstream systems. This can take the form of wells we develop on our own, wells
developed by others on acreage that is dedicated to our midstream systems or through contracts with third-party customers to flow volumes
on our midstream systems. We have no control over third party producers’ levels of development and completion activity in areas adjacent
to our midstream systems, or the amount of reserves associated with or rate of production decline from those third-party wells – and only
limited control over those factors on our own wells.
We may incur losses as a result of title defects in the properties in which we invest or the loss of certain leasehold or other rights related
to our midstream activities.
It is our practice when we acquire natural gas leases or interests not to conduct a thorough chain of title examination to the mineral
interest.
Prior to the drilling of a well, however, it is the normal practice in our industry for the operator of the well to obtain a complete title
review to ensure there are no obvious defects in title to the well. As a result of such examinations, certain curative work may be required to
correct defects in the marketability of the title and such curative work entails expense. Our inability to cure any title defects in our leases in a
timely and cost-efficient manner may delay or prevent us from utilizing the associated mineral interest, which may adversely impact our
ability in the future to increase production and reserves. The existence of a material title deficiency can render a lease worthless and can
adversely affect our results of operations and financial position.
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Additionally, most of the land on which our midstream systems have been constructed is not owned in fee by us; rather, the properties
are held by surface use agreements, rights-of-way or other easement rights. We are, therefore, subject to the possibility of more onerous
terms or increased costs to retain necessary land use if we do not have valid rights-of-way or if such rights-of-way lapse or terminate. We
may obtain the rights to construct and operate our pipelines on land owned by third parties and governmental agencies for a specific period
of time. Our loss of these rights, through our inability to renew the right-of-way or for other reasons, could materially adversely affect our
business, financial condition, results of operations and cash flows.
Legal, Environmental and Regulatory Risks
Climate change risk, legislation, litigation and regulation of greenhouse gas emissions at the federal or state level may increase our
operating costs and reduce the value of our natural gas assets and such regulation, as well as uncertainty concerning such regulation
and public policy pressures, that may arise, could adversely impact the market for natural gas, as well as for our securities.
The issue of global climate change continues to attract considerable public and scientific attention with underlying concern about the
impacts of human activity, especially the emissions of greenhouse gases (“GHGs”) such as carbon dioxide (“CO2”) and methane,
environment, and is increasingly the subject of civil litigation.
The EPA, under the Climate Action Plan, elected to regulate GHGs under the Clean Air Act (“CAA”) to limit emissions of CO2 from
natural gas-fired power plants. In April 2017, the EPA announced that it was initiating a review of the Clean Power Plan consistent with
President Trump’s Executive Order 13783, and in October 2017 published a proposed rule to formally repeal the Clean Power Plan. On
August 20, 2018, the EPA issued the proposed “Affordable Clean Energy Rule.” On June 19, 2019, the EPA issued the final Affordable
Clean Energy Rule, replacing the Clean Power Plan. The Biden administration may take a different direction than the Trump administration
regarding these regulatory actions. For example, the new administration has announced it will re-enter the United States in the Paris Climate
Accord and may attempt to establish more stringent standards to update or replace the Affordable Clean Energy Rule.
The EPA has adopted regulations under existing provisions of the federal Clean Air Act that establish Prevention of Significant
Deterioration, or PSD, construction and Title V operating permits for large stationary sources. Facilities requiring PSD permits may also be
required to meet “best available control technology” (BACT) standards. Rulemaking related to GHG could alter or delay our ability to
obtain new and/or modified air source permits.
The EPA has also adopted, changed and amended rules to control volatile organic compound emissions from certain oil and natural gas
equipment and operations as part of its initiative to reduce methane emissions. In response to subsequent judicial involvement, the EPA
issued a proposed rule in July 2017 that would stay the methane rule for two years which rule was vacated by the United States Court of
Appeals for the D.C. Circuit. Thereafter in September 2018, the EPA proposed revisions to the 2016 New Source Performance Standards for
the oil and natural gas industry. Additional revisions were proposed in August 2019 and August 2020. As these proposed rules are adopted,
changed, rescinded or modified, these rules may result in increased costs for permitting, equipping, and monitoring methane emissions or
otherwise restrict operations or increase the costs thereof.
Additionally, some states have issued mandates to reduce emissions of GHGs, primarily through the planned development of GHG
emission inventories and potential cap-and-trade programs. For example, Pennsylvania has recently taken initial steps to bring Pennsylvania
into a nine-state consortium of Northeastern and Mid-Atlantic States - the Regional Greenhouse Gas Initiative -- that set price and declining
limits on CO2 emissions from power plants. Virginia recently joined the consortium as well. Most of these types of programs require major
sources of emissions or major producers of fuels to acquire and subsequently surrender emission allowances, with the number of allowances
available being reduced each year until a target goal is achieved. The cost of these allowances could increase over time. While new laws and
regulations that are aimed at reducing GHG emissions will increase demand for natural gas, they may also result in increased costs for
permitting, equipping, monitoring and reporting GHGs associated with natural gas production and use.
Finally, there are currently more than twenty lawsuits filed on behalf of states and municipalities seeking to hold producers of oil,
natural gas and coal liable for the consequences of certain weather-related events, like rising sea levels and more frequent and severe
flooding, storms and heatwaves, and seeks money damages for remedial measures aimed at eliminating or ameliorating damages caused by
climate change. For further discussion of pending legal proceedings, see Note 20 - Commitments and Contingent Liabilities in the Notes to
the Audited Consolidated Financial Statements in Item 8 of this Form 10-K.
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Environmental regulations can increase costs and introduce uncertainty that could adversely impact the market for natural gas with
potential short and long-term liabilities.
CNX is subject to various stringent federal, state, and local laws and regulations relating to the discharge of materials into, and
protection of, the environment. These laws and regulations may impose numerous obligations that are applicable to us and our customers'
operations. Failure to comply with these laws, regulations and related permit requirements may result in joint and several or strict liability or
the assessment of administrative, civil and criminal penalties, the imposition of remedial obligations, and/or the issuance of injunctions
limiting or preventing some or all of our operations. Private parties, including the owners of the properties through which CNX’s gathering
systems pass, and some local municipalities may also have the right to pursue legal actions to enforce compliance, challenge governmental
actions, as well as seek damages for non-compliance, with environmental laws and regulations or for personal injury or property damage.
CNX may not be able to recover all or any of these costs from insurance. There is no assurance that changes in or additions to regulations
and public policies regarding the protection of the environment will not have a significant impact on our operations and profitability.
Our operations also pose risks of environmental liability due to leakage, migration, releases or spills from our operations to surface or
subsurface soils, and surface water or groundwater. Certain environmental laws impose strict as well as joint and several liability for costs
required to investigate, remediate and restore sites where regulated substances have been disposed, stored or released, as well as fines and
penalties for such releases. CNX may be required to remediate contaminated properties currently or formerly operated by us regardless of
the cause of contamination or whether such contamination resulted from the conduct of others. In addition, claims for damages to persons or
property, including natural resources, may result from the environmental, health and safety impacts of our operations. Additionally, the
Federal Endangered Species Act (ESA) and similar state laws protect species endangered or threatened with extinction and may cause us to
modify a natural gas well pad siting or pipeline right of ways or routes, or to develop and implement species-specific protection and
enhancement plans and schedules to avoid or minimize impacts to endangered species or their habitats during construction or operations.
CNX utilizes pipelines extensively for its operations. Stream encroachment and crossing permits from the Army Corps of Engineers
(ACOE) are often required for the location of or certain impacts these pipelines cause to streams and wetlands. The EPA and the ACOE
have developed a rule that revised the definition of “waters of the United States” under the Clean Water Act. The EPA moved forward with
the first step on December 11, 2018, when it issued a proposed, revised rule which would replace a prior 2015 rule with pre-2015
regulations, and which narrowed language defining “waters of the United States” under the Clean Water Act that existed prior to that time.
In September 2019, the EPA and the ACOE announced that the agencies were repealing the 2015 rule. This second step was a notice-and-
comment rulemaking in which federal agencies conducted a substantive reevaluation of such definition. On June 22, 2020, the Navigable
Waters Protection Rule became effective. While CNX cannot at this time predict how this rule will be enforced by the new Biden
administration, such rulemaking, its enforcement, and future revisions to the rulemaking could lead to additional mitigation costs and
severely limit CNX’s operations.
The foregoing and other regulations applicable to the natural gas industry are under constant review for amendment or expansion at
both the federal and state levels. Any future changes may increase the costs of producing natural gas and other hydrocarbons, which would
adversely impact our cash flows and results of operations. For example, hydraulic fracturing is an important and common practice that is
used to stimulate production of hydrocarbons from tight unconventional shale formations. The process involves the injection of water, sand
and chemicals under pressure into formations to fracture the surrounding rock and stimulate production. The process is typically regulated
by state oil and natural gas agencies. The disposal of flowback and produced water and other wastes in underground injection disposal wells
is regulated by the EPA under the federal Safe Drinking Water Act and by various states in which we conduct operations under counterpart
state laws and regulations. The imposition of new environmental initiatives and regulations could include restrictions on our ability to
conduct hydraulic fracturing operations or to dispose of waste resulting from such operations.
Public interest in the protection of the environment has increased dramatically in recent years. The trend of more expansive and
stringent environmental legislation and regulations applied to the oil and natural gas industry could continue, potentially resulting in
increased costs of doing business and consequently affecting profitability. Please read “Business - Regulation of Environmental and
Occupational Safety and Health Matters” under Item 1 of Part I of this Form 10-K.
Existing and future governmental 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.
There are numerous federal and state governmental regulations applicable to the natural gas industry that are not directly related to
environmental regulation, many of which are under perpetual review for amendment, expansion, or modifications which may adversely
affect, among other things, our ability to develop the resource, obtain and operate under permits, as well
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as pricing or marketing of natural gas production.
For example, currently CNX’s gathering operations are exempt from regulation by the Federal Energy Regulatory Commission (FERC)
under the Natural Gas Act (NGA). Although FERC has not made any formal determinations with respect to any of our gathering facilities,
we believe that the natural gas pipelines in our gathering systems meet the traditional tests FERC has used to establish that a natural gas
pipeline is a gathering pipeline not subject to FERC jurisdiction. However, this issue has been the subject of substantial litigation, and if
FERC were to consider the status of an individual facility and determine that it is not exempt from FERC regulation under the NGA, the
rates for, and terms and conditions of, services provided by such facility would become subject to regulation by FERC. Such regulation
could decrease revenue, increase operating costs, and, depending upon the facility in question, could adversely affect results of operations
and cash flows.
Additionally, some states have adopted more stringent regulation and oversight of natural gas gathering lines than is currently required
by federal standards. Pennsylvania, under Act 127, authorized Public Utility Commission (PUC) oversight of Class I gathering lines, and
required standards and fees for Class II and Class III pipelines. The State of Ohio also moved to regulate natural gas gathering lines in a
similar manner pursuant to Ohio Senate Bill 315 (SB315). SB315 expanded the Ohio PUC's authority over rural natural gas gathering lines.
These changes in interpretation and regulation affect our midstream activities, requiring changes in reporting, as well as increased costs.
Various judicial decisions that may directly or indirectly impact natural gas drilling could also serve to increase our cost of doing business or
restrict our operations.
Pennsylvania courts have been considering cases involving concepts of landowner rights, trespass claims and the historic common law
concept of “rule of capture” as well as the role that Pennsylvania’s Environmental Rights Amendment may play in natural gas drilling
activities. These cases, and similar cases testing these and other legal principles could result in judicial outcomes that could negatively
impact future shale drilling and hydraulic fracturing within the Commonwealth of Pennsylvania if the court finds that hydraulic fracturing
could violate the constitutional or property rights of Pennsylvania citizens and residents.
Further, the Biden administration may take a different direction than the Trump administration regarding certain regulatory measures
impacting air emissions or clean water standards. For example, the new administration has announced that it will re-enter the United States
in the Paris Climate Accords and may attempt to establish more stringent standards to update or replace the Affordable Clean Energy Rule.
For additional detail regarding the risks to our business resulting from governmental regulation, see Risk Factor titled, “Climate change
legislation, litigation and regulation of greenhouse gas emissions at the federal or state level may increase our operating costs and reduce the
value of our natural gas assets and such regulation, as well as uncertainty concerning such regulation and public policy pressures that may
arise, could adversely impact the market for natural gas, as well as for our securities.” See Note 20 - Commitments and Contingent
Liabilities in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for further discussion of pending legal
proceedings.
CNX may incur significant costs and liabilities as a result of pipeline operations and/or increases in the regulation of natural gas
gathering pipelines.
The Pipeline and Hazardous Materials Safety Administration (PHMSA) has adopted safety, transportation and operational regulations
applicable to pipeline operators. Should our operations fail to comply with PHMSA or comparable state regulations, CNX could be subject
to substantial penalties and fines. In October 2019, PHMSA issued a final rule, effective July 2020, regarding hazardous pipeline safety
regulations that significantly extends the integrity management requirements to previously exempt pipelines and imposes additional
obligations on hazardous liquid pipeline operators that are already subject to the integrity management requirements.
PHMSA also issued a separate regulatory proposal in July 2015 that would impose pipeline incident prevention and response measures
on natural gas and hazardous liquid pipeline operators. In October 2019, PMHSA published a final rule that significantly modifies existing
regulations related to reporting, impact, design, construction, maintenance, operations and integrity management of gas transmission and
gathering pipelines. Compliance with the rule could materially adversely affect our operations. In May 2020, PMHSA proposed additional
amendments to Federal Pipeline Safety Regulations. The adoption of these regulations, which may apply different and/or more
comprehensive or stringent safety standards than we are currently subject to, could require us to install new or modified safety controls,
pursue new capital projects, or conduct maintenance programs on an accelerated basis, all of which could require us to incur increased
operational costs that could be significant. While CNX cannot predict the outcome of legislative or regulatory initiatives, such legislative
and regulatory changes could have a material effect on our cash flow.
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Changes in federal or state tax laws focused on natural gas exploration and development could cause our financial position and
profitability to deteriorate. Additionally, our future tax liability may be greater than expected if our net operating loss (“NOL”)
carryforwards are limited, we do not generate expected deductions, or tax authorities challenge certain of our tax positions.
We are subject to extensive tax laws and regulations, including federal and state income taxes and transactional taxes such as excise,
sales/use, payroll, franchise and ad valorem taxes. New tax laws and regulations and changes in existing tax laws and regulations are
continuously being enacted that could result in increased tax expenditures in the future.
The passage of future legislation or any other changes in U.S. federal or state income tax laws could eliminate or postpone certain tax
deductions that are currently available with respect to natural gas exploration and development. Any such changes could negatively affect
our financial condition and results of operations. For instance, previous tax law legislation decreased the regular U.S. federal income tax
rate, limited the ability of corporations to take certain interest deductions, increased the limitation on deductibility of executive
compensation, and have eliminated a corporation’s ability to take deductions for income attributable to domestic production activities. Any
future tax law legislation could adversely impact our financial position, current and deferred federal and state income tax liabilities and cash
flows.
Additionally, legislation has been proposed from time to time in the states in which we operate - primarily Pennsylvania, Ohio, Virginia
and West Virginia - that would impose additional taxes or increase taxes on the production from our wells. The proposed tax rates have
varied but would represent a greater financial burden on the economics of the wells we drill in these states. Such changes in the rates of
existing production taxes could adversely impact our earnings, cash flows and financial position.
As of December 31, 2020, we have U.S. federal and state NOL carryforwards of $1.0 billion and $1.9 billion, respectively, some of
which expire at various dates from 2021 to 2040 while others have no expiration date. We expect to be able to utilize these NOL
carryforwards and generate deductions to offset our future taxable income. This expectation is based upon assumptions we have made
regarding, among other things, our income, capital expenditures and net working capital and the current expectation that our NOL
carryforwards will not become subject to future limitations under Section 382 of the Internal Revenue Code of 1986 or otherwise.
Additionally, any significant variance in our interpretation of current income tax laws, including as result of the release of any Treasury
Regulations or other interpretive guidance or a challenge of one or more of our tax positions by the IRS or other tax authorities could affect
our tax position. While we expect to be able to utilize our NOL carryforwards and generate deductions to offset our future taxable income,
in the event that deductions are not generated as expected, one or more of our tax positions are successfully challenged by the IRS (in a tax
audit or otherwise), or our NOL carryforwards are subject to future limitations, our future tax liability may be greater than expected.
CNX and its subsidiaries are subject to various legal proceedings and investigations, which may have an adverse effect on our business.
We are party to a number of legal proceedings and, from time to time, investigations, in the normal course of business activities.
Responding to investigations or defending these actions, especially purported class actions, can be costly and can distract management. For
example, we are a defendant in pending purported class action lawsuits dealing with claimants’ alleged entitlements to, and accounting for,
natural gas royalties. Additionally, we are a party to two climate change lawsuits being pursued by communities against fossil fuel producers
relating to climate change, which are beginning to gain prevalence in the courts. There is also the possibility that CNX may become
involved in future investigations or suits regarding its business activities. There is the potential that the costs of defending litigation in an
individual matter or the aggregation of many matters could have an adverse effect on our cash flows, results of operations or financial
position. See Note 20 - Commitments and Contingent Liabilities in the Notes to the Audited Consolidated Financial Statements in Item 8 of
this Form 10-K for further discussion of pending legal proceedings.
Financing, Investment and Indebtedness Risks
Our current long-term debt obligations, and the terms of the agreements that govern that debt, including debt of our subsidiaries, and
the risks associated therewith, could adversely affect our business, financial condition, liquidity and results of operations.
As of December 31, 2020, CNX's total long-term indebtedness, was approximately $2.5 billion, including current portion and excluding
unamortized debt issuance costs, of which approximately (i) $500.0 million was under our 6.00% Senior Notes due 2029 (ii) $161.0 million
was under our senior secured credit facility (the “Credit Facility”), (iii) $700.0 million was under our 7.25% Senior Notes due 2027 plus $7
million of unamortized bond premium, (iv) $345 million of 2.25% Senior Notes due
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May 2026, (v) $400 million of 6.50% Senior Notes due March 2026 issued by our midstream business, less $4 million of unamortized bond
discount (CNX is not a guarantor of these notes), (vi) $291 million in outstanding borrowings under our midstream revolver. (CNX is not a
guarantor of this revolving credit facility), (vii) $115 million in outstanding borrowings under the Cardinal States Gathering Company
Credit Facility (the “Cardinal States Facility”) and (iv) $45 million in outstanding borrowings under the CSG Holdings II LLC Credit
Facility (the “CSG Holdings Facility”). The degree to which we are leveraged could have important consequences, including, but not limited
to:
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increasing our vulnerability to general adverse economic and industry conditions;
requiring us to dedicate a substantial portion of our cash flow from operations to the payment of interest and principal due
under our outstanding debt, which will limit our ability to obtain additional financing to fund future working capital,
capital expenditures, acquisitions, development of our natural gas reserves or other general corporate requirements;
limiting our flexibility in planning for, or reacting to, changes in our business and in the natural gas industry;
placing us at a competitive disadvantage compared to our competitors with lower leverage and better access to capital
resources; and
limiting our ability to implement our business strategy.
The one-month LIBOR rate may be used under our secured credit facilities. The transition from LIBOR to a replacement interest rate
“benchmark” is ongoing, and the effects of this transition remains unclear. The discontinuation of LIBOR is not expected to occur until the
end of 2021, beyond which the United Kingdom’s Financial Conduct Authority will no longer mandate publication of LIBOR, but banks
and other financial institutions are being encouraged to make the transition to a replacement rate sooner rather than later. In the U.S., the
Alternative Reference Rates Committee (ARRC) was convened to identify a suitable alternative to LIBOR. The ARRC has chosen the
Secured Overnight Financing Rate (SOFR) as its preferred alternative, which is based on rates for overnight loans, collateralized by U.S.
treasury securities, and is based on directly observable Treasury-backed repurchase transactions, which is a liquid market with daily volumes
regularly in excess of $800 billion. While many financial industry experts consider SOFR to be a reliable alternative to LIBOR, CNX cannot
predict the effects of this transition, and our ability to borrow on favorable terms may be adversely affected.
Our senior secured Credit Facility and the indentures governing our 7.25% Senior Notes due 2027 and 6.00% Senior Notes due 2029
limit the incurrence of additional indebtedness unless specified tests or exceptions are met, compliance with certain financial covenants on a
quarterly basis, and impose a number of restrictions upon us, such as restrictions on granting liens on our assets, making investments, paying
dividends, stock repurchases, selling assets and engaging in acquisitions. Failure to comply with these covenants could result in an event of
default that, if not cured or waived, could materially adversely affect us. Further, CNXM’s existing $600 million revolving credit facility and
CNXM’s $400 million of 6.50% Senior Notes, neither of which are guaranteed by CNX, subjects CNXM to similar financial and/or other
restrictive covenants and other restrictions.
If our cash flows and capital resources are insufficient to fund our debt service obligations, including repayment of such obligations at
maturity, we may be; forced to sell assets, seek additional capital or seek to restructure or refinance our indebtedness. These alternative
measures may not be successful and may not permit us to meet our respective scheduled debt service obligations. In the absence of such
operating results and resources, we could face substantial liquidity problems and might be required to sell material assets or operations to
attempt to meet their debt service and other obligations; however, our existing debt documents restrict our ability to sell assets and the use of
the proceeds from the sales, such that we may not be able to consummate those sales or to obtain the proceeds which we could realize from
them and these proceeds may not be adequate to meet any debt service obligations then due.
Our borrowing base under our senior secured credit facility 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. Significant reductions in our borrowing
base below $1.8 billion could materially adversely affect our results of operations, financial condition and liquidity.
Our ability to borrow and have letters of credit issued under our $1.8 billion senior secured Credit Facility is generally limited to a
borrowing base. Our borrowing base is determined by the required number of lenders in good faith calculating a loan value of the
Company’s proved natural gas reserves. The borrowing base under our Credit Facility is currently $1.8 billion. Our borrowing base is
redetermined by the lenders twice per year, and the next scheduled borrowing base redetermination is expected to occur in the Spring of
2021. The various matters which we describe in other risk factors that can decrease our proved natural gas reserves including lower natural
gas prices, operating difficulties and failure to replace our proved reserves could also decrease our borrowing base. Our borrowing base
could also decrease as a result of new lending requirements or regulations or the issuance of new indebtedness. If our borrowing base
declined significantly below $1.8 billion, CNX may be unable to implement our development plans, make acquisitions or otherwise execute
our business plan which could materially
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adversely affect our financial condition and results of operations. CNX also could be required to repay any outstanding indebtedness in
excess of the redetermined borrowing base. CNX could face substantial liquidity problems, might not be able to access the equity or debt
capital markets and might be required to sell material assets or operations to attempt to meet our debt service and other obligations. CNX
may not be able to consummate those sales or to obtain the proceeds which CNX could realize from them and those proceeds may not be
adequate to meet any debt service obligations then due.
The accounting method for convertible debt securities that may be settled in cash, such as the Convertible Notes, could have a material
effect on our reported financial results.
Under Accounting Standards Codification 470-20, Debt with Conversion and Other Options (“ASC 470-20”), an entity must separately
account for the liability and equity components of the convertible debt instruments (such as the Convertible Notes) that may be settled
entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The effect of ASC 470-20 on the
accounting for the Convertible Notes is that the equity component is required to be included in the Capital in Excess of Par Value section of
Stockholders’ Equity on our Consolidated Balance Sheet at the issuance date and the value of the equity component would be treated as debt
discount for purposes of accounting for the debt component of the Convertible Notes. As a result, we will be required to record non-cash
interest expense through the amortization of the excess of the face amount over the carrying amount of the expected life of the Convertible
Notes. We will report lower net income (or larger net losses) in our financial results because ASC 470-20 requires interest expense to
include both the amortization of the debt discount and the instrument’s cash coupon interest rate, which could adversely affect our reported
or future financial results, the trading price of our common stock and the trading price of the Convertible Notes.
In addition, under certain circumstances, convertible debt instruments (such as the Convertible Notes) that may be settled entirely or
partly in cash may be accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of
such Convertible Notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of such
Convertible Notes exceeds their principal amount. Under the treasury stock method, for purposes of calculating diluted earnings per share,
the transaction is accounted for by including in the denominator the number of shares of common stock that would be necessary to settle
such excess, if we elected to settle such excess in shares. There is no assurance that the future accounting standards will continue to permit
the use of the treasury stock method. If we are unable or otherwise elect not to use the treasury stock method in accounting for the shares
issuable upon conversion of the Convertible Notes, then our diluted earnings per share could be adversely affected.
The capped call transactions may affect the value of the Convertible Notes and our common stock.
In connection with the pricing of the Convertible Notes, we entered into capped call transactions with certain financial institutions. The
capped call transactions are expected generally to reduce the potential dilution to our common stock upon any conversion of the Convertible
Notes and/or offset any potential cash payments we are required to make in excess of the principal amount of converted Convertible Notes,
as the case may be, with such reduction and/or offset subject to a cap.
In connection with establishing their initial hedges of the capped call transactions, these financial institutions or their respective
affiliates purchased shares of our common stock and/or entered into various derivative transactions with respect to our common stock
concurrently with or shortly after the pricing of the Convertible Notes. These financial institutions or their respective affiliates may modify
their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our
common stock or other securities of ours in secondary market transactions following the pricing of the Convertible Notes and prior to the
maturity of the Convertible Notes (and are likely to do so during any observation period related to a conversion of Convertible Notes). This
activity could also cause or avoid an increase or a decrease in the market price of our common stock or the Convertible Notes.
The potential effect, if any, of these transactions and activities on the price of our common stock or the Convertible Notes will depend in
part on market conditions and cannot be ascertained at this time. Any of these activities could adversely affect the value of our common
stock.
We are subject to counterparty performance risk with respect to the capped call transactions.
The counterparties to the capped call transactions are financial institutions or affiliates of financial institutions, and we will be subject to
the risk that they might default under the capped call transactions. Our exposure to the credit risk of the counterparties will not be secured by
any collateral. Global economic conditions have from time to time resulted in the actual or perceived failure or financial difficulties of many
financial institutions. If a counterparty becomes subject to insolvency proceedings, with respect to such option counterparty’s obligations
under the relevant capped call transaction, we will become
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an unsecured creditor in those proceedings with a claim equal to our exposure at that time under our transactions with that counterparty. Our
exposure will depend on many factors, but, generally, the increase in our exposure will be positively correlated to the increase in the market
price and in the volatility of our common stock. In addition, upon a default by a counterparty, we may suffer adverse tax consequences and
more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or
viability of any counterparty.
Conversion of the Convertible Notes may dilute the ownership interest of existing stockholders or may otherwise depress the price of our
common stock.
The conversion of some or all of the Convertible Notes will dilute the ownership interests of existing stockholders to the extent we
deliver shares of our common stock upon conversion of any of the Convertible Notes and the potential dilution is not reduced or offset by
the capped call transactions we entered into. The Convertible Notes may become convertible at the option of holders prior to their scheduled
terms under certain circumstances. Any sales in the public market of the common stock issuable upon such conversion could adversely
affect prevailing market prices of our common stock. In addition, the existence of the Convertible Notes may encourage short selling by
market participants because the conversion of the Convertible Notes could be used to satisfy short positions, or anticipated conversion of the
Convertible Notes into shares of our common stock could depress the price of our common stock.
We may be unable to raise the funds necessary to repurchase the Convertible Notes for cash following a fundamental change, or to pay
any cash amounts due upon conversion, and our other indebtedness may limit our ability to repurchase the Convertible Notes or pay
cash upon their conversion.
Noteholders may, subject to a limited exception, require us to repurchase their Convertible Notes following a fundamental change at a
cash repurchase price generally equal to 100% of the principal amount of the Convertible Notes to be repurchased, plus accrued and unpaid
interest, if any. In addition, upon conversion, we will satisfy part or all of our conversion obligation in cash unless we elect to settle
conversions solely in shares of our common stock. We may not have enough available cash or be able to obtain financing at the time we are
required to repurchase the Convertible Notes or pay the cash amounts due upon conversion. In addition, applicable law, regulatory
authorities and the agreements governing our other indebtedness, may restrict our ability to repurchase the Convertible Notes or pay the cash
amounts due upon conversion. Our inability to satisfy our obligations under the Convertible Notes could harm our reputation and affect the
trading price of our common stock.
Our failure to repurchase the Convertible Notes or to pay the cash amounts due upon conversion when required will constitute a default
under the indenture. A default under the indenture or the occurrence of the fundamental change itself could also lead to a default under
agreements governing our other indebtedness, which may result in that other indebtedness becoming immediately payable in full. We may
not have sufficient funds to satisfy all amounts due under the other indebtedness and the Convertible Notes.
The conditional conversion feature of the Convertible Notes, if triggered, may adversely affect our financial condition and operating
results.
In the event the conditional conversion feature of the Convertible Notes is triggered, holders of Convertible Notes will be entitled to
convert their Convertible Notes at any time during specified periods at their option. If one or more holders elect to convert their Convertible
Notes, unless we elect to satisfy our conversion obligation by delivering solely common stock (other than paying cash in lieu of delivering
any fractional shares), we would be required to settle a portion or all of our conversion obligation through the payment of cash, which could
adversely affect our liquidity.
Provisions of our Convertible Notes could delay or prevent an otherwise beneficial takeover of us.
Certain provisions of our Convertible Notes and the indenture governing the Convertible Notes could make a third-party attempt to
acquire us more difficult or expensive. For example, if a takeover constitutes a “fundamental change” (as defined in the indenture), then
noteholders will have the right to require us to repurchase their Convertible Notes for cash. In addition, if a takeover constitutes a “make-
whole fundamental change” (as defined in the indenture), then we may be required to temporarily increase the conversion rate. In either
case, and in other cases, our obligations under the Convertible Notes and the indenture could increase the cost of acquiring us or otherwise
discourage a third party from acquiring us, including in a transaction that noteholders or holders of our common stock may view as
favorable.
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Risks Related to Strategic Transactions
Strategic determinations, including the allocation of capital and other resources to strategic opportunities, are subject to risk and
uncertainties, and our failure to appropriately allocate capital and resources among our strategic opportunities may adversely affect our
financial condition.
Our future growth prospects are dependent upon our ability to identify optimal strategies for investing our capital resources to produce
superior rates of return. In developing our business plan, we consider allocating capital and other resources to various aspects of our
businesses including well development, reserve acquisitions, exploratory activity, corporate items (including share and debt repurchases)
and other alternatives. We also consider our likely sources of capital, including cash generated from operations and borrowings under our
credit facilities. Notwithstanding the determinations made in the development of our business plan, business opportunities not previously
identified periodically come to our attention, including possible acquisitions and dispositions. If CNX fails to identify optimal business
strategies or fails to optimize our capital investment and capital raising opportunities and the use of our other resources in furtherance of our
business strategies, our financial condition and future growth may be adversely affected. Moreover, economic or other circumstances may
change from those contemplated by our business plan, and our failure to recognize or respond to those changes may limit our ability to
achieve our objectives.
We do not completely control the timing of divestitures that we plan to engage in, and they may not provide anticipated benefits.
Additionally, CNX may be unable to acquire additional properties in the future and any acquired properties may not provide the
anticipated benefits.
Our business and financing plans may include divesting certain assets over time. However, we do not completely control the timing of
divestitures, and delays in completing divestitures may reduce the benefits CNX may receive from them, such as the timing of the receipt of
cash proceeds. Also, there can be no assurance that the assets we divest will produce anticipated proceeds. Further, the terms of our existing
indentures may place restrictions on our ability to divest or sell certain assets.
In the future CNX may make acquisitions of assets or businesses that complement or expand our current business. No assurance can be
given that CNX will be able to identify suitable acquisition opportunities, negotiate acceptable terms, obtain financing for acquisitions on
acceptable terms or successfully acquire the identified targets. The success of any completed acquisition will depend on our ability to
effectively integrate the acquired business into our existing operations and to identify and appropriately manage any liabilities assumed as
part of the acquisition. The process of integrating acquired businesses or assets may involve unforeseen difficulties and may require a
disproportionate amount of our managerial and financial resources. Our failure to make acquisitions in the future and successfully integrate
the acquired businesses or assets into our existing operations could materially adversely affect our financial condition and results of
operations.
There is no guarantee that CNX 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. Any determinations to repurchase shares of our common stock will be at
the discretion of our board of directors based upon a review of all relevant considerations.
CNX currently has a repurchase program in place authorized by our board of directors, which is not subject to an expiration date, and
for which $245 million remains available for repurchases as of January 26, 2021. The repurchase program does not require us to acquire any
specific number of shares. Our board of director’s determination to repurchase shares of our common stock will depend upon market
conditions, applicable legal requirements, contractual obligations and other factors that the board of directors deems relevant. Based on an
evaluation of these factors, our board of directors may determine not to repurchase shares or to repurchase shares at reduced levels from
those anticipated by our shareholders. See Note 5 - Stock Repurchase in the Notes to the Audited Consolidated Financial Statements in Item
8 of this Form 10-K for further discussion.
CNX 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; actions taken by the other partner or third-party operator may materially
impact our financial position and results of operations; and we may not realize the benefits we expect to realize from a joint venture.
As is common in the natural gas industry, CNX may operate one or more of our properties with a joint venture partner, or contract with
a third-party to control operations. These relationships could require us to share operational and other control, such that CNX may no longer
have the flexibility to control completely the development of these properties. If we do not timely meet our financial commitments in such
circumstances, our rights to participate may be adversely affected. If a joint venture partner is unable or fails to pay its portion of
development costs or if a third-party operator does not operate in accordance with our expectations, our costs of operations could be
increased. CNX could also incur liability as a result of actions taken by a joint
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venture partner or third-party operator. Disputes between us and the other party may result in litigation or arbitration that would increase our
expenses, delay or terminate projects and distract our officers and directors from focusing their time and effort on our business.
In connection with the separation of our coal business, CONSOL Energy has agreed to indemnify us for certain liabilities, and we have
agreed to indemnify CONSOL Energy for certain liabilities. If we are required to pay under these indemnities to CONSOL Energy, our
financial results could be negatively impacted. The CONSOL Energy indemnity may not be sufficient to hold us harmless from the full
amount of liabilities for which CONSOL Energy has been allocated responsibility, and CONSOL Energy may not be able to satisfy its
indemnification obligations in the future.
Pursuant to the Separation and Distribution Agreement and certain other agreements with CONSOL Energy, CNX and CONSOL
Energy have agreed to indemnify the other for certain liabilities in each case for uncapped amounts. We remain liable as a guarantor on
certain liabilities that were assumed by CONSOL Energy in connection with the separation. The estimated value of these guarantees was
approximately $146 million as of December 31, 2020. Although CONSOL Energy agreed to indemnify us to the extent that we are called
upon to pay any of these liabilities, there is no assurance that CONSOL Energy will satisfy its obligations to indemnify us in these
situations. For example, we could be liable for liabilities assumed by Murray Energy and its subsidiaries (Murray Energy) in connection
with the disposition of certain mines to Murray Energy in 2013 in the event that both Murray Energy and CONSOL Energy are unable to
satisfy those liabilities.
Indemnities that CNX may be required to provide CONSOL Energy are not subject to any cap, may be significant and could negatively
impact our business. Third parties could also seek to hold us responsible for any of the liabilities that CONSOL Energy has agreed to retain,
including in respect of certain statutory obligations related to, among others, health and environmental matters. For example, see disclosure
in Note 20 - Commitments and Contingent Liabilities in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form
10-K for further discussion regarding a lawsuit filed by the UMWA 1992 Benefit Plan against CNX and CONSOL Energy in May 2020.
Any amounts we are required to pay pursuant to these indemnification obligations and other liabilities could require us to divert cash
that would otherwise have been used in furtherance of our operating business. Further, the indemnity from CONSOL Energy may not be
sufficient to protect us against the full amount of such liabilities, and CONSOL Energy may not be able to fully satisfy its indemnification
obligations. Moreover, even if we ultimately succeed in recovering from CONSOL Energy any amounts for which we are held liable, CNX
may be temporarily required to bear such losses. Each of these risks could negatively affect our business, results of operations and financial
condition.
Other General Risks
Cyber-incidents targeting our systems, oil and natural gas industry systems and infrastructure, or the systems of our third party service
providers could materially adversely affect our business, financial condition or results of operations.
Cyber-incidents, including cyber-attacks, may significantly affect us or the operations of our customers and business partners, as well as
impact general economic conditions, consumer confidence and spending and market liquidity. Strategic targets, including energy-related
assets, may be at greater risk of future incidents than other targets in the United States. A cyber incident could result in information theft,
data corruption, operational disruption, including environmental and safety issues resulting from a loss of control of field equipment and
assets, and/or financial loss. Consequently, it is possible that any of these occurrences, or a combination of them, could materially adversely
affect our business, financial condition and results of operations. Our insurance may not protect us against all such occurrences.
The oil and natural gas industry has become increasingly dependent upon digital technologies, including information systems,
infrastructure and cloud applications and services, to operate our businesses, process and record financial and operating data, communicate
with our employees and business partners, analyze seismic and drilling information, estimate quantities of natural gas reserves, monitor and
control our field equipment and assets and perform other activities related to our businesses. Our business partners, including vendors,
service providers and financial institutions, are also dependent on digital technology.
As dependence on digital technologies has increased the threat of cyber incidents, including deliberate attacks or unintentional events,
have also increased. A cyber-incident could include gaining unauthorized access to digital systems for purposes of misappropriating assets
or sensitive information, corrupting data, or causing operational disruption, or result in denial-of-service on websites. SCADA (supervisory
control and data acquisition) based systems are potentially vulnerable to targeted cyber-attacks due to their critical role in operations.
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Our technologies, systems, networks, data centers and those of our business partners may become the target of cyber-incidents or
information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary
and other information, or other disruption of our business operations. In addition, certain cyber incidents, such as surveillance, may remain
undetected for an extended period.
Deliberate attacks on our assets, or security breaches in our systems or infrastructure, the systems or infrastructure of third-parties or the
cloud could lead to corruption or loss of our proprietary data and potentially sensitive data, delays in production or delivery, difficulty in
completing and settling transactions, challenges in maintaining our books and records, environmental damage, communication interruptions,
damage to our reputation, other operational disruptions and third-party liability, including the following:
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a cyber-incident impacting one of our vendors or service providers could result in supply chain disruptions, loss or corruption of
our information or other negative consequences, any of which could delay or halt development of additional infrastructure,
effectively delaying the start of cash flows from the project;
a cyber-incident related to our facilities may result in equipment damage or failure;
a cyber-incident impacting a communications network or power grid could cause operational disruption resulting in loss of
revenues;
a deliberate corruption of our financial or operational data could result in events of non-compliance which could lead to regulatory
fines or penalties; and
business interruptions could result in expensive remediation efforts, distraction of management, damage to our reputation, or a
negative impact on the price of our stock.
Our implementation of various internal and externally-facing controls and processes, including appropriate internal risk assessment and
internal policy implementation, globally incorporating a risk-based cyber security framework to monitor and mitigate security threats and
other strategies to increase security for our information, facilities and infrastructure is costly and labor intensive. Moreover, there can be no
assurance that such measures will be sufficient to prevent security breaches or other cyber-incidents from occurring. As cyber threats
continue to evolve, CNX may be required to expend significant additional resources to continue to modify or enhance our protective
measures or to investigate and remediate any information security vulnerabilities.
Our success depends on key members of our management and our ability to attract and retain experienced technical and other
professional personnel.
Our future success depends to a large extent on the services of our key employees. The loss of one or more of these individuals could
materially adversely affect our business. Furthermore, competition for experienced technical and other professional personnel remains
strong. If CNX cannot retain our current personnel or attract additional experienced personnel, our ability to compete could be adversely
affected. Also, the loss of experienced personnel could lead to a loss of technical expertise.
Terrorist activities could materially adversely affect our business and results of operations.
Terrorist attacks, including eco-terrorism, and the threat of terrorist attacks, whether domestic or foreign, as well as military or other
actions taken in response to these acts, could affect the energy industry, the environment and industry related economic conditions, including
our operations and the operations of our customers, as well as general economic conditions, consumer confidence and spending and market
liquidity. Strategic targets, including energy-related assets, may be at greater risk of future attacks than other targets in the United States. The
occurrence or threat of terrorist attacks in the United States or other countries could adversely affect the global economy in unpredictable
ways, including the disruption of energy supplies and markets, increased volatility in commodity prices or the possibility that the
infrastructure on which we rely could be a direct target or an indirect casualty of an act of terrorism, and, in turn, could materially adversely
affect our business and results of operations. Our insurance may not protect us against such occurrences.
ITEM 1B.
Unresolved Staff Comments
None.
ITEM 2.
Properties
See "Detail of Operations" in Part I. Item 1 of this Form 10-K for a description of CNX's properties.
40
/
ITEM 3.
Legal Proceedings
The first two paragraphs of “Note 20–Commitments and Contingent Liabilities” in the Notes to the Audited Consolidated Financial
Statements in Item 8 of this Form 10-K are incorporated herein by reference.
ITEM 4.
Mine Safety Disclosures
Not applicable.
PART II
ITEM 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
The Company's common stock is listed on the New York Stock Exchange under the symbol CNX.
As of December 31, 2020, there were 102 holders of record of our common stock.
The following performance graph compares the yearly percentage change in the cumulative total shareholder return on the common
stock of CNX to the cumulative shareholder return for the same period of a peer group and the Standard & Poor's 500 Stock Index. The
current peer group is comprised of CNX, Antero Resources Corporation, Cabot Oil & Gas Corporation, EQT Corporation, Gulfport Energy
Corporation, Range Resources Corporation and Southwestern Energy Co. The graph assumes that the value of the investment in CNX
common stock and each index was $100 at December 31, 2015. The graph also assumes that all dividends were reinvested and that the
investments were held through December 31, 2020.
CNX Resources Corporation
Peer Group
S&P 500 Stock Index
2015
2016
2017
2018
2019
2020
100.0
100.0
100.0
230.9
130.1
109.5
214.0
107.3
130.7
167.2
60.4
122.6
129.6
39.1
158.1
158.1
43.2
183.8
Cumulative Total Shareholder Return Among CNX Resources Corporation, Peer Group and S&P 500 Stock Index
The above information is being furnished pursuant to Regulation S-K, Item 201 (e) (Performance Graph).
/
41
/
The determination to declare and pay dividends is made by CNX's Board of Directors. CNX suspended its quarterly dividend starting
in March 2016 to support the Company's increased emphasis on growth at that time. Any 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 other factors as the Board of Directors deems relevant.
The Company's Credit Facility currently 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 Company's net leverage ratio was 2.45 to 1.00 at December 31, 2020. The Credit Facility does not permit dividend
payments in the event of default. The indentures to the 7.25% Senior Notes due in March 2027 and the 6.00% Senior Notes due in January
2029 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 under the Company’s Credit Facility or Notes in
the year ended December 31, 2020.
Unregistered Sales of Equity Securities and Use of Proceeds
The following table sets forth repurchases of our common stock during the three months ended December 31, 2020:
ISSUER PURCHASES OF EQUITY SECURITIES
Period
Total Number of Shares
Purchased (1)
Average Price Paid per
Share
Total Number of Shares
Purchased as Part of
Publicly Announced Plans
or Programs (2)
Approximate Dollar Value
of Shares that May Yet be
Purchased Under the Plans
or Programs (000's
omitted)
October 1, 2020-
October 31, 2020
November 1, 2020-
November 30, 2020
December 1, 2020-
December 31, 2020
Total
— $
725,784 $
3,418,437 $
4,144,221
—
9.63
10.60
— $
725,641 $
3,412,886 $
148,466
141,480
105,302
(1) Includes shares withheld from employees to satisfy minimum tax withholding obligations associated with the vesting of restricted stock
during the period.
(2) Shares repurchased as part of the Company's current $750 million share repurchase program authorized by the Board of Directors on
October 30, 2017 and subsequently amended from time to time, which is not subject to an expiration date. The amount of shares that may
yet be purchased under the Plan does not include a $150 million increase authorized by the Board of Directors on January 26, 2021 (See
Note 5 - Stock Repurchase in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for additional
information).
See Part III. Item 12. “Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” for
information relating to CNX's equity compensation plans.
42
/
ITEM 6.
Selected Financial Data
The following table presents our selected consolidated financial and operating data for, and as of the end of, each of the periods
indicated. The selected consolidated financial data for, and as of the end of, each of the years ended December 31, 2020, 2019, 2018, 2017
and 2016 are derived from our audited Consolidated Financial Statements. Certain reclassifications of prior year data have been made to
conform to the year ended December 31, 2020 presentation. The selected consolidated financial and operating data are not necessarily
indicative of the results that may be expected for any future period. The selected consolidated financial and operating data should be read in
conjunction with Part II. Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” and the
financial statements and related notes included in this Form 10k.
(Dollars in thousands, except per share data)
For the Years Ended December 31,
Revenue and Other Operating Income from
Continuing Operations
(Loss) Income from Continuing Operations
Net (Loss) Income Attributable to CNX Resources
Shareholders
Earnings per share:
Basic:
(Loss) Income from Continuing Operations
Income (Loss) from Discontinued Operations
Net (Loss) Income
Diluted:
(Loss) Income from Continuing Operations
Income (Loss) from Discontinued Operations
Net (Loss) Income
Assets from Continuing Operations
Assets from Discontinued Operations
Total Assets
Long-Term Debt from Continuing Operations
(including current portion)
Long-Term Debt from Discontinued Operations
(including current portion)
2020
2019
2018
2017
2016
1,257,978 $
1,922,449 $
1,730,434 $
1,455,131 $
759,968
(428,744) $
31,948 $
883,111 $
295,039 $
(550,945)
(483,775) $
(80,730) $
796,533 $
380,747 $
(848,102)
(2.43) $
(0.42) $
3.75 $
—
—
—
(2.43) $
(0.42) $
3.75 $
(2.43) $
(0.42) $
3.71 $
—
—
—
(2.43) $
(0.42) $
3.71 $
1.29 $
0.37
1.66 $
1.28 $
0.37
1.65 $
(2.40)
(1.30)
(3.70)
(2.40)
(1.30)
(3.70)
8,041,764 $
9,060,806 $
8,592,170 $
6,931,913 $
6,682,770
—
—
—
—
2,496,921
8,041,764 $
9,060,806 $
8,592,170 $
6,931,913 $
9,179,691
$
$
$
$
$
$
$
$
$
$
2,424,001 $
2,754,443 $
2,378,205 $
2,187,289 $
2,422,472
Total Long-Term Debt (including current portion)
Cash Dividends Declared Per Share of Common
Stock
$
$
—
—
—
—
302,200
2,424,001 $
2,754,443 $
2,378,205 $
2,187,289 $
2,724,672
— $
— $
— $
— $
0.010
See Part 1. Item 1A. “Risk Factors” and Part II. Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” for a discussion of an adjustment to operating income for all periods and other matters that affect the comparability of the
selected financial data as well as uncertainties that might affect the Company’s future financial condition.
OTHER OPERATING DATA
(unaudited)
/
Gas:
Net Sales Volumes Produced (in Bcfe)
Average Sales Price ($ per Mcfe) (A)
Average Cost ($ per Mcfe)
Proved Reserves (in Bcfe) (B)
Years Ended December 31,
2020
2019
2018
2017
2016
511.1
539.1
507.1
407.2
$
$
2.49 $
1.64 $
2.66 $
1.72 $
2.97 $
1.82 $
2.66 $
2.23 $
9,550
8,426
7,881
7,582
394.4
2.63
2.32
6,252
____________
(A) Represents average net sales price including the effect of derivative transactions and excluding hedge monetizations.
(B) Represents proved developed and undeveloped gas reserves at period end.
43
/
ITEM 7.
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-K. 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 views and
beliefs of management, as well as assumptions and estimates made by management. Actual results could differ materially from 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 I. Item 1A. Risk Factors” and
the section entitled “Forward‑Looking Statements.” CNX does not undertake any obligation to publicly update any forward-looking
statements except as otherwise required by applicable law.
General
COVID-19 Update:
CNX continues to monitor 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 also continues to monitor a number of factors that may cause actual results of
operations to differ from our historical results or current expectations. 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-K are not necessarily indicative of future operating results.
While CNX did not incur significant disruptions to operations during the year ended December 31, 2020 as a direct 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.
The full extent of the future impact of the COVID-19 pandemic on the Company’s operational and financial performance is currently
uncertain and will depend on many factors outside the Company’s control, including, without limitation, the timing, extent, trajectory and
duration of the pandemic, the development and availability of effective treatments and vaccines, the imposition of protective public safety
measures, and the impact of the pandemic on the global economy and demand for consumer products. Refer to Part I, Item 1A of this Form
10-K under the heading “Risk Factors,” for more information.
2020 Highlights:
Increased proved reserves to 9.5 Tcfe, 13.3% higher than 2019.
Total gas production of 511.1 Bcfe.
Shale production of 458.3 Bcfe.
Repurchased $43 million of CNX common stock on the open market.
•
•
•
•
• On September 28, 2020, CNX completed the acquisition of all of the outstanding common units of CNX Midstream Partners
LP ("CNXM") and CNXM became an indirect wholly-owned subsidiary (the “Merger”) (See Note 4 - Acquisitions and
Dispositions in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K).
2021 Outlook:
• Our 2021 annual gas production is expected to be approximately 540-570 Bcfe.
• Our 2021 E&P capital expenditures are expected to be approximately $430-$470 million.
44
/
Results of Operations: Year Ended December 31, 2020 Compared with the Year Ended December 31, 2019
Net Loss Attributable to CNX Resources Shareholders
CNX reported a net loss attributable to CNX Resources shareholders of $484 million, or a loss per diluted share of $2.43, for the year
ended December 31, 2020, compared to a net loss attributable to CNX Resources shareholders of $81 million, or a loss per diluted share of
$0.42, for the year ended December 31, 2019.
(Dollars in thousands)
Net (Loss) Income
Less: Net Income Attributable to Noncontrolling Interests
Net Loss Attributable to CNX Resources Shareholders
For the Years Ended December 31,
2020
2019
Variance
$
$
(428,744) $
31,948 $
(460,692)
55,031
112,678
(57,647)
(483,775) $
(80,730) $
(403,045)
Included in the loss for the year ended December 31, 2020 was a $62 million non-cash impairment charge related to exploration and
production properties specific to our Southwestern Pennsylvania (SWPA) CBM asset group, a $473 million non-cash impairment charge
related to goodwill and an unrealized loss on commodity derivatives of $288 million. Included in the loss for the year ended December 31,
2019 was a $327 million non-cash impairment charge related to exploration and production properties and a $119 million non-cash
impairment charge related to unproved properties and expirations, both were associated with the Company's Central Pennsylvania (CPA)
acreage, offset, in part, by an unrealized gain on commodity derivative instruments of $306 million.
Prior to the effective time of the Merger on September 28, 2020 (See Note 4 - Acquisitions and Dispositions in the Notes to the
Audited Consolidated Financial Statements in Item 8 of this Form 10-K), public unitholders held a 46.9% equity interest in CNXM and
CNX owned the remaining 53.1% equity interest. The earnings of CNXM that were attributed to its common units held by the public prior
to the Merger are reflected in Net Income Attributable to Noncontrolling Interest in the Consolidated Statements of Income. There were no
changes in our ownership interest in CNXM during the year ended December 31, 2019.
Selected Operating Revenue and Other Cost Data
The following table presents sales volumes, revenue, costs, average sales prices (including the effects of settled derivatives and
excluding hedge monetizations) and average unit costs for production operations on a total Company basis:
For the Years Ended December 31,
2020
2019
Variance
in Millions
Per Mcfe
in Millions
Per Mcfe
in Millions
Per Mcfe
Total Sales Volumes (Bcfe)*
511.1
539.1
(28.0)
Natural Gas, NGL and Oil Revenue
$
897 $
1.71 $
1,364 $
2.52 $
(467) $
(0.81)
Gain on Commodity Derivative Instruments - Cash
Settlement - Gas**
Total Revenue
Lease Operating Expense
Production, Ad Valorem, and Other Fees
Transportation, Gathering and Compression
Depreciation, Depletion and Amortization (DD&A)
Average Costs
Average Margin
377
1,274
40
24
286
492
842
0.78
2.49
0.08
0.04
0.56
0.96
1.64
70
1,434
65
27
331
506
929
0.14
2.66
0.12
0.05
0.61
0.94
1.72
307
(160)
(25)
(3)
(45)
(14)
(87)
$
432 $
0.85 $
505 $
0.94 $
(73) $
0.64
(0.17)
(0.04)
(0.01)
(0.05)
0.02
(0.08)
(0.09)
*NGLs and Oil/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 NGL, condensate, and natural gas prices.
**Excluding hedge monetizations.
/
45
/
The decrease in volumes in the period-to-period comparison was primarily due to the strategic temporary shut-in of certain wells to
take advantage of higher prices later in the year and thereby optimize the overall value of the assets. Twenty-two dry gas turn-in-lines from
April and May were temporarily shut-in through September and a portion of CNX's liquids-rich Shirley-Pennsboro production was shut-in
during May and June of 2020. Normal production declines also contributed to the decrease in total volumes.
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 as a result of increased reuse of produced water in well completions in the current period.
Transportation, gathering and compression expense decreased on a per unit basis primarily due to lower processing costs due to a
drier production mix and a decrease in firm transportation costs due to lower gas sales volumes.
Depreciation, depletion and amortization expense increased on a per unit basis as a result of fixed depreciation costs related to
CNX's gathering infrastructure being spread over fewer production volumes in 2020. The lower production volumes were the result
of the strategic temporary shut-in of certain wells as previously discussed.
The following table is a summary of total other revenue and operating income and selected other expense line items that are included
in the total loss before income tax on a total company Mcfe equivalent and excluded from the previous table.
Total Company Sales Volumes (Bcfe)*
511.1
539.1
(28.0)
For the Years Ended December 31,
2020
2019
Variance
in Millions
Per Mcfe
in Millions
Per Mcfe
in Millions
Per Mcfe
Total Other Revenue and Operating Income
Depreciation, Depletion and Amortization
Exploration and Production Related Other Costs
Selling, General and Administrative Costs
Other Operating Expense
Total Selected Operating Costs and Expenses
Other Expense
Interest Expense
Total Selected Other Expense
Total Selected Costs and Expenses
$
$
82 $
0.16 $
88 $
0.16 $
(6) $
0.00
10 $
0.02 $
2 $
0.00 $
8 $
15
109
85
219
24
171
195
0.03
0.21
0.17
0.43
0.05
0.33
0.38
44
144
80
270
3
151
154
0.08
0.27
0.15
0.50
0.01
0.28
0.29
(29)
(35)
5
(51)
21
20
41
$
414 $
0.81 $
424 $
0.79 $
(10) $
0.02
(0.05)
(0.06)
0.02
(0.07)
0.04
0.05
0.09
0.02
* NGLs and Oil/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 NGL, condensate, and natural gas prices.
/
46
/
Average Realized Price Reconciliation
The following table presents a breakout of liquids 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:
in thousands (unless noted)
LIQUIDS
NGL:
Sales Volume (MMcfe)
Sales Volume (Mbbls)
Gross Price ($/Bbl)
Gross NGL Revenue
Oil/Condensate:
Sales Volume (MMcfe)
Sales Volume (Mbbls)
Gross Price ($/Bbl)
Gross Oil/Condensate Revenue
GAS
Sales Volume (MMcf)
Sales Price ($/Mcf)
Gross Gas Revenue
Hedging Impact ($/Mcf)
Gain on Commodity Derivative Instruments - Cash Settlement*
*Excluding gains from hedge monetizations
For the Years Ended December 31,
2020
2019
Variance
Percent Change
28,062
4,677
32,571
5,428
13.74 $
19.20 $
(4,509)
(751)
(5.46)
64,138 $
104,139 $
(40,001)
1,584
264
35.91 $
9,475 $
1,223
204
45.00 $
9,173 $
361
60
(9.09)
302
481,426
505,355
1.71 $
2.48 $
(23,929)
(0.77)
823,132 $
1,251,013 $
(427,881)
0.78 $
0.14 $
0.64
377,219 $
69,780 $
307,439
$
$
$
$
$
$
$
$
(13.8)%
(13.8)%
(28.4)%
(38.4)%
29.5 %
29.4 %
(20.2)%
3.3 %
(4.7)%
(31.0)%
(34.2)%
457.1 %
440.6 %
The decrease in gross revenue was primarily the result of the $0.77 per Mcf decrease in general natural gas prices, when excluding the
impact of hedging, in the markets in which CNX sells its natural gas and the 28.0 Bcfe decrease in sales volumes. The decrease in gross
revenue was offset, in part, by the increase in the realized gain on commodity derivative instruments related to the Company's hedging
program.
/
47
/
SEGMENT ANALYSIS for the year ended December 31, 2020 compared to the year ended December 31, 2019:
(in millions)
Shale
CBM
Other
Total
Shale
CBM
Other
Total
Natural Gas, NGLs and Oil Revenue
$
781 $
114 $
2 $
897 $
(418) $
(50) $
1 $
(467)
For the Year Ended
December 31, 2020
Difference to Year Ended
December 31, 2019
Gain (Loss) on Commodity Derivative Instruments
Purchased Gas Revenue
Other Revenue and Operating Income
337
—
65
40
—
—
Total Revenue and Other Operating Income
1,183
154
Lease Operating Expense
Production, Ad Valorem, and Other Fees
Transportation, Gathering and Compression
Depreciation, Depletion and Amortization
Impairment of Exploration and Production Properties
Impairment of Unproved Properties and Expirations
Impairment of Goodwill
Exploration and Production Related Other Costs
Purchased Gas Costs
Other Operating Expense
Selling, General and Administrative Costs
26
19
248
416
—
—
—
—
—
—
—
14
5
39
70
—
—
—
—
—
—
—
Total Operating Costs and Expenses
709
128
Other Expense
Gain on Asset Sales and Abandonments, net
Gain on Debt Extinguishment
Interest Expense
Total Other Expenses
Total Costs and Expenses
—
—
—
—
—
—
—
—
—
—
(204)
106
17
(79)
—
—
(1)
16
62
—
473
15
101
85
109
860
24
(21)
(10)
171
164
173
106
82
275
—
(9)
33
—
—
(511)
(203)
12
3
12
(6)
1,258
(152)
(17)
(495)
(664)
40
24
286
502
62
—
473
15
101
85
109
(23)
(2)
(42)
(10)
—
—
—
—
—
—
—
1,697
(77)
24
(21)
(10)
171
164
—
—
—
—
—
(2)
(2)
(1)
(3)
—
—
—
—
—
—
—
(8)
—
—
—
—
—
(8)
—
1
(2)
7
(265)
(119)
473
(29)
10
5
(35)
46
21
15
(18)
20
38
84
(25)
(3)
(45)
(6)
(265)
(119)
473
(29)
10
5
(35)
(39)
21
15
(18)
20
38
(1)
709
128
1,024
1,861
(77)
Earnings (Loss) Before Income Tax
$
474 $
26 $ (1,103) $
(603) $
(75) $
(9) $
(579) $
(663)
/
48
/
SHALE SEGMENT
The Shale segment had earnings before income tax of $474 million for the year ended December 31, 2020 compared to earnings
before income tax of $549 million for the year ended December 31, 2019.
For the Years Ended December 31,
Shale Gas Sales Volumes (Bcf)
NGLs Sales Volumes (Bcfe)*
Oil/Condensate Sales Volumes (Bcfe)*
Total Shale Sales Volumes (Bcfe)*
Average Sales Price - Gas (per Mcf)
Gain on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)
Average Sales Price - NGLs (per Mcfe)*
Average Sales Price - Oil/Condensate (per Mcfe)*
Total Average Shale Sales Price (per Mcfe)
Average Shale Lease Operating Expenses (per Mcfe)
Average Shale Production, Ad Valorem, and Other Fees (per Mcfe)
Average Shale Transportation, Gathering and Compression Costs (per Mcfe)
Average Shale Depreciation, Depletion and Amortization Costs (per Mcfe)
Total Average Shale Costs (per Mcfe)
Average Margin for Shale (per Mcfe)
$
$
$
$
$
$
$
2020
2019
Variance
428.7
28.1
1.5
458.3
449.6
32.6
1.2
483.4
(20.9)
(4.5)
0.3
(25.1)
2.42 $
(0.77)
1.65 $
0.79 $
2.29 $
5.83 $
0.14 $
3.20 $
7.47 $
0.65
(0.91)
(1.64)
(0.17)
(0.04)
(0.01)
(0.06)
0.03
(0.08)
(0.09)
2.44 $
2.61 $
0.06
0.04
0.54
0.91
0.10
0.05
0.60
0.88
1.55 $
1.63 $
0.89 $
0.98 $
Percent
Change
(4.6)%
(13.8)%
25.0 %
(5.2)%
(31.8)%
464.3 %
(28.4)%
(22.0)%
(6.5)%
(40.0)%
(20.0)%
(10.0)%
3.4 %
(4.9)%
(9.2)%
*NGLs and Oil/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, NGLs, condensate, and natural gas prices.
The Shale segment had natural gas, NGLs and oil/condensate revenue of $781 million for the year ended December 31, 2020
compared to $1,199 million for the year ended December 31, 2019. The $418 million decrease was due primary to a 31.8% decrease in the
average sales price for natural gas, a 5.2% decrease in total Shale sales volumes, and a 28.4% decrease in the average sales price of NGLs.
The decrease in volumes in the period-to-period comparison was primarily due to the strategic temporary shut-in of certain wells to
take advantage of higher prices later in the year and thereby optimize the overall value of the assets. Twenty-two dry gas turn-in-lines from
April and May were temporarily shut-in through September and a portion of CNX's liquids-rich Shirley-Pennsboro production was shut-in
during May and June of 2020. Normal production declines also contributed to the decrease in total volumes.
The decrease in total average Shale sales price was primarily due to a $0.77 per Mcf decrease in average gas sales price and a $0.91
per Mcfe decrease in the average NGL sales price. These decreases were offset in part by a $0.65 per Mcf increase in the realized gain on
commodity derivative instruments. The notional amounts associated with these financial hedges represented approximately 412.1 Bcf of the
Company's produced Shale gas sales volumes for the year ended December 31, 2020 at an average realized gain of $0.82 per Mcf hedged.
For the year ended December 31, 2019, these financial hedges represented approximately 348.1 Bcf at an average realized gain of $0.18 per
Mcf hedged.
Total operating costs and expenses for the Shale segment were $709 million for the year ended December 31, 2020 compared to $786
million for the year ended December 31, 2019. The decrease in total dollars and decrease in unit costs for the Shale segment were due to the
following items:
• Shale lease operating expense was $26 million for the year ended December 31, 2020, compared to $49 million for the year ended
December 31, 2019. The decrease in total dollars was primarily due to a decrease in water disposal costs in the current period resulting from
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.
/
49
/
• Shale transportation, gathering and compression costs were $248 million for the year ended December 31, 2020 compared to $290
million for the year ended December 31, 2019. The decreases in total dollars and unit costs were primarily related to lower processing costs
due to a drier production mix. Lower firm transportation costs from lower gas sales volumes also contributed to the decrease in total dollars.
• Depreciation, depletion and amortization costs attributable to the Shale segment were $416 million for the year ended
December 31, 2020 compared to $426 million for the year ended December 31, 2019. The decrease is due to lower production volumes.
These amounts each included depletion on a unit of production basis of $0.81 per Mcfe. The remaining depreciation, depletion and
amortization costs were either recorded on a straight-line basis or related to asset retirement obligations.
Total Shale other revenue and operating income relates to natural gas gathering services provided to third-parties. The Shale segment
had other revenue and operating income of $65 million for the year ended December 31, 2020 compared to $74 million for the year ended
December 31, 2019. The decrease in the period-to-period comparison was primarily due to a reduction in volumes transported due to
temporary production curtailments by third-party producers that occurred early in the 2020 period.
COALBED METHANE (CBM) SEGMENT
The CBM segment had earnings before income tax of $26 million for the year ended December 31, 2020 compared to earnings before
income tax of $35 million for the year ended December 31, 2019.
CBM Gas Sales Volumes (Bcf)
Average Sales Price - Gas (per Mcf)
Gain on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)
Total Average CBM Sales Price (per Mcf)
Average CBM Lease Operating Expenses (per Mcf)
Average CBM Production, Ad Valorem and Other Fees (per Mcf)
Average CBM Transportation, Gathering and Compression Costs (per Mcf)
Average CBM Depreciation, Depletion and Amortization Costs (per Mcf)
Total Average CBM Costs (per Mcf)
Average Margin for CBM (per Mcf)
For the Years Ended December 31,
2020
2019
Variance
Percent
Change
52.6
55.4
(2.8)
(5.1)%
$
$
$
$
$
2.17 $
0.76 $
2.96 $
(0.79)
0.13 $
0.63
2.93 $
3.09 $
0.27
0.10
0.73
1.33
0.29
0.12
0.72
1.32
2.43 $
2.45 $
0.50 $
0.64 $
(0.16)
(0.02)
(0.02)
0.01
0.01
(0.02)
(0.14)
(26.7)%
484.6 %
(5.2)%
(6.9)%
(16.7)%
1.4 %
0.8 %
(0.8)%
(21.9)%
The CBM segment had natural gas revenue of $114 million for the year ended December 31, 2020 compared to $164 million for the
year ended December 31, 2019. The $50 million decrease was due to a 5.1% decrease in total CBM sales volumes and a 26.7% decrease in
the average sales price for natural gas in the current period. The decrease in CBM sales volumes was primarily due to normal production
declines.
The total average CBM sales price decreased $0.16 per Mcf due to a $0.79 per Mcf decrease in average sales price for natural gas,
offset in part by a $0.63 per Mcf increase in the gain on commodity derivative instruments resulting from the Company's hedging program.
The notional amounts associated with these financial hedges represented approximately 48.7 Bcf of the Company's produced CBM sales
volumes for the year ended December 31, 2020 at an average gain of $0.82 per Mcf hedged. For the year ended December 31, 2019, these
financial hedges represented approximately 40.9 Bcf at an average gain of $0.18 per Mcf hedged.
Total operating costs and expenses for the CBM segment were $128 million for the year ended December 31, 2020 compared to $136
million for the year ended December 31, 2019. The decrease in total dollars was primarily due to decreases in employee costs, electrical
power expense and repairs and maintenance. The decrease in unit costs was driven by the decrease in total dollars.
• Depreciation, depletion and amortization costs attributable to the CBM segment were $70 million for the year ended December 31,
2020 compared to $73 million for the year ended December 31, 2019. These amounts included depletion on a
50
/
/
unit of production basis of $0.68 per Mcfe and $0.70 per Mcfe, respectively. The decrease in the units of production depreciation, depletion
and amortization rate was due, in part, to an impairment in the first quarter of 2020 related to the Southwest Pennsylvania (SWPA) CBM
asset group. The remaining depreciation, depletion and amortization costs were either recorded on a straight-line basis or related to asset
retirement obligations.
OTHER SEGMENT
The Other Segment includes nominal 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 monetized prior to their contractual settlement dates, exploration and production related other costs, impairments, as
well as various other expenses that are managed outside the Shale and CBM segments such as SG&A, interest expense and income taxes.
The Other Segment had a loss before income tax of $1,103 million for the year ended December 31, 2020 compared to a loss before
income tax of $524 million for the year ended December 31, 2019. The decrease in total dollars is discussed below.
Other Gas Sales Volumes (Bcf)
Oil/Condensate Sales Volumes (Bcfe)*
Total Other Sales Volumes (Bcfe)*
For the Years Ended December 31,
2020
2019
Variance
Percent Change
0.1
0.1
0.2
0.3
—
0.3
(0.2)
0.1
(0.1)
(66.7)%
100.0 %
(33.3)%
*Oil is 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 and natural gas prices.
Gain or Loss on Commodity Derivative Instruments and Monetization
For the year ended December 31, 2020, the Other segment recognized an unrealized loss on commodity derivative instruments of $288
million as well as cash settlements received of $84 million related to natural gas hedges and financial basis hedges that were partially
monetized or terminated prior to their settlement date. For the year ended December 31, 2019, the Other segment recognized an unrealized
gain on commodity derivative instruments of $306 million as well as cash settlements received of $1 million. The unrealized gain or loss on
commodity derivative instruments represents changes in the fair value of all the Company's existing commodity hedges on a mark-to-market
basis. See Note 19 - Derivative Instruments in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for
additional information related to the cash settlements.
Purchased Gas
Purchased gas volumes represent volumes of natural 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 $106 million for the year ended December 31, 2020
compared to $94 million for the year ended December 31, 2019. Purchased gas costs were $101 million for the year ended December 31,
2020 compared to $91 million for the year ended December 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 average sales price.
Purchased Gas Sales Volumes (in Bcf)
Average Sales Price (per Mcf)
Average Cost (per Mcf)
For the Years Ended December 31,
2020
2019
Variance
Percent Change
66.6
1.59 $
1.52 $
40.6
2.32 $
2.23 $
26.0
(0.73)
(0.71)
$
$
64.0 %
(31.5)%
(31.8)%
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51
/
Other Operating Income
(in millions)
Water Income
Excess Firm Transportation Income
Equity in (Loss) Earnings of Affiliates
Total Other Operating Income
For the Years Ended December 31,
2020
2019
Variance
Percent Change
$
$
6 $
12
(1)
2 $
10
2
17 $
14 $
4
2
(3)
3
200.0 %
20.0 %
(150.0)%
21.4 %
• Water income increased $4 million in the 2020 period due to increased revenue for accepting deliveries of produced water from
third-parties for reuse in the Company's hydraulic fracturing.
• Excess firm transportation income represents revenue from the sale of excess firm transportation capacity to third-parties. The
Company obtains firm pipeline transportation capacity to enable gas production to flow uninterrupted as sales volumes increase. In
order to minimize this unutilized firm transportation expense, CNX is able to release (sell) unutilized firm transportation capacity to
other parties when possible and when beneficial. The revenue (gathering income) from released capacity helps offset the unutilized
firm transportation and processing fees in total other operating expense.
Impairment of Exploration and Production Properties
During the year ended December 31, 2020, CNX recognized certain indicators of impairments specific to our SWPA CBM asset group
and determined that the 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 first quarter.
During the year ended December 31, 2019, CNX identified certain indicators of impairment specific to our CPA Marcellus 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 $327 million was recognized within the CPA Marcellus proved properties and is included in Impairment of
Exploration and Production Properties in the Consolidated Statements of Income. This impairment was related to 56 operated wells and
approximately 51,000 acres within our CPA Marcellus proved properties in Armstrong, Indiana, Jefferson and Westmoreland counties. The
majority of these properties were developed prior to 2013 and the last of these properties were developed in 2015.
Impairment of Unproved Properties and Expirations
Capitalized costs of unproved oil and gas properties are evaluated periodically for indicators of potential impairment. Indicators of
potential impairment include, but are not limited to, changes brought about by economic factors, commodity price outlooks, our geologists’
evaluation of the property, favorable or unfavorable activity on the property being evaluated and/or adjacent properties, potential shifts in
business strategy employed by management and historical experience. The likelihood of an impairment of unproved oil and gas properties
increases as the expiration of a lease term approaches if drilling activity has not commenced. If it is determined that the Company does not
intend to drill on the property prior to expiration or does not have the intent and ability to extend, renew, trade, or sell the lease prior to
expiration, an impairment is recorded. Expense for lease expirations that were not previously impaired are recorded as the leases expire.
No impairments related to unproved properties were recorded for the year-ended December 31, 2020. For the year ended
December 31, 2019, CNX recorded an impairment related to unproved properties of $119 million that was included in Impairment of
Unproved Properties and Expirations in the Consolidated Statements of Income. These unproved properties are within CNX's CPA operating
region and east of the acreage associated with the proved property impairment described above.
Impairment of Goodwill
In connection with the Midstream Acquisition that occurred in January 2018, CNX recorded $796 million of goodwill. (See Note 4 -
Acquisitions and Dispositions of the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for additional
information).
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52
/
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 Statements of Income. No such impairment occurred in the prior period. See Note 9 - Goodwill and Other
Intangible Assets in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for
additional information.
Exploration and Production Related Other Costs
(in millions)
Lease Expiration Costs
Seismic Activity
Land Rentals
Other
Total Exploration and Production Related Other Costs
For the Years Ended December 31,
2020
2019
Variance
Percent Change
$
$
10 $
31 $
1
3
1
8
3
2
15 $
44 $
(21)
(7)
—
(1)
(29)
(67.7)%
(87.5)%
— %
(50.0)%
(65.9)%
•
•
Lease Expiration Costs relate to leases where the primary term expired or will expire within the next 12 months. The $21 million
decrease in the period-to-period comparison is due to a decrease in the number of leases that were allowed to expire in the year
ended December 31, 2020, or will expire within the next 12 months, because they were no longer in the Company's future drilling
plan. Additionally, approximately $15 million of the $21 million decrease is associated with leases which expired
Seismic activity decreased in the period-to-period comparison due to additional geophysical research in the prior period.
Selling, General and Administrative ("SG&A")
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.
(in millions)
2020
2019
Variance
Percent Change
Long-Term Equity-Based Compensation (Non-Cash)
Salaries, Wages and Employee Benefits
Short-Term Incentive Compensation
Other
Total SG&A
$
$
14 $
38 $
31
20
44
40
21
45
109 $
144 $
(24)
(9)
(1)
(1)
(35)
(63.2)%
(22.5)%
(4.8)%
(2.2)%
(24.3)%
For the Years Ended December 31,
•
•
Long-term equity-based compensation decreased $24 million in the period-to-period comparison due to a change in control event
that occurred in the second quarter of 2019 and resulted in the acceleration of vesting of certain restricted stock units and
performance share units held by certain employees. See Note 15 - Stock-Based Compensation in the Notes to the Audited
Consolidated Financial Statements in Item 8 of this Form 10-K for additional information.
Salaries, wages and employee benefits decreased $9 million due to an overall reduction in employees and employee-related costs
resulting from a reduction in staff.
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53
/
Other Operating Expense
For the Years Ended December 31,
(in millions)
2020
2019
Variance
Percent Change
Unutilized Firm Transportation and Processing Fees
Insurance Expense
Severance Expense
Idle Equipment and Service Charges
Other
Total Other Operating Expense
$
$
70 $
55 $
3
—
10
2
4
1
12
8
85 $
80 $
15
(1)
(1)
(2)
(6)
5
27.3 %
(25.0)%
(100.0)%
(16.7)%
(75.0)%
6.3 %
•
Unutilized firm transportation and processing fees represent pipeline transportation capacity obtained to enable gas production to
flow uninterrupted as sales volumes increase, as well as additional processing capacity for NGLs. In some instances, the Company
may have the opportunity to realize more favorable net pricing by strategically choosing to sell natural gas into a market or to a
customer that does not require the use of the Company’s own firm transportation capacity. Such sales would result in an increase in
unutilized firm transportation expense. The Company attempts to minimize this expense by releasing (selling) unutilized firm
transportation capacity to other parties when possible and when beneficial. The revenue received when this capacity is released
(sold) is included in Gathering Income in Total Revenue and Other Operating Income above. The increase in the period-to-period
comparison was primarily due to an increase in previously acquired capacity that was not able to be utilized during the current
period to transport the Company's flowing production or to process the Company’s wet natural gas production. One contributing
factor was the strategic temporary shut-in of certain wells to take advantage of higher prices later in the year and thereby optimize
the overall value of the assets. Twenty-two dry gas turn-in-lines from April and May were temporarily shut-in through September
and a portion of CNX's liquids-rich Shirley-Pennsboro production was shut-in during May and June of 2020. Normal production
declines also contributed to the decrease in total volumes.
• Other decreased $6 million in the period-to-period comparison primarily due to a tax refund that was received in the 2020 period.
Other Expense
(in millions)
Other Income
Right-of-Way Sales
Royalty Income
Interest Income
Other
Total Other Income
Other Expense
Merger Related Costs
Professional Services
Bank Fees
Other Land Rental Expense
Other Corporate Expense
Total Other Expense
Total Other Expense
For the Years Ended December 31,
2020
2019
Variance
Percent Change
$
$
$
$
$
3 $
9 $
—
2
8
4
2
4
13 $
19 $
11 $
— $
9
12
4
1
4
11
4
3
37 $
22 $
24 $
3 $
(6)
(4)
—
4
(6)
11
5
1
—
(2)
15
21
(66.7)%
(100.0)%
— %
100.0 %
(31.6)%
100.0 %
125.0 %
9.1 %
— %
(66.7)%
68.2 %
700.0 %
•
•
Right-of-way sales relate to revenue generated from the sale of the Company's unutilized surface rights. The decrease of $6 million
in the period-to-period comparison was due to a decrease in sales.
Royalty income is comprised of royalties CNX received on non-operated properties unrelated to natural gas. The decrease of $4
million in the period-to-period comparison was due to a reduction in third-party prices.
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54
/
• Other income increased $4 million in the period-to-period comparison primarily due to various items that occurred throughout both
periods, none of which were individually material.
• Merger-related costs consist of transaction costs directly attributable to the CNXM Merger (See Note 4 - Acquisitions and
Dispositions in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for additional information),
including financial advisory, legal service and other professional fees, which were recorded to Other Expense in the Consolidated
Statements of Income.
Professional services increased $5 million in the period-to-period comparison primarily due to fees related to an agreement to
eliminate CNXM's incentive distribution rights, or IDRs, in January of 2020, prior to the Merger.
•
Gain on Asset Sales and Abandonments, net
A gain on asset sales of $21 million related to the sale of various non-core assets, primarily surface properties, was recognized in the
year ended December 31, 2020 compared to a gain of $36 million in the year ended December 31, 2019.
Loss on Debt Extinguishment
A gain on debt extinguishment of $10 million was recognized in the year ended December 31, 2020 compared to a loss on debt
extinguishment of $8 million in the year ended December 31, 2019. During the year ended December 31, 2020, CNX purchased the
remaining $894 million of its 5.875% Senior Notes due April 2022 at an average price equal to 98.6% of the principal amount. During the
year ended December 31, 2019 CNX purchased $400 million of its 5.875% Senior Notes due April 2022 at an average price equal to
101.5% of the principal amount. See Note 12 - Long-Term Debt in the Notes to the Audited Consolidated Financial Statements in Item 8 of
this Form 10-K for additional information.
Interest Expense
(in millions)
Total Interest Expense
For the Years Ended December 31,
2020
2019
Variance
Percent Change
$
171 $
151 $
20
13.2 %
•
The $20 million increase was primarily due to interest related to the addition, in the current period, of $345 million of Convertible
Senior Notes due 2026, the $125 million Cardinal States Facility, the $50 million CSG Holdings Facility, $500 million of senior
notes due 2029, and $200 million of senior notes due 2027. The amortization of debt discount in connection with the Convertible
Senior Notes and realized and unrealized losses on interest rate swap agreements during the year ended December 31, 2020 also
contributed to the increase. These increases were offset in part by the purchase of the remaining $894 million of the 5.875% senior
notes due in April 2022 during the year ended December 31, 2020, as well as lower borrowings on the CNX credit facility. See
Note 12 - Long-Term Debt in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for
additional information.
Income Taxes
(in millions)
2020
2019
Variance
Percent Change
Total Company (Loss) Earnings Before Income Tax
Income Tax (Benefit) Expense
Effective Income Tax Rate
$
$
$
$
(603)
(174)
28.9 %
60
28
$
$
(663)
(202)
46.5 %
(17.6)%
(1,105.0)%
(721.4)%
For the Years Ended December 31,
The effective income tax rate was 28.9% for the year ended December 31, 2020, compared to 46.5% for the year ended December 31,
2019. The effective rates for the years ended December 31, 2020 and 2019 differs from the U.S. federal statutory rate of 21% primarily due
to the impact of state income taxes, equity compensation and state valuation allowances, partially offset by the benefit from non-controlling
interest.
See Note 6 - Income Taxes in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for additional
information.
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55
/
Results of Operations: Year Ended December 31, 2019 Compared with the Year Ended December 31, 2018
Net (Loss) Income Attributable to CNX Resources Shareholders
CNX reported a net loss attributable to CNX Resources shareholders of $81 million, or a loss per diluted share of $0.42, for the year
ended December 31, 2019, compared to net income attributable to CNX Resources shareholders of $797 million, or earnings per diluted
share of $3.71, for the year ended December 31, 2018.
(Dollars in thousands)
Net Income
Less: Net Income Attributable to Noncontrolling Interest
Net (Loss) Income Attributable to CNX Resources Shareholders
For the Years Ended December 31,
2019
2018
Variance
$
$
31,948 $
883,111 $
(851,163)
112,678
86,578
26,100
(80,730) $
796,533 $
(877,263)
Included in the loss for the year ended December 31, 2019 was a $327 million non-cash impairment charge related to exploration and
production properties and a $119 million non-cash impairment charge related to unproved properties and expirations, both of which were
associated with the Company's Central Pennsylvania (CPA) acreage, offset, in part, by an unrealized gain on commodity derivative
instruments of $306 million. Included in the earnings for the year ended December 31, 2018 was a $19 million non-cash impairment charge
related to the other intangible asset - customer relationship in connection with the AEA with HG Energy and an unrealized gain on
commodity derivative instruments of $40 million. (See Note 4 - Acquisitions and Dispositions of the Notes to the Audited Consolidated
Financial Statements in Item 8 of this Form 10-K for additional information).
As a result of the Midstream Acquisition (See Note 4 - Acquisitions and Dispositions in the Notes to the Audited Consolidated
Financial Statements in Item 8 of this Form 10-K for additional information), CNX owns and controls 100% of CNX Gathering, making
CNXM a single-sponsor master limited partnership and thus the Company began consolidating CNXM on January 3, 2018. The resulting
gain on remeasurement to fair value of the previously held equity interest in CNX Gathering and CNXM of $624 million was included in
the Gain on Previously Held Equity Interest line of the Consolidated Statements of Income in the 2018 period and was part of CNX's
unallocated expenses. No such transactions occurred during the year ended December 31, 2019. Prior to the acquisition, CNX accounted for
its interests in CNX Gathering and CNXM as an equity-method investment.
Selected Operating Revenue and Other Cost Data
The following table presents sales volumes, revenue, costs, average sales prices (including the effects of settled derivatives) and
average unit costs for production operations on a total Company basis:
For the Years Ended December 31,
2019
2018
Variance
in Millions
Per Mcfe
in Millions
Per Mcfe
in Millions
Per Mcfe
Total Sales Volumes (Bcfe)*
539.1
507.1
32.0
Natural Gas, NGL and Oil Revenue
$
1,364 $
2.52 $
1,578 $
3.12 $
(214) $
(0.60)
Gain (Loss) on Commodity Derivative Instruments - Cash
Settlement - Gas
Total Revenue
Lease Operating Expense
Production, Ad Valorem and Other Fees
Transportation, Gathering and Compression
Depreciation, Depletion and Amortization (DD&A)
Average Costs
Average Margin
70
1,434
65
27
331
506
929
0.14
2.66
0.12
0.05
0.61
0.94
1.72
(70)
1,508
95
33
303
493
924
(0.15)
2.97
0.19
0.06
0.60
0.97
1.82
140
(74)
(30)
(6)
28
13
5
$
505 $
0.94 $
584 $
1.15 $
(79) $
0.29
(0.31)
(0.07)
(0.01)
0.01
(0.03)
(0.10)
(0.21)
*NGLs and Oil/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 NGL, condensate, and natural gas prices.
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56
/
The 32.0 Bcfe increase in total sales volumes was primarily due to additional natural gas wells that were turned-in-line in the latter half
of the 2018 period as well as throughout the 2019 period.
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 2019 period, and also due to the sale of the
majority of CNX's shallow oil and gas assets and the sale of substantially all of CNX's Ohio Utica JV assets in 2018.
• Depreciation, Depletion and Amortization decreased on a per unit basis due to positive reserve revisions within the core SWPA
Shale development area, partially offset by negative reserve revisions within CNX's Ohio Shale operations, as well as an increase in
capital expenditures.
Transportation, gathering and compression expense increased on a per unit basis primarily due to new firm transportation contracts
which began in the fourth quarter of 2018 and the first quarter of 2019.
•
The following table is a summary of total other revenue and operating income and selected other expense line items that are included
in the total (loss) earnings before income tax on a total company Mcfe equivalent and excluded from the previous table.
Total Company Sales Volumes (Bcfe)*
539.1
507.1
32.0
For the Years Ended December 31,
2019
2018
Variance
in Millions
Per Mcfe
in Millions
Per Mcfe
in Millions
Per Mcfe
Total Other Revenue and Operating Income
Depreciation, Depletion and Amortization
Exploration and Production Related Other Costs
Selling, General and Administrative Costs
Other Operating Expense
Total Selected Operating Costs and Expenses
Other Expense (Income)
Interest Expense
Total Selected Other Expense
Total Selected Costs and Expenses
$
$
88 $
0.16 $
116 $
0.23 $
(28) $
(0.07)
2 $
0.00 $
— $
0.00 $
2 $
44
144
80
270
3
151
154
0.08
0.27
0.15
0.50
0.01
0.28
0.29
12
135
72
219
(15)
146
131
0.02
0.27
0.14
0.43
(0.03)
0.29
0.26
32
9
8
51
18
5
23
$
424 $
0.79 $
350 $
0.69 $
74 $
0.00
0.06
0.00
0.01
0.07
0.04
(0.01)
0.03
0.10
* NGLs and Oil/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 NGL, condensate, and natural gas prices.
/
57
/
Average Realized Price Reconciliation
The following table presents a breakout of liquids 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:
in thousands (unless noted)
LIQUIDS
NGL:
Sales Volume (MMcfe)
Sales Volume (Mbbls)
Gross Price ($/Bbl)
Gross Revenue
Oil/Condensate:
Sales Volume (MMcfe)
Sales Volume (Mbbls)
Gross Price ($/Bbl)
Gross Revenue
GAS
Sales Volume (MMcf)
Sales Price ($/Mcf)
Gross Revenue
Hedging Impact ($/Mcf)
Gain (Loss) on Commodity Derivative Instruments - Cash Settlement
For the Years Ended December 31,
2019
2018
Variance
Percent Change
32,571
5,428
36,489
6,081
19.20 $
27.30 $
(3,918)
(653)
(8.10)
104,139 $
165,883 $
(61,744)
1,223
204
45.00 $
9,173 $
2,389
398
51.72 $
(1,166)
(194)
(6.72)
20,595 $
(11,422)
505,355
468,226
2.48 $
2.97 $
37,129
(0.49)
1,251,013 $
1,391,459 $
(140,446)
0.14 $
(0.15) $
0.29
69,780 $
(69,720) $
139,500
$
$
$
$
$
$
$
$
(10.7)%
(10.7)%
(29.7)%
(37.2)%
(48.8)%
(48.7)%
(13.0)%
(55.5)%
7.9 %
(16.5)%
(10.1)%
193.3 %
200.1 %
The decrease in gross revenue was primarily the result of the $0.49 per Mcf decrease in general natural gas prices, when excluding the
impact of hedging, in the markets in which CNX sells its natural gas and the $8.10 per Bbl decrease in NGL prices. These decreases were
offset, in-part, by the 32.0 Bcfe increase in sales volumes and the increase in the realized gain on commodity derivative instruments related
to the Company's hedging program.
58
/
SEGMENT ANALYSIS for the year ended December 31, 2019 compared to the year ended December 31, 2018:
For the Year Ended
December 31, 2019
Difference to Year Ended
December 31, 2018
(in millions)
Shale
CBM
Other
Total
Shale
CBM
Other
Total
Natural Gas, NGLs and Oil Revenue
$ 1,199 $
164 $
1 $ 1,364 $
(150) $
(49) $
(15) $
(214)
Gain on Commodity Derivative Instruments
Purchased Gas Revenue
Other Revenue and Operating Income
62
—
74
7
—
—
307
94
14
376
94
88
Total Revenue and Other Operating Income
1,335
171
416
1,922
Lease Operating Expense
Production, Ad Valorem and Other Fees
Transportation, Gathering and Compression
Depreciation, Depletion and Amortization
Impairment of Exploration and Production Properties
Impairment of Unproved Properties and Expirations
Impairment of Other Intangible Assets
Exploration and Production Related Other Costs
Purchased Gas Costs
Other Operating Expense
Selling, General and Administrative Costs
49
21
290
426
—
—
—
—
—
—
—
16
7
40
73
—
—
—
—
—
—
—
Total Operating Costs and Expenses
786
136
Other Expense
Gain on Asset Sales and Abandonments, net
Gain on Previously Held Equity Interest
Loss on Debt Extinguishment
Interest Expense
Total Other Expenses
Total Costs and Expenses
—
—
—
—
—
—
—
—
—
—
—
—
786
136
—
(1)
1
9
327
119
—
44
91
80
144
814
3
(36)
—
8
151
126
940
65
27
331
508
327
119
—
44
91
80
144
1,736
3
(36)
—
8
151
126
1,862
122
—
(16)
(44)
(22)
(4)
39
21
—
—
—
—
—
—
—
34
—
—
—
—
—
—
34
16
—
—
(33)
(6)
—
(8)
(4)
—
—
—
—
—
—
—
(18)
—
—
—
—
—
—
268
28
(12)
269
(2)
(2)
(3)
(2)
327
119
(19)
32
26
8
9
493
18
121
624
(46)
5
722
406
28
(28)
192
(30)
(6)
28
15
327
119
(19)
32
26
8
9
509
18
121
624
(46)
5
722
(18)
1,215
1,231
Earnings (Loss) Before Income Tax
$
549 $
35 $
(524) $
60 $
(78) $
(15) $
(946) $ (1,039)
59
/
SHALE SEGMENT
The Shale segment had earnings before income tax of $549 million for the year ended December 31, 2019 compared to earnings
before income tax of $627 million for the year ended December 31, 2018.
For the Years Ended December 31,
Shale Gas Sales Volumes (Bcf)
NGLs Sales Volumes (Bcfe)*
Oil/Condensate Sales Volumes (Bcfe)*
Total Shale Sales Volumes (Bcfe)*
2019
2018
Variance
449.6
32.6
1.2
483.4
403.2
36.5
2.2
441.9
46.4
(3.9)
(1.0)
41.5
Average Sales Price - Gas (per Mcf)
$
2.42 $
2.89 $
(0.47)
Gain (Loss) on Commodity Derivative Instruments - Cash Settlement- Gas (per Mcf) $
0.14 $
(0.15) $
Average Sales Price - NGLs (per Mcfe)*
Average Sales Price - Oil/Condensate (per Mcfe)*
Total Average Shale Sales Price (per Mcfe)
Average Shale Lease Operating Expenses (per Mcfe)
Average Shale Production, Ad Valorem and Other Fees (per Mcfe)
Average Shale Transportation, Gathering and Compression Costs (per Mcfe)
Average Shale Depreciation, Depletion and Amortization Costs (per Mcfe)
Total Average Shale Costs (per Mcfe)
Average Margin for Shale (per Mcfe)
$
$
$
$
$
3.20 $
7.47 $
4.55 $
8.48 $
2.61 $
2.92 $
0.10
0.05
0.60
0.88
0.16
0.06
0.57
0.91
1.63 $
0.98 $
1.70 $
1.22 $
0.29
(1.35)
(1.01)
(0.31)
(0.06)
(0.01)
0.03
(0.03)
(0.07)
(0.24)
Percent
Change
11.5 %
(10.7)%
(45.5)%
9.4 %
(16.3)%
193.3 %
(29.7)%
(11.9)%
(10.6)%
(37.5)%
(16.7)%
5.3 %
(3.3)%
(4.1)%
(19.7)%
*NGLs and Oil/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, NGLs, condensate, and natural gas prices.
The Shale segment had natural gas, NGLs and oil/condensate revenue of $1,199 million for the year ended December 31, 2019
compared to $1,349 million for the year ended December 31, 2018. The $150 million decrease was due primarily to a 16.3% decrease in the
average sales price for natural gas. This decrease was offset in part by a 9.4% increase in total Shale sales volumes. The increase in total
Shale sales volumes was primarily due to additional wells being turned-in-line throughout 2018 and 2019, partially offset by the sale of
substantially all of CNX's Ohio JV assets in the third quarter of 2018 (See Note 4 - Acquisitions and Dispositions in the Notes to the
Audited Consolidated Financial Statements in Item 8 of this Form 10-K for additional information) as well as normal production declines in
the remaining dry Shale wells.
The decrease in total average Shale sales price was primarily due to a $0.47 per Mcf decrease in average gas sales price. Additionally,
there was a $0.10 per Mcfe decrease in the uplift from NGLs and condensate sales volumes when excluding the impact of hedging due to the
sale of the previously mentioned Ohio JV assets in the third quarter of 2018, which consisted primarily of wet Shale production. The
decreases were partially offset by a $0.29 per Mcf increase in the realized gain (loss) on commodity derivative instruments. The notional
amounts associated with these financial hedges represented approximately 348.1 Bcf of the Company's produced Shale gas sales volumes
for the year ended December 31, 2019 at an average gain of $0.18 per Mcf hedged. For the year ended December 31, 2018, these financial
hedges represented approximately 308.3 Bcf at an average loss of $0.20 per Mcf hedged.
Total operating costs and expenses for the Shale segment were $786 million for the year ended December 31, 2019 compared to $752
million for the year ended December 31, 2018. The increase in total dollars and decrease in unit costs for the Shale segment were due to the
following items:
• Shale lease operating expenses were $49 million for the year ended December 31, 2019 compared to $71 million for the year ended
December 31, 2018. The decrease in total dollars was primarily due to a decrease in water disposal costs due to an increase in reuse of
produced water in well completions and a reduction in employee costs. The decrease in unit costs was driven by the decrease in total dollars.
/
60
/
• Shale transportation, gathering and compression costs were $290 million for the year ended December 31, 2019 compared to $251
million for the year ended December 31, 2018. The $39 million increase in total dollars and $0.03 per Mcfe increase in unit costs were both
due to the overall increase in Shale volumes and the new firm transportation contracts which began in the fourth quarter of 2018 and first
quarter of 2019.
• Depreciation, depletion and amortization costs attributable to the Shale segment were $426 million for the year ended
December 31, 2019 compared to $405 million for the year ended December 31, 2018. These amounts included depletion on a unit of
production basis of $0.81 per Mcfe and $0.83 per Mcfe, respectively. The decrease in the units of production depreciation, depletion and
amortization rate was due to positive reserve revisions within the core SWPA development area, partially offset by an increase in the units of
production depreciation, depletion and amortization rate due to negative reserve revisions within the Ohio operations, an increase in capital
expenditures and a higher depreciation, depletion and amortization rate on deep dry Shale wells compared to the lower capital cost wells
which were part of the Ohio JV asset sale in 2018. The remaining depreciation, depletion and amortization costs were either recorded on a
straight-line basis or related to asset retirement obligations.
Total Shale other revenue and operating income relates to natural gas gathering services provided to third-parties. The Shale segment
had other revenue and operating income of $74 million for the year ended December 31, 2019 compared to $90 million for the year ended
December 31, 2018. The decrease in the period-to-period comparison was primarily due to a reduction in third-party volumes transported
due to normal production declines.
COALBED METHANE (CBM) SEGMENT
The CBM segment had earnings before income tax of $35 million for the year ended December 31, 2019 compared to earnings before
income tax of $50 million for the year ended December 31, 2018.
CBM Gas Sales Volumes (Bcf)
For the Years Ended December 31,
2019
2018
Variance
Percent
Change
55.4
60.3
(4.9)
(8.1)%
Average Sales Price - Gas (per Mcf)
$
2.96 $
3.53 $
(0.57)
Gain (Loss) on Commodity Derivative Instruments - Cash Settlement- Gas (per Mcf) $
0.13 $
(0.14) $
0.27
Total Average CBM Sales Price (per Mcf)
Average CBM Lease Operating Expenses (per Mcf)
Average CBM Production, Ad Valorem and Other Fees (per Mcf)
Average CBM Transportation, Gathering and Compression Costs (per Mcf)
Average CBM Depreciation, Depletion and Amortization Costs (per Mcf)
Total Average CBM Costs (per Mcf)
Average Margin for CBM (per Mcf)
$
3.09 $
3.39 $
0.29
0.12
0.72
1.32
0.37
0.12
0.79
1.28
$
$
2.45 $
0.64 $
2.56 $
0.83 $
(0.30)
(0.08)
—
(0.07)
0.04
(0.11)
(0.19)
(16.1)%
192.9 %
(8.8)%
(21.6)%
— %
(8.9)%
3.1 %
(4.3)%
(22.9)%
The CBM segment had natural gas revenue of $164 million for the year ended December 31, 2019 compared to $213 million for the
year ended December 31, 2018. The $49 million decrease was due to an 8.1% decrease in total CBM sales volumes and the 16.1% decrease
in the average gas sales price. The decrease in CBM sales volumes was primarily due to normal well declines, as well as the sale of certain
CBM assets that were sold along with the majority of CNX's shallow oil and gas assets in 2018 (See Note 4 - Acquisitions and Dispositions
in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for additional information).
The total average CBM sales price decreased $0.30 per Mcf due to a $0.57 per Mcf decrease in average gas sales price, offset in part
by a $0.27 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 40.9 Bcf of the Company's produced CBM sales
volumes for the year ended December 31, 2019 at an average gain of $0.18 per Mcf hedged. For the year ended December 31, 2018, these
financial hedges represented approximately 44.8 Bcf at an average loss of $0.20 per Mcf hedged.
61
/
/
Total operating costs and expenses for the CBM segment were $136 million for the year ended December 31, 2019 compared to $154
million for the year ended December 31, 2018. The decrease in total dollars and decrease in unit costs for the CBM segment were due to the
following items:
• CBM lease operating expense was $16 million for the year ended December 31, 2019 compared to $22 million for the year ended
December 31, 2018. The $6 million decrease was primarily due to reductions in contract services, a decrease in repairs and maintenance
costs, and a reduction in employee costs. The decrease in unit costs was also due to the decrease in total dollars.
• CBM transportation, gathering and compression costs were $40 million for the year ended December 31, 2019 compared to $48
million for the year ended December 31, 2018. The $8 million decrease in total dollars as well as the $0.07 per Mcf decrease in unit costs
were primarily related to a decrease in electrical power expense as well as a decrease in contractor services.
• Depreciation, depletion and amortization costs attributable to the CBM segment were $73 million for the year ended December 31,
2019 compared to $77 million for the year ended December 31, 2018. These amounts each included depletion on a unit of production basis
of $0.70 per Mcfe. The remaining depreciation, depletion and amortization costs were either recorded on a straight-line basis or related to
asset retirement obligations.
OTHER SEGMENT
The Other Segment includes nominal 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, exploration and production related other
costs, impairments, as well as various other expenses that are managed outside the Shale and CBM segments such as SG&A, interest
expense and income taxes.
The Other Segment had a loss before income tax of $524 million for the year ended December 31, 2019 compared to earnings before
income tax of $422 million for the year ended December 31, 2018.
Other Gas Sales Volumes (Bcf)
Oil/Condensate Sales Volumes (Bcfe)*
Total Other Sales Volumes (Bcfe)*
For the Years Ended December 31,
2019
2018
Variance
0.3
—
0.3
4.7
0.2
4.9
(4.4)
(0.2)
(4.6)
Percent
Change
(93.6)%
(100.0)%
(93.9)%
*Oil/Condensate is 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, condensate and natural gas prices.
Other Gas sales volumes were primarily related to shallow oil and gas production. CNX sold substantially all of these assets on March
30, 2018 (See Note 4 - Acquisitions and Dispositions of the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form
10-K for additional information). There was $1 million of natural gas and oil revenue related to the Other Gas segment for the year ended
December 31, 2019 compared to $16 million for the year ended December 31, 2018. Total operating costs and expenses related to these
other gas sales volumes were $6 million for the year ended December 31, 2019 compared to $18 million for the year ended December 31,
2018. The decrease in natural gas and oil revenue was due to the asset sale.
Gain or Loss on Commodity Derivative Instruments
The Other Segment recognized an unrealized gain on commodity derivative instruments of $306 million and cash settlements received
of $1 million for the year ended December 31, 2019. For the year ended December 31, 2018, the Other Segment recognized an unrealized
gain on commodity derivative instruments of $40 million and cash settlements paid of $1 million. The unrealized gain or loss on commodity
derivative instruments represents changes in the fair value of all the Company's existing commodity hedges on a mark-to-market basis.
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 $94 million for the year ended December 31, 2019
compared to $66 million for the year ended December 31, 2018. Purchased gas costs were $91 million for
62
/
62
/
the year ended December 31, 2019 compared to $65 for the year ended December 31, 2018. 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 average sales price.
Purchased Gas Sales Volumes (in Bcf)
Average Sales Price (per Mcf)
Average Cost (per Mcf)
Other Operating Income
(in millions)
Water Income
Equity in Earnings of Affiliates
Excess Firm Transportation Income
Total Other Operating Income
For the Years Ended December 31,
2019
2018
Variance
Percent Change
40.6
2.32 $
2.23 $
20.5
3.23 $
3.17 $
20.1
(0.91)
(0.94)
98.0 %
(28.2)%
(29.7)%
For the Years Ended December 31,
2019
2018
Variance
Percent Change
2 $
2
10
14 $
11 $
5
10
26 $
(9)
(3)
—
(12)
(81.8)%
(60.0)%
— %
(46.2)%
$
$
$
$
• Water income decreased $9 million due to nominal sales of freshwater to third parties for hydraulic fracturing in 2019 compared to
2018.
Impairment of Exploration and Production Properties
During the fourth quarter of 2019, CNX identified certain indicators of impairment specific to our CPA Marcellus 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 $327 million was recognized within the CPA Marcellus proved properties and is included in Impairment of
Exploration and Production Properties in the Consolidated Statements of Income. This impairment was related to 56 operated wells and
approximately 51,000 acres within our CPA Marcellus proved properties in Armstrong, Indiana, Jefferson and Westmoreland counties. The
majority of these properties were developed prior to 2013 and the last of these properties were developed in 2015.
Impairment of Unproved Properties and Expirations
Capitalized costs of unproved oil and gas properties are evaluated periodically for indicators of potential impairment. Indicators of
potential impairment include, but are not limited to, changes brought about by economic factors, commodity price outlooks, our geologists’
evaluation of the property, favorable or unfavorable activity on the property being evaluated and/or adjacent properties, potential shifts in
business strategy employed by management and historical experience. The likelihood of an impairment of unproved oil and gas properties
increases as the expiration of a lease term approaches if drilling activity has not commenced. If it is determined that the Company does not
intend to drill on the property prior to expiration or does not have the intent and ability to extend, renew, trade, or sell the lease prior to
expiration, an impairment is recorded. Expense for lease expirations that were not previously impaired are recorded as the leases expire.
For the year ended December 31, 2019, CNX recorded an impairment related to unproved properties of $119 million that was included
in Impairment of Unproved Properties and Expirations in the Consolidated Statements of Income. These unproved properties are within
CNX's CPA operating region and east of the acreage associated with the proved property impairment described above.
Impairment of Other Intangible Assets
Intangible assets are tested for impairment whenever events or circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment loss would be recognized when the carrying amount of the asset exceeds the estimated undiscounted future cash
flows expected to result from the use of the asset and its eventual disposition. The impairment loss to be recorded would be the excess of the
asset's carrying value over its fair value.
63
/
In connection with the AEA with HG Energy (See Note 4 - Acquisitions and Dispositions in the Notes to the Audited Consolidated
Financial Statements in Item 8 of this Form 10-K for additional information) that occurred during the year ended December 31, 2018, CNX
determined that the carrying value of the other intangible asset - customer relationship exceeded its fair value, and an impairment of $19
million was included in Impairment of Other Intangible Assets in the Consolidated Statement of Income. No such transactions occurred in
the 2019 period.
Exploration and Production Related Other Costs
(in millions)
Lease Expiration Costs
Seismic Activity
Land Rentals
Other
Total Exploration and Production Related Other Costs
For the Years Ended December 31,
2019
2018
Variance
Percent Change
$
$
31 $
5 $
8
3
2
—
4
3
44 $
12 $
26
8
(1)
(1)
32
520.0 %
100.0 %
(25.0)%
(33.3)%
266.7 %
•
•
Lease Expiration Costs relate to leases where the primary term expired or will expire within the next 12 months. The $26 million
increase in the period-to-period comparison is due to an increase in the number of leases that were allowed to expire in the year
ended December 31, 2019, or will expire within the next 12 months, because they were no longer in the Company's future drilling
plan. Additionally, approximately $15 million of the $26 million increase is associated with leases which have ceased production.
Seismic activity increased in the period-to-period comparison due to additional geophysical research in the 2019 period.
SG&A
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.
(in millions)
2019
2018
Variance
Percent Change
Long-Term Equity-Based Compensation (Non-Cash)
Salaries, Wages and Employee Benefits
Short-Term Incentive Compensation
Other
Total SG&A
$
$
38 $
21 $
40
21
45
40
24
50
144 $
135 $
17
—
(3)
(5)
9
81.0 %
— %
(12.5)%
(10.0)%
6.7 %
For the Years Ended December 31,
•
•
Long-term equity-based compensation increased $17 million in the period-to-period comparison due to the Company incurring an
additional $20 million of long-term equity-based compensation (non-cash) expense during the year ended December 31, 2019. The
additional expense was a result of the acceleration of vesting of certain pre-2019 restricted stock units and performance share units
held by certain employees related to the trigger of a contractual change in control event. See Note 15 - Stock-Based Compensation
in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for additional information. The
remaining variance was due to various items that occurred throughout both periods, none of which were individually material.
Short-term incentive compensation decreased $3 million due to a reduction in the number of employees and lower projected
payouts in the 2019 period.
/
64
/
Other Operating Expense
(in millions)
2019
2018
Variance
Percent Change
For the Years Ended December 31,
Unutilized Firm Transportation and Processing Fees
$
55 $
42 $
Idle Equipment and Service Charges
Insurance Expense
Severance Expense
Litigation Expense
Water Expense
Other
12
4
1
—
—
8
Total Other Operating Expense
$
80 $
5
3
1
4
6
11
72 $
13
7
1
—
(4)
(6)
(3)
8
31.0 %
140.0 %
33.3 %
— %
(100.0)%
(100.0)%
(27.3)%
11.1 %
• Unutilized Firm Transportation and Processing Fees represent pipeline transportation capacity obtained to enable gas production to
flow uninterrupted as sales volumes increase, as well as additional processing capacity for NGLs. The increase in the period-to-
period comparison was primarily due to previously-acquired capacity which was not utilized during the 2019 period to transport the
Company's flowing production. In some instances, the Company may have the opportunity to realize more favorable net pricing by
strategically choosing to sell natural gas into a market or to a customer that does not require the use of the Company’s own firm
transportation capacity. Such sales would increase unutilized firm transportation expense. The Company attempts to minimize this
expense by releasing (selling) unutilized firm transportation capacity to other parties when possible and when beneficial. The
revenue received when this capacity is released (sold) is included in Gathering Income in Total Other Operating Income above.
Idle Equipment and Service Charges primarily relate to the temporary idling of some of the Company's natural gas drilling rigs as
well as related equipment and other services that may be needed in the natural gas drilling and completions process. The increase of
$7 million in the period-to-period comparison was primarily the result CNX terminating one of its drilling rig contracts early, as
well as additional idle service expense related to the Shaw 1G Utica Shale well that occurred in the first quarter of 2019.
•
• Water Expense decreased $6 million due to the associated costs related to the sales of freshwater to third-parties for hydraulic
fracturing during 2018 in Total Other Operating Income above. There were nominal sales during 2019.
Other Expense (Income)
(in millions)
Other Income
Royalty Income
Right of Way Sales
Interest Income
Other
Total Other Income
Other Expense
Bank Fees
Professional Services
Other Land Rental Expense
Other Corporate Expense
Total Other Expense
Total Other Expense (Income)
For the Years Ended December 31,
2019
2018
Variance
Percent Change
$
$
$
$
$
4 $
15 $
9
2
4
14
—
8
19 $
37 $
11 $
11 $
4
4
3
7
4
—
22 $
22 $
3 $
(15) $
(11)
(5)
2
(4)
(18)
—
(3)
—
3
—
18
(73.3)%
(35.7)%
100.0 %
(50.0)%
(48.6)%
— %
(42.9)%
— %
100.0 %
— %
120.0 %
/
65
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Gain on Asset Sales and Abandonments, net
A gain on asset sales of $36 million related to non-core assets was recognized in the year ended December 31, 2019 compared to a
gain of $157 million in the year ended December 31, 2018, primarily due to the $131 million gain that was recognized related to the sale of
substantially all of CNX's Ohio Utica JV assets as well as the sale of various other non-core assets in the 2018 period. See Note 4 -
Acquisitions and Dispositions in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for additional
information.
Gain on Previously Held Equity Interest
CNX recognized a gain on previously held equity interest of $624 million in the year ended December 31, 2018 due to the Midstream
Acquisition that occurred in January 2018. No such transactions occurred in the 2019 period. See Note 4 - Acquisitions and Dispositions in
the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for additional information.
Loss on Debt Extinguishment
A loss on debt extinguishment of $8 million was recognized in the year ended December 31, 2019 compared to a loss on debt
extinguishment of $54 million in the year ended December 31, 2018. During the year ended December 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. During the year ended
December 31, 2018, CNX purchased $411 million of its 5.875% senior notes due in April 2022 at an average price equal to 103.5% of the
principal amount and redeemed the $500 million 8.00% senior notes due in April 2023 at a call price equal to 106.0% of the principal
amount. See Note 12 - Long-Term Debt in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for
additional information.
Interest Expense
(in millions)
Total Interest Expense
For the Years Ended December 31,
2019
2018
Variance
Percent Change
$
151 $
146 $
5
3.4 %
•
The $5 million increase was primarily due to additional borrowings on the CNX and CNXM credit facilities as well as a completed
private offering of $500 million of 7.25% senior notes due March 2027 during the year ended December 31, 2019. These increases
were partially offset by the reduction in higher cost long-term debt, resulting from the $500 million purchase of the outstanding
8.00% senior notes due in April 2023 and the $411 million purchase of the outstanding 5.875% senior notes due in April 2022
during the year ended December 31, 2018. Additionally, the Company purchased $400 million of its outstanding 5.875% senior
notes due in April 2022 during the year ended December 31, 2019. See Note 12 - Long-Term Debt in the Notes to the Audited
Consolidated Financial Statements in Item 8 of this Form 10-K for additional information.
Income Taxes
(in millions)
Total Company Earnings Before Income Tax
Income Tax Expense
Effective Income Tax Rate
For the Years Ended December 31,
2019
2018
Variance
Percent Change
$
$
60
28
$
$
46.5 %
1,099
216
$
$
19.6 %
(1,039)
(188)
26.9 %
(94.5)%
(87.0)%
The effective income tax rate was 46.5% for the year ended December 31, 2019, compared to 19.6% for the year ended December 31,
2018. The effective rate for the year ended December 31, 2019 differs from the U.S. federal statutory rate of 21% primarily due to state
income taxes, equity compensation and state valuation allowances partially offset by the benefit from non-controlling interest. During the
year ended December 31, 2018, CNX obtained a controlling interest in CNX Gathering LLC and, through CNX Gathering's ownership of
the general partner, control over CNXM. All of CNXM’s income is included in the Company's pre-tax income. However, the Company is
not required to record income tax expense with respect to the portions of CNXM’s income allocated to the noncontrolling public limited
partners of CNXM, which reduces the Company's effective tax rate in periods when the Company has consolidated pre-tax income and
increases the Company's effective tax rate in periods when the Company has consolidated pre-tax loss. The effective rate for the year ended
December 31, 2018 differs from the U.S. federal statutory 21% primarily due to a benefit from the filing of a Federal 10-year net operating
loss (“NOL”)
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66
/
carryback which resulted in the Company being able to utilize previously valued tax attributes at a tax rate differential of 14%,
noncontrolling interest, the reversal of the alternative minimum tax ("AMT") credit sequestration valuation allowance, and the release of
certain state valuation allowances as a result of a corporate reorganization during the year.
See Note 6 - Income Taxes in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for additional
information.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make judgments, estimates and assumptions that affect reported amounts of assets and liabilities, revenues and
expenses and related disclosure of contingent assets and liabilities in the Consolidated Financial Statements and at the date of the financial
statements. See Note 1-Significant Accounting Policies in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form
10-K for further discussion. We base our estimates on historical experience and on various other assumptions that we believe are reasonable
under the circumstances, the results of which form the basis for making the judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. We evaluate our estimates on an on-going basis. Actual results could differ from those estimates
upon subsequent resolution of identified matters. Management believes that the estimates utilized are reasonable. The following critical
accounting policies are materially impacted by judgments, assumptions and estimates used in the preparation of the Consolidated Financial
Statements.
Asset Retirement Obligations
Accounting for Asset Retirement Obligations requires that the fair value of an asset retirement obligation be recognized in the period
in which it is incurred if a reasonable estimate of fair value can be made. The present value of the estimated asset retirement costs is
capitalized as part of the carrying amount of the long-lived asset. Asset retirement obligations primarily relate to the closure of gas wells and
the reclamation of land upon exhaustion of gas reserves. Changes in the variables used to calculate the liabilities can have a significant effect
on the gas well closing liability. The amounts of assets and liabilities recorded are dependent upon a number of variables, including the
estimated future retirement costs, estimated proved reserves, assumptions involving profit margins, inflation rates and the assumed credit-
adjusted risk-free interest rate.
The Company believes that the accounting estimates related to asset retirement obligations are “critical accounting estimates” because
the Company must assess the expected amount and timing of asset retirement obligations. In addition, the Company must determine the
estimated present value of future liabilities. Future results of operations for any particular quarterly or annual period could be materially
affected by changes in the Company’s assumptions.
Income Taxes
Deferred tax assets and liabilities are recognized using enacted tax rates for the estimated future tax effects of temporary differences
between the book and tax basis of recorded assets and liabilities. Deferred tax assets are reduced by a valuation allowance if it is more likely
than not that some portion of the deferred tax asset will not be realized. All available evidence, both positive and negative, must be
considered in determining the need for a valuation allowance. At December 31, 2020, CNX had deferred tax liabilities in excess of deferred
tax assets of approximately $343 million. At December 31, 2020, CNX had a valuation allowance of $123 million on deferred tax assets.
CNX evaluates all tax positions taken on the state and federal tax filings to determine if the position is more likely than not to be
sustained upon examination. For positions that meet the more likely than not to be sustained criteria, an evaluation of the largest amount of
benefit, determined on a cumulative probability basis that is more likely than not to be realized upon ultimate settlement is determined. A
previously recognized tax position is reversed when it is subsequently determined that a tax position no longer meets the more likely than
not threshold to be sustained. The evaluation of the sustainability of a tax position and the probable amount that is more likely than not is
based on judgment, historical experience and on various other assumptions that we believe are reasonable under the circumstances. The
results of these estimates, that are not readily apparent from other sources, form the basis for recognizing an uncertain tax liability. Actual
results could differ from those estimates upon subsequent resolution of identified matters. See Note 6 - Income Taxes in the Notes to the
Audited Consolidated Financial Statements in Item 8 of this Form 10-K for additional information regarding the Company’s uncertain tax
liabilities.
The Company believes that accounting estimates related to income taxes are “critical accounting estimates” because the Company
must assess the likelihood that deferred tax assets will be recovered from future taxable income and exercise
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judgment regarding the amount of financial statement benefit to record for uncertain tax positions. When evaluating whether or not a
valuation allowance must be established on deferred tax assets, the Company exercises judgment in determining whether it is more likely
than not (a likelihood of more than 50%) that some portion or all of the deferred tax assets will not be realized. The Company considers all
available evidence, both positive and negative, to determine whether, based on the weight of the evidence, a valuation allowance is needed,
including carrybacks, tax planning strategies and reversal of deferred tax assets and liabilities. In making the determination related to
uncertain tax positions, the Company considers the amounts and probabilities of the outcomes that could be realized upon ultimate
settlement of an uncertain tax position using the facts, circumstances and information available at the reporting date to establish the
appropriate amount of financial statement benefit. To the extent that an uncertain tax position or valuation allowance is established or
increased or decreased during a period, the Company must include an expense or benefit within tax expense in the income statement. Future
results of operations for any particular quarterly or annual period could be materially affected by changes in the Company’s assumptions.
Natural Gas, NGL, Condensate and Oil Reserve ("Natural Gas Reserve") Values
Proved oil and gas reserves, as defined by SEC Regulation S-X Rule 4-10, are those quantities of oil and natural gas which, by analysis
of geoscience 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.
There are numerous uncertainties inherent in estimating quantities and values of economically recoverable natural gas reserves,
including many factors beyond our control. As a result, estimates of economically recoverable natural gas reserves are by their nature
uncertain. Information about our reserves consists of estimates based on engineering, economic and geological data assembled and analyzed
by our staff. Our natural gas reserves are reviewed by independent experts each year. Some of the factors and assumptions which impact
economically recoverable reserve estimates include:
•
•
•
•
•
geological conditions;
historical production from the area compared with production from other producing areas;
the assumed effects of regulations and taxes by governmental agencies;
assumptions governing future prices; and
future operating costs.
Each of these factors may in fact vary considerably from the assumptions used in estimating reserves. For these reasons, estimates of
the economically recoverable quantities of gas attributable to a particular group of properties, and classifications of these reserves based on
risk of recovery and estimates of future net cash flows, may vary substantially. Actual production, revenues and expenditures with respect to
our reserves will likely vary from estimates, and these variances may be material. See "Risk Factors" in Item 1A of this Form 10-K for a
discussion of the uncertainties in estimating our reserves.
The Company believes that the accounting estimate related to oil and gas reserves is a “critical accounting estimate” because the
Company must periodically reevaluate proved reserves along with estimates of future production rates, production costs and the estimated
timing of development expenditures. Future results of operations and strength of the balance sheet for any particular quarterly or annual
period could be materially affected by changes in the Company’s assumptions. See "Impairment of Long-lived Assets" below for additional
information regarding the Company’s oil and gas reserves.
Impairment of Long-lived Assets
The carrying values of the Company's proved oil and gas properties are reviewed for impairment whenever events or changes in
circumstances indicate that a property’s carrying amount may not be recoverable. Impairment tests require that the Company first compare
future undiscounted cash flows by asset group to their respective carrying values. The Company groups its assets by geological and
geographical characteristics. If the carrying amount exceeds the estimated undiscounted future cash flows, a reduction of the carrying
amount of the natural gas properties to their estimated fair values is required, which is determined based on discounted cash flow techniques
using a market-specific weighted average cost of capital. For the year ended December 31, 2020, an impairment of $62 million was included
in Impairment of Exploration and Production Properties in the Consolidated Statements of Income. This impairment was related to our
Southwest Pennsylvania (SWPA) coalbed methane (CBM) asset group. For the year ended December 31, 2019, an impairment of $327
million was included in Impairment of Exploration and Production Properties in the Consolidated Statements of Income. This impairment
was related to 56 operated wells and approximately 51,000 acres within our CPA Marcellus proved properties in Armstrong, Indiana,
Jefferson and Westmoreland counties. See Note 1 - Significant Accounting Policies in the Notes to the Audited Consolidated Financial
Statements in Item 8 of this Form 10-K for more information.
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There were no other impairments related to proved properties in the years ended December 31, 2020, 2019 or 2018.
CNX evaluates capitalized costs of unproved gas properties for recoverability on a prospective basis. Indicators of potential
impairment include, but are not limited to, changes brought about by economic factors, commodity price outlooks, our geologists’
evaluation of the property, favorable or unfavorable activity on the property being evaluated and/or adjacent properties, potential shifts in
business strategy employed by management and historical experience. If it is determined that the properties will not yield proved reserves,
the related costs are expensed in the period the determination is made. For the year ended December 31, 2019, an impairment of $119
million was included in Impairment of Unproved Properties and Expirations in the Consolidated Statements of Income. There were no other
impairments related to unproved properties in the years ended December 31, 2020, 2019 or 2018.
The Company believes that the accounting estimates related to the impairment of long-lived assets are “critical accounting estimates”
because 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. In addition, the Company must determine the estimated
undiscounted future cash flows as well as the impact of commodity price outlooks. The Company believes the estimates and assumptions
used in estimating the fair value are reasonable and appropriate; however, different assumptions and estimates, such as different assumptions
in projected revenues, future commodity prices or the weighted average costs of capital, could materially impact the calculated fair value
and the resulting determinations about the impairment of long-lived assets which could materially impact the Company’s results of
operations and financial position. Additionally, future estimates may differ materially from current estimates and assumptions.
Impairment of Goodwill
In connection with the Midstream Acquisition that closed on January 3, 2018, CNX recorded $796 million of goodwill. See Note 4 -
Acquisitions and Dispositions for more information in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form
10-K for more information.
Goodwill is not amortized, but rather it is evaluated 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. We may
assess goodwill for impairment by first performing a qualitative assessment, which considers specific factors, based on the weight of
evidence, and the significance of all identified events and circumstances in the context of determining whether it is more likely than not that
the fair value of a reporting unit is less than its carrying amount. 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, we perform a quantitative impairment test. From time to
time, we may also bypass the qualitative assessment and proceed directly to the quantitative impairment test. Under the quantitative
goodwill impairment test, the fair value of a reporting unit is compared to its carrying amount. If the quantitative goodwill impairment test
indicates that the goodwill is impaired, an impairment loss is recorded, which is the difference between carrying value of the reporting unit
and its fair value, with the impairment loss not to exceed the amount of goodwill recorded. The estimation of fair value of a reporting unit is
determined using the income approach and/or the market approach as described below.
The income approach is a quantitative evaluation to determine the fair value of the reporting unit. Under the income approach we
determine the fair value based on estimated future cash flows discounted by an estimated weighted-average cost of capital plus a forecast
risk, which reflects the overall level of inherent risk of the reporting unit and the rate of return a market participant would expect to earn.
The inputs used for the income approach were significant unobservable inputs, or Level 3 inputs, as described in the accounting fair value
hierarchy. CNX determined the fair value based on estimated future cash flows and earnings before deducting net interest expense (interest
expense less interest income) and income taxes (EBITDA - a non-GAAP financial measure) and also included estimates for capital
expenditures, discounted to present value using a risk-adjusted rate, which management feels reflects the overall level of inherent risk of the
reporting unit. Cash flow projections were derived from board approved budgeted amounts, a seven-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 market approach measures the fair value of a reporting unit through the analysis of recent transactions and/or financial multiples
of comparable businesses. Consideration is given to the financial conditions and operating performance of the reporting unit being valued
relative to those publicly-traded companies operating in the same or similar lines of business.
The determination of the fair value requires us to make significant estimates and assumptions. These estimates and assumptions
primarily include but are not limited to: the selection of appropriate peer group companies; control premiums appropriate for acquisitions in
the industries in which we compete; discount rates; terminal growth rates; and forecasts of revenue, operating income, depreciation and
amortization and capital expenditures. The estimates of future cash flows and
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EBITDA are subjective in nature and are subject to impacts from business risks as described in Part I. Item 1A. "Risk Factors" of this 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 we believe our estimates of fair value are reasonable, actual
financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. Changes in
assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of
the reporting unit, the amount of any goodwill impairment charge, or both.
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 Statements of Income. See Note 9 - Goodwill and Other Intangible Assets in the Notes to the Audited
Consolidated Financial Statements in Item 8 of this Form 10-K for more information. There were no other impairments related to goodwill
in the years ended December 31, 2020, 2019 or 2018. 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.
The Company believes that the accounting estimates related to goodwill are “critical accounting estimates” because 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. 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 as well as other assumptions
such as movement in the Company's stock price, weighted-average cost of capital, terminal growth rates, changes in the business climate,
unanticipated changes in the competitive environment, adverse legal or regulatory actions or developments, changes in capital structure, cost
of debt, interest rates, capital expenditure levels, operating cash flows, or market capitalization and industry multiples. The Company
believes the estimates and assumptions used in estimating the fair value are reasonable and appropriate; however, different assumptions and
estimates could materially impact the calculated fair value and the resulting determinations about goodwill impairment which could
materially impact the Company’s results of operations and financial position. Additionally, future estimates may differ materially from
current estimates and assumptions.
Impairment of Definite-lived Intangible Assets
Definite-lived intangible assets are amortized on a straight-line basis over their estimated economic lives and they are reviewed for
impairment when indicators of impairment are present. Impairment tests require that the Company first compare future undiscounted cash
flows to their respective carrying values. If the carrying amount exceeds the estimated undiscounted future cash flows, a reduction of the
carrying amount of the asset to its estimated fair value is required.
In May 2018, CNX determined that the carrying value of a portion of the customer relationship intangible assets that were acquired in
connection with the Midstream acquisition exceeded their fair value in conjunction with the AEA with HG Energy (See Note 4 -
Acquisitions and Dispositions in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for more
information). As a result, CNX recognized an impairment on this intangible asset of $19 million, which is included in Impairment of Other
Intangible Assets in the Consolidated Statements of Income for the year ended December 31, 2018. There were no other impairments related
to definite-lived intangible assets in the years ended December 31, 2020, 2019 or 2018.
The Company believes that the accounting estimates related to the impairment of definite-lived intangible assets are “critical
accounting estimates” because 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. The Company believes the estimates and assumptions
used in estimating the fair value are reasonable and appropriate; however, different assumptions and estimates could materially impact the
calculated fair value and the resulting determinations about the impairment of definite-lived intangible assets which could materially impact
the Company’s results of operations and financial position. Additionally, future estimates may differ materially from current estimates and
assumptions.
Business Combinations
Accounting for the acquisition of a business requires the identifiable assets and liabilities acquired to be recorded at fair value. The
most significant assumptions in a business combination include those used to estimate the fair value of the oil and natural gas properties
acquired. The fair value of proved natural gas properties is determined using a risk-adjusted after-tax
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discounted cash flow analysis based upon significant assumptions including commodity prices; projections of estimated quantities of
reserves; projections of future rates of production; timing and amount of future development and operating costs; projected reserve recovery
factors; and a weighted average cost of capital.
The Company utilizes the guideline transaction method to estimate the fair value of unproved properties acquired in a business
combination which requires the Company to use judgment in considering the value per undeveloped acre in recent comparable transactions
to estimate the value of unproved properties.
The estimated fair value of midstream facilities and equipment, generally consisting of pipeline systems and compression stations, is
estimated using the cost approach, which incorporates assumptions about the replacement costs for similar assets, the relative age of assets
and any potential economic or functional obsolescence.
The fair values of the intangible assets are estimated using the multi-period excess earnings model which estimates revenues and cash
flows derived from the intangible asset and then deducts portions of the cash flow that can be attributed to supporting assets otherwise
recognized. The Company’s intangible assets are comprised of customer relationships.
The Company believes that the accounting estimates related to business combinations are “critical accounting estimates” because the
Company must, in determining the fair value of assets acquired, make assumptions about future commodity prices; projections of estimated
quantities of reserves; projections of future rates of production; projections regarding the timing and amount of future development and
operating costs; and projections of reserve recovery factors, per acre values of undeveloped property, replacement cost of and future cash
flows from midstream assets, cash flow from customer relationships and non-compete agreements and the pre and post modification value
of stock based awards. Different assumptions may result in materially different values for these assets which would impact the Company’s
financial position and future results of operations.
Convertible Senior Notes
CNX accounted for its Convertible Senior Notes due May 2026 as separate liability and equity components. The carrying amount of
the liability component of the instrument was computed by estimating the fair value of a similar liability without the conversion option. The
amount of the equity component was then calculated by deducting the fair value of the liability component from the principal amount of the
instrument. The difference between the principal amount and the liability component represents a debt discount that is amortized to interest
expense over the respective term of the Convertible Notes using the effective interest rate method. The equity component is not remeasured
as long as it continues to meet the conditions for equity classification. Additionally, a detailed analysis of the terms of the convertible senior
notes transactions was required to determine existence of any derivatives that may require separate mark-to-market accounting under
applicable accounting guidance.
The Company believes that the accounting estimates related to the Convertible Notes are “critical accounting estimates” because of the
judgment required when determining the balance sheet classification of the elements of the Convertible Notes as well as the existence of any
derivatives that may require separate presentation under the applicable accounting guidance. The Company believes the estimates and
assumptions used in estimating the fair value are reasonable and appropriate; however, different assumptions and estimates could materially
impact the calculated fair value and the resulting balance sheet classification.
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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, if any, 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 a significant
decline in commodity prices or due to the 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 December 31, 2020, CNX was in compliance with all of its debt covenants. After considering the potential effect of a significant
decline in commodity prices as well as the 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 also enters into various financial natural gas
swap transactions to manage the market risk exposure to in-basin and out-of-basin pricing. The fair value of these contracts was a net asset
of $118 million at December 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)
Cash Provided by Operating Activities
Cash Used in Investing Activities
Cash (Used in) Provided by Financing Activities
For the Years Ended December 31,
2020
2019
Change
$
$
$
795 $
(439) $
(351) $
981 $
(1,147) $
166 $
(186)
708
(517)
Cash provided by operating activities changed in the period-to-period comparison primarily due to the following items:
• Net income decreased $461 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 $266 million decrease in impairment of exploration and production properties, a $119 million decrease in impairment
of unproved properties and expirations, a $595 million net change in commodity derivative instruments, an $18 million increase
in the gain on debt extinguishment, a $24 million decrease in stock based compensation, $197 million change in deferred income
taxes, and various other changes in working capital.
Cash used in investing activities changed in the period-to-period comparison primarily due to the following items:
•
Capital expenditures decreased $705 million in the period-to-period comparison primarily due to decreased expenditures in the
Shale segment resulting from decreased drilling and completions activity. Gathering capital expenditures decreased due primarily
to the substantial build out that was completed during 2019.
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•
Proceeds from asset sales increased $3 million mainly due to increased surface sales and oil and natural gas assignment sales in
the year ended December 31, 2020.
Cash (used in) provided by financing activities changed in the period-to-period comparison primarily due to the following items:
•
•
•
•
•
•
•
•
•
•
In the year ended December 31, 2020, CNX paid $882 million to purchase $894 million of Senior Notes due in 2022 at 98.6% of
the principal amount. In the year ended December 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 12 - Long-Term Debt in the Notes to the Audited Consolidated
Financial Statements in Item 8 of this Form 10-K for additional information.
In the year ended December 31, 2020, there were $21 million of net payments on the CNXM Credit Facility compared to $228
million of net proceeds in the year ended December 31, 2019.
In the year ended December 31, 2020, there were $500 million of net payments on the CNX Credit Facility compared to $49
million of net proceeds in the year ended December 31, 2019.
In the year ended December 31, 2020, CNX received proceeds of $500 million from the issuance of Senior Notes due in 2029.
In the year ended December 31, 2020, CNX received proceeds of $207 million from the issuance of Senior Notes due in 2027 at
103.5% of the principal amount. The new Senior Notes due in 2027 were offered as additional notes under an indenture pursuant
to the $500 million Senior Notes due in 2027 that were issued in the year ended December 31, 2019. See Note 12 - Long-Term
Debt in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for additional information.
In the year ended December 31, 2020, there were $159 million of net proceeds from the Cardinal States Facility and CSG
Holdings Facility. See Note 12 - Long-Term Debt in the Notes to the Audited Consolidated Financial Statements in Item 8 of this
Form 10-K for additional information.
In the year ended December 31, 2020, CNX received proceeds of $335 million from the issuance of the Convertible Notes. See
Note 12 - Long-Term Debt in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-K for
additional information.
In the year ended December 31, 2020, CNX paid $36 million for capped call transactions related to the issuance of the
Convertible Notes. See Note 12 - Long-Term Debt in the Notes to the Audited Consolidated Financial Statements in Item 8 of
this Form 10-K for additional information.
In the year ended December 31, 2020, there were $42 million in distributions to CNXM noncontrolling interest holders compared
to distributions of $64 million in the year ended December 31, 2019.
In the years ended December 31, 2020 and 2019, CNX repurchased $37 million and $117 million, respectively, of its common
stock on the open market.
• Debt issuance and financing fees increased $15 million primarily due to the fees associated with the borrowings on the Cardinal
States Facility and CSG Holdings Facility and the issuance of the Convertible Notes.
The following is a summary of the Company's significant contractual obligations at December 31, 2020 (in thousands):
Payments due by Year
Less Than
1 Year
1-3 Years
3-5 Years
More Than
5 Years
Total
Purchase Order Firm Commitments
$
806 $
970 $
— $
— $
1,776
Gas Firm Transportation and Processing
Long-Term Debt
Interest on Long-Term Debt
Finance Lease Obligations
Interest on Finance Lease Obligations
Operating Lease Obligations
Interest on Operating Lease Obligations
Long-Term Liabilities—Employee Related (a)
Other Long-Term Liabilities (b)
Total Contractual Obligations (c)
252,886
22,574
122,251
6,876
262
52,575
3,615
1,992
201,684
430,312
48,181
262,415
837
52
23,301
3,744
4,169
10,000
390,693
497,423
240,083
182
11
7,434
2,823
4,436
10,000
985,201
1,882,675
202,118
38
1
22,500
3,496
35,129
64,713
2,059,092
2,450,853
826,867
7,933
326
105,810
13,678
45,726
286,397
$
665,521 $
783,981 $
1,153,085 $
3,195,871 $
5,798,458
_________________________
(a)
(b)
Employee related long-term liabilities include salaried retirement contributions and work-related injuries and illnesses.
Other long-term liabilities include royalties and other long-term liability costs.
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The table above does not include obligations to taxing authorities due to the uncertainty surrounding the ultimate settlement of
amounts and timing of these obligations.
(c)
Debt
At December 31, 2020, CNX had total long-term debt of $2,451 million, including the current portion of long-term debt of $23
million and excluding unamortized debt issuance costs. This long-term debt consisted of:
• An aggregate principal amount of $700 million of 7.25% Senior Notes due March 2027 plus $7 million of unamortized bond
premium. 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 its subsidiaries or general partner) or CSG
Holdings III LLC.
• An aggregate principal amount of $500 million of 6.00% Senior Notes due January 2029. Interest on the notes is payable January
15 and July 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 its subsidiaries or general partner) or CSG Holdings III LLC.
• An aggregate principal amount of $400 million of 6.50% Senior Notes due March 2026 issued by CNXM, less $4 million of
unamortized bond discount. Interest on the notes is payable March 15 and September 15 of each year. Payment on 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 $345 million of 2.25% Senior Notes due May 2026, unless earlier redeemed, repurchased, or
converted, less $108 million of unamortized bond discount and issuance costs. Interest on the notes is payable May 1 and
November 1 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 its subsidiaries or general partner) or CSG Holdings III LLC.
• An aggregate principal amount of $291 million in outstanding borrowings under the CNXM Credit Facility. CNX is not a guarantor
of CNXM's Credit Facility.
• An aggregate principal amount of $161 million in outstanding borrowings under the CNX Credit Facility. CNXM (or its
subsidiaries or general partner) is not a guarantor of CNX's Credit Facility.
• An aggregate principal amount of $115 million in outstanding borrowings under the Cardinal States Facility, less $1 million of
unamortized discount. Interest and a portion of the obligation are paid quarterly.
• An aggregate principal amount of $45 million in outstanding borrowings under the CSG Holdings Facility, less a nominal
unamortized discount. Interest and a portion of the obligation are paid quarterly.
Total Equity and Dividends
CNX had total equity of $4,422 million at December 31, 2020 compared to $4,962 million at December 31, 2019. See the
Consolidated Statements of Stockholders' Equity in Item 8 of this Form 10-K for additional details.
On September 28, 2020, the Merger of CNXM was completed (See Note 4 - Acquisitions and Dispositions in the Notes to the Audited
Consolidated Financial Statements in Item 8 of this Form 10-K for additional information). CNX accounted for the change in our ownership
interest in CNXM as an equity transaction which was reflected as a reduction of noncontrolling interest with corresponding increases to
common stock and capital in excess of par value.
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 suspended its quarterly dividend in March 2016 to further reflect the Company's
increased emphasis on growth at that time. 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. CNX's Credit Facility limits its 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 2.45 to 1.00 at December 31,
2020. The Credit Facility does not permit dividend payments in the event of default. The indentures to the 7.25% Senior Notes due March
2027 and the 6.00% Senior Notes due January 2029 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
under the year ended December 31, 2020.
/
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/
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 Audited 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 December 31, 2020. Management believes these items will expire without being funded. See
Note 20 - Commitments and Contingent Liabilities in the Notes to the Audited Consolidated Financial Statements in Item 8 of this Form 10-
K for additional details of the various financial guarantees that have been issued by CNX.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06 -
Accounting for Convertible Instruments and Contracts in an Entity's Own Equity. This ASU simplifies an entity's accounting for convertible
instruments by eliminating two of the three models in ASC 470-20 that require separate accounting for embedded conversion features,
simplifies the settlement assessment that entities are required to perform to determine whether a contract qualifies for equity classification,
requires entities to use the if-converted method for all convertible instruments in the diluted EPS calculation and include the effect of
potential share settlement (if the effect is more dilutive) for instruments that may be settled in cash or shares, except for certain liability-
classified share-based payment awards, requires new disclosures about events that occur during the reporting period and cause conversion
contingencies to be met and about the fair value of an entity's convertible debt at the instrument level, among other things. The amendments
in this ASU are effective for public entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal
years, and can be adopted through either a modified retrospective method of transition or a fully retrospective method of transition. Early
adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.
The Company is still evaluating the effect of adopting this guidance.
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. In January 2021, the FASB issued ASU 2021-01, which clarifies that certain provisions in Topic 848, if elected by an
entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a
result of reference rate reform. The amendments in these ASUs 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 - Significant Accounting Policies in the Notes to the
Audited Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K 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.
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ITEM 7A.
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 (over-the-counter swaps) 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. Typically, CNX “sells”
swaps under which it receives a fixed price from counterparties and pays a floating market price. During the second quarter of 2020, CNX
purchased, rather than sold, financial swaps for the period May through November of 2020 under which CNX will pay a fixed price to and
receive a floating price from its hedge counterparties.
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 this Form 10-K.
At December 31, 2020 and 2019, our open derivative instruments were in a net asset position with a fair value of $118 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 December 31, 2020 and 2019. A hypothetical 10 percent increase in future natural gas prices would have decreased
the fair value by $362 million and $383 million at December 31, 2020 and 2019, respectively. A hypothetical 10 percent decrease in future
natural gas prices would have increased the fair value by $366 million and $402 million at December 31, 2020 and 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. These instruments change the variable-rate cash flow exposure on the debt obligations to
fixed cash flows. At December 31, 2020 and 2019, CNX had $1,980 million and $1,797 million, respectively, aggregate principal amount of
debt outstanding under fixed-rate instruments, including unamortized debt issuance costs of $27 million and $9 million, respectively. At
December 31, 2020 and 2019, CNX had $452 million and $973 million, respectively, of debt outstanding under variable-rate instruments.
CNX’s primary exposure to market risk for changes in interest rates relates to our Credit Facility, under which there were $161 million of
borrowings at December 31, 2020 and $661 million at December 31, 2019, and CNXM's revolving credit facility, under which there were
$291 million of borrowings at December 31, 2020 and $312 million at December 31, 2019. A hypothetical 100 basis-point increase in the
average rate for CNX's variable-rate instruments would decrease pre-tax future earnings as of December 31, 2020 and 2019 by $5 million
and $10 million, respectively, on an annualized basis.
All of CNX's transactions are denominated in U.S. dollars, and, as a result, it does not have material exposure to currency exchange-
rate risks.
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/
Natural Gas Hedging Volumes
As of January 7, 2021, the Company's hedged volumes for the periods indicated are as follows:
2021 Fixed Price Volumes
Hedged Bcf
Weighted Average Hedge Price per Mcf
2022 Fixed Price Volumes
Hedged Bcf
Weighted Average Hedge Price per Mcf
2023 Fixed Price Volumes
Hedged Bcf
Weighted Average Hedge Price per Mcf
2024 Fixed Price Volumes
Hedged Bcf
Weighted Average Hedge Price per Mcf
2025 Fixed Price Volumes
Hedged Bcf
Weighted Average Hedge Price per Mcf
$
$
$
$
$
For the Three Months Ended
March 31,
June 30,
September 30,
December 31,
Total Year
126.3
2.57 $
101.4
2.41 $
70.2
2.24 $
67.6
2.32 $
25.4
2.10 $
112.1
2.45 $
115.2
2.45 $
119.2
2.52 $
96.9
2.32 $
71.0
2.21 $
64.7
2.27 $
25.7
2.10 $
97.9
2.32 $
71.8
2.21 $
65.4
2.27 $
26.0
2.10 $
95.1
2.30 $
71.8
2.23 $
65.4
2.27 $
25.9
2.10 $
472.1*
2.50
391.3
2.34
284.8
2.22
263.1
2.28
103.0
2.10
*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 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
Consolidated Statements of Income for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Balance Sheets at December 31, 2020 and 2019
Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 2020, 2019 and 2018
Consolidated Statements of Cash Flows for the Years Ended December 31, 2020, 2019, 2018
Notes to the Audited Consolidated Financial Statements
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82
83
84
86
87
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of CNX Resources Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of CNX Resources Corporation and Subsidiaries (the Company) as of
December 31, 2020 and 2019, and the related consolidated statements of income, comprehensive income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule listed in the
Index at Item 15 (a) (2) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of
its operations and its cash flows for each of the three years in the period ended December 31, 2020, in conformity with U.S. generally
accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Company's internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated
February 9, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the
Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,
and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates
made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were
communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the
financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit
matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating
the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they
relate.
/
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Description of the Matter
How We Addressed the Matter
in Our Audit
Description of the Matter
Issuance of Convertible Senior Notes
As described in Note 12 to the consolidated financial statements, in April 2020, the Company issued
$345.0 million of aggregate principal of 2.25% convertible senior notes due May 2026 in a private
offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as
amended. Additionally, the Company entered into separate capped call transactions to reduce potential
dilution to the Company’s common stock upon any conversion of the Convertible Notes. These
transactions are collectively referred to as the Convertible Notes Transactions. To account for the
Convertible Notes, the Company was required to separate the Convertible Notes into liability and equity
components. The carrying amount of the liability component was calculated by measuring the fair value of
a similar debt instrument that does not have an associated conversion feature. The carrying amount of the
equity component was determined by deducting the fair value of the liability component from the
principal value of the Convertible Notes. The equity component was recorded in capital in excess of par
value in the consolidated statement of stockholders’ equity and is not remeasured as long as it continues to
meet the conditions for equity classification.
Auditing the Company’s accounting for the Convertible Notes Transactions was complex due to the
judgment that was required in determining the balance sheet classification of the elements of the
Convertible Notes. Additionally, a detailed analysis of the terms of the Convertible Notes Transactions
was required to determine the existence of any derivatives that may require separate accounting under
applicable accounting guidance.
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over
the Convertible Notes Transactions. For example, we tested the Company's controls over the initial
recognition and measurement of the Convertible Notes Transactions, including the recording of the
associated liability and equity components. We also tested the evaluation of the Notes and the
identification and evaluation of specific features and the related accounting.
To test the initial accounting for the Convertible Notes Transactions, our audit procedures included,
among others, inspection of the agreements underlying the Convertible Notes Transactions and testing
management’s application of the relevant accounting guidance, including the determination of the balance
sheet classification of each transaction and the identification of any derivatives included in the
arrangements. We involved professionals with specialized skill and knowledge to assist in evaluating the
appropriateness of the accounting for the convertible notes, including conclusions reached with respect to
identification and bifurcation of embedded features.
Valuation of Goodwill
At December 31, 2020, the Company’s goodwill was $323.3 million and all goodwill was attributed to the
Midstream reporting unit in the Shale segment. As discussed in Note 9 to the consolidated financial
statements, goodwill is tested for impairment at least annually, 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.
Auditing management’s annual and interim quantitative goodwill impairment tests was complex and
highly judgmental due to the significant estimation required to determine the fair value of the Midstream
reporting unit. In particular, the fair value estimates were sensitive to significant assumptions, including
changes in estimated future revenues, which are affected by expectations about future market, industry
and economic conditions.
How We Addressed the Matter
in Our Audit
We tested controls that address the risks of material misstatement related to the Company’s goodwill
impairment review process, including controls over management’s review of the significant assumptions
described above.
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/
Description of the Matter
How We Addressed the Matter
in Our Audit
To test the estimated fair value of the Company’s midstream reporting unit, we performed audit
procedures that included, among others, assessing methodologies and testing the significant assumptions
discussed above and the underlying data used by the Company in its analysis. We compared the
significant assumptions used by management to current industry and economic trends and evaluated
whether changes in those trends would affect the significant assumptions. We assessed the historical
accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to
evaluate the changes in the fair value of the reporting unit that would result from changes in the
assumptions.
Depreciation, Depletion & Amortization
As described in Note 1, under the successful efforts method of accounting, depreciation, depletion, and
amortization (DD&A) related to proved gas properties is recorded using the units-of-production method.
For the year ended December 31, 2020, the Company recorded DD&A expense related to proved gas
properties of $400.8 million. Proved developed reserves, as estimated by petroleum engineers, are used to
calculate depreciation of wells and related equipment and facilities and amortization of intangible drilling
costs. Total proved reserves, also estimated by petroleum engineers, are used to calculate depletion on
property acquisitions. Proved oil and natural gas reserve estimates are based on geological and
engineering evaluations of in-place hydrocarbon volumes. Significant judgment is required by the
Company’s internal engineering staff in evaluating geological and engineering data when estimating
proved oil and natural gas reserves. Estimating reserves also requires the selection of inputs, including
price and operating, and development cost assumptions as well as tax rates by jurisdiction, among others.
Because of the complexity involved in estimating oil and natural gas reserves, management used
independent petroleum engineers to audit the estimates prepared by the Company’s internal engineering
staff as of December 31, 2020.
Auditing the Company’s DD&A calculation was especially complex because of the use of the work of the
internal engineering staff and the independent petroleum engineers and the evaluation of management’s
determination of the inputs described above used by the independent petroleum engineers in estimating
proved oil and natural gas reserves.
We obtained an understanding, evaluated the design and tested the operating effectiveness of the
Company’s controls over its process to calculate DD&A, including management’s controls over the
completeness and accuracy of the financial data provided to the independent petroleum engineers for use
in estimating the proved oil and natural gas reserves.
Our audit procedures included, among others, evaluating the professional qualifications and objectivity of
the individual primarily responsible for overseeing the preparation of the reserve estimates by the internal
engineering staff and the independent petroleum engineers used to audit the estimates. In addition, in
assessing whether we can use the work of the independent petroleum engineers, we evaluated the
completeness and accuracy of the financial data and inputs described above used by the independent
petroleum engineers in estimating proved oil and natural gas reserves by agreeing them to source
documentation and we identified and evaluated corroborative and contrary evidence. For proved
undeveloped reserves, we evaluated management’s development plan for compliance with the SEC rule
that undrilled locations are scheduled to be drilled within five years, unless specific circumstances justify
a longer time, by assessing consistency of the development projections with the Company’s drill plan and
the availability of capital relative to the drill plan. We also tested the mathematical accuracy of the DD&A
calculations, including comparing the proved oil and natural gas reserves amounts used to the Company’s
reserve report.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2008.
Pittsburgh, Pennsylvania
February 9, 2021
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/
CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
Revenue and Other Operating Income:
Natural Gas, NGLs and Oil Revenue
Gain (Loss) on Commodity Derivative Instruments
Purchased Gas Revenue
Other Revenue and Operating Income
For the Years Ended December 31,
2020
2019
2018
$
896,745 $
1,364,325 $
1,577,937
172,982
105,792
82,459
376,105
94,027
87,992
(30,212)
65,986
116,723
Total Revenue and Other Operating Income
1,257,978
1,922,449
1,730,434
Costs and Expenses:
Operating Expense
Lease Operating Expense
Transportation, Gathering and Compression
Production, Ad Valorem and Other Fees
Depreciation, Depletion and Amortization
Exploration and Production Related Other Costs
Purchased Gas Costs
Impairment of Exploration and Production Properties
Impairment of Goodwill
Impairment of Unproved Properties and Expirations
Impairment of Other Intangible Assets
Selling, General and Administrative Costs
Other Operating Expense
Total Operating Expense
Other Expense (Income)
Other Expense (Income)
Gain on Asset Sales and Abandonments, net
Gain on Previously Held Equity Interest
(Gain) Loss on Debt Extinguishment
Interest Expense
Total Other Expense (Income)
Total Costs and Expenses
(Loss) Earnings Before Income Tax
Income Tax (Benefit) Expense
Net (Loss) Income
Less: Net Income Attributable to Noncontrolling Interests
Net (Loss) Income Attributable to CNX Resources Shareholders
(Loss) Earnings Per Share
Basic
Diluted
Dividends Declared Per Share
40,407
285,683
24,196
501,821
14,994
100,902
61,849
473,045
—
—
109,375
85,472
65,443
330,539
27,461
508,463
44,380
90,553
327,400
—
119,429
—
143,550
79,255
95,139
302,933
32,750
493,423
12,033
64,817
—
—
—
18,650
134,806
72,412
1,697,744
1,736,473
1,226,963
23,584
(21,224)
—
(10,101)
170,806
163,065
2,862
(35,563)
—
7,614
151,379
126,292
1,860,809
1,862,765
(602,831)
(174,087)
(428,744)
55,031
59,684
27,736
31,948
112,678
(483,775) $
(80,730) $
(2.43) $
(2.43) $
(0.42) $
(0.42) $
— $
— $
$
$
$
$
(14,571)
(157,015)
(623,663)
54,118
145,934
(595,197)
631,766
1,098,668
215,557
883,111
86,578
796,533
3.75
3.71
—
/
The accompanying notes are an integral part of these financial statements.
82
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CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Dollars in thousands)
Net (Loss) Income
Other Comprehensive (Loss) Income:
For the Years Ended December 31,
2020
2019
2018
$
(428,744) $
31,948 $
883,111
Actuarially Determined Long-Term Liability Adjustments (Net of tax: $914,
$1,664, $(792))
(2,579)
(4,701)
1,672
Comprehensive (Loss) Income
(431,323)
27,247
884,783
Less: Comprehensive Income Attributable to Noncontrolling Interests
55,031
112,678
86,578
Comprehensive (Loss) Income Attributable to CNX Resources Shareholders
$
(486,354) $
(85,431) $
798,205
The accompanying notes are an integral part of these financial statements.
/
83
/
CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
Current Assets:
Cash and Cash Equivalents
Restricted Cash
Accounts and Notes Receivable:
Trade (Note 17)
Other Receivables
Supplies Inventories
Recoverable Income Taxes (Note 6)
Derivative Instruments (Note 19)
Prepaid Expenses
Total Current Assets
Property, Plant and Equipment (Note 8):
Property, Plant and Equipment
Less—Accumulated Depreciation, Depletion and Amortization
Total Property, Plant and Equipment—Net
Other Assets:
Operating Lease Right-of-Use Assets (Note 13)
Investment in Affiliates
Derivative Instruments (Note 19)
Goodwill (Note 9)
Other Intangible Assets (Note 9)
Restricted Cash
Other
Total Other Assets
TOTAL ASSETS
December 31,
December 31,
2020
2019
$
15,617 $
16,283
735
—
145,929
133,480
4,238
9,657
88
84,657
12,411
273,332
13,679
6,984
62,425
247,794
17,456
498,101
10,963,996
10,572,006
3,938,451
7,025,545
3,435,431
7,136,575
108,683
16,022
188,237
323,314
90,095
5,247
11,289
187,097
16,710
314,096
796,359
96,647
—
15,221
742,887
1,426,130
$
8,041,764 $
9,060,806
/
The accompanying notes are an integral part of these financial statements.
84
/
CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable
Derivative Instruments (Note 19)
Current Portion of Finance Lease Obligations (Note 13)
Current Portion of Long-Term Debt (Note 12)
Current Portion of Operating Lease Obligations (Note 13)
Other Accrued Liabilities (Note 11)
Total Current Liabilities
Non-Current Liabilities:
Long-Term Debt (Note 12)
Finance Lease Obligations (Note 13)
Operating Lease Obligations (Note 13)
Derivative Instruments (Note 19)
Deferred Income Taxes (Note 6)
Asset Retirement Obligations (Note 7)
Other
Total Non-Current Liabilities
TOTAL LIABILITIES
Stockholders’ Equity:
Common Stock, $0.01 Par Value; 500,000,000 Shares Authorized, 220,440,993 Issued and
Outstanding at December 31, 2020; 186,642,962 Issued and Outstanding at December 31, 2019
Capital in Excess of Par Value
Preferred Stock, 15,000,000 Shares Authorized, None Issued and Outstanding
Retained Earnings
Accumulated Other Comprehensive Loss
Total CNX Resources Stockholders’ Equity
Noncontrolling Interest
TOTAL STOCKHOLDERS' EQUITY
December 31,
December 31,
2020
2019
$
118,185 $
202,553
42,329
6,876
22,574
52,575
198,773
441,312
41,466
7,164
—
61,670
216,086
528,939
2,401,427
2,754,443
1,057
53,235
127,290
466,253
84,712
44,041
7,706
110,466
115,862
476,108
63,377
41,596
3,178,015
3,619,327
3,569,558
4,098,497
2,208
1,870
2,959,357
2,199,605
—
—
1,476,056
1,971,676
(15,184)
4,422,437
—
4,422,437
(12,605)
4,160,546
801,763
4,962,309
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
8,041,764 $
9,060,806
/
The accompanying notes are an integral part of these financial statements.
85
/
CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Dollars in thousands)
December 31, 2017
Net Income
Issuance of Common Stock
Purchase and Retirement of Common Stock
Shares Withheld for Taxes
Amortization of Stock-Based Compensation
Awards
Other Comprehensive Income
ASU 2018-02 Reclassification
Distributions to CNXM Noncontrolling
Interest Holders
Acquisition of CNX Gathering, LLC
December 31, 2018
December 31, 2018
Net (Loss) Income
Issuance of Common Stock
Purchase and Retirement of Common Stock
Shares Withheld for Taxes
Amortization of Stock-Based Compensation
Awards
Other Comprehensive Loss
Distributions to CNXM Noncontrolling
Interest Holders
December 31, 2019
December 31, 2019
Net (Loss) Income
Issuance of Common Stock
Purchase and Retirement of Common Stock
Shares Withheld for Taxes
Amortization of Stock-Based Compensation
Awards
Equity Component of Convertible Senior
Notes, net of Issuance Costs
Purchase of Capped Call
Other Comprehensive Loss
Distributions to CNXM Noncontrolling
Interest Holders
CNXM Merger
December 31, 2020
Capital in
Excess
of Par
Value
Retained
Earnings
(Deficit)
Common
Stock
Accumulated
Other
Total
Comprehensive
CNX Resources
Non-
Income
(Loss)
Stockholders’
Controlling
Equity
Interest
Total Equity
$
2,241 $
2,450,323 $
1,455,811 $
(8,476) $
3,899,899 $
— $
3,899,899
$
$
$
$
—
8
(259)
—
—
—
—
—
—
—
1,705
796,533
—
(206,895)
(176,598)
—
(5,037)
18,930
—
—
—
—
—
—
1,100
—
—
—
—
—
—
—
1,672
(1,100)
—
—
796,533
1,713
(383,752)
(5,037)
18,930
1,672
—
—
—
86,578
—
—
(348)
2,411
—
—
(55,433)
718,577
883,111
1,713
(383,752)
(5,385)
21,341
1,672
—
(55,433)
718,577
1,990 $
2,264,063 $
2,071,809 $
(7,904) $
4,329,958 $
751,785 $
5,081,743
1,990 $
2,264,063 $
2,071,809 $
(7,904) $
4,329,958 $
751,785 $
5,081,743
—
9
(129)
—
—
—
—
—
556
(101,559)
—
36,545
—
—
(80,730)
—
(13,789)
(5,614)
—
—
—
—
—
—
—
—
(4,701)
(80,730)
112,678
565
(115,477)
(5,614)
36,545
(4,701)
—
—
(696)
1,880
—
31,948
565
(115,477)
(6,310)
38,425
(4,701)
—
—
(63,884)
(63,884)
1,870 $
2,199,605 $
1,971,676 $
(12,605) $
4,160,546 $
801,763 $
4,962,309
1,870 $
2,199,605 $
1,971,676 $
(12,605) $
4,160,546 $
801,763 $
4,962,309
—
8
(41)
—
—
—
—
—
—
371
—
2,049
(33,067)
—
12,897
78,317
(26,351)
—
—
725,907
(483,775)
—
(10,139)
(1,706)
—
—
—
—
—
—
—
—
—
—
—
—
—
(2,579)
—
—
(483,775)
55,031
(428,744)
2,057
(43,247)
(1,706)
—
—
(309)
2,057
(43,247)
(2,015)
12,897
1,485
14,382
78,317
(26,351)
(2,579)
—
—
—
—
(41,987)
726,278
(815,983)
78,317
(26,351)
(2,579)
(41,987)
(89,705)
$
2,208 $
2,959,357 $
1,476,056 $
(15,184) $
4,422,437 $
— $
4,422,437
/
The accompanying notes are an integral part of these financial statements.
86
/
CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Cash Flows from Operating Activities:
Net (Loss) Income
For the Years Ended December 31,
2020
2019
2018
$
(428,744) $
31,948 $
883,111
Adjustments to Reconcile Net (Loss) Income to Net Cash Provided by Continuing Operating Activities:
Depreciation, Depletion and Amortization
Amortization of Deferred Financing Costs
Impairment of Exploration and Production Properties
Impairment of Unproved Properties and Expirations
Impairment of Goodwill
Impairment of Other Intangible Assets
Stock-Based Compensation
Gain on Asset Sales and Abandonments, net
Gain on Previously Held Equity Interest
(Gain) Loss on Debt Extinguishment
(Gain) Loss on Commodity Derivative Instruments
Loss on Other Derivative Instruments
Net Cash Received (Paid) in Settlement of Commodity Derivative Instruments
Deferred Income Taxes
Equity in Loss (Earnings) of Affiliates
Return on Equity Investment
Changes in Operating Assets:
Accounts and Notes Receivable
Supplies Inventories
Recoverable Income Taxes
Prepaid Expenses
Changes in Other Assets
Changes in Operating Liabilities:
Accounts Payable
Accrued Interest
Other Operating Liabilities
Changes in Other Liabilities
Net Cash Provided by Operating Activities
Cash Flows from Investing Activities:
Capital Expenditures
CNX Gathering LLC Acquisition, Net of Cash Acquired
Proceeds from Asset Sales
Net Distributions from Equity Affiliates
Net Cash Used in Investing Activities
Cash Flows from Financing Activities:
Net (Payments on) Proceeds from CNX Revolving Credit Facility
Payments on Miscellaneous Borrowings
Payments on Long-Term Notes
Proceeds from Issuance of CNX Senior Notes
Proceeds from Issuance of CNXM Senior Notes
Net Proceeds from CSG Non-Revolving Credit Facilities
Proceeds from Issuance of Convertible Senior Notes
Purchase of Capped Call Related to Convertible Senior Notes
501,821
21,202
61,849
—
473,045
—
14,382
(21,224)
—
(10,101)
(172,982)
13,051
461,217
(118,300)
688
—
(4,895)
(2,673)
62,336
4,923
(39)
(48,485)
(4,314)
(6,453)
(1,233)
795,071
508,463
7,747
327,400
119,429
—
—
38,425
(35,563)
—
7,614
(376,105)
—
69,780
79,092
(2,103)
4,056
118,622
2,731
87,050
3,115
1,000
(6,405)
4,529
13,242
(23,507)
980,560
493,423
8,361
—
—
—
18,650
21,341
(157,015)
(623,663)
54,118
30,212
—
(69,720)
345,560
(5,363)
—
(57,734)
1,027
(118,498)
(1,391)
4,904
12,760
(5,839)
53,135
(1,556)
885,823
(487,291)
(1,192,599)
(1,116,397)
—
48,322
—
—
(299,272)
45,160
—
511,767
9,250
(438,969)
(1,147,439)
(894,652)
(500,200)
(7,155)
(882,213)
707,000
—
158,794
334,650
(35,673)
49,000
(7,149)
612,000
(7,165)
(405,876)
(955,019)
500,000
—
—
—
—
—
394,000
—
—
—
/
Net (Payments on) Proceeds from CNXM Revolving Credit Facility
Distributions to CNXM Noncontrolling Interest Holders
Proceeds from Issuance of Common Stock
Shares Withheld for Taxes
Purchases of Common Stock
Debt Issuance and Financing Fees
Net Cash (Used in) Provided by Financing Activities
Net Increase (Decrease) in Cash, Cash Equivalents, and Restricted Cash
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period
(20,750)
(41,987)
2,057
(2,015)
(37,247)
(26,047)
(350,786)
5,316
16,283
227,750
(63,884)
565
(6,310)
(65,500)
(55,433)
1,713
(5,385)
(117,477)
(381,752)
(10,655)
165,964
(915)
17,198
(20,599)
(483,140)
(491,969)
509,167
Cash, Cash Equivalents, and Restricted Cash at End of Period
$
21,599 $
16,283 $
17,198
The accompanying notes are an integral part of these financial statements.
87
/
CNX RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
NOTE 1—SIGNIFICANT ACCOUNTING POLICIES:
A summary of the significant accounting policies of CNX Resources Corporation and subsidiaries ("CNX" or "the Company") is
presented below. These, together with the other notes that follow, are an integral part of the Consolidated Financial Statements.
Basis of Consolidation:
The Consolidated Financial Statements include the accounts of CNX Resources Corporation, its wholly-owned subsidiaries, and its
majority-owned and/or controlled subsidiaries. Investments in business entities in which CNX does not have control but has the ability to
exercise significant influence over the operating and financial policies, are accounted for under the equity method. All significant
intercompany transactions and accounts have been eliminated in consolidation. Investments in oil and natural gas producing entities are
accounted for under the proportionate consolidation method.
Prior to the Merger on September 28, 2020, see Note 4 - Acquisitions and Dispositions, certain variable interest entities were required
to be consolidated pursuant to the Consolidation topic of the Financial Accounting Standards Board (FASB) Accounting Standards
Codification. The portion of these entities that was not owned by the Company was presented as non-controlling interest.
Use of Estimates:
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, as
well as various disclosures. Actual results could differ from those estimates. The most significant estimates included in, but not limited to,
the preparation of the consolidated financial statements are related to long-lived assets (including intangible assets and goodwill), accounts
receivable credit losses, the values of natural gas, NGLs, condensate and oil (collectively "natural gas") reserves, asset retirement
obligations, deferred income tax assets and liabilities, contingencies, fair value of derivative instruments, the fair value of the liability and
equity components of the convertible senior notes, stock-based compensation and salary retirement benefits.
Cash, Cash Equivalents, and Restricted Cash
Cash and cash equivalents include cash on hand and on deposit at banking institutions as well as all highly liquid short-term securities
with original maturities of three months or less.
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 Agreements, each dated March 13, 2020 (See Note 12 - Long-Term Debt for more
information).
The following table provides a reconciliation of cash, cash equivalents, and restricted cash to amounts shown in the statement of cash
flows:
Cash and Cash Equivalents
Restricted Cash, Current Portion
Restricted Cash, Less Current Portion
Total Cash, Cash Equivalents and Restricted Cash
December 31,
2020
2019
2018
15,617 $
16,283 $
17,198
735
5,247
—
—
—
—
21,599 $
16,283 $
17,198
$
$
88
/
Trade Accounts Receivable and Allowance for Credit Losses:
Trade accounts receivable are recorded at the invoiced amount and do not bear interest.
On January 1, 2020, CNX adopted Accounting Standards Update (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 uncollectible 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 and collectability on an on-going
basis. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for
recovery is considered remote.
There were no material financing receivables with a contractual maturity greater than one year at December 31, 2020 or 2019.
As of December 31, 2020 and 2019, Accounts Receivable - Trade were $145,929 and $133,480, respectively, and Other Receivables
were $4,238 and $13,679, respectively.
The following represents the roll forward of the allowance for credit losses for the years ended:
Allowance for Credit Losses - Trade, Beginning of Year
Provision for Expected Credit Losses
Allowance for Credit Losses - Trade, End of Period
Allowance for Credit Losses - Other Receivables, Beginning of Year
Provision for Expected Credit Losses
Write-off of Uncollectible Accounts
Allowance for Credit Losses - Other Receivables, End of Period
Inventories:
December 31,
2020
2019
$
$
$
$
— $
84
84 $
2,463 $
2,760
(1,975)
3,248 $
—
—
—
2,038
595
(170)
2,463
Inventories are stated at the lower of cost or net realizable value. The cost of supplies inventory is determined by the average cost
method and includes operating and maintenance supplies to be used in the Company's operations.
Property, Plant and Equipment:
CNX uses the successful efforts method of accounting for natural gas producing activities. Costs of property acquisitions, successful
exploratory, development wells and related support equipment and facilities are capitalized. Periodic valuation provisions for impairment of
capitalized costs of unproved mineral interests are expensed. Costs of unsuccessful exploratory wells are expensed when such wells are
determined to be non-productive, or if the determination cannot be made after finding sufficient quantities of reserves to continue evaluating
the viability of the project. The costs of producing properties and mineral
/
89
/
interests are amortized using the units-of-production method. Depreciation, depletion and amortization expense is calculated based on the
actual produced sales volumes multiplied by the applicable rate per unit, which is derived by dividing the net capitalized costs by the
number of units expected to be produced over the life of the reserves. Wells and related equipment and intangible drilling costs are also
amortized on a units-of-production method. Proved developed reserves, as estimated by petroleum engineers, are used to calculate
amortization of wells and related equipment and facilities and amortization of intangible drilling costs. Total proved reserves, also estimated
by petroleum engineers, are used to calculate depletion on property acquisitions. Proved oil and natural gas reserve estimates are based on
geological and engineering evaluations of in-place hydrocarbon volumes. Units-of-production amortization rates are revised at least once per
year, or more frequently if events and circumstances indicate an adjustment is necessary. Such revisions are accounted for prospectively as
changes in accounting estimates. The Company recorded depreciation, depletion and amortization expense related to proved gas properties
using the units-of-production method of $400,758, $423,488, and $412,588 for the years ended December 31, 2020, 2019, and 2018,
respectively.
Property, plant and equipment is recorded at cost upon acquisition. Expenditures which extend the useful lives of existing plant and
equipment are capitalized. Interest costs applicable to major asset additions are capitalized during the construction period. Planned major
maintenance costs which do not extend the useful lives of existing plant and equipment are expensed as incurred.
Depreciation of plant and equipment is calculated on the straight-line method over their estimated useful lives or lease terms,
generally as follows:
Buildings and Improvements
Machinery and Equipment
Gathering and Transmission
Leasehold Improvements
Years
10 to 45
3 to 25
30 to 40
Life of Lease
Costs for purchased software are capitalized and amortized using the straight-line method over the estimated useful life which does
not exceed seven years.
Impairment of Long-Lived Assets:
Impairment of long-lived assets is recorded when indicators of impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the assets' carrying value. The carrying value of the assets is then reduced to its estimated fair value
which is usually measured based on an estimate of future discounted cash flows. Impairment of equity investments is recorded when
indicators of impairment are present, and the estimated fair value of the investment is less than the assets' carrying value.
Impairment of Proved Properties:
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 year ended December 31, 2020, CNX recognized certain indicators of impairments specific to our Southwest Pennsylvania
Coalbed Methane asset group and determined that the 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 first quarter.
90
/
During the fourth quarter of 2019, CNX identified certain indicators of impairment specific to our Central Pennsylvania Marcellus
asset group and determined that the 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 $327,400 was included in Impairment of
Exploration and Production Properties in the Consolidated Statements of Income. This impairment was related to 56 operated wells and
approximately 51,000 acres within our Central Pennsylvania Marcellus proved properties in Armstrong, Indiana, Jefferson and
Westmoreland counties. The majority of these properties were developed prior to 2013 and the last of these properties were developed in
2015.
Impairment of Unproved Properties:
Capitalized costs of unproved oil and gas properties are evaluated at least annually for recoverability on a prospective basis. Indicators
of potential impairment include, but are not limited to, changes brought about by economic factors, commodity price outlooks, our
geologists’ evaluation of the property, favorable or unfavorable activity on the property being evaluated and/or adjacent properties, potential
shifts in business strategy employed by management and historical experience. The likelihood of an impairment of unproved oil and gas
properties increases as the expiration of a lease term approaches if drilling activity has not commenced. If it is determined that the Company
does not intend to drill on the property prior to expiration or does not have the intent and ability to extend, renew, trade, or sell the lease
prior to expiration, an impairment expense is recorded. Expense for lease expirations that were not previously impaired are recorded as the
leases expire.
For the year ended December 31, 2019, CNX recorded an impairment related to unproved properties of $119,429 that was included in
Impairment of Unproved Properties and Expirations in the Consolidated Statements of Income. These unproved properties are within CNX's
Central Pennsylvania operating region and east of the acreage associated with the proved property impairment described above.
Exploration expense, which is associated primarily with lease expirations, was $14,994, $44,380 and $12,033 for the years ended
December 31, 2020, 2019 and 2018, respectively, and is included in Exploration and Production Related Other Costs in the Consolidated
Statements of Income.
Impairment of Goodwill:
In connection with the Midstream Acquisition (See Note 4 - Acquisitions and Dispositions for more information), CNX recorded
$796,359 of goodwill through the application of purchase accounting. The goodwill recorded was allocated in its entirety to the Midstream
reporting unit within the Shale segment.
Goodwill is the cost of an acquisition less the fair value of the identifiable net assets of the acquired business. Goodwill is not
amortized, but rather it is evaluated 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. These indicators include, but
are not limited to, overall financial performance, industry and market considerations, anticipated future cash flows and discount rates,
changes in the stock price with regards to CNX, regulatory and legal developments, and other relevant factors.
In connection with the annual evaluation of goodwill for impairment or earlier if an impairment indicator is identified, 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. In the case of a quantitative assessment, CNX estimates the fair value of the reporting unit with
which the goodwill is associated using level 3 inputs and compares it to the carrying value. 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.
The income approach is used to estimate value based on the present value of future economic benefits that are expected to be produced
by an asset or business entity. This approach generally involves two general steps:
(i) The first step involves establishing a forecast of the estimated future net cash flows expected to accrue directly or indirectly to
the owner of the asset over its remaining useful life or to the owner of the business entity (including a
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reporting unit).
(ii) The second step involves discounting these estimated future net cash flows to their present value using a market rate of return.
CNX determined the fair value based on estimated future revenues and earnings before deducting net interest expense (interest expense
less interest income) and income taxes (EBITDA - a non-GAAP financial measure), and also included estimates for capital expenditures,
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 seven-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 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 of this 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.
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 master limited partnership (MLP) market space, an impairment indicator was identified. 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 $473,045 was included in Impairment of Goodwill in the Consolidated Statements of Income.
In connection with our annual assessment of goodwill in the fourth quarter of 2020, we 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, we concluded that the estimated fair value exceeded carrying value, and accordingly no
adjustment to goodwill was necessary. However, the margin by which the fair value of the Midstream reporting unit exceeded its carrying
value was less than 10%. As a result, this reporting unit is susceptible to impairment risk from further adverse macroeconomic conditions or
other adverse factors such as future gathering volumes being less than those currently estimated. Any such 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.
Impairment of Definite-Lived Intangible Assets:
Definite-lived intangible assets are amortized on a straight-line basis over their estimated economic lives and they are reviewed for
impairment when indicators of impairment are present.
In connection with the Midstream Acquisition (See Note 4 - Acquisitions and Dispositions for more information), CNX recorded
$128,781 of other intangible assets, which are comprised of customer relationships, through the application of purchase accounting.
In May 2018, CNX determined that the carrying value of a portion of the customer relationship intangible assets that were acquired in
connection with the Midstream acquisition exceeded their fair value in conjunction with the Asset Exchange Agreement with HG Energy II
Appalachia, LLC (See Note 4 - Acquisitions and Dispositions for more information). CNX recognized an impairment on this intangible
asset of $18,650, which is included in Impairment of Other Intangible Assets in the Consolidated Statements of Income.
The customer relationships intangible asset is amortized on a straight-line basis over approximately 17 years.
Income Taxes:
Deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. The provision for income taxes represents income taxes paid or
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payable for the current year and the change in deferred taxes, excluding the effects of acquisitions during the year. Deferred taxes result from
differences between the financial and tax bases of the Company's assets and liabilities and are adjusted for changes in tax rates and tax laws
when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a deferred tax
benefit will not be realized.
CNX evaluates all tax positions taken on the state and federal tax filings to determine if the position is more likely than not to be
sustained upon examination. For positions that do not meet the more likely than not to be sustained criteria, the Company determines, on a
cumulative probability basis, the largest amount of benefit that is more likely than not to be realized upon ultimate settlement. A previously
recognized tax position is reversed when it is subsequently determined that a tax position no longer meets the more likely than not threshold
to be sustained. The evaluation of the sustainability of a tax position and the probable amount that is more likely than not is based on
judgment, historical experience and on various other assumptions that the Company believes are reasonable under the circumstances. The
results of these estimates, that are not readily apparent from other sources, form the basis for recognizing an uncertain tax position liability.
Actual results could differ from those estimates upon subsequent resolution of identified matters.
Asset Retirement Obligations:
CNX accrues for dismantling and removing costs of gas-related facilities and related surface reclamation using the accounting
treatment prescribed by the Asset Retirement and Environmental Obligations Topic of the FASB Accounting Standards Codification. This
topic requires the fair value of an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. Estimates are regularly reviewed by management and are revised for changes in future estimated costs and
regulatory requirements. The present value of the estimated asset retirement costs is capitalized as part of the carrying amount of the long-
lived asset. Amortization of the capitalized asset retirement cost is generally determined on a units-of-production basis. Accretion of the
asset retirement obligation is recognized over time and generally will escalate over the life of the producing asset, typically as production
declines. Accretion is included in Depreciation, Depletion and Amortization in the Consolidated Statements of Income.
Investment Plan:
CNX has an investment plan that is available to most employees. Throughout the years ended December 31, 2020, 2019 and 2018, the
Company's matching contribution was 6% of eligible compensation contributed by eligible employees. The Company may also make
discretionary contributions to the Plan ranging from 1% to 6% of eligible compensation for eligible employees (as defined by the Plan).
There were no such discretionary contributions made by CNX for the years ended December 31, 2020, 2019 and 2018. Total matching
contribution payments and costs were $2,976, $3,460 and $3,205 for the years ended December 31, 2020, 2019 and 2018, respectively.
Revenue Recognition:
Revenues are recognized when the recognition criteria of ASC 606 are met, which generally occurs at the point in which title passes to
the customers. For natural gas, NGL and oil revenue, this occurs at the contractual point of delivery. For revenues generated from natural gas
gathering services provided to third-parties, this occurs when obligations under the terms of the contract with the shipper are satisfied.
CNX sells natural gas to accommodate the delivery points of its customers. In general, this gas is purchased at market price and re-
sold on the same day at market price less a small transaction fee. These matching buy/sell transactions include a legal right of offset of
obligations and have been simultaneously entered into with the counterparty. These transactions qualify for netting under the Nonmonetary
Transactions Topic of the FASB Accounting Standards Codification and are, therefore, recorded net within the Consolidated Statements of
Income in the Purchased Gas Revenue line.
CNX purchases natural gas produced by third-parties at market prices less a fee. The gas purchased from third-parties is then resold to
end users or gas marketers at current market prices. These revenues and expenses are recorded gross as Purchased Gas Revenue and
Purchase Gas Costs, respectively, in the Consolidated Statements of Income. Purchased gas revenue is recognized when title passes to the
customer. Purchased gas costs are recognized when title passes to CNX from the third-party.
Contingencies:
From time to time, CNX, or its subsidiaries, are subject to various lawsuits and claims with respect to such matters as personal injury,
wrongful death, damage to property, exposure to hazardous substances, governmental regulations (including environmental remediation),
employment and contract disputes and other claims and actions, arising out of the normal course of
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business. Liabilities are recorded when it is probable that obligations have been incurred and the amounts can be reasonably estimated.
Estimates are developed through consultation with legal counsel involved in the defense of these matters and are based upon the nature of
the lawsuit, progress of the case in court, view of legal counsel, prior experience in similar matters and management's intended response.
Environmental liabilities are not discounted or reduced by possible recoveries from third-parties. Legal fees associated with defending these
various lawsuits and claims are expensed when incurred.
Stock-Based Compensation:
Stock-based compensation expense for all stock-based compensation awards is based on the grant date fair value estimated in
accordance with the provisions of the Stock Compensation Topic of the FASB Accounting Standards Codification. CNX recognizes these
compensation costs on a straight-line basis over the requisite service period of the award, which is generally the award's vesting term. See
Note 15 - Stock-Based Compensation for more information.
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.
CNX enters into financial derivative instruments to manage its exposure to commodity price volatility. Natural gas commodity hedges
are accounted for on a mark-to-market basis with changes in fair value recorded in current period earnings.
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 any of its counterparties cease to be secured on the same basis as
similar obligations with the other lenders under the credit facility, CNX would be required 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 the
counterparties. CNX recognizes all financial derivative instruments as either assets or liabilities at fair value in the Consolidated Balance
Sheets on a gross basis, generally measured based upon Level 2 inputs, which is further described in Note 18 - Fair Value of Financial
Instruments.
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.
CNX is exposed to credit risk in the event of non-performance by counterparties, whose creditworthiness is subject to continuing
review. Historically, CNX has not experienced any issues of non-performance by derivative counterparties.
Recent Accounting Pronouncements:
In August 2020, the FASB issued Accounting Standards Update (ASU) 2020-06 - Accounting for Convertible Instruments and
Contracts in an Entity's Own Equity. This ASU simplifies an entity's accounting for convertible instruments by eliminating two of the three
models in ASC 470-20 that require separate accounting for embedded conversion features, simplifies the settlement assessment that entities
are required to perform to determine whether a contract qualifies for equity classification, requires entities to use the if-converted method for
all convertible instruments in the diluted EPS calculation and include the effect of potential share settlement (if the effect is more dilutive)
for instruments that may be settled in cash or shares, except for certain liability-classified share-based payment awards, requires new
disclosures about events that occur during the reporting period and cause conversion contingencies to be met and about the fair value of an
entity's convertible debt at the instrument level, among other things. The amendments in this ASU are effective for public entities for fiscal
years beginning after December 15, 2021, including interim periods within those fiscal years, and can be adopted through either a modified
retrospective method of transition or a fully retrospective method of transition. Early adoption is permitted, but no earlier than fiscal years
beginning after December 15, 2020, including interim periods within those fiscal years. The Company is still evaluating the effect of
adopting this guidance.
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
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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. In January 2021, the FASB issued ASU 2021-
01, which clarifies that certain provisions in Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for
margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The amendments in these ASUs 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. 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.
Reclassifications:
Certain amounts in prior periods have been reclassified to conform with the report classifications of the year ended December 31,
2020, with no effect on previously reported net income, stockholders' equity, or statement of cash flows.
Subsequent Events:
The Company has evaluated all subsequent events through the date the financial statements were issued. No material recognized or
non-recognizable subsequent events were identified.
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, performance share units and shares issuable upon conversion of CNX's outstanding Convertible Notes (See Note 12 -
Long-Term Debt). 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.
Pursuant to the Merger (See Note 4 - Acquisitions and Dispositions for more information), all outstanding phantom units previously
granted under the CNXM long-term incentive plan were converted into the right to receive 0.88 shares of common stock of CNX. As such,
all outstanding phantom units were converted, effective as of the closing of the Merger, into CNX restricted stock units. Each CNX
restricted stock unit will be subject to the same vesting, forfeiture and other terms and conditions applicable to the converted CNXM
phantom units. Under Accounting Standards Codification Topic 718, Compensation - Stock Compensation, it was determined that there was
no additional compensation cost to record as the conversion of awards did not result in incremental fair value. CNXM's dilutive units did not
have a material impact on the Company's earnings per share calculations for the period from January 1, 2020 through September 30, 2020,
the year ended December 31, 2019, or the period from January 3, 2018 through December 31, 2018.
The table below sets forth the share-based awards that have been excluded from the computation of diluted earnings per share because
their effect would be antidilutive:
Anti-Dilutive Options
Anti-Dilutive Restricted Stock Units
Anti-Dilutive Performance Share Units
Anti-Dilutive Performance Share Options
For the Years Ended December 31,
2020
4,200,509
2,160,727
721,244
—
2019
4,696,264
1,282,582
752,899
927,268
2018
2,285,775
—
145,217
927,268
7,082,480
7,659,013
3,358,260
The Company expects to settle the principal amount of the Convertible Notes in cash. As a result, only the amount by which the
conversion value exceeds the aggregated principal amount of the Convertible Notes is included in the diluted
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earnings per share computation under the treasury stock method. The conversion spread has a dilutive impact on diluted earnings per share
when the average market price of the Company’s common stock for a given period exceeds the initial conversion price of $12.84 per share
for the Convertible Notes. As of December 31, 2020, the if-converted value of the Convertible Notes did not exceed the outstanding
principal amount. In connection with the Convertible Notes’ issuance, the Company entered into privately negotiated capped call
transactions with certain counterparties, (the “Capped Calls” and “Capped Call Transactions”), which were not included in calculating the
number of diluted shares outstanding, as their effect would have been anti-dilutive.
The computations for basic and diluted (loss) earnings per share are as follows:
Net (Loss) Income
Less: Net Income Attributable to Non-Controlling Interest
Net (Loss) Income Attributable to CNX Resources Shareholders
Weighted-Average Shares of Common Stock Outstanding
Effect of Diluted Shares*
Weighted-Average Diluted Shares of Common Stock Outstanding
(Loss) Earnings Per Share:
Basic
Diluted
For the Years Ended December 31,
2020
2019
2018
(428,744) $
31,948 $
55,031
112,678
(483,775) $
(80,730) $
883,111
86,578
796,533
199,225,441
190,727,122
212,348,581
—
—
2,280,384
199,225,441
190,727,122
214,628,965
(2.43) $
(2.43) $
(0.42) $
(0.42) $
3.75
3.71
$
$
$
$
*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.
Shares of common stock outstanding were as follows:
Balance, Beginning of Year
Issuance Related to Stock-Based Compensation (1)
Retirement of Common Stock (2)
Issuance Related to CNXM Merger
Balance, End of Year
(1) See Note 15 - Stock-Based Compensation for additional information.
(2) See Note 5 - Stock Repurchase for additional information.
NOTE 3—REVENUE FROM CONTRACTS WITH CUSTOMERS:
For the Years Ended December 31,
2020
2019
2018
186,642,962
198,663,342
223,743,322
882,335
909,107
814,344
(4,138,527)
(12,929,487)
(25,894,324)
37,054,223
—
—
220,440,993
186,642,962
198,663,342
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
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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.
Included in Other Revenue and Operating Income in the Consolidated Statements of Income and in the below table are revenues
generated from natural gas gathering services provided to third-parties. 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.
Disaggregation of Revenue
The following table is a disaggregation of revenue by major source:
Revenue from Contracts with Customers:
Natural Gas Revenue
NGL Revenue
Oil/Condensate Revenue
Total Natural Gas, NGL and Oil Revenue
For the Years Ended December 31,
2020
2019
2018
$
823,132 $
1,251,013 $
1,391,459
64,138
9,475
104,139
9,173
165,883
20,595
896,745
1,364,325
1,577,937
Purchased Gas Revenue
105,792
94,027
65,986
Other Sources of Revenue and Other Operating Income:
Gain (Loss) on Commodity Derivative Instruments
Other Revenue and Operating Income
Total Revenue and Other Operating Income
172,982
82,459
376,105
87,992
(30,212)
116,723
$
1,257,978 $
1,922,449 $
1,730,434
The disaggregated revenue information corresponds with the Company’s segment reporting found in Note 21 - 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 $145,929, respectively, as of December 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
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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 $120,275 as of December 31, 2020. The Company expects to recognize net
revenue of $55,500 in the next 12 months and $37,151 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.
Prior-Period Performance Obligations
CNX records revenue in the month production is delivered to the purchaser. However, settlement statements for certain natural gas,
NGL and oil 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 actual revenue received historically have not been significant. For each of the years ended December 31, 2020, 2019, and
2018, revenue recognized in the current reporting period related to performance obligations satisfied in prior a reporting period was not
material.
NOTE 4—ACQUISITIONS AND DISPOSITIONS:
On July 26, 2020, CNX entered into an Agreement and Plan of Merger (the “Merger Agreement”) with CNXM, CNX Midstream GP
LLC (the “General Partner”) and CNX Resources Holding LLC., a wholly owned subsidiary of CNX (“Merger Sub”), pursuant to which
Merger Sub merged with and into CNXM with CNXM surviving as an indirect wholly owned subsidiary of CNX (the “Merger”). On
September 28, 2020, the Merger was completed and CNX issued 37,054,223 shares of common stock to acquire the 42,107,071 common
units of CNXM not owned by CNX prior to the Merger at a fixed exchange ratio of 0.88 shares of CNX common stock for each CNXM
common unit, for total implied consideration of $384,623. As a result of the Merger, CNXM’s common units are no longer publicly traded.
Except for the Class B units of CNXM, which were automatically canceled immediately prior to the effective time of the Merger for
no consideration in accordance with CNXM’s partnership agreement, the interests in CNXM owned by CNX and its subsidiaries remain
outstanding as limited partner interests in the surviving entity. The General Partner will continue to own the non-economic general partner
interest in the surviving entity.
Because CNX controlled CNXM prior to the Merger and continues to control CNXM after the Merger, CNX accounted for the change
in its ownership interest in CNXM as an equity transaction which was reflected as a reduction of noncontrolling interest with corresponding
increases to common stock and capital in excess of par value. No gain or loss was recognized in its condensed consolidated statements of
operations as a result of the Merger.
The tax effects of the Merger were reported as adjustments to deferred income taxes and capital in excess of par value.
Prior to the effective time of the Merger on September 28, 2020, public unitholders held a 46.9% equity interest in CNXM and CNX
owned the remaining 53.1% equity interest. The earnings of CNXM that were attributed to its common units held by the public prior to the
Merger are reflected in Net Income Attributable to Noncontrolling Interest in the Consolidated Statements of Income. There were no
changes in CNX's ownership interest in CNXM during the year ended December 31, 2019. See discussion of Midstream Acquisition below
for change in ownership interest during the year ended December 31, 2018.
CNXM’s revolving credit facility (See Note 10 - Revolving Credit Facilities) and the CNXM Senior Notes (See Note 12 - Long-Term
Debt) were not impacted by the Merger.
The Company incurred $11,271 of transaction costs directly attributable to the Merger during the year ended December 31, 2020,
including financial advisory, legal service and other professional fees, which were recorded to Other Expense (Income) in the Consolidated
Statements of Income.
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On August 31, 2018, CNX closed on the sale of substantially all of its Ohio Utica Joint Venture Assets in the wet gas Utica Shale areas
of Belmont, Guernsey, Harrison, and Noble Counties, which included approximately 26,000 net undeveloped acres. The net cash proceeds
of $381,124 are included in Proceeds from Asset Sales in the Consolidated Statements of Cash Flows and the net gain on the transaction of
$130,710 is included in Gain on Asset Sales and Abandonments, net in the Consolidated Statements of Income.
On May 2, 2018, CNX closed on an Asset Exchange Agreement (the “AEA”) with HG Energy II Appalachia, LLC (“HG Energy”),
pursuant to which, among other things, HG Energy (i) paid to CNX approximately $7,000 and (ii) assigned to CNX certain undeveloped
Marcellus and Utica acreage in Southwest Pennsylvania, in exchange for CNX (x) assigning its interest in certain non-core midstream assets
and surface acreage to HG Energy and (y) releasing certain HG Energy oil and gas acreage from dedication under a gathering agreement that
is partially held, indirectly, by CNX. In connection with the transaction, CNX also agreed to certain transactions with CNXM, including the
amendment of the existing gas gathering agreement between CNX and CNXM to increase the existing well commitment by an additional
forty wells. The net gain on the sale was $286 and is included in Gain on Asset Sales and Abandonments, net in the Consolidated Statements
of Income.
As a result of the AEA, CNX determined that the carrying value of a portion of the customer relationship intangible assets that were
acquired in connection with the Midstream Acquisition discussed below (see also Note 9 - Goodwill and Other Intangible Assets) exceeded
their fair value, and recognized an impairment of approximately $18,650, which is included in Impairment of Other Intangible Assets in the
Consolidated Statements of Income.
On March 30, 2018, CNX Gas completed the sale of substantially all of its shallow oil and gas assets and certain Coalbed Methane
(CBM) assets in Pennsylvania and West Virginia for $89,921 in cash consideration. In connection with the sale, the buyer assumed
approximately $196,514 of asset retirement obligations. The net gain on the sale was $4,227 and is included in Gain on Asset Sales and
Abandonments, net in the Consolidated Statements of Income.
On December 14, 2017, CNX Gas entered into a purchase agreement with Noble, pursuant to which CNX Gas acquired Noble’s 50%
membership interest in CNX Gathering 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, through CNX Gathering's ownership of the
general partner, control over the Partnership. Accordingly, the Midstream Acquisition has been accounted for as a business combination
using the acquisition method of accounting pursuant to ASC Topic 805, Business Combinations, or ASC 805. ASC 805 requires that, in
circumstances where a business combination is achieved in stages (or step acquisition), previously held equity interests are remeasured at
fair value and any difference between the fair value and the carrying value of the equity interest held be recognized as a gain or loss on the
statement of income.
The fair value assigned to the previously held equity interest in CNX Gathering and CNXM for purposes of calculating the gain or loss
was $799,033 and was determined using the income approach, based on a discounted cash flow methodology. The resulting gain on
remeasurement to fair value of the previously held equity interest in CNX Gathering and CNXM of $623,663 is included in Gain on
Previously Held Equity Interest in the Consolidated Statements of Income.
The fair value of the previously held equity interests was based on inputs that are not observable in the market and therefore represent
Level 3 inputs (See Note 18 - Fair Value of Financial Instruments). The fair value was measured using valuation techniques that convert
future cash flows into a single discounted amount. Significant inputs to the valuation included estimates of: (i) gathering volumes; (ii) future
operating costs; and (iii) a market-based weighted average cost of capital. These inputs required significant judgments and estimates by
management.
The fair value of midstream facilities and equipment, generally consisting of pipeline systems and compression stations, were
estimated using the cost approach. Significant unobservable inputs in the valuation include management's assumptions about the
replacement costs for similar assets, the relative age of the acquired assets and any potential economic or functional obsolescence associated
with the acquired assets. As a result, the fair value estimates of the midstream facilities and equipment represents a Level 3 fair value
measurement.
As part of the purchase price allocation, the Company identified intangible assets for customer relationships with third-party
customers. The fair value of the identified intangible assets was determined using the income approach, which requires a forecast of the
expected future cash flows generated and an estimated market-based weighted average cost of capital. Significant unobservable inputs in the
valuation include future revenue estimates, future cost assumptions, and estimated
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customer retention rates. As a result, the fair value estimate of the identified intangible assets represents a Level 3 fair value measurement.
The noncontrolling interest in the acquired business is comprised of the limited partner units in CNXM, which were not acquired by
the Company. At the time of the Midstream Acquisition, the CNXM limited partner units were actively traded on the New York Stock
Exchange and were valued based on observable market prices as of the transaction date and therefore represent a Level 1 fair value
measurement.
Allocation of Purchase Price (Midstream Acquisition)
The following table summarizes the purchase price and the amounts of identified assets acquired and liabilities assumed based on the
fair value as of January 3, 2018, with any excess of the purchase price over the fair value of the identified net assets acquired recorded as
goodwill. The purchase price allocation was finalized as of December 31, 2018.
Fair Value of Consideration Transferred:
Cash Consideration
CNX Gathering Cash on Hand at January 3, 2018 Distributed to Noble
Fair Value of Previously Held Equity Interest
Total Estimated Fair Value of Consideration Transferred
The following is a summary of the fair values of the net assets acquired:
Fair Value of Assets Acquired:
Cash and Cash Equivalents
Accounts and Notes Receivable
Prepaid Expense
Other Current Assets
Property, Plant and Equipment, net
Intangible Assets
Other
Total Assets Acquired
Fair Value of Liabilities Assumed:
Accounts Payable
CNXM Revolving Credit Facility
Total Liabilities Assumed
Total Identifiable Net Assets
Fair Value of Noncontrolling Interest in CNXM
Goodwill
Net Assets Acquired
Post-Acquisition Operating Results (Midstream Acquisition)
The Midstream Acquisition contributed the following to the Midstream reporting unit within the Shale segment:
$
$
$
Amount
305,000
2,620
799,033
1,106,653
Amount
8,348
21,199
2,006
163
1,043,340
128,781
593
1,204,430
26,059
149,500
175,559
1,028,871
(718,577)
796,359
$
1,106,653
/
Other Revenue and Operating Income
Earnings Before Income Tax
For the Years Ended December 31,
2020
2019
2018
$
$
64,710 $
74,314 $
156,818 $
166,654 $
89,781
133,811
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/
NOTE 5— STOCK REPURCHASE:
As of December 31, 2020, CNX's Board of Directors had approved $750,000 in stock repurchases since the October 30, 2017
inception of the current stock repurchase program. On January 26, 2021, the Company’s Board of Directors approved an increase in the
aggregate amount of the current stock repurchase program plan, to $900,000. This increases the amount available under the current stock
repurchase program to $245,000, 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 year ended December 31, 2020, 4,138,527 shares were repurchased and retired at an average price of $10.43 per share for
a total cost of $43,247. During the year ended December 31, 2019, 12,929,487 shares were repurchased and retired at an average price of
$8.91 per share for a total cost of $115,477. During the year ended December 31, 2018, 25,894,324 shares were repurchased and retired at
an average price of $14.80 per share for a total cost of $383,752.
NOTE 6—INCOME TAXES:
Income tax (benefit) expense provided on earnings consisted of:
Current:
U.S. Federal
U.S. State
Deferred:
U.S. Federal
U.S. State
For the Years Ended December 31,
2020
2019
2018
$
(55,799) $
(51,243) $
(130,003)
12
(55,787)
(83,080)
(35,220)
(118,300)
(113)
(51,356)
—
(130,003)
47,717
31,375
79,092
319,813
25,747
345,560
Total Income Tax (Benefit) Expense
$
(174,087) $
27,736 $
215,557
/
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The components of the net deferred taxes are as follows:
December 31,
2020
2019
Deferred Tax Assets:
Net Operating Loss- Federal
Net Operating Loss - State
Foreign Tax Credit
Operating Lease Right-of-Use Assets
Gas Well Closing
Salary Retirement
Equity Compensation
Alternative Minimum Tax
Interest Limitation
Other
Total Deferred Tax Assets
Valuation Allowance
Net Deferred Tax Assets
Deferred Tax Liabilities:
Property, Plant and Equipment
Investment in Partnership
Gas Derivatives
Operating Lease Liabilities
Discount on Convertible Notes
Advance Gas Royalties
Other
Total Deferred Tax Liabilities
Net Deferred Tax Liability
$
215,936 $
129,641
43,194
28,085
24,251
11,478
6,639
—
—
9,416
468,640
(123,098)
345,542
(649,917)
(85,882)
(26,882)
(28,287)
(18,097)
(2,519)
(211)
202,913
130,430
43,194
47,849
17,888
9,236
9,308
51,241
25,734
10,030
547,823
(125,054)
422,769
(593,401)
(145,424)
(105,721)
(46,640)
—
(3,337)
(4,354)
(811,795)
(898,877)
$
(466,253) $
(476,108)
Deferred taxes are recorded for certain tax benefits, including net operating losses and tax credit carry-forwards, if management
assesses the utilization of those assets to be more likely than not. A valuation allowance is required when it is not more likely than not that
all or a portion of a deferred tax asset will be realized. All available evidence, both positive and negative, must be considered in determining
the need for a valuation allowance. Positive evidence considered included financial earnings generated over the past three years for certain
subsidiaries, reversals of financial to tax temporary differences and the implementation of and/or ability to employ various tax planning
strategies. Negative evidence includes financial and tax losses generated in prior periods and the inability to achieve forecasted results for
those periods.
As of December 31, 2020, the Company has a deferred tax asset related to federal net operating losses of $215,936, which expire at
various times between 2034 and 2039. However, because of the Tax Cuts and Jobs Act (the "TCJA Act") enacted on December 22, 2017 and
the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") enacted on March 27, 2020, the anticipated federal net
operating losses generated in 2018 - 2020 do not expire but may only offset 80% of taxable income in any tax years beginning after 2020.
The CARES Act, which, among other things; 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 in 2020. The impact of other tax
implications of the Act on the financial statements and related disclosures are immaterial.
The TCJA Act repealed the corporate AMT for tax years beginning January 1, 2018 and provides that AMT credits can be utilized to
offset current federal taxes owed in tax years 2018 through 2020. In addition, 50% of any unused AMT credits are refundable during these
/
years with any remaining AMT credit carryforward being fully refunded in 2021, which was revised under the CARES Act to 2020. The
Company has no deferred tax asset relating to federal AMT credits as of December 31,
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/
2020 compared to $51,241 as of December 31, 2019, a decrease of $51,241 from the prior year that resulted from the refunds received of all
remaining outstanding AMT credits.
A valuation allowance on foreign tax credits of $43,194 has also been recorded at December 31, 2020 and 2019. The foreign tax
credits expire at various times between 2021 and 2023.
CNX has, on an after federal tax basis, a deferred tax asset related to state operating losses of $129,641 with a related valuation
allowance of $79,197 at December 31, 2020. The deferred tax asset related to state operating losses, on an after-tax adjusted basis, was
$130,430 with a related valuation allowance of $81,202 at December 31, 2019. A review of positive and negative evidence regarding these
state tax benefits concluded that the valuation allowances for various CNX subsidiaries was warranted. These net operating losses (NOLs)
expire at various times between 2021 and 2040.
Management will continue to assess the potential for realized deferred tax assets based upon income forecast data and the feasibility of
future tax planning strategies and may record adjustments to valuation allowances against deferred tax assets in future periods, as
appropriate, that could materially impact net income.
The following is a reconciliation, stated as a percentage of pretax income, of the United States statutory federal income tax rate to
CNX's effective tax rate:
For the Years Ended December 31,
2020
2019
2018
Amount
Percent
Amount
Percent
Amount
Percent
Statutory U.S. Federal Income Tax Rate
$ (126,595)
21.0 % $
12,534
21.0 % $
230,721
21.0 %
Net Effect of State Income Taxes
Non-Controlling Interest
Uncertain Tax Positions
Accrual to Tax Return Reconciliation
Effect of Equity Compensation
Effect of Change in State Valuation Allowance
Effect of Change in Federal Valuation Allowance
Other Deferred Adjustments
Effect of Federal and State Rate Reductions
Effect of Federal Tax Credits
Other
(32,336)
(11,556)
375
13
4,311
(2,004)
48
1,166
(1,450)
(6,284)
225
5.5
1.9
(0.1)
—
(0.7)
0.3
—
(0.2)
0.2
1.0
—
1,333
(23,662)
—
603
8,771
33,238
(2,640)
(1,691)
(3,842)
2,881
211
2.2
(39.6)
—
1.0
14.7
55.6
(4.4)
(2.8)
(6.4)
4.8
0.4
60,814
(18,181)
(4,265)
3,028
—
(22,684)
(18,110)
5,957
(27,429)
1,208
4,498
5.6
(1.7)
(0.4)
0.3
—
(2.1)
(1.7)
0.6
(2.5)
0.1
0.4
Income Tax (Benefit) Expense / Effective Rate
$ (174,087)
28.9 % $
27,736
46.5 % $
215,557
19.6 %
The effective tax rate for the year ended December 31, 2020 was higher than the U.S. federal statutory rate primarily due to state taxes,
equity compensation, and the decrease in certain state valuation allowances as a result of the Merger transaction with CNXM partially offset
by the benefit from non-controlling interest.
The effective tax rate for the year ended December 31, 2019 was higher than the U.S. federal statutory rate primarily due to state taxes,
equity compensation, and the increase in certain state valuation allowances as a result of the higher than projected net operating loss
generated in 2018 partially offset by the benefit from non-controlling interest.
As a result of the Midstream Acquisition on January 3, 2018 as discussed in Note 4 - Acquisitions and Dispositions, the Company
obtained a controlling interest in CNX Gathering LLC and, through CNX Gathering's ownership of the general partner, control over CNXM.
The financial results for 2018 through 2020 reflect full consolidation of CNXM’s assets and liabilities. The effective tax rates for the years
ended December 31, 2019 and 2018 reflect a $23,662 and $18,181 reduction in income tax expense, respectively, due to the non-controlling
interest in CNXM’s earnings.
The effective tax rate for the year ended December 31, 2018 was lower than the U.S. federal statutory rate primarily due to the effect
of the filing of a Federal NOL carryback for 2017 and 2016 resulting in a financial statement benefit of $23,483 through the realization of
the Federal NOLs at a 35% tax rate as a carryback versus the current 21% tax rate as a carryforward, the reversal of the AMT credit
sequestration valuation allowance, and the release of certain state valuation allowances as a result of a corporate reorganization during the
/
year. The federal NOL carryback claims for 2016 and 2017 were subject to a review by the IRS and the Joint Committee on Taxation which
has since been completed.
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The TCJA Act, which, among other things, lowered the U.S. Federal corporate income tax rate from 35% to 21%, repealed the
corporate AMT for tax years beginning January 1, 2018, and provided for a refund of previously accrued AMT credits. The Company's
effective tax rate for 2018 reflects the release of previously recorded valuation allowances against AMT credit carry-forwards of $12,413, as
those credits were able to be monetized under the TCJA Act.
In December 2019, the FASB issued 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 were 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.
A reconciliation of the beginning and ending gross amounts of unrecognized tax benefits is as follows:
Balance at Beginning of Period
Increase in Unrecognized Tax Benefits Resulting from Tax Positions Taken During Prior Periods
Reduction in Unrecognized Tax Benefits Because of the Lapse of the Applicable Statute of Limitations
Balance at End of Period
For the Years Ended
December 31,
2020
2019
$
31,516 $
31,516
1,726
(1,351)
—
—
$
31,891 $
31,516
If these unrecognized tax benefits were recognized, $31,891 and $31,516 would affect CNX's effective income tax rate for 2020 and
2019, respectively.
In 2020, CNX recognized an increase in unrecognized tax benefits of $1,726 for tax benefits resulting from a tax position taken on our
2019 federal tax return for additional tax credits. CNX recognized a reduction to unrecognized tax benefits of $1,351 due to the expiration of
the statute of limitations from a position taken on a previously filed federal income tax return.
CNX recognizes accrued interest related to unrecognized tax benefits in its interest expense. As of December 31, 2020 and 2019, the
Company reported no accrued liability relating to uncertain tax positions in Other Liabilities in the Consolidated Balance Sheets. During the
years ended December 31, 2020 and 2019, CNX paid no interest related to income tax deficiencies.
CNX recognizes penalties accrued related to uncertain tax positions in its income tax expense. CNX had no accrued liabilities for tax
penalties as of December 31, 2020 and 2019.
CNX and its subsidiaries file federal income tax returns with the United States and income tax returns within various states. 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 2018.
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NOTE 7—ASSET RETIREMENT OBLIGATIONS:
The reconciliation of changes in asset retirement obligations is as follows:
Balance, Beginning of Year
Obligations Divested
Accretion Expense
Obligations Incurred
Obligations Settled
Revisions in Estimated Cash Flows
Balance, End of Year
NOTE 8—PROPERTY, PLANT AND EQUIPMENT:
Property, Plant and Equipment
Intangible Drilling Cost
Gas Gathering Equipment
Proved Gas Properties
Gas Wells and Related Equipment
Unproved Gas Properties
Surface Land and Other Equipment
Other
Total Property, Plant and Equipment
Less: Accumulated Depreciation, Depletion and Amortization
Total Property, Plant and Equipment - Net
December 31,
2020
2019
$
68,454 $
38,554
(703)
11,067
2,806
(7,905)
19,449
$
93,168 $
—
9,458
2,933
(4,231)
21,740
68,454
December 31,
2020
2019
$
4,965,252 $
4,688,497
2,510,917
1,253,094
1,120,061
725,705
199,322
189,645
2,463,866
1,208,046
1,042,000
755,590
226,285
187,722
10,963,996
10,572,006
3,938,451
3,435,431
$
7,025,545 $
7,136,575
During the years ended December 31, 2020 and 2019, the Company capitalized $1,328 and $5,482, respectively, of interest on Gas
Gathering Equipment under construction.
Amounts below reflect properties where drilling operations have not yet commenced and therefore, were not being amortized for the
years ended December 31, 2020 and 2019, respectively. These assets will be amortized using the units-of-production method and
reclassified to proved gas properties when placed in service.
Unproved Gas Properties
Advance Royalties
Total
December 31,
2020
2019
$
$
725,705 $
9,676
735,381 $
755,590
12,770
768,360
NOTE 9—GOODWILL AND OTHER INTANGIBLE ASSETS:
In connection with the Midstream Acquisition that closed on January 3, 2018 (see Note 4 - Acquisitions and Dispositions for more
information), CNX recorded $796,359 of goodwill and $128,781 of other intangible assets which are comprised of customer relationships.
Impairment of Goodwill
All goodwill is attributed to the Midstream reporting unit within the Shale 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
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/
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.
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 seven-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.
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.
In connection with our annual assessment of goodwill in the fourth quarter of 2020, we 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, we concluded that the estimated fair value exceeded carrying value, and accordingly no
adjustment to goodwill was necessary. However, the margin by which the fair value of the Midstream reporting unit exceeded its carrying
value was less than 10%. As a result, this reporting unit is susceptible to impairment risk from further adverse macroeconomic conditions or
other adverse factors such as future gathering volumes being less than those currently estimated. 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.
The estimates of future cash flows are subjective in nature and are subject to impacts from business risks as described in “Item 1A.
Risk Factors”. 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:
December 31, 2019
Impairment
December 31, 2020
Amount
796,359
473,045
323,314
$
$
/
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Other Intangible Assets
The carrying amount and accumulated amortization of other intangible assets consist of the following:
Other Intangible Assets:
Gross Amortizable Asset - Customer Relationships
Less: Accumulated Amortization - Customer Relationships
Total Other Intangible Assets, net
December 31,
2020
2019
$
$
109,752 $
109,752
19,657
90,095 $
13,105
96,647
During the year ended December 31, 2018, CNX determined that the carrying value of a portion of the customer relationship
intangible assets exceeded their fair value as a result of the AEA with HG Energy. Accordingly, CNX recognized an impairment on this
intangible asset of $18,650. There were no such impairments during the years ended December 31, 2020 and 2019.
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 $6,552 for each of the years ended December 31, 2020 and 2019, and $6,931 for the year
ended December 31, 2018. The estimated annual amortization expense is expected to approximate $6,552 per year for each of the next five
years.
NOTE 10—REVOLVING CREDIT FACILITIES:
CNX
In April 2019, CNX amended its senior 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 commitments to
$3,000,000. 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. In April 2020, as part of the semi-annual borrowing base redetermination, both the lenders' commitments and
borrowing base decreased to $1,900,000, and the $650,000 letters of credit aggregate sub-limit remained unchanged. The amount of cash on
hand that CNX may have is also limited to $150,000 when loans under the credit agreement are outstanding, subject to certain exceptions. In
October 2020, as part of the semi-annual borrowing base redetermination, the lenders reaffirmed CNX's $1,900,000 borrowing base. In
November 2020, as part of the issuance of the $500,000 of 6.00% Senior Notes due January 2029 (See Note 12 - Long-Term Debt), both the
lenders' commitments and borrowing base decreased to $1,775,000.
The CNX Credit Facility is secured by substantially all of the assets of CNX and certain of its subsidiaries (excluding the certain
excluded subsidiaries, which includes Cardinal States Gathering LLC, CNX Midstream GP LLC and CNXM, and their respective
subsidiaries).
Under the terms of the 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 0.75% to 1.75%; or
•
the LIBOR rate, which is the LIBOR rate plus a margin ranging from 1.75% to 2.75%.
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 85% of the value of its proved reserves and
85% 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.
/
107
/
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 December 31, 2020.
At December 31, 2020, the CNX Credit Facility had $160,800 of borrowings outstanding and $185,272 of letters of credit outstanding,
leaving $1,428,928 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)
CNXM's revolving credit facility was not impacted by the Merger (See Note 4 - Acquisitions and Dispositions).
In April 2019, CNXM amended its senior secured revolving credit facility (the “CNXM 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. The CNXM Credit Facility includes the ability to
issue letters of credit up to $100,000 in the aggregate.
Under the terms of the amended agreement, borrowings under the CNXM 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 requires CNXM to comply with a number of affirmative and negative covenants. 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 6.50% Senior Notes due March
2026 (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 to1.00.
CNXM was in compliance with all financial covenants as of December 31, 2020.
The CNXM 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 CNXM
Credit Facility.
At December 31, 2020, the CNXM Credit Facility had $291,000 of borrowings outstanding and $30 of letters of credit outstanding,
leaving $308,970 of unused capacity. At December 31, 2019, the CNXM Credit Facility had $311,750 of borrowings outstanding, leaving
$288,250 of unused capacity.
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NOTE 11—OTHER ACCRUED LIABILITIES:
Royalties
Accrued Interest
Short-Term Incentive Compensation
Transportation Charges
Deferred Revenue
Accrued Other Taxes
Accrued Payroll & Benefits
Other
Current Portion of Long-Term Liabilities:
Asset Retirement Obligations
Salary Retirement
Total Other Accrued Liabilities
NOTE 12—LONG-TERM DEBT:
December 31,
2020
2019
$
72,401 $
26,549
20,340
15,969
10,986
10,580
5,009
26,697
8,455
1,787
74,061
30,862
21,030
16,533
13,964
9,115
6,248
37,610
5,076
1,587
$
198,773 $
216,086
December 31,
2020
2019
Senior Notes due March 2027 at 7.25% (Principal of $700,000 and $500,000, respectively, plus
Unamortized Premium of $6,686 at December 31, 2020)
$
706,686 $
500,000
Senior Notes due January 2029 at 6.00%, Issued at Par Value
CNX Midstream Partners LP Senior Notes due March 2026 at 6.50% (Principal of $400,000 less
Unamortized Discount of $3,875 and $4,625, respectively)*
CNX Midstream Partners LP Revolving Credit Facility*
Convertible Senior Notes due May 2026 at 2.25% (Principal of $345,000 less Unamortized Discount
and Issuance Costs of $107,735)
CNX Revolving Credit Facility
Cardinal States Gathering Company Credit Facility maturing in March 2028 (Principal of $114,985
less Unamortized Discount of $1,126)
CSG Holdings II LLC Credit Facility maturing in March 2027 (Principal of $45,559 less
Unamortized Discount of $441)
Senior Notes due April 2022 at 5.875% (Principal of $894,307 plus Unamortized Premium of $1,001
at December 31, 2019)
Less: Unamortized Debt Issuance Costs
Less: Amounts Due in One Year
Long-Term Debt
500,000
396,125
291,000
237,265
160,800
113,859
45,118
—
26,852
2,424,001
22,574
—
395,375
311,750
—
661,000
—
—
895,308
8,990
2,754,443
—
$
2,401,427 $
2,754,443
*CNX is not a guarantor of CNXM's 6.50% Senior Notes due March 2026 or CNXM's Credit Facility.
CNXM's Credit Facility and the CNXM Senior Notes were not impacted by the Merger (See Note 4 - Acquisitions and Dispositions).
/
109
/
At December 31, 2020, annual undiscounted maturities of CNX and CNXM long-term debt during the next five years and thereafter
are as follows:
Year ended December 31,
2021
2022
2023
2024
2025
Thereafter
Total Long-Term Debt Maturities
Amount
22,574
23,712
24,469
474,366
23,057
1,989,166
2,557,344
$
$
During the year ended December 31, 2020, CNX purchased and retired the remaining $894,307 of its outstanding 5.875% Senior
Notes due April 2022. As part of this transaction, a gain of $10,101 was included in (Gain) Loss on Debt Extinguishment in the
Consolidated Statements of Income.
In November 2020, CNX completed a private offering of $500,000 aggregate principal amount of 6.00% Senior Notes due January
2029 (the “Senior Notes due January 2029”). The notes, along with the related guarantees, were issued pursuant to an indenture, dated
November 30, 2020, among the Company, the subsidiary guarantors party thereto and UMB Bank, N.A., as trustee. The notes accrue interest
from November 30, 2020 at a rate of 6.00% per year. Interest is payable semi-annually in arrears on January 15 and July 15 of each year,
beginning July 15, 2021. The Senior Notes due January 2029 mature on January 15, 2029, subject to adjustment upon the occurrence of
specified events. The notes rank equally in right of payment with all of the Company’s existing and future senior indebtedness and senior to
any subordinated indebtedness that the Company may incur. The notes are guaranteed by most of CNX's subsidiaries but does not include
CNXM (or its subsidiaries or general partner) or CSG Holdings III LLC.
In September 2020, CNX completed a private offering of $200,000 aggregate principal amount of 7.25% Senior Notes due March
2027 (the “Senior Notes due March 2027s”) plus $7,000 of unamortized bond premium at a price of 103.5% of par with an effective yield of
6.34%. The notes, along with the related guarantees, were issued pursuant to an indenture, dated March 14, 2019. The notes accrue interest
from September 14, 2020 at a rate of 7.25% per year. Interest is payable semi-annually in arrears on March 14 and September 14 of each
year, beginning March 14, 2021. The notes mature on March 14, 2027. The Senior Notes due March 2027 rank equally in right of payment
with all of the Company’s existing and future senior indebtedness and senior to any subordinated indebtedness that the Company may incur.
The notes are guaranteed by most of CNX's subsidiaries but does not include CNXM (or its subsidiaries or general partner) or CSG
Holdings III LLC.
In April 2020, CNX issued $345,000 in aggregate principal amount of 2.25% convertible senior notes due May 2026 (the "Convertible
Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended, including
$45,000 aggregate principal amount of Convertible Notes issued pursuant to the exercise in full of the initial purchasers’ option to purchase
additional Convertible Notes. The Convertible Notes were issued pursuant to an indenture and are senior, unsecured obligations of the
Company. The Convertible Notes bear interest at a fixed rate of 2.25% per annum, payable semi-annually in arrears on May 1 and
November 1 of each year, commencing on November 1, 2020. Proceeds from the issuance of the Convertible Notes totaled $334,650, net of
initial purchaser discounts and issuance costs. The notes are guaranteed by most of CNX's subsidiaries but does not include CNXM (or its
subsidiaries or general partner) or CSG Holdings III LLC.
The initial conversion rate is 77.8816 shares of CNX's common stock per $1,000 principal amount of Convertible Notes, which
represents an initial conversion price of approximately $12.84 per share, subject to adjustment upon the occurrence of specified events. The
Convertible Notes will mature on May 1, 2026, unless earlier repurchased, redeemed or converted. Before February 1, 2026, note holders
will have the right to convert their Convertible Notes only upon the occurrence of the following events:
•
•
during any calendar quarter (and only during such calendar quarter) commencing after the calendar quarter ending on June 30,
2020, if the Last Reported Sale Price per share of Common Stock exceeds one hundred and thirty percent (130%) of the
Conversion Price for each of at least twenty (20) Trading Days (whether or not consecutive) during the thirty (30) consecutive
Trading Days ending on, and including, the last Trading Day of the immediately preceding calendar quarter.
during the five (5) consecutive Business Days immediately after any ten (10) consecutive trading day period (such ten (10)
consecutive Trading Day period, the “Measurement Period”) if the trading Price per $1,000 principal amount of
110
/
110
/
Notes, as determined following a request by a Holder in accordance with the procedures set forth below, for each trading day of the
Measurement Period was less than ninety eight percent (98%) of the product of the last reported sale price per share of common
stock on such trading day and the conversion rate on such trading day.
if we call any or all of the Convertible Notes for redemption, at any time prior to the close of business on the scheduled trading day
immediately preceding the redemption date; or
upon the occurrence of certain specified corporate events as set forth in the indenture governing the Convertible Notes.
•
•
From and after February 1, 2026, note holders may convert their Convertible Notes at any time at their election until the close of
business on the second scheduled trading day immediately before the maturity date.
Upon conversion, the Company may satisfy its conversion obligation by paying and/or delivering, as the case may be, cash, shares of
the Company’s common stock or a combination of cash and shares of the Company’s common stock, at the Company’s election, in the
manner and subject to the terms and conditions provided in the indenture governing the Convertible Notes. The conversion rate is subject to
adjustment under certain circumstances in accordance with the terms of the indenture governing the Convertible Notes. In addition,
following certain corporate events, as described in the indenture governing the Convertible Notes, that occur prior to the maturity date, the
Company will increase the conversion rate, in certain circumstances, for a holder who elects to convert its Convertible Notes in connection
with such a corporate event.
The Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash
and shares of its common stock, at the Company’s election. The Company’s current intent is to settle the principal amount of the Convertible
Notes in cash upon conversion.
If certain corporate events that constitute a “Fundamental Change” (as defined in the indenture governing the Convertible Notes)
occur, then noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal amount of the
Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase date. The definition
of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing events with respect
to the Company’s common stock. During the year ended December 31, 2020, the conditions allowing holders of the Convertible Notes to
exercise their conversion right were not met and as of December 31, 2020, the notes were not convertible. The Convertible Notes are
therefore classified as long-term debt at December 31, 2020.
In accounting for the transaction, the Convertible Notes were separated into liability and equity components. The carrying amount of
the liability component was calculated by measuring the fair value of a similar debt instrument that does not have an associated conversion
feature. The fair value was based on market data available for publicly traded, senior, unsecured corporate bonds with similar maturity,
which represent Level 2 observable inputs. The carrying amount of the equity component, representing the conversion option, was
determined by deducting the fair value of the liability component from the principal value of the Convertible Notes and was recorded in
Capital in Excess of Par Value in the Consolidated Statement of Stockholders Equity and is not remeasured as long as it continues to meet
the conditions for equity classification. The excess of the principal amount of the Convertible Notes over the liability component and the
debt issuance costs are amortized to interest expense over the contractual term of the Convertible Notes using the effective interest method.
In accounting for the debt issuance costs of $10,350 related to the Convertible Notes, the Company allocated the total amount incurred
to the liability and equity components using the same proportions as the proceeds of the Convertible Notes. Issuance costs attributable to the
liability component were $7,024 and will be amortized to interest expense using the effective interest method over the contractual term of
the Convertible Notes. Issuance costs attributable to the equity component were $3,326 and were netted with the equity component in
Capital in Excess of Par Value in the Consolidated Statement of Stockholders Equity and are not subject to amortization.
The net carrying amount of the liability and equity components of the Convertible Notes was as follows:
December 31, 2020
Liability Component:
Principal
Unamortized Discount
Unamortized Issuance Costs
Net Carrying Amount
Equity Component, net of Purchase Discounts and Issuance Costs
$
$
345,000
(101,367)
(6,368)
237,265
78,317
/
111
/
Interest expense related to the Convertible Notes is as follows:
Contractual Interest Expense
Amortization of Debt Discount
Amortization of Issuance Costs
Total Interest Expense
For the Year Ended
December 31, 2020
$
$
5,175
9,516
655
15,346
In connection with the offering of the Convertible Notes, the Company entered into privately negotiated capped call transactions with
certain counterparties, (the “Capped Calls”). The Capped Calls each have an initial strike price of $12.84 per share, subject to certain
adjustments, which correspond to the initial conversion price of the Convertible Notes. The Capped Calls have an initial cap price of $18.19
per share, subject to certain adjustments. The Capped Calls cover, subject to anti-dilution adjustments, the aggregate number of shares of the
Company’s common stock that initially underlie the Convertible Notes, and are expected generally to reduce potential dilution to the
Company’s common stock upon any conversion of Convertible Notes and/or offset any cash payments the Company is required to make in
excess of the principal amount of converted Convertible Notes, as the case may be, with such reduction and/or offset subject to a cap, based
on the cap price of the Capped Call Transactions. The conditions that cause adjustments to the initial strike price of the Capped Calls mirror
the conditions that result in corresponding adjustments for the Convertible Notes. For accounting purposes, the Capped Calls are separate
transactions, and not part of the terms of the Convertible Notes. As these transactions meet certain accounting criteria, the Capped Calls are
recorded in stockholders’ equity and are not accounted for as derivatives. The cost of $35,673 incurred in connection with the Capped Calls
was recorded as a reduction to Capital in Excess of Par Value. The impact of the Capped Calls related to stockholders’ equity has been
included in Capital in Excess of Par Value in the Consolidated Statement of Stockholders Equity and includes taxes in the amount of $9,322,
for a net impact of $26,351.
During the year ended December 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 year ended December 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 2027,
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 year ended December 31, 2019, CNX completed a private offering of $500,000 of 7.25% Senior Notes due March 2027.
The notes are guaranteed by most of CNX's subsidiaries but do not include CNXM (or its subsidiaries or general partner).
During the year ended December 31, 2019, CNX purchased and retired $400,000 of its outstanding 5.875% Senior Notes due April
2022. As part of this transaction, a loss of $7,614 was included in (Gain) Loss on Debt Extinguishment in the Consolidated Statements of
Income.
During the year ended December 31, 2018, CNX purchased and retired $411,375 of its outstanding 5.875% Senior Notes due April
2022. As part of this transaction, a loss of $15,320 was included in (Gain) Loss on Debt Extinguishment in the Consolidated Statements of
Income.
During the year ended December 31, 2018, CNX called the $500,000 balance on its 8.00% Senior Notes due April 2023. As part of
this transaction, a loss of $38,798 was included in (Gain) Loss on Debt Extinguishment in the Consolidated Statements of Income.
NOTE 13—LEASES:
On January 1, 2019, the Company adopted ASU 2016-02, and all related amendments, using the transition method, which allows for a
cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. CNX elected the transition relief package
of practical expedients by applying previous accounting conclusions under ASC 840 to all leases that existed prior to the transition date. As
a result, CNX did not reassess 1) whether existing or expired contracts contain
112
/
112
/
leases, 2) lease classification for any existing or expired leases or 3) whether lease origination costs qualified as initial direct costs.
Additionally, the Company elected the short-term practical expedient for all asset classes by establishing an accounting policy to exclude
leases with a term of 12 months or less. CNX will not separate lease components from non-lease components for any asset class. Lastly,
CNX adopted the easement practical expedient, which allows the Company to apply ASC 842 prospectively to land easements after the
adoption date. Easements that existed or expired prior to the adoption date that were not previously assessed under ASC 840 will not be
reassessed.
CNX's leasing activities primarily consist of operating and finance leases for electric fracturing equipment, natural gas drilling rigs,
CNX's corporate headquarters as well as field offices, a natural gas gathering pipeline and commercial vehicles. Some leases include options
to renew ranging from a period of 1 to 10 years, which are not recognized as part of the lease right-of-use (ROU) assets or liabilities as they
are not reasonably certain to be exercised.
Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of the lease payments
over the lease term. As most of CNX's leases do not provide an implicit rate, an incremental borrowing rate is used to determine the present
value of lease payments.
The components of lease cost were as follows:
Operating Lease Cost
Finance Lease Cost:
Amortization of Right-of-Use Assets
Interest on Lease Liabilities
Short-term Lease Cost
Variable Lease Cost*
Total Lease Cost
For the Years Ended December 31,
2020
2019
$
74,703 $
73,809
4,959
739
3,252
9,634
$
93,287 $
5,242
1,241
5,547
17,337
103,176
*Amounts recognized in the Consolidated Balance Sheets for natural gas drilling rigs are measured using the rates that would be paid if the rigs were idle,
as this represents the minimum payment that could be made under the contract. Variable lease cost represents amounts paid for natural gas drilling rigs
above this minimum when the rigs are in use. Amounts recognized in the Consolidated Balance Sheets for electric fracturing equipment are measured using
minimum pumping hours under the contract; however, pumping hours may exceed the minimum and vary period to period. Any such amounts paid related
to pumping hours in excess of the minimum represent variable lease cost.
Rental expense under operating leases prior to the adoption of ASC 842 was $21,441 for the year ended December 31, 2018.
/
Amounts recognized in the Consolidated Balance Sheets are as follows:
Operating Leases:
Operating Lease Right-of-Use Asset
Current Portion of Operating Lease Obligations
Operating Lease Obligations
Total Operating Lease Liabilities
Finance Leases:
Property, Plant and Equipment
Less—Accumulated Depreciation, Depletion and Amortization
Property, Plant and Equipment—Net
Current Portion of Finance Lease Obligations
Finance Lease Obligations
Total Finance Lease Liabilities
113
December 31,
2020
2019
108,683 $
187,097
52,575 $
53,235
105,810 $
61,670
110,466
172,136
72,653 $
67,508
5,145 $
6,876 $
1,057
7,933 $
72,916
63,008
9,908
7,164
7,706
14,870
$
$
$
$
$
$
$
/
Supplemental cash flow information related to leases was as follows:
Cash Paid for Amounts Included in the Measurement of Lease Liabilities:
Operating Cash Flows from Operating Leases
Operating Cash Flows from Finance Leases
Financing Cash Flows from Finance Leases
Right-of-Use Assets Obtained in Exchange for Lease Obligations:
Operating Leases
Finance Leases
Maturities of lease liabilities are as follows:
Year Ended December 31,
2021
2022
2023
2024
2025
Thereafter
Total Lease Payments
Less: Interest
Present Value of Lease Liabilities
Lease terms and discount rates are as follows:
Weighted Average Remaining Lease Term (years):
Operating Leases
Finance Leases
Weighted Average Discount Rate:
Operating Leases
Finance Leases
NOTE 14—PENSION:
For the Years Ended December 31,
2020
2019
62,610 $
739 $
7,155 $
4,027 $
257 $
66,827
1,241
7,149
15,347
1,846
Operating
Leases
Finance
Leases
$
$
$
$
$
$
56,190 $
21,592
5,453
5,433
4,824
25,996
119,488
13,678
$
105,810 $
December 31,
2020
2019
4.68
1.37
4.40 %
6.33 %
7,138
446
442
155
38
40
8,259
326
7,933
4.39
2.16
4.96 %
6.92 %
The benefits for the Defined Contribution Restoration Plan were frozen effective July 1, 2018. Employees hired after this date are not
eligible for this benefit plan. In addition, current participants receive no further compensation credits after that date, with the last award
being 2017. Annual interest credits will continue to be made in accordance with the terms of the plan. The freezing of the plan triggered a
curtailment gain of $416 during the year ended December 31, 2018.
The current portion of the pension obligation is included in Other Accrued Liabilities and the noncurrent portion is included in Other
Liabilities in the Consolidated Balance Sheets.
/
114
/
The reconciliation of changes in the benefit obligation, plan assets and funded status of the pension benefits is as follows:
Change in Benefit Obligation:
Benefit Obligation at Beginning of Period
Service Cost
Interest Cost
Actuarial Loss
Plan Amendments
Benefits and Other Payments
Benefit Obligation at End of Period
Change in Plan Assets:
Fair Value of Plan Assets at Beginning of Period
Company Contributions
Benefits and Other Payments
Fair Value of Plan Assets at End of Period
Funded Status:
Current Liabilities
Noncurrent Liabilities
Net Obligation Recognized
Amounts Recognized in Accumulated Other Comprehensive Loss Consist of:
Net Actuarial Loss
Prior Service Cost
Total
Less: Tax Benefit
Net Amount Recognized
The components of the net periodic benefit cost are as follows:
Components of Net Periodic Benefit Cost:
Service Cost
Interest Cost
Amortization of Prior Service Cost (Credit)
Recognized Net Actuarial Loss
Curtailment Gain
Net Periodic Benefit Cost
December 31,
2020
2019
$
40,196 $
33,569
247
1,179
4,098
—
(1,644)
44,076 $
— $
1,644
(1,644)
— $
209
1,338
4,865
1,728
(1,513)
40,196
—
1,513
(1,513)
—
(1,787) $
(42,289)
(44,076) $
(1,587)
(38,609)
(40,196)
19,075 $
1,506
20,581
5,397
15,184 $
15,361
1,727
17,088
4,483
12,605
$
$
$
$
$
$
$
For the Years Ended December 31,
2020
2019
2018
$
$
247 $
1,179
209 $
1,338
221
383
—
(17)
242
—
2,030 $
1,772 $
302
1,265
(193)
865
(416)
1,823
CNX utilizes a corridor approach to amortize actuarial gains and losses that have been accumulated under the pension
plan. Cumulative gains and losses that are in excess of 10% of the greater of either the projected benefit obligation (PBO) or the market-
related value of plan assets are amortized over the expected remaining future lifetime of all plan participants for the pension plan.
/
115
/
The following table provides information related to the pension plan with an accumulated benefit obligation in excess of plan assets:
Projected Benefit Obligation
Accumulated Benefit Obligation
Fair Value of Plan Assets
Assumptions:
The weighted-average assumptions used to determine benefit obligations are as follows:
Discount Rate
Rate of Compensation Increase
Interest Credited Rate
As of December 31,
2020
2019
$
$
$
44,076 $
43,886 $
— $
40,196
40,196
—
As of December 31,
2020
2019
2.47 %
— %
2.26 %
3.36 %
— %
3.01 %
The discount rates are determined using a Company-specific yield curve model (above-mean) developed with the assistance of an
external actuary. The Company-specific yield curve models (above-mean) use a subset of the expanded bond universe to determine the
Company-specific discount rate. Bonds used in the yield curve are rated AA by Moody's or Standard & Poor's as of the measurement date.
The yield curve models parallel the plans' projected cash flows, and the underlying cash flows of the bonds included in the models exceed
the cash flows needed to satisfy the Company plans.
The weighted-average assumptions used to determine net periodic benefit cost are as follows:
Discount Rate
Rate of Compensation Increase
Interest Credited Rate
Cash Flows:
For the Years ended December 31,
2020
2019
2018
3.36 %
— %
2.47 %
4.37 %
3.63 %
3.39 %
4.28 %
4.05 %
3.94 %
The following benefit payments, which reflect expected future service, are expected to be paid:
Year ended December 31,
2021
2022
2023
2024
2025
Year 2026-2030
116
Pension
Benefits
1,787
1,846
1,913
1,977
2,049
11,172
$
$
$
$
$
$
/
NOTE 15—STOCK-BASED COMPENSATION:
CNX's Equity Incentive Plan provides for grants of stock-based awards to key employees and to non-employee directors.
Amendments to the Equity Incentive Plan have been adopted and approved by the Board of Directors and the Company's shareholders since
the commencement of the Equity Incentive Plan. Most recently, in May 2020 the Company's Shareholders adopted and approved a
10,775,000 increase to the total number of shares available for issuance. At December 31, 2020, 14,081,055 shares of common stock
remained available for grant under the plan. The Equity Incentive Plan provides that the aggregate number of shares available for issuance
will be reduced by one share for each share relating to stock options and by 1.62 for each share relating to Performance Share Units (PSUs)
or Restricted Stock Units (RSUs). No award of stock options may be exercised under the Equity Incentive Plan after the tenth anniversary of
the grant date of the award.
For those shares expected to vest, CNX recognizes stock-based compensation costs on a straight-line basis over the requisite service
period of the award, which is generally the vesting term. Options and RSUs vest over a three-year term. PSUs granted in 2016-2019 vest
over a five-year term at 20% per year and PSUs granted in 2020 vest over a three-year term at 33.3% per year subject to performance
conditions. If an employee leaves the Company, all unvested shares are forfeited. CNX recognizes forfeitures as they occur. The vesting of
all awards will accelerate in the event of death and disability and may accelerate upon a change in control of CNX.
Pursuant to the terms of the change in control severance agreements of certain employees and CNX officers, outstanding equity
awards held by such employees vest upon a stockholder (or stockholder group) becoming the beneficial owner of more than 25% of the
Company's outstanding common stock. During the year ended December 31, 2019, Southeastern Asset Management, Inc. and its affiliates
("SEAM") acquired shares of CNX's common stock in the open market which resulted in SEAM's aggregate share ownership exceeding
more than 25% of CNX's common stock outstanding. This transaction, as such, constituted a change in control event under the severance
agreements, resulting in the accelerated vesting of 473,126 restricted stock units and 903,100 performance share units held by the
aforementioned employees that were issued prior to 2019. Those affected employees and officers each consented to waive the change in
control vesting provision included in the change in control severance agreements with respect to their restricted stock unit and performance
share unit awards that were issued during 2019. The accelerated vesting resulted in $19,654 of additional long-term equity-based
compensation expense for the year ended December 31, 2019, and is included in Selling, General and Administrative Costs in the
Consolidated Statements of Income. The performance share unit awards that vested continue to be subject to the attainment of performance
goals as determined by the Compensation Committee of CNX's Board of Directors after the end of the applicable performance period.
The total stock-based compensation expense recognized relating to CNX shares during the years ended December 31, 2020, 2019 and
2018 was $12,897, $36,545 and $18,930, respectively. The related deferred tax benefit totaled $2,134, $3,955, $4,169, respectively.
As of December 31, 2020, CNX has $10,830 of unrecognized compensation cost related to all non-vested stock-based compensation
awards, which is expected to be recognized over a weighted-average period of 1.82 years. When stock options are exercised, and restricted
and performance stock unit awards become vested, the issuances are made from CNX's common stock shares.
Pursuant to the Merger (See Note 4 - Acquisitions and Dispositions for more information), all outstanding phantom units previously
granted under the CNXM long-term incentive plan were converted into the right to receive 0.88 shares of common stock of CNX. As such,
all outstanding phantom units were converted, effective as of the closing of the Merger, into CNX restricted stock units. Each CNX
restricted stock unit will be subject to the same vesting, forfeiture and other terms and conditions applicable to the converted CNXM
phantom units. Under Accounting Standards Codification Topic 718, Compensation - Stock Compensation, it was determined that there was
no additional compensation cost to record as the conversion of awards did not result in incremental fair value.
Stock Options:
CNX examined its historical pattern of option exercises in an effort to determine if there were any discernible activity patterns based
on certain employee populations. From this analysis, CNX identified two distinct employee populations and used the Black-Scholes option
pricing model to value the options for each of the employee populations. The expected term computation presented in the table below is
based upon a weighted average of the historical exercise patterns and post-vesting termination behavior of the two populations. The risk-free
interest rate was determined for each vesting tranche of an award based upon the calculated yield on U.S. Treasury obligations for the
expected term of the award. A combination of historical and implied volatility is used to determine expected volatility and future stock price
trends.
117
/
The total fair value of options granted during the years ended December 31, 2020, 2019 and 2018 was $1,066, $50, and $143
respectively, based on the following assumptions and weighted average fair values:
Weighted Average Fair Value of Grants
Risk-free Interest Rate
Expected Dividend Yield
Expected Forfeiture Rate
Expected Volatility
Expected Term in Years
A summary of the status of stock options granted is presented below:
Outstanding at December 31, 2019
Granted
Exercised
Forfeited
Expired
Outstanding at December 31, 2020
Exercisable at December 31, 2020
December 31,
2020
2019
2018
$
3.56
$
1.61 %
3.48
$
2.13 %
— %
— %
55.33 %
5.11
— %
— %
43.60 %
6.50
Weighted
Average
6.50
2.66 %
— %
— %
52.68 %
3.71
Weighted
Remaining
Aggregate
Average
Exercise
Price
Contractual
Term (in
years)
Intrinsic
Value (in
thousands)
18.05
10.46
6.87
10.53
43.53
15.32
15.68
4.18 $
3.81 $
9,430
9,330
Shares
4,696,264 $
299,541 $
(298,513) $
(3,561) $
(493,222) $
4,200,509 $
3,908,444 $
At December 31, 2020, there were 3,710,157 employee stock options outstanding under the Equity Incentive Plan. Non-employee
director stock options vest one year after the grant date. There are 490,352 stock options outstanding under these grants.
The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between CNX's closing stock
price on the last trading day of the year ended December 31, 2020 and the option's exercise price, multiplied by the number of in-the-money
options) that would have been received by the option holders had all option holders exercised their options on December 31, 2020. This
amount varies based on the fair market value of CNX's stock. The total intrinsic value of options exercised for the years ended December 31,
2020, 2019 and 2018 was $1,263, $175, and $2,077, respectively.
Cash received from option exercises for the years ended December 31, 2020, 2019 and 2018 was $2,052, $546 and $1,714,
respectively. The tax impact from option exercises totaled $328, $46 and $569 for the years ended December 31, 2020, 2019 and 2018,
respectively.
Restricted Stock Units:
Under the Equity Incentive Plan, CNX grants certain employees and non-employee directors RSU awards, which entitle the holder to
receive shares of common stock as the award vests. Non-employee director RSUs vest at the end of one year. Compensation expense is
recognized over the vesting period of the units, described above. The total fair value of RSUs granted during the years ended December 31,
2020, 2019 and 2018 was $10,619, $10,844 and $13,768, respectively. The total fair value of restricted stock units vested during the years
ended December 31, 2020, 2019 and 2018 was $4,798, $10,391 and $6,437, respectively.
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/
The following table represents the nonvested restricted stock units and their corresponding fair value (based upon the closing share
price) at the date of grant:
Nonvested at December 31, 2019
Granted
RSUs granted in conversion, as a result of the CNXM Merger
Vested
Forfeited
Nonvested at December 31, 2020
Performance Share Units:
Number of
Weighted Average
Shares
Grant Date Fair Value
1,033,200
1,251,065
204,619
(577,834)
(39,923)
1,871,127
$11.71
$8.49
$18.01
$10.95
$9.65
$10.10
Under the Equity Incentive Plan, CNX grants certain employees performance share unit awards, which entitle the holder to shares of
common stock subject to the achievement of certain market and performance goals. Compensation expense is recognized over the
performance measurement period of the units in accordance with the provisions of the Stock Compensation Topic of the FASB Accounting
Standards Codification for awards with market and performance vesting conditions. The total fair value of performance share units granted
during the years ended December 31, 2020, 2019 and 2018 was $3,826, $6,741 and $8,570, respectively. The total fair value of performance
share units vested during the years ended December 31, 2020, 2019 and 2018 was $1,926, $4,668 and $7,547, respectively.
The following table represents the nonvested performance share units and their corresponding fair value (based upon the Monte Carlo
Methodology) on the date of grant:
Nonvested at December 31, 2019
Granted
PSUs Issued
Vested
Forfeited
Nonvested at December 31, 2020
Performance Options:
Number of
Weighted Average
Shares
Grant Date Fair Value
1,400,836
660,634
112,158
(274,716)
(131,474)
1,767,438
$18.91
$5.79
$20.39
$20.82
$18.37
$13.85
Under the Equity Incentive Plan, CNX granted certain employees performance options in 2010, which entitled the holder to shares of
common stock subject to the achievement of certain performance goals. Compensation expense was recognized over the vesting period of
the options. The Black-Scholes option valuation model was used to value each tranche separately. There have been no performance options
granted since 2010. The 927,268 performance options that were outstanding and exercisable at a weighted average exercise price of $39.00
at December 31, 2019 expired as of December 31, 2020.
NOTE 16—SUPPLEMENTAL CASH FLOW INFORMATION:
The following are non-cash transactions that impact the investing and financing activities of CNX. For non-cash transactions that
relate to the separation, as well as acquisitions and dispositions, see Note 4 - Acquisitions and Dispositions.
As of December 31, 2020, 2019 and 2018, CNX purchased goods and services related to capital projects in the amount of $30,982,
$43,982 and $58,246, respectively, which are included in accounts payable.
The following table shows cash paid (received):
/
Interest (Net of Amounts Capitalized)
Income Taxes
For the Years Ended December 31,
2020
2019
2018
$
$
141,992 $
143,111 $
(118,125) $
(138,409) $
144,756
(11,505)
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NOTE 17—CONCENTRATION OF CREDIT RISK AND MAJOR CUSTOMERS:
CNX markets natural gas primarily to gas wholesalers in the United States. Concentration of credit risk is summarized below:
Gas Wholesalers
NGL, Condensate & Processing Facilities
Other
Allowance for Credit Losses
Total Accounts Receivable Trade
December 31,
2020
2019
133,253 $
7,008
5,752
(84)
115,641
10,140
7,699
—
145,929 $
133,480
$
$
As of December 31, 2020, a receivable of $19,995 due from Direct Energy Business Marketing LLC was included in the Gas
Wholesalers balance above. As of December 31, 2019, receivables of $23,859 and $15,401 due from Direct Energy Business Marketing
LLC and NJR Energy Services Company, respectively, were included. No other customers made up more than 10% of the total balances.
During the year ended December 31, 2020, sales to Direct Energy Business Marketing LLC were $167,390, which comprised over
10% of the Company's revenue from contracts with external customers for the period.
During the year ended December 31, 2019, sales to Direct Energy Business Marketing LLC were $214,980 and sales to NJR Energy
Services Company were $147,540, each of which comprised over 10% of the Company's revenue from contracts with external customers for
the period.
During the year ended December 31, 2018, sales to NJR Energy Services Company were $219,472 and sales to Direct Energy
Business Marketing LLC were $184,668, each of which comprised over 10% of the Company's revenue from contracts with external
customers for the period.
NOTE 18—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.
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.
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/
The financial instrument measured at fair value on a recurring basis is summarized below:
Description
Gas Derivatives
Interest Rate Swaps
Fair Value Measurements at December 31, 2020
Fair Value Measurements at December 31, 2019
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
$
$
— $
— $
117,545 $
(14,270) $
— $
— $
— $
— $
405,781 $
(1,219) $
—
—
The carrying amounts and fair values of financial instruments for which the fair value option was not elected are as follows:
December 31, 2020
December 31, 2019
Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Cash and Cash Equivalents
Long-Term Debt (Excluding Debt Issuance Costs)
$
$
15,617 $
15,617 $
16,283 $
16,283
2,450,853 $
2,638,251 $
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 19—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 swaps related to $175,000 of borrowings under the Cardinal States Facility and CSG
Holdings Facility (See Note 12 - 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 Credit Facility (See
Note 10 - 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 terminated and replaced via a new interest rate swap, effective April 3,
2020, into 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 (over-the-counter swaps) to manage its exposure to commodity price volatility.
Typically, CNX “sells” swaps under which it receives a fixed price from counterparties and pays a floating market price. During the second
quarter of 2020, CNX purchased, rather than sold, financial swaps for the period May through November of 2020 under which CNX will
pay a fixed price to and receive a floating price from its hedge counterparties. Swaps purchased have the effect of reducing total hedged
volumes for the period of the swap. 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 any 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.
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/
Each of the Company's counterparty master agreements allows, in the event of default, the ability to elect early termination of
outstanding contracts. If early termination is elected, CNX and the applicable counterparty would net settle all open hedge positions.
The total notional amounts of production of CNX's derivative instruments were as follows:
Natural Gas Commodity Swaps (Bcf)
Natural Gas Basis Swaps (Bcf)
Interest Rate Swaps
The gross fair value of CNX's derivative instruments was as follows:
December 31,
2020
2019
Forecasted to
Settle Through
1,256.9
1,294.1
$
569,972 $
1,460.6
1,290.4
160,000
2025
2026
2028
Current Assets:
Commodity Derivative Instruments:
Commodity Swaps
Basis Only Swaps
Interest Rate Swaps
Total Current Assets
Other Non-Current Assets:
Commodity Derivative Instruments:
Commodity Swaps
Basis Only Swaps
Interest Rate Swaps
Total Other Non-Current Assets
Current Liabilities:
Commodity Derivative Instruments:
Commodity Swaps
Basis Only Swaps
Interest Rate Swaps
Total Current Liabilities
Non-Current Liabilities:
Commodity Derivative Instruments:
Commodity Swaps
Basis Only Swaps
Interest Rate Swaps
Total Non-Current Liabilities
December 31,
2020
2019
53,668 $
30,848
141
234,238
13,556
—
84,657 $
247,794
134,661 $
52,903
673
288,543
25,553
—
188,237 $
314,096
23,506 $
14,491
4,332
42,329 $
345
40,626
495
41,466
59,388 $
57,150
10,752
9,693
105,445
724
127,290 $
115,862
$
$
$
$
$
$
$
$
/
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/
The effect of derivative instruments on the Company's Consolidated Statements of Income was as follows:
Cash Received (Paid) in Settlement of Commodity Derivative Instruments:
Natural Gas:
Commodity Swaps
Basis Swaps
Total Cash Received (Paid) in Settlement of Commodity Derivative Instruments
Unrealized (Loss) Gain on Commodity Derivative Instruments:
Natural Gas:
Commodity Swaps
Basis Swaps
Total Unrealized (Loss) Gain on Commodity Derivative Instruments
Gain (Loss) on Commodity Derivative Instruments:
Natural Gas:
Commodity Swaps
Basis Swaps
Total Gain (Loss) on Commodity Derivative Instruments
For the Years Ended December 31,
2020
2019
2018
$
390,547 $
82,899 $
70,670
461,217
(13,119)
69,780
(41,098)
(28,622)
(69,720)
(407,308)
119,073
(288,235)
406,472
(100,147)
306,325
33,026
6,482
39,508
(16,761)
189,743
489,371
(113,266)
$
172,982 $
376,105 $
(8,072)
(22,140)
(30,212)
The effect of interest rate swaps on Interest Expense in the Company's Consolidated Statements of Income was as follows:
Cash (Paid) Received in Settlement of Interest Rate Swaps
Unrealized Loss on Interest Rate Swaps
Loss on Interest Rate Swaps
For the Years Ended December 31,
2020
2019
$
$
(3,141) $
(13,051)
(16,192) $
223
(1,219)
(996)
Cash Received (Paid) in Settlement of Commodity Derivative Instruments for the year ended December 31, 2020 includes $54,982
related to 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 this
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 20—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.
The 1992 Coal Industry Retiree Health Benefit Act (“Coal Act”), in Section 9711, requires coal companies that were providing health
benefits to United Mine Workers of America (“UMWA”) retirees as of February 1993 to continue providing health benefits to such
individuals, in substantially the same coverages, for as long as the last signatory operator remains in
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business. Section 9711 also requires any “related person” to be joint and severally liable for the provision of these health benefits. On May
1, 2020, the court in the Murray Energy Corporation (“Murray”) bankruptcy proceedings approved a settlement agreement between Murray
and the UMWA that transferred to the UMWA 1992 Benefit Plan the Coal Act liabilities for retirees in Murray’s Section 9711 plan. The
retirees transferred by Murray to the 1992 Benefit Plan include approximately 2,159 retirees allegedly traced to the December 2013 sale by
CONSOL Energy Inc. to Murray Energy of the following possible last signatory operators: Consolidation Coal Company, McElroy Coal
Company, Southern Ohio Coal Company, Central Ohio Coal Company, Keystone Coal Mining Corp., and Eight-Four Coal Mining
Company (the “Sold Subsidiaries”). On May 2, 2020, the Trustees of the UMWA 1992 Benefit Plan sued CNX and CONSOL Energy Inc.
(“CONSOL”) in federal court contending that the Sold Subsidiaries were last signatory operators and that CNX and CONSOL are related
persons to the Sold Subsidiaries and, as such, CNX and CONSOL are jointly and severally liable for the Coal Act health benefits allegedly
owed to the eligible retirees traced to the Sold Subsidiaries. The 1992 Plan seeks, among other relief, a declaration that CNX and CONSOL
are obligated to enroll the eligible retirees attributed to the Sold Subsidiaries in a Section 9711 Plan; that CNX and CONSOL are liable to
post the security required by Section 9712; and, that CNX and CONSOL are liable to pay per beneficiary premiums until the eligible retirees
are enrolled in a Section 9711 plan, and other fees, costs and disbursements under the Coal Act. We disagree with the suit filed by the
UMWA 1992 Plan, have filed a Motion to Dismiss and intend to defend this action. Further, under the Separation and Distribution
Agreement that was entered into at the time we spun-out our coal business in 2017, CONSOL agreed to indemnify CNX for all coal-related
liabilities, including this lawsuit. With respect to this matter although a loss is possible, it is not probable, and accordingly no accrual has
been recognized.
At December 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.
Letters of Credit:
Firm Transportation
Other
Total Letters of Credit
Surety Bonds:
Employee-Related
Environmental
Financial Guarantees
Other
Total Surety Bonds
Amount of Commitment Expiration Per Period
Total
Amounts
Committed
Less Than
1 Year
1-3 Years
3-5 Years
Beyond
5 Years
$
178,352 $
178,352 $
6,950
185,302
6,950
185,302
— $
—
—
2,600
12,447
81,670
9,183
2,600
12,187
81,670
7,899
105,900
104,356
—
260
—
1,284
1,544
— $
—
—
—
—
—
—
—
Total Commitments
$
291,202 $
289,658 $
1,544 $
— $
—
—
—
—
—
—
—
—
—
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 (See “Item 1A. Risk Factors” in this Form 10-K).
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.
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As of December 31, 2020, the purchase obligations for each of the next five years and beyond were as follows:
Obligations Due
Less than 1 year
1 - 3 years
3 - 5 years
More than 5 years
Total Purchase Obligations
NOTE 21—SEGMENT INFORMATION:
Amount
253,692
431,282
390,693
985,201
2,060,868
$
$
The Company reports segment information based on the “management” approach. The management approach designates the internal
reporting used by management for making decisions and assessing performance as the source of the Company’s reportable segments.
The Company evaluates the performance of its reportable segments based on total revenue and other operating income, and operating
expenses directly attributable to that segment. Certain expenses are managed outside the reportable segments and therefore are not allocated.
These expenses include, but are not limited to, interest expense, impairment of exploration and production properties, impairment of
goodwill and other corporate expenses such as selling, general and administrative costs.
CNX's principal activity is to produce pipeline quality natural gas for sale primarily to gas wholesalers and the Company has two
reportable segments that conducts those operations: Shale and Coalbed Methane. The Other Segment includes nominal 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 monetized prior to their settlement dates,
exploration and production related other costs, impairments of exploration and production properties, as well as various other expenses that
are managed outside the reportable segments as discussed above. Operating profit for each segment is based on sales less identifiable
operating and non-operating expenses.
Prior to the Merger of CNXM that occurred in September 2020 (See Note 4 - Acquisitions and Dispositions), CNX consisted of two
principal business divisions: Exploration and Production (E&P) and Midstream. The E&P Division included four reportable segments,
Marcellus Shale, Utica Shale, Coalbed Methane and Other Gas. Certain reclassifications of 2019 and 2018 segment information have been
made to conform to the 2020 presentation.
Industry segment results for the year ended December 31, 2020 are:
Natural Gas, NGLs and Oil Revenue
Purchased Gas Revenue
Gain (Loss) on Commodity Derivative Instruments
Other Operating Income
Total Revenue and Other Operating Income
Total Operating Expense
Earnings (Loss) Before Income Tax
Segment Assets
Depreciation, Depletion and Amortization
Capital Expenditures
Shale
Coalbed
Methane
Other
Consolidated
$
781,038 $
114,366 $
1,341 $
896,745 (A)
—
337,269
64,710
—
39,884
—
105,792
(204,171)
17,749
105,792
172,982 (B)
82,459 (C)
1,183,017 $
154,250 $
(79,289) $
1,257,978
709,036 $
127,845 $
860,863 $
1,697,744
473,981 $
26,405 $
(1,103,217) $
(602,831)
6,068,933 $
1,095,816 $
877,015 $
8,041,764 (D)
416,441 $
69,745 $
15,635 $
474,545 $
9,789 $
2,957 $
501,821
487,291
$
$
$
$
$
$
(A) Included in Total Natural Gas, NGLs and Oil Revenue are sales of $167,390 to Direct Energy Business Marketing LLC, which comprises over 10% of revenue
from contracts with external customers for the period.
(B) Included in Other is a realized gain on commodity derivative instruments of $83,997 related to the monetization of hedges (see Note 19 - Derivative Instruments for
more information).
(C) Includes midstream revenue of $64,710 and equity in loss of unconsolidated affiliates of $688 for Shale and Other, respectively.
(D) Includes investments in unconsolidated equity affiliates of $16,022 .
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/
Industry segment results for the year ended December 31, 2019 are:
Natural Gas, NGLs and Oil Revenue
Purchased Gas Revenue
Gain on Commodity Derivative Instruments
Other Revenue and Operating Income
Total Revenue and Other Operating Income
Total Operating Expense
Earnings (Loss) Before Income Tax
Segment Assets
Depreciation, Depletion and Amortization
Capital Expenditures
Shale
Coalbed
Methane
Other
Consolidated
$
1,199,276 $
163,893 $
1,156 $
1,364,325 (E)
—
62,418
74,314
—
7,335
—
94,027
306,352
13,678
94,027
376,105
87,992 (F)
1,336,008 $
171,228 $
415,213 $
1,922,449
787,488 $
135,778 $
813,207 $
1,736,473
548,520 $
35,450 $
(524,286) $
59,684
6,527,245 $
1,222,005 $
1,311,556 $
9,060,806 (G)
427,219 $
73,189 $
8,055 $
508,463
1,175,091 $
11,333 $
6,175 $
1,192,599
$
$
$
$
$
$
(E) Included in Total Natural Gas, NGLs and Oil Revenue are sales of $214,980 to Direct Energy Business Marketing LLC and $147,540 to NJR Energy Services
Company, each of which comprises over 10% of revenue from contracts with external customers for the period.
(F) Includes midstream revenue of $74,314 and equity in earnings of unconsolidated affiliates of $2,103 for Shale and Other, respectively.
(G) Includes investments in unconsolidated equity affiliates of $16,710.
Industry segment results for the year ended December 31, 2018 are:
Natural Gas, NGLs and Oil Revenue
Purchased Gas Revenue
(Loss) Gain on Commodity Derivative Instruments
Other Revenue and Operating Income
Total Revenue and Other Operating Income
Total Operating Expense
Earnings Before Income Tax
Segment Assets
Depreciation, Depletion and Amortization
Capital Expenditures
Shale
Coalbed
Methane
Other
Consolidated
$
1,349,196 $
212,884 $
15,857 $
1,577,937 (H)
—
(60,326)
89,781
—
(8,768)
—
65,986
38,882
26,942
65,986
(30,212)
116,723 (I)
1,378,651 $
204,116 $
147,667 $
1,730,434
751,673 $
154,121 $
321,169 $
1,226,963
626,978 $
49,995 $
421,695 $
1,098,668
6,268,113 $
1,272,457 $
1,051,600 $
8,592,170 (J)
404,503 $
77,004 $
11,916 $
493,423
1,094,471 $
17,083 $
4,843 $
1,116,397
$
$
$
$
$
$
(H) Included in Total Natural Gas, NGLs and Oil Revenue are sales of $219,472 to NJR Energy Services Company and $184,668 to Direct Energy Business Marketing
LLC, each of which comprises over 10% of revenue from contracts with external customers for the period.
(I) Includes midstream revenue of $89,781 and equity in earnings of unconsolidated affiliates of $5,363 for Shale and Other, respectively.
(J) Includes investments in unconsolidated equity affiliates of $18,663.
Reconciliation of Segment Information to Consolidated Amounts:
Revenue and Other Operating Income:
Total Segment Revenue from Contracts with External Customers
$
1,067,247 $
1,532,666 $
1,733,704
Gain (Loss) on Commodity Derivative Instruments
Other Operating Income
Total Consolidated Revenue and Other Operating Income
172,982
17,749
376,105
13,678
(30,212)
26,942
$
1,257,978 $
1,922,449 $
1,730,434
For the Years Ended December 31,
2020
2019
2018
NOTE 22—SUPPLEMENTAL GAS DATA (unaudited):
/
The following information was prepared in accordance with the FASB's Accounting Standards Update No. 2010-03, “Extractive
Activities-Oil and Gas (Topic 932).” The supplementary information summarized below presents the results of natural gas and oil activities
for the E&P segment in accordance with the successful efforts method of accounting for production activities.
126
/
Capitalized Costs:
Intangible Drilling Costs
Gas Gathering Assets
Proved Gas Properties
Gas Wells and Related Equipment
Unproved Gas Properties
Other Gas Assets
Total Property, Plant and Equipment
Accumulated Depreciation, Depletion and Amortization
Net Capitalized Costs
Costs incurred for property acquisition, exploration and development (*):
Property Acquisitions:
Proved Properties
Unproved Properties
Development**
Exploration
Total
As of December 31,
2020
2019
$
4,965,252 $
2,510,916
1,253,094
1,120,061
725,705
95,734
10,670,762
(3,852,593)
4,688,497
2,463,866
1,208,046
1,042,000
755,590
73,479
10,231,478
(3,317,442)
$
6,818,169 $
6,914,036
For the Years Ended December 31,
2020
2019
2018
$
16,622 $
36,710 $
8,060
432,438
33,644
24,760
1,063,945
79,855
38,621
36,248
986,419
61,604
$
490,764 $
1,205,270 $
1,122,892
__________
(*) Includes costs incurred whether capitalized or expensed.
(**) Includes development costs for midstream of $67 million, $325 million and $142 million for 2020, 2019 and 2018, respectively.
Results of Operations for Producing Activities:
/
Natural Gas, NGLs and Oil Revenue
$
896,745 $
1,364,325 $
1,577,937
For the Years Ended December 31,
2020
2019
2018
Realized Gain (Loss) on Commodity Derivative Instruments
Unrealized (Loss) Gain on Commodity Derivative Instruments
Purchased Gas Revenue
Total Revenue
Lease Operating Expense
Production, Ad Valorem and Other Fees
Transportation, Gathering and Compression
Purchased Gas Costs
Impairment of Exploration and Production Properties
Impairment of Undeveloped Properties
Exploration Costs
Depreciation, Depletion and Amortization
Total Costs
Pre-tax Operating Income
Income Tax Expense
461,217
(288,235)
105,792
69,780
306,325
94,027
(69,720)
39,508
65,986
1,175,519
1,834,457
1,613,711
40,407
24,196
285,683
100,902
61,849
—
14,994
501,821
65,443
27,461
330,539
90,553
327,400
119,429
44,380
508,463
95,139
32,750
302,933
64,817
—
—
12,033
493,423
1,029,852
1,513,668
1,001,095
145,667
42,098
320,789
149,167
Results of Operations for Producing Activities excluding Corporate and Interest Costs $
103,569 $
171,622 $
127
612,616
120,073
492,543
/
The following is production, average sales price and average production costs, excluding ad valorem and severance taxes, per unit of
production:
Production (MMcfe)
Total Average Sales Price Before Effects of Commodity Derivative Financial
Settlements (per Mcfe)
Average Effects of Commodity Derivative Financial Settlements (per Mcfe)
Total Average Sales Price Including Effects of Commodity Derivative Financial
Settlements (per Mcfe)
Average Lifting Costs, Excluding Ad Valorem and Severance Taxes (per Mcfe)
$
$
$
$
For the Years Ended December 31,
2020
2019
2018
511,072
539,149
507,104
1.75 $
0.74 $
2.49 $
0.08 $
2.53 $
0.14 $
2.66 $
0.12 $
3.11
(0.15)
2.97
0.19
During the years ended December 31, 2020, 2019 and 2018, the Company drilled 29.0, 75.7, and 83.9 net development wells,
respectively. There were no net dry development wells in 2020 and 2018, and 1.0 net dry development well in 2019.
During the years ended December 31, 2020 and 2019, the Company drilled 2.0 and 5.0 net exploratory wells, respectively. During the
year ended December 31, 2018, the Company drilled no net exploratory wells. There were no net dry exploratory wells in 2020, 2019 or
2018.
At December 31, 2020, there were 23.0 net development wells and 1.0 exploratory well that are drilled but uncompleted. Additionally,
there are 2.0 net exploratory wells that have been completed and are awaiting final tie-in to production.
CNX is committed to provide 492.5 Bcf of gas under existing sales contracts or agreements over the course of the next four years. The
Company expects to produce sufficient quantities from existing proved developed reserves to satisfy these commitments.
Most of the Company's development wells and proved acreage are located in Virginia, West Virginia, Ohio and Pennsylvania. Some
leases are beyond their primary term, but these leases are extended in accordance with their terms as long as certain drilling commitments or
other term commitments are satisfied.
The following table sets forth, at December 31, 2020, the number of producing wells, developed acreage and undeveloped acreage:
Producing Gas Wells (including Gob Wells) - Working Interest
Producing Oil Wells - Working Interest
Producing Gas Wells - Royalty Interest
Producing Oil Wells - Royalty Interest
Acreage Position:
Proved Developed Acreage
Proved Undeveloped Acreage
Unproved Acreage
Total Acreage
Gross(1)
Net(2)
4,712
—
1,810
152
351,537
43,713
4,986,196
5,381,446
4,401
—
—
—
351,537
43,713
3,637,982
4,033,232
____________
(1) All of our acreage identified as proved developed and undeveloped is controlled fully by CNX through ownership of a 100% working
interest.
(2) Net acres include acreage attributable to our working interests in the properties. Additional adjustments (either increases or decreases)
may be required as we further develop title to and further confirm our rights with respect to our various properties in anticipation of
development. We believe that our assumptions and methodology in this regard are reasonable.
Proved Oil and Gas Reserves Quantities:
Annually, the preparation of natural gas reserves estimates is completed in accordance with CNX prescribed internal control
procedures, which include verification of input data into a gas reserves forecasting and economic evaluation software, as well as multi-
functional management review. As part of the annual review, management reviews and approves changes in the
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/
future development plan and the impact to proved-undeveloped locations to ensure that annual changes are aligned with the overall strategic
business plan of the Company. A detailed review is completed to ensure that all proved undeveloped locations will be fully developed within
five-years of the reserves booking. As part of the development plan review, management reviews current well production data, acreage
position, downstream infrastructure availability, operational leases and other commitments, financial capacity to complete the development
and individual project economics in expected future gas pricing scenarios. The input data verification includes reviews of the price and
operating, and development cost assumptions as well as tax rates by jurisdiction used in the economic model to determine the reserves. Also,
the production volumes are reconciled between the system used to calculate the reserves and other accounting/measurement systems. The
technical employee responsible for overseeing the preparation of the reserve estimates is a registered professional engineer in the state of
West Virginia with over 16 years of experience in the oil and gas industry. The Company's gas reserves results, which are reported in the
Supplemental Gas Data for the year ended December 31, 2020 Form 10-K, were audited by independent petroleum engineers, Netherland,
Sewell & Associates, Inc. The technical person primarily responsible for overseeing the audit of the Company's reserves is a registered
professional engineer in the state of Texas with over 13 years of experience in the oil and gas industry.
The gas reserves estimates are as follows:
Balance December 31, 2017 (a)
7,121,758
71,691
4,950
7,581,612
Natural Gas
(MMcf)
NGLs
(Mbbls)
Condensate
Consolidated
& Crude Oil
Operations
(Mbbls)
(MMcfe)
Revisions (b)
Price Changes
Extensions and Discoveries (c)
Production
Sales of Reserves In-Place (d)
Balance December 31, 2018 (a)
Revisions (e)
Price Changes
Extensions and Discoveries (c)
Production
Balance December 31, 2019 (a)
Revisions (f)
Price Changes
Extensions and Discoveries (c)
Production
Balance December 31, 2020 (a)
Proved developed reserves:
Proved undeveloped reserves:
313,091
28,100
839,268
(468,228)
(715,088)
7,436,338
(521,617)
(40,773)
1,569,813
(505,355)
7,938,406
407,836
(1,019,523)
2,188,773
(481,426)
9,034,066
December 31, 2018
December 31, 2019
December 31, 2020
4,242,579
4,473,534
4,939,283
December 31, 2018
December 31, 2019
December 31, 2020
3,193,759
3,464,873
4,094,783
441
32
16,247
(6,011)
(17,252)
65,904
5,926
(740)
10,182
(5,428)
75,844
51,857
(50,456)
9,299
(4,677)
81,867
40,180
59,800
42,204
25,724
16,044
39,664
865
4
4,010
(468)
(1,100)
8,261
(5,418)
(5)
2,732
(204)
5,366
3,525
(4,946)
400
(264)
4,081
1,870
1,087
1,207
6,391
4,278
2,874
320,925
28,315
960,808
(507,104)
(825,196)
7,881,335
(518,570)
(45,246)
1,647,297
(539,149)
8,425,667
740,129
(1,351,934)
2,246,968
(511,072)
9,549,758
4,494,878
4,838,858
5,199,748
3,386,457
3,586,809
4,350,010
__________
(a) Proved developed and proved undeveloped gas reserves are defined by SEC Rule 4.10(a) of Regulation S-X. Generally, these reserves
would be commercially recovered under current economic conditions, operating methods and government regulations. CNX cautions
that there are many inherent uncertainties in estimating proved reserve quantities, projecting future production rates and timing of
development expenditures. Proved oil and gas reserves are estimated quantities of natural gas which geological and engineering data
demonstrate with reasonable certainty to be recoverable in future years
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/
from known reservoirs under existing economic and operating conditions and government regulations. Proved developed reserves are
reserves expected to be recovered through existing wells, with existing equipment and operating methods.
(b) The upward revision for 2018 of 321 Bcfe is primarily due to a 472 Bcfe upward revision from increased performance through our
continued focus on optimization. This is partially offset by a 151 Bcfe downward revision due to plan changes.
(c) Extensions and Discoveries in 2018, 2019, and 2020 are due to the addition of wells on the Company's Shale acreage more than one
offset location away with continued use of reliable technology. The Company uses reliable technologies when assigning reserves to
undeveloped locations, including wire line open-hole log data, performance data, geological log cross sections, core data and
statistical analysis. The statistical methods use production performance of analog wells and include data from operated and competitor
wells. We also use geophysical data that includes data from our wells, published documents, state data-sits and data exchanges to
confirm continuity of the formation. Total proved extensions and discoveries are a combination of proved developed and proved
undeveloped reserves; and, extensions and discoveries for proven developed reserves are associated with non-operated assets and
exploratory wells. In 2020 and 2019, the Company added 70 Bcfe and 77 Bcfe, respectively, related to exploratory and non-operated
wells.
(d) The sales of reserves in-place is related to the divestiture of our Utica JV assets and substantially all of our conventional properties.
Refer to Note 4 - Acquisitions and Dispositions for more information.
(e) The downward revisions in 2019 are due to changes in our five-year development plan due to increased dry gas investment which
increased dry gas proved undeveloped reserves and decreased wet gas investment which lowered wet gas proved undeveloped
reserves. The investment shift was a result of a significant decrease in forecasted liquids price realizations in the five-year plan. These
five-year plan changes resulted in the removal of 872 Bcfe in reserves for wet gas investment. There was additionally a reduction of
304 Bcfe related to removal of proved undeveloped locations removed from our plans due to the SEC five-year development rule.
These downward revisions were partially offset by efficiencies in operations investment in dry gas properties which increased reserves
by 657 Bcfe.
(f) Upward revisions in 2020 are due to performance revisions of 579 Bcfe related to production performance and an 853 Bcfe increase in
reserves due to a decrease in operating costs in 2020. These upward revisions were partially offset by negative revisions of 677 Bcfe
due to changes in our development plan related to the removal of four Utica wells and 23 Marcellus wells from our development plan.
Proved Undeveloped Reserves (MMcfe)
Beginning Proved Undeveloped Reserves
Undeveloped Reserves Transferred to Developed (a)
Price Revisions
Revisions Due to Plan Changes (b)
Revisions Due to Changes Due to Well Performance (c)
Extension and Discoveries (d)
Ending Proved Undeveloped Reserves(e)
For the Year
Ended
December 31,
2020
3,586,809
(1,152,598)
(380,200)
(691,054)
810,727
2,176,326
4,350,010
_________
(a) During 2020, various exploration and development drilling and evaluations were completed. Approximately, $257,952 of capital was
spent in the year ended December 31, 2020 related to undeveloped reserves that were transferred to developed.
(b) The downward revisions for 2020 plan changes is due to the removal of 88 Bcfe of reserves related to 4 Utica wells and 579 Bcfe of
reserves related to 23 Marcellus wells which were removed from our development plan.
(c) The upward revisions due to a 342 Bcfe increase in reserves of liquids rich Marcellus production which requires processing due to a
reduction in the Company's operating costs as a result of the CNXM take-in transaction completed in 2020. The remaining portion is
due to production performance.
(d) Extensions and discoveries are due mainly to the addition of 1,465 Bcfe related to 47 net Marcellus wells within our Southwest
Pennsylvania and West Virginia dry gas operations and 711 Bcfe of 23 net Utica wells within our Central Pennsylvania and Southwest
Pennsylvania operations. The Company uses reliable technologies when assigning reserves to undeveloped locations, including wire
line open-hole log data, performance data, geological log cross sections, core data and statistical analysis. The statistical methods use
production performance of analog wells and include data from operated and competitor wells. We also use geophysical data that
includes data from our wells, published documents, state data-sites and data exchanges to confirm continuity of the formation.
(e) Included in proved undeveloped reserves at December 31, 2020 are approximately 320,987 MMcfe of reserves that have been reported
for more than five years. These reserves are all attributable to acreage within the current operating plan
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identified by the life-of-mine timing maps for the Buchanan mine. The annual increase in proved undeveloped gob reserves is a result
of a change in planned mining activity, which includes an expanded mining footprint, partially offset by the conversion to proved
developed gob reserves. These reserves specifically relate to GOB (a rubble zone formed in the cavity created by the extraction of
coal) production due to a complex fracture being generated in the overburden strata above the mined seam. Mining operations take a
significant amount of time and our GOB forecasts are consistent with the future plans of the Buchanan Mine that was sold in March
2016 to Coronado IV LLC with the rights to this gas being retained by the Company. Evidence also exists that supports the continual
operation of the mine beyond the current plan, unless there was an extreme circumstance resulting from an external factor. These
reasons constitute the specific circumstances that exist to continue recognizing these reserves for CNX.
The following table indicates the changes to the Company's suspended exploratory well costs for the three years ended December 31,
2020:
Balance, Beginning of Period
Additions to Capitalized Exploratory Well Costs Pending the Determination of Proved
Reserves
Reclassifications to Wells, Facilities and Equipment Based on the Determination of
Proved Reserves
Capitalized Exploratory Well Costs Charged to Expense
Balance, End of Period
2020
2019
2018
$
8,984 $
8,178 $
6,388
28,336
66,409
49,213
(28,258)
(65,603)
(46,614)
—
—
$
9,062 $
8,984 $
(809)
8,178
At December 31, 2020 there was one well pending the determination of proved reserves. The $9,062 of exploratory well costs
capitalized for more than one year is related to one partially constructed well that the Company is currently evaluating to determine the most
economic approach to access the natural gas reserves. The company expects to make a determination in 2021 to either finalize the well or to
access the natural gas reserves from an alternative location.
CNX proved natural gas reserves are located in the United States.
Standardized Measure of Discounted Future Net Cash Flows:
The following information has been prepared in accordance with the provisions of the Financial Accounting Standards Board's
Accounting Standards Update No. 2010-03, “Extractive Activities-Oil and Gas (Topic 932).” This topic requires the standardized measure of
discounted future net cash flows to be based on the average, first-day-of-the-month price for the year. Because prices used in the calculation
are average prices for that year, the standardized measure could vary significantly from year to year based on the market conditions that
occurred.
The projections should not be viewed as realistic estimates of future cash flows, nor should the “standardized measure” be interpreted
as representing current value to CNX. Material revisions to estimates of proved reserves may occur in the future; development and
production of the reserves may not occur in the periods assumed; actual prices realized are expected to vary significantly from those used;
and actual costs may vary. CNX investment and operating decisions are not based on the information presented, but on a wide range of
reserve estimates that include probable as well as proved reserves and on different price and cost assumptions.
The standardized measure is intended to provide a better means for comparing the value of CNX proved reserves at a given time with
those of other gas producing companies than is provided by a comparison of raw proved reserve quantities.
Future Cash Flows (a)
Revenues
Production Costs
Development Costs (b)
Income Tax Expense
Future Net Cash Flows
Discounted to Present Value at a 10% Annual Rate
December 31,
2020
2019
2018
$
16,577,563 $
19,489,588 $
26,610,100
(6,071,763)
(1,957,519)
(2,235,205)
(7,903,120)
(1,121,073)
(2,720,994)
(7,730,451)
(1,600,128)
(4,147,075)
6,313,076
7,744,401
13,132,446
(3,677,340)
(4,673,932)
(8,476,989)
Total Standardized Measure of Discounted Net Cash Flows
$
2,635,736 $
3,070,469 $
4,655,457
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/
_________
(a) For 2020, the reserves were computed using unweighted arithmetic averages of the closing prices on the first day of each month
during 2020, adjusted for energy content and a regional price differential. For 2020, this adjusted natural gas price was $1.70 per Mcf,
the adjusted oil price was $35.61 per barrel and the adjusted NGL price was $13.18 per barrel. In 2020, as the result of the CNXM
take-in transaction (see Note 4 - Acquisitions and Dispositions), there was a change in production costs and development costs.
Historically the production costs included contractual CNXM rates but in 2020 this was replaced with actual operating costs of the
midstream infrastructure. Additionally, our development costs in 2020 include capital related to connecting undeveloped Shale wells to
the midstream gathering systems; in prior years this was captured within the CNXM contractual rate within production costs. These
changes resulted in an increase of $932 million to the current year Standardized Measure of Discounted Net Cash Flows.
(b) Development costs for 2020 include $402,174 of plugging and abandonment costs and $286,724 of Midstream capital on an
undiscounted pre-tax basis. On a PV-10 pre-tax discounted basis, these amounts equate to $18,357 and $231,512, respectively. The
addition of Midstream capital is the result of the Merger that occurred on September 28, 2020 (See Note 4 - Acquisitions and
Dispositions).
For 2019, the reserves were computed using unweighted arithmetic averages of the closing prices on the first day of each month
during 2019, adjusted for energy content and a regional price differential. For 2019, this adjusted natural gas price was $2.24 per Mcf,
the adjusted oil price was $44.31 per barrel and the adjusted NGL price was $19.10 per barrel.
For 2018, the reserves were computed using unweighted arithmetic averages of the closing prices on the first day of each month
during 2018, adjusted for energy content and a regional price differential. For 2018, this adjusted natural gas price was $3.28 per Mcf,
the adjusted oil price was $51.68 per barrel and the adjusted NGL price was $27.58 per barrel.
The following are the principal sources of change in the standardized measure of discounted future net cash flows for consolidated
operations during:
Balance at Beginning of Period
Net Changes in Sales Prices and Production Costs
Sales Net of Production Costs
Net Change Due to Revisions in Quantity Estimates
Net Change Due to Extensions, Discoveries and Improved Recovery
Development Costs Incurred During the Period
Difference in Previously Estimated Development Costs Compared to Actual Costs
Incurred During the Period
Purchase of Reserves In-Place
Sales of Reserves In-Place
Changes in Estimated Future Development Costs
Net Change in Future Income Taxes
Timing and Other
Accretion
December 31,
2020
2019
2018
$
3,070,469 $
4,655,457 $
3,131,398
(819,247)
(719,441)
322,820
268,196
434,273
(2,826,725)
(1,130,685)
(252,796)
654,027
739,874
(129,642)
(323,922)
—
—
(499,316)
138,404
390,391
178,829
—
—
(24,469)
409,797
586,591
583,320
1,732,229
(995,630)
307,030
534,052
844,081
(434,817)
209,630
(434,103)
(49,294)
(507,410)
(69,087)
387,378
Total Discounted Cash Flow at End of Period
$
2,635,736 $
3,070,469 $
4,655,457
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/
Supplemental Quarterly Information (unaudited):
(Dollars in thousands, except per share data)
Revenue (a)
Expenses (b)
Net (Loss) Income (c)
Net (Loss) Income Attributable to CNX Resources Shareholders
(Loss) Earnings Per Share:
Basic (Loss) Earnings Per Share
Diluted (Loss) Earnings Per Share
Revenue (a)
Expenses (b)
Net (Loss) Income (c)
Net (Loss) Income Attributable to CNX Resources Shareholders
(Loss) Earnings Per Share:
Basic (Loss) Earnings Per Share
Diluted (Loss) Earnings Per Share
Three Months Ended
March 31,
June 30,
September 30,
December 31,
2020
2020
2020
2020
411,401 $
149,004 $
145,088 $
125,548 $
61,609 $
142,327 $
(305,222) $
(130,487) $
(188,793) $
(329,086) $
(145,749) $
(204,698) $
622,131
134,775
195,758
195,758
(1.76) $
(1.76) $
(0.78) $
(0.78) $
(1.03) $
(1.03) $
0.88
0.87
Three Months Ended
March 31,
June 30,
September 30,
December 31,
2019
2019
2019
2019
275,234 $
147,928 $
(64,651) $
(87,337) $
602,109 $
153,835 $
192,694 $
162,477 $
526,681 $
153,833 $
143,960 $
115,538 $
504,747
182,035
(240,055)
(271,408)
(0.44) $
(0.44) $
0.85 $
0.84 $
0.62 $
0.61 $
(1.45)
(1.45)
$
$
$
$
$
$
$
$
$
$
$
$
_________
(a) Includes natural gas, NGLs, and oil revenue; gain (loss) on commodity derivative instruments, purchased gas revenue and midstream
revenue.
(b) Includes exploration and production costs and other operating expense; excludes depreciation, depletion and amortization, impairment
charges, selling, general and administrative, gain (loss) on debt extinguishment, interest expense and other expense.
(c) Includes impairment charges of $61,849 and $473,045 that were recorded during the three months ended March 31, 2020 related to
CNX's exploration and production properties and goodwill, respectively, and $327,400 and $119,429 that were recorded during the three
months ended December 31, 2019 related to CNX's exploration and production properties and unproved properties, respectively. See Note 1
- Significant Accounting Policies in Item 8 of this Form 10-K for additional information.
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ITEM 9.
None.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES
ITEM 9A.
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 Securities Act of 1934, as amended (the “Exchange Act”), as of the end of
the period covered by this Form 10-K. 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 December 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 SEC 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.
Management's Annual Report on Internal Control Over Financial Reporting. CNX's management is responsible for establishing
and maintaining adequate internal control over financial reporting. CNX's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles.
CNX's internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect transactions and dispositions of assets; (2) provide reasonable assurances that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that
receipts and expenditures are being made only in accordance with authorizations of management and the directors of CNX; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of CNX's assets that could
have a material effect on our financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections
of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of CNX's internal control over financial reporting as of December 31, 2020. In making this
assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) (COSO) in Internal Control-Integrated Framework. Based on management's assessment and those criteria, management has
concluded that CNX maintained effective internal control over financial reporting as of December 31, 2020.
The effectiveness of CNX's internal control over financial reporting as of December 31, 2020 has been audited by Ernst & Young,
LLP, an independent registered public accounting firm, as stated in their report set forth in the Report of Independent Registered Public
Accounting Firm in Part II. Item 9A of this Annual Report on Form 10-K.
Changes in internal controls over financial reporting. There were no changes in the Company's internal controls over financial
reporting that occurred during the fourth quarter of the fiscal year covered by this Annual Report on Form 10-K that have materially
affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of CNX Resources Corporation
Opinion on Internal Control over Financial Reporting
We have audited CNX Resources Corporation and Subsidiaries’ internal control over financial reporting as of December 31, 2020, based on
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (2013 framework) (the COSO criteria). In our opinion, CNX Resources Corporation and Subsidiaries (the Company)
maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated balance sheets of CNX Resources Corporation and Subsidiaries as of December 31, 2020 and 2019, and the related
consolidated statements of income, comprehensive income, stockholders' equity and cash flows for each of the three years in the period
ended December 31, 2020 and the related notes and financial statement schedule listed in the Index at Item 15 (a) (2) of the Company and
our report dated February 9, 2021 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on
our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other
procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
February 9, 2021
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ITEM 9B.
OTHER INFORMATION
None.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item is incorporated herein by reference from the information under the captions “PROPOSAL NO.
1-ELECTION OF DIRECTORS-Biographies of Nominees,” “BOARD OF DIRECTORS AND COMPENSATION INFORMATION and
“DELINQUENT SECTION 16 REPORTS” in the Company's Proxy Statement for the annual meeting of shareholders to be held on May 6,
2021 (the “Proxy Statement”).
Information About Our Executive Officers
The following is a list, as of February 1, 2021, of CNX executive officers, their ages and their positions and offices held with CNX.
Name
Nicholas J. DeIuliis
Donald W. Rush
Chad A. Griffith
Olayemi Akinkugbe
Alexander Reyes
Age
52
38
43
46
49
Position
President and Chief Executive Officer
Executive Vice President and Chief Financial Officer
Executive Vice President and Chief Operating Officer
Executive Vice President and Chief Excellence Officer
Executive Vice President, General Counsel and Corporate Secretary
Nicholas J. DeIuliis has served as a Director and the Chief Executive Officer of CNX Resources Corporation since May 7, 2014. He
was appointed President of the Company on February 23, 2011. Including the period prior to the separation of CONSOL Energy Inc. into
two separate companies, Mr. DeIuliis has more than 30 years of experience with the Company and in that time has held the positions of
President and Chief Executive Officer, Chief Operating Officer, Senior Vice President - Strategic Planning, and earlier in his career various
engineering positions. He was a Director, President and Chief Executive Officer of CNX Gas Corporation from its creation in 2005 through
2009. Mr. DeIuliis is a registered engineer in the Commonwealth of Pennsylvania and a member of the Pennsylvania bar.
Donald W. Rush has served as the Executive Vice President and Chief Financial Officer of CNX Resources Corporation since August
2, 2017. In this role, he is responsible for development and execution of the Company's financial policies and strategy, including risk
management, budgeting and planning, and compliance and reporting. Mr. Rush held the same position at CONSOL Energy Inc. prior to its
separation into two separate companies. He previously served as Vice President of Energy Marketing where he oversaw the Company's
commercial functions, including mergers and acquisitions, gas marketing and transportation, in addition to holding other strategy and
planning, business development and engineering positions during his 13 years with the Company. He successfully guided the Company
through every significant transaction during its transition into a pure play natural gas exploration and production company. Mr. Rush holds a
B.S in civil engineering from the University of Pittsburgh and an M.B.A from Carnegie Mellon University’s Tepper School of Business.
Chad A. Griffith has served as the Executive Vice President and Chief Operating Officer of CNX Resources Corporation since July 30,
2019. In this role, he is responsible for daily management of the Company's asset base and safe and effective execution of its operational
plan. Before being appointed to his current position, Mr. Griffith served as Vice President, Commercial and Vice President of Marketing of
CNX from January 2018 to July 2019 and prior to that Mr. Griffith served as the Director of Marketing of CNX from November 2015 to
January 2018. He was the Director of Diversified Business Units at CNX from April 2014 to November 2015. Mr. Griffith and holds a
bachelor’s degree in physics from Frostburg State University, a law degree from West Virginia University College of Law, and an M.B.A.
from Carnegie Mellon University’s Tepper School of Business. Mr. Griffith is a licensed attorney in Maryland and licensed, but inactive, in
West Virginia.
Olayemi Akinkugbe has served as the Executive Vice President and Chief Excellence Officer of CNX Resources Corporation since
July 30, 2019. As the Chief Excellence Officer of CNX, Mr. Akinkugbe oversees all operational and corporate support functions for the
company. In this role, he is responsible for providing services to facilitate safe, environmentally compliant and efficient operational
execution, rigorous corporate spend management, and overall daily administration of the enterprise. Prior to assuming this role, Mr.
Akinkugbe served as Director Virginia Operations at CNX, a
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role he assumed in July 2018. Mr. Akinkugbe served as Director Business Development from September 2017 through July 2018, General
Manager - Planning and Petroleum Reserves from February 2014 through September 2017, and served in various other positions, including
with the Engineering Department, throughout his tenure at CNX, which started in 2003. Mr. Akinkugbe holds an undergraduate degree in
mineral engineering, a master’s degree in engineering with a specialty in rock mechanics from West Virginia University, and an M.B.A.
from Carnegie Mellon University’s Tepper School of Business.
Alexander Reyes has served as the Executive Vice President, General Counsel, and Corporate Secretary of CNX Resources
Corporation since December 21, 2020. Mr. Reyes has a breadth of corporate legal and business expertise in the energy industry. He first
joined CNX in 2006, and spent 14 years with the company, with responsibilities ranging from legal management of major transactions to
leading the Company’s Land department. Before rejoining CNX to become General Counsel, for much of 2020 Alex served as Chair of the
Corporate Practice Group of Pittsburgh-based Leech Tishman Fuscaldo & Lampl, LLC. He began his career at Buchanan Ingersoll PC
where his practice focused on mergers and acquisitions, joint ventures, securities, financings, and corporate governance. He is a graduate of
the Duquesne University School of Law where he served as an editor of The Duquesne Law Review. Mr. Reyes holds a Bachelors of
Business Administration degree in finance from The George Washington University.
CNX has a written Code of Employee Business Conduct and Ethics that applies to CNX's Chief Executive Officer (Principal
Executive Officer), Chief Financial Officer (Principal Financial Officer), Chief Accounting Officer (Principal Accounting Officer) and
others. The Code of Employee Business Conduct and Ethics is available on CNX's website at www.cnx.com. Any amendments to, or
waivers from, a provision of our Code of Employee Business Conduct and Ethics that applies to our Principal Executive Officer, Principal
Financial Officer and Principal Accounting Officer and that relates to any element enumerated in paragraph (b) of Item 406 of Regulation S-
K shall be disclosed by posting such information on our website at www.cnx.com.
By certification dated May 27, 2020, CNX's Chief Executive Officer certified to the New York Stock Exchange (NYSE) that he was
not aware of any violation by the Company of the NYSE corporate governance listing standards. In addition, the required Sarbanes-Oxley
Act, Section 302 certifications regarding the quality of our public disclosures were filed by CNX Resources as exhibits to this Form 10-K.
ITEM 11.
EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from the information under the captions “BOARD OF
DIRECTORS AND COMPENSATION INFORMATION and “EXECUTIVE COMPENSATION INFORMATION” (excluding the
Compensation Committee Report) in the Proxy Statement.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information required by this Item is incorporated by reference from the information under the captions “BENEFICIAL
OWNERSHIP OF SECURITIES” and “SECURITIES AUTHORIZED FOR ISSUANCE UNDER CNX EQUITY COMPENSATION
PLAN” in the Proxy Statement.
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information requested by this Item is incorporated by reference from the information under the caption “PROPOSAL NO. 1-
ELECTION OF DIRECTORS - Related Party Policy and Procedures and PROPOSAL NO. 1 - ELECTION OF DIRECTORS -
Determination of Director Independence in the Proxy Statement.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item is incorporated by reference from the information under the caption “ACCOUNTANTS AND
AUDIT COMMITTEE-INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM” in the Proxy Statement.
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ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
PART IV
In reviewing any agreements incorporated by reference in this Form 10-K or filed with this Form 10-K, please remember that such
agreements are included to provide information regarding their terms. They are not intended to be a source of financial, business or
operational information about CNX or any of its subsidiaries or affiliates. The representations, warranties and covenants contained in these
agreements are made solely for purposes of the agreements and are made as of specific dates; are solely for the benefit of the parties; may be
subject to qualifications and limitations agreed upon by the parties in connection with negotiating the terms of the agreements, including
being made for the purpose of allocating contractual risk between the parties instead of establishing matters as facts; and may be subject to
standards of materiality applicable to the contracting parties that differ from those applicable to investors or security holders. Investors and
security holders should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual
state of facts or condition of CNX or any of its subsidiaries or affiliates or, in connection with acquisition agreements, of the assets to be
acquired. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the date of
the agreements. Accordingly, these representations and warranties alone may not describe the actual state of affairs as of the date they were
made or at any other time.
(a)(1)
(a)(2)
Financial Statements Contained in Item 8 hereof.
Financial Statement Schedule-Schedule II Valuation and Qualifying Accounts contained below, following the signature
page.
(a)(3)
Exhibits and Exhibit Index.
2.1
2.2
2.3
2.4
2.5
3.1
3.2
3.3
4.1
4.2
4.3
4.4
4.5
Separation and Distribution Agreement, dated as of November 28, 2017, by and between the Company and CONSOL
Mining Corporation, incorporated by reference to Exhibit 2.1 to Form 8-K (file no. 001-14901) filed on December 4, 2017.
Tax Matters Agreement, dated as of November 28, 2017, by and between the Company and CONSOL Mining Corporation,
incorporated by reference to Exhibit 2.2 to Form 8-K (file no. 001-14901) filed on December 4, 2017.
Employee Matters Agreement, dated as of November 28, 2017, by and between the Company and CONSOL Mining
Corporation, incorporated by reference to Exhibit 2.3 to Form 8-K (file no. 001-14901) filed on December 4, 2017.
Intellectual Property Matters Agreement, dated as of November 28, 2017, by and between the Company and CONSOL
Mining Corporation, incorporated by reference to Exhibit 2.4 to Form 8-K (file no. 001-14901) filed on December 4, 2017.
Agreement and Plan of Merger, dated as of July 26, 2020, by and among the Company, CNX Midstream Partners LP, CNX
Midstream GP LLC and CNX Resources Holdings LLC, incorporated by reference to Exhibit 2.1 to Form 8-K (file no.
001-14901) filed on July 27, 2020.
Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit 3.1 to Form 8-K (file no. 001-
14901) filed on May 8, 2006.
Certificate of Amendment to the Restated Certificate of Incorporation of the Company, incorporated by reference to Exhibit
3.1 to Form 8-K (file no. 001-14901) filed on December 4, 2017.
Amended and Restated Bylaws of the Company, incorporated by reference to Exhibit 3.2 to Form 8-K (file no. 001-14901)
filed on April 10, 2019.
Description of the Company’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934,
incorporated by reference to Exhibit 4.1 to Form 10-K (file no. 001-14901) filed on February 10, 2020.
Indenture, dated as of April 16, 2014, by and among the Company, the subsidiary guarantors party thereto and Wells Fargo
Bank, National Association, a national banking association, as trustee, with respect to the 5.875% Senior Notes due 2022,
incorporated by reference to Exhibit 4.1 to Form 8-K (file no. 001-14901) filed on April 16, 2014.
Indenture, dated as of March 14, 2019, by and among the Company, the subsidiary guarantors party thereto and UMB
Bank, N.A., a national banking association, as trustee, with respect to the 7.250% Senior Notes due 2027, incorporated by
reference to Exhibit 4.1 to Form 8-K (file no. 001-14901) filed on March 14, 2019.
Registration Rights Agreement, dated as of April 16, 2014, by and among the Company, the guarantors signatory thereto
and J.P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC, as representatives of the several initial
purchasers, incorporated by reference to Exhibit 4.2 to Form 8-K (file no. 001-14901) filed on April 16, 2014.
Registration Rights Agreement, dated as of August 12, 2014, by and among the Company, the guarantors signatory thereto
and Goldman, Sachs & Co., as the initial purchasers, incorporated by reference to Exhibit 4.2 to Form 8-K (file no. 001-
14901) filed on August 12, 2014.
/
138
/
/
4.6
4.7
4.8
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
Indenture, dated as of May 1, 2020, by and among the Company, the subsidiary guarantors party thereto and UMB Bank,
N.A., as trustee., incorporated by reference to Exhibit 4.1 to Form 8-K (file no. 001-14901) filed on May 4, 2020.
Indenture, dated as of November 30, 2020, by and among the Company, the subsidiary guarantors party thereto and UMB
Bank, N.A., as Trustee., incorporated by reference to Exhibit 4.1 to Form 8-K (file no. 001-14901) filed on November 30,
2020.
Indenture, dated as of March 16, 2018, among CNX Midstream Partners LP, CNX Midstream Finance Corp., the guarantors
party thereto and UMB Bank, N.A., as Trustee., incorporated by reference to Exhibit 4.1 to Form 8-K (file no. 001-36635)
filed on March 16, 2018.
Second Amended and Restated Credit Agreement, dated as of March 8, 2018, by and among the Company, certain of its
subsidiaries, PNC Bank, National Association, as administrative agent and collateral agent, JPMorgan Chase Bank, N.A., as
syndication agent and the lender parties thereto, incorporated by reference to Exhibit 10.1 to Form 8-K (file no. 001-14901)
filed on March 12, 2018.
Waiver No. 1 to Second Amended and Restated Credit Agreement, dated as of February 27, 2019, by and among the
Company, the guarantors party thereto, the lenders party thereto, JPMorgan Chase Bank, N.A., as syndication agent, and
PNC Bank, National Association, as administrative agent and collateral agent, incorporated by reference to Exhibit 10.1 to
Form 8-K (file no. 001-14901) filed on March 4, 2019.
Amendment No. 1, dated as of April 24, 2019, to the Second Amended and Restated Credit Agreement, dated as of March
8, 2018, by and among the Company, the guarantors party thereto, the lenders party thereto, JPMorgan Chase Bank, N.A.,
as syndication agent, and PNC Bank, National Association, as administrative agent and collateral agent, incorporated by
reference to Exhibit 10.1 to Form 8-K (file no. 001-14901) filed on April 30, 2019.
Amendment No. 2, dated as of October 28, 2019, to the Second Amended and Restated Credit Agreement, dated as of
March 8, 2018, by and among the Company, the guarantors party thereto, the lenders party thereto, JPMorgan Chase Bank,
N.A., as syndication agent, and PNC Bank, National Association, as administrative agent and collateral agent, incorporated
by reference to Exhibit 10.1 to Form 8-K (file no. 001-14901) filed on October 29, 2019.
Amendment No. 4, dated as of April 24, 2020, to the Second Amended and Restated Credit Agreement, dated as of March
8, 2018, by and among the Company, the guarantors party thereto, the lenders party thereto, JPMorgan Chase Bank, N.A.,
as syndication agent, and PNC Bank, National Association, as administrative agent and collateral agent, incorporated by
reference to Exhibit 10.1 to Form 8-K (file no. 001-14901) filed on April 28, 2020.
Transition Services Agreement, dated as of November 28, 2017, by and between the Company and CONSOL Mining
Corporation, incorporated by reference to Exhibit 10.1 to Form 8-K (file no. 001-14901) filed on December 4, 2017.
CNX Resources Corporation to CONSOL Energy Inc. Trademark License Agreement dated as of November 28, 2017, by
and between the Company and CONSOL Energy Inc., incorporated by reference to Exhibit 10.2 to Form 8-K (file no. 001-
14901) filed on December 4, 2017.
CONSOL Energy Inc. to CNX Resources Corporation Trademark License Agreement, dated as of November 28, 2017, by
and between the Company and CONSOL Energy Inc., incorporated by reference to Exhibit 10.3 to Form 8-K (file no. 001-
14901) filed on December 4, 2017.
Exchange Agreement, dated as of January 29, 2020, by and among CNX Midstream Partners LP, CNX Midstream GP LLC,
and CNX Gas Company LLC, incorporated by reference to Exhibit 10.1 to Form 8-K (file no. 001-14901) filed on January
30, 2020.
Form of Confirmation of Base Capped Call Transaction, incorporated by reference to Exhibit 10.1 to Form 8-K (file no.
001-14901) filed on May 4, 2020.
Form of Confirmation of Additional Capped Call Transaction, incorporated by reference to Exhibit 10.2 to Form 8-K (file
no. 001-14901) filed on May 4, 2020.
Support Agreement, dated as of July 26, 2020, by and among CNX Midstream Partners LP, CNX Gas Company LLC and
CNX Gas Holdings, Inc. incorporated by reference to Exhibit 10.1 to Form 8-K (file number 001-14901) filed on July 27,
2020.
Purchase Agreement, dated as of April 28, 2020, by and among the Company, the subsidiary guarantors party thereto and
J.P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC as representatives of the several initial purchasers
named therein., incorporated by reference to Exhibit 1.1 to Form 8-K (file no. 001-14901) filed on May 4, 2020.
Purchase Agreement, dated as of September 8, 2020 by and among the Company, the subsidiary guarantors party thereto
and BofA Securities, Inc. and Wells Fargo Securities, LLC, as representatives of the initial purchasers named therein.,
incorporated by reference to Exhibit 10.1 to Form 8-K (file no. 001-14901) filed on September 9, 2020.
Purchase Agreement, dated as of November 24, 2020 by and among the Company, the subsidiary guarantors party thereto
and BofA Securities, Inc., incorporated by reference to Exhibit 10.1 to Form 8-K (file no. 001-14901) filed on November
25, 2020.
139
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/
10.16
10.17
10.18
10.19
10.20
10.21*
10.22*
10.23*
10.24*
10.25*
10.26*
10.27*
10.28*
10.29*
10.30*
10.31*
10.32*
10.33*
10.34*
10.35*
Credit Agreement dated as of March 8, 2018, among CNX Midstream Partners LP, certain of its subsidiaries, PNC Bank,
National Association, as administrative agent and collateral agent, JPMorgan Chase Bank, N.A., as syndication agent and
the lender parties thereto, incorporated by reference to Exhibit 10.1 to Form 8-K (file no. 001-36635) filed on March 12,
2018.
Amendment No. 1 to Credit Agreement, dated as of March 15, 2018, to the Credit Agreement, dated as of March 8, 2018,
among CNX Midstream Partners LP, certain of its subsidiaries, PNC Bank, National Association, as administrative agent
and collateral agent, JPMorgan Chase Bank, N.A. as syndication agent and the lender parties thereto, incorporated by
reference to Exhibit 10.1 to Form 8-K (file no. 001-36635) filed on March 16, 2018.
Amendment No. 2 to Credit Agreement, dated as of April 24, 2019, to the Credit Agreement, dated as of March 8, 2018,
among CNX Midstream Partners LP, certain of its subsidiaries, PNC Bank, National Association, as administrative agent
and collateral agent, JPMorgan Chase Bank, N.A. as syndication agent and the lender parties thereto., incorporated by
reference to Exhibit 10.1 to Form 8-K (file no. 001-36635) filed on April 30, 2019.
Limited Consent and Amendment to Credit Agreement, dated December 22, 2017, by and among CONE Midstream
Partners LP, as Borrower, certain subsidiaries of the Borrower as Guarantors, JPMorgan Chase Bank, N.A., as
Administrative Agent, Swing Line Lender and L/C Issuer, and other lender parties thereto, incorporated by reference to
Exhibit 10.10 to Form 10-K (file no. 001-36635) filed on February 7, 2018.
Purchase and Sale Agreement, dated as of February 7, 2018, by and among CNX Midstream Partners LP, CNX Midstream
DevCo I LP, CNX Midstream DevCo III LP, CNX Gathering LLC, and, for certain purposes, CNX Midstream DevCo I GP
LLC, CNX Midstream DevCo III GP LLC and CNX Midstream Operating Company LLC, incorporated by reference to
Exhibit 10.75 to Form 10-K (file no. 001-14901) for the year ended December 31, 2017, filed on February 7, 2018.
Letter Agreement, dated August 24, 2007, by and between the Company and Nicholas J. DeIuliis, incorporated by reference
to Exhibit 10.1 to Form 8-K (file no. 001-14901) filed on August 24, 2007.
Change in Control Agreement, dated as of December 30, 2008, by and between the Company and Nicholas J. DeIuliis,
incorporated by reference to Exhibit 10.7 to Form 10-K (file no. 001-14901) for the year ended December 31, 2008, filed
on February 17, 2009.
Change in Control Severance Agreement, dated August 24, 2015, between the Company and Donald W. Rush, incorporated
by reference to Exhibit 10.6 to Form 10-Q (file no. 001-14901) for the quarter ended March 31, 2018, filed on May 3, 2018.
Change in Control Severance Agreement, dated October 28, 2019, by and between the Company and Chad A. Griffith,
incorporated by reference to Exhibit 10.1 to Form 10-Q (file no. 001-14901) for the quarter ended September 30, 2019,
filed on October 29, 2019.
Change in Control Severance Agreement, dated October 28, 2019, by and between the Company and Olayemi Akinkugbe,
incorporated by reference to Exhibit 10.2 to Form 10-Q (file no. 001-14901) for the quarter ended September 30, 2019,
filed on October 29, 2019.
Form of Indemnification Agreement for Directors and Executive Officers of the Company, incorporated by reference to
Exhibit 10.6 to Form 10-Q (file no. 001-14901) for the quarter ended June 30, 2009, filed on August 3, 2009.
Form of Indemnification Agreement for Directors and Executive Officers of CNX Gas Corporation, incorporated by
reference to Exhibit 10.7 to Form 10-Q (file no. 001-14901) for the quarter ended June 30, 2009, filed on August 3, 2009.
CNX Resources Corporation Equity Incentive Plan, as amended and restated effective January 26, 2018, incorporated by
reference to Exhibit 10.48 to Form 10-K (file no. 001-14901) for the year ended December 31, 2017, filed on February 7,
2018.
Amended and Restated CNX Resources Corporation Executive Annual Incentive Plan, incorporated by reference to Exhibit
10.49 to Form 10-K (file no. 001-14901) for the year ended December 31, 2017, filed on February 7, 2018.
CNX Resources Corporation Amended and Restated Equity and Incentive Compensation Plan, effective May 6, 2020,
incorporated by reference to Exhibit 99.1 to Form 8-K (file no. 001-14901) filed on May 7, 2020.
Amendment to CNX Resources Corporation Amended and Restated Equity and Incentive Compensation Plan, effective
September 28, 2020, incorporated by reference to Exhibit 4.5 to the Registration Statement on Form S-8 filed on September
28, 2020.
Form of Non-Qualified Stock Option Award Agreement for Employees (February 17, 2009 and through 2012),
incorporated by reference to Exhibit 10.28 to Form S-4 (file no. 333-157894) filed on June 26, 2009.
Form of Non-Qualified Performance Stock Option Agreement for Employees, incorporated by reference to Exhibit 10.1 to
Form 8-K (file no. 001-14901) filed on June 21, 2010.
Form of Employee Nonqualified Stock Option Agreement (May 26, 2016), incorporated by reference to Exhibit 10.4 to
Form 10-Q (file no. 001-14901) for the quarter ended June 30, 2016, filed on July 29, 2016.
Form of Non-Qualified Stock Option Agreement for Directors, incorporated by reference to Exhibit 10.4 to Form 10-Q (file
no. 001-14901) for the quarter ended June 30, 2019, filed on July 30, 2019.
/
140
/
10.36*
10.37*
10.38*
10.39*
10.40*
10.41*
10.42*
10.43*
10.44*
10.45*
10.46*
10.47*
10.48*
10.49*
10.50*
10.51*
10.52*
10.53*
10.54*
10.55*
10.56*
10.57*
10.58*
Form of CNX Resources Corporation Non-Employee Director Non-Qualified Stock Option agreement, incorporated by
reference to Exhibit 10.8 to Form 10-Q (file no. 001-14901) for the quarter ended June 30, 2020, filed on August 3, 2020.
Form of Non-Qualified Stock Option Agreement for Employees (for 2020 awards), incorporated by reference to Exhibit
10.31 to Form 10-K (file no. 001-14901) for the year ended December 31, 2019, filed on February 10, 2020.
Form of Restricted Stock Unit Award Agreement for Directors, incorporated by reference to Exhibit 10.5 to Form 10-Q
(file no. 001-14901) for the quarter ended June 30, 2019, filed on July 30, 2019.
Form of Restricted Stock Unit Award Under CNX Resources Corporation Amended and Restated Equity and Incentive
Compensation Plan for Non-Employee Directors, incorporated by reference to Exhibit 10.7 to Form 10-Q (file no. 001-
14901) for the quarter ended June 30, 2020, filed on August 3, 2020.
Form of Restricted Stock Unit Award Agreement for CEO (for 2019 awards), incorporated by reference to Exhibit 10.37 to
Form 10-K (file no. 001-14901) for the year ended December 31, 2018, filed on February 7, 2019.
Form of Restricted Stock Unit Award Agreement for VP and Above (for 2019 awards), incorporated by reference to Exhibit
10.38 to Form 10-K (file no. 001-14901) for the year ended December 31, 2018, filed on February 7, 2019.
Form of Restricted Stock Unit Award Agreement for Non-VP and Below (for 2019 awards), incorporated by reference to
Exhibit 10.39 to Form 10-K (file no. 001-14901) for the year ended December 31, 2018, filed on February 7, 2019.
Form of Restricted Stock Unit Award Agreement for Employees (for 2020 awards), incorporated by reference to Exhibit
10.42 to Form 10-K (file no. 001-14901) for the year ended December 31, 2019, filed on February 10, 2020.
Form of Performance Share Unit Award Agreement (for 2016 awards), incorporated by reference to Exhibit 10.79 to Form
10-K (file no. 001-14901) for the year ended December 31, 2015, filed on February 5, 2016.
Form of Performance Share Unit Award Agreement (for 2017 awards), incorporated by reference to Exhibit 10.80 to Form
10-K (file no. 001-14901) for the year ended December 31, 2016, filed on February 8, 2017.
Form of Performance Share Unit Award Agreement (for 2018 awards), incorporated by reference to Exhibit 10.63 to Form
10-K (file no. 001-14901) for the year ended December 31, 2017, filed on February 7, 2018.
Form of Performance Share Unit Award Agreement for CEO (for 2019 awards), incorporated by reference to Exhibit 10.44
to Form 10-K (file no. 001-14901) for the year ended December 31, 2018, filed on February 7, 2019.
Form of Performance Share Unit Agreement for VP and Above (for 2019 awards), incorporated by reference to Exhibit
10.45 to Form 10-K (file no. 001-14901) for the year ended December 31, 2018, filed on February 7, 2019.
Form of Performance Share Unit Agreement for Non-VP and Below (for 2019 awards), incorporated by reference to
Exhibit 10.46 to Form 10-K (file no. 001-14901) for the year ended December 31, 2018, filed on February 7, 2019.
Form of Performance Share Unit Award Agreement (for 2020 awards), incorporated by reference to Exhibit 10.48 to Form
10-K (file no. 001-14901) for the year ended December 31, 2019, filed on February 10, 2020.
Directors' Deferred Fee Plan (2004 Plan) (Amended and Restated on December 4, 2007), incorporated by reference to
Exhibit 10.3 to Form 10-Q (file no. 001-14901) for the quarter ended March 31, 2008, filed on April 30, 2008.
Hypothetical Investment Election Form Relating to Directors' Deferred Fee Plan (2004 Plan), incorporated by reference to
Exhibit 10.50 to Form 10-K (file no. 001-14901) for the year ended December 31, 2007, filed on February 19, 2008.
Form of Director Deferred Stock Unit Grant Agreement, incorporated by reference to Exhibit 10.95 to Form 8-K (file no.
001-14901) filed on May 8, 2006.
Form of Director Deferred Stock Unit Grant Agreement, incorporated by reference to Exhibit 10.3 to Form 10-Q (file no.
001-14901) for the quarter ended March 31, 2018, filed on May 3, 2018.
Form of Director Deferred Stock Unit Grant Agreement, updated May 2019, incorporated by reference to Exhibit 10.3 to
Form 10-Q (file no. 001-14901) for the quarter ended June 30, 2019, filed on July 30, 2019.
Form of CNX Resources Corporation Amended and Restated Equity and Incentive Compensation Plan Deferred Stock Unit
Grant Agreement for Non-Employee Directors, incorporated by reference to Exhibit 10.6 to Form 10-Q (file no. 001-
14901) for the quarter ended June 30, 2020, filed on August 3, 2020.
Trust Agreement (Amended and Restated on March 20, 2008) (Directors' Deferred Fee Plan (2004 Plan)), incorporated by
reference to Exhibit 10.4 to Form 10-Q (file no. 001-14901) for the quarter ended March 31, 2008, filed on April 30, 2008.
Amended and Restated Retirement Restoration Plan of CNX Resources Corporation, as amended and restated effective
December 2, 2008, as amended and restated effective November 28, 2017, incorporated by reference to Exhibit 10.71 to
Form 10-K (file no. 001-14901) for the year ended December 31, 2017, filed on February 7, 2018.
141
/
/
10.59*
10.60*
10.61*
10.62*
10.63*
10.64*
10.65*
10.66*
10.67*
10.68*
10.69*
10.70*
10.71*
10.72*
21
23.1
23.2
31.1
31.2
32.1
32.2
Amended and Restated Supplemental Retirement Plan of CNX Resources Corporation effective January 1, 2007, as
amended and restated effective November 28, 2017, incorporated by reference to Exhibit 10.72 to Form 10-K (file no. 001-
14901) for the year ended December 31, 2017, filed on February 7, 2018.
Amendment, effective May 30, 2019, to the Amended and Restated Supplemental Retirement Plan of CNX Resources
Corporation, as amended and restated effective November 28, 2017, incorporated by reference to Exhibit 10.2 to Form 10-
Q (file no. 001-14901) for the quarter ended June 30, 2019, filed on July 30, 2019.
Amendment, effective September 24, 2019, to the Amended and Restated Supplemental Retirement Plan of CNX
Resources Corporation as amended and restated effective November 28, 2017, incorporated by reference to Exhibit 10.61
to Form 10-K (file no. 001-14901) for the year ended December 31, 2019, filed on February 10, 2020.
CNX Resources Corporation Defined Contribution Restoration Plan, effective January 1, 2012, as amended and restated
effective November 28, 2017, incorporated by reference to Exhibit 10.73 to Form 10-K (file no. 001-14901) for the year
ended December 31, 2017, filed on February 7, 2018.
Amendment, dated as of July 1, 2018, to the CNX Resources Corporation Defined Contribution Restoration Plan, effective
January 1, 2012, as amended and restated effective November 28, 2017, incorporated by reference to Exhibit 10.1 to Form
10-Q (file no. 001-14901) for the quarter ended June 30, 2018, filed on August 2, 2018.
Executive Compensation Clawback Policy of the Company, dated as of January 28, 2014, incorporated by reference to
Exhibit 10.11 to Form 10-Q (file no. 001-14901) for the quarter ended March 31, 2014, filed on May 6, 2014.
Change in Control Severance Agreement, dated as of February 8, 2021, by and between the Company and Alexander
Reyes, filed herewith.
Letter Agreement, dated as of December 4, 2020, by and between the Company and Stephanie Gill, filed herewith.
Form of Restricted Stock Unit Award Agreement for CEO (for 2021 awards), filed herewith.
Form of Performance Share Unit Award Agreement for CEO (for 2021 awards), filed herewith.
Form of Performance-Based Restricted Stock Unit Award Agreement for CEO (for 2021 awards), filed herewith.
Form of Restricted Stock Unit Award Agreement for Non-CEO (for 2021 awards), filed herewith.
Form of Performance Share Unit Award Agreement for Non-CEO (for 2021 awards), filed herewith.
Form of Performance-Based Restricted Stock Unit Award Agreement for Non-CEO (for 2021 awards), filed
herewith.
Subsidiaries of CNX Resources Corporation.
Consent of Ernst & Young LLP
Consent of Netherland, Sewell & Associates, Inc.
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.1
Engineers' Audit Letter
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.
104
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in
Exhibits 101).
* Denotes the management contracts and compensatory arrangements in which any director or any named executive officer participates.
Supplemental Information
/
142
/
No annual report or proxy material has been sent to shareholders of CNX at the time of filing of this Form 10-K. An annual report will
be sent to shareholders and to the commission subsequent to the filing of this Form 10-K.
In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.
ITEM 16. FORM 10-K SUMMARY
None.
Pursuant to the requirements of Section 13 or 15(d) 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, as of the 9th day of February, 2021.
SIGNATURES
CNX RESOURCES CORPORATION
By:
/s/ NICHOLAS J. DEIULIIS
Nicholas J. DeIuliis
Director, Chief Executive Officer and President
(Duly Authorized Officer and Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed as of the 9th day of February, 2021,
by the following persons on behalf of the registrant in the capacities indicated:
Signature
Title
/s/ NICHOLAS J. DEIULIIS
Director, Chief Executive Officer and President
Nicholas J. DeIuliis
(Duly Authorized Officer and Principal Executive Officer)
/s/ DONALD W. RUSH
Chief Financial Officer
Donald W. Rush
(Duly Authorized Officer and Principal Financial Officer)
/s/ ALAN K. SHEPARD
Chief Accounting Officer and Vice President
Alan K. Shepard
(Duly Authorized Officer and Principal Accounting Officer)
/s/ JASON L. MUMFORD
Vice President and Controller
Jason L. Mumford
/s/ WILLIAM N. THORNDIKE JR.
Director and Chairman of the Board
William N. Thorndike Jr.
/s/ J. PALMER CLARKSON
Director
J. Palmer Clarkson
/s/ MAUREEN E. LALLY-GREEN
Director
Maureen E. Lally-Green
/s/ BERNARD LANIGAN JR.
Director
Bernard Lanigan Jr.
/s/ IAN MCGUIRE
Director
Ian McGuire
143
/
CNX RESOURCES CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
(Dollars in thousands)
SCHEDULE II
Additions
Deductions
Balance at
Release of
Balance at
Beginning
Charged to
Valuation
Charged to
End
of Period
Expense
Allowance
Expense
of Period
Year Ended December 31, 2020
State Operating Loss Carry-Forwards
$
81,202 $
— $
(2,004) $
— $
79,198
Charitable Contributions
Foreign Tax Credits
Total
Year Ended December 31, 2019
State Operating Loss Carry-Forwards
Charitable Contributions
Foreign Tax Credits
Total
Year Ended December 31, 2018
State Operating Loss Carry-Forwards
Deferred Deductible Temporary Differences
Charitable Contributions
162(m) Officers Compensation
AMT Credit
Foreign Tax Credits
Total
658
43,194
48
—
—
—
—
—
706
43,194
$
125,054 $
48 $
(2,004) $
— $
123,098
$
$
$
47,964 $
33,238 $
— $
— $
81,202
3,297
43,194
—
—
(2,639)
—
—
—
658
43,194
94,455 $
33,238 $
(2,639) $
— $
125,054
61,560 $
— $
(13,596) $
— $
47,964
9,088
3,156
5,957
12,413
44,402
—
141
—
1,983
—
(9,088)
—
(5,957)
(14,396)
(1,208)
—
—
—
—
—
$
136,576 $
2,124 $
(44,245) $
— $
—
3,297
—
—
43,194
94,455
144
/
CHANGE IN CONTROL SEVERANCE AGREEMENT
THIS CHANGE IN CONTROL SEVERANCE AGREEMENT (this "Agreement"), dated as of February 4, 2021 (the
"Effective Date"), is made between CNX Resources Corporation, CNX Center, 1000 CONSOL Energy Drive, Canonsburg,
Pennsylvania 15317, a Delaware corporation (the "Company"), and Alexander J. Reyes (the "Executive").
WITNESSETH:
WHEREAS, the Executive is a senior executive of the Company and has made and is expected to continue to make
major contributions to the short- and long-term profitability, growth and financial strength of the Company;
WHEREAS, the Board of Directors of the Company (the "Board") recognizes that, as is the case with many publicly
held corporations, the possibility of a Change in Control (as defined below) exists and that such possibility, and the uncertainty
and questions which it may raise among management, may result in the departure or distraction of key management personnel
to the detriment of the Company and its stockholders;
WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and encourage the continued
attention and dedication of members of the Company's management, including the Executive, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control;
WHEREAS, in consideration of the Executive's continued employment with the Company and the Executive's
agreement to waive certain rights he may have to receive severance compensation and benefits under any applicable Company
severance plan or policy, as set forth below, the Company desires to provide the Executive with certain compensation and
benefits set forth in this Agreement in order to ameliorate the financial and career impact on the Executive in the event the
Executive's employment with the Company is terminated for a reason related to a Change in Control; and
WHEREAS, the Executive agrees to waive any rights he may have under any Company severance plan, policy or other
agreement with respect to severance compensation and benefits in the event the Executive's employment with the Company is
terminated as the result of an Involuntary Termination Associated With a Change in Control (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements hereinafter set forth
and intending to be legally bound hereby, the Company and the Executive agree as follows:
1.
Certain Defined Terms. In addition to terms defined elsewhere herein, the following terms have the following
meanings when used in this Agreement with initial capital letters:
(a)
"Base Pay" means the greater of (i) the Executive's annual base salary rate, exclusive of bonuses,
commissions and other Incentive Pay, as in effect immediately preceding the Executive's Termination Date, or (ii) the
Executive's annual base salary rate, exclusive of bonuses, commissions and other Incentive Pay, as in effect immediately prior
to the Change in Control.
/
(b)
"Board" means the Board of Directors of the Company. If the Executive is also a member of the Board,
then in the case of any provision hereof that requires action by, or a determination of, the Board in connection with this
Agreement, it is understood that such provision refers to the members of the Board other than the Executive.
(c)
"Cause" means a determination by the Board that the Executive has committed any of the following
acts:
(i)the Executive has been convicted of, or the Executive has pleaded guilty or nolo contendere to, (A) any
felony, or (B) any misdemeanor involving fraud, embezzlement or theft; or
(ii)the Executive has wrongfully disclosed material confidential information of the Company or any
Subsidiary, has intentionally violated any material express provision of the Company's code of conduct for executives
and management employees (as in effect on the date of the Change in Control), or has intentionally failed or refused to
perform any of his material assigned duties for the Company; and any such failure or refusal has been demonstrably
and materially harmful to the Company.
Notwithstanding the foregoing, the Executive will not be deemed to have been terminated for "Cause"
under this subsection (ii) unless and until there has been delivered to the Executive a copy of a resolution duly adopted
by the affirmative vote of not less than the majority of the members of the Board plus one member, finding that, in the
good faith opinion of the Board, the Executive has committed an act constituting "Cause," as herein defined, and
specifying the particulars thereof in detail. Prior to any such determination, the Executive shall be provided with
reasonable notice of such pending determination and the Executive, together with his counsel (if the Executive chooses
to have counsel present at such meeting), shall be provided with the opportunity to be heard before the Board makes
any such determination. Nothing herein will limit the right of the Executive or his beneficiaries to contest the validity
or propriety of any such determination.
(d)
"Change in Control" means the occurrence of any of the following events:
(i)the acquisition after the date hereof by any individual, entity or group (within the meaning of section
13(d)(3) or 14(d)(2) of the Exchange Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of more than 25% of the combined voting power of the then outstanding Voting
Stock of the Company; provided, however, that for purposes of this Section 1(d)(i), the following acquisitions will not
constitute a Change in Control: (A) any issuance of Voting Stock of the Company directly from the Company that is
approved by the Incumbent Board (as defined in Section 1(d)(ii), below), (B) any acquisition by the Company of
Voting Stock of the Company, (C) any acquisition of Voting Stock of the Company by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any Subsidiary, (D) any acquisition of Voting Stock of the
Company by an underwriter holding securities of the Company in connection with a public offering thereof, or (E) any
acquisition of Voting Stock of the Company by any Person pursuant to a Business Combination that complies with
clauses (A), (B) and (C) of Section 1(d)(iii), below; or
2
/
(ii)individuals who constitute the Board as of the Effective Date (the "Incumbent Board," as modified by
this Section 1(d)(ii)), cease for any reason to constitute at least a majority of the Board; provided, however, that any
individual becoming a Director subsequent to such date whose election, or nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds of the Directors then comprising the Incumbent Board
(either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a
nominee for director, without objection to such nomination) will be deemed to have then been a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election or removal of Directors or other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or
(iii)consummation of a reorganization, merger or consolidation of the Company or a direct or indirect
wholly owned subsidiary thereof, a sale or other disposition (whether by sale, taxable or nontaxable exchange,
formation of a joint venture or otherwise) of all or substantially all of the assets of the Company, or other transaction
involving the Company (each, a "Business Combination"), unless, in each case, immediately following such Business
Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners of Voting Stock
of the Company immediately prior to such Business Combination beneficially own, directly or indirectly, more than
50% of the combined voting power of the then outstanding shares of Voting Stock of the entity resulting from such
Business Combination or any direct or indirect parent corporation thereof (including, without limitation, an entity
which as a result of such transaction owns the Company or all or substantially all of the Company's assets either
directly or through one or more subsidiaries), (B) no Person other than the Company beneficially owns 25% or more of
the combined voting power of the then outstanding shares of Voting Stock of the entity resulting from such Business
Combination or any direct or indirect parent corporation thereof (disregarding all "acquisitions" described in
subsections (A) - (C) of Section 1 (d)(i)), and (C) at least a majority of the members of the Board of Directors of the
entity resulting from such Business Combination or any direct or indirect parent corporation thereof were members of
the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for
such Business Combination; or
(iv)approval by the stockholders of the Company of a complete liquidation or dissolution of the Company,
except pursuant to a Business Combination that complies with clauses (A), (B) and (C) of Section 1(d)(iii).
(e)
(f)
(g)
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1986, as amended.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consultancy Period" and "Consultancy Position" shall have the respective meanings assigned to those
terms in Section 2(d) hereof.
3
/
(h)
"Constructive Termination Associated With a Change in Control" means the termination of the
Executive's employment with the Company by the Executive as a result of the occurrence without the Executive's written
consent of one of the following events:
(i)a material adverse change in the Executive's position with the Company and/or a Subsidiary (or any
successor thereto by operation of law or otherwise) (but excluding any loss of any position with a Subsidiary with
respect to which the Executive is not separately compensated) as compared to the Executive's position with the
Company (and/or a Subsidiary) immediately prior to the Change in Control;
(ii)(A) a material reduction in the Executive's annual base salary rate, exclusive of bonuses, commissions
and other Incentive Pay, as in effect immediately prior to the Change in Control; (B) a material reduction in the
Executive's Target Bonus opportunity in effect immediately prior to the Change in Control; or (C) a material reduction
in the level of Employee Benefits provided to the Executive immediately prior to the Change in Control (excluding any
reduction that is generally applicable to all or substantially all salaried Company employees);
(iii) a material adverse change in circumstances has occurred following a Change in Control, including,
without limitation, a material change in the scope of the business or other activities for which the Executive was
responsible immediately prior to the Change in Control, which has rendered the Executive unable to carry out, has
materially hindered the Executive's performance of, or has caused the Executive to suffer a material reduction in, any of
the authorities, powers, functions, responsibilities or duties attached to the position held by the Executive immediately
prior to the Change in Control; a good faith determination by the Executive (that a material adverse change has
occurred) will be conclusive and binding upon the parties hereto unless otherwise shown by the Company to be not in
good faith);
(iv)in connection with the liquidation, dissolution, merger, consolidation or reorganization of the Company
or transfer of all or substantially all of its business and/or assets, the Company breached this Agreement by not
requiring the successor or successors (by liquidation, merger, consolidation, reorganization, transfer or otherwise) to
which all or substantially all of its business and/or assets have been transferred (by operation of law or otherwise) to
assume all duties and obligations of the Company under this Agreement pursuant to Section 14(a); or
(v)the relocation of the Executive's principal work location (other than in connection with a relocation
contemplated by the Company as of the date hereof or pursuant to organizational changes in accordance with past
practice) to a location that increases the Executive's normal work commute by fifty (50) miles or more as compared to
the Executive's normal work commute immediately prior to the Change in Control, or that the Executive's required
travel away from his office in the course of discharging his responsibilities or duties of his job is materially increased as
compared to that which was required of the Executive in any of the three (3) full years immediately prior to the Change
in Control.
Without limiting the generality or effect of the foregoing, the Executive shall have no right to terminate
employment in a Constructive Termination Associated With a Change in Control in
4
/
connection with an event described above unless (A) the Executive provides written notice to the Company within one month
of the occurrence of such event that identifies such event with particularity, and (B) the Company fails to correct such event
within thirty (30) days after receipt of such notice from the Executive, and (C) such termination must occur within sixty (60)
days after the expiration of the failure of the Company to correct the event.
In no event shall the termination of the Executive's employment with the Company on account of the
Executive's death or Disability or because the Executive engaged in conduct constituting Cause be deemed to be a Constructive
Termination Associated With a Change in Control.
"Disability" means the Executive becomes permanently disabled within the meaning of, and begins
actually to receive disability benefits pursuant to, the long-term disability plan in effect for, or applicable to, the Executive.
(i)
(j)
"Employee Benefits" means the perquisites, benefits and service credit for benefits as provided under
any and all employee retirement income and welfare benefit policies, plans, programs or arrangements in which the Executive
is entitled to participate, including, without limitation, any stock option, performance share, performance unit, stock purchase,
stock appreciation, savings, pension, supplemental executive retirement, or other retirement income or welfare benefit, deferred
compensation, incentive compensation, group or other life, health, medical/hospital or other insurance (whether funded by
actual insurance or self-insured by the Company or a Subsidiary), disability, salary continuation, expense reimbursement and
other employee benefit policies that may exist as of a Change in Control or any successor policies, plans or arrangements that
provide substantially similar perquisites or benefits.
(k)
(l)
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Incentive Pay" means the greater of: (i) the Executive's Target Bonus for which the Executive was
eligible during the period that includes the Termination Date, or (ii) the average of the annual bonuses paid by the Company to
the Executive for the three years prior to the year that includes the Termination Date. For purposes of this definition, "Target
Bonus" means 100% of the amount established under the CNX Resources Corporation Executive Annual Incentive Plan, and
any other annual bonus, applicable incentive, commission or other sales incentive compensation, or comparable incentive
payment opportunity which, in the sole discretion of the Company, is deemed to constitute a Target Bonus, in addition to Base
Pay, for which the Executive was eligible to receive, but did not receive prior to his Termination Date, in regard to services
rendered in the year covered by the Executive's Termination Date and which is to be made pursuant to any bonus, incentive,
profit-sharing, performance, discretionary pay or similar agreement, policy, plan, program or arrangement (whether or not
funded) of the Company or a Subsidiary, or any successor thereto. For purposes of this definition, "Incentive Pay" does not
include any stock option, stock appreciation, stock purchase, restricted stock, the CNX Resources Corporation Long-Term
Incentive Programs or similar plan, program, arrangement or grant, one time bonus or payment (including, but not limited to,
any sign-on bonus), any amounts contributed by the Company for the benefit of the Executive to any qualified or nonqualified
deferred compensation plan, whether or not provided under an arrangement described in the prior sentence, or any amounts
designated by the parties as amounts other than Incentive Pay.
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(m)
"Involuntary Termination Associated With a Change in Control" means the termination of the
Executive's employment related to a Change in Control: (i) involuntarily by the Company for any reason other than Cause, the
Executive's death or the Executive's Disability, or (ii) on account of a Constructive Termination Associated With a Change in
Control.
(n)
"Restricted Business" means any business function with a direct competitor of the Company that is
substantially similar to the business function performed by the Executive with the Company immediately prior to his
Termination Date.
(o)
"Restricted Territory" means the counties, towns, cities or states of any country in which the Company
operates or does business.
(p)
(q)
(r)
"Subsidiary" means any Company controlled affiliate.
"Termination Date" means the last day of the Executive's employment with the Company.
"Termination of Employment" means, except as provided in the following sentence and subject to the
provisions of Section 19(b), the termination of the Executive's active employment relationship with the Company on account of
an Involuntary Termination Associated With a Change in Control. For purposes of the non-solicitation provision of Section 10
of this Agreement, the term "Termination of Employment" shall mean the termination of the Executive's employment
relationship with the Company for any reason.
(s)
"Voting Stock" means securities entitled to vote generally in the election of directors.
2.
Termination Associated With a Change in Control.
(a)
Involuntary Termination Associated With a Change in Control. In the event the Executive's
employment is terminated after, or in connection with, a Change in Control, on account of (i) an Involuntary Termination
Associated With a Change in Control within the two year period after the Change in Control, or (ii) an involuntary termination
by the Company (other than for Cause or due to the Executive's death or Disability) that (A) occurs not more than three (3)
months prior to the date on which a Change in Control occurs, or (B) is requested by a third party who initiates a Change in
Control, the Executive shall be entitled to the benefits provided in subsection (b) of this Section 2. For purposes of subsection
2(a)(ii)(B) above, to be eligible to receive amounts described in Section 2(b) below, a Change in Control must be consummated
within the twelve (12) month period following the Executive's Termination Date, except in circumstances pursuant to which the
consummation of the Change in Control is delayed, through no failure of the Company or the third person, by a governmental
or regulatory authority or agency with jurisdiction over the matter, or as a result of other similar circumstances where a third
party approval is necessary and is delayed. In such a circumstance, the remainder of the twelve (12) month period shall be
tolled and shall recommence upon termination of the delaying event.
(b)
Compensation and Benefits Upon Involuntary Termination Associated With a Change in Control. In
the event a termination described in subsection (a) of this Section 2 occurs, and
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subject to the Executive’s compliance with the provisions of Section 4 hereof, the Company shall pay and provide to the
Executive after his Termination Date:
(i)A lump sum cash payment equal to (A) one and one-half (1.5) times Base Pay, plus (B) one and one-
half (1.5) times Incentive Pay.
(ii)The Executive shall receive a pro rated payment of his Incentive Pay for the year in which his
Termination of Employment occurs. The pro rated payment shall be based on the Executive's Incentive Pay as of the
Executive's Termination Date, multiplied by a fraction, the numerator of which is the number of days during which the
Executive was employed by the Company in the year of his termination and the denominator of which is 365.
(iii)For the 18 month period immediately following the Date of Termination or, if later, the closing dates
for the Change in Control:
(A) If the Executive elects COBRA Continuation Coverage, the Executive shall continue to
participate in all medical, dental and vision insurance plans he was participating in on the Termination Date,
and the Company shall pay the applicable premium. During the applicable period of coverage described in the
foregoing sentences, the Executive shall be entitled to benefits on substantially the same basis and cost as
would have otherwise been provided had the Executive not separated from service. To the extent that such
benefits are available under the above-referenced benefit plans and the Executive had such coverage
immediately prior to termination of employment, such continuation of benefits for the Executive shall also
cover the Executive's dependents for so long as the Executive is receiving benefits under this paragraph (iii).
The COBRA Continuation Period for medical and dental insurance under this paragraph (iii) shall be deemed
to run concurrent with the continuation period federally mandated by COBRA (generally 18 months), or any
other legally mandated and applicable federal, state, or local coverage period for benefits provided to
terminated employees under the health care plan. For purposes of this Agreement, "COBRA" means the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended; and "COBRA Continuation Period"
shall mean the continuation period for medical and dental insurance to be provided under the terms of this
Agreement which shall commence on the first day of the calendar month following the month in which the date
of termination falls and generally shall continue for an 18 month period.
(iv)If the Executive would have been eligible for post-retirement medical and dental coverage had he
retired from employment during the period of 18 months following his Termination Date, but is not so eligible as the
result of his termination, then, at the conclusion of the benefit continuation period described in (iii) above, the
Company shall take all commercially reasonable efforts to provide the Executive with additional continued group
medical and dental coverage comparable to that which would have been available to him from time to time under the
Company's post-retirement medical and dental benefit program, for as long as such coverage would have been available
under such program. It is specifically acknowledged by the Executive that if such coverage is provided under a
Company sponsored self insured plan, it will be provided on an after-tax basis and the Executive will have income
imputed to him annually equal to the fair market value of the premium. If this coverage cannot be provided by the
Company, (or
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where such continuation would adversely affect the tax status of the plan pursuant to which the coverage is provided),
then as an alternative, the Company will reimburse the Executive in lieu of such coverage an amount equal to the
Executive's actual and reasonable after-tax cost of continuing comparable coverage.
Reimbursement to the Executive pursuant to subsections (iii) or (iv) above will be available only to the
extent that (1) such expense is actually incurred for any particular calendar year and reasonably substantiated; (2)
reimbursement shall be made no later than the end of the calendar year following the year in which such expense is
incurred by the Executive; (3) no reimbursement provided for any expense incurred in one taxable year will affect the
amount available in another taxable year; and (4) the right to this reimbursement is not subject to liquidation or
exchange for another benefit. Notwithstanding the foregoing, under subsection (iii), no reimbursement will be provided
for any expense incurred following the 18 months or for any expense which relates to coverage after such date.
(v)A lump sum cash payment equal to the total amount that the Executive would have received under the
Company's 401(k) plan as a Company match if the Executive was eligible to participate in the Company's 401(k) plan
for the 18 month period after his Termination Date and he contributed the maximum amount to the plan for the match.
Such amount shall be determined based on the assumption that the Executive would have received annual Base Pay
plus Incentive Pay during such period in the amounts set forth in Sections 2(b)(i) and (ii) above.
(vi)A lump sum cash payment equal to the difference between the present value of the Executive's accrued
pension benefits at his Termination Date under the Company's qualified defined benefit plan and (if eligible) any plan
or plans sponsored by the Company providing nonqualified retirement benefits (which currently includes the CNX
Resources Corporation Defined Contribution Restoration Plan) (the qualified and nonqualified plans together being
referred to as the "pension plans") and the present value of the accrued pension benefits to which the Executive would
have been entitled under the pension plans if the Executive had continued participation in those plans for the 18 month
period after his Termination Date. Such amount shall be determined based on the assumption that the Executive would
have received annual Base Pay plus Incentive Pay during such period in the amounts set forth in Sections 2(b)(i) and
(ii) above.
(vii)A lump sum cash payment of $25,000 in order to cover the cost of outplacement assistance services for
the Executive and other expenses associated with seeking another employment position.
(viii)The Executive shall receive any amounts earned, accrued or owing but not yet paid to the Executive as
of his Termination Date, payable in a lump sum, and any benefits accrued or earned in accordance with the terms of any
applicable benefit plans and programs of the Company.
(ix)All payments under this subsection 2(b) will be made in a lump sum no later than 60 days after the date
of termination (or, if later, the closing date of the Change in Control, as
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applicable); provided, however, that the benefits due under subsections (iii) and (iv) shall be provided as specified
thereunder.
(c)
Vesting of Equity Rights. Notwithstanding any provision to the contrary in any applicable plan,
program or agreement, upon the occurrence of a Change in Control, all stock options, stock appreciation rights, restricted stock,
restricted stock units and other equity rights held by the Executive will become fully vested and/or exercisable, as the case may
be, on the date on which the Change in Control occurs, and all stock options or stock appreciation rights held by the Executive
shall remain exercisable for the period set forth in the award agreement covering the options or rights.
(d)
Consultancy Period Option. In the case of any Involuntary Termination Associated With a Change in
Control, the Company may, in its sole discretion, elect to require reasonable cooperation from the Executive following the
Executive's Termination Date for a period (the "Consultancy Period") not to exceed 18 months. In the event that the Company
so elects, the Executive shall, during the pendency of the Consultancy Period, be available from time to time, at the request of
the Company's Chairman of the Board or Chief Executive Officer, to provide advice and assistance concerning (i) the transition
of the Executive's duties and responsibilities to any successor to his position, and (ii) any other matters concerning the
Company's corporate, business and financial affairs which are consistent with the Executive's expertise and experience. Such
advice and assistance may, at the Executive's option, be provided either in person or by telephone or videoconference. In no
event shall the Company request, nor shall the Executive be required to provide more than five (5) hours of consulting services
per work week, nor to provide such services other than during normal Company business hours. The Executive shall be
reimbursed by the Company for any reasonable expenses incurred in connection with the performance of such services, subject
to compliance with the Company's standard policies and procedures regarding reimbursement of expenses. The Executive shall
be permitted, during the Consultancy Period, to engage in other business and personal activities; provided, that such activities
are not inconsistent with the Executive's duties under Sections 9 and 10 hereof.
3.
Termination of Employment on Account of Disability, Cause or Death. Notwithstanding anything in this
Agreement to the contrary, if the Executive's employment terminates on account of Disability, the Executive shall be entitled to
receive disability benefits under any disability program maintained by the Company that covers the Executive, and the
Executive shall not be considered to have terminated employment under this Agreement and shall not receive benefits pursuant
to Section 2 hereof. If the Executive's employment terminates on account of Cause or because of his death, the Executive shall
not be considered to have terminated employment under this Agreement and shall not receive benefits pursuant to Section 2
hereof.
4.
Release. To receive the consideration described in Sections 2(b) of this Agreement, the Executive must sign a
Separation of Employment and General Release Agreement, substantially in the form attached hereto as Annex A (the
"Release"), deliver the signed Release to the Company’s General Counsel within thirty (30) days after the Termination Date
(unless a longer period is required by law), and not revoke the Release within the seven-day revocation period provided for in
the Release.
5.
Enforcement. Without limiting the rights of the Executive at law or in equity, if the Company fails to make any
payment or provide any benefit required to be made or provided hereunder on a timely basis, the Company will pay interest on
the amount or value thereof at an annualized rate of
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interest equal to the so-called composite "prime rate" as quoted from time to time during the relevant period in the Eastern
Edition of The Wall Street Journal. Such interest will be payable as it accrues on demand. Any change in such prime rate will
be effective on and as of the date of such change.
6.
Limit on Payments by the Company.
(a)
The provisions of this Section 6 shall apply notwithstanding anything in this Agreement or any other
agreement to the contrary. In the event that it shall be determined that any payment or distribution by the Company to or for the
benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would constitute an "excess parachute payment" within the meaning of Section 280G of the Code,
Company will apply a limitation on the Payment amount as set forth below (a "Parachute Cap") as follows: The aggregate
present value of the Payments under Section 2(b) of this Agreement ("Agreement Payments") shall be reduced (but not below
zero) to the Reduced Amount; provided, however, that any such reduction shall be applied to Agreement Payments that do not
constitute deferred compensation and are exempt or otherwise excepted from coverage under Section 409A (but excluding
stock options or other stock rights). The "Reduced Amount" shall be an amount expressed in present value which maximizes
the aggregate present value of Agreement Payments without causing any Payment to be subject to the limitation of deduction
under Section 280G of the Code. For purposes of this Section 6, "present value" shall be determined in accordance with
Section 280G(d)(4) of the Code.
(b)
Except as set forth in the next sentence, all determinations to be made under this Section 6 shall be
made by the nationally recognized independent public accounting firm used by the Company immediately prior to the Change
in Control ("Accounting Firm"), which Accounting Firm shall provide its determinations and any supporting calculations to the
Company and the Executive within ten (10) days of the Executive's Termination Date. The value of the Executive's non-
competition covenant under Section 10(a) of this Agreement shall be determined by independent appraisal by a nationally-
recognized business valuation firm acceptable to both the Executive and the Company, and a portion of the Agreement
Payments shall, to the extent of that appraised value, be specifically allocated as reasonable compensation for such non-
competition covenant and shall not be treated as a parachute payment. Any such determination by the Accounting Firm shall be
binding upon the Company and the Executive.
(c)
All of the fees and expenses of the Accounting Firm in performing the determinations referred to in
this Section 6 shall be borne solely by the Company.
7.
No Mitigation Obligation. The Company hereby acknowledges that it will be difficult and may be impossible
for the Executive to find reasonably comparable employment following the Termination Date. Accordingly, the payment of the
severance compensation by the Company to the Executive in accordance with the terms of this Agreement is hereby
acknowledged by the Company to be reasonable, and the Executive will not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor will any profits, income, earnings or other
benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of the Executive
hereunder or otherwise. Notwithstanding anything to the contrary contained herein, as a condition to accepting benefits
provided hereunder, the Executive will be required to waive,
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and will be deemed to have waived, any other right or entitlement to severance or termination benefits from the Company or its
Subsidiaries.
8.
Legal Fees and Expenses. In the event of a Change in Control, it is the intent of the Company that the
Executive not be required to incur legal fees and the related expenses associated with the interpretation, enforcement or defense
of the Executive's rights under this Agreement by litigation or otherwise because the cost and expense thereof would detract
from the benefits intended to be extended to the Executive hereunder. Accordingly, if a Change in Control occurs and it should
appear to the Executive that the Company has failed to comply with any of its obligations under this Agreement or in the event
that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or
institutes any litigation or other action or proceeding designed to deny, or to recover from, the Executive the benefits provided
or intended to be provided to the Executive under Section 2 of this Agreement, the Company irrevocably authorizes the
Executive from time to time to retain counsel of the Executive's choice, at the expense of the Company as hereafter provided, to
advise and represent the Executive in connection with any such interpretation, enforcement or defense, including without
limitation the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director,
officer or employee of the Company, in any jurisdiction. Notwithstanding any existing or prior attorney-client relationship
between the Company and such counsel, the Company irrevocably consents to the Executive's entering into an attorney-client
relationship with such counsel, and in that connection, the Company and the Executive agree that a confidential relationship
will exist between the Executive and such counsel. Without respect to whether the Executive prevails, in whole or in part, in
connection with any of the foregoing, the Company will pay and be solely financially responsible for any and all reasonable
attorneys' and related fees and expenses incurred by the Executive in connection with any of the foregoing; provided that, in
regard to such matters, the Executive has not acted frivolously, in bad faith or with no colorable claim of success. Such fees and
expenses will be paid by the Company as they are incurred by the Executive, but in no event later than the end of the
Executive's taxable year following the Executive's taxable year in which the Executive incurs the fees and expenses. In
addition, no reimbursement provided for any expense incurred in one taxable year will affect the amount available in another
taxable year, and the right to this reimbursement is not subject to liquidation or exchange for another benefit.
9.
Confidentiality. The Executive hereby covenants and agrees that, except as specifically requested or directed
by the Company, he will not disclose to any person not employed by the Company, or use in connection with engaging in
competition with the Company, any confidential or proprietary information (as defined below) of the Company. For purposes of
this Agreement, the term "confidential or proprietary information" will include all information of any nature and in any form
that is owned by the Company and that is not publicly available (other than by the Executive's breach of this Section 9) or
generally known to persons engaged in businesses similar or related to those of the Company. Confidential or proprietary
information will include, without limitation, the Company's financial matters, customers, employees, industry contracts,
strategic business plans, product development (or other proprietary product data), marketing plans, consulting solutions and
processes, and all other secrets and all other information of a confidential or proprietary nature which is protected by the
Uniform Trade Secrets Act. For purposes of the preceding two sentences, the term "Company" will also include any Subsidiary
(collectively, the "Restricted Group"). The foregoing obligations imposed by this Section 9 will not apply (i) in the course of the
business of and for the benefit of the Company, (ii) if such
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confidential or proprietary information has become, through no fault of the Executive, generally known to the public, or (iii) if
the Executive is required by law to make disclosure (after giving the Company notice and an opportunity to contest such
requirement).
Notwithstanding the foregoing, nothing in this Agreement restricts or prohibits the Executive from reporting possible violations
of law or regulation to any governmental agency or entity, including but not limited to the Department of Justice, the Securities
and Exchange Commission, the Congress, and any agency Inspector General, or from making other disclosures that are
protected under state or federal law or regulation. The Executive does not need the prior authorization of the Company to make
such reports or disclosures. The Executive is not required to notify the Company that the Executive has made any such reports
or disclosures.
10.
Covenants Not to Compete and Not to Solicit. In the event of the Executive's Termination of Employment, the
Company's obligations to provide the payments and benefits set forth in Section 2 shall be expressly conditioned upon the
Executive's compliance with the covenants not to compete and not to solicit as provided herein. In the event the Executive
breaches his obligations to the Company as provided herein, the Company's obligations to provide the payments and benefits
set forth in Section 2 shall cease, without prejudice to any other remedies that may be available to the Company.
(a)
Covenant Not to Compete. If the Executive is receiving payments and benefits under Section 2 above
(or subsequently becomes entitled thereto because of a termination described in Section 2(a)(ii)), then, for a period of one (1)
year following the Executive's Termination Date, the Executive shall not directly or indirectly engage in (whether as an
employee, consultant, proprietor, partner, director or otherwise), or have any ownership interest in, or participate in a financing,
operation, management or control of, any person, firm, corporation or business that is a Restricted Business in a Restricted
Territory without the prior written consent of the Board. For this purpose, ownership of no more than 5% of the outstanding
Voting Stock of a publicly traded corporation shall not constitute a violation of this provision.
(b)
Covenant Not to Solicit. If the Executive is receiving payments and benefits under Section 2 above (or
subsequently becomes entitled thereto because of a termination described in Section 2(a)(ii)), then, for a period of two (2) years
following the Executive's Termination Date, the Executive shall not: (i) solicit, encourage or take any other action which is
intended to induce any other employee of the Company to terminate his employment with the Company; or (ii) interfere in any
manner with the contractual or employment relationship between the Company and any such employee of the Company. The
foregoing shall not prohibit the Executive or any entity with which the Executive may be affiliated from hiring a former
employee of the Company; provided, that such hiring results exclusively from such former employee's affirmative response to a
general recruitment effort.
(c)
Interpretation. The covenants contained herein are intended to be construed as a series of separate
covenants, one for each county, town, city and state or other political subdivision of a Restricted Territory. Except for
geographic coverage, each such separate covenant shall be deemed identical in terms to the covenant contained in the preceding
subsections. If, in any judicial proceeding, the court shall refuse to enforce any of the separate covenants (or any part thereof)
deemed included in such subsections, then such unenforceable covenant (or such part) shall be deemed to be eliminated from
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this Agreement for the purpose of those proceedings to the extent necessary to permit the remaining separate covenants (or
portions thereof) to be enforced.
(d)
Reasonableness. In the event that the provisions of this Section 10 shall ever be deemed to exceed the
time, scope or geographic limitations permitted by applicable laws, then such provisions shall be reformed to the maximum
time, scope or geographic limitations, as the case may be, permitted by applicable laws.
11.
Employment Rights. Nothing expressed or implied in this Agreement will create any right or duty on the part
of the Company or the Executive to have the Executive remain in the employment of the Company or any Subsidiary prior to or
following any Change in Control.
12.
Withholding of Taxes. The Company may withhold from any amounts payable under this Agreement all
federal, state, city or other taxes as the Company is required to withhold pursuant to any applicable law, regulation or ruling.
13.
Term of Agreement. The term of this Agreement shall commence on the Effective Date hereof and shall
continue until December 31, 2019; provided, however, that commencing on January 1, 2020, and each January 1 thereafter, the
term of this Agreement shall automatically be extended until the following December 31, unless the Company gives notice not
later than October 31 of the preceding year that it does not wish to extend this Agreement; and provided, further, that regardless
of any such notice by the Company, this Agreement shall continue in effect for a period of 18 months beyond the term provided
herein if a Change in Control occurs during the period that this Agreement is in effect.
14.
Successors and Binding Agreement.
(a)
The Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, by agreement in
form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the
same manner and to the same extent the Company would be required to perform if no such succession had taken place. This
Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including without
limitation any persons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether
by purchase, merger, consolidation, reorganization or otherwise (and such successor will thereafter be deemed the "Company"
for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company.
(b)
This Agreement will inure to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees and legatees. This Agreement will supersede the
provisions of any employment or other agreement between the Executive and the Company that relate to any matter that is also
the subject of this Agreement, and such provisions in such other agreements will be null and void.
(c)
This Agreement is personal in nature and neither of the parties hereto will, without the consent of the
other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in
Sections 14(a) and (b). Without limiting the generality or
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effect of the foregoing, the Executive's right to receive payments hereunder will not be assignable, transferable or delegable,
whether by pledge, creation of a security interest, or otherwise, other than by a transfer by the Executive's will or by the laws of
descent and distribution and, in the event of any attempted assignment or transfer contrary to this Section 14(c), the Company
will have no liability to pay any amount so attempted to be assigned, transferred or delegated.
15.
Notices. For all purposes of this Agreement, all communications, including without limitation, notices,
consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be deemed to have been
duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof orally confirmed by the
recipient), or five (5) business days after having been mailed by United States registered or certified mail, return receipt
requested, postage prepaid, or three (3) business days after having been sent by a nationally recognized courier service for
overnight/next-day delivery, such as FedEx, UPS, or the United States Postal Service, addressed to the Company (to the
attention of the Secretary of the Company) at its principal executive office and to the Executive at his principal residence, or to
such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of
changes of address will be effective only upon receipt.
16.
Governing Law. The validity, interpretation, construction and performance of this Agreement will be governed
by and construed in accordance with the substantive laws of the Commonwealth of Pennsylvania, without giving effect to the
principles of conflict of laws of such Commonwealth.
17.
Validity. If any provision of this Agreement or the application of any provision hereof to any person or
circumstances is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such
provision to any other person or circumstances will not be affected, and the provision so held to be invalid, unenforceable or
otherwise illegal will be reformed to the extent (and only to the extent) necessary to make it enforceable, valid or legal.
18.
Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in a writing signed by the Executive and the Company. No waiver by either party hereto
at any time of any breach by the other party hereto or compliance with any condition or provision of this Agreement to be
performed by such other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise, expressed or implied with respect to the subject
matter hereof have been made by either party that are not set forth expressly in this Agreement. References to Sections are to
references to Sections of this Agreement. Any reference in this Agreement to a provision of a statute, rule or regulation will
also include any successor provision thereto. Whenever used herein, the masculine includes the feminine.
19.
Code Section 409A.
(a) If any benefit provided under this Agreement is subject to the provisions of Section 409A of the Code and
the regulations issued thereunder, the provisions of the Agreement shall be administered, interpreted and construed in a manner
necessary to comply with Section 409A and the
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regulations issued thereunder (or disregarded to the extent such provision cannot be so administered, interpreted, or construed).
(b) Severance benefits are payable only if the Executive is involuntarily terminated by the Company as
provided under this Agreement. For purposes of the Agreement, the Executive shall be considered to have experienced a
termination of employment only if the Executive has terminated employment with the Company and all of its controlled group
members within the meaning of Section 409A of the Code. For purposes hereof, the determination of controlled group members
shall be made pursuant to the provisions of Section 414(b) and 414(c) of the Code; provided that the language "at least 50
percent" shall be used instead of "at least 80 percent" in each place it appears in Section 1563(a)(1), (2) and (3) of the Code and
Treas. Reg. § 1.414(c)-2. Whether the Executive has terminated employment will be determined based on all of the facts and
circumstances and in accordance with the guidance issued under Section 409A of the Code.
(c) For purposes of Section 409A, each severance benefit payment shall be treated as a separate payment.
Each payment under this Agreement is intended to be excepted from Section 409A to the maximum extent provided under
Section 409A as follows: (i) each payment that is scheduled to be made on or before March 15th of the calendar year following
the calendar year containing the Executive's termination date (or, if later, the closing date of the Change in Control) is intended
to be excepted under the short-term deferral exception as specified in Treas. Reg. § 1.409A-1(b)(4); (ii) post-termination
medical benefits are intended to be excepted under the medical benefits exceptions as specified in Treas. Reg. § 1.409A-1(b)(9)
(v)(B); and (iii) each payment that is not otherwise excepted under the short-term deferral exception or medical benefits
exception is intended to be excepted under the involuntary pay exception as specified in Treas. Reg. § 1.409A-1(b)(9)(iii). The
Executive shall have no right to designate the date of any payment under this Agreement.
1.
With respect to payments subject to Section 409A of the Code (and not excepted therefrom), if any, it
is intended that each payment is paid on permissible distribution event and at a specified time consistent with Section 409A of
the Code. The Company reserves the right to accelerate and/or defer any payment to the extent permitted and consistent with
Section 409A. Notwithstanding any provision of this Agreement to the contrary, to the extent that a payment hereunder is
subject to Section 409A of the Code (and not excepted therefrom) and payable on account or a termination of employment,
such payment shall be delayed for a period of six months after the date of termination (or, if earlier, the death of the Executive)
if the Executive is a "specified employee" (as defined in Section 409A of the Code and determined in accordance with the
procedures established by the Company). Any payment that would otherwise have been due or owing during such six-month
period will be paid immediately following the end of the six-month period in the month following the month containing the six
(6)-month anniversary of the date of termination.
2.
Survival. Notwithstanding any provision of this Agreement to the contrary, the parties' respective rights and
obligations under Sections 2, 6, 8, 9, and 10 will survive any termination or expiration of this Agreement or the termination of
the Executive's employment for any reason whatsoever.
3.
Counterparts. This Agreement may be executed in one or more counterparts, each of which will be deemed to
be an original but all of which together will constitute one and the same agreement.
[Remainder of Page Intentionally Left Blank]
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[Signature Page for Change In Control Agreement]
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered February 4, 2021,
but effective as of the date first above written.
CNX Resources Corporation
By:
/s/ Nicholas J. DeIuliis
Name: Nicholas J. DeIuliis
Title: President and Chief Executive Officer
Executive
/s/ Alexander J. Reyes
Alexander J. Reyes
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Annex A
SEPARATION OF EMPLOYMENT AND GENERAL RELEASE AGREEMENT
THIS SEPARATION OF EMPLOYMENT AGREEMENT AND GENERAL RELEASE (the “Agreement”)
is made as of this _____ day of __________, _____, by and between CNX Resources Corporation (the “Company”)
and _________________________ (the “Executive”).
WHEREAS, the Executive formerly was employed by the Company as ________; and
WHEREAS, the Executive and Company entered into a Change in Control Severance Agreement, dated
__________ ___, 20__, (the “Severance Agreement”) which provides for certain payments and benefits in the event
that the Executive’s employment is terminated on account of a reason set forth in the Severance Agreement; and
WHEREAS, the Executive’s employment with the Company was terminated for reasons that qualify the
Executive to receive certain payments and benefits, as set forth in Section 2(b) of the Severance Agreement, subject
to, among other things, the Executive’s execution of this Agreement.
NOW, THEREFORE, for and in consideration of the Company’s commitments in Section 2(b) of the
Severance Agreement, the Executive and the Company hereby agree as follows:
The Executive does hereby REMISE, RELEASE AND FOREVER DISCHARGE the Company, its
1.
affiliates, subsidiaries and parents, and its and their respective officers, directors, employees, and agents, and its and
their respective successors and assigns, heirs, executors, and administrators, as well as the current and former
fiduciaries of any pension, welfare, or other benefit plans applicable to the employees or former employees of the
Company, and the current and former welfare and other benefit plans sponsored by the Company (collectively,
“Releasees”) from all causes of action, suits, debts, claims and demands whatsoever in law or in equity, which the
Executive ever had, now has, or hereafter may have, whether known or unknown, or which the Executive’s heirs,
executors, or administrators may have, by reason of any matter, cause or thing whatsoever, from the beginning of
time to the date the Executive signs this Agreement, and particularly, but without limitation of the foregoing general
terms, any claims arising from or relating in any way to the Executive’s employment relationship with the Company,
the terms and conditions of that employment relationship, and the termination of that employment relationship,
including, but not limited to, any claims arising under the Age Discrimination in Employment Act, the Older
Workers Benefit Protection Act, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the
Worker Readjustment and Retraining Notification Act, the Consolidated Omnibus Budget Reconciliation Act, the
Employee Retirement Income Security Act of 1974, the Pennsylvania Human Relations Act, and any other claims
under any federal, state or local common law, statutory, or regulatory provision, now or hereafter recognized, and
any claims for attorneys’ fees and costs. This Agreement is effective without regard to the legal nature of the claims
raised and without regard
DB1/ 92014808.3
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to whether any such claims are based upon tort, equity, implied or express contract or discrimination of any sort.
(a)
Although Paragraph 1(a) is intended to be a general release, it is understood and agreed that
Paragraph 1(a) excludes claims related to the Executive’s right to receive the payments and benefits described in
Section 2(b) of the Severance Agreement, as well as claims under any statute or common law that the Executive is
legally barred from releasing, such as the Executive’s entitlement to vested pension benefits.
(b)
Nothing herein is intended to or shall preclude the Executive from filing a charge with the Equal
Employment Opportunity Commission (“EEOC”), or similar state or local fair employment practices agency and/or
cooperating with said agency in its investigation. The Executive, however, explicitly waives any right to file a
personal lawsuit or receive monetary damages that the agency may recover against the Releasees resulting from such
charge, without regard as to who brought any said complaint or charge. Employee further agrees that to the extent
any relief, including monetary relief, is awarded against the Releasees in favor of Executive in any such proceeding,
all amounts paid as consideration under Section 2(b) of the Separation Agreement shall be a setoff and credit against
any such award to the fullest extent permitted by law.
(c)
The Executive represents and agrees by signing below that the Executive has not been denied any
leave or benefit requested, has received the appropriate pay for all hours worked for the Company, and has no known
workplace injuries or occupational diseases.
(d)
To the fullest extent permitted by law, the Executive represents and affirms that [other than
_________________________,] the Executive has not filed or caused to be filed on the Executive’s behalf any claim
for relief covered by the general release in Paragraph 1(a) against any Releasee and, to the best of the Executive’s
knowledge and belief, no outstanding claims for relief covered by the general release in Paragraph 1(a) have been
filed or asserted against the Company or any Releasee on the Executive’s behalf.
2.
The Company, for and in consideration of the commitments of the Executive as set forth in this Agreement,
and intending to be legally bound, does hereby REMISE, RELEASE AND FOREVER DISCHARGE the Executive
from all claims, demands or causes of action arising out of facts or occurrences prior to the date of this Agreement,
but only to the extent the Company knows or reasonably should know of such facts or occurrence and only to the
extent such claim, demand or cause of action relates to a violation of applicable law or the performance of the
Executive’s duties with the Company; provided, however, that this release of claims shall not in any case be effective
with respect to any claim by the Company alleging a breach of the Executive’s obligations under this Agreement.
[Note: The Company and the Executive may, but shall not be required to mutually agree on a case-by-case basis at
the time of the signing of this release to include the foregoing provision, or a substantially similar provision, to this
Agreement.
The Executive further agrees and recognizes that the Executive’s employment relationship with the Company
3.
has been permanently severed, that the Executive shall not seek
DB1/ 92014808.3
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employment with the Company or any affiliated entity at any time in the future, and that the Company has no
obligation to employ the Executive in the future.
Subject to the provisions of Paragraph 9, the Executive further agrees that the Executive will not disparage or
4.
subvert the Company, or make any statement reflecting negatively on the Releasees including, but not limited to,
statements relating to the operation or management of the Company, the Executive’s employment and the
termination of the Executive’s employment, irrespective of the truthfulness or falsity of such statement.
The Executive acknowledges that if the Executive had not executed this Agreement containing a release of all
5.
claims, the Executive would not have been entitled to the payments and benefits set forth in Section 2(b) of the
Severance Agreement.
6.
This Agreement contains the entire agreement between the Company and the Executive relating to the subject
matter hereof. No prior or contemporaneous oral or written agreements or representations may be offered to alter the
terms of this Agreement. To the extent Employee has entered into other agreements with the Company that are not in
conflict with this Agreement, including, but not limited to the Severance Agreement, the terms of this Agreement
shall not supersede, but shall be in addition to such other agreements.
7.
Subject to the provisions of Paragraph 9, the Executive agrees not to disclose the terms of this Agreement or
the Severance Agreement to anyone, except the Executive’s spouse, attorney and, as necessary, tax/financial advisor,
or the Internal Revenue Service or other taxing authority. Likewise, the Company agrees that the terms of this
Agreement will not be disclosed except as may be necessary to obtain approval or authorization to fulfill its
obligations hereunder or as required by law. It is expressly understood that any violation of the confidentiality
obligation imposed hereunder constitutes a material breach of this Agreement.
8.
The Executive represents that the Executive has returned to the Company and does not presently have in the
Executive’s possession or control any records and business documents, whether on computer or hard copy, and other
materials (including but not limited to computer disks and tapes, computer programs and software, office keys,
correspondence, files, customer lists, technical information, customer information, pricing information, business
strategies and plans, sales records and all copies thereof) (collectively, the “Corporate Records”) provided by the
Company and/or its predecessors, subsidiaries or affiliates or obtained as a result of the Executive’s prior
employment with the Company and/or its predecessors, subsidiaries or affiliates, or created by the Executive while
employed by or rendering services to the Company and/or its predecessors, subsidiaries or affiliates. In addition, the
Executive has or will promptly return in good condition any other Company owned equipment or property,
including, but not limited to, automobiles, personal data assistants, facsimile machines, copy machines, pagers, credit
cards, cellular telephone equipment, business cards, laptops and computers. At the Executive’s request, the Company
will make reasonable arrangements to transfer cellular phone numbers and personal fax numbers to the Executive.
Nothing in this Agreement shall prohibit or restrict the Executive from: (i) making any disclosure of
9.
information required or protected by law; or (ii) initiating communications directly
DB1/ 92014808.3
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with, cooperating with, providing information to, testifying, participating in, responding to any inquiry from, or
otherwise assisting in any investigation or proceeding brought by any federal regulatory or law enforcement agency
or legislative body, including but not limited to the Securities and Exchange Commission (SEC), any self-regulatory
organization, or the Company’s designated legal, compliance or human resources officers, relating to a possible
violation of any applicable law, rule or regulation. Further, nothing in this Agreement requires Executive to notify the
Company of any activity protected by this paragraph, and nothing in this Agreement is intended to or shall prevent,
impede or interfere with Executive’s non-waivable right to receive and fully retain a monetary award from a
government-administered whistleblower award program for providing information directly to a government agency.
The parties agree and acknowledge that the agreement by the Company described herein, and the release of
10.
any asserted or unasserted claims against the Releasees, are not and shall not be construed to be an admission of any
violation of any federal, state or local statute or regulation, or of any duty owed by any of the Releasees to the
Executive.
The Executive agrees and recognizes that should the Executive breach any of the obligations or covenants set
11.
forth in Sections 9 and 10 of the Severance Agreement, the Company will have no further obligation to provide the
Executive with the consideration set in Section 2(b) of the Severance Agreement, and will have the right to seek
repayment of all consideration paid up to the time of any such breach. Notwithstanding the foregoing, the Executive
acknowledges that if the Executive breaches Section 10 of the Severance Agreement, and if the Company’s
terminates or recovers any of the payments or benefits provided under Section 2(b) of the Severance Agreement (as
provided for in Section 10 of the Severance Agreement), the release provided by Section 1 of this Agreement shall
remain valid and enforceable.
The Executive further agrees that the Company shall be entitled to preliminary and permanent injunctive
12.
relief, without the necessity of proving actual damages, as well as to an equitable accounting of all earnings, profits
and other benefits arising from any violations of this Agreement, which rights shall be cumulative and in addition to
any other rights or remedies to which the Company may be entitled.
This Agreement and the obligations of the parties hereunder shall be construed, interpreted and enforced in
13.
accordance with the laws of the Commonwealth of Pennsylvania.
14.
The Executive certifies and acknowledges as follows:
(a)
That the Executive has read the terms of this Agreement, and that the Executive understands its terms
and effects, including the fact that the Executive has agreed to RELEASE AND FOREVER DISCHARGE the
Releasees from any legal action arising out of the Executive’s employment relationship with the Company and the
termination of that employment relationship; and
(b)
That the Executive has signed this Agreement voluntarily and knowingly in exchange for the
consideration described herein, which the Executive acknowledges is adequate
DB1/ 92014808.3
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and satisfactory to him and which the Executive acknowledges is in addition to any other benefits to which the
Executive is otherwise entitled; and
(c)
That the Executive has been and is hereby advised in writing to consult with an attorney prior to
signing this Agreement; and
(d)
That the Executive does not waive rights or claims that may arise after the date this Agreement is
executed; and
(e)
That the Company has provided the Executive with a period of [twenty-one (21)] or [forty-five (45)]
days within which to consider this Agreement, and that the Executive has signed on the date indicated below after
concluding that this Separation of Employment Agreement and General Release is satisfactory; and
(f)
The Executive acknowledges that this Agreement may be revoked by within seven (7) days after
execution, and it shall not become effective until the expiration of such seven (7) day revocation period. In the event
of a timely revocation by the Executive, this Agreement will be deemed null and void and the Company will have no
obligations hereunder or under Section 2(b) of the Separation Agreement.
[SIGNATURE PAGE FOLLOWS]
DB1/ 92014808.3
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Intending to be legally bound hereby, the Executive and the Company executed the foregoing Separation of
Employment Agreement and General Release this _____ day of __________, _____.
Executive
By:
Name:
Title:
CNX Resources Corporation
By:
Name:
Title:
Witness:
Witness:
A-1
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December 4, 2020
Stephanie L. Gill
360 Hays Road
Upper St. Clair, PA 15241
Dear Stephanie,
As discussed, I understand that you are re ring from CNX Resources Corpora on (the “Company” or “CNX”)
on December 14, 2020. As of that date (the “Re rement Date”), you are no longer expected or required to provide
any services to the Company, except as provided in this le er agreement. Further, you agree that, effec ve as of the
Re rement Date, you hereby resign from all other posi ons you hold as an officer or director of the Company or
any of its subsidiaries and affiliates.
As a consequence of your re rement, you are en tled to receive the following (regardless of whether you
sign this agreement):
1. Final Wages: Your wages for your work through the Re rement Date which will be paid to you on
the Re rement Date or the next payroll date when those wages would otherwise be due.
2. Con nued Healthcare Insurance: The Company will provide you with con nued dental coverage
through January 31, 2021. You will receive informa on under separate cover regarding any
rights you may have to group health con nua on coverage.
3. Unused Vaca on: The Company already has or will pay you for unused vaca on me for 2020 as
of your last day of work (minus applicable withholdings and deduc ons) on the next payroll
date.
4. Defined Contribu on Restora on Plan: You will con nue to be en tled to benefits under the
Company’s Defined Contribu on Restora on Plan, consistent with the terms and condi ons of
the Plan as amended or may be amended from me-to- me.
5. Supplemental Re rement Plan: You will con nue to be en tled to benefits under the Company’s
Supplemental Execu ve Re rement Plan (“SERP”), consistent with the terms and condi ons of
the SERP as amended or may be amended from me-to- me.
We remind you that you con nue to be bound by the Company’s policies and your contractual
commitments, including, without limita on, protec ng the Company’s and its subsidiaries’ and affiliates’
confiden al business informa on, which are subject to any laws that require, permit or protect disclosure of such
confiden al informa on. With regard solely to Range Resources Corpora on, EQT Corpora on, Cabot Oil and Gas
Corpora on and CONSOL Energy Inc., you will, for a period of three years a er the Re rement Date, con nue to be
subject to the non-compete obliga ons included in your equity award agreements.
In addi on, in exchange for the release (and non-revoca on of this agreement) as provided below, the
Company will pay you the following severance benefits (the “Severance Payment and Benefits”).
1. Lump Sum Payment. The Company will pay you a lump sum payment on the first available payroll date
following your execu on and return of this agreement, and your non-revoca on of this agreement
during the 7-day Revoca on Period described below. Your total gross lump sum
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payment equals $453,334.00 (four hundred fi y three thousand three hundred thirty four dollars) less
applicable withholdings and deduc ons.
2. Equity Ves ng (Outstanding Awards). Except as otherwise provided herein, you will con nue to keep
your equity incen ve awards (and related Shares (as defined below) issued thereunder) granted under
the CNX Resources Corpora on Equity and Incen ve Compensa on Plan (the “Plan”), to the extent
vested, as of the Re rement Date. Addi onally, in considera on both for your signing the release in this
agreement, and for your compliance with the terms and provisions of this agreement during and
through the ves ng periods noted below, the unvested equity incen ve awards granted to you under the
Plan shall vest as follows:
• RSUs. The unvested Restricted Stock Unit awards granted to you under the Company’s Equity
Incen ve Plan (as amended and restated, the “Plan”) in 2019 and 2020 shall accelerate and
vest on the Re rement Date;
• Op ons. Op on awards granted to you under the Plan prior to 2016 can be exercised by you
for ninety (90) days a er your Re rement Date. Op on awards granted to you under the Plan
in 2020 shall remain outstanding and con nue to be subject to the original ves ng schedule.
Further, these op on awards, along with the op on awards granted in 2016, shall remain
exercisable un l the op on expira on date set forth in the related op on award agreement
(i.e., 10 years from the grant date); and,
•
PSUs. Performance Share Unit awards granted to you in 2019 and 2020, are vested, with the
outstanding annual tranches of such awards con nuing to be subject to a ainment of
applicable performance goals as determined by the Compensa on Commi ee of the Board of
Directors of the Company (“Compensa on Commi ee”) a er the end of the applicable
performance period (for the avoidance of doubt, the outstanding annual tranches of the
2016, 2017, and 2018 performance award share unit awards, which previously vested as a
result of a change of control pursuant to the CIC Agreement in 2019, also con nue to be
subject to the a ainment of the applicable performance goals as determined by the
Compensa on Commi ee a er the end of the applicable performance period).
Except as otherwise provided herein, the terms and condi ons of such equity awards shall
remain in full force and effect, including, without limita on, the restric ve covenants contained
therein.
3. STIC. You will be en tled to payment under the 2020 short-term incen ve compensa on program for
Sec on 16 officers (“STIC”), with a performance period of January 1, 2020 through December 31, 2020,
with such cash payment determined a er the end of the performance period based on achievement of
the applicable performance goals and, with respect to the company component of the 2020 STIC, it shall
be the same as for all other Sec on 16 officers, and in the case of the individual component of the 2020
STIC, you will be paid an amount equal to the average score of the Company’s Sec on 16 officers
(excluding yourself). Your 2020 STIC award will not be pro-rated and will be paid to you by the Company
at the same me that 2020 STIC payments are paid to the Company’s employees and on or before March
15, 2021. For clarifica on purposes only, the Company component of your 2020 STIC is es mated to be
200% of target payout.
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4. Change in Control. With regard to your Change in Control Agreement dated November 5, 2012 (“CIC
Agreement”), to the extent a Change in Control event (as defined in the CIC Agreement) occurs within 24
months a er the Re rement Date or an acquisi on agreement is signed within such period, the
Company will pay you the severance and other benefits in cash provided under the CIC Agreement,
including the amounts set forth in Sec on 2(b) of the CIC Agreement, upon the closing of the Change in
Control. The par es hereto expressly recognize that this extension of the CIC term supersedes and
replaces any other conflic ng term, including Sec on 13 of the CIC Agreement, and the CIC Agreement
shall be deemed amended to give effect to this paragraph. For purposes of the CIC Agreement and
irrespec ve of when a CIC event occurs, the term “Base Pay” shall mean $340,000 and the term
“Incen ve Pay” shall mean the STIC paid pursuant to the immediately preceding paragraph in Sec on 3.
To the extent that the CIC Agreements for any of the Sec on 16 officers are amended (or they enter into
any other agreements that are intended to have the effect of supplemen ng or replacing the CIC
Agreements) in a manner that is or could be a benefit to such Sec on 16 officer (excluding the mul plier
set forth in Sec on 2(b)(i) of the agreements, but including any expansion of the defini on of a Change
in Control for example), you shall be no fied of the amendment, replacement or supplemental
agreement and your CIC Agreement shall be similarly amended, replaced or supplemented.
You are responsible for all taxes imposed on you as a result of payments received by you under this
agreement, and the Company makes no guarantee of any par cular tax result. The payments provided under this
agreement are intended to comply, or be exempt, from Sec on 409A of the Internal Revenue Code of 1986, as
amended (“Code Sec on 409A”). It is further intended that the Re rement Date will cons tute the date of your
separa on from service from the Company for purposes of Code Sec on 409A.
By signing and not revoking this agreement, you release CNX, and all of its affiliated companies direct and
indirect parents, subsidiaries, affiliates, successors, and assigns (collec vely, the “CNX Companies”) and all of their
current and former shareholders, partners, principals, members, directors, officers, agents, employees, employee
benefit plans, trustees, insurers and all others ac ng in concert with them (collec vely, the “Released Persons”),
from any and all claims you have or might have against them as a result of events that occurred on or before the
date you execute this agreement, whether known or unknown, except for the rights described in the next
paragraph. The claims released by you include, without limita on, all claims rela ng in any way to your
employment with the CNX Companies, the conclusion of your employment, claims for wrongful discharge or
retalia on, claims related to any purported status as a whistleblower, and any cause of ac on or claim you have or
might have for an alleged viola on of any express or implied contract, or federal, state, or local law, including
(without limita on) state and federal statutes or laws, as amended, that prohibit discrimina on or retalia on in
employment based on any protected status, including, but not limited to, the Age Discrimina on in Employment
Act of 1967 (“ADEA”), the Employee Re rement Income Security Act of 1974, as amended, Title VII of the Civil
Rights Act of 1964, the Civil Rights Act of 1991, 42 U.S.C. § 1981, the Civil Rights Acts of 1866 and 1871, the
Pregnancy Discrimina on Act, the Na onal Labor Rela ons Act, the Racketeer Influenced and Corrupt Organiza ons
Act, the Rehabilita on Act, the Americans with Disabili es Act, the Family and Medical Leave Act, the Sarbanes-
Oxley Act, the Worker Adjustment and Retraining No fica on Act (“WARN Act”), Pennsylvania Human Rela ons
Act, Pennsylvania Minimum Wage Act of 1968, and any other state, federal or local law, rule or regula on, the
common law for negligence, gross negligence, or any other tort claim, including (except as otherwise provided in
this Agreement), but not limited to, inten onal inflic on of emo onal distress, assault, ba ery, invasion of privacy,
false imprisonment, breach of express or implied contract, interference with contractual rela ons, addi onal wages
or benefits owed, whether pursuant to the accrued and unused vaca on policy, the CNX Severance Pay Plan for
Salaried Employees, , or otherwise, covenants of fair dealing and good faith, civil conspiracy, duress, promissory or
equitable estoppel, defama on, slander, fraud, mistake, misrepresenta on, viola on of public policy, over me,
retalia on, personal injury, breach of fiduciary duty, loss of consor um, bad faith, any other
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wrongful conduct and claims under any federal, state or local laws, statutes, regula ons, ordinances, or other
similar provisions, and any claims for a orneys’ fees and costs. If any administra ve agency or court assumes
jurisdic on over any charge, complaint, proceeding, or ac on involving claims released in this agreement, you agree
that you will not accept, recover, or receive any monetary damages or other relief from or in connec on with that
charge, complaint, or proceeding. You agree that if a court of competent jurisdic on determines that you are to be
awarded damages under the WARN Act or any other federal or state law, those damages would be offset by an
amount equal to your above severance payment minus $500. You also agree that you have not assigned or
transferred to another person or en ty any interest in any of the above stated claims.
In considera on of you execu ng and not revoking this agreement, the CNX Companies and all Released
Persons release you from any and all claims they have or might have against you as a result of the events that
occurred on or before the date you execute this Agreement, whether known or unknown, except as set forth
herein. The claims released by the CNX Companies include claims rela ng in any way to your employment with the
CNX Companies and the end of your employment; provided, however, that nothing herein shall release you from:
(i) your contractual commitments regarding the protec on of confiden al business informa on; (ii) the obliga ons
or restric ons applicable to you arising under or referred to in your equity award agreements including without
limita on the non-compete and non-solicit obliga ons; (iii) claims involving fraud or willful malfeasance; and (iv)
claims by a third party for which you would not be indemnified under applicable law, any provision of the CNX
Companies’ cer ficate of incorpora on, bylaws, or other governing documents, any contract, or any applicable
directors or officers liability insurance policies.
You have certain rights that are not released by signing this agreement, as set forth below:
(a) The foregoing release does not affect the following: any rights or claims that may arise a er the
date this agreement is executed; your right to enforce the Company’s obliga ons under this agreement; any rights
you may have to vested CNX Companies’ pension or re rement benefits that you are en tled to on the date of
execu on of this agreement by you; your right to file a charge or complaint with any appropriate federal, state, or
local agency, such as the United States Equal Employment Opportunity Commission; your right to par cipate in or
cooperate with any such charge or complaint procedure; and any right that cannot be waived as a ma er of law.
(b) Both you and CNX also agree that nothing in the release set forth above or in this Agreement
shall be construed to limit, waive or release your rights (i) under your Director and Officer Indemnifica on
Agreement, or your rights to indemnifica on or contribu on, if any, pursuant to applicable law, CNX’s bylaws, or any
applicable insurance policy arising from acts (or failures to act) actually or allegedly taken in the scope of your
employment with CNX, or (ii) that you may have pursuant to or under any of the equity awards, the STIC, the CIC
Agreement and other benefit plans.
Any other claim you have or might have is, however, released by this agreement.
By signing below, you represent and agree that, except for the wages to be paid to you regardless of
whether you sign this agreement, as described above, and the Severance Payment and Benefits to be paid under
the terms of this Agreement, you have been paid in full for all other wages and benefits to which you are en tled.
If one or more dispute(s) arises with regard to the interpreta on and/or performance of this agreement or
any of its provisions (“Covered Claims”), the par es agree to a empt to resolve the same by telephone conference
with a mediator jointly selected by the par es. If the par es cannot resolve their differences by such telephone
conference, then the par es agree to schedule and conduct a half-day media on within 30 days of dispute(s) and to
share equally the costs of such media on. If a party refuses to
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/
mediate, then such party thereby waives any recovery for a orneys’ fees or costs incurred in any Arbitra on
brought regarding this agreement. Otherwise, if the par es are unable to resolve their dispute by media on, then
you and the Company agree that the dispute will be decided by a single arbitrator of the American Arbitra on
Associa on (“AAA”) through final and binding arbitra on only and will not be decided by a court or jury or any
other forum, except as otherwise provided herein. This is an agreement to arbitrate Covered Claims which shall be
governed by the Federal Arbitra on Act (9 U.S.C. §§ 1–16). The mutual agreement to arbitrate contained herein
cons tutes considera on for this Agreement. You and the Company acknowledge the sufficiency of such
considera on. The prevailing party or par es in any resul ng Arbitra on shall be en tled to recover reasonable
a orneys’ fees, costs, and expenses, including the costs of media on and Arbitra on.
By signing below, you agree that as of the date you sign this agreement, you have returned all property and
informa on belonging to the CNX Companies in your possession or control, including but not limited to the
following (where applicable): vehicle; computer, phone, and handheld devices; keys, passwords, and/or access
cards; and all records, customer lists, wri en informa on, forms, plans, and other documents, including
electronically stored informa on. You agree that you are not en tled to receive or retain the Severance Payment
and Benefits set forth in this agreement unless and un l you return all informa on and property to the Company in
compliance with this agreement.
By signing below, you represent and affirm (i) as of your Re rement Date, you will have no confiden al
business informa on, in hard copy or electronic form of any kind, belonging to the CNX Companies in your
possession or control; and (ii) at no me during your employment and as of the date you sign this agreement have
you ever disclosed or u lized in any manner confiden al business informa on of the CNX Companies in viola on of
applicable policies or your contractual obliga ons. You agree that you are not en tled to receive or retain the
Severance Payment and Benefits set forth in this agreement in the event either representa on set forth above is
false.
You affirm that you have not asserted any claim for sexual harassment or sexual abuse by any of the
Released Persons and that you are not aware of any facts suppor ng such a claim. You further affirm that no claim
released by you as a part of this agreement involves any illness, injury, incident, or accident in which medical
expenses were, or are expected to be, incurred. Accordingly, you affirm that Medicare has no interest in the
payment under this agreement. Nonetheless, if the Centers for Medicare & Medicaid Services (“CMS”) (this term
includes any related agency represen ng Medicare’s interests) determines that Medicare has an interest in the
payment to you under this agreement, you agree to indemnify, defend and hold Released Persons harmless from
any ac on by CMS rela ng to your medical expenses. You agree to reasonably cooperate with Released Persons
upon request with respect to (i) any informa on needed to sa sfy the repor ng requirements under Sec on 111 of
the Medicare, Medicaid, and SCHIP Extension Act of 2007, and (ii) any claim that the CMS may make and for which
you are required to indemnify Released Persons under this paragraph. Furthermore, you agree to waive any and all
future ac ons against Released Persons for any private cause of ac on for damages pursuant to 42 U.S.C. §
1395y(b)(3)(A).
You agree that you will keep the terms of this agreement confiden al and will not disclose them to any
person other than your spouse and your professional advisors, except as may be necessary to enforce the terms of
this agreement, or pursuant to a lawful subpoena, or as otherwise permi ed by law. Similarly, CNX shall keep the
terms of this agreement confiden al and will not disclose them to any person, other than professional advisors,
except as may be necessary to enforce the terms of this agreement, including with respect to the Shares in your
Morgan Stanley account, or pursuant to a lawful subpoena, or as otherwise permi ed by law. This provision is not
intended to restrict either par es’ legal right to discuss the terms and condi ons of your employment.
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Nothing in this agreement or any other confiden ality provision to which you may be subject as a result of
employment at, or separa on from, the CNX Companies restricts or prohibits you from ini a ng communica ons
directly with, responding to any inquiries from, providing tes mony before, providing confiden al informa on to,
repor ng possible viola ons of law or regula on to, or from filing a claim or assis ng with an inves ga on directly
with a self-regulatory authority or a government agency or en ty, including the U.S. Equal Employment Opportunity
Commission, the Department of Labor, the Na onal Labor Rela ons Board, the Department of Jus ce, the
Securi es and Exchange Commission, the Congress, and any agency Inspector General, or from making other
disclosures that are protected under the whistleblower provisions of state or federal law or regula on or from
receiving and fully retaining a monetary award from a government-administered whistleblower award program for
providing informa on directly to a government agency. The CNX Companies nonetheless assert and do not waive
a orney-client privilege over any informa on appropriately protected by the privilege. You do not need the prior
authoriza on of the Company to engage in conduct protected by this paragraph, and you do not need to no fy the
Company that you have engaged in such conduct.
Please take no ce that federal law provides criminal and civil immunity to federal and state claims for trade
secret misappropria on to individuals who disclose a trade secret to their a orney, a court, or a government official
in certain, confiden al circumstances that are set forth at 18 U.S.C. §§ 1833(b)(1) and 1833(b)(2), related to the
repor ng or inves ga on of a suspected viola on of the law, or in connec on with a lawsuit for retalia on for
repor ng a suspected viola on of the law.
Further, both par es acknowledge that this is an amicable arrangement and will be portrayed as such in all
public statements, whether wri en or oral, by you or the CNX Companies, and subject to the confiden ality
obliga ons recited in the three paragraphs above. As such, you agree that you will not disparage the CNX
Companies or any of the Released Persons, and the CNX Companies, including their officers and directors, agree
that they will not disparage you.
Addi onally, you agree to cooperate with the Company in any future ma ers rela ng to your past
employment. You agree to be reasonably available to the CNX Companies for the purpose of responding to requests
for informa on, to provide informa on, documents, declara ons or statements, to meet with a orneys and other
Company representa ves, to prepare for and give tes mony by deposi on or otherwise, and to cooperate in the
inves ga on, defense or prosecu on of ma ers rela ng to any threatened, present, or future legal ac ons,
inves ga ons, or administra ve proceedings involving the CNX Companies. Such me shall not exceed
approximately 20 hours, and to the extent that addi onal me is needed, the par es shall discuss it at that me,
subject to your sole discre on. The Company advises you to consult with an a orney of your choice regarding this
agreement, which includes an offer of considera on in exchange for a release of claims. If you have any ques ons
regarding the scope of your release, including those rights that are not released, the Company advises you to
address that subject with your own a orney before signing this agreement.
The Company will rely on your signature to this agreement as your representa on that you read this
agreement carefully, and that you have a full and complete understanding of its terms a er having had sufficient
opportunity to discuss the documents with an a orney of your own choosing, and that in execu ng this agreement,
you did not rely upon any statement or representa on made by or on behalf of the CNX Companies or by any of
their officers, agents, employees or a orneys.
You have up to and including 45 days from the date you receive this agreement to consider the terms of this
agreement as proposed by the Company. Any modifica on to these proposed terms, whether material or
immaterial, does not restart the running of the 45-day period.
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If you decide to sign this agreement, you may then revoke your acceptance of it for up to seven (7) days
a er signing it (the “Revoca on Period”), by no fying me in wri ng before the expira on of that seven-day period.
This agreement will not become effec ve and you will not be en tled to the Severance Payments and Benefits to be
paid under this agreement un l the expira on of that seven-day period.
If this agreement is not signed and returned by January 18, 2021, then this offer is revoked by the
Company. This agreement must be delivered to me (and not merely postmarked) within the me specified herein
in order to be effec ve. You should not sign this agreement if you do not understand its terms. By signing this
agreement, you affirm that you have read its terms, that you understand its terms and effects, including the fact
that you have agreed to release employment-related claims, that you have signed this agreement voluntarily and
knowingly in exchange for the considera on described herein, which you acknowledge is adequate and
sa sfactory and which you acknowledge is in addi on to other benefits to which you would be en tled; and that
you have been advised in wri ng to consult with an a orney prior to signing this agreement.
This Agreement shall be binding on any and all successors and assigns of CNX, including successors by opera on
of law as a result of the acquisi on of all or substan ally all of the assets of CNX and/or its subsidiaries.
If all of the above terms are agreeable to you, please sign the enclosed copy of this le er and return the original
signed document, in its en rety, to me at 1000 CONSOL Energy Drive, Canonsburg, PA 15317-6506 for our files by
January 18, 2021. Please direct any ques ons to me.
Sincerely,
/s/ Nicholas J. DeIuliis
Nicholas J. DeIuliis
President and Chief Execu ve Officer
I knowingly and voluntarily agree to the above terms this 4th day of December, intending to be legally
bound.
/s/ Stephanie L. Gill
Stephanie L. Gill
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CNX RESOURCES CORPORATION
EQUITY INCENTIVE PLAN
FORM OF
RESTRICTED STOCK UNIT AWARD AGREEMENT
This Restricted Stock Unit Award Agreement set forth below (this “Agreement”) is dated as of the grant date (the
“Grant Date”) set forth on Exhibit A and is between CNX Resources Corporation, a Delaware corporation (the “Company”),
and the individual to whom the Compensation Committee of the Board of Directors of the Company or its delegatee (the
“Committee”) has made this Restricted Stock Unit Award and whose name is set forth on Exhibit A (the “Participant”).
The Company has established the CNX Resources Corporation Amended and Restated Equity and Incentive
Compensation Plan (the “Plan”) to advance the interests of the Company and its shareholders by providing incentives to certain
eligible persons who contribute significantly to the strategic and long-term performance objectives and growth of the Company.
Unless the context otherwise requires, all capitalized terms not otherwise defined in this Agreement have the same meaning
given such capitalized terms in the Plan.
Pursuant to the provisions of the Plan, the Board has delegated to the Committee full power and authority to direct the
execution and delivery of this Agreement in the name and on behalf of the Company, and has authorized the execution and
delivery of this Agreement.
Agreement
1.
Restricted Stock Unit Award. Subject to and pursuant to all terms and conditions stated in this Agreement and
in the Plan, as of the Grant Date, the Company hereby grants an Award to the Participant in the form of the number of
Restricted Stock Units set forth on Exhibit A (the “Restricted Stock Units”). Each Restricted Stock Unit awarded under this
Agreement shall represent a contingent right to receive one Share following the vesting date of such Restricted Stock Unit as
described on Exhibit A (each such vesting date, a “Vesting Date”). Notwithstanding, Restricted Stock Units as initially awarded
have no independent economic value, but rather are mere units of measurement used for purposes of calculating the value of
any benefits to be paid under this Agreement.
2.
Issuance and Distribution.
a.
Subject to the terms and conditions of this Agreement, and except as otherwise provided in Section 2.2 or
Section 4, Restricted Stock Units will be settled and paid in Shares issued to the Participant (to the extent not previously settled)
on the applicable Vesting Date, or if the applicable Vesting Date is not a business day, on the immediately following business
day, or as soon as reasonably practicable but in no event later than the 15 day of the third month following such date, subject
to the Participant’s satisfaction of all applicable income and employment withholding taxes; provided, however, that the
Participant shall not be permitted to designate the taxable year of payment.
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b.
Notwithstanding any other provision of this Agreement, in the event of a Change in Control, as defined in
Section 16 of the Plan, the Restricted Stock Units (to the extent not previously vested or forfeited) will be deemed to have
vested, and, if the Change in Control qualifies as a “Change in Control” event within the meaning of Treas. Reg. Section
1.409A-3(i)(5)(i) with respect to the Company, will be settled, on the closing date of the Change in Control transaction (the
“CiC Payment Date”);
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provided, however, in the event of a Change in Control, Restricted Stock Units may, in the Committee’s discretion, be settled in
1
cash and/or securities or other property.
c.
The Participant is required to hold, and not sell, transfer or otherwise dispose of fifty percent (50%) of the
Shares issued to the Participant following the vesting of the Restricted Stock Units (after accounting for the payment of any
related taxes in connection with the vesting of the Restricted Stock Units) until the earlier of (i) ten (10) years from the Grant
Date; or (ii) the Participant’s attainment of age sixty-two (62).
3.
Dividends. Each Restricted Stock Unit will be cumulatively credited with dividends that are paid on the
Company’s common stock in the form of additional units. These additional units shall be deemed to have been purchased on the
record date for the dividend using the closing stock price per Share as reported in The Wall Street Journal and shall be subject
to all the same conditions and restrictions as provided in this Agreement applicable to Restricted Stock Units.
4.
Change in Participant’s Status. In the event the Participant Separates from Service (i) on or after the date the
Participant has reached the age of 50 with 20 or more years of continuous service to the Company and its Affiliates, other than
an involuntary termination by the Company for Cause, (ii) on account of death or Disability (and, for the avoidance of doubt,
the Participant shall have a Separation from Service upon the Participant’s becoming Disabled), or (iii) by action taken by the
Company (including any Affiliate) without Cause and after a decision by the Committee, in its sole and absolute discretion, that
such Separation from Service without Cause qualifies for special vesting treatment hereunder (a “Qualifying Separation from
Service without Cause”), prior to any Vesting Date or the CiC Payment Date, as applicable, the Participant shall vest in any
unvested Restricted Stock Units (to the extent not previously forfeited) and receive payment therefore on the date of such
Separation from Service (or as soon as reasonably practicable thereafter, but in no event later than the 15 day of the third
month following such Separation from Service); provided, however, that the Participant shall not be permitted to designated the
taxable year of payment. Except as otherwise provided herein or in another agreement between the Participant and the
Company, in the event the Participant Separates from Service for any other reason, including, but not limited to, by the
Participant voluntarily, or by the Company (including any Affiliate) with Cause or without Cause (other than in connection with
a Qualifying Separation of Service without Cause), prior to any Vesting Date or the CiC Payment Date, as applicable, the
unvested Restricted Stock Units awarded to the Participant shall be cancelled and forfeited, without payment by the Company
or any Affiliate; provided that in the event the Participant Separates from Service by action taken by the Company (including
any Affiliate) with Cause, any vested Restricted Stock Units that are held by the Participant shall also be forfeited (with any
Shares issued thereunder returned to the Company) and, to the extent that the Participant has sold any of his or her Shares
issued under the Award within the six (6)-month period ending with the date of the Participant’s date of Separation from
Service for Cause, the Participant will be required to repay to the Company, within ten (10) days after receipt of written demand
from the Company, the cash proceeds that the Participant received upon each such sale. Any payments due a deceased
Participant may be transferred pursuant to the provisions of his or her will or the laws of inheritance following the Participant’s
death. Notwithstanding the foregoing or any provision contained herein to the contrary, the delivery of any Shares shall be
delayed until six (6) months after your Separation from Service to the extent required by Section 409A(a)(2)(B)(i) of the Code
as provided under the terms of the Plan.
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5.
Tax Consequences/Withholding.
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For the avoidance of doubt, the sale of any Affiliate of the Company shall not constitute a Change in Control for purposes of this
Agreement.
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a.
It is intended that the Participant shall have merely an unfunded, unsecured promise to be paid a benefit,
and such unfunded promise shall not consist of a transfer of “property” within the meaning of Code Section 83.
b.
Participant acknowledges that any income for federal, state, local or foreign tax purposes, including
payroll taxes, that the Participant is required to recognize on account of the vesting of the Restricted Stock Units and/or
issuance of the Shares under this Award to the Participant shall be subject to withholding of tax by the Company. The
Participant must pay all applicable taxes when due. The Company will automatically withhold from the total number of Shares
deliverable to the Participant upon the applicable payment date, the number of Shares having a fair market value equal to the
minimum statutory tax withholding requirements (or as otherwise approved by the Board or the Committee) as determined in
accordance with the Plan. In the event of any remaining tax balance, the Participant will be required to deliver a check
for that amount payable to the Company before the Shares are deposited into Participant’s plan account.
Notwithstanding the foregoing, if the Participant is liable for the payment of the employee share of the FICA (Social Security
and Medicare) taxes applicable to the Award prior to the payment of the Shares underlying the Award, the Participant will be
required to deliver a check for the amount of such FICA taxes payable to CNX Resources Corporation in a timely manner.
c.
This Agreement is intended to comply with, or be excepted from coverage under, Section 409A of the
Code and the regulations promulgated thereunder and shall be administered, interpreted and construed accordingly.
Notwithstanding any provision of this Agreement to the contrary, if any benefit provided under this Agreement is subject to the
provisions of Section 409A of the Code and the regulations issued thereunder (and not excepted therefrom), the provisions of
the Agreement shall be administered, interpreted and construed in a manner necessary to comply with Section 409A (or
disregarded to the extent such provision cannot be so administered, interpreted, or construed). Notwithstanding, Section 409A
may impose upon the Participant certain taxes or other charges for which the Participant is and shall remain solely responsible,
and nothing contained in this Agreement or the Plan shall be construed to obligate any member of the Committee or Board, the
Company or any Affiliate (or its employees, officers or directors) for any such taxes or other charges.
6.
Non-Competition.
a.
The Participant hereby agrees that this Section 6 is reasonable and necessary in order to protect the
legitimate business interests and goodwill of the Company, including the Company’s trade secrets, valuable confidential
business and professional information, substantial relationships with prospective and existing customers and clients, and
specialized training provided to the Participant and other employees of the Company. The Participant acknowledges and
recognizes the highly competitive nature of the business of the Company and its Affiliates and accordingly agrees that during
the term of Participant’s employment and for a period of two (2) years after the termination thereof (the “Restriction Period”):
(i)The Participant will not directly or indirectly engage in any business substantially similar to any line of
business conducted by the Company or any of its Affiliates, including, but not limited to, where such engagement is as an
officer, director, proprietor, employee, partner, investor (other than as a holder of less than 1% of the outstanding capital stock
of a publicly traded corporation), consultant, advisor, agent or sales representative, in any geographic region in which the
Company or any of its Affiliates conducted business;
prospective customer of the Company or any of its Affiliates;
(ii)The Participant will not contact, solicit, perform services for, or accept business from any customer or
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(iii)The Participant will not directly or indirectly induce any employee of the Company or any of its
Affiliates to: (1) engage in any activity or conduct which is prohibited pursuant to subparagraph 6.1(a); or (2) terminate such
employee’s employment with the Company or any of its Affiliates. Moreover, the Participant will not directly or indirectly
employ or offer employment (in connection with any business substantially similar to any line of business conducted by the
Company or any of its Affiliates) to any person who was employed by the Company or any of its Affiliates unless such person
shall have ceased to be employed by the Company or any of its Affiliates for a period of at least 12 months; and
are prohibited under subparagraphs (a) — (c) above.
(iv)The Participant will not directly or indirectly assist others in engaging in any of the activities, which
Notwithstanding the foregoing, if the Restriction Period set forth herein is shorter in duration following the Participant’s
termination of employment with the Company and its Affiliates than in any other prior Award Agreement, the Restriction
Period set forth herein shall be the Restriction Period for all such prior Award Agreements and related Awards. Similarly, if the
Restriction Period is longer in this Agreement than in prior Award Agreements, the Restriction Period set forth in such prior
Award Agreements and related Awards shall be amended hereby and have the same applicable Restriction Period following
Participant’s termination of employment with the Company and its Affiliates as set forth herein (and the Participant shall be
deemed to have consented to such amendment by executing this Agreement).
b.
It is expressly understood and agreed that although the Participant and the Company consider the
restrictions contained in this Section 6 to be reasonable, if a final judicial determination is made by a court of competent
jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against
the Participant, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable
against such Participant. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect
the enforceability of any of the other restrictions contained herein. The restrictive covenants set forth in this Section 6 shall be
extended by any amount of time that the Participant is in breach of such covenants, such that the Company receives the full
benefit of the time duration set forth above.
7.
Confidential Information and Trade Secrets. The Participant and the Company agree that certain materials,
including, but not limited to, information, data and other materials relating to customers, development programs, costs,
marketing, trading, investment, sales activities, promotion, credit and financial data, manufacturing processes, financing
methods, plans or the business and affairs of the Company and its Affiliates, constitute proprietary confidential information and
trade secrets. Accordingly, the Participant will not at any time during or after the Participant’s employment with the Company
(including any Affiliate) disclose or use for such Participant’s own benefit or purposes or the benefit or purposes of any other
person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise other than
the Company and any of its Affiliates, any proprietary confidential information or trade secrets, provided that the foregoing
shall not apply to information which is not unique to the Company or any of its Affiliates or which is generally known to the
industry or the public other than as a result of such Participant’s breach of this covenant. The Participant agrees that upon
termination of employment with the Company (including any Affiliate) for any reason, the Participant will immediately return
to the Company all memoranda, books, papers, plans, information, letters and other data, and all copies thereof or therefrom,
which in any way relate to the business of the Company and its Affiliates, except that the Participant may retain personal notes,
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notebooks and diaries. The Participant further agrees that the Participant will not retain or use for the Participant’s own account
at any time any trade names, trademark or other proprietary business designation used or owned in connection with the business
of the Company or any of its Affiliates.
Notwithstanding anything contained herein to the contrary, this Agreement shall not prohibit disclosure of proprietary
confidential information if (i) it is required by law or by a court of competent jurisdiction or (ii) it is in connection with any
judicial, arbitration, dispute resolution or other legal proceeding in which your legal rights and obligations as an employee or
under this Agreement are at issue; provided, however, that you shall, to the extent practicable and lawful in any such event, give
prior notice to the Company of your intent to disclose proprietary confidential information so as to allow the Company an
opportunity (which you shall not oppose) to obtain such protective orders or similar relief with respect thereto as may be
deemed appropriate.
Notwithstanding the foregoing, nothing in this Agreement is intended to restrict, prohibit, impede or interfere with the
Participant providing information to, or from reporting possible violations of law or regulation to, any governmental agency or
entity, from participating in investigations, testifying in proceedings regarding the Company’s past or future conduct, or from
making other disclosures that are protected under state or federal law or regulation, engaging in any future activities protected
under statutes administered by any government agency (including but not limited, to the Department of Justice, the Securities
and Exchange Commission, the Congress, and any agency Inspector General), or from receiving and retaining a monetary
award from a government-administered whistleblower award program for providing information directly to a government-
administered whistleblower award program. The Participant does not need the prior authorization of the Company to make
such reports or disclosures. The Participant is not required to notify the Company that he or she has made any such reports or
disclosures. The Company nonetheless asserts, and does not waive, its attorney-client privilege over any information
appropriately protected by the privilege.
8.
Remedies/Forfeiture.
a.
The Participant acknowledges that a violation or attempted violation on the Participant’s part of Sections
6 and/or 7 will cause irreparable damage to the Company and its Affiliates, and the Participant therefore agrees that the
Company and its Affiliates shall be entitled as a matter of right to an injunction, out of any court of competent jurisdiction,
restraining any violation or further violation of such promises by the Participant or the Participant’s employees, partners or
agents. The Participant agrees that such right to an injunction is cumulative, in addition to whatever other remedies the
Company (including any Affiliate) may have under law or equity and to the Participant’s obligations to make timely payment to
the Company as set forth in Section 8.2 of this Agreement. The Participant further acknowledges and agrees that the
Participant’s Restricted Stock Units (whether vested or unvested) shall be cancelled and forfeited (with any Shares issued
thereunder returned to the Company), without payment by the Company, if the Participant breaches any of his obligations set
forth in Sections 6 and 7 herein.
b.
At any point after becoming aware of a breach of any obligation set forth in Sections 6 and 7 of this
Agreement, the Company shall provide notice of such breach to the Participant. By agreeing to receive the Restricted Stock
Units pursuant to this Agreement, the Participant agrees that, to the extent the Participant has sold any of his or her Shares
issued under the Award, within ten (10) days after the date the Company provides such notice, the Participant shall pay to the
Company in cash an amount equal to the cash proceeds that the Participant received upon each such sale that occurred after the
date that was six (6) months prior to the date of the earliest breach. The Participant agrees that failure to make such timely
payment to the Company constitutes an independent and material breach of the terms
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and conditions of this Agreement, for which the Company may seek recovery of the unpaid amount as liquidated damages, in
addition to all other rights and remedies the Company may have resulting from the Participant’s breach of the obligations set
forth in Sections 6 and/or 7. The Participant agrees that timely payment to the Company as set forth in this provision of this
Agreement is reasonable and necessary because the compensatory damages that will result from breaches of Sections 6 and/or 7
cannot readily be ascertained. Further, the Participant agrees that timely payment to the Company as set forth in this provision
of this Agreement is not a penalty, and it does not preclude the Company from seeking all other remedies that may be available
to the Company, including without limitation those set forth in this Section 8.
9.
Assignment/Nonassignment.
a.
The Company shall have the right to assign this Agreement, including without limitation Sections 6
and/or 7, and the Participant agrees to remain obligated by all provisions of this Agreement that are assigned to any successor,
assign or surviving entity. Any successor to the Company is an intended third party beneficiary of this Agreement.
b.
The Restricted Stock Units shall not be sold, pledged, assigned, hypothecated, transferred or disposed of
(a “Transfer”) in any manner, other than by will or the laws of descent and distribution. Any attempt by the Participant to
Transfer the Restricted Stock Units in violation of the terms of this Agreement shall render the Restricted Stock Units null and
void, and result in the immediate forfeiture of such Restricted Stock Units, without payment by the Company.
10.
Impact on Benefit Plans. Payments under this Agreement shall not be considered as earnings for purposes of
the Company’s and/or Affiliate’s qualified retirement plans or any other retirement or benefit plan unless specifically provided
for therein. Nothing herein shall prevent the Company or any Affiliate from maintaining additional compensation plans and
arrangements for its employees.
11.
Successors; Changes in Stock. The obligation of the Company under this Agreement shall be binding upon the
successors and assigns of the Company. If a dividend or other distribution shall be declared upon the Company’s common stock
payable in Shares, the Restricted Stock Units shall be adjusted by adding thereto the number of Restricted Stock Units equal to
the number of Shares which would have been distributable thereon if such Restricted Stock Units had been actual Shares and
outstanding on the date fixed for determining the shareholders entitled to receive such stock dividend or distribution. In the
event of any spin-off, split-off or split-up, dividend in property other than cash, recapitalization or other change in the capital
structure of the Company, or any merger, consolidation, reorganization, partial or complete liquidation or other distribution of
assets (other than a normal cash dividend), or any other corporate transaction or event having an effect similar to any of the
foregoing, or extraordinary distribution to shareholders of the Company’s common stock, the Restricted Stock Units shall be
appropriately adjusted to prevent dilution or enlargement of the rights of the Participant which would otherwise result from any
such transaction, provided such adjustment shall be consistent with Code Section 409A.
In the case of a Change in Control, any obligation under this Agreement shall be handled in accordance with the terms
of Section 2 hereof. In any case not constituting a Change in Control in which the Company’s common stock is changed into or
becomes exchangeable for a different number or kind of shares of stock or other securities of the Company or another
corporation, or cash or other property, whether through reorganization, reclassification, recapitalization, stock split-up,
combination of Shares, merger or consolidation, then (i) the value of the Restricted Stock Units constituting the Award shall be
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calculated based on the closing price per Share of such common stock on the closing date of the transaction on the principal
market on which such common stock is traded and (ii) there shall be substituted for each Restricted Stock Unit constituting the
Award, the number and kind of shares of stock or other securities (or cash or other property) into which each outstanding Share
shall be so changed or for which each such Share shall be exchangeable. In the case of any such adjustment, the Restricted
Stock Units shall remain subject to the terms of the Agreement.
12.
Governing Law, Jurisdiction, and Venue.
a.
This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware,
without giving effect to the principles of conflicts of law.
b.
The Participant hereby irrevocably submits to the personal and exclusive jurisdiction of the United States
District Court for the Western District of Pennsylvania or the Court of Common Pleas of Allegheny County, Pennsylvania in
any action or proceeding arising out of, or relating to, this Agreement (whether such action or proceeding arises under contract,
tort, equity or otherwise). The Participant hereby irrevocably waives any objection which the Participant now or hereafter may
have to the laying of venue or personal jurisdiction of any such action or proceeding brought in said courts.
c.
Jurisdiction over, and venue of, any such action or proceeding shall be exclusively vested in the United
States District Court for the Western District of Pennsylvania or the Court of Common Pleas of Allegheny County,
Pennsylvania.
d.
Provided that the Company commences any such action or proceeding in the courts identified in Section
12.3, the Participant irrevocably waives the Participant’s right to object to or challenge the above selected forum on the basis of
inconvenience or unfairness under 28 U.S.C. § 1404, 42 Pa. C.S. § 5322 or similar state or federal statutes. The Participant
agrees to reimburse the Company for all of the attorneys’ fees and costs it incurs to oppose the Participant’s efforts to challenge
or object to litigation proceeding in the courts identified in Section 12.3 with respect to actions arising out of or relating to this
Agreement (whether such actions arise under contract, tort, equity or otherwise).
13.
Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this
Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.
14.
Severability. In the event that any one or more of the provisions of this Agreement shall be held to be invalid,
illegal or unenforceable, the validity, legality or enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
15.
Funding. This Agreement is not funded and all amounts payable hereunder, if any, shall be paid from the
general assets of the Company or its Affiliate, as applicable. No provision contained in this Agreement or the Plan and no
action taken pursuant to the provisions of this Agreement or the Plan shall create a trust of any kind or require the Company to
maintain or set aside any specific funds to pay benefits hereunder. To the extent the Participant acquires a right to receive
payments from the Company under this Agreement, such right shall be no greater than the right of any unsecured general
creditor of the Company.
16.
Headings. The descriptive headings of the Sections of this Agreement are inserted for convenience of reference
only and shall not constitute a part of this Agreement.
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17.
Awards Subject to Plan. In the event of a conflict between any term or provision contained herein and a term or
provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
18.
Amendment or Termination of this Agreement. This Agreement may be modified, amended, suspended or
terminated by the Committee at any time; provided, however, that no modification, amendment, suspension or termination of
the Plan or this Agreement shall adversely affect the material rights of the Participant under this Agreement without the consent
of such Participant. Notwithstanding the foregoing or any provision of this Agreement to the contrary, the Company may, in its
sole discretion and without the Participant’s consent, modify or amend the terms of the Agreement or a Restricted Stock Unit
award, or take any other action it deems necessary or advisable, to cause the Agreement to comply with Section 10D of the
Exchange Act or Section 409A (or an exception thereto). Any modification, amendment, suspension or termination shall only
be effective upon a writing issued by the Company, and the Participant shall not offer evidence of any purported oral
modifications or amendments to vary or contradict the terms of this Agreement document.
19.
Entire Agreement. Except as otherwise provided in this Agreement or in any other agreement between the
Participant and the Company, this Agreement and the Plan are: (i) intended to be the final, complete, and exclusive statement of
the terms of the agreement between the Participant and the Company with regard to the subject matter of this Agreement; (ii)
supersede all other prior agreements, communications, and statements, whether written or oral, express or implied, pertaining to
that subject matter; and (iii) may not be contradicted by evidence of any prior or contemporaneous statements or agreements,
oral or written, and may not be explained or supplemented by evidence of consistent additional terms.
20.
Clawback. Notwithstanding any provisions in this Agreement to the contrary, any compensation, payments, or
benefits provided hereunder (or profits realized from the sale of Shares delivered hereunder), whether in the form of cash or
otherwise, shall be subject to recoupment and recapture to the extent necessary to comply with the requirements of any
Company-adopted policy and/or laws or regulations, including, but not limited to, the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010, the Exchange Act, Section 304 of the Sarbanes Oxley Act of 2002, the New York Stock
Exchange Listed Company Manual or any rules or regulations promulgated thereunder with respect to such laws, regulations
and/or securities exchange listing requirements, as may be in effect from time to time, and which may operate to create
additional rights for the Company with respect to this grant and recovery of amounts relating thereto. By accepting this grant of
Restricted Stock Units, the Participant agrees and acknowledges that he or she is obligated to cooperate with, and provide any
and all assistance necessary to, the Company to recover, recoup or recapture this grant of Restricted Stock Units or amounts
paid under the Plan pursuant to such law, government regulation, stock exchange listing requirement or Company policy. Such
cooperation and assistance shall include, but is not limited to, executing, completing and submitting any documentation
necessary to recover, recoup or recapture this grant of Restricted Stock Units or amounts paid under the Plan from a
Participant’s accounts, or pending or future compensation or other grants.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the day and year indicated below. This
Agreement may be executed in more than one counterpart, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
PARTICIPANT
Dated: ___________________
Nicholas J. DeIuliis
CNX RESOURCES CORPORATION
William N. Thorndike, Jr. CNX Resources – Board of Directors -
Chair
Exhibit A
Participant: Nicholas J. DeIuliis
Grant Date:
Number of Restricted Stock Units Subject to Award:
Vesting Schedule: Except as otherwise provided in the Agreement, three (3) successive equal annual installments upon the
Participant’s completion of each year of continuous employment with the Company and its Affiliates over the three (3)-year
period measured from the Grant Date.
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CNX RESOURCES CORPORATION
EQUITY INCENTIVE PLAN
FORM OF
PERFORMANCE SHARE UNIT AWARD AGREEMENT
This Performance Share Unit Award Agreement set forth below (this “Agreement”) is dated as of the grant date (the
“Grant Date”) set forth on Exhibit A and is between CNX Resources Corporation, a Delaware corporation (the “Company”),
and the individual to whom the Compensation Committee of the Board of Directors (the “Committee”) of the Company has
made this Performance Award and whose name is set forth on Exhibit A (the “Participant”).
The Company has established the CNX Resources Corporation Amended and Restated Equity and Incentive
Compensation Plan (the “Plan”), to advance the interests of the Company and its shareholders by providing incentives to certain
eligible persons who contribute significantly to the strategic and long-term performance objectives and growth of the Company.
Unless the context otherwise requires, all capitalized terms not otherwise defined in this Agreement have the same meaning
given such capitalized terms in the Plan.
Pursuant to the provisions of the Plan, the Committee has full power and authority to direct the execution and delivery
of this Agreement in the name and on behalf of the Company, and has authorized the execution and delivery of this Agreement.
Agreement
1.
Performance Share Unit Award. Subject to and pursuant to all terms and conditions stated in this Agreement
and in the Plan, as of the Grant Date, the Company hereby grants a Performance Award to the Participant in the form of
performance share units (the “Performance Share Units”) with the target number set forth on Exhibit A. Each Performance
Share Unit awarded under this Agreement shall represent a contingent right to receive one share of the Company’s common
stock as described more fully herein, to the extent such Performance Share Unit is earned and becomes payable pursuant to the
terms of this Agreement. Notwithstanding, Performance Share Units as initially awarded have no independent economic value,
but rather are mere units of measurement used for purposes of calculating the value of benefits, if any, to be paid under this
Agreement.
2.
Performance Period. The “Performance Period” means the performance period as set forth on Exhibit A.
3.
Performance Goals of the Performance Share Units. Subject to the provisions of this Agreement, the total
number of Performance Share Units awarded to Participant will be earned (at a maximum award level of 100% of the target
number of Performance Share Units awarded), if the performance measures set by and on file with the Committee are satisfied
(each, a “Performance Goal”); provided, however, that the Committee has sole discretion to determine whether the Performance
Goals, as defined, are met, and provided, further, that the Award will only become payable, except as otherwise provided herein
or in another agreement between the Participant and the Company, if the Participant remains an employee of the Company and
its subsidiaries through the Payment Date or the CiC Payment Date, as applicable. As a condition to receiving this Award,
Participant agrees that all determinations made by the Committee are final and conclusive.
4.
Issuance and Distribution.
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a.
After the end of the Performance Period and prior to the commencement of the payment of Shares
relating to the Award, the Committee shall certify in writing the extent to which the Performance Goals and any other material
terms of this Agreement have been achieved. For purposes of this provision, and for so long as the Code permits, the approved
minutes of the Committee meeting in which the certification is made may be treated as written certification.
b.
Subject to the terms and conditions of this Agreement, Performance Share Units earned by the Participant
(to the extent not previously settled) will be settled and paid in shares of the Company’s common stock in the first calendar year
immediately following the end of the Performance Period on a date determined in the Committee’s discretion, but in no event
later than March 15th of such year, subject to Participant’s satisfaction of all applicable income and employment withholding
taxes (the “Payment Date”).
c.
Notwithstanding any other provision of this Agreement, in the event of a Change in Control, as defined in
Section 16 of the Plan, the Performance Goals will be deemed to have been achieved (and the Performance Share Units will be
deemed vested) at the target award level, and, if the Change in Control qualifies as a “Change in Control” event within the
meaning of Treas. Reg. Section 1.409A-3(i)(5)(i) with respect to the Company, the value of such units will be settled (to the
extent not previously settled), on the closing date of the Change in Control transaction (the “CiC Payment Date”); provided,
further, in the event of a Change in Control, Performance Share Units may, in the Committee’s discretion, be settled in cash
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and/or securities or other property.
d.
The Participant is required to hold, and not sell, transfer or otherwise dispose of fifty percent (50%) of the
shares issued to the Participant following the vesting of the Performance Share Units (after accounting for the payment of any
related taxes in connection with the vesting of the Performance Share Units) until the earlier of (i) ten (10) years from the Grant
Date; or (ii) the Participant’s attainment of age sixty-two (62).
5.
Dividends. Each Performance Share Unit will be cumulatively credited with dividends that are paid on the
Company’s common stock in the form of additional units. These additional units shall be deemed to have been purchased on the
record date for the dividend using the closing stock price per share of the Company’s common stock as reported in The Wall
Street Journal and shall be subject to all the same conditions and restrictions as provided in this Agreement applicable to
Performance Share Units.
6.
Change in Participant’s Status. In the event the Participant Separates from Service (i) on or after the date the
Participant has reached the age of 50 with 20 or more years of continuous service to the Company and its Affiliates, other than
an involuntary termination by the Company for Cause, (ii) on account of death or Disability, or (iii) by action taken by the
Company (including any Affiliate) without Cause and after a decision by the Committee, in its sole and absolute discretion, that
such Separation from Service without Cause qualifies for special vesting treatment hereunder (a “Qualifying Separation from
Service without Cause”), prior to any Payment Date or the CiC Payment Date, as applicable, the Participant shall be entitled to
retain the Performance Share Units and receive payment therefore to the extent earned and payable pursuant to the provisions of
this Agreement. Except as otherwise provided herein or in another agreement between the Participant and the Company, in the
event the Participant Separates from Service for any other reason, including, but not limited to, by the Participant voluntarily, or
by the Company (including any Affiliate) with Cause or without Cause (other than in connection with a Qualifying Separation
of Service without Cause), prior to any Payment Date or the CiC Payment Date, as
1
For the avoidance of doubt, the sale of any Affiliate of the Company shall not constitute a Change in Control for purposes of this
Agreement.
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applicable, the Performance Share Units awarded to the Participant shall be cancelled and forfeited, whether payable or not,
without payment by the Company or any Affiliate. Any payments due a deceased Participant shall be paid to his or her estate as
provided herein after the end of the Performance Period.
7.
Tax Consequences/Withholding.
a.
It is intended that: (i) the Participant’s Performance Share Units shall be considered to be subject to a
substantial risk of forfeiture in accordance with those terms as defined in Sections 409A and 3121(v)(2) of the Code; and (ii)
the Participant shall have merely an unfunded, unsecured promise to be paid a benefit, and such unfunded promise shall not
consist of a transfer of “property” within the meaning of Code Section 83.
b.
Participant acknowledges that any income for federal, state, local or foreign tax purposes, including
payroll taxes, that the Participant is required to recognize on account of the vesting of the Performance Share Units and/or
issuance of the Shares under this Award to Participant shall be subject to withholding of tax by the Company. Participant must
pay all applicable taxes when due. The Company will automatically withhold from the total number of Shares deliverable to
Participant upon the applicable payment date, the number of Shares having a Fair Market Value equal to the minimum statutory
tax withholding requirements (or as otherwise approved by the Board or the Committee) as determined in accordance with the
Plan. In the event of any remaining tax balance, Participant will be required to deliver a check for that amount payable
to the Company before the Shares are deposited into Participant’s plan account.
c.
This Agreement is intended to comply with, or be excepted from coverage under, Section 409A of the
Code and the regulations promulgated thereunder and shall be administered, interpreted and construed accordingly.
Notwithstanding any provision of this Agreement to the contrary, if any benefit provided under this Agreement is subject to the
provisions of Section 409A of the Code and the regulations issued thereunder (and not excepted therefrom), the provisions of
the Agreement shall be administered, interpreted and construed in a manner necessary to comply with Section 409A (or
disregarded to the extent such provision cannot be so administered, interpreted, or construed). Notwithstanding, Section 409A
may impose upon the Participant certain taxes or other charges for which the Participant is and shall remain solely responsible,
and nothing contained in this Agreement or the Plan shall be construed to obligate any member of the Committee or Board, the
Company or any Affiliate (or its employees, officers or directors) for any such taxes or other charges.
8.
Non-Competition.
a.
The Participant hereby agrees that this Section 8 is reasonable and necessary in order to protect the
legitimate business interests and goodwill of the Company, including the Company’s trade secrets, valuable confidential
business and professional information, substantial relationships with prospective and existing customers and clients, and
specialized training provided to the Participant and other employees of the Company. The Participant acknowledges and
recognizes the highly competitive nature of the business of the Company and its Affiliates and accordingly agrees that during
the term of Participant’s employment and for a period of two (2) years after the termination thereof (the “Restriction Period”):
(i)The Participant will not directly or indirectly engage in any business substantially similar to any line of
business conducted by the Company or any of its Affiliates, including, but not limited to, where such engagement is as an
officer, director, proprietor, employee, partner, investor (other than as a holder of less than 1% of the outstanding capital stock
of a publicly traded corporation),
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consultant, advisor, agent or sales representative, in any geographic region in which the Company or any of its Affiliates
conducted business;
prospective customer of the Company or any of its Affiliates;
(ii)The Participant will not contact, solicit, perform services for, or accept business from any customer or
(iii)The Participant will not directly or indirectly induce any employee of the Company or any of its
Affiliates to: (1) engage in any activity or conduct which is prohibited pursuant to subparagraph 8.1(a); or (2) terminate such
employee’s employment with the Company or any of its Affiliates. Moreover, the Participant will not directly or indirectly
employ or offer employment (in connection with any business substantially similar to any line of business conducted by the
Company or any of its Affiliates) to any person who was employed by the Company or any of its Affiliates unless such person
shall have ceased to be employed by the Company or any of its Affiliates for a period of at least 12 months; and
are prohibited under subparagraphs (a) — (c) above.
(iv)The Participant will not directly or indirectly assist others in engaging in any of the activities, which
Notwithstanding the foregoing, if the Restriction Period set forth herein is shorter in duration following Participant’s
termination of employment with the Company and its Affiliates than in any other prior Award Agreement, the Restriction
Period set forth herein shall be the Restriction Period for all such prior Award Agreements and related Awards. Similarly, if the
Restriction Period is longer in this Agreement than in prior Award Agreements, the Restriction Period set forth in such prior
Award Agreements and related Awards shall be amended hereby and have the same applicable Restriction Period following
Participant’s termination of employment with the Company and its Affiliates as set forth herein (and the Participant shall be
deemed to have consented to such amendment by executing this Agreement).
b.
It is expressly understood and agreed that although the Participant and the Company consider the
restrictions contained in this Section 8 to be reasonable, if a final judicial determination is made by a court of competent
jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against
the Participant, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable
against such Participant. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect
the enforceability of any of the other restrictions contained herein. The restrictive covenants set forth in this Section 8 shall be
extended by any amount of time that the Participant is in breach of such covenants, such that the Company receives the full
benefit of the time duration set forth above.
9.
Confidential Information and Trade Secrets. The Participant and the Company agree that certain materials,
including, but not limited to, information, data and other materials relating to customers, development programs, costs,
marketing, trading, investment, sales activities, promotion, credit and financial data, manufacturing processes, financing
methods, plans or the business and affairs of the Company and its Affiliates, constitute proprietary confidential information and
trade secrets. Accordingly, the Participant will not at any time during or after the Participant’s employment with the Company
(including any Affiliate) disclose or use for such Participant’s own benefit or purposes or the benefit or purposes of any other
person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise other than
the Company and any of its Affiliates, any proprietary confidential information or trade secrets, provided that the foregoing
shall not apply to
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information which is not unique to the Company or any of its Affiliates or which is generally known to the industry or the
public other than as a result of such Participant’s breach of this covenant. The Participant agrees that upon termination of
employment with the Company (including any Affiliate) for any reason, the Participant will immediately return to the Company
all memoranda, books, papers, plans, information, letters and other data, and all copies thereof or therefrom, which in any way
relate to the business of the Company and its Affiliates, except that the Participant may retain personal notes, notebooks and
diaries. The Participant further agrees that the Participant will not retain or use for the Participant’s own account at any time any
trade names, trademark or other proprietary business designation used or owned in connection with the business of the
Company or any of its Affiliates.
Notwithstanding anything contained herein to the contrary, this Agreement shall not prohibit disclosure of proprietary
confidential information if (i) it is required by law or by a court of competent jurisdiction or (ii) it is in connection with any
judicial, arbitration, dispute resolution or other legal proceeding in which your legal rights and obligations as an employee or
under this Agreement are at issue; provided, however, that you shall, to the extent practicable and lawful in any such event, give
prior notice to the Company of your intent to disclose proprietary confidential information so as to allow the Company an
opportunity (which you shall not oppose) to obtain such protective orders or similar relief with respect thereto as may be
deemed appropriate.
Notwithstanding the foregoing, nothing in this Agreement is intended to restrict, prohibit, impede or interfere with the
Participant providing information to, or from reporting possible violations of law or regulation to, any governmental agency or
entity, from participating in investigations, testifying in proceedings regarding the Company’s past or future conduct, or from
making other disclosures that are protected under state or federal law or regulation, engaging in any future activities protected
under statutes administered by any government agency (including but not limited, to the Department of Justice, the Securities
and Exchange Commission, the Congress, and any agency Inspector General), or from receiving and retaining a monetary
award from a government-administered whistleblower award program for providing information directly to a government-
administered whistleblower award program. The Participant does not need the prior authorization of the Company to make
such reports or disclosures. The Participant is not required to notify the Company that he or she has made any such reports or
disclosures. The Company nonetheless asserts, and does not waive, its attorney-client privilege over any information
appropriately protected by the privilege.
10.
Remedies/Forfeiture.
a.
The Participant acknowledges that a violation or attempted violation on the Participant’s part of Sections
8 and/or 9 will cause irreparable damage to the Company and its Affiliates, and the Participant therefore agrees that the
Company and its Affiliates shall be entitled as a matter of right to an injunction, out of any court of competent jurisdiction,
restraining any violation or further violation of such promises by the Participant or the Participant’s employees, partners or
agents. The Participant agrees that such right to an injunction is cumulative, in addition to whatever other remedies the
Company (including any Affiliate) may have under law or equity and to the Participant’s obligations to make timely payment to
the Company as set forth in Section 10.2 of this Agreement. The Participant further acknowledges and agrees that the
Participant’s Performance Share Units shall be cancelled and forfeited without payment by the Company if the Participant
breaches any of his obligations set forth in Sections 8 and 9 herein.
b.
At any point after becoming aware of a breach of any obligation set forth in Sections 8 and 9 of this
Agreement, the Company shall provide notice of such breach to the Participant. By agreeing to receive the Performance Share
Units pursuant to this Agreement, the Participant agrees
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that within ten (10) days after the date the Company provides such notice, the Participant shall pay to the Company in cash an
amount equal in value to any and all distributions paid to or on behalf of such Participant under this Agreement after the date
that was six (6) months prior to the date of the earliest breach. The Participant agrees that failure to make such timely payment
to the Company constitutes an independent and material breach of the terms and conditions of this Agreement, for which the
Company may seek recovery of the unpaid amount as liquidated damages, in addition to all other rights and remedies the
Company may have resulting from the Participant’s breach of the obligations set forth in Sections 8 and/or 9. The Participant
agrees that timely payment to the Company as set forth in this provision of this Agreement is reasonable and necessary because
the compensatory damages that will result from breaches of Sections 8 and/or 9 cannot readily be ascertained. Further, the
Participant agrees that timely payment to the Company as set forth in this provision of this Agreement is not a penalty, and it
does not preclude the Company from seeking all other remedies that may be available to the Company, including without
limitation those set forth in this Section 10.
11.
Assignment/Nonassignment.
a.
The Company shall have the right to assign this Agreement, including without limitation Sections 8
and/or 9, and the Participant agrees to remain obligated by all provisions of this Agreement that are assigned to any successor,
assign or surviving entity. Any successor to the Company is an intended third party beneficiary of this Agreement.
b.
The Performance Share Units shall not be sold, pledged, assigned, hypothecated, transferred or disposed
of (a “Transfer”) in any manner, other than by will or the laws of descent and distribution. Any attempt by the Participant to
Transfer the Performance Share Units in violation of the terms of this Agreement shall render the Performance Share Units null
and void, and result in the immediate forfeiture of such Performance Share Units, without payment by the Company.
12.
Impact on Benefit Plans. Payments under this Agreement shall not be considered as earnings for purposes of
the Company’s and/or Affiliate’s qualified retirement plans or any other retirement or benefit plan unless specifically provided
for therein. Nothing herein shall prevent the Company or any Affiliate from maintaining additional compensation plans and
arrangements for its employees.
13.
Successors; Changes in Stock. The obligation of the Company under this Agreement shall be binding upon the
successors and assigns of the Company. If a dividend or other distribution shall be declared upon the Company’s common stock
payable in Shares, the target number of Performance Share Units shall be adjusted by adding thereto the number of
Performance Share Units which would have been distributable thereon if such shares and Performance Share Units had been
actual Shares and outstanding on the date fixed for determining the shareholders entitled to receive such stock dividend or
distribution. In the event of any spin-off, split-off or split-up, dividend in property other than cash, recapitalization or other
change in the capital structure of the Company, or any merger, consolidation, reorganization, partial or complete liquidation or
other distribution of assets (other than a normal cash dividend), or any other corporate transaction or event having an effect
similar to any of the foregoing, or extraordinary distribution to shareholders of the Company’s common stock, the Performance
Share Units and the Performance Goals shall be appropriately adjusted to prevent dilution or enlargement of the rights of
Participants which would otherwise result from any such transaction, provided such adjustment shall be consistent with Code
Section 409A.
In the case of a Change in Control, any obligation under this Agreement shall be handled in accordance with the terms
of Section 4 hereof. In any case not constituting a Change in Control in which
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the Company’s common stock is changed into or becomes exchangeable for a different number or kind of shares of stock or
other securities of the Company or another corporation, or cash or other property, whether through reorganization,
reclassification, recapitalization, stock split-up, combination of shares, merger or consolidation, then (i) the value of the
Performance Share Units constituting the Award shall be calculated based on the closing price per share of such common stock
on the closing date of the transaction on the principal market on which such common stock is traded, (ii) there shall be
substituted for each Performance Share Unit constituting the Award, the number and kind of shares of stock or other securities
(or cash or other property) into which each outstanding Share shall be so changed or for which each such Share shall be
exchangeable, and (iii) the Share on which the Performance Goals are based shall be appropriately and equitably adjusted,
provided any such adjustments shall be consistent with Code Section 409A. In the case of any such adjustment, the
Performance Share Units shall remain subject to the terms of the Agreement.
14.
Governing Law, Jurisdiction, and Venue.
a.
This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware,
without giving effect to the principles of conflicts of law.
b.
The Participant hereby irrevocably submits to the personal and exclusive jurisdiction of the United States
District Court for the Western District of Pennsylvania or the Court of Common Pleas of Allegheny County, Pennsylvania in
any action or proceeding arising out of, or relating to, this Agreement (whether such action or proceeding arises under contract,
tort, equity or otherwise). The Participant hereby irrevocably waives any objection which the Participant now or hereafter may
have to the laying of venue or personal jurisdiction of any such action or proceeding brought in said courts.
c.
Jurisdiction over, and venue of, any such action or proceeding shall be exclusively vested in the United
States District Court for the Western District of Pennsylvania or the Court of Common Pleas of Allegheny County,
Pennsylvania.
d.
Provided that the Company commences any such action or proceeding in the courts identified in Section
14.3, the Participant irrevocably waives the Participant’s right to object to or challenge the above selected forum on the basis of
inconvenience or unfairness under 28 U.S.C. § 1404, 42 Pa. C.S. § 5322 or similar state or federal statutes. The Participant
agrees to reimburse the Company for all of the attorneys’ fees and costs it incurs to oppose the Participant’s efforts to challenge
or object to litigation proceeding in the courts identified in Section 14.3 with respect to actions arising out of or relating to this
Agreement (whether such actions arise under contract, tort, equity or otherwise).
15.
Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this
Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.
16.
Severability. In the event that any one or more of the provisions of this Agreement shall be held to be invalid,
illegal or unenforceable, the validity, legality or enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
17.
Funding. This Agreement is not funded and all amounts payable hereunder, if any, shall be paid from the
general assets of the Company or its Affiliate, as applicable. No provision contained in this Agreement or the Plan and no
action taken pursuant to the provisions of this Agreement or the Plan shall create a trust of any kind or require the Company to
maintain or set aside any specific funds to pay benefits hereunder. To the extent the Participant acquires a right to receive
payments from the Company
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under this Agreement, such right shall be no greater than the right of any unsecured general creditor of the Company.
18.
Headings. The descriptive headings of the Sections of this Agreement are inserted for convenience of reference
only and shall not constitute a part of this Agreement.
19.
Awards Subject to Plan. In the event of a conflict between any term or provision contained herein and a term or
provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
20.
Amendment or Termination of this Agreement. This Agreement may be modified, amended, suspended or
terminated by the Committee at any time; provided, however, that no modification, amendment, suspension or termination of
the Plan or this Agreement shall adversely affect the material rights of the Participant under this Agreement without the consent
of such Participant. Notwithstanding the foregoing or any provision of this Agreement to the contrary, the Company may, in its
sole discretion and without the Participant’s consent, modify or amend the terms of the Agreement or a Performance Share Unit
award, or take any other action it deems necessary or advisable, to cause the Agreement to comply with Section 10D of the
Exchange Act or Section 409A (or an exception thereto). Any modification, amendment, suspension or termination shall only
be effective upon a writing issued by the Company, and the Participant shall not offer evidence of any purported oral
modifications or amendments to vary or contradict the terms of this Agreement document.
21.
Entire Agreement. Except as otherwise provided in this Agreement or in any other agreement between the
Participant and the Company, this Agreement and the Plan are: (i) intended to be the final, complete, and exclusive statement of
the terms of the agreement between the Participant and the Company with regard to the subject matter of this Agreement; (ii)
supersede all other prior agreements, communications, and statements, whether written or oral, express or implied, pertaining to
that subject matter; and (iii) may not be contradicted by evidence of any prior or contemporaneous statements or agreements,
oral or written, and may not be explained or supplemented by evidence of consistent additional terms.
22.
Clawback. Notwithstanding any provisions in this Agreement to the contrary, any compensation, payments, or
benefits provided hereunder (or profits realized from the sale of Shares delivered hereunder), whether in the form of cash or
otherwise, shall be subject to recoupment and recapture to the extent necessary to comply with the requirements of any
Company-adopted policy and/or laws or regulations, including, but not limited to, the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010, the Exchange Act, Section 304 of the Sarbanes Oxley Act of 2002, the New York Stock
Exchange Listed Company Manual or any rules or regulations promulgated thereunder with respect to such laws, regulations
and/or securities exchange listing requirements, as may be in effect from time to time, and which may operate to create
additional rights for the Company with respect to this grant and recovery of amounts relating thereto. By accepting this grant of
Performance Share Units, the Participant agrees and acknowledges that he or she is obligated to cooperate with, and provide
any and all assistance necessary to, the Company to recover, recoup or recapture this grant of Performance Share Units or
amounts paid under the Plan pursuant to such law, government regulation, stock exchange listing requirement or Company
policy. Such cooperation and assistance shall include, but is not limited to, executing, completing and submitting any
documentation necessary to recover, recoup or recapture this grant of Performance Share Units or amounts paid under the Plan
from a Participant’s accounts, or pending or future compensation or other grants.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the day and year indicated below. This
Agreement may be executed in more than one counterpart, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
PARTICIPANT
Dated: ___________________
Nicholas J. DeIuliis
CNX RESOURCES CORPORATION
William N. Thorndike, Jr. CNX Resources – Board of Directors -
Chair
Exhibit A
Participant: Nicholas J. DeIuliis
Grant Date:
Performance Share Units (Target):
Performance Period: January 1, 2021 through December 31, 2023.
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CNX RESOURCES CORPORATION
EQUITY INCENTIVE PLAN
FORM OF
PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT
This Performance-Based Restricted Stock Unit Award Agreement set forth below (this “Agreement”) is dated as of the
grant date (the “Grant Date”) set forth on Exhibit A and is between CNX Resources Corporation, a Delaware corporation (the
“Company”), and the individual to whom the Compensation Committee of the Board of Directors (the “Committee”) of the
Company has made this Performance Award and whose name is set forth on Exhibit A (the “Participant”).
The Company has established the CNX Resources Corporation Amended and Restated Equity and Incentive
Compensation Plan (the “Plan”) to advance the interests of the Company and its shareholders by providing incentives to certain
eligible persons who contribute significantly to the strategic and long-term performance objectives and growth of the Company.
Unless the context otherwise requires, all capitalized terms not otherwise defined in this Agreement have the same meaning
given such capitalized terms in the Plan.
Pursuant to the provisions of the Plan, the Committee has full power and authority to direct the execution and delivery
of this Agreement in the name and on behalf of the Company, and has authorized the execution and delivery of this Agreement.
Agreement
1.
PRSU Award. Subject to and pursuant to all terms and conditions stated in this Agreement and in the Plan, as
of the Grant Date, the Company hereby grants a Performance Award to the Participant in the form of performance-based
Restricted Stock Units (the “PRSUs”) with the target number set forth on Exhibit A. Such target number consists of three
tranches (each, a “Tranche”), with (a) the first such Tranche consisting of one-third of the target PRSUs, rounded down to the
nearest whole PRSU (the “Year 1 PRSUs”), (b) the second such Tranche consisting of one-third of the target PRSUs, rounded
down to the nearest whole PRSU (the “Year 2 PRSUs”), and (c) the third such Tranche consisting of the remainder of the target
PRSUs (the “Year 3 PRSUs”). Each PRSU awarded under this Agreement shall represent a contingent right to receive one share
of the Company’s common stock as described more fully herein, to the extent such PRSU is earned and becomes payable
pursuant to the terms of this Agreement. Notwithstanding, PRSUs as initially awarded have no independent economic value,
but rather are mere units of measurement used for purposes of calculating the value of benefits, if any, to be paid under this
Agreement.
2.
Applicable Performance Period. The “Applicable Performance Period” means the performance period
applicable to a Tranche of PRSUs as set forth on Exhibit A.
3.
Performance Goals of the PRSUs. Subject to the provisions of this Agreement, each Tranche of the PRSUs
awarded to Participant will be earned if the performance measures set by and on file with the Committee with respect to such
Tranche (in each case, the “Applicable Performance Goals”) are satisfied; provided, however, that the Committee has sole
discretion to determine whether the Applicable Performance Goals, as defined, are met, and provided, further, that each Tranche
will only become payable, except as otherwise provided herein or in another agreement between the Participant and the
Company, if the Participant remains an employee of the Company and its subsidiaries through the Applicable Payment Date or
the CiC Payment Date, as applicable, for such Tranche. As a condition to
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receiving this Award, Participant agrees that all determinations made by the Committee are final and conclusive.
4.
Issuance and Distribution.
a.
After the end of each Applicable Performance Period and prior to the commencement of the payment of
Shares relating to the applicable Tranche of the PRSUs (but no later than 2 ½ months following the end of the Applicable
Performance Period), the Committee shall certify in writing the extent to which the Applicable Performance Goals for the
applicable Tranche of the Award and any other material terms of this Agreement with respect to such Tranche have been
achieved. For purposes of this provision, and for so long as the Code permits, the approved minutes of the Committee meeting
in which the certification is made may be treated as written certification.
b.
Subject to the terms and conditions of this Agreement, each Tranche of PRSUs earned by the Participant
(to the extent not previously settled) will be settled and paid in shares of the Company’s common stock in the first calendar year
immediately following the end of the Applicable Performance Period on a date determined in the Committee’s discretion, but in
no event later than March 15th of such year, subject to Participant’s satisfaction of all applicable income and employment
withholding taxes (the “Applicable Payment Date”).
c.
Notwithstanding any other provision of this Agreement, in the event of a Change in Control, as defined in
Section 16 of the Plan, the Applicable Performance Goals for any Tranche of the PRSUs for which the Applicable Performance
Period has not ended will be deemed to have been satisfied, and the value of such Tranche or Tranches of PRSUs will be settled
(to the extent not previously settled), on the closing date of the Change in Control transaction (the “CiC Payment Date”);
provided, further, in the event of a Change in Control, PRSUs may, in the Committee’s discretion, be settled in cash and/or
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securities or other property.
d.
The Participant is required to hold, and not sell, transfer or otherwise dispose of fifty percent (50%) of the
shares issued to the Participant following the vesting of each Tranche of the PRSUs (after accounting for the payment of any
related taxes in connection with the vesting of the PRSUs) until the earlier of (i) ten (10) years from the Grant Date or (ii) the
Participant’s attainment of age sixty-two (62).
5.
Dividends. Each PRSU will be cumulatively credited with dividends that are paid on the Company’s common
stock in the form of additional performance-based Restricted Stock Units. These additional performance-based Restricted Stock
Units shall be deemed to have been purchased on the record date for the dividend using the closing stock price per share of the
Company’s common stock as reported in The Wall Street Journal and shall be subject to all the same conditions and restrictions
as provided in this Agreement applicable to the PRSUs to which they relate.
6.
Change in Participant’s Status. In the event the Participant Separates from Service (i) on or after the date the
Participant has reached the age of 50 with 20 or more years of continuous service to the Company and its Affiliates, other than
an involuntary termination by the Company for Cause, (ii) on account of death or Disability, or (iii) by action taken by the
Company (including any Affiliate) without Cause and after a decision by the Committee, in its sole and absolute discretion, that
such Separation from Service without Cause qualifies for special vesting treatment hereunder (a “Qualifying Separation from
Service without Cause”), prior to any Applicable Payment Date or the CiC Payment Date, as applicable,
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For the avoidance of doubt, the sale of any Affiliate of the Company shall not constitute a Change in Control for purposes of this
Agreement.
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the Participant shall be entitled to retain the PRSUs and receive payment therefore to the extent earned and payable pursuant to
the provisions of this Agreement. Except as otherwise provided herein or in another agreement between the Participant and the
Company, in the event the Participant Separates from Service for any other reason, including, but not limited to, by the
Participant voluntarily, or by the Company (including any Affiliate) with Cause or without Cause (other than in connection with
a Qualifying Separation of Service without Cause), prior to any Applicable Payment Date or the CiC Payment Date, as
applicable, the PRSUs awarded to the Participant shall be cancelled and forfeited, whether payable or not, without payment by
the Company or any Affiliate. Any payments due a deceased Participant shall be paid to his or her estate as provided herein
after the end of the Performance Period.
7.
Tax Consequences/Withholding.
a.
It is intended that: (i) the Participant’s PRSUs shall be considered to be subject to a substantial risk of
forfeiture in accordance with those terms as defined in Sections 409A and 3121(v)(2) of the Code; and (ii) the Participant shall
have merely an unfunded, unsecured promise to be paid a benefit, and such unfunded promise shall not consist of a transfer of
“property” within the meaning of Code Section 83.
b.
Participant acknowledges that any income for federal, state, local or foreign tax purposes, including
payroll taxes, that the Participant is required to recognize on account of the vesting of the PRSUs and/or issuance of the Shares
under this Award to Participant shall be subject to withholding of tax by the Company. Participant must pay all applicable taxes
when due. The Company will automatically withhold from the total number of Shares deliverable to Participant upon the
applicable payment date, the number of Shares having a Fair Market Value equal to the minimum statutory tax withholding
requirements (or as otherwise approved by the Board or the Committee) as determined in accordance with the Plan. In the
event of any remaining tax balance, Participant will be required to deliver a check for that amount payable to the
Company before the Shares are deposited into Participant’s plan account.
c.
This Agreement is intended to comply with, or be excepted from coverage under, Section 409A of the
Code and the regulations promulgated thereunder and shall be administered, interpreted and construed accordingly.
Notwithstanding any provision of this Agreement to the contrary, if any benefit provided under this Agreement is subject to the
provisions of Section 409A of the Code and the regulations issued thereunder (and not excepted therefrom), the provisions of
the Agreement shall be administered, interpreted and construed in a manner necessary to comply with Section 409A (or
disregarded to the extent such provision cannot be so administered, interpreted, or construed). Notwithstanding, Section 409A
may impose upon the Participant certain taxes or other charges for which the Participant is and shall remain solely responsible,
and nothing contained in this Agreement or the Plan shall be construed to obligate any member of the Committee or Board, the
Company or any Affiliate (or its employees, officers or directors) for any such taxes or other charges.
8.
Non-Competition.
a.
The Participant hereby agrees that this Section 8 is reasonable and necessary in order to protect the
legitimate business interests and goodwill of the Company, including the Company’s trade secrets, valuable confidential
business and professional information, substantial relationships with prospective and existing customers and clients, and
specialized training provided to the Participant and other employees of the Company. The Participant acknowledges and
recognizes the highly competitive nature of the business of the Company and its Affiliates and accordingly agrees that during
the term of
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Participant’s employment and for a period of two (2) years after the termination thereof (the “Restriction Period”):
(i)The Participant will not directly or indirectly engage in any business substantially similar to any line of
business conducted by the Company or any of its Affiliates, including, but not limited to, where such engagement is as an
officer, director, proprietor, employee, partner, investor (other than as a holder of less than 1% of the outstanding capital stock
of a publicly traded corporation), consultant, advisor, agent or sales representative, in any geographic region in which the
Company or any of its Affiliates conducted business;
prospective customer of the Company or any of its Affiliates;
(ii)The Participant will not contact, solicit, perform services for, or accept business from any customer or
(iii)The Participant will not directly or indirectly induce any employee of the Company or any of its
Affiliates to: (1) engage in any activity or conduct which is prohibited pursuant to subparagraph 8.1(a); or (2) terminate such
employee’s employment with the Company or any of its Affiliates. Moreover, the Participant will not directly or indirectly
employ or offer employment (in connection with any business substantially similar to any line of business conducted by the
Company or any of its Affiliates) to any person who was employed by the Company or any of its Affiliates unless such person
shall have ceased to be employed by the Company or any of its Affiliates for a period of at least 12 months; and
are prohibited under subparagraphs (a) — (c) above.
(iv)The Participant will not directly or indirectly assist others in engaging in any of the activities, which
Notwithstanding the foregoing, if the Restriction Period set forth herein is shorter in duration following Participant’s
termination of employment with the Company and its Affiliates than in any other prior Award Agreement, the Restriction
Period set forth herein shall be the Restriction Period for all such prior Award Agreements and related Awards. Similarly, if the
Restriction Period is longer in this Agreement than in prior Award Agreements, the Restriction Period set forth in such prior
Award Agreements and related Awards shall be amended hereby and have the same applicable Restriction Period following
Participant’s termination of employment with the Company and its Affiliates as set forth herein (and the Participant shall be
deemed to have consented to such amendment by executing this Agreement).
b.
It is expressly understood and agreed that although the Participant and the Company consider the
restrictions contained in this Section 8 to be reasonable, if a final judicial determination is made by a court of competent
jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against
the Participant, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable
against such Participant. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect
the enforceability of any of the other restrictions contained herein. The restrictive covenants set forth in this Section 8 shall be
extended by any amount of time that the Participant is in breach of such covenants, such that the Company receives the full
benefit of the time duration set forth above.
9.
Confidential Information and Trade Secrets. The Participant and the Company agree that certain materials,
including, but not limited to, information, data and other materials relating to customers, development programs, costs,
marketing, trading, investment, sales activities, promotion, credit and
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financial data, manufacturing processes, financing methods, plans or the business and affairs of the Company and its Affiliates,
constitute proprietary confidential information and trade secrets. Accordingly, the Participant will not at any time during or after
the Participant’s employment with the Company (including any Affiliate) disclose or use for such Participant’s own benefit or
purposes or the benefit or purposes of any other person, firm, partnership, joint venture, association, corporation or other
business organization, entity or enterprise other than the Company and any of its Affiliates, any proprietary confidential
information or trade secrets, provided that the foregoing shall not apply to information which is not unique to the Company or
any of its Affiliates or which is generally known to the industry or the public other than as a result of such Participant’s breach
of this covenant. The Participant agrees that upon termination of employment with the Company (including any Affiliate) for
any reason, the Participant will immediately return to the Company all memoranda, books, papers, plans, information, letters
and other data, and all copies thereof or therefrom, which in any way relate to the business of the Company and its Affiliates,
except that the Participant may retain personal notes, notebooks and diaries. The Participant further agrees that the Participant
will not retain or use for the Participant’s own account at any time any trade names, trademark or other proprietary business
designation used or owned in connection with the business of the Company or any of its Affiliates.
Notwithstanding anything contained herein to the contrary, this Agreement shall not prohibit disclosure of proprietary
confidential information if (i) it is required by law or by a court of competent jurisdiction or (ii) it is in connection with any
judicial, arbitration, dispute resolution or other legal proceeding in which your legal rights and obligations as an employee or
under this Agreement are at issue; provided, however, that you shall, to the extent practicable and lawful in any such event, give
prior notice to the Company of your intent to disclose proprietary confidential information so as to allow the Company an
opportunity (which you shall not oppose) to obtain such protective orders or similar relief with respect thereto as may be
deemed appropriate.
Notwithstanding the foregoing, nothing in this Agreement is intended to restrict, prohibit, impede or interfere with the
Participant providing information to, or from reporting possible violations of law or regulation to, any governmental agency or
entity, from participating in investigations, testifying in proceedings regarding the Company’s past or future conduct, or from
making other disclosures that are protected under state or federal law or regulation, engaging in any future activities protected
under statutes administered by any government agency (including but not limited, to the Department of Justice, the Securities
and Exchange Commission, the Congress, and any agency Inspector General), or from receiving and retaining a monetary
award from a government-administered whistleblower award program for providing information directly to a government-
administered whistleblower award program. The Participant does not need the prior authorization of the Company to make
such reports or disclosures. The Participant is not required to notify the Company that he or she has made any such reports or
disclosures. The Company nonetheless asserts, and does not waive, its attorney-client privilege over any information
appropriately protected by the privilege.
10.
Remedies/Forfeiture.
a.
The Participant acknowledges that a violation or attempted violation on the Participant’s part of Sections
8 and/or 9 will cause irreparable damage to the Company and its Affiliates, and the Participant therefore agrees that the
Company and its Affiliates shall be entitled as a matter of right to an injunction, out of any court of competent jurisdiction,
restraining any violation or further violation of such promises by the Participant or the Participant’s employees, partners or
agents. The Participant agrees that such right to an injunction is cumulative, in addition to whatever other remedies the
Company (including any Affiliate) may have under law or equity and to the Participant’s obligations to make timely payment to
the Company as set forth in Section 10.2 of this Agreement. The Participant
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further acknowledges and agrees that the Participant’s PRSUs shall be cancelled and forfeited without payment by the
Company if the Participant breaches any of his obligations set forth in Sections 8 and 9 herein.
b.
At any point after becoming aware of a breach of any obligation set forth in Sections 8 and 9 of this
Agreement, the Company shall provide notice of such breach to the Participant. By agreeing to receive the PRSUs pursuant to
this Agreement, the Participant agrees that within ten (10) days after the date the Company provides such notice, the Participant
shall pay to the Company in cash an amount equal in value to any and all distributions paid to or on behalf of such Participant
under this Agreement after the date that was six (6) months prior to the date of the earliest breach. The Participant agrees that
failure to make such timely payment to the Company constitutes an independent and material breach of the terms and
conditions of this Agreement, for which the Company may seek recovery of the unpaid amount as liquidated damages, in
addition to all other rights and remedies the Company may have resulting from the Participant’s breach of the obligations set
forth in Sections 8 and/or 9. The Participant agrees that timely payment to the Company as set forth in this provision of this
Agreement is reasonable and necessary because the compensatory damages that will result from breaches of Sections 8 and/or 9
cannot readily be ascertained. Further, the Participant agrees that timely payment to the Company as set forth in this provision
of this Agreement is not a penalty, and it does not preclude the Company from seeking all other remedies that may be available
to the Company, including without limitation those set forth in this Section 10.
11.
Assignment/Nonassignment.
a.
The Company shall have the right to assign this Agreement, including without limitation Sections 8
and/or 9, and the Participant agrees to remain obligated by all provisions of this Agreement that are assigned to any successor,
assign or surviving entity. Any successor to the Company is an intended third party beneficiary of this Agreement.
b.
The PRSUs shall not be sold, pledged, assigned, hypothecated, transferred or disposed of (a “Transfer”)
in any manner, other than by will or the laws of descent and distribution. Any attempt by the Participant to Transfer the PRSUs
in violation of the terms of this Agreement shall render the PRSUs null and void, and result in the immediate forfeiture of such
PRSUs, without payment by the Company.
12.
Impact on Benefit Plans. Payments under this Agreement shall not be considered as earnings for purposes of
the Company’s and/or Affiliate’s qualified retirement plans or any other retirement or benefit plan unless specifically provided
for therein. Nothing herein shall prevent the Company or any Affiliate from maintaining additional compensation plans and
arrangements for its employees.
13.
Successors; Changes in Stock. The obligation of the Company under this Agreement shall be binding upon the
successors and assigns of the Company. If a dividend or other distribution shall be declared upon the Company’s common stock
payable in Shares, the target number of PRSUs shall be adjusted by adding thereto the number of PRSUs which would have
been distributable thereon if such shares and PRSUs had been actual Shares and outstanding on the date fixed for determining
the shareholders entitled to receive such stock dividend or distribution. In the event of any spin-off, split-off or split-up,
dividend in property other than cash, recapitalization or other change in the capital structure of the Company, or any merger,
consolidation, reorganization, partial or complete liquidation or other distribution of assets (other than a normal cash dividend),
or any other corporate transaction or event having an effect similar to any of the foregoing, or extraordinary distribution to
shareholders of the
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Company’s common stock, the PRSUs and the Performance Goals shall be appropriately adjusted to prevent dilution or
enlargement of the rights of Participants which would otherwise result from any such transaction, provided such adjustment
shall be consistent with Code Section 409A.
In the case of a Change in Control, any obligation under this Agreement shall be handled in accordance with the terms
of Section 4 hereof. In any case not constituting a Change in Control in which the Company’s common stock is changed into or
becomes exchangeable for a different number or kind of shares of stock or other securities of the Company or another
corporation, or cash or other property, whether through reorganization, reclassification, recapitalization, stock split-up,
combination of shares, merger or consolidation, then (i) the value of the PRSUs constituting the Award shall be calculated
based on the closing price per share of such common stock on the closing date of the transaction on the principal market on
which such common stock is traded, (ii) there shall be substituted for each PRSU constituting the Award, the number and kind
of shares of stock or other securities (or cash or other property) into which each outstanding Share shall be so changed or for
which each such Share shall be exchangeable, and (iii) the Share on which the Performance Goals are based shall be
appropriately and equitably adjusted, provided any such adjustments shall be consistent with Code Section 409A. In the case of
any such adjustment, the PRSUs shall remain subject to the terms of the Agreement.
14.
Governing Law, Jurisdiction, and Venue.
a.
This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware,
without giving effect to the principles of conflicts of law.
b.
The Participant hereby irrevocably submits to the personal and exclusive jurisdiction of the United States
District Court for the Western District of Pennsylvania or the Court of Common Pleas of Allegheny County, Pennsylvania in
any action or proceeding arising out of, or relating to, this Agreement (whether such action or proceeding arises under contract,
tort, equity or otherwise). The Participant hereby irrevocably waives any objection which the Participant now or hereafter may
have to the laying of venue or personal jurisdiction of any such action or proceeding brought in said courts.
c.
Jurisdiction over, and venue of, any such action or proceeding shall be exclusively vested in the United
States District Court for the Western District of Pennsylvania or the Court of Common Pleas of Allegheny County,
Pennsylvania.
d.
Provided that the Company commences any such action or proceeding in the courts identified in Section
14.3, the Participant irrevocably waives the Participant’s right to object to or challenge the above selected forum on the basis of
inconvenience or unfairness under 28 U.S.C. § 1404, 42 Pa. C.S. § 5322 or similar state or federal statutes. The Participant
agrees to reimburse the Company for all of the attorneys’ fees and costs it incurs to oppose the Participant’s efforts to challenge
or object to litigation proceeding in the courts identified in Section 14.3 with respect to actions arising out of or relating to this
Agreement (whether such actions arise under contract, tort, equity or otherwise).
15.
Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this
Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.
16.
Severability. In the event that any one or more of the provisions of this Agreement shall be held to be invalid,
illegal or unenforceable, the validity, legality or enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
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17.
Funding. This Agreement is not funded and all amounts payable hereunder, if any, shall be paid from the
general assets of the Company or its Affiliate, as applicable. No provision contained in this Agreement or the Plan and no
action taken pursuant to the provisions of this Agreement or the Plan shall create a trust of any kind or require the Company to
maintain or set aside any specific funds to pay benefits hereunder. To the extent the Participant acquires a right to receive
payments from the Company under this Agreement, such right shall be no greater than the right of any unsecured general
creditor of the Company.
18.
Headings. The descriptive headings of the Sections of this Agreement are inserted for convenience of reference
only and shall not constitute a part of this Agreement.
19.
Awards Subject to Plan. In the event of a conflict between any term or provision contained herein and a term or
provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
20.
Amendment or Termination of this Agreement. This Agreement may be modified, amended, suspended or
terminated by the Committee at any time; provided, however, that no modification, amendment, suspension or termination of
the Plan or this Agreement shall adversely affect the material rights of the Participant under this Agreement without the consent
of such Participant. Notwithstanding the foregoing or any provision of this Agreement to the contrary, the Company may, in its
sole discretion and without the Participant’s consent, modify or amend the terms of the Agreement or a PRSU award, or take
any other action it deems necessary or advisable, to cause the Agreement to comply with Section 10D of the Exchange Act or
Section 409A (or an exception thereto). Any modification, amendment, suspension or termination shall only be effective upon a
writing issued by the Company, and the Participant shall not offer evidence of any purported oral modifications or amendments
to vary or contradict the terms of this Agreement document.
21.
Entire Agreement. Except as otherwise provided in this Agreement or in any other agreement between the
Participant and the Company, this Agreement and the Plan are: (i) intended to be the final, complete, and exclusive statement of
the terms of the agreement between the Participant and the Company with regard to the subject matter of this Agreement; (ii)
supersede all other prior agreements, communications, and statements, whether written or oral, express or implied, pertaining to
that subject matter; and (iii) may not be contradicted by evidence of any prior or contemporaneous statements or agreements,
oral or written, and may not be explained or supplemented by evidence of consistent additional terms.
22.
Clawback. Notwithstanding any provisions in this Agreement to the contrary, any compensation, payments, or
benefits provided hereunder (or profits realized from the sale of Shares delivered hereunder), whether in the form of cash or
otherwise, shall be subject to recoupment and recapture to the extent necessary to comply with the requirements of any
Company-adopted policy and/or laws or regulations, including, but not limited to, the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010, the Exchange Act, Section 304 of the Sarbanes Oxley Act of 2002, the New York Stock
Exchange Listed Company Manual or any rules or regulations promulgated thereunder with respect to such laws, regulations
and/or securities exchange listing requirements, as may be in effect from time to time, and which may operate to create
additional rights for the Company with respect to this grant and recovery of amounts relating thereto. By accepting this grant of
PRSUs, the Participant agrees and acknowledges that he or she is obligated to cooperate with, and provide any and all
assistance necessary to, the Company to recover, recoup or recapture this grant of PRSUs or amounts paid under the Plan
pursuant to such law, government regulation, stock exchange listing requirement or Company policy. Such cooperation and
assistance shall include, but is not limited to, executing, completing and
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submitting any documentation necessary to recover, recoup or recapture this grant of PRSUs or amounts paid under the Plan
from a Participant’s accounts, or pending or future compensation or other grants.
[Remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the day and year indicated below. This
Agreement may be executed in more than one counterpart, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
PARTICIPANT
Dated: ___________________
Nicholas J. DeIuliis
CNX RESOURCES CORPORATION
William N. Thorndike, Jr. CNX Resources – Board of Directors -
Chair
Exhibit A
Participant: Nicholas J. DeIuliis
Grant Date:
Total PRSUs (Target):
Applicable Performance Period: Year 1 PRSUs—January 1, 2021 through December 31, 2021
Year 2 PRSUs—January 1, 2022 through December 31, 2022
Year 3 PRSUs—January 1, 2023 through December 31, 2023
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CNX RESOURCES CORPORATION
EQUITY INCENTIVE PLAN
FORM OF
RESTRICTED STOCK UNIT AWARD AGREEMENT
This Restricted Stock Unit Award Agreement set forth below (this “Agreement”) is dated as of the grant date (the
“Grant Date”) set forth on Exhibit A and is between CNX Resources Corporation, a Delaware corporation (the “Company”),
and the individual to whom the Compensation Committee of the Board of Directors of the Company or its delegatee (the
“Committee”) has made this Restricted Stock Unit Award and whose name is set forth on Exhibit A (the “Participant”).
The Company has established the CNX Resources Corporation Amended and Restated Equity and Incentive
Compensation Plan (the “Plan”) to advance the interests of the Company and its shareholders by providing incentives to certain
eligible persons who contribute significantly to the strategic and long-term performance objectives and growth of the Company.
Unless the context otherwise requires, all capitalized terms not otherwise defined in this Agreement have the same meaning
given such capitalized terms in the Plan.
Pursuant to the provisions of the Plan, the Board has delegated to the Committee full power and authority to direct the
execution and delivery of this Agreement in the name and on behalf of the Company, and has authorized the execution and
delivery of this Agreement.
Agreement
1.
Restricted Stock Unit Award. Subject to and pursuant to all terms and conditions stated in this Agreement and
in the Plan, as of the Grant Date, the Company hereby grants an Award to the Participant in the form of the number of
Restricted Stock Units set forth on Exhibit A (the “Restricted Stock Units”). Each Restricted Stock Unit awarded under this
Agreement shall represent a contingent right to receive one Share following the vesting date of such Restricted Stock Unit as
described on Exhibit A (each such vesting date, a “Vesting Date”). Notwithstanding, Restricted Stock Units as initially awarded
have no independent economic value, but rather are mere units of measurement used for purposes of calculating the value of
any benefits to be paid under this Agreement.
2.
Issuance and Distribution.
a.
Subject to the terms and conditions of this Agreement, and except as otherwise provided in Section 2.2 or
Section 4, Restricted Stock Units will be settled and paid in Shares issued to the Participant (to the extent not previously settled)
on the applicable Vesting Date, or if the applicable Vesting Date is not a business day, on the immediately following business
day, or as soon as reasonably practicable but in no event later than the 15 day of the third month following such date, subject
to the Participant’s satisfaction of all applicable income and employment withholding taxes; provided, however, that the
Participant shall not be permitted to designate the taxable year of payment.
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b.
Notwithstanding any other provision of this Agreement, in the event of a Change in Control, as defined in
Section 16 of the Plan, the Restricted Stock Units (to the extent not previously vested or forfeited) will be deemed to have
vested, and will be settled, on the closing date of the Change in Control transaction (the “CiC Payment Date”); provided,
however, in the event of a Change in Control,
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1
Restricted Stock Units may, in the Committee’s discretion, be settled in cash and/or securities or other property.
c.
[The Participant is required to hold, and not sell, transfer or otherwise dispose of fifty percent (50%) of
the Shares issued to the Participant following the vesting of the Restricted Stock Units (after accounting for the payment of any
related taxes in connection with the vesting of the Restricted Stock Units) until the earlier of (i) ten (10) years from the Grant
Date; or (ii) the Participant’s attainment of age sixty-two (62). [Note: For VPs and above only]]
3.
Dividends. Each Restricted Stock Unit will be cumulatively credited with dividends that are paid on the
Company’s common stock in the form of additional units. These additional units shall be deemed to have been purchased on the
record date for the dividend using the closing stock price per Share as reported in The Wall Street Journal and shall be subject
to all the same conditions and restrictions as provided in this Agreement applicable to Restricted Stock Units.
2
4.
Change in Participant’s Status. In the event the Participant Separates from Service (i) on account of death or
Disability (and, for the avoidance of doubt, the Participant shall have a Separation from Service upon the Participant’s
becoming Disabled) or (ii) by action taken by the Company (including any Affiliate) without Cause and after a decision by the
Company’s Chief Executive Officer, in his or her sole and absolute discretion with respect to non-Section 16 employees, that
such Separation from Service without Cause qualifies for special vesting treatment hereunder (a “Qualifying Separation from
Service without Cause”) , prior to any Vesting Date or the CiC Payment Date, as applicable, the Participant shall vest in any
unvested Restricted Stock Units (to the extent not previously forfeited) and receive payment therefore on the date of such
Separation from Service (or as soon as reasonably practicable thereafter, but in no event later than the 15 day of the third
month following such Separation from Service); provided, however, that the Participant shall not be permitted to designated the
taxable year of payment. Except as otherwise provided herein or in another agreement between the Participant and the
Company, in the event the Participant Separates from Service for any other reason, including, but not limited to, by the
Participant voluntarily, or by the Company (including any Affiliate) with Cause or without Cause (other than in connection with
a Qualifying Separation of Service without Cause), prior to any Vesting Date or the CiC Payment Date, as applicable, the
unvested Restricted Stock Units awarded to the Participant shall be cancelled and forfeited, without payment by the Company
or any Affiliate; provided that in the event the Participant Separates from Service by action taken by the Company (including
any Affiliate) with Cause, any vested Restricted Stock Units that are held by the Participant shall also be forfeited (with any
Shares issued thereunder returned to the Company) and, to the extent that the Participant has sold any of his or her Shares
issued under the Award within the six (6)-month period ending with the date of the Participant’s date of Separation from
Service for Cause, the Participant will be required to repay to the Company, within ten (10) days after receipt of written demand
from the Company, the cash proceeds that the Participant received upon each such sale. Any payments due a deceased
Participant may be transferred pursuant to the provisions of his or her will or the laws of inheritance following the Participant’s
death. Notwithstanding the foregoing or any provision contained herein to the contrary, the delivery of any Shares shall be
delayed until six (6) months after your Separation from Service to the extent required by Section 409A(a)(2)(B)(i) of the Code
as provided under the terms of the Plan.
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1
For the avoidance of doubt, the sale of any Affiliate of the Company shall not constitute a Change in Control for purposes of this
Agreement.
2
In the case of Participants who are “officers” of the Company (as defined by Rule 16a-1(f) of the Exchange Act as
determined by the Board and/or the Committee), the Committee must approve any decision to allow an Award to
vest in this circumstance.
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5.
Tax Consequences/Withholding.
a.
It is intended that the Participant shall have merely an unfunded, unsecured promise to be paid a benefit,
and such unfunded promise shall not consist of a transfer of “property” within the meaning of Code Section 83.
b.
Participant acknowledges that any income for federal, state, local or foreign tax purposes, including
payroll taxes, that the Participant is required to recognize on account of the vesting of the Restricted Stock Units and/or
issuance of the Shares under this Award to the Participant shall be subject to withholding of tax by the Company. The
Participant must pay all applicable taxes when due. The Company will automatically withhold from the total number of Shares
deliverable to the Participant upon the applicable payment date, the number of Shares having a fair market value equal to the
minimum statutory tax withholding requirements (or as otherwise approved by the Board or the Committee) as determined in
accordance with the Plan. In the event of any remaining tax balance, the Participant will be required to deliver a check
for that amount payable to the Company before the Shares are deposited into Participant’s plan account.
Notwithstanding the foregoing, if the Participant is liable for the payment of the employee share of the FICA (Social Security
and Medicare) taxes applicable to the Award prior to the payment of the Shares underlying the Award, the Participant will be
required to deliver a check for the amount of such FICA taxes payable to CNX Resources Corporation in a timely manner.
c.
This Agreement is intended to comply with, or be excepted from coverage under, Section 409A of the
Code and the regulations promulgated thereunder and shall be administered, interpreted and construed accordingly.
Notwithstanding any provision of this Agreement to the contrary, if any benefit provided under this Agreement is subject to the
provisions of Section 409A of the Code and the regulations issued thereunder (and not excepted therefrom), the provisions of
the Agreement shall be administered, interpreted and construed in a manner necessary to comply with Section 409A (or
disregarded to the extent such provision cannot be so administered, interpreted, or construed). Notwithstanding, Section 409A
may impose upon the Participant certain taxes or other charges for which the Participant is and shall remain solely responsible,
and nothing contained in this Agreement or the Plan shall be construed to obligate any member of the Committee or Board, the
Company or any Affiliate (or its employees, officers or directors) for any such taxes or other charges.
6.
Non-Competition. [Insert “Intentionally Deleted” for Participants who don’t have a Non-Compete]
a.
The Participant hereby agrees that this Section 6 is reasonable and necessary in order to protect the
legitimate business interests and goodwill of the Company, including the Company’s trade secrets, valuable confidential
business and professional information, substantial relationships with prospective and existing customers and clients, and
specialized training provided to the Participant and other employees of the Company. The Participant acknowledges and
recognizes the highly competitive nature of the business of the Company and its Affiliates and accordingly agrees that during
the term of Participant’s employment and for a period of [2 years, 1 year or 6 months] after the termination thereof (the
“Restriction Period”):
(i)The Participant will not directly or indirectly engage in any business substantially similar to any line of
business conducted by the Company or any of its Affiliates, including, but not limited to, where such engagement is as an
officer, director, proprietor, employee, partner, investor (other than as a holder of less than 1% of the outstanding capital stock
of a publicly traded corporation), consultant, advisor, agent or sales representative, in any geographic region in which the
Company or any of its Affiliates conducted business;
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prospective customer of the Company or any of its Affiliates;
(ii)The Participant will not contact, solicit, perform services for, or accept business from any customer or
(iii)The Participant will not directly or indirectly induce any employee of the Company or any of its
Affiliates to: (1) engage in any activity or conduct which is prohibited pursuant to subparagraph 6.1(a); or (2) terminate such
employee’s employment with the Company or any of its Affiliates. Moreover, the Participant will not directly or indirectly
employ or offer employment (in connection with any business substantially similar to any line of business conducted by the
Company or any of its Affiliates) to any person who was employed by the Company or any of its Affiliates unless such person
shall have ceased to be employed by the Company or any of its Affiliates for a period of at least 12 months; and
are prohibited under subparagraphs (a) — (c) above.
(iv)The Participant will not directly or indirectly assist others in engaging in any of the activities, which
Notwithstanding the foregoing, if the Restriction Period set forth herein is shorter in duration following the Participant’s
termination of employment with the Company and its Affiliates than in any other prior Award Agreement, the Restriction
Period set forth herein shall be the Restriction Period for all such prior Award Agreements and related Awards. Similarly, if the
Restriction Period is longer in this Agreement than in prior Award Agreements, the Restriction Period set forth in such prior
Award Agreements and related Awards shall be amended hereby and have the same applicable Restriction Period following
Participant’s termination of employment with the Company and its Affiliates as set forth herein (and the Participant shall be
deemed to have consented to such amendment by executing this Agreement).
b.
It is expressly understood and agreed that although the Participant and the Company consider the
restrictions contained in this Section 6 to be reasonable, if a final judicial determination is made by a court of competent
jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against
the Participant, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable
against such Participant. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect
the enforceability of any of the other restrictions contained herein. The restrictive covenants set forth in this Section 6 shall be
extended by any amount of time that the Participant is in breach of such covenants, such that the Company receives the full
benefit of the time duration set forth above.
7.
Confidential Information and Trade Secrets. The Participant and the Company agree that certain materials,
including, but not limited to, information, data and other materials relating to customers, development programs, costs,
marketing, trading, investment, sales activities, promotion, credit and financial data, manufacturing processes, financing
methods, plans or the business and affairs of the Company and its Affiliates, constitute proprietary confidential information and
trade secrets. Accordingly, the Participant will not at any time during or after the Participant’s employment with the Company
(including any Affiliate) disclose or use for such Participant’s own benefit or purposes or the benefit or purposes of any other
person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise other than
the Company and any of its Affiliates, any proprietary confidential information or trade secrets, provided that the foregoing
shall not apply to information which is not unique to the Company or any of its Affiliates or which is generally known to the
industry or the public other than as a result of such Participant’s breach of this covenant. The Participant agrees that upon
termination of employment with the Company (including any Affiliate) for
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/
any reason, the Participant will immediately return to the Company all memoranda, books, papers, plans, information, letters
and other data, and all copies thereof or therefrom, which in any way relate to the business of the Company and its Affiliates,
except that the Participant may retain personal notes, notebooks and diaries. The Participant further agrees that the Participant
will not retain or use for the Participant’s own account at any time any trade names, trademark or other proprietary business
designation used or owned in connection with the business of the Company or any of its Affiliates.
Notwithstanding anything contained herein to the contrary, this Agreement shall not prohibit disclosure of proprietary
confidential information if (i) it is required by law or by a court of competent jurisdiction or (ii) it is in connection with any
judicial, arbitration, dispute resolution or other legal proceeding in which your legal rights and obligations as an employee or
under this Agreement are at issue; provided, however, that you shall, to the extent practicable and lawful in any such event, give
prior notice to the Company of your intent to disclose proprietary confidential information so as to allow the Company an
opportunity (which you shall not oppose) to obtain such protective orders or similar relief with respect thereto as may be
deemed appropriate.
Notwithstanding the foregoing, nothing in this Agreement is intended to restrict, prohibit, impede or interfere with the
Participant providing information to, or from reporting possible violations of law or regulation to, any governmental agency or
entity, from participating in investigations, testifying in proceedings regarding the Company’s past or future conduct, or from
making other disclosures that are protected under state or federal law or regulation, engaging in any future activities protected
under statutes administered by any government agency (including but not limited, to the Department of Justice, the Securities
and Exchange Commission, the Congress, and any agency Inspector General), or from receiving and retaining a monetary
award from a government-administered whistleblower award program for providing information directly to a government-
administered whistleblower award program. The Participant does not need the prior authorization of the Company to make
such reports or disclosures. The Participant is not required to notify the Company that he or she has made any such reports or
disclosures. The Company nonetheless asserts, and does not waive, its attorney-client privilege over any information
appropriately protected by the privilege.
8.
Remedies/Forfeiture.
a.
The Participant acknowledges that a violation or attempted violation on the Participant’s part of Sections
6 and/or 7 will cause irreparable damage to the Company and its Affiliates, and the Participant therefore agrees that the
Company and its Affiliates shall be entitled as a matter of right to an injunction, out of any court of competent jurisdiction,
restraining any violation or further violation of such promises by the Participant or the Participant’s employees, partners or
agents. The Participant agrees that such right to an injunction is cumulative, in addition to whatever other remedies the
Company (including any Affiliate) may have under law or equity and to the Participant’s obligations to make timely payment to
the Company as set forth in Section 8.2 of this Agreement. The Participant further acknowledges and agrees that the
Participant’s Restricted Stock Units (whether vested or unvested) shall be cancelled and forfeited (with any Shares issued
thereunder returned to the Company), without payment by the Company, if the Participant breaches any of his obligations set
forth in Sections 6 and 7 herein.
b.
At any point after becoming aware of a breach of any obligation set forth in Sections 6 and 7 of this
Agreement, the Company shall provide notice of such breach to the Participant. By agreeing to receive the Restricted Stock
Units pursuant to this Agreement, the Participant agrees that, to the extent the Participant has sold any of his or her Shares
issued under the Award, within ten (10) days after the date the Company provides such notice, the Participant shall pay to the
Company in cash an
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/
amount equal to the cash proceeds that the Participant received upon each such sale that occurred after the date that was six (6)
months prior to the date of the earliest breach. The Participant agrees that failure to make such timely payment to the Company
constitutes an independent and material breach of the terms and conditions of this Agreement, for which the Company may
seek recovery of the unpaid amount as liquidated damages, in addition to all other rights and remedies the Company may have
resulting from the Participant’s breach of the obligations set forth in Sections 6 and/or 7. The Participant agrees that timely
payment to the Company as set forth in this provision of this Agreement is reasonable and necessary because the compensatory
damages that will result from breaches of Sections 6 and/or 7 cannot readily be ascertained. Further, the Participant agrees that
timely payment to the Company as set forth in this provision of this Agreement is not a penalty, and it does not preclude the
Company from seeking all other remedies that may be available to the Company, including without limitation those set forth in
this Section 8.
9.
Assignment/Nonassignment.
a.
The Company shall have the right to assign this Agreement, including without limitation Sections 6
and/or 7, and the Participant agrees to remain obligated by all provisions of this Agreement that are assigned to any successor,
assign or surviving entity. Any successor to the Company is an intended third party beneficiary of this Agreement.
b.
The Restricted Stock Units shall not be sold, pledged, assigned, hypothecated, transferred or disposed of
(a “Transfer”) in any manner, other than by will or the laws of descent and distribution. Any attempt by the Participant to
Transfer the Restricted Stock Units in violation of the terms of this Agreement shall render the Restricted Stock Units null and
void, and result in the immediate forfeiture of such Restricted Stock Units, without payment by the Company.
10.
Impact on Benefit Plans. Payments under this Agreement shall not be considered as earnings for purposes of
the Company’s and/or Affiliate’s qualified retirement plans or any other retirement or benefit plan unless specifically provided
for therein. Nothing herein shall prevent the Company or any Affiliate from maintaining additional compensation plans and
arrangements for its employees.
11.
Successors; Changes in Stock. The obligation of the Company under this Agreement shall be binding upon the
successors and assigns of the Company. If a dividend or other distribution shall be declared upon the Company’s common stock
payable in Shares, the Restricted Stock Units shall be adjusted by adding thereto the number of Restricted Stock Units equal to
the number of Shares which would have been distributable thereon if such Restricted Stock Units had been actual Shares and
outstanding on the date fixed for determining the shareholders entitled to receive such stock dividend or distribution. In the
event of any spin-off, split-off or split-up, dividend in property other than cash, recapitalization or other change in the capital
structure of the Company, or any merger, consolidation, reorganization, partial or complete liquidation or other distribution of
assets (other than a normal cash dividend), or any other corporate transaction or event having an effect similar to any of the
foregoing, or extraordinary distribution to shareholders of the Company’s common stock, the Restricted Stock Units shall be
appropriately adjusted to prevent dilution or enlargement of the rights of the Participant which would otherwise result from any
such transaction, provided such adjustment shall be consistent with Code Section 409A.
In the case of a Change in Control, any obligation under this Agreement shall be handled in accordance with the terms
of Section 2 hereof. In any case not constituting a Change in Control in which the Company’s common stock is changed into or
becomes exchangeable for a different number or kind of
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shares of stock or other securities of the Company or another corporation, or cash or other property, whether through
reorganization, reclassification, recapitalization, stock split-up, combination of Shares, merger or consolidation, then (i) the
value of the Restricted Stock Units constituting the Award shall be calculated based on the closing price per Share of such
common stock on the closing date of the transaction on the principal market on which such common stock is traded and (ii)
there shall be substituted for each Restricted Stock Unit constituting the Award, the number and kind of shares of stock or other
securities (or cash or other property) into which each outstanding Share shall be so changed or for which each such Share shall
be exchangeable. In the case of any such adjustment, the Restricted Stock Units shall remain subject to the terms of the
Agreement.
12.
Governing Law, Jurisdiction, and Venue.
a.
This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware,
without giving effect to the principles of conflicts of law.
b.
The Participant hereby irrevocably submits to the personal and exclusive jurisdiction of the United States
District Court for the Western District of Pennsylvania or the Court of Common Pleas of Allegheny County, Pennsylvania in
any action or proceeding arising out of, or relating to, this Agreement (whether such action or proceeding arises under contract,
tort, equity or otherwise). The Participant hereby irrevocably waives any objection which the Participant now or hereafter may
have to the laying of venue or personal jurisdiction of any such action or proceeding brought in said courts.
c.
Jurisdiction over, and venue of, any such action or proceeding shall be exclusively vested in the United
States District Court for the Western District of Pennsylvania or the Court of Common Pleas of Allegheny County,
Pennsylvania.
d.
Provided that the Company commences any such action or proceeding in the courts identified in Section
12.3, the Participant irrevocably waives the Participant’s right to object to or challenge the above selected forum on the basis of
inconvenience or unfairness under 28 U.S.C. § 1404, 42 Pa. C.S. § 5322 or similar state or federal statutes. The Participant
agrees to reimburse the Company for all of the attorneys’ fees and costs it incurs to oppose the Participant’s efforts to challenge
or object to litigation proceeding in the courts identified in Section 12.3 with respect to actions arising out of or relating to this
Agreement (whether such actions arise under contract, tort, equity or otherwise).
13.
Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this
Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.
14.
Severability. In the event that any one or more of the provisions of this Agreement shall be held to be invalid,
illegal or unenforceable, the validity, legality or enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
15.
Funding. This Agreement is not funded and all amounts payable hereunder, if any, shall be paid from the
general assets of the Company or its Affiliate, as applicable. No provision contained in this Agreement or the Plan and no
action taken pursuant to the provisions of this Agreement or the Plan shall create a trust of any kind or require the Company to
maintain or set aside any specific funds to pay benefits hereunder. To the extent the Participant acquires a right to receive
payments from the Company under this Agreement, such right shall be no greater than the right of any unsecured general
creditor of the Company.
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16.
Headings. The descriptive headings of the Sections of this Agreement are inserted for convenience of reference
only and shall not constitute a part of this Agreement.
17.
Awards Subject to Plan. In the event of a conflict between any term or provision contained herein and a term or
provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
18.
Amendment or Termination of this Agreement. This Agreement may be modified, amended, suspended or
terminated by the Committee at any time; provided, however, that no modification, amendment, suspension or termination of
the Plan or this Agreement shall adversely affect the material rights of the Participant under this Agreement without the consent
of such Participant. Notwithstanding the foregoing or any provision of this Agreement to the contrary, the Company may, in its
sole discretion and without the Participant’s consent, modify or amend the terms of the Agreement or a Restricted Stock Unit
award, or take any other action it deems necessary or advisable, to cause the Agreement to comply with Section 10D of the
Exchange Act or Section 409A (or an exception thereto). Any modification, amendment, suspension or termination shall only
be effective upon a writing issued by the Company, and the Participant shall not offer evidence of any purported oral
modifications or amendments to vary or contradict the terms of this Agreement document.
19.
Entire Agreement. Except as otherwise provided in this Agreement or in any other agreement between the
Participant and the Company, this Agreement and the Plan are: (i) intended to be the final, complete, and exclusive statement of
the terms of the agreement between the Participant and the Company with regard to the subject matter of this Agreement; (ii)
supersede all other prior agreements, communications, and statements, whether written or oral, express or implied, pertaining to
that subject matter; and (iii) may not be contradicted by evidence of any prior or contemporaneous statements or agreements,
oral or written, and may not be explained or supplemented by evidence of consistent additional terms.
20.
Clawback. Notwithstanding any provisions in this Agreement to the contrary, any compensation, payments, or
benefits provided hereunder (or profits realized from the sale of Shares delivered hereunder), whether in the form of cash or
otherwise, shall be subject to recoupment and recapture to the extent necessary to comply with the requirements of any
Company-adopted policy and/or laws or regulations, including, but not limited to, the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010, the Exchange Act, Section 304 of the Sarbanes Oxley Act of 2002, the New York Stock
Exchange Listed Company Manual or any rules or regulations promulgated thereunder with respect to such laws, regulations
and/or securities exchange listing requirements, as may be in effect from time to time, and which may operate to create
additional rights for the Company with respect to this grant and recovery of amounts relating thereto. By accepting this grant of
Restricted Stock Units, the Participant agrees and acknowledges that he or she is obligated to cooperate with, and provide any
and all assistance necessary to, the Company to recover, recoup or recapture this grant of Restricted Stock Units or amounts
paid under the Plan pursuant to such law, government regulation, stock exchange listing requirement or Company policy. Such
cooperation and assistance shall include, but is not limited to, executing, completing and submitting any documentation
necessary to recover, recoup or recapture this grant of Restricted Stock Units or amounts paid under the Plan from a
Participant’s accounts, or pending or future compensation or other grants.
[Remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the day and year indicated below. This
Agreement may be executed in more than one counterpart, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
PARTICIPANT
Dated: ___________________
[________]
Dated: ___________________
CNX RESOURCES CORPORATION
/
Exhibit A
Participant: [_________]
Grant Date: [______] [__], 2021
Number of Restricted Stock Units Subject to Award: [_________]
Vesting Schedule: Except as otherwise provided in the Agreement, three (3) successive equal annual installments upon the
Participant’s completion of each year of continuous employment with the Company and its Affiliates over the three (3)-year
period measured from the Grant Date.
/
CNX RESOURCES CORPORATION
EQUITY INCENTIVE PLAN
FORM OF
PERFORMANCE SHARE UNIT AWARD AGREEMENT
This Performance Share Unit Award Agreement set forth below (this “Agreement”) is dated as of the grant date (the
“Grant Date”) set forth on Exhibit A and is between CNX Resources Corporation, a Delaware corporation (the “Company”),
and the individual to whom the Compensation Committee of the Board of Directors (the “Committee”) of the Company has
made this Performance Award and whose name is set forth on Exhibit A (the “Participant”).
The Company has established the CNX Resources Corporation Amended and Restated Equity and Incentive
Compensation Plan (the “Plan”) to advance the interests of the Company and its shareholders by providing incentives to certain
eligible persons who contribute significantly to the strategic and long-term performance objectives and growth of the Company.
Unless the context otherwise requires, all capitalized terms not otherwise defined in this Agreement have the same meaning
given such capitalized terms in the Plan.
Pursuant to the provisions of the Plan, the Committee has full power and authority to direct the execution and delivery
of this Agreement in the name and on behalf of the Company, and has authorized the execution and delivery of this Agreement.
Agreement
1.
Performance Share Unit Award. Subject to and pursuant to all terms and conditions stated in this Agreement
and in the Plan, as of the Grant Date, the Company hereby grants a Performance Award to the Participant in the form of
performance share units (the “Performance Share Units”) with the target number set forth on Exhibit A. Each Performance
Share Unit awarded under this Agreement shall represent a contingent right to receive one share of the Company’s common
stock as described more fully herein, to the extent such Performance Share Unit is earned and becomes payable pursuant to the
terms of this Agreement. Notwithstanding, Performance Share Units as initially awarded have no independent economic value,
but rather are mere units of measurement used for purposes of calculating the value of benefits, if any, to be paid under this
Agreement.
2.
Performance Period. The “Performance Period” means the performance period as set forth on Exhibit A.
3.
Performance Goals of the Performance Share Units. Subject to the provisions of this Agreement, the total
number of Performance Share Units awarded to Participant will be earned (at a maximum award level of 100% of the target
number of Performance Share Units awarded), if the performance measures set by and on file with the Committee are satisfied
(each, a “Performance Goal”); provided, however, that the Committee has sole discretion to determine whether the Performance
Goals, as defined, are met, and provided, further, that the Award will only become payable, except as otherwise provided herein
or in another agreement between the Participant and the Company, if the Participant remains an employee of the Company and
its subsidiaries through the Payment Date or the CiC Payment Date, as applicable. As a condition to receiving this Award,
Participant agrees that all determinations made by the Committee are final and conclusive.
4.
Issuance and Distribution.
/
a.
After the end of the Performance Period and prior to the commencement of the payment of Shares
relating to the Award, the Committee shall certify in writing the extent to which the Performance Goals and any other material
terms of this Agreement have been achieved. For purposes of this provision, and for so long as the Code permits, the approved
minutes of the Committee meeting in which the certification is made may be treated as written certification.
b.
Subject to the terms and conditions of this Agreement, Performance Share Units earned by the Participant
(to the extent not previously settled) will be settled and paid in shares of the Company’s common stock in the first calendar year
immediately following the end of the Performance Period on a date determined in the Committee’s discretion, but in no event
later than March 15th of such year, subject to Participant’s satisfaction of all applicable income and employment withholding
taxes (the “Payment Date”).
c.
Notwithstanding any other provision of this Agreement, in the event of a Change in Control, as defined in
Section 16 of the Plan, the Performance Goals will be deemed to have been achieved (and the Performance Share Units will be
deemed vested) at the target award level, and, if the Change in Control qualifies as a “Change in Control” event within the
meaning of Treas. Reg. Section 1.409A-3(i)(5)(i) with respect to the Company, the value of such units will be settled (to the
extent not previously settled), on the closing date of the Change in Control transaction (the “CiC Payment Date”); provided,
further, in the event of a Change in Control, Performance Share Units may, in the Committee’s discretion, be settled in cash
1
and/or securities or other property.
d.
[The Participant is required to hold, and not sell, transfer or otherwise dispose of fifty percent (50%) of
the shares issued to the Participant following the vesting of the Performance Share Units (after accounting for the payment of
any related taxes in connection with the vesting of the Performance Share Units) until the earlier of (i) ten (10) years from the
Grant Date; or (ii) the Participant’s attainment of age sixty-two (62). [Note: For VPs and above only]]
5.
Dividends. Each Performance Share Unit will be cumulatively credited with dividends that are paid on the
Company’s common stock in the form of additional units. These additional units shall be deemed to have been purchased on the
record date for the dividend using the closing stock price per share of the Company’s common stock as reported in The Wall
Street Journal and shall be subject to all the same conditions and restrictions as provided in this Agreement applicable to
Performance Share Units.
6.
Change in Participant’s Status. In the event the Participant Separates from Service (i) on account of death or
Disability or (ii) by action taken by the Company (including any Affiliate) without Cause and after a decision by the
Company’s Chief Executive Officer, in his or her sole and absolute discretion with respect to non-Section 16 employees, that
such Separation from Service without Cause qualifies for special vesting treatment hereunder (a “Qualifying Separation from
Service without Cause”) , prior to any Payment Date or the CiC Payment Date, as applicable, the Participant shall be entitled to
retain the Performance Share Units and receive payment therefore to the extent earned and payable pursuant to the provisions of
this Agreement. Except as otherwise provided herein or in another agreement between the Participant and the Company, in the
event the Participant Separates from Service for any other reason, including, but not limited to, by the Participant voluntarily, or
by the Company
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1
For the avoidance of doubt, the sale of any Affiliate of the Company shall not constitute a Change in Control for purposes of this
Agreement.
2
In the case of Participants who are “officers” of the Company (as defined by Rule 16a-1(f) of the Exchange Act as
determined by the Board and/or the Committee), the Committee must approve any decision to allow an Award to
vest in this circumstance.
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(including any Affiliate) with Cause or without Cause (other than in connection with a Qualifying Separation of Service
without Cause), prior to any Payment Date or the CiC Payment Date, as applicable, the Performance Share Units awarded to the
Participant shall be cancelled and forfeited, whether payable or not, without payment by the Company or any Affiliate. Any
payments due a deceased Participant shall be paid to his or her estate as provided herein after the end of the Performance
Period.
7.
Tax Consequences/Withholding.
a.
It is intended that: (i) the Participant’s Performance Share Units shall be considered to be subject to a
substantial risk of forfeiture in accordance with those terms as defined in Sections 409A and 3121(v)(2) of the Code; and (ii)
the Participant shall have merely an unfunded, unsecured promise to be paid a benefit, and such unfunded promise shall not
consist of a transfer of “property” within the meaning of Code Section 83.
b.
Participant acknowledges that any income for federal, state, local or foreign tax purposes, including
payroll taxes, that the Participant is required to recognize on account of the vesting of the Performance Share Units and/or
issuance of the Shares under this Award to Participant shall be subject to withholding of tax by the Company. Participant must
pay all applicable taxes when due. The Company will automatically withhold from the total number of Shares deliverable to
Participant upon the applicable payment date, the number of Shares having a Fair Market Value equal to the minimum statutory
tax withholding requirements (or as otherwise approved by the Board or the Committee) as determined in accordance with the
Plan. In the event of any remaining tax balance, Participant will be required to deliver a check for that amount payable
to the Company before the Shares are deposited into Participant’s plan account.
c.
This Agreement is intended to comply with, or be excepted from coverage under, Section 409A of the
Code and the regulations promulgated thereunder and shall be administered, interpreted and construed accordingly.
Notwithstanding any provision of this Agreement to the contrary, if any benefit provided under this Agreement is subject to the
provisions of Section 409A of the Code and the regulations issued thereunder (and not excepted therefrom), the provisions of
the Agreement shall be administered, interpreted and construed in a manner necessary to comply with Section 409A (or
disregarded to the extent such provision cannot be so administered, interpreted, or construed). Notwithstanding, Section 409A
may impose upon the Participant certain taxes or other charges for which the Participant is and shall remain solely responsible,
and nothing contained in this Agreement or the Plan shall be construed to obligate any member of the Committee or Board, the
Company or any Affiliate (or its employees, officers or directors) for any such taxes or other charges.
8.
Non-Competition. [Insert “Intentionally Deleted” for Participants who don’t have a Non-Compete]
a.
The Participant hereby agrees that this Section 8 is reasonable and necessary in order to protect the
legitimate business interests and goodwill of the Company, including the Company’s trade secrets, valuable confidential
business and professional information, substantial relationships with prospective and existing customers and clients, and
specialized training provided to the Participant and other employees of the Company. The Participant acknowledges and
recognizes the highly competitive nature of the business of the Company and its Affiliates and accordingly agrees that during
the term of Participant’s employment and for a period of [2 years, 1 year or 6 months] after the termination thereof (the
“Restriction Period”):
business conducted by the Company or any of its Affiliates, including, but not
(i)The Participant will not directly or indirectly engage in any business substantially similar to any line of
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limited to, where such engagement is as an officer, director, proprietor, employee, partner, investor (other than as a holder of
less than 1% of the outstanding capital stock of a publicly traded corporation), consultant, advisor, agent or sales representative,
in any geographic region in which the Company or any of its Affiliates conducted business;
prospective customer of the Company or any of its Affiliates;
(ii)The Participant will not contact, solicit, perform services for, or accept business from any customer or
(iii)The Participant will not directly or indirectly induce any employee of the Company or any of its
Affiliates to: (1) engage in any activity or conduct which is prohibited pursuant to subparagraph 8.1(a); or (2) terminate such
employee’s employment with the Company or any of its Affiliates. Moreover, the Participant will not directly or indirectly
employ or offer employment (in connection with any business substantially similar to any line of business conducted by the
Company or any of its Affiliates) to any person who was employed by the Company or any of its Affiliates unless such person
shall have ceased to be employed by the Company or any of its Affiliates for a period of at least 12 months; and
are prohibited under subparagraphs (a) — (c) above.
(iv)The Participant will not directly or indirectly assist others in engaging in any of the activities, which
Notwithstanding the foregoing, if the Restriction Period set forth herein is shorter in duration following Participant’s
termination of employment with the Company and its Affiliates than in any other prior Award Agreement, the Restriction
Period set forth herein shall be the Restriction Period for all such prior Award Agreements and related Awards. Similarly, if the
Restriction Period is longer in this Agreement than in prior Award Agreements, the Restriction Period set forth in such prior
Award Agreements and related Awards shall be amended hereby and have the same applicable Restriction Period following
Participant’s termination of employment with the Company and its Affiliates as set forth herein (and the Participant shall be
deemed to have consented to such amendment by executing this Agreement).
b.
It is expressly understood and agreed that although the Participant and the Company consider the
restrictions contained in this Section 8 to be reasonable, if a final judicial determination is made by a court of competent
jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against
the Participant, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable
against such Participant. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect
the enforceability of any of the other restrictions contained herein. The restrictive covenants set forth in this Section 8 shall be
extended by any amount of time that the Participant is in breach of such covenants, such that the Company receives the full
benefit of the time duration set forth above.
9.
Confidential Information and Trade Secrets. The Participant and the Company agree that certain materials,
including, but not limited to, information, data and other materials relating to customers, development programs, costs,
marketing, trading, investment, sales activities, promotion, credit and financial data, manufacturing processes, financing
methods, plans or the business and affairs of the Company and its Affiliates, constitute proprietary confidential information and
trade secrets. Accordingly, the Participant will not at any time during or after the Participant’s employment with the Company
(including any Affiliate) disclose or use for such Participant’s own benefit or purposes or the benefit or purposes of any other
person, firm, partnership, joint venture, association, corporation or other
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business organization, entity or enterprise other than the Company and any of its Affiliates, any proprietary confidential
information or trade secrets, provided that the foregoing shall not apply to information which is not unique to the Company or
any of its Affiliates or which is generally known to the industry or the public other than as a result of such Participant’s breach
of this covenant. The Participant agrees that upon termination of employment with the Company (including any Affiliate) for
any reason, the Participant will immediately return to the Company all memoranda, books, papers, plans, information, letters
and other data, and all copies thereof or therefrom, which in any way relate to the business of the Company and its Affiliates,
except that the Participant may retain personal notes, notebooks and diaries. The Participant further agrees that the Participant
will not retain or use for the Participant’s own account at any time any trade names, trademark or other proprietary business
designation used or owned in connection with the business of the Company or any of its Affiliates.
Notwithstanding anything contained herein to the contrary, this Agreement shall not prohibit disclosure of proprietary
confidential information if (i) it is required by law or by a court of competent jurisdiction or (ii) it is in connection with any
judicial, arbitration, dispute resolution or other legal proceeding in which your legal rights and obligations as an employee or
under this Agreement are at issue; provided, however, that you shall, to the extent practicable and lawful in any such event, give
prior notice to the Company of your intent to disclose proprietary confidential information so as to allow the Company an
opportunity (which you shall not oppose) to obtain such protective orders or similar relief with respect thereto as may be
deemed appropriate.
Notwithstanding the foregoing, nothing in this Agreement is intended to restrict, prohibit, impede or interfere with the
Participant providing information to, or from reporting possible violations of law or regulation to, any governmental agency or
entity, from participating in investigations, testifying in proceedings regarding the Company’s past or future conduct, or from
making other disclosures that are protected under state or federal law or regulation, engaging in any future activities protected
under statutes administered by any government agency (including but not limited, to the Department of Justice, the Securities
and Exchange Commission, the Congress, and any agency Inspector General), or from receiving and retaining a monetary
award from a government-administered whistleblower award program for providing information directly to a government-
administered whistleblower award program. The Participant does not need the prior authorization of the Company to make
such reports or disclosures. The Participant is not required to notify the Company that he or she has made any such reports or
disclosures. The Company nonetheless asserts, and does not waive, its attorney-client privilege over any information
appropriately protected by the privilege.
10.
Remedies/Forfeiture.
a.
The Participant acknowledges that a violation or attempted violation on the Participant’s part of Sections
8 and/or 9 will cause irreparable damage to the Company and its Affiliates, and the Participant therefore agrees that the
Company and its Affiliates shall be entitled as a matter of right to an injunction, out of any court of competent jurisdiction,
restraining any violation or further violation of such promises by the Participant or the Participant’s employees, partners or
agents. The Participant agrees that such right to an injunction is cumulative, in addition to whatever other remedies the
Company (including any Affiliate) may have under law or equity and to the Participant’s obligations to make timely payment to
the Company as set forth in Section 10.2 of this Agreement. The Participant further acknowledges and agrees that the
Participant’s Performance Share Units shall be cancelled and forfeited without payment by the Company if the Participant
breaches any of his obligations set forth in Sections 8 and 9 herein.
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b.
At any point after becoming aware of a breach of any obligation set forth in Sections 8 and 9 of this
Agreement, the Company shall provide notice of such breach to the Participant. By agreeing to receive the Performance Share
Units pursuant to this Agreement, the Participant agrees that within ten (10) days after the date the Company provides such
notice, the Participant shall pay to the Company in cash an amount equal in value to any and all distributions paid to or on
behalf of such Participant under this Agreement after the date that was six (6) months prior to the date of the earliest breach.
The Participant agrees that failure to make such timely payment to the Company constitutes an independent and material breach
of the terms and conditions of this Agreement, for which the Company may seek recovery of the unpaid amount as liquidated
damages, in addition to all other rights and remedies the Company may have resulting from the Participant’s breach of the
obligations set forth in Sections 8 and/or 9. The Participant agrees that timely payment to the Company as set forth in this
provision of this Agreement is reasonable and necessary because the compensatory damages that will result from breaches of
Sections 8 and/or 9 cannot readily be ascertained. Further, the Participant agrees that timely payment to the Company as set
forth in this provision of this Agreement is not a penalty, and it does not preclude the Company from seeking all other remedies
that may be available to the Company, including without limitation those set forth in this Section 10.
11.
Assignment/Nonassignment.
a.
The Company shall have the right to assign this Agreement, including without limitation Sections 8
and/or 9, and the Participant agrees to remain obligated by all provisions of this Agreement that are assigned to any successor,
assign or surviving entity. Any successor to the Company is an intended third party beneficiary of this Agreement.
b.
The Performance Share Units shall not be sold, pledged, assigned, hypothecated, transferred or disposed
of (a “Transfer”) in any manner, other than by will or the laws of descent and distribution. Any attempt by the Participant to
Transfer the Performance Share Units in violation of the terms of this Agreement shall render the Performance Share Units null
and void, and result in the immediate forfeiture of such Performance Share Units, without payment by the Company.
12.
Impact on Benefit Plans. Payments under this Agreement shall not be considered as earnings for purposes of
the Company’s and/or Affiliate’s qualified retirement plans or any other retirement or benefit plan unless specifically provided
for therein. Nothing herein shall prevent the Company or any Affiliate from maintaining additional compensation plans and
arrangements for its employees.
13.
Successors; Changes in Stock. The obligation of the Company under this Agreement shall be binding upon the
successors and assigns of the Company. If a dividend or other distribution shall be declared upon the Company’s common stock
payable in Shares, the target number of Performance Share Units shall be adjusted by adding thereto the number of
Performance Share Units which would have been distributable thereon if such shares and Performance Share Units had been
actual Shares and outstanding on the date fixed for determining the shareholders entitled to receive such stock dividend or
distribution. In the event of any spin-off, split-off or split-up, dividend in property other than cash, recapitalization or other
change in the capital structure of the Company, or any merger, consolidation, reorganization, partial or complete liquidation or
other distribution of assets (other than a normal cash dividend), or any other corporate transaction or event having an effect
similar to any of the foregoing, or extraordinary distribution to shareholders of the Company’s common stock, the Performance
Share Units and the Performance Goals shall be appropriately adjusted to prevent dilution or enlargement of the rights of
Participants which would otherwise result from any such transaction, provided such adjustment shall be consistent with Code
Section 409A.
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In the case of a Change in Control, any obligation under this Agreement shall be handled in accordance with the terms
of Section 4 hereof. In any case not constituting a Change in Control in which the Company’s common stock is changed into or
becomes exchangeable for a different number or kind of shares of stock or other securities of the Company or another
corporation, or cash or other property, whether through reorganization, reclassification, recapitalization, stock split-up,
combination of shares, merger or consolidation, then (i) the value of the Performance Share Units constituting the Award shall
be calculated based on the closing price per share of such common stock on the closing date of the transaction on the principal
market on which such common stock is traded, (ii) there shall be substituted for each Performance Share Unit constituting the
Award, the number and kind of shares of stock or other securities (or cash or other property) into which each outstanding Share
shall be so changed or for which each such Share shall be exchangeable, and (iii) the Share on which the Performance Goals are
based shall be appropriately and equitably adjusted, provided any such adjustments shall be consistent with Code Section 409A.
In the case of any such adjustment, the Performance Share Units shall remain subject to the terms of the Agreement.
14.
Governing Law, Jurisdiction, and Venue.
a.
This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware,
without giving effect to the principles of conflicts of law.
b.
The Participant hereby irrevocably submits to the personal and exclusive jurisdiction of the United States
District Court for the Western District of Pennsylvania or the Court of Common Pleas of Allegheny County, Pennsylvania in
any action or proceeding arising out of, or relating to, this Agreement (whether such action or proceeding arises under contract,
tort, equity or otherwise). The Participant hereby irrevocably waives any objection which the Participant now or hereafter may
have to the laying of venue or personal jurisdiction of any such action or proceeding brought in said courts.
c.
Jurisdiction over, and venue of, any such action or proceeding shall be exclusively vested in the United
States District Court for the Western District of Pennsylvania or the Court of Common Pleas of Allegheny County,
Pennsylvania.
d.
Provided that the Company commences any such action or proceeding in the courts identified in Section
14.3, the Participant irrevocably waives the Participant’s right to object to or challenge the above selected forum on the basis of
inconvenience or unfairness under 28 U.S.C. § 1404, 42 Pa. C.S. § 5322 or similar state or federal statutes. The Participant
agrees to reimburse the Company for all of the attorneys’ fees and costs it incurs to oppose the Participant’s efforts to challenge
or object to litigation proceeding in the courts identified in Section 14.3 with respect to actions arising out of or relating to this
Agreement (whether such actions arise under contract, tort, equity or otherwise).
15.
Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this
Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.
16.
Severability. In the event that any one or more of the provisions of this Agreement shall be held to be invalid,
illegal or unenforceable, the validity, legality or enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
17.
Funding. This Agreement is not funded and all amounts payable hereunder, if any, shall be paid from the
general assets of the Company or its Affiliate, as applicable. No provision contained in this Agreement or the Plan and no
action taken pursuant to the provisions of this Agreement or the Plan shall create a trust of any kind or require the Company to
maintain or set aside any specific funds to pay
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benefits hereunder. To the extent the Participant acquires a right to receive payments from the Company under this Agreement,
such right shall be no greater than the right of any unsecured general creditor of the Company.
18.
Headings. The descriptive headings of the Sections of this Agreement are inserted for convenience of reference
only and shall not constitute a part of this Agreement.
19.
Awards Subject to Plan. In the event of a conflict between any term or provision contained herein and a term or
provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
20.
Amendment or Termination of this Agreement. This Agreement may be modified, amended, suspended or
terminated by the Committee at any time; provided, however, that no modification, amendment, suspension or termination of
the Plan or this Agreement shall adversely affect the material rights of the Participant under this Agreement without the consent
of such Participant. Notwithstanding the foregoing or any provision of this Agreement to the contrary, the Company may, in its
sole discretion and without the Participant’s consent, modify or amend the terms of the Agreement or a Performance Share Unit
award, or take any other action it deems necessary or advisable, to cause the Agreement to comply with Section 10D of the
Exchange Act or Section 409A (or an exception thereto). Any modification, amendment, suspension or termination shall only
be effective upon a writing issued by the Company, and the Participant shall not offer evidence of any purported oral
modifications or amendments to vary or contradict the terms of this Agreement document.
21.
Entire Agreement. Except as otherwise provided in this Agreement or in any other agreement between the
Participant and the Company, this Agreement and the Plan are: (i) intended to be the final, complete, and exclusive statement of
the terms of the agreement between the Participant and the Company with regard to the subject matter of this Agreement; (ii)
supersede all other prior agreements, communications, and statements, whether written or oral, express or implied, pertaining to
that subject matter; and (iii) may not be contradicted by evidence of any prior or contemporaneous statements or agreements,
oral or written, and may not be explained or supplemented by evidence of consistent additional terms.
22.
Clawback. Notwithstanding any provisions in this Agreement to the contrary, any compensation, payments, or
benefits provided hereunder (or profits realized from the sale of Shares delivered hereunder), whether in the form of cash or
otherwise, shall be subject to recoupment and recapture to the extent necessary to comply with the requirements of any
Company-adopted policy and/or laws or regulations, including, but not limited to, the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010, the Exchange Act, Section 304 of the Sarbanes Oxley Act of 2002, the New York Stock
Exchange Listed Company Manual or any rules or regulations promulgated thereunder with respect to such laws, regulations
and/or securities exchange listing requirements, as may be in effect from time to time, and which may operate to create
additional rights for the Company with respect to this grant and recovery of amounts relating thereto. By accepting this grant of
Performance Share Units, the Participant agrees and acknowledges that he or she is obligated to cooperate with, and provide
any and all assistance necessary to, the Company to recover, recoup or recapture this grant of Performance Share Units or
amounts paid under the Plan pursuant to such law, government regulation, stock exchange listing requirement or Company
policy. Such cooperation and assistance shall include, but is not limited to, executing, completing and submitting any
documentation necessary to recover, recoup or recapture this grant of Performance Share Units or amounts paid under the Plan
from a Participant’s accounts, or pending or future compensation or other grants.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the day and year indicated below. This
Agreement may be executed in more than one counterpart, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
PARTICIPANT
Dated: ___________________
[________]
Dated: ___________________
CNX RESOURCES CORPORATION
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Exhibit A
Participant: [__________]
Grant Date: [________] [__], 2021
Performance Share Units (Target): [_________]
Performance Period: January 1, 2021 through December 31, 2023.
/
CNX RESOURCES CORPORATION
EQUITY INCENTIVE PLAN
FORM OF
PERFORMANCE-BASED RESTRICTED STOCK UNIT AWARD AGREEMENT
This Performance-Based Restricted Stock Unit Award Agreement set forth below (this “Agreement”) is dated as of the
grant date (the “Grant Date”) set forth on Exhibit A and is between CNX Resources Corporation, a Delaware corporation (the
“Company”), and the individual to whom the Compensation Committee of the Board of Directors (the “Committee”) of the
Company has made this Performance Award and whose name is set forth on Exhibit A (the “Participant”).
The Company has established the CNX Resources Corporation Amended and Restated Equity and Incentive
Compensation Plan (the “Plan”) to advance the interests of the Company and its shareholders by providing incentives to certain
eligible persons who contribute significantly to the strategic and long-term performance objectives and growth of the Company.
Unless the context otherwise requires, all capitalized terms not otherwise defined in this Agreement have the same meaning
given such capitalized terms in the Plan.
Pursuant to the provisions of the Plan, the Committee has full power and authority to direct the execution and delivery
of this Agreement in the name and on behalf of the Company, and has authorized the execution and delivery of this Agreement.
Agreement
1.
PRSU Award. Subject to and pursuant to all terms and conditions stated in this Agreement and in the Plan, as
of the Grant Date, the Company hereby grants a Performance Award to the Participant in the form of performance-based
Restricted Stock Units (the “PRSUs”) with the target number set forth on Exhibit A. Such target number consists of three
tranches (each, a “Tranche”), with (a) the first such Tranche consisting of one-third of the target PRSUs, rounded down to the
nearest whole PRSU (the “Year 1 PRSUs”), (b) the second such Tranche consisting of one-third of the target PRSUs, rounded
down to the nearest whole PRSU (the “Year 2 PRSUs”), and (c) the third such Tranche consisting of the remainder of the target
PRSUs (the “Year 3 PRSUs”). Each PRSU awarded under this Agreement shall represent a contingent right to receive one share
of the Company’s common stock as described more fully herein, to the extent such PRSU is earned and becomes payable
pursuant to the terms of this Agreement. Notwithstanding, PRSUs as initially awarded have no independent economic value,
but rather are mere units of measurement used for purposes of calculating the value of benefits, if any, to be paid under this
Agreement.
2.
Applicable Performance Period. The “Applicable Performance Period” means the performance period
applicable to a Tranche of PRSUs as set forth on Exhibit A.
3.
Performance Goals of the PRSUs. Subject to the provisions of this Agreement, each Tranche of the PRSUs
awarded to Participant will be earned if the performance measures set by and on file with the Committee with respect to such
Tranche (in each case, the “Applicable Performance Goals”) are satisfied; provided, however, that the Committee has sole
discretion to determine whether the Applicable Performance Goals, as defined, are met, and provided, further, that each Tranche
will only become payable, except as otherwise provided herein or in another agreement between the Participant and the
Company, if the Participant remains an employee of the Company and its subsidiaries through the Applicable Payment Date or
the CiC Payment Date, as applicable, for such Tranche. As a condition to
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receiving this Award, Participant agrees that all determinations made by the Committee are final and conclusive.
4.
Issuance and Distribution.
a.
After the end of each Applicable Performance Period and prior to the commencement of the payment of
Shares relating to the applicable Tranche of the PRSUs (but no later than 2 ½ months following the end of the Applicable
Performance Period), the Committee shall certify in writing the extent to which the Applicable Performance Goals for the
applicable Tranche of the Award and any other material terms of this Agreement with respect to such Tranche have been
achieved. For purposes of this provision, and for so long as the Code permits, the approved minutes of the Committee meeting
in which the certification is made may be treated as written certification.
b.
Subject to the terms and conditions of this Agreement, each Tranche of PRSUs earned by the Participant
(to the extent not previously settled) will be settled and paid in shares of the Company’s common stock in the first calendar year
immediately following the end of the Applicable Performance Period on a date determined in the Committee’s discretion, but in
no event later than March 15th of such year, subject to Participant’s satisfaction of all applicable income and employment
withholding taxes (the “Applicable Payment Date”).
c.
Notwithstanding any other provision of this Agreement, in the event of a Change in Control, as defined in
Section 16 of the Plan, the Applicable Performance Goals for any Tranche of the PRSUs for which the Applicable Performance
Period has not ended will be deemed to have been satisfied, and the value of such Tranche or Tranches of PRSUs will be settled
(to the extent not previously settled), on the closing date of the Change in Control transaction (the “CiC Payment Date”);
provided, further, in the event of a Change in Control, PRSUs may, in the Committee’s discretion, be settled in cash and/or
1
securities or other property.
d.
[The Participant is required to hold, and not sell, transfer or otherwise dispose of fifty percent (50%) of
the shares issued to the Participant following the vesting of each Tranche of the PRSUs (after accounting for the payment of
any related taxes in connection with the vesting of the PRSUs) until the earlier of (i) ten (10) years from the Grant Date; or (ii)
the Participant’s attainment of age sixty-two (62). [Note: For VPs and above only]
5.
Dividends. Each PRSU will be cumulatively credited with dividends that are paid on the Company’s common
stock in the form of additional performance-based Restricted Stock Units. These additional performance-based Restricted Stock
Units shall be deemed to have been purchased on the record date for the dividend using the closing stock price per share of the
Company’s common stock as reported in The Wall Street Journal and shall be subject to all the same conditions and restrictions
as provided in this Agreement applicable to the PRSUs to which they relate.
6.
Change in Participant’s Status. In the event the Participant Separates from Service (i) on account of death or
Disability or (ii) by action taken by the Company (including any Affiliate) without Cause and after a decision by the
Company’s Chief Executive Officer, in his or her sole and absolute discretion with respect to non-Section 16 employees, that
such Separation from Service without Cause qualifies for special vesting treatment hereunder (a “Qualifying Separation from
Service without
1
For the avoidance of doubt, the sale of any Affiliate of the Company shall not constitute a Change in Control for purposes of this
Agreement.
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2
Cause”) , prior to any Applicable Payment Date or the CiC Payment Date, as applicable, the Participant shall be entitled to
retain the PRSUs and receive payment therefore to the extent earned and payable pursuant to the provisions of this Agreement.
Except as otherwise provided herein or in another agreement between the Participant and the Company, in the event the
Participant Separates from Service for any other reason, including, but not limited to, by the Participant voluntarily, or by the
Company (including any Affiliate) with Cause or without Cause (other than in connection with a Qualifying Separation of
Service without Cause), prior to any Applicable Payment Date or the CiC Payment Date, as applicable, the PRSUs awarded to
the Participant shall be cancelled and forfeited, whether payable or not, without payment by the Company or any Affiliate. Any
payments due a deceased Participant shall be paid to his or her estate as provided herein after the end of the Performance
Period.
7.
Tax Consequences/Withholding.
a.
It is intended that: (i) the Participant’s PRSUs shall be considered to be subject to a substantial risk of
forfeiture in accordance with those terms as defined in Sections 409A and 3121(v)(2) of the Code; and (ii) the Participant shall
have merely an unfunded, unsecured promise to be paid a benefit, and such unfunded promise shall not consist of a transfer of
“property” within the meaning of Code Section 83.
b.
Participant acknowledges that any income for federal, state, local or foreign tax purposes, including
payroll taxes, that the Participant is required to recognize on account of the vesting of the PRSUs and/or issuance of the Shares
under this Award to Participant shall be subject to withholding of tax by the Company. Participant must pay all applicable taxes
when due. The Company will automatically withhold from the total number of Shares deliverable to Participant upon the
applicable payment date, the number of Shares having a Fair Market Value equal to the minimum statutory tax withholding
requirements (or as otherwise approved by the Board or the Committee) as determined in accordance with the Plan. In the
event of any remaining tax balance, Participant will be required to deliver a check for that amount payable to the
Company before the Shares are deposited into Participant’s plan account.
c.
This Agreement is intended to comply with, or be excepted from coverage under, Section 409A of the
Code and the regulations promulgated thereunder and shall be administered, interpreted and construed accordingly.
Notwithstanding any provision of this Agreement to the contrary, if any benefit provided under this Agreement is subject to the
provisions of Section 409A of the Code and the regulations issued thereunder (and not excepted therefrom), the provisions of
the Agreement shall be administered, interpreted and construed in a manner necessary to comply with Section 409A (or
disregarded to the extent such provision cannot be so administered, interpreted, or construed). Notwithstanding, Section 409A
may impose upon the Participant certain taxes or other charges for which the Participant is and shall remain solely responsible,
and nothing contained in this Agreement or the Plan shall be construed to obligate any member of the Committee or Board, the
Company or any Affiliate (or its employees, officers or directors) for any such taxes or other charges.
8.
Non-Competition. [Insert “Intentionally Deleted” for Participants who don’t have a Non-Compete]
a.
The Participant hereby agrees that this Section 8 is reasonable and necessary in order to protect the
legitimate business interests and goodwill of the Company, including the Company’s
2
In the case of Participants who are “officers” of the Company (as defined by Rule 16a-1(f) of the Exchange Act as determined by the
Board and/or the Committee), the Committee must approve any decision to allow an Award to vest in this circumstance.
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trade secrets, valuable confidential business and professional information, substantial relationships with prospective and
existing customers and clients, and specialized training provided to the Participant and other employees of the Company. The
Participant acknowledges and recognizes the highly competitive nature of the business of the Company and its Affiliates and
accordingly agrees that during the term of Participant’s employment and for a period of [2 years, 1 year or 6 months] after the
termination thereof (the “Restriction Period”):
(i)The Participant will not directly or indirectly engage in any business substantially similar to any line of
business conducted by the Company or any of its Affiliates, including, but not limited to, where such engagement is as an
officer, director, proprietor, employee, partner, investor (other than as a holder of less than 1% of the outstanding capital stock
of a publicly traded corporation), consultant, advisor, agent or sales representative, in any geographic region in which the
Company or any of its Affiliates conducted business;
prospective customer of the Company or any of its Affiliates;
(ii)The Participant will not contact, solicit, perform services for, or accept business from any customer or
(iii)The Participant will not directly or indirectly induce any employee of the Company or any of its
Affiliates to: (1) engage in any activity or conduct which is prohibited pursuant to subparagraph 8.1(a); or (2) terminate such
employee’s employment with the Company or any of its Affiliates. Moreover, the Participant will not directly or indirectly
employ or offer employment (in connection with any business substantially similar to any line of business conducted by the
Company or any of its Affiliates) to any person who was employed by the Company or any of its Affiliates unless such person
shall have ceased to be employed by the Company or any of its Affiliates for a period of at least 12 months; and
are prohibited under subparagraphs (a) — (c) above.
(iv)The Participant will not directly or indirectly assist others in engaging in any of the activities, which
Notwithstanding the foregoing, if the Restriction Period set forth herein is shorter in duration following Participant’s
termination of employment with the Company and its Affiliates than in any other prior Award Agreement, the Restriction
Period set forth herein shall be the Restriction Period for all such prior Award Agreements and related Awards. Similarly, if the
Restriction Period is longer in this Agreement than in prior Award Agreements, the Restriction Period set forth in such prior
Award Agreements and related Awards shall be amended hereby and have the same applicable Restriction Period following
Participant’s termination of employment with the Company and its Affiliates as set forth herein (and the Participant shall be
deemed to have consented to such amendment by executing this Agreement).
b.
It is expressly understood and agreed that although the Participant and the Company consider the
restrictions contained in this Section 8 to be reasonable, if a final judicial determination is made by a court of competent
jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against
the Participant, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable
against such Participant. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect
the enforceability of any of the other restrictions contained herein. The restrictive covenants set forth in this Section 8 shall be
extended by any amount of time that the Participant is in breach of such covenants, such that the Company receives the full
benefit of the time duration set forth above.
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9.
Confidential Information and Trade Secrets. The Participant and the Company agree that certain materials,
including, but not limited to, information, data and other materials relating to customers, development programs, costs,
marketing, trading, investment, sales activities, promotion, credit and financial data, manufacturing processes, financing
methods, plans or the business and affairs of the Company and its Affiliates, constitute proprietary confidential information and
trade secrets. Accordingly, the Participant will not at any time during or after the Participant’s employment with the Company
(including any Affiliate) disclose or use for such Participant’s own benefit or purposes or the benefit or purposes of any other
person, firm, partnership, joint venture, association, corporation or other business organization, entity or enterprise other than
the Company and any of its Affiliates, any proprietary confidential information or trade secrets, provided that the foregoing
shall not apply to information which is not unique to the Company or any of its Affiliates or which is generally known to the
industry or the public other than as a result of such Participant’s breach of this covenant. The Participant agrees that upon
termination of employment with the Company (including any Affiliate) for any reason, the Participant will immediately return
to the Company all memoranda, books, papers, plans, information, letters and other data, and all copies thereof or therefrom,
which in any way relate to the business of the Company and its Affiliates, except that the Participant may retain personal notes,
notebooks and diaries. The Participant further agrees that the Participant will not retain or use for the Participant’s own account
at any time any trade names, trademark or other proprietary business designation used or owned in connection with the business
of the Company or any of its Affiliates.
Notwithstanding anything contained herein to the contrary, this Agreement shall not prohibit disclosure of proprietary
confidential information if (i) it is required by law or by a court of competent jurisdiction or (ii) it is in connection with any
judicial, arbitration, dispute resolution or other legal proceeding in which your legal rights and obligations as an employee or
under this Agreement are at issue; provided, however, that you shall, to the extent practicable and lawful in any such event, give
prior notice to the Company of your intent to disclose proprietary confidential information so as to allow the Company an
opportunity (which you shall not oppose) to obtain such protective orders or similar relief with respect thereto as may be
deemed appropriate.
Notwithstanding the foregoing, nothing in this Agreement is intended to restrict, prohibit, impede or interfere with the
Participant providing information to, or from reporting possible violations of law or regulation to, any governmental agency or
entity, from participating in investigations, testifying in proceedings regarding the Company’s past or future conduct, or from
making other disclosures that are protected under state or federal law or regulation, engaging in any future activities protected
under statutes administered by any government agency (including but not limited, to the Department of Justice, the Securities
and Exchange Commission, the Congress, and any agency Inspector General), or from receiving and retaining a monetary
award from a government-administered whistleblower award program for providing information directly to a government-
administered whistleblower award program. The Participant does not need the prior authorization of the Company to make
such reports or disclosures. The Participant is not required to notify the Company that he or she has made any such reports or
disclosures. The Company nonetheless asserts, and does not waive, its attorney-client privilege over any information
appropriately protected by the privilege.
10.
Remedies/Forfeiture.
a.
The Participant acknowledges that a violation or attempted violation on the Participant’s part of Sections
8 and/or 9 will cause irreparable damage to the Company and its Affiliates, and the Participant therefore agrees that the
Company and its Affiliates shall be entitled as a matter of right to an injunction, out of any court of competent jurisdiction,
restraining any violation or further violation of such promises by the Participant or the Participant’s employees, partners or
agents. The
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Participant agrees that such right to an injunction is cumulative, in addition to whatever other remedies the Company (including
any Affiliate) may have under law or equity and to the Participant’s obligations to make timely payment to the Company as set
forth in Section 10.2 of this Agreement. The Participant further acknowledges and agrees that the Participant’s PRSUs shall be
cancelled and forfeited without payment by the Company if the Participant breaches any of his obligations set forth in Sections
8 and 9 herein.
b.
At any point after becoming aware of a breach of any obligation set forth in Sections 8 and 9 of this
Agreement, the Company shall provide notice of such breach to the Participant. By agreeing to receive the PRSUs pursuant to
this Agreement, the Participant agrees that within ten (10) days after the date the Company provides such notice, the Participant
shall pay to the Company in cash an amount equal in value to any and all distributions paid to or on behalf of such Participant
under this Agreement after the date that was six (6) months prior to the date of the earliest breach. The Participant agrees that
failure to make such timely payment to the Company constitutes an independent and material breach of the terms and
conditions of this Agreement, for which the Company may seek recovery of the unpaid amount as liquidated damages, in
addition to all other rights and remedies the Company may have resulting from the Participant’s breach of the obligations set
forth in Sections 8 and/or 9. The Participant agrees that timely payment to the Company as set forth in this provision of this
Agreement is reasonable and necessary because the compensatory damages that will result from breaches of Sections 8 and/or 9
cannot readily be ascertained. Further, the Participant agrees that timely payment to the Company as set forth in this provision
of this Agreement is not a penalty, and it does not preclude the Company from seeking all other remedies that may be available
to the Company, including without limitation those set forth in this Section 10.
11.
Assignment/Nonassignment.
a.
The Company shall have the right to assign this Agreement, including without limitation Sections 8
and/or 9, and the Participant agrees to remain obligated by all provisions of this Agreement that are assigned to any successor,
assign or surviving entity. Any successor to the Company is an intended third party beneficiary of this Agreement.
b.
The PRSUs shall not be sold, pledged, assigned, hypothecated, transferred or disposed of (a “Transfer”)
in any manner, other than by will or the laws of descent and distribution. Any attempt by the Participant to Transfer the PRSUs
in violation of the terms of this Agreement shall render the PRSUs null and void, and result in the immediate forfeiture of such
PRSUs, without payment by the Company.
12.
Impact on Benefit Plans. Payments under this Agreement shall not be considered as earnings for purposes of
the Company’s and/or Affiliate’s qualified retirement plans or any other retirement or benefit plan unless specifically provided
for therein. Nothing herein shall prevent the Company or any Affiliate from maintaining additional compensation plans and
arrangements for its employees.
13.
Successors; Changes in Stock. The obligation of the Company under this Agreement shall be binding upon the
successors and assigns of the Company. If a dividend or other distribution shall be declared upon the Company’s common stock
payable in Shares, the target number of PRSUs shall be adjusted by adding thereto the number of PRSUs which would have
been distributable thereon if such shares and PRSUs had been actual Shares and outstanding on the date fixed for determining
the shareholders entitled to receive such stock dividend or distribution. In the event of any spin-off, split-off or split-up,
dividend in property other than cash, recapitalization or other change in the capital structure of
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the Company, or any merger, consolidation, reorganization, partial or complete liquidation or other distribution of assets (other
than a normal cash dividend), or any other corporate transaction or event having an effect similar to any of the foregoing, or
extraordinary distribution to shareholders of the Company’s common stock, the PRSUs and the Performance Goals shall be
appropriately adjusted to prevent dilution or enlargement of the rights of Participants which would otherwise result from any
such transaction, provided such adjustment shall be consistent with Code Section 409A.
In the case of a Change in Control, any obligation under this Agreement shall be handled in accordance with the terms
of Section 4 hereof. In any case not constituting a Change in Control in which the Company’s common stock is changed into or
becomes exchangeable for a different number or kind of shares of stock or other securities of the Company or another
corporation, or cash or other property, whether through reorganization, reclassification, recapitalization, stock split-up,
combination of shares, merger or consolidation, then (i) the value of the PRSUs constituting the Award shall be calculated
based on the closing price per share of such common stock on the closing date of the transaction on the principal market on
which such common stock is traded, (ii) there shall be substituted for each PRSU constituting the Award, the number and kind
of shares of stock or other securities (or cash or other property) into which each outstanding Share shall be so changed or for
which each such Share shall be exchangeable, and (iii) the Share on which the Performance Goals are based shall be
appropriately and equitably adjusted, provided any such adjustments shall be consistent with Code Section 409A. In the case of
any such adjustment, the PRSUs shall remain subject to the terms of the Agreement.
14.
Governing Law, Jurisdiction, and Venue.
a.
This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware,
without giving effect to the principles of conflicts of law.
b.
The Participant hereby irrevocably submits to the personal and exclusive jurisdiction of the United States
District Court for the Western District of Pennsylvania or the Court of Common Pleas of Allegheny County, Pennsylvania in
any action or proceeding arising out of, or relating to, this Agreement (whether such action or proceeding arises under contract,
tort, equity or otherwise). The Participant hereby irrevocably waives any objection which the Participant now or hereafter may
have to the laying of venue or personal jurisdiction of any such action or proceeding brought in said courts.
c.
Jurisdiction over, and venue of, any such action or proceeding shall be exclusively vested in the United
States District Court for the Western District of Pennsylvania or the Court of Common Pleas of Allegheny County,
Pennsylvania.
d.
Provided that the Company commences any such action or proceeding in the courts identified in Section
14.3, the Participant irrevocably waives the Participant’s right to object to or challenge the above selected forum on the basis of
inconvenience or unfairness under 28 U.S.C. § 1404, 42 Pa. C.S. § 5322 or similar state or federal statutes. The Participant
agrees to reimburse the Company for all of the attorneys’ fees and costs it incurs to oppose the Participant’s efforts to challenge
or object to litigation proceeding in the courts identified in Section 14.3 with respect to actions arising out of or relating to this
Agreement (whether such actions arise under contract, tort, equity or otherwise).
15.
Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this
Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.
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16.
Severability. In the event that any one or more of the provisions of this Agreement shall be held to be invalid,
illegal or unenforceable, the validity, legality or enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
17.
Funding. This Agreement is not funded and all amounts payable hereunder, if any, shall be paid from the
general assets of the Company or its Affiliate, as applicable. No provision contained in this Agreement or the Plan and no
action taken pursuant to the provisions of this Agreement or the Plan shall create a trust of any kind or require the Company to
maintain or set aside any specific funds to pay benefits hereunder. To the extent the Participant acquires a right to receive
payments from the Company under this Agreement, such right shall be no greater than the right of any unsecured general
creditor of the Company.
18.
Headings. The descriptive headings of the Sections of this Agreement are inserted for convenience of reference
only and shall not constitute a part of this Agreement.
19.
Awards Subject to Plan. In the event of a conflict between any term or provision contained herein and a term or
provision of the Plan, the applicable terms and provisions of the Plan will govern and prevail.
20.
Amendment or Termination of this Agreement. This Agreement may be modified, amended, suspended or
terminated by the Committee at any time; provided, however, that no modification, amendment, suspension or termination of
the Plan or this Agreement shall adversely affect the material rights of the Participant under this Agreement without the consent
of such Participant. Notwithstanding the foregoing or any provision of this Agreement to the contrary, the Company may, in its
sole discretion and without the Participant’s consent, modify or amend the terms of the Agreement or a PRSU award, or take
any other action it deems necessary or advisable, to cause the Agreement to comply with Section 10D of the Exchange Act or
Section 409A (or an exception thereto). Any modification, amendment, suspension or termination shall only be effective upon a
writing issued by the Company, and the Participant shall not offer evidence of any purported oral modifications or amendments
to vary or contradict the terms of this Agreement document.
21.
Entire Agreement. Except as otherwise provided in this Agreement or in any other agreement between the
Participant and the Company, this Agreement and the Plan are: (i) intended to be the final, complete, and exclusive statement of
the terms of the agreement between the Participant and the Company with regard to the subject matter of this Agreement; (ii)
supersede all other prior agreements, communications, and statements, whether written or oral, express or implied, pertaining to
that subject matter; and (iii) may not be contradicted by evidence of any prior or contemporaneous statements or agreements,
oral or written, and may not be explained or supplemented by evidence of consistent additional terms.
22.
Clawback. Notwithstanding any provisions in this Agreement to the contrary, any compensation, payments, or
benefits provided hereunder (or profits realized from the sale of Shares delivered hereunder), whether in the form of cash or
otherwise, shall be subject to recoupment and recapture to the extent necessary to comply with the requirements of any
Company-adopted policy and/or laws or regulations, including, but not limited to, the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010, the Exchange Act, Section 304 of the Sarbanes Oxley Act of 2002, the New York Stock
Exchange Listed Company Manual or any rules or regulations promulgated thereunder with respect to such laws, regulations
and/or securities exchange listing requirements, as may be in effect from time to time, and which may operate to create
additional rights for the Company with respect to this grant and recovery of amounts relating thereto. By accepting this grant of
PRSUs, the Participant agrees and
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acknowledges that he or she is obligated to cooperate with, and provide any and all assistance necessary to, the Company to
recover, recoup or recapture this grant of PRSUs or amounts paid under the Plan pursuant to such law, government regulation,
stock exchange listing requirement or Company policy. Such cooperation and assistance shall include, but is not limited to,
executing, completing and submitting any documentation necessary to recover, recoup or recapture this grant of PRSUs or
amounts paid under the Plan from a Participant’s accounts, or pending or future compensation or other grants.
[Remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, the undersigned have executed this Agreement on the day and year indicated below. This
Agreement may be executed in more than one counterpart, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
PARTICIPANT
Dated: ___________________
[________]
Dated: ___________________
CNX RESOURCES CORPORATION
/
Exhibit A
Participant: [__________]
Grant Date: [__________][__], 2021
Total PRSUs (Target): [_________]
Applicable Performance Period: Year 1 PRSUs—January 1, 2021 through December 31, 2021
Year 2 PRSUs—January 1, 2022 through December 31, 2022
Year 3 PRSUs—January 1, 2023 through December 31, 2023
/
CNX RESOURCES CORPORATION
SUBSIDIARIES
As of January 29, 2021
(In alphabetical order)
Exhibit 21
Buchanan Generation, LLC (a Virginia limited liability company)
Cardinal States Gathering Company (a Virginia limited liability company)
CSG Holdings I LLC (a Delaware limited liability company)
CSG Holdings II LLC (a Delaware limited liability company)
CSG Holdings III LLC (a Delaware limited liability company)
CNX Gas Company LLC (a Virginia limited liability company)
CNX Gas Holdings, Inc. (a Delaware corporation )
CNX Gas LLC (a Delaware limited liability company)
CNX Investments LLC (a Delaware limited liability company )
CNX Land LLC (a Delaware limited liability company)
CNX Resource Holdings LLC (a Delaware limited liability company)
CNX Water Assets LLC (formerly CONSOL of WV LLC) (d/b/a CONVEY Water Systems) (a West Virginia limited liability Company)
Mon-View, LLC (a West Virginia limited liability company)
Pocahontas Gas LLC (a Delaware limited liability company)
CNX Gathering LLC (a Delaware limited liability company)
CNX Midstream GP LLC (a Delaware limited liability company)
CNX Midstream Partners LP (a Delaware limited partnership)
CNX Midstream Finance Corp. (a Delaware corporation )
CNX Midstream Operating Company LLC (a Delaware limited liability company)
CNX Midstream DevCo I GP LLC (a Delaware limited liability company)
CNX Midstream DevCo I LP (a Delaware limited partnership )
CNX Midstream SP Holdings LLC (a Delaware limited liability company)
/
Consent of Independent Registered Public Accounting Firm
Exhibit 23.1
We consent to the incorporation by reference in the Registration Statements on Form S-8 (File No. 333-183039, File No. 333-167892, File
No. 333-126057, File No. 333-113973, File No. 333-87545, File No. 333-160273, File No. 333-211286, File No. 333-238309, and File No.
333-249096) of CNX Resources Corporation; of our reports dated February 9, 2021, with respect to the consolidated financial statements
and schedule of CNX Resources Corporation and Subsidiaries and the effectiveness of internal control over financial reporting of CNX
Resources Corporation and Subsidiaries included in this Annual Report (Form 10-K) for the year ended December 31, 2020.
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
February 9, 2021
/
Consent of Independent Petroleum Engineers and Geologists
As independent petroleum engineers, we hereby consent to (a) the use of our audit letter relating to the proved reserves of gas and oil
(including coalbed methane) of CNX Resources Corporation as of December 31, 2020, (b) the references to us as experts in CNX Resources
Corporation's Annual Report on Form 10-K for the year ended December 31, 2020 and (c) the incorporation by reference of our name and
our audit letter into CNX Resources Corporation's Registration Statements on Form S-8 (File No. 333-183039, File No. 333-167892, File
No. 333-126057, File No. 333-113973, File No. 333-87545, File No. 333-160273, File No. 333-211286, File No. 333-238309, and File No.
333-249096), that incorporate by reference such Form 10-K.
We further wish to advise that we are not employed on a contingent basis and that at the time of the preparation of our report, as well as at
present, neither Netherland Sewell & Associates, Inc. nor any of its employees had, or now has, a substantial interest in CNX Resources
Corporation or any of its subsidiaries, as a holder of its securities, promoter, underwriter, voting trustee, director, officer, or employee.
NETHERLAND, SEWELL & ASSOCIATES, INC.
/s/ DANNY D. SIMMONS
By:
Danny D. Simmons, P.E.
President and Chief Operating Officer
Houston, Texas
February 9, 2021
Please be advised that the digital document you are viewing is provided by Netherland, Sewell & Associates, Inc. (NSAI) as a convenience to our clients. The digital document
is intended to be substantively the same as the original signed document maintained by NSAI. The digital document is subject to the parameters, limitations, and conditions
stated in the original document. In the event of any differences between the digital document and the original document, the original document shall control and supersede the
digital document.
/
/
Exhibit 31.1
I, Nicholas J. DeIuliis, certify that:
CERTIFICATIONS
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of CNX Resources Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing
the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: February 9, 2021
/s/ Nicholas J. DeIuliis
Nicholas J. DeIuliis
Director, Chief Executive Officer and President
(Principal Executive Officer)
/
/
Exhibit 31.2
I, Donald W. Rush, certify that:
CERTIFICATIONS
1.
2.
3.
4.
I have reviewed this Annual Report on Form 10-K of CNX Resources Corporation;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented
in this report;
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange
Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this
report based on such evaluation; and
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the
equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting
which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial
information;
Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant's internal control over financial reporting.
Date: February 9, 2021
/s/ Donald W. Rush
Donald W. Rush
Chief Financial Officer and Executive Vice President
(Principal Financial Officer)
/
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
18 U.S.C. Section 1350
Exhibit 32.1
I, Nicholas J. DeIuliis, President and Chief Executive Officer (principal executive officer) of CNX Resources Corporation (the
“Registrant”), certify that to my knowledge, based upon a review of the Annual Report on Form 10-K for the period ended December 31,
2020, of the Registrant (the “Report”):
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Registrant.
Date: February 9, 2021
/s/ Nicholas J. DeIuliis
Nicholas J. DeIuliis
Director, Chief Executive Officer and President
(Principal Executive Officer)
/
CERTIFICATION
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
18 U.S.C. Section 1350
Exhibit 32.2
I, Donald W. Rush, Chief Financial Officer (principal financial officer) of CNX Resources Corporation (the “Registrant”), certify that
to my knowledge, based upon a review of the Annual Report on Form 10-K for the period ended December 31, 2020, of the Registrant (the
“Report”):
(1)
(2)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Registrant.
Date: February 9, 2021
/s/ Donald W. Rush
Donald W. Rush
Chief Financial Officer and Executive Vice President
(Principal Financial Officer)
/
January 29, 2021
Mr. Jeremy Hayhurst
CNX Resources Corporation
1000 Consol Energy Drive
Canonsburg, Pennsylvania 15317
Dear Mr. Hayhurst:
In accordance with your request, we have audited the estimates prepared by CNX Resources Corporation (CNX), as of December 31, 2020,
of the proved reserves and future revenue to the CNX interest in certain oil and gas properties located in the United States. It is our
understanding that the proved reserves estimates shown herein constitute all of the proved reserves owned by CNX. We have examined the
estimates with respect to reserves quantities, reserves categorization, future producing rates, future net revenue, and the present value of
such future net revenue, using the definitions set forth in U.S. Securities and Exchange Commission (SEC) Regulation S-X Rule 4-10(a).
The estimates of reserves and future revenue have been prepared in accordance with the definitions and regulations of the SEC and, with the
exception of the exclusion of future income taxes, conform to the FASB Accounting Standards Codification Topic 932, Extractive Activities
—Oil and Gas. We completed our audit on or about the date of this letter. This report has been prepared for CNX's use in filing with the
SEC; in our opinion the assumptions, data, methods, and procedures used in the preparation of this report are appropriate for such purpose.
The following table sets forth CNX's estimates of the net reserves and future net revenue, as of December 31, 2020, for the audited
properties:
Category
Oil
(MBBL)
Net Reserves
NGL
(MBBL)
Future Net Revenue (M$)
Gas
(MMCF)
Total
Present Worth
at 10%
Proved Developed Producing
Proved Developed Non-Producing
Proved Undeveloped
1,207.1
0
2,873.8
42,203.6
4,886,925.3
5,706,445.2
0
52,355.3
59,865.1
39,664.1
4,094,786.0
2,781,970.4
3,001,490.0
39,334.8
562,438.8
Total Proved
4,080.9
81,867.7
9,034,065.9
8,548,280.8
3,603,264.0
Totals may not add because of rounding.
The oil volumes shown include crude oil and condensate. Oil and natural gas liquids (NGL) volumes are expressed in thousands of barrels
(MBBL); a barrel is equivalent to 42 United States gallons. Gas volumes are expressed in millions of cubic feet (MMCF) at standard
temperature and pressure bases. The table following this letter sets forth CNX's estimates of net reserves and future net revenue, by reserves
category.
When compared on a lease-by-lease basis, some of the estimates of CNX are greater and some are less than the estimates of Netherland,
Sewell & Associates, Inc. (NSAI). However, in our opinion the estimates shown herein of CNX's reserves and future revenue are reasonable
when aggregated at the proved level and have been prepared in accordance with the Standards Pertaining to the Estimating and Auditing of
Oil and Gas Reserves Information promulgated by the Society of Petroleum Engineers (SPE Standards). Additionally, these estimates are
within the recommended 10 percent tolerance threshold set forth in the SPE Standards. We are satisfied with the methods and procedures
used by CNX in preparing the December 31,
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2020, estimates of reserves and future revenue, and we saw nothing of an unusual nature that would cause us to take exception with the
estimates, in the aggregate, as prepared by CNX.
Reserves categorization conveys the relative degree of certainty; reserves subcategorization is based on development and production status.
The estimates of reserves and future revenue included herein have not been adjusted for risk. CNX's estimates do not include probable or
possible reserves that may exist for these properties, nor do they include any value for undeveloped acreage beyond those tracts for which
undeveloped reserves have been estimated.
Prices used by CNX are based on the 12-month unweighted arithmetic average of the first-day-of-the-month price for each month in the
period January through December 2020. For oil and NGL volumes, the average West Texas Intermediate spot price of $39.57 per barrel is
adjusted for quality, transportation fees, and market differentials. For gas volumes, the average Henry Hub spot price of $1.985 per MMBTU
is adjusted for energy content and market differentials. All prices are held constant throughout the lives of the properties. This report
includes the effects of several gas price hedge contracts currently in place. The average adjusted product prices weighted by production over
the remaining lives of the properties are $35.61 per barrel of oil, $13.18 per barrel of NGL, and $1.70 per MCF of gas.
Operating costs used by CNX are based on historical operating expense records. These costs include the per-well overhead expenses allowed
under joint operating agreements, estimates of costs to be incurred at and below the district and field levels, and CNX's estimate of its gas
gathering expenses. The fees associated with CNX's firm transportation contracts are included as additional operating expenses. Operating
costs have been divided into per-well costs and per-unit-of-production costs. Headquarters general and administrative overhead expenses of
CNX are included to the extent that they are covered under joint operating agreements for the operated properties. Capital costs used by
CNX are based on authorizations for expenditure and actual costs from recent activity. Capital costs are included as required for new
development wells, production equipment, and gathering infrastructure. Abandonment costs used are CNX's estimates of the costs to
abandon the wells and production facilities, net of any salvage value. Operating, capital, and abandonment costs are not escalated for
inflation.
The reserves shown in this report are estimates only and should not be construed as exact quantities. Proved reserves are those quantities of
oil and gas which, by analysis of engineering and geoscience data, can be estimated with reasonable certainty to be economically
producible; probable and possible reserves are those additional reserves which are sequentially less certain to be recovered than proved
reserves. Estimates of reserves may increase or decrease as a result of market conditions, future operations, changes in regulations, or actual
reservoir performance. In addition to the primary economic assumptions discussed herein, estimates of CNX and NSAI are based on certain
assumptions including, but not limited to, that the properties will be developed consistent with current development plans as provided to us
by CNX, that the properties will be operated in a prudent manner, that no governmental regulations or controls will be put in place that
would impact the ability of the interest owner to recover the reserves, and that projections of future production will prove consistent with
actual performance. If the reserves are recovered, the revenues therefrom and the costs related thereto could be more or less than the
estimated amounts. Because of governmental policies and uncertainties of supply and demand, the sales rates, prices received for the
reserves, and costs incurred in recovering such reserves may vary from assumptions made while preparing these estimates.
It should be understood that our audit does not constitute a complete reserves study of the audited oil and gas properties. Our audit consisted
primarily of substantive testing, wherein we conducted a detailed review of all properties. In the conduct of our audit, we have not
independently verified the accuracy and completeness of information and data furnished by CNX with respect to ownership interests, oil and
gas production, well test data, historical costs of operation and development, product prices, or any agreements relating to current and future
operations of the properties and sales of production. However, if in the course of our examination something came to our attention that
brought into question the validity or sufficiency of any such information or data, we did not rely on such information or data until we had
satisfactorily resolved our questions relating thereto or had independently verified such information or data. Our audit did not include a
review of CNX's overall reserves management processes and practices.
We used standard engineering and geoscience methods, or a combination of methods, including performance analysis, volumetric analysis,
and analogy, that we considered to be appropriate and necessary to establish the conclusions set forth
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herein. As in all aspects of oil and gas evaluation, there are uncertainties inherent in the interpretation of engineering and geoscience data;
therefore, our conclusions necessarily represent only informed professional judgment.
Supporting data documenting this audit, along with data provided by CNX, are on file in our office. The technical persons primarily
responsible for conducting this audit meet the requirements regarding qualifications, independence, objectivity, and confidentiality set forth
in the SPE Standards. Steven W. Jansen, a Licensed Professional Engineer in the State of Texas, has been practicing consulting petroleum
engineering at NSAI since 2011 and has over 4 years of prior industry experience. Edward C. Roy III, a Licensed Professional Geoscientist
in the State of Texas, has been practicing consulting petroleum geoscience at NSAI since 2008 and has over 11 years of prior industry
experience. We are independent petroleum engineers, geologists, geophysicists, and petrophysicists; we do not own an interest in these
properties nor are we employed on a contingent basis.
Sincerely,
NETHERLAND, SEWELL & ASSOCIATES, INC.
Texas Registered Engineering Firm F-2699
/s/ C.H. (Scott) Rees III
By: C.H. (Scott) Rees III, P.E.
Chairman and Chief Executive Officer
/s/ Steven W. Jansen
By:
Steven W. Jansen, P.E. 112973
Vice President
Date Signed: January 29, 2021
/s/ Edward C. Roy III
By: Edward C. Roy III, P.G. 2364
Vice President
Date Signed: January 29, 2021
SWJ:STH
Please be advised that the digital document you are viewing is provided by Netherland, Sewell & Associates, Inc. (NSAI) as a convenience
to our clients. The digital document is intended to be substantively the same as the original signed document maintained by NSAI. The
digital document is subject to the parameters, limitations, and conditions stated in the original document. In the event of any differences
between the digital document and the original document, the original document shall control and supersede the digital document.
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SUMMARY OF NET RESERVES AND FUTURE NET REVENUE
CNX RESOURCES CORPORATION INTEREST
AS OF DECEMBER 31, 2020
Net Reserves
Future
Operating
(1)
Oil
NGL
Gas
Gross Revenue
Expenses
Category
(MBBL)
(MBBL)
(MMCF)
(M$)
(M$)
Taxes
(M$)
Investment
Including
Abandonment
Future Net Revenue (M$)
Discounted
at 10%
(M$)
Total
Proved Developed
1,207.1
42,203.6
4,886,925.3
8,556,800.5
3,301,234.7
158,825.7
329,558.0
4,767,184.9
2,197,783.6
Producing
Other Revenue and
(2)
Costs
0
0
0
945,410.4
6,150.2
0
0
939,260.3
803,706.5
Total
Proved
1,207.1
42,203.6
4,886,925.3
9,502,210.9
3,307,384.8
158,825.7
329,558.0
5,706,445.2
3,001,490.0
Developed
Producing
Proved Developed
0
0
52,355.3
77,043.1
15,603.7
347.9
1,226.4
00,59,865.1
39,334.8
Non-Producing
Proved
Undeveloped
2,873.8
39,664.1
4,094,786.0
6,998,306.8
2,404,651.8
184,951.2
1,626,734.6
2,781,970.4
562,438.8
Total Proved
4,080.9
81,867.7
9,034,065.9
16,577,562.6
5,727,638.5
344,124.7
1,957,519.2
8,548,280.8
3,603,264.0
Totals may not add because of rounding.
Note: Reserves categorization conveys the relative degree of certainty; reserves subcategorization is based on development and production status. The
estimates of reserves and future revenue included herein have not been adjusted for risk.
(1)
(2)
The oil volumes include crude oil and condensate.
Other revenue and costs include revenue from gas price hedge contracts and costs associated with the Buchanan County pipeline.
This table contains CNX Resources Corporation's estimates of net reserves and future net revenue.
All estimates and exhibits herein are part of this NSAI report and are subject to its parameters and
conditions.
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