UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 __________________________________________________
FORM 10-Q
  __________________________________________________ 
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 20192020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                     to                     
Commission file number: 001-14901
  __________________________________________________
CNX Resources Corporation
(Exact name of registrant as specified in its charter)
Delaware51-0337383
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
CNX Center
1000 CONSOL Energy Drive Suite 400
Canonsburg,, PA15317-6506
(724) (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 classTrading Symbol(s)Name of exchange on which registered
Common Stock ($.01 par value)CNXNew York Stock Exchange
Preferred Share Purchase Rights--New York Stock Exchange
 __________________________________________________ 
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer      Accelerated filer Non-accelerated filer Smaller Reporting Company
Emerging Growth Company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes      No  
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
ClassShares outstanding as of October 15, 2020
Common stock, $0.01 par value224,528,583






TABLE OF CONTENTS

Page
PART I FINANCIAL INFORMATION
ClassShares outstanding as of October 15, 2019
Common stock, $0.01 par value186,586,751




TABLE OF CONTENTS

Page
PART I FINANCIAL INFORMATION
ITEM 1.Unaudited Condensed Consolidated Financial Statements
Consolidated Statements of Income for the three and nine months ended September 30, 20192020 and 20182019
Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 20192020 and 2018
2019
Consolidated Balance Sheets at September 30, 20192020 and December 31, 20182019
Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 20192020 and 20182019
Consolidated Statements of Cash Flows for the nine months ended September 30, 20192020 and 20182019
ITEM 2.
ITEM 3.
ITEM 4.
PART II OTHER INFORMATION
ITEM 1.
ITEM 1A.Risk Factors
ITEM 2.Unregistered Sales of Equity Securities and Use of Proceeds
ITEM 6.






GLOSSARY OF CERTAIN OIL AND GAS MEASUREMENT TERMS

The following are abbreviations of certain measurement terms and abbreviations commonly used in the oil and gas industry and included within this Form 10-Q:

Bbl - One stock tank barrel, or 42 U.S. gallons liquid volume, used in reference to oil or other liquid hydrocarbons.
Bcf - One billion cubic feet of natural gas.
Bcfe - One billion cubic feet of natural gas equivalents, with one barrel of oil being equivalent to 6,000 cubic feet of gas.
Btu - One British Thermal Unit.
BBtu - One billion British Thermal Units.
Mbbls - One thousand barrels of oil or other liquid hydrocarbons.
Mcf - One thousand cubic feet of natural gas.
Mcfe - One thousand cubic feet of natural gas equivalents, with one barrel of oil being equivalent to 6,000 cubic feet of gas.
MMbtu - One million British Thermal Units.
MMcfe - One million cubic feet of natural gas equivalents, with one barrel of oil being equivalent to 6,000 cubic feet of gas.
Tcfe - One trillion cubic feet of natural gas equivalents, with one barrel of oil being equivalent to 6,000 cubic feet of gas.
NGL - Natural gas liquids - those hydrocarbons in natural gas that are separated from the gas as liquids through the process.
net - “net” natural gas or “net” acres are determined by adding the fractional ownership working interests the Company has in gross wells or acres.
TIL - turn-in-line; a well turned to sales.
blending - process of mixing dry and damp gas in order to meet downstream pipeline specifications.
lease operating expense - costs of operating wells and equipment on a producing lease, many of which are recurring. Includes items such as water disposals, repairs and maintenance, equipment rental, and operating supplies, among others.
proved reserves - quantities of oil, natural gas, and NGLsNGL which, by analysis of geological and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods and government regulations prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation.
proved developed reserves (PDPs) - proved reserves which can be expected to be recovered through existing wells with existing equipment and operating methods.
proved undeveloped reserves (PUDs) - proved reserves that can be estimated with reasonable certainty to be recovered from new wells on undrilled proved acreage or from existing wells where a relatively major expenditure is required for completion.
reservoir - a porous and permeable underground formation containing a natural accumulation of producible natural gas and/or oil that is confined by impermeable rock or water barriers and is separate from other reservoirs.
development well - a well drilled within the proved area of an oil or gas reservoir to the depth of a stratigraphic horizon known to be productive.
exploratory well - a well drilled to find a new field or to find a new reservoir in a field previously found to be productive of oil or gas in another reservoir. Generally, an exploratory well is any well that is not a development well, an extension well, a service well or a stratigraphic test well.
gob well - a well drilled or vent hole converted to a well which produces or is capable of producing coalbed methane or other natural gas from a distressed zone created above and below a mined-out coal seam by any prior full seam extraction of the coal.
service well - a well drilled or completed for the purpose of supporting production in an existing field. Specific purposes of service wells include, among other things, gas injection, water injection and salt-water disposal.
play - a proven geological formation that contains commercial amounts of hydrocarbons.
royalty interest - the land owner’s share of oil or gas production, historically 1/8.
throughput - the volume of natural gas transported or passing through a pipeline, plant, terminal, or other facility during a particular period. 
transportation, gathering and compression - cost incurred related to transporting natural gas to the ultimate point of sale. These costs also include costs related to physically preparing natural gas, natural gas liquids and condensate for ultimate sale which include costs related to processing, compressing, dehydrating and fractionating, among others.
working interest - an interest that gives the owner the right to drill, produce and conduct operating activities on a property and receive a share of any production.
wet gas - natural gas that contains significant heavy hydrocarbons, such as propane, butane and other liquid hydrocarbons.






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

ITEM 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)Three Months EndedNine Months Ended
(Unaudited)September 30,September 30,
Revenue and Other Operating Income:2020201920202019
Natural Gas, NGL and Oil Revenue$182,213 $265,051 $609,483 $1,043,862 
(Loss) Gain on Commodity Derivative Instruments(168,834)213,913 (116,995)240,118 
Purchased Gas Revenue31,541 29,192 78,324 64,181 
Other Revenue and Operating Income21,155 21,841 60,463 65,299 
Total Revenue and Other Operating Income66,075 529,997 631,275 1,413,460 
Costs and Expenses:
Operating Expense
Lease Operating Expense10,377 14,202 30,654 52,706 
Production, Ad Valorem, and Other Fees5,994 6,127 17,540 20,103 
Transportation, Gathering and Compression68,810 80,193 212,077 244,217 
Depreciation, Depletion and Amortization114,464 120,459 357,174 374,619 
Exploration and Production Related Other Costs2,141 6,075 9,339 14,900 
Purchased Gas Costs31,721 27,490 76,709 62,476 
Impairment of Exploration and Production Properties61,849 
Impairment of Goodwill473,045 
Selling, General, and Administrative Costs22,714 24,307 76,350 109,016 
Other Operating Expense23,284 19,746 70,561 61,197 
Total Operating Expense279,505 298,599 1,385,298 939,234 
Other Expense
Other Expense2,180 3,439 12,184 2,757 
Gain on Asset Sales and Abandonments(3,567)(3,308)(21,559)(610)
Loss (Gain) on Debt Extinguishment108 (10,812)7,614 
Interest Expense37,921 38,405 133,173 114,328 
Total Other Expense36,642 38,536 112,986 124,089 
Total Costs and Expenses316,147 337,135 1,498,284 1,063,323 
(Loss) Earnings Before Income Tax(250,072)192,862 (867,009)350,137 
Income Tax (Benefit) Expense(61,279)48,902 (242,507)78,133 
Net (Loss) Income(188,793)143,960 (624,502)272,004 
Less: Net Income Attributable to Noncontrolling Interest15,905 28,422 55,031 81,325 
Net (Loss) Income Attributable to CNX Resources Shareholders$(204,698)$115,538 $(679,533)$190,679 
(Loss) Earnings per Share
Basic$(1.03)$0.62 $(3.56)$1.01 
Diluted$(1.03)$0.61 $(3.56)$1.01 
Dividends Declared$$$$
(Dollars in thousands, except per share data)Three Months Ended Nine Months Ended
(Unaudited)September 30, September 30,
Revenues and Other Operating Income:2019 2018 2019 2018
Natural Gas, NGLs and Oil Revenue$265,051
 $344,712
 $1,043,862
 $1,084,851
Gain on Commodity Derivative Instruments213,913
 18,005
 240,118
 78,752
Purchased Gas Revenue29,192
 10,560
 64,181
 38,546
Midstream Revenue18,525
 19,946
 55,863
 69,684
Other Operating Income3,316
 3,903
 9,436
 23,146
Total Revenue and Other Operating Income529,997
 397,126
 1,413,460
 1,294,979
Costs and Expenses:       
Operating Expense       
Lease Operating Expense14,202
 16,202
 52,706
 78,350
Transportation, Gathering and Compression80,193
 68,907
 244,217
 230,935
Production, Ad Valorem, and Other Fees6,127
 7,342
 20,103
 24,277
Depreciation, Depletion and Amortization120,459
 119,585
 374,619
 363,338
Exploration and Production Related Other Costs6,075
 3,321
 14,900
 9,401
Purchased Gas Costs27,490
 10,602
 62,476
 37,404
Impairment of Other Intangible Assets
 
 
 18,650
Selling, General, and Administrative Costs24,307
 32,435
 109,016
 98,693
Other Operating Expense19,746
 17,405
 61,197
 51,238
Total Operating Expense298,599
 275,799
 939,234
 912,286
Other Expense (Income)       
Other Expense (Income)3,439
 1,105
 2,757
 (4,812)
Gain on Asset Sales and Abandonments(3,308) (134,320) (610) (148,942)
Gain on Previously Held Equity Interest
 
 
 (623,663)
Loss on Debt Extinguishment
 15,385
 7,614
 54,433
Interest Expense38,405
 35,723
 114,328
 112,712
Total Other Expense (Income)38,536
 (82,107) 124,089
 (610,272)
Total Costs and Expenses337,135
 193,692
 1,063,323
 302,014
Earnings Before Income Tax192,862
 203,434
 350,137
 992,965
Income Tax Expense48,902
 56,678
 78,133
 239,269
Net Income143,960
 146,756
 272,004
 753,696
Less: Net Income Attributable to Noncontrolling Interest28,422
 21,727
 81,325
 59,090
Net Income Attributable to CNX Resources Shareholders$115,538
 $125,029
 $190,679
 $694,606
        
Earnings per Share       
Basic$0.62
 $0.59
 $1.01
 $3.22
Diluted$0.61
 $0.59
 $1.01
 $3.18
        
Dividends Declared$
 $
 $
 $





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


4




CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 Three Months EndedNine Months Ended
(Dollars in thousands)September 30,September 30,
(Unaudited)2020201920202019
Net (Loss) Income$(188,793)$143,960 $(624,502)$272,004 
Other Comprehensive Income:
  Actuarially Determined Long-Term Liability Adjustments (Net of tax: ($40), ($15), ($119), ($44))112 41 335 126 
Comprehensive (Loss) Income(188,681)144,001 (624,167)272,130 
Less: Comprehensive Income Attributable to Noncontrolling Interest15,905 28,422 55,031 81,325 
Comprehensive (Loss) Income Attributable to CNX Resources Shareholders$(204,586)$115,579 $(679,198)$190,805 
 Three Months Ended Nine Months Ended
(Dollars in thousands)September 30, September 30,
(Unaudited)2019 2018 2019 2018
Net Income$143,960
 $146,756
 $272,004
 $753,696
Other Comprehensive Income:       
  Actuarially Determined Long-Term Liability Adjustments (Net of tax: ($15), ($13), ($44), ($794))41
 22
 126
 2,004


 
    
Comprehensive Income144,001
 146,778
 272,130
 755,700
        
Less: Comprehensive Income Attributable to Noncontrolling Interest28,422
 21,727
 81,325
 59,090
        
Comprehensive Income Attributable to CNX Resources Shareholders$115,579
 $125,051
 $190,805
 $696,610






































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


5




CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)  (Unaudited)
(Dollars in thousands)September 30,
2019
 December 31,
2018
(Dollars in thousands)September 30,
2020
December 31,
2019
ASSETS   ASSETS
Current Assets:   Current Assets:
Cash and Cash Equivalents$5,484
 $17,198
Cash and Cash Equivalents$150,132 $16,283 
Restricted CashRestricted Cash733 
Accounts and Notes Receivable:  
Accounts and Notes Receivable:
Trade96,997
 252,424
Other Receivables11,462
 11,077
Trade, netTrade, net75,929 133,480 
Other Receivables, netOther Receivables, net4,653 13,679 
Supplies Inventories7,527
 9,715
Supplies Inventories10,090 6,984 
Recoverable Income Taxes11,184
 149,481
Recoverable Income Taxes644 62,425 
Derivative InstrumentsDerivative Instruments77,608 247,794 
Prepaid Expenses213,072
 61,791
Prepaid Expenses12,450 17,456 
Total Current Assets345,726
 501,686
Total Current Assets332,239 498,101 
Property, Plant and Equipment:   Property, Plant and Equipment:
Property, Plant and Equipment10,512,298
 9,567,428
Property, Plant and Equipment10,904,837 10,572,006 
Less—Accumulated Depreciation, Depletion and Amortization2,981,723
 2,624,984
Less—Accumulated Depreciation, Depletion and Amortization3,841,699 3,435,431 
Total Property, Plant and Equipment—Net7,530,575
 6,942,444
Total Property, Plant and Equipment—Net7,063,138 7,136,575 
Other Assets:   
Other Non-Current Assets:Other Non-Current Assets:
Operating Lease Right-of-Use Assets205,647
 
Operating Lease Right-of-Use Assets124,329 187,097 
Investment in Affiliates17,110
 18,663
Investment in Affiliates15,685 16,710 
Derivative InstrumentsDerivative Instruments160,098 314,096 
Goodwill796,359
 796,359
Goodwill323,314 796,359 
Other Intangible Assets98,285
 103,200
Other Intangible Assets91,733 96,647 
Restricted CashRestricted Cash5,456 
Other292,556
 229,818
Other13,182 15,221 
Total Other Assets1,409,957
 1,148,040
Total Other Non-Current AssetsTotal Other Non-Current Assets733,797 1,426,130 
TOTAL ASSETS$9,286,258
 $8,592,170
TOTAL ASSETS$8,129,174 $9,060,806 























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


6



CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

(Unaudited)
(Dollars in thousands, except per share data)September 30,
2020
December 31,
2019
LIABILITIES AND EQUITY
Current Liabilities:
Accounts Payable$117,004 $202,553 
Derivative Instruments144,545 41,466 
Current Portion of Finance Lease Obligations7,419 7,164 
Current Portion of Long-Term Debt22,488 
Current Portion of Operating Lease Obligations52,032 61,670 
Other Accrued Liabilities164,473 216,086 
Total Current Liabilities507,961 528,939 
Non-Current Liabilities:
Long-Term Debt2,577,974 2,754,443 
Finance Lease Obligations2,322 7,706 
Operating Lease Obligations66,180 110,466 
Derivative Instruments203,709 115,862 
Deferred Income Taxes398,878 476,108 
Asset Retirement Obligations61,761 63,377 
Other40,213 41,596 
Total Non-Current Liabilities3,351,037 3,569,558 
TOTAL LIABILITIES3,858,998 4,098,497 
Stockholders’ Equity:
Common Stock, $.01 Par Value; 500,000,000 Shares Authorized, 224,528,583 Issued and Outstanding at September 30, 2020; 186,642,962 Issued and Outstanding at December 31, 2019
2,249 1,870 
Capital in Excess of Par Value2,989,699 2,199,605 
Preferred Stock, 15,000,000 shares authorized, None issued and outstanding
Retained Earnings1,290,498 1,971,676 
Accumulated Other Comprehensive Loss(12,270)(12,605)
Total CNX Resources Stockholders’ Equity4,270,176 4,160,546 
Noncontrolling Interest801,763 
TOTAL STOCKHOLDERS' EQUITY4,270,176 4,962,309 
TOTAL LIABILITIES AND EQUITY$8,129,174 $9,060,806 

 (Unaudited)  
(Dollars in thousands, except per share data)September 30,
2019
 December 31,
2018
LIABILITIES AND EQUITY   
Current Liabilities:   
Accounts Payable$308,003
 $229,806
Current Portion of Finance Lease Obligations7,203
 6,997
Current Portion of Operating Lease Obligations65,061
 
Other Accrued Liabilities241,357
 286,172
Total Current Liabilities621,624
 522,975
Non-Current Liabilities:   
Long-Term Debt2,640,234
 2,378,205
Finance Lease Obligations9,400
 13,299
Deferred Income Taxes476,968
 398,682
Operating Lease Obligations122,514
 
Asset Retirement Obligations33,123
 37,479
Other160,577
 159,787
Total Non-Current Liabilities3,442,816
 2,987,452
TOTAL LIABILITIES4,064,440
 3,510,427
Stockholders’ Equity:   
Common Stock, $.01 Par Value; 500,000,000 Shares Authorized, 186,586,751 Issued and Outstanding at September 30, 2019; 198,663,342 Issued and Outstanding at December 31, 20181,870
 1,990
Capital in Excess of Par Value2,197,783
 2,264,063
Preferred Stock, 15,000,000 shares authorized, None issued and outstanding
 
Retained Earnings2,243,104
 2,071,809
Accumulated Other Comprehensive Loss(7,778) (7,904)
Total CNX Resources Stockholders’ Equity4,434,979
 4,329,958
Noncontrolling Interest786,839
 751,785
TOTAL STOCKHOLDERS' EQUITY5,221,818
 5,081,743
TOTAL LIABILITIES AND EQUITY$9,286,258
 $8,592,170


















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


7




CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Dollars in thousands)
(Unaudited)
Common StockCapital in
Excess
of Par
Value
Retained Earnings (Deficit)Accumulated Other Comprehensive Income
(Loss)
Total
CNX Resources Stockholders’ Equity
Non- Controlling InterestTotal Equity
June 30, 2020$1,878 $2,261,729 $1,495,197 $(12,382)$3,746,422 $820,532 $4,566,954 
Net (Loss) Income— — (204,698)— (204,698)15,905 (188,793)
Issuance of Common Stock— 151 — — 151 — 151 
Shares Withheld for Taxes— — (1)— (1)— (1)
Amortization of Stock-Based Compensation Awards— 1,902 — — 1,902 601 2,503 
Equity Component of Convertible Senior Notes, net of Issuance Costs— 10 — — 10 — 10 
Other Comprehensive Income— — — 112 112 — 112 
Distributions to CNXM Noncontrolling Interest Holders— — — — — (21,055)(21,055)
CNXM Merger371 725,907 — — 726,278 (815,983)(89,705)
September 30, 2020$2,249 $2,989,699 $1,290,498 $(12,270)$4,270,176 $$4,270,176 
(Dollars in thousands)
(Unaudited)
June 30, 2019$1,879 $2,203,969 $2,127,627 $(7,819)$4,325,656 $774,339 $5,099,995 
Net Income— — 115,538 — 115,538 28,422 143,960 
Issuance of Common Stock48 — — 49 — 49 
Purchase and Retirement of Common Stock(10)(7,687)— — (7,697)— (7,697)
Shares Withheld for Taxes— — (61)— (61)— (61)
Amortization of Stock-Based Compensation Awards— 1,453 — — 1,453 328 1,781 
Other Comprehensive Income— — — 41 41 — 41 
Distributions to CNXM Noncontrolling Interest Holders— — — — — (16,250)(16,250)
September 30, 2019$1,870 $2,197,783 $2,243,104 $(7,778)$4,434,979 $786,839 $5,221,818 
 Three Months Ended Nine Months Ended
(Unaudited)September 30, September 30,
Dollars in Thousands2019 2018 2019 2018
Total Stockholders’ Equity, Beginning Balance$5,099,995
 $5,038,923
 $5,081,743
 $3,899,899
        
Common Stock and Capital in Excess of Par Value:       
Beginning Balance2,205,848
 2,374,788
 2,266,053
 2,452,564
Issuance of Common Stock49
 126
 211
 1,689
Purchase and Retirement of Common Stock(7,697) (66,503) (101,687) (155,191)
Amortization of Stock-Based Compensation Awards1,453
 4,737
 35,076
 14,086
Ending Balance2,199,653
 2,313,148
 2,199,653
 2,313,148
        
Retained Earnings:       
Beginning Balance2,127,627
 1,940,507
 2,071,809
 1,455,811
Net Income115,538
 125,029
 190,679
 694,606
Purchase and Retirement of Common Stock
 (61,512) (13,790) (141,543)
Shares Withheld for Taxes(61) (136) (5,594) (4,986)
Ending Balance2,243,104
 2,003,888
 2,243,104
 2,003,888
        
Accumulated Other Comprehensive Loss:       
Beginning Balance(7,819) (6,494) (7,904) (8,476)
Other Comprehensive Income41
 22
 126
 2,004
Ending Balance(7,778) (6,472) (7,778) (6,472)
        
Total CNX Resources Corporation Stockholders' Equity4,434,979
 4,310,564
 4,434,979
 4,310,564
        
Non-Controlling Interest:       
Beginning Balance774,339
 730,122
 751,785
 
Net Income28,422
 21,727
 81,325
 59,090
Shares Withheld for Taxes
 (1) (690) (348)
Amortization of Stock-Based Compensation Awards328
 506
 1,481
 1,775
Distributions to CNXM Noncontrolling Interest Holders(16,250) (14,099) (47,062) (40,839)
Acquisition of CNX Gathering, LLC
 
 
 718,577
Ending Balance786,839
 738,255
 786,839
 738,255
        
Total Stockholders' Equity, Ending Balance$5,221,818
 $5,048,819
 $5,221,818
 $5,048,819




















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


8





CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
STOCKHOLDERS’ EQUITY
(Unaudited)Nine Months Ended
Dollars in ThousandsSeptember 30,
Cash Flows from Operating Activities:2019 2018
Net Income$272,004
 $753,696
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
 
Depreciation, Depletion and Amortization374,619
 363,338
Amortization of Deferred Financing Costs6,057
 6,640
Impairment of Other Intangible Assets
 18,650
Stock-Based Compensation36,557
 15,861
Gain on Asset Sales and Abandonments(610) (148,942)
Gain on Previously Held Equity Interest
 (623,663)
Loss on Debt Extinguishment7,614
 54,433
Gain on Commodity Derivative Instruments(240,118) (78,752)
Net Cash Received in Settlement of Commodity Derivative Instruments26,331
 2,518
Deferred Income Taxes78,133
 259,116
Equity in Earnings of Affiliates(1,703) (4,688)
Return on Equity Investment3,256
 
Changes in Operating Assets:
 
Accounts and Notes Receivable154,715
 50,125
Recoverable Income Taxes138,406
 (8,501)
Supplies Inventories2,188
 1,016
Prepaid Expenses5,725
 (337)
Changes in Operating Liabilities:
 
Accounts Payable55,280
 2,532
Accrued Interest2,359
 5,812
Other Operating Liabilities(31,689) 30,418
Changes in Other Liabilities(23,041) (9,736)
Other9
 683
Net Cash Provided by Operating Activities866,092
 690,219
Cash Flows from Investing Activities:
 
Capital Expenditures(964,502) (794,124)
CNX Gathering LLC Acquisition, Net of Cash Acquired
 (299,272)
Proceeds from Asset Sales15,276
 500,811
Net Distributions from Equity Affiliates
 7,750
Net Cash Used in Investing Activities(949,226) (584,835)
Cash Flows from Financing Activities:
 
Payments on Miscellaneous Borrowings(5,322) (5,455)
Payments on Long-Term Notes(405,876) (935,419)
Net Proceeds from (Payments on) CNXM Revolving Credit Facility162,000
 (105,500)
Proceeds from CNX Revolving Credit Facility

1,200
 439,000
Proceeds from Issuance of CNX Senior Notes500,000
 
Proceeds from Issuance of CNXM Senior Notes
 394,000
Distributions to CNXM Noncontrolling Interest Holders(47,062) (40,839)
Proceeds from Issuance of Common Stock210
 1,689
Shares Withheld for Taxes(6,284) (5,335)
Purchases of Common Stock(117,477) (294,365)
Debt Repurchase and Financing Fees(9,969) (19,655)
Net Cash Provided by (Used in) Financing Activities71,420
 (571,879)
Net Decrease in Cash and Cash Equivalents(11,714) (466,495)
Cash and Cash Equivalents at Beginning of Period17,198
 509,167
Cash and Cash Equivalents at End of Period$5,484
 $42,672

(Dollars in thousands)Common
Stock
Capital in
Excess
of Par
Value
Retained
Earnings
(Deficit)
Accumulated
Other
Comprehensive
Income
(Loss)
Total
CNX Resources
Stockholders’
Equity
Non-
Controlling
Interest
Total
Equity
December 31, 2019$1,870 $2,199,605 $1,971,676 $(12,605)$4,160,546 $801,763 $4,962,309 
(Unaudited)
Net (Loss) Income— — (679,533)— (679,533)55,031 (624,502)
Issuance of Common Stock1,797 — — 1,805 — 1,805 
Shares Withheld for Taxes— — (1,645)— (1,645)(309)(1,954)
Amortization of Stock-Based Compensation Awards— 10,424 — — 10,424 1,485 11,909 
Equity Component of Convertible Senior Notes, net of Issuance Costs— 78,317 — — 78,317 — 78,317 
Purchase of Capped Call— (26,351)— — (26,351)— (26,351)
Other Comprehensive Income— — — 335 335 — 335 
Distributions to CNXM Noncontrolling Interest Holders— — — — — (41,987)(41,987)
CNXM Merger371 725,907 — — 726,278 (815,983)(89,705)
September 30, 2020$2,249 $2,989,699 $1,290,498 $(12,270)$4,270,176 $$4,270,176 
(Dollars in thousands)
December 31, 2018$1,990 $2,264,063 $2,071,809 $(7,904)$4,329,958 $751,785 $5,081,743 
(Unaudited)
Net Income— — 190,679 — 190,679 81,325 272,004 
Issuance of Common Stock202 — — 211 — 211 
Purchase and Retirement of Common Stock(129)(101,558)(13,790)— (115,477)— (115,477)
Shares Withheld for Taxes— — (5,594)— (5,594)(690)(6,284)
Amortization of Stock-Based Compensation Awards— 35,076 — — 35,076 1,481 36,557 
Other Comprehensive Income— — — 126 126 — 126 
Distributions to CNXM Noncontrolling Interest Holders— — — — — (47,062)(47,062)
September 30, 2019$1,870 $2,197,783 $2,243,104 $(7,778)$4,434,979 $786,839 $5,221,818 
















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


9



CNX RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)Nine Months Ended
Dollars in ThousandsSeptember 30,
Cash Flows from Operating Activities:20202019
Net (Loss) Income$(624,502)$272,004 
Adjustments to Reconcile Net (Loss) Income to Net Cash Provided by Operating Activities:
Depreciation, Depletion and Amortization357,174 374,619 
Amortization of Deferred Financing Costs14,602 6,057 
Impairment of Exploration and Production Properties61,849 
Impairment of Goodwill473,045 
Stock-Based Compensation11,909 36,557 
Gain on Asset Sales and Abandonments(21,559)(610)
(Gain) Loss on Debt Extinguishment(10,812)7,614 
Loss (Gain) on Commodity Derivative Instruments116,995 (240,118)
Loss on Other Derivative Instruments14,389 
Net Cash Received in Settlement of Commodity Derivative Instruments383,727 26,331 
Deferred Income Taxes(186,707)78,133 
Equity in Loss (Earnings) of Affiliates1,025 (1,703)
Return on Equity Investment3,256 
Changes in Operating Assets:
Accounts and Notes Receivable64,843 154,715 
Recoverable Income Taxes61,781 138,406 
Supplies Inventories(3,106)2,188 
Prepaid Expenses4,700 5,725 
Changes in Other Assets267 
Changes in Operating Liabilities:
Accounts Payable(29,641)55,280 
Accrued Interest(13,967)2,359 
Other Operating Liabilities(40,479)(31,689)
Changes in Other Liabilities(1,186)(23,041)
Net Cash Provided by Operating Activities634,347 866,092 
Cash Flows from Investing Activities:
Capital Expenditures(395,236)(964,502)
Proceeds from Asset Sales31,981 15,276 
Net Cash Used in Investing Activities(363,255)(949,226)
Cash Flows from Financing Activities:
Payments on Miscellaneous Borrowings(5,348)(5,322)
Payments on Long-Term Notes(518,865)(405,876)
Net Proceeds from CNXM Revolving Credit Facility31,250 162,000 
Net (Payments on) Proceeds from CNX Revolving Credit Facility
(251,000)1,200 
Proceeds from Issuance of CNX Senior Notes207,000 500,000 
Net Proceeds from CSG Non-Revolving Credit Facilities164,381 
Proceeds from Issuance of Convertible Senior Notes334,650 
Purchase of Capped Call Related to Convertible Senior Notes(35,673)
Distributions to CNXM Noncontrolling Interest Holders(41,987)(47,062)
Proceeds from Issuance of Common Stock1,805 210 
Shares Withheld for Taxes(1,954)(6,284)
Purchases of Common Stock(117,477)
Debt Issuance and Financing Fees(15,313)(9,969)
Net Cash (Used in) Provided by Financing Activities(131,054)71,420 
Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash140,038 (11,714)
Cash, Cash Equivalents, and Restricted Cash at Beginning of Period16,283 17,198 
Cash, Cash Equivalents, and Restricted Cash at End of Period$156,321 $5,484 
The accompanying notes are an integral part of these financial statements.

10


CNX RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)

NOTE 1—BASIS OF PRESENTATION:

The accompanying Unaudited Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 20192020 are not necessarily indicative of the results that may be expected for future periods.

The Consolidated Balance Sheet at December 31, 20182019 has been derived from the Audited Consolidated Financial Statements at that date but does not include all the notes required by generally accepted accounting principles for complete financial statements. For further information, refer to the Consolidated Financial Statements and related notes for the year ended December 31, 20182019 included in CNX Resources Corporation's ("CNX," "CNX Resources," the "Company," "we," "us," or "our") Annual Report on Form 10-K as filed with the Securities and Exchange Commission (SEC) on February 7,10, 2020.

On September 28, 2020, the Merger (as defined in Note 13 – Acquisitions and Dispositions) of CNX Midstream Partners LP (CNXM) was completed. Prior to the Merger, 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 three and nine months ended September 30, 2019.

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

Cash, Cash Equivalents, and Restricted Cash

The Consolidated Balance Sheet at September 30, 2019 reflectsfollowing table provides a reconciliation of cash, cash equivalents, and restricted cash to amounts shown in the full consolidationstatement of CNX Gathering LLC's assets and liabilities as a resultcash flows:
September 30,
20202019
Cash and Cash Equivalents$150,132 $5,484 
Restricted Cash, Current Portion733 
Restricted Cash, Less Current Portion5,456 
Total Cash, Cash Equivalents, and Restricted Cash$156,321 $5,484 

Restricted Cash

Restricted cash consists of cash that the Company is contractually obligated to maintain in accordance with the terms of the acquisition by CNX Gas Company LLC ("CNX Gas"), an indirect wholly owned subsidiary of CNX, of NBL Midstream, LLC's ("Noble") 50% interest in CNXCardinal States Gathering LLC on January 3, 2018and CSG Holdings II LLC Credit Agreement, each dated March 13, 2020 (See Note 59 - Acquisitions and DispositionsLong-Term Debt for more information).

Receivables

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

11


allowance after all means of collection had been exhausted and the potential for recovery was considered remote. Reserves for uncollectable amounts were not material in the periods presented.
Under Topic 326, management records an allowance for credit losses related to the collectability of third-party customers' receivables using the historical aging of the customer receivable balance. The collectability is determined based on past events, including historical experience, customer credit rating, as well as current market conditions. CNX monitors customer ratings and collectability on an on-going basis. Account balances will be charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

As of September 30, 2020 and December 31, 2019, Accounts Receivable - Trade were $76,007 and $133,480, respectively, and Other Receivables were $9,167 and $16,142, respectively. The following represents the rollforward of the allowance for credit losses for the nine months ended:
September 30,
20202019
Allowance for Credit Losses - Trade, Beginning of Year$$
Provision for Expected Credit Losses78 
Allowance for Credit Losses - Trade, End of Period$78 $
Allowance for Credit Losses - Other Receivables, Beginning of Year$2,463 $2,038 
Provision for Expected Credit Losses2,974 389 
Write-off of Uncollectible Accounts(923)(77)
Allowance for Credit Losses - Other Receivables, End of Period$4,514 $2,350 

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 areis computed similarly to basic earnings per share, except that the weighted average shares outstanding are increased to include, if dilutive, additional shares from stock options, performance stock options, restricted stock units, and performance share units, if dilutive.and shares issuable upon conversion of CNX's outstanding Convertible Notes (See Note 9 - 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 13 - 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 Midstream Partners LP's ("CNXM") dilutive unitsrestricted 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 have a material impact on the Company's earnings per share calculations for the three or nine months ended September 30, 2019, the three months ended September 30, 2018, or the period from January 3, 2018 through September 30, 2018.result in incremental fair value.

The table below sets forth the share-based awards that have been excluded from the computation of diluted earnings per share because their effect would be antidilutive:
 For the Three Months Ended September 30,For the Nine Months Ended September 30,
 2020201920202019
Anti-Dilutive Options4,237,319 2,035,273 4,237,319 2,035,273 
Anti-Dilutive Restricted Stock Units2,180,548 814,183 2,180,548 813,266 
Anti-Dilutive Performance Share Units780,335 780,335 
Anti-Dilutive Performance Stock Options927,268 927,268 
7,198,202 3,776,724 7,198,202 3,775,807 
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2019 2018 2019 2018
Anti-dilutive Options2,035,273
 2,288,274
 2,035,273
 2,288,274
Anti-dilutive Restricted Stock Units814,183
 
 813,266
 55,936
Anti-dilutive Performance Share Units
 157,120
 
 157,120
Anti-dilutive Performance Stock Options927,268
 927,268
 927,268
 927,268
 3,776,724
 3,372,662
 3,775,807
 3,428,598



12








10


Additionally, the 32,242,975 shares underlying the Convertible Notes are not considered in the calculation of diluted net loss per share for the three and nine months ended September 30, 2020 as these Convertible Notes were not convertible as of September 30, 2020. 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, and therefore will use the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable.

The table below sets forth the share-based awards that have been exercised or released:
 For the Three Months Ended September 30,For the Nine Months Ended September 30,
 2020201920202019
Options21,864 6,953 261,703 27,794 
Restricted Stock Units21,186 28,769 525,226 1,002,003 
Performance Share Units274,716 342,882 
43,050 35,722 1,061,645 1,372,679 
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2019 2018 2019 2018
Options6,953
 18,546
 27,794
 245,847
Restricted Stock Units28,769
 184,176
 1,002,003
 362,573
Performance Share Units
 192,926
 342,882
 550,523
 35,722
 395,648
 1,372,679
 1,158,943


Pursuant to the terms of the change in control severance agreements of certain CNX employees and CNX officers, outstanding equity awards held by such employees and officers vest upon a stockholder (or stockholder group) becoming the beneficial owner of more than 25% of the Company's outstanding common stock. During the nine months ended September 30, 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 thanthe 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 and officers 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 2019 restricted stock unit and performance share unit awards.awards that were issued during 2019. The accelerated vesting resulted in $19,654 of additional long-term equity-based compensation expense for the nine months ended September 30, 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 computations for basic and diluted (loss) earnings per share are as follows:
For the Three Months Ended September 30,For the Nine Months Ended September 30,
 2020201920202019
Net (Loss) Income$(188,793)$143,960 $(624,502)$272,004 
      Less: Net Income Attributable to Non-Controlling Interest15,905 28,422 55,031 81,325 
Net (Loss) Income Attributable to CNX Resources Shareholders$(204,698)$115,538 $(679,533)$190,679 
Weighted-Average Shares of Common Stock Outstanding198,727,472 187,448,749 191,015,680 188,012,044 
Effect of Diluted Shares*982,210 1,548,899 
Weighted-Average Diluted Shares of Common Stock Outstanding198,727,472 188,430,959 191,015,680 189,560,943 
(Loss) Earnings per Share:
Basic$(1.03)$0.62 $(3.56)$1.01 
Diluted$(1.03)$0.61 $(3.56)$1.01 
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2019 2018 2019 2018
Net Income$143,960
 $146,756
 $272,004
 $753,696
      Less: Net Income Attributable to Non-Controlling Interest28,422
 21,727
 81,325
 59,090
Net Income Attributable to CNX Resources Shareholders$115,538
 $125,029
 $190,679
 $694,606
        
Weighted-average Shares of Common Stock Outstanding187,448,749
 210,238,509
 188,012,044
 216,010,561
Effect of Diluted Shares982,210
 2,469,573
 1,548,899
 2,288,301
Weighted-average Diluted Shares of Common Stock Outstanding188,430,959
 212,708,082
 189,560,943
 218,298,862
        
Earnings per Share:       
Basic$0.62
 $0.59
 $1.01
 $3.22
Diluted$0.61
 $0.59
 $1.01
 $3.18
*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.



13

11




NOTE 3—CHANGES IN ACCUMULATED OTHER COMPREHENSIVE LOSS:

Changes in Accumulated Other Comprehensive Loss related to pension obligations, net of tax, were as follows:
 Amount
Balance at December 31, 2018$(7,904)
Amounts Reclassified from Accumulated Other Comprehensive Loss, net of tax126
Balance at September 30, 2019$(7,778)


The following table shows the reclassification of adjustments out of Accumulated Other Comprehensive Loss:
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2019 2018 2019 2018
Actuarially Determined Long-Term Liability Adjustments       
Amortization of Prior Service Costs$(4) $(6) $(13) $(186)
Recognized Net Actuarial Loss60
 41
 183
 749
Total56
 35
 170
 563
Less: Tax Benefit15
 13
 44
 202
Net of Tax$41
 $22
 $126
 $361


NOTE 4—REVENUE FROM CONTRACTS WITH CUSTOMERS:

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

For natural gas, NGLsNGL 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, NGLsNGL and oil as presented on the accompanying Consolidated Statements of Income represent the Company’s share of revenues net of royalties and excluding revenue interests owned by others. When selling natural gas, NGLsNGL and oil on behalf of royalty owners or working interest owners, the Company is acting as an agent and thus reports the revenue on a net basis.

Midstream revenue consistsIncluded in Other Revenue and Operating Income in the Consolidated Statements of Income and in the below table, are revenues generated from natural gas gathering activities.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.













12



Disaggregation of Revenue

The following table is a disaggregation of revenue by major source:
For the Three Months Ended September 30,For the Nine Months Ended September 30,
2020201920202019
Revenue from Contracts with Customers
Natural Gas Revenue$163,054 $245,815 $561,162 $966,574 
NGL Revenue15,053 18,305 40,691 72,095 
Oil/Condensate Revenue4,106 931 7,630 5,193 
Total Natural Gas, NGL and Oil Revenue182,213 265,051 609,483 1,043,862 
Purchased Gas Revenue31,541 29,192 78,324 64,181 
Other Sources of Revenue and Other Operating Income
(Loss) Gain on Commodity Derivative Instruments(168,834)213,913 (116,995)240,118 
Other Revenue and Operating Income21,155 21,841 60,463 65,299 
Total Revenue and Other Operating Income$66,075 $529,997 $631,275 $1,413,460 
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
2019 2018 2019 2018
Revenue from Contracts with Customers       
Natural Gas Revenue$245,815
 $293,864
 $966,574
 $930,505
NGLs Revenue18,305
 46,663
 72,095
 137,104
Condensate Revenue839
 3,426
 4,846
 14,925
Oil Revenue92
 759
 347
 2,317
Total Natural Gas, NGLs and Oil Revenue265,051
 344,712
 1,043,862
 1,084,851
        
Purchased Gas Revenue29,192
 10,560
 64,181
 38,546
Midstream Revenue18,525
 19,946
 55,863
 69,684
        
Other Sources of Revenue and Other Operating Income       
Gain on Commodity Derivative Instruments213,913
 18,005
 240,118
 78,752
Other Operating Income3,316
 3,903
 9,436

23,146
Total Revenue and Other Operating Income$529,997
 $397,126
 $1,413,460
 $1,294,979


The disaggregated revenue corresponds with the Company’s segment reporting found in Note 1714 - 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 Accounting Standards Codification (ASC)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 $252,424$133,480 and $96,997,$75,929, respectively, as of September 30, 2019.2020.



14


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

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

For revenue associated with contract terms greater than one year with a fixed price component, the aggregate amount of the transaction price allocated to remaining performance obligations was $155,567$127,887 as of September 30, 2019.2020. The Company expects to recognize net revenue of $43,538$50,125 in the next 12 months and $47,076$41,379 over the following 12 months, with the remainder recognized thereafter.

For revenue associated with ourCNX'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.


13




Prior-Period Performance Obligations

CNX records revenue in the month production is delivered to the purchaser. However, settlement statements for certain natural gas and NGL revenue may not be received for 30 to 90 days after the date production is delivered, and as a result, the Company is required to estimate the amount of production delivered to the purchaser and the price that will be received for the sale of the product. CNX records the differences between the estimate and the actual amountamounts received in the month that payment is received from the purchaser. The Company has existing internal controls for its revenue estimation process and the related accruals, and any identified differences between its revenue estimates and the actual revenue received historically have not been significant. For the three and nine months ended September 30, 20192020 and 2018,2019, revenue recognized in the current reporting period related to performance obligations satisfied in a prior reporting period was not material.

NOTE 5—ACQUISITIONS AND DISPOSITIONS:4—INCOME TAXES:

On August 31, 2018,The effective tax rates for the three and nine months ended September 30, 2020 were 24.5% and 28.0%, respectively. The effective tax rates for the three and nine months ended September 30, 2019 were 25.4% and 22.3%, respectively. The effective tax rates for the three and nine months ended September 30, 2020 and 2019 differ from the U.S. federal statutory rate of 21% primarily due to the impact of noncontrolling interest, equity compensation and state taxes.

Effective September 28, 2020, CNXM merged with a wholly-owned subsidiary of CNX closed onwith CNXM surviving as a wholly-owned subsidiary (See Note 13 - Acquisitions and Dispositions for more information). The tax effects of the saleMerger were reported as an adjustment to deferred income taxes and capital in excess 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 $381,214 are included in Proceeds from Asset Sales in the Consolidated Statements of Cash Flows and the net gain on the transaction of $130,849 is included in the Gain on Asset Sales and Abandonments in the Consolidated Statements of Income.par value.

OnMay 2, 2018, CNX closed on an Asset Exchange Agreement March 27, 2020, the United States enacted the Coronavirus Aid, Relief, and Economic Security Act (the “AEA”"Act") with HG Energy II Appalachia, LLC (“HG Energy”), pursuant to which, among other things, HG Energy (i) paidremoved the 80% taxable income limitation for utilization of net operating losses generated in tax years 2018 through 2020, allowing for 5-year net operating loss carrybacks, increased the adjusted taxable income limitation for the disallowance of interest expense from 30% to CNX approximately $7,00050%, and (ii) assigned to CNX certain undeveloped Marcellus and Utica acreage in Southwest Pennsylvania, in exchangeprovided 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 amendmentrefunds of the existing gas gathering agreement between CNX and CNXM to increase the existing well commitment by an additional 40 wells. The net gain on the sale was $286 and is included in the Gain on Asset Sales and Abandonments line of the Consolidated Statements of Income.

any remaining alternative minimum tax (“AMT”) credits. As a result of the AEA, Act, the Company recorded AMT refunds of $102,482 in Recoverable Income Taxes in the Consolidated Balance Sheets in anticipation of the AMT refund being received in 2020. The Company received the AMT tax refund in the third quarter of 2020.The impact of other tax implications of the Act on the financial statements and related disclosures are immaterial.


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

The total amount of uncertain tax positions at September 30, 2020 and December 31, 2019 was $33,243 and $31,516, respectively. If these uncertain tax positions were recognized, approximately $33,243 would affect CNX's effective tax rate at September 30, 2020 and December 31, 2019. The increase in the unrecognized tax benefits during the nine months ended September 30, 2020 was due to additional tax credits claimed on the 2019 federal income tax return.

CNX recognizes accrued interest and penalties related to uncertain tax positions in interest expense and income tax expense, respectively. As of September 30, 2020 and December 31, 2019, CNX had 0 accrued liabilities for interest and penalties related to uncertain tax positions.
CNX and its subsidiaries file federal income tax returns with the United States and tax returns within various 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 2016. The Internal Revenue Service and the Joint Committee on Taxation concluded its review of tax years 2016 through 2017 during the third quarter of 2020.

NOTE 5—PROPERTY, PLANT AND EQUIPMENT:
September 30,
2020
December 31,
2019
Intangible Drilling Cost$4,900,667 $4,688,497 
Gas Gathering Equipment2,505,267 2,463,866 
Proved Gas Properties1,214,416 1,208,046 
Gas Wells and Related Equipment1,102,366 1,042,000 
Unproved Gas Properties765,008 755,590 
Surface Land and Other Equipment222,732 226,285 
Other194,381 187,722 
Total Property, Plant and Equipment10,904,837 10,572,006 
Less: Accumulated Depreciation, Depletion and Amortization3,841,699 3,435,431 
Total Property, Plant and Equipment - Net$7,063,138 $7,136,575 

Impairment of Proved Property

CNX performs a quantitative impairment test whenever events or changes in circumstances indicate that an asset group's carrying amount may not be recoverable, over proved properties using the published 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 nine months ended September 30, 2020, CNX recognized certain indicators of impairment specific to our Southwest Pennsylvania (SWPA) coalbed methane (CBM) asset group and determined that the carrying value of a portionthat asset group was not recoverable. The fair value of the customer relationship intangible assetsasset group was estimated by using level 3 inputs which consisted of discounting the estimated future cash flows using discount rates and other assumptions that were acquiredmarket participants would use in connection with the Midstream Acquisition discussed below (see also Note 8 - Goodwill and Other Intangible Assets) exceeded their estimates of fair value, and recognizedvalue. As a result, an impairment of approximately $18,650 which$61,849 was recognized and is included in the Impairment of Other Intangible Assets line of

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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.
On March 30, 2018, CNX Gas completed the sale of substantially all of its shallow oil and gas assets and certain Coalbed Methane (CBM) assets in Pennsylvania and West Virginia for $89,296 in cash consideration.
NOTE 6—GOODWILL AND OTHER INTANGIBLE ASSETS:

In connection with the sale, the buyer assumed approximately $196,514 of asset retirement obligations. The net gain on the sale was $4,432 and is included in Gain on Asset Sales and Abandonments in the Consolidated Statements of Income for the nine months ended September 30, 2018.

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


Prior to the Midstream Acquisition, the Company accounted for its 50% interest in CNX Gathering 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 beenwas 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.

value. 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


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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 15 - 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 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. The CNXM limited partner units are actively traded on the New York Stock Exchange and were valued based on observable market prices as of the transaction date and therefore represent a Level 1 fair value measurement.

Allocation of Purchase Price (Midstream Acquisition)

The following table summarizes the purchase price and the amounts of identified assets acquired and liabilities assumed based on the fair value as of January 3, 2018,in connection 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:
 Amount
Cash Consideration$305,000
CNX Gathering Cash on Hand at January 3, 2018 Distributed to Noble2,620
Fair Value of Previously Held Equity Interest799,033
Total Estimated Fair Value of Consideration Transferred$1,106,653






















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The following is a summary of the fair values of the net assets acquired:
Fair Value of Assets Acquired:Amount
Cash and Cash Equivalents$8,348
Accounts and Notes Receivable21,199
Prepaid Expense2,006
Other Current Assets163
Property, Plant and Equipment, Net1,043,340
Intangible Assets128,781
Other593
Total Assets Acquired1,204,430
  
Fair Value of Liabilities Assumed: 
Accounts Payable26,059
CNXM Revolving Credit Facility149,500
Total Liabilities Assumed175,559
  
Total Identifiable Net Assets1,028,871
Fair Value of Noncontrolling Interest in CNXM(718,577)
Goodwill796,359
Net Assets Acquired$1,106,653


Post-Acquisition Operating Results (Midstream Acquisition)

The Midstream Acquisition contributed the following to the Company's Midstream segment:
 Three Months Ended Nine Months Ended
September 30, September 30,
 2019 2018 2019 2018
Midstream Revenue$74,261
 $61,372
 $225,280
 $186,875
Earnings Before Income Tax$41,741
 $31,173
 $118,739
 $94,502


NOTE 6—INCOME TAXES:

The effective tax rates for the three and nine months ended September 30, 2019 were 25.4% and 22.3%, respectively. The effective tax rate for the nine months ended September 30, 2019 differs from the U.S. federal statutory rate of 21% primarily due to the impact of noncontrolling interest, equity compensation and state income taxes.

The effective tax rates for the three and nine months ended September 30, 2018 were 27.9% and 24.1%, respectively. The effective rate for the nine months ended September 30, 2018 differs from the U.S. federal statutory rate of 21% primarily due to increases for both state income taxes and state valuation allowances, offset by the benefit derived from the filing of a Federal 10-year net operating loss (“NOL”) carryback as well as non-controlling interest.

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the "Act") which, among other things, lowered the U.S. Federal corporate income tax rate from 35% to 21%, repealed the corporate alternative minimum tax ("AMT"), and provided for a refund of previously accrued corporate AMT credits. As of December 31, 2018, the Company reclassified $102,482 from Deferred Income Taxes to Recoverable Income Taxes in the Consolidated Balance Sheets in anticipation of the AMT refund that is also included in the Recoverable Income Taxes line of the Consolidated Statements of Cash Flows in the nine months ended September 30, 2019.

The total amount of uncertain tax positionsconsideration transferred at each of September 30, 2019 and December 31, 2018 was $31,516. If these uncertain tax positions were recognized, approximately $31,516 would affect CNX's effective tax rate. There were no changes in unrecognized tax benefits during the three and nine months ended September 30, 2019.



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CNX recognizes accrued interest related to uncertain tax positions in interest expense. As of September 30, 2019 and December 31, 2018, CNX had 0 accrued liabilities for interest related to uncertain tax positions.
CNX recognizes penalties accrued related to uncertain tax positions in its income tax expense. As of September 30, 2019 and December 31, 2018, CNX had no accrued liabilities for tax penalties related to uncertain tax positions.
CNX and its subsidiaries file federal income tax returns with the United States and tax returns within various state jurisdictions. With few exceptions, the Company is no longer subject to United States federal, state, local, or non-U.S. income tax examinations by tax authorities for the years before 2016. The Company expects the Internal Revenue Service to conclude its audit of tax years 2016 through 2017 in the second quarter of 2020.

NOTE 7—PROPERTY, PLANT AND EQUIPMENT:
 September 30,
2019
 December 31,
2018
Property, Plant and Equipment   
Intangible Drilling Cost$4,566,206
 $4,120,283
Gas Gathering Equipment2,399,883
 2,126,895
Proved Gas Properties1,157,361
 1,135,411
Gas Wells and Related Equipment1,047,139
 859,359
Unproved Gas Properties949,529
 927,667
Surface Land and Other Equipment233,812
 238,487
Other158,368
 159,326
Total Property, Plant and Equipment10,512,298
 9,567,428
Less: Accumulated Depreciation, Depletion and Amortization2,981,723
 2,624,984
Total Property, Plant and Equipment - Net$7,530,575
 $6,942,444


NOTE 8—GOODWILL AND OTHER INTANGIBLE ASSETS:

In connection with the Midstream Acquisition that closedclosing on January 3, 2018, (See Note 5 - 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 reportablereporting 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 carrying amount. If after assessing such factors or circumstances, CNX determines it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then a quantitative assessment is not required. If CNX chooses to bypass the qualitative assessment, or if it chooses to perform a qualitative assessment but is unable to qualitatively conclude that no impairment has occurred, then CNX will perform a quantitative assessment. If the estimated fair value of a reporting unit is less than its carrying value, an impairment charge is recognized for the excess of the reporting unit's carrying value over its fair value. The Company uses a combination of the income approach (generally a discounted cash flow method) and market approach (which may include the guideline public company method and/or the guideline transaction method) to estimate the fair value of a reporting unit.

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

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

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

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

Amount
December 31, 2019$796,359 
Impairment473,045 
September 30, 2020$323,314 

Other Intangible Assets

The carrying amount and accumulated amortization of other intangible assets consist of the following:
September 30,
2020
December 31,
2019
Other Intangible Assets
Gross Amortizable Asset - Customer Relationships$109,752 $109,752 
Less: Accumulated Amortization - Customer Relationships18,019 13,105 
Total Other Intangible Assets, net$91,733 $96,647 
 September 30,
2019
 December 31, 2018
Other Intangible Assets   
Gross Amortizable Asset - Customer Relationships$109,752
 $109,752
Less: Accumulated Amortization - Customer Relationships11,467
 6,552
Total Other Intangible Assets, net$98,285
 $103,200


During the second quarter of 2018, CNX determined that the carrying value of a portion of the customer relationship intangible assets exceeded their fair value as a result of an Asset Exchange Agreement with HG Energy. Accordingly, CNX recognized an impairment on this intangible asset of $18,650. There were 0 such impairments in the current period.

The customer relationship intangible asset is being amortized on a straight-line basis over approximately 17 years. Amortization expense related to other intangible assets was $1,638 for the three months ended September 30, 2020 and 2019, and $4,914 for the nine months ended September 30, 2019 was $1,6382020 and $4,915, respectively. Amortization expense related to other intangible assets was $1,638 and $5,293 for the three and nine months ended September 30, 2018, respectively.2019. The estimated annual amortization expense is expected to approximate $6,552 per year for each of the next five years.



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NOTE 9—7—REVOLVING CREDIT FACILITIES:
CNX Resources Corporation (CNX)
In April 2019, CNX amended its senior secured revolving credit facility ("Credit Facility") and extended its maturity to April 2024. The lenders' commitments remained unchanged at $2,100,000, with an accordion feature that allows the Company to increase the commitments to $3,000,000. The borrowing base was reaffirmed at $2,100,000, including a $650,000 letters of credit aggregate sub-limit. In addition, the Cumulative Credit Basketcumulative 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 facilityCredit 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 balance sheet cash that CNX may have on hand is also limited to $150,000 when loans under the credit agreement are outstanding, subject to certain exceptions. If the aggregate principal amount of the existing 5.875% Senior Notes due in April 2022 and certain other publicly traded debt securities outstanding 91 days prior to the earliest maturity of such debt (the "Springing Maturity Date") is greater than $500,000, then the Credit Facility will mature on the Springing Maturity Date. In October 2019,2020, as part of the semi-annual borrowing base redetermination, the lenders' increasedreaffirmed CNX's $1,900,000 borrowing base to $2,300,000.base.

Under the terms of the amended agreement, borrowings under the revolving credit facility will bear interest at CNX's option at either:
the base rate, which is the highest of (i) the federal funds open rate plus 0.50%, (ii) PNC Bank, N.A.’s prime rate, or (iii) the one-month LIBOR rate plus 1.0%, in each case, plus a margin ranging from 0.25%0.75% to 1.25%1.75%; or
the LIBOR rate, which is the LIBOR rate plus a margin ranging from 1.25%1.75% to 2.25%2.75%.

The CNX Credit Facility is secured by substantially all of the assets of CNX and certain of its subsidiaries (excluding the Excluded Subsidiaries,certain excluded subsidiaries, which includes Cardinal States Gathering LLC, CNX Midstream GP LLC and itsCNXM, and their respective subsidiaries). Fees and interest rate spreads are based on the percentage of facility utilization, measured quarterly.

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Availability under the Credit Facility is limited to a borrowing base, which is determined by the lenders' syndication agent and approved by the required number of lenders in good faith by calculating a value of CNX's proved natural gas reserves.

The CNX Credit Facility contains a number of affirmative and negative covenants including those that, except in certain circumstances, limit the Company and the subsidiary guarantors' ability to create, incur, assume or suffer to exist indebtedness, create or permit to exist liens on properties, dispose of assets, make investments, purchase or redeem CNX common stock, pay dividends, merge with another corporation andor amend the senior unsecured notes. The Company must also mortgage 80%85% of the value of its proved reserves and 80%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.

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 September 30, 2019.2020.

At September 30, 2020, the CNX Credit Facility had $410,000 of borrowings outstanding and $185,272 of letters of credit outstanding, leaving $1,304,728 of unused capacity. At December 31, 2019, the CNX Credit Facility had $613,200$661,000 of borrowings outstanding and $199,066$204,726 of letters of credit outstanding, leaving $1,287,734 of unused capacity. At December 31, 2018, the CNX Credit Facility had $612,000 of borrowings outstanding and $198,396 of letters of credit outstanding, leaving $1,289,604$1,234,274 of unused capacity.

CNX Midstream Partners LP (CNXM)
CNXM’s revolving credit facility was not impacted by the Merger (See Note 13- Acquisitions and Dispositions).

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




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

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


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In addition, CNXM is obligated to maintain at the end of each fiscal quarter (w) for so long as at least $150,000 of the CNXM senior notes6.50% 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 notesSenior Notes are outstanding, a maximum total leverage ratio of no greater than 4.75 to 1.00 (which increases to no greater than 5.25 to 1.00 during qualifying acquisition periods); (y) a maximum secured leverage ratio of no greater than 3.50 to 1.00 and (z) a minimum interest coverage ratio of no less than 2.50 to 1.00. CNXM was in compliance with all financial covenants as of September 30, 2019.2020.

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

At September 30, 2020, the CNXM credit facility had $343,000 of borrowings outstanding and $30 of letters of credit outstanding, leaving $256,970 of unused capacity. At December 31, 2019, the CNXM credit facility had $246,000$311,750 of borrowings outstanding.outstanding, leaving $288,250 of unused capacity.

NOTE 8—OTHER ACCRUED LIABILITIES:
September 30,
2020
December 31,
2019
Royalties$53,343 $74,061 
Transportation Charges19,556 16,533 
Accrued Interest16,896 30,862 
Accrued Other Taxes9,681 9,115 
Deferred Revenue8,934 13,964 
Short-Term Incentive Compensation7,785 21,030 
Accrued Payroll & Benefits6,082 6,248 
Other35,471 37,610 
Current Portion of Long-Term Liabilities:
Asset Retirement Obligations5,076 5,076 
Salary Retirement1,649 1,587 
Total Other Accrued Liabilities$164,473 $216,086 

























20


NOTE 9—LONG-TERM DEBT:
September 30,
2020
December 31,
2019
Senior Notes due March 2027 at 7.25% (Principal of $700,000 and $500,000 plus Unamortized Premium of $6,955 at September 30, 2020)$706,955 $500,000 
CNX Revolving Credit Facility410,000 661,000 
CNX Midstream Partners LP Senior Notes due March 2026 at 6.50% (Principal of $400,000 less Unamortized Discount of $4,062 and $4,625, respectively)*395,938 395,375 
Senior Notes due April 2022 at 5.875% (Principal of $363,348 and $894,307
plus Unamortized Premium of $276 and $1,001, respectively)
363,624 895,308 
CNX Midstream Partners LP Revolving Credit Facility*343,000 311,750 
Convertible Senior Notes due May 2026 at 2.25% (Principal of $345,000 less Unamortized Discount and Issuance Costs of $111,621)233,379 
Cardinal States Gathering Company Credit Facility maturing in March 2028 (Principal of $118,776 less Unamortized Discount of $1,165)117,611 
CSG Holdings II LLC Credit Facility maturing in December 2026 (Principal of $47,355 less Unamortized Discount of $460)46,895 
Less: Unamortized Debt Issuance Costs16,940 8,990 
2,600,462 2,754,443 
Less: Amounts Due in One Year22,488 
Long-Term Debt$2,577,974 $2,754,443 
*CNX is not a guarantor of CNXM's 6.50% senior notes due in March 2026 or CNXM's senior secured revolving credit facility.

CNXM’s revolving credit facility and the CNXM hadSenior Notes were not impacted by the maximumMerger (See Note 13 - Acquisitions and Dispositions).

During the three and nine months ended September 30, 2020, CNX completed a private offering of $200,000 of 7.25% senior notes due in March 2027 plus $7,000 of unamortized bond premium. The notes are guaranteed by most of CNX's subsidiaries but do not include CNXM's general partner or CNXM.

During the three and nine months ended September 30, 2020, CNX purchased and retired $50,000 and $530,959, respectively, of its outstanding 5.875% senior notes due in April 2022. As part of these transactions, a loss of $108 and a gain of $10,812 were included in Loss (Gain) on Debt Extinguishment in the Consolidated Statements of Income during the three and nine months ended September 30, 2020, respectively. During the nine months ended September 30, 2019, CNX purchased and retired $400,000 of its outstanding 5.875% senior notes due in April 2022. As part of this transaction, a loss of $7,614 was included in Loss (Gain) on Debt Extinguishment in the Consolidated Statements of Income.

In April 2020, CNX issued $345,000 in aggregate principal amount of revolving credit available2.25% 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 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 borrowingeach 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

21


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 three and nine months ended September 30, 2020, the conditions allowing holders of the Convertible Notes to exercise their conversion right were not met and as of September 30, 2020, the notes were not convertible. The Convertible Notes are therefore classified as long-term debt at September 30, 2019, 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 equity component is not remeasured as long as it continues to meet the condition 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.

As of September 30, 2020, the if-converted value of the Convertible Notes did not exceed the outstanding principal amount.









22


The net carrying amount of the liability and equity components of the Convertible Notes was as follows:

September 30, 2020
Liability Component:
Principal$345,000 
Unamortized Discount(105,004)
Unamortized Issuance Costs(6,617)
Net Carrying Amount$233,379 
Equity Component, net of Purchase Discounts and Issuance Costs$78,317 

Interest expense related to the Convertible Notes is as follows:
For the Three Months EndedFor the Nine Months Ended
September 30, 2020September 30, 2020
Contractual Interest Expense$1,941 $3,234 
Amortization of Debt Discount3,554 5,879 
Amortization of Issuance Costs245 407 
Total Interest Expense$5,740 $9,520 

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 $354,000. At December 31, 2018,offset any cash payments the CNXMCompany 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 nine months ended September 30, 2020, CNX's wholly-owned subsidiary Cardinal States Gathering Company LLC ("Cardinal States") entered into a $125,000 non-revolving credit facility had $84,000agreement (the "Cardinal States Facility"). The Cardinal States Facility matures in 2028, has an interest rate of borrowings outstanding.3-month LIBOR + 475 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.

NOTE 10—OTHER ACCRUED LIABILITIES:
  September 30,
2019
 December 31,
2018
Royalties $64,245
 $92,005
Gas Derivatives 44,826
 61,661
Accrued Interest 28,692
 26,333
Transportation Charges 19,925
 19,661
Deferred Revenue 11,614
 17,693
Short-Term Incentive Compensation 9,774
 20,482
Accrued Other Taxes 8,788
 7,300
Accrued Payroll & Benefits 5,909
 6,533
Other 40,862
 31,851
Current Portion of Long-Term Liabilities:    
Asset Retirement Obligations 5,076
 1,075
Salary Retirement 1,646
 1,578
Total Other Accrued Liabilities $241,357
 $286,172


Additionally, during the nine months ended September 30, 2020, CNX's wholly-owned subsidiary CSG Holdings II LLC (CSG Holdings) entered into a $50,000 non-revolving credit facility agreement (the "CSG Holdings Facility"). The CSG Holdings Facility matures in 2026, has interest rate of 3-month LIBOR + 675 basis points and includes a full excess cash sweep. The facility is secured by substantially all of the CSG Holding assets, requires a minimum level of hedging of the variable interest rate exposure and is non-recourse to CNX.

19




NOTE 11—LONG-TERM DEBT:
 September 30,
2019
 December 31,
2018
Senior Notes due April 2022 at 5.875% (Principal of $894,307 and $1,294,307
plus Unamortized Premium of $1,108 and $2,069, respectively)
$895,415
 $1,296,376
CNX Credit Facility613,200
 612,000
Senior Notes due March 2027 at 7.25%, Issued at Par Value500,000
 
CNX Midstream Partners LP Senior Notes due March 2026 at 6.50% (Principal of $400,000 less Unamortized Discount of $4,813 and $5,375, respectively)395,187
 394,625
CNX Midstream Partners LP Revolving Credit Facility246,000
 84,000
Less: Unamortized Debt Issuance Costs9,568
 8,796
Long-Term Debt$2,640,234
 $2,378,205


During the nine months ended September 30, 2019, CNX completed a private offering of $500,000 of 7.25% senior notes due in March 2027. The notes are guaranteed by most of CNX's subsidiaries but do not include CNXM's general partner or CNXM.

During the nine months ended September 30, 2019, CNX purchased $400,000 of its outstanding 5.875% senior notes due in April 2022. As part of this transaction, a loss of $7,614 was included in Loss on Debt Extinguishment in the Consolidated Statements of Income.

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

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

During the three and nine months ended September 30, 2018, CNX purchased $200,000 and $500,000, respectively, of its outstanding 8.00% senior notes due in April 2023. As part of these transactions, a loss of $15,385 and $38,798, respectively, was included in Loss on Debt Extinguishment in the Consolidated Statements of Income.

NOTE 12—LEASES:

On January 1, 2019, the Company adopted Accounting Standard Update (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 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.





20




The components of lease cost were as follows:
 For the Three Months Ended For the Nine Months Ended
 September 30, 2019 September 30, 2019
Operating Lease Cost$21,723
 $53,080
Finance Lease Cost:   
Amortization of Right-of-Use Assets1,310
 3,936
Interest on Lease Liabilities298
 974
Short-term Lease Cost555
 4,922
Variable Lease Cost*5,015
 16,554
Total Lease Cost$28,901
 $79,466
*Amounts recognized on the balance sheet 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 on the balance sheet 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.

Amounts recognized in the Consolidated Balance Sheet are as follows:
 September 30,
 2019
Operating Leases: 
Operating Lease Right-of-Use Asset$205,647
  
Current Portion of Operating Lease Obligations65,061
Operating Lease Obligations122,514
Total Operating Lease Liabilities$187,575
  
Finance Leases: 
Property, Plant and Equipment$73,363
Less—Accumulated Depreciation, Depletion and Amortization62,191
Property, Plant and Equipment—Net$11,172
  
Current Portion of Finance Lease Obligations$7,203
Finance Lease Obligations9,400
Total Finance Lease Liabilities$16,603

Supplemental cash flow information related to leases was as follows:
 For the Nine Months Ended
 September 30, 2019
Cash Paid for Amounts Included in the Measurement of Lease Liabilities: 
Operating Cash Flows from Operating Leases$48,308
Operating Cash Flows from Finance Leases$974
Financing Cash Flows from Finance Leases$5,322
Right-of-Use Assets Obtained in Exchange for Lease Obligations: 
Operating Leases$15,347
Finance Leases$1,722





21




Maturities of lease liabilities are as follows:
 Operating Finance
 Leases Leases
Twelve months ended September 30,   
2020$72,775
 $8,136
202157,943
 7,794
202237,534
 1,584
20235,460
 413
20245,440
 201
Thereafter32,034
 
Total Lease Payments211,186
 18,128
Less: Interest23,611
 1,525
Present Value of Lease Liabilities$187,575
 $16,603


Lease terms and discount rates are as follows:
September 30,
2019
Weighted Average Remaining Lease Term (years):
Operating Leases4.46
Finance Leases2.35
Weighted Average Discount Rate:
Operating Leases4.95%
Finance Leases6.96%




23


NOTE 13—10—COMMITMENTS AND CONTINGENT LIABILITIES:
CNX and its subsidiaries are subject to various lawsuits and claims with respect to such matters as personal injury, royalty accounting, damage to property, climate change, governmental regulations including environmental violations and remediation, employment and contract disputes and other claims and actions arising out of the normal course of business. CNX accrues the estimated loss for these lawsuits and claims when the loss is probable and can be estimated. The Company's current estimated accruals related to these pending claims, individually and in the aggregate, are immaterial to the financial position, results of operations or cash flows of CNX. It is possible that the aggregate loss in the future with respect to these lawsuits and claims could ultimately be material to the financial position, results of operations or cash flows of CNX; however, such amounts cannot be reasonably estimated.
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 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 September 30, 2019,2020, CNX has provided the following financial guarantees, unconditional purchase obligations, and letters of credit to certain third-parties as described by major category in the following tables. These amounts represent the maximum potential of total future payments that the Company could be required to make under these instruments. These amounts have not been reduced for potential recoveries under recourse or collateralization provisions. Generally, recoveries under reclamation bonds would be limited to the extent of the work performed at the time of the default. No amounts related to these unconditional purchase obligations and letters of credit are recorded as liabilities in the financial statements. CNX management believes that the commitments in the following table will expire without being funded, and therefore will not have a material adverse effect on financial condition.
 Amount of Commitment Expiration Per Period
 Total
Amounts
Committed
Less Than
1  Year
1-3 Years3-5 YearsBeyond
5  Years
Letters of Credit:
Firm Transportation$178,352 $178,352 $$$
Other6,950 6,950 
Total Letters of Credit185,302 185,302 
Surety Bonds:
Employee-Related2,600 1,500 1,100 
Environmental12,312 10,717 1,595 
Financial Guarantees81,670 26,400 55,270 
Other9,285 8,594 691 
Total Surety Bonds105,867 47,211 58,656 
Total Commitments$291,169 $232,513 $58,656 $$


2224



 Amount of Commitment Expiration Per Period
 
Total
Amounts
Committed
 
Less Than
1  Year
 1-3 Years 3-5 Years 
Beyond
5  Years
Letters of Credit:         
Firm Transportation$198,316
 $80,244
 $118,072
 $
 $
Other750
 750
 
 
 
Total Letters of Credit199,066
 80,994
 118,072
 
 
Surety Bonds:         
Employee-Related1,850
 
 1,850
 
 
Environmental11,283
 11,073
 210
 
 
Financial Guarantees81,670
 26,400
 55,270
 
 
Other9,306
 8,433
 873
 
 
Total Surety Bonds104,109
 45,906
 58,203
 
 
Total Commitments$303,175
 $126,900
 $176,275
 $
 $


Excluded from the above table are commitments and guarantees entered into in conjunction with the spin-off of the Company's coal business (See CNX's 2018 Annual Report on Form 10-K as filed with the SEC on February 7, 2019 for further information).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.upon (See “Item 1A. Risk Factors” in CNX's 2019 Annual Report on Form 10-K as filed with the SEC on February 10, 2020 ("2019 Form 10-K") and in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020 for additional information).

CNX enters into long-term unconditional purchase obligations to procure major equipment purchases, natural gas firm transportation, gas drilling services and other operating goods and services. These purchase obligations are not recorded in the Consolidated Balance Sheets. As of September 30, 2019,2020, the purchase obligations for each of the next five years and beyond wereare as follows:
Obligations DueAmount
Less than 1 year$242,786 
1 - 3 years429,062 
3 - 5 years369,444 
More than 5 years930,189 
Total Purchase Obligations$1,971,481 
Obligations DueAmount
Less than 1 year$252,535
1 - 3 years489,023
3 - 5 years412,960
More than 5 years1,113,008
Total Purchase Obligations$2,267,526


NOTE 14—11—DERIVATIVE INSTRUMENTS:

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

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

In June 2019, CNX entered into an interest rate swap agreement to manage its exposure to interest rate volatility. The interest rate swap agreement relatesrelated to $160,000 of borrowings under CNX’s senior secured revolving credit facilityCredit Facility (See Note 97 - Revolving Credit Facilities) andwhich has the economic effect of modifying the variable-interest obligation into a fixed-interest obligation over a three-yearthree-year period.

The change In March 2020, this swap was blended and extended via a new interest rate swap, effective April 3, 2020, into a new four-year interest rate swap inclusive of a put option at 0 basis points. Also executed in fair valueMarch 2020 was a new four-year $250,000 interest rate swap inclusive of a put option at 0 basis points, effective April 3, 2020. Consistent with the previous interest rate swap agreement, is accounted for on a mark-to-market basis with changes in fair value recorded in current period earnings. The fair value at September 30, 2019 and the corresponding change in fair value from inception through September 30, 2019$250,000 interest rate swap was nominal.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. These naturalTypically, 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 one of its counterparties cease to be secured on the same basis as similar obligations with the other lenders under the credit facility, CNX would have to post collateral for instruments in a liability position in excess of defined thresholds. All of the Company's derivative instruments are subject to master netting arrangements with our counterparties. CNX recognizes all financial derivative instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets on a gross basis.


2325



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:
September 30,December 31,Forecasted to
20202019Settle Through
Natural Gas Commodity Swaps (Bcf)1,280.9 *1,460.6 2025
Natural Gas Basis Swaps (Bcf)1,311.8 *1,290.4 2025
Interest Rate Swaps$575,625 $160,000 2028
 September 30, December 31, Forecasted to
 2019 2018 Settle Through
Natural Gas Commodity Swaps (Bcf)1,502.4
 1,484.4
 2024
Natural Gas Basis Swaps (Bcf)1,240.5
 1,056.6
 2024
*Net of purchased natural gas commodity swaps and natural gas basis swaps of 5.7 Bcf and 3.8 Bcf, respectively.


The gross fair value of CNX's derivative instruments was as follows:
September 30,December 31,
20202019
Current Assets:
  Commodity Derivative Instruments:
     Commodity Swaps$39,263 $234,238 
     Basis Only Swaps38,201 13,556 
  Interest Rate Swaps144 
Total Current Assets$77,608 $247,794 
Other Non-Current Assets:
  Commodity Derivative Instruments:
     Commodity Swaps$118,210 $288,543 
     Basis Only Swaps41,060 25,553 
  Interest Rate Swaps828 
Total Other Non-Current Assets$160,098 $314,096 
Current Liabilities:
  Commodity Derivative Instruments:
     Commodity Swaps$103,297 $345 
     Basis Only Swaps36,878 40,626 
  Interest Rate Swaps4,370 495 
Total Current Liabilities$144,545 $41,466 
Non-Current Liabilities:
  Commodity Derivative Instruments:
     Commodity Swaps$92,125 $9,693 
     Basis Only Swaps99,373 105,445 
  Interest Rate Swaps12,211 724 
Total Non-Current Liabilities$203,709 $115,862 
Asset Derivative Instruments Liability Derivative Instruments
 September 30, December 31,  September 30, December 31,
 2019 2018  2019 2018
Commodity Swaps:        
Prepaid Expense$172,836
 $28,612
 Other Accrued Liabilities$1,389
 $34,640
Other Assets254,967
 164,310
 Other Liabilities17,440
 52,011
Total Asset$427,803
 $192,922
 Total Liability$18,829
 $86,651
         
Basis Only Swaps:        
Prepaid Expense$25,420
 $11,628
 Other Accrued Liabilities$43,437
 $27,021
Other Assets20,925
 48,788
 Other Liabilities98,638
 40,210
Total Asset$46,345
 $60,416
 Total Liability$142,075
 $67,231










26


The effect of commodity derivative instruments on the Company's Consolidated Statements of Income was as follows:
For the Three Months EndedFor the Nine Months Ended
September 30,September 30,
2020201920202019
Cash Received (Paid) in Settlement of Commodity Derivative Instruments:
  Natural Gas:
Commodity Swaps$72,062 $61,441 $382,891 $53,058 
Basis Swaps18,248 (4,400)836 (26,727)
Total Cash Received in Settlement of Commodity Derivative Instruments90,310 57,041 383,727 26,331 
Unrealized (Loss) Gain on Commodity Derivative Instruments:
  Natural Gas:
Commodity Swaps(369,121)126,617 (550,694)302,701 
Basis Swaps109,977 30,255 49,972 (88,914)
Total Unrealized (Loss) Gain on Commodity Derivative Instruments(259,144)156,872 (500,722)213,787 
(Loss) Gain on Commodity Derivative Instruments:
  Natural Gas:
Commodity Swaps(297,059)188,058 (167,803)355,759 
Basis Swaps128,225 25,855 50,808 (115,641)
Total (Loss) Gain on Commodity Derivative Instruments$(168,834)$213,913 $(116,995)$240,118 
 For the Three Months Ended For the Nine Months Ended
 September 30, September 30,
 2019 2018 2019 2018
Cash Received (Paid) in Settlement of Commodity Derivative Instruments:       
  Natural Gas:       
Commodity Swaps$61,441
 $6,916
 $53,058
 $23,540
Basis Swaps(4,400) (4,091) (26,727) (21,022)
Total Cash Received in Settlement of Commodity Derivative Instruments57,041
 2,825
 26,331
 2,518
        
Unrealized Gain (Loss) on Commodity Derivative Instruments:       
  Natural Gas:       
Commodity Swaps126,617
 27,749
 302,701
 76,999
Basis Swaps30,255
 (12,569) (88,914) (765)
Total Unrealized Gain on Commodity Derivative Instruments156,872
 15,180
 213,787
 76,234
        
Gain (Loss) on Commodity Derivative Instruments:       
  Natural Gas:       
Commodity Swaps188,058
 34,665
 355,759
 100,539
Basis Swaps25,855
 (16,660) (115,641) (21,787)
Total Gain on Commodity Derivative Instruments$213,913
 $18,005
 $240,118
 $78,752


The effect of interest rate swaps on Interest Expense in the Company's Consolidated Statements of Income was as follows:

For the Three Months EndedFor the Nine Months Ended
September 30,September 30,
2020201920202019
Cash (Paid) Received in Settlement of Interest Rate Swaps$(1,257)$195 $(1,850)$195 
Unrealized Loss on Interest Rate Swaps(152)(713)(14,389)(1,774)
Loss on Interest Rate Swaps$(1,409)$(518)$(16,239)$(1,579)

24


Cash (Paid) Received in Settlement of Commodity Derivative Instruments for the nine months ended September 30, 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. In addition, Cash (Paid) Received in Settlement of Commodity Derivative Instruments for the nine months ended September 30, 2020 includes $5,851 related to the monetization and termination of approximately 8 million MMBtus of NYMEX natural gas hedges and a similar quantity of financial basis hedges that were to settle at various times from October through November of 2020. Net proceeds received from the monetizations 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.








27


NOTE 15—12—FAIR VALUE OF FINANCIAL INSTRUMENTS:

CNX determines the fair value of assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in valuation techniques and the inputs to valuations. The fair value hierarchy is based on whether the inputs to valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources (including NYMEX forward curves, LIBOR-based discount rates and basis forward curves), while unobservable inputs reflect the Company's own assumptions of what market participants would use.
The fair value hierarchy includes three levels of inputs that may be used to measure fair value as described below:
Level 1 - Quoted prices for identical instruments in active markets.
Level 2 - The fair value of the assets and liabilities included in Level 2 are based on standard industry income approach models that use significant observable inputs, including NYMEX forward curves, LIBOR-based discount rates and basis forward curves.
Level 3 - Unobservable inputs significant to the fair value measurement supported by little or no market activity.
In those cases when the inputs used to measure fair value meet the definition of more than one level of the fair value hierarchy, the lowest level input that is significant to the fair value measurement in its totality determines the applicable level in the fair value hierarchy.
The financial instrument measured at fair value on a recurring basis is summarized below:
 Fair Value Measurements at September 30, 2020Fair Value Measurements at December 31, 2019
DescriptionLevel 1Level 2Level 3Level 1Level 2Level 3
Gas Derivatives$$(94,939)$$$405,781 $
Interest Rate Swaps$$(15,609)$$$(1,219)$
 Fair Value Measurements at September 30, 2019 Fair Value Measurements at December 31, 2018
Description

(Level 1)
 

(Level 2)
 

(Level 3)
 

(Level 1)
 

(Level 2)
 

(Level 3)
Gas Derivatives$
 $313,244
 $
 $
 $99,456
 $


The carrying amounts and fair values of financial instruments for which the fair value option was not elected are as follows:
 September 30, 2019 December 31, 2018
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Cash and Cash Equivalents$5,484
 $5,484
 $17,198
 $17,198
Long-Term Debt (Excluding Debt Issuance Costs)$2,649,802
 $2,505,114
 $2,387,001
 $2,290,537

 September 30, 2020December 31, 2019
 Carrying
Amount
Fair
Value
Carrying
Amount
Fair
Value
Cash and Cash Equivalents$150,132 $150,132 $16,283 $16,283 
Long-Term Debt (Excluding Debt Issuance Costs)$2,617,402 $2,723,756 $2,763,433 $2,619,676 
Cash and cash equivalents represent highly- liquidhighly-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.



















28


NOTE 16—VARIABLE INTEREST ENTITIES:13—ACQUISITIONS AND DISPOSITIONS:

The Company determinedOn 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 Company owns an approximately 34% limited partner interestMerger was completed and 100%CNX issued 37,054,223 shares of common stock to acquire the general partner interest,42,107,071 common units of CNXM not owned by CNX prior to bethe Merger at a variable interest entity.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 Midstream Acquisition (see Note 5 - Acquisitions and Dispositions),Merger, CNXM’s common units are no longer publicly traded.

Except for the Company has the power through the Company's ownership and control of CNXM's general partner (CNX Midstream GP LLC) to direct the activities that most significantly impact CNXM's economic performance. In addition, through its limited partner interest and incentive distribution rights, or IDRs, in CNXM, the Company has the obligation to absorb the lossesClass B units of CNXM, andwhich were automatically canceled immediately prior to the right to receive benefitseffective time of the Merger for no consideration in accordance with such interests. 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.

As CNX controlled CNXM prior to the Company hasMerger and continues to control CNXM after the Merger, CNX accounted for the change in our ownership interest in CNXM as an equity transaction which was reflected as a controlling financialreduction of noncontrolling interest with corresponding increases to common stock and iscapital in excess of par value. No gain or loss was recognized in our condensed consolidated statements of operations as a result of the primary beneficiaryMerger.

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 Company consolidated CNXM commencing January 3, 2018.

The risks associated withpublic prior to the operations of CNXMMerger are discussedreflected in its Annual Report on Form 10-K for the year ended December 31, 2018 filed with the SEC on February 7, 2019 and its other periodic reports filed after that date.




25




The following table presents amounts includedNet Income Attributable to Noncontrolling Interest in the Company's Consolidated Balance Sheets that were for the use or obligation of CNXM:
 September 30, December 31,
 2019 2018
Assets:   
Cash$1,735
 $3,966
Receivables - Related Party17,845
 17,073
Receivables - Third Party6,074
 7,028
Other Current Assets1,646
 2,383
Property, Plant and Equipment, net1,144,177
 891,775
Operating Lease ROU Asset6,281
 
Other Assets3,508
 3,203
Total Assets$1,181,266
 $925,428
Liabilities:   
Accounts Payable and Accrued Liabilities$99,118
 $43,919
Accounts Payable - Related Party3,788
 4,980
Revolving Credit Facility246,000
 84,000
Long-Term Debt393,925
 393,215
Long-Term Operating Lease Liabilities40
 
Total Liabilities$742,871
 $526,114

The following table summarizes CNXM's Consolidated Statements of OperationsIncome. There were no changes in our ownership interest in CNXM during the three and Cash Flows, inclusive of affiliate amounts:nine months ended September 30, 2019.
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2019 2018 2019 2018
Revenue       
Gathering Revenue - Related Party$55,453
 $41,022
 $168,434
 $116,328
Gathering Revenue - Third Party18,523
 19,946
 55,862
 69,523
Total Revenue73,976
 60,968
 224,296
 185,851
Expenses       
Operating Expense - Related Party6,105
 5,131
 18,167
 14,645
Operating Expense - Third Party5,612
 4,870
 17,774
 20,744
General and Administrative Expense - Related Party3,573
 3,060
 11,567
 10,292
General and Administrative Expense - Third Party1,236
 1,771
 4,136
 6,639
Loss on Asset Sales and Abandonments
 
 7,229
 2,501
Depreciation Expense6,184
 5,306
 17,694
 16,605
Interest Expense7,601
 7,255
 22,625
 16,863
Total Expense30,311
 27,393
 99,192
 88,289
Net Income$43,665
 $33,575
 $125,104
 $97,562
        
Net Cash Provided by Operating Activities$51,014
 $35,666
 $175,680
 $131,207
Net Cash Used in Investing Activities$(68,289) $(44,241) $(251,156) $(79,366)
Net Cash Provided by (Used in) Financing Activities$7,333
 $8,818
 $73,245
 $(54,085)


CNXM’s revolving credit facility (See Note 7 - Revolving Credit Facility) and the CNXM Senior Notes (See Note 9 - Long-Term Debt) were not impacted by the Merger.
In March 2018, CNXM closed on its acquisition
We incurred $4,717 and $4,737 of CNX's remaining 95% interesttransaction costs directly attributable to the Merger during the three and nine months ended September 30, 2020, respectively, including financial advisory, legal service and other professional fees, which were recorded to Other Expense in the gathering systemConsolidated Statements of Income.















29


NOTE 14—SEGMENT INFORMATION:
The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making decisions and related assets commonly referred toassessing performance as the Shirley-Penns System, in exchange for cash consideration insource of the amount of $265,000. CNXM fundedCompany’s reportable segments.
The Company evaluates the cash consideration with proceeds from the issuanceperformance of its 6.50% senior notes due 2026 (See Note 11 - Long-Term Debt).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.
At September 30, 2019 and December 31, 2018, CNX had a net payable of $14,085 and $12,202 respectively, due to CNX Gathering and CNXM, primarily for accrued but unpaid gathering services.



26



NOTE 17—SEGMENT INFORMATION:
CNX consists of 2 principal business divisions: Exploration and Production (E&P) and Midstream. TheCNX's principal activity of the E&P Division, which includes 4 reportable segments, is to produce pipeline quality natural gas for sale primarily to gas wholesalers. The E&P Division'swholesalers and the Company has 2 reportable segments are Marcellusthat conducts those operations: Shale Utica Shale,and Coalbed Methane, and Other Gas.Methane. The Other Gas Segment is primarily related toincludes nominal shallow oil and gas production which is not significant to the Company due to the sale of substantially all of CNX's shallow oil and gas assets in the 2018 period (See Note 5 - Acquisitions and Dispositions for more information).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 operating activities assigned toexpenses that are managed outside the E&P Division but not allocated to each individual segment.
CNX's Midstream Division's principal activity is the ownership, operation, development and acquisition of natural gas gathering and other midstream energy assets of CNX Gathering and CNXM, which provide natural gas gathering services for the Company's produced gas,reportable segments as well as for other independent third-parties in the Marcellus Shale and Utica Shale in Pennsylvania and West Virginia. Excluded from the Midstream Division are the gathering assets and operations of CNX that have not been contributed to CNX Gathering and CNXM. As a result of the Midstream Acquisition (See Note 5 - Acquisitions and Dispositions for more 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 Company's unallocated expenses include other expense, gain on asset sales related to non-core assets, gain on previously held equity interest, loss on debt extinguishment, impairment of other intangible assets and income taxes.
In the preparation of the following information, intersegment sales have been recorded at amounts approximating market prices.discussed above. Operating profit for each segment is based on sales less identifiable operating and non-operating expenses. Assets are reflected at the division level for E&P and are not allocated between each individual E&P segment. These assets are not allocated to each individual segment due
Prior to the diverse asset base controlled byMerger of CNXM that occurred in September 2020 (See Note 13 - Acquisitions and Dispositions), CNX whereby each individual asset may service more than oneconsisted 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 segment withininformation have been made to conform to the division. An allocation of such asset base would not be meaningful or representative on a segment by segment basis.2020 presentation.


27



Industry segment results for the three months ended September 30, 2019:2020: 
 ShaleCoalbed Methane OtherConsolidated
Natural Gas, NGL and Oil Revenue$155,792 $25,667 $754 $182,213 (A)
Purchased Gas Revenue31,541 31,541   
Gain (Loss) on Commodity Derivative Instruments79,773 10,518 (259,125)(168,834)
Other Revenue and Operating Income16,689 4,466 21,155 (B)
Total Revenue and Other Operating Income$252,254 $36,185 $(222,364)$66,075   
Total Operating Expense$165,587 $30,439 $83,479 $279,505 
Earnings (Loss) Before Income Tax$86,667 $5,746 $(342,485)$(250,072)
Segment Assets$6,070,356 $1,125,312 $933,506 $8,129,174 (C)
Depreciation, Depletion and Amortization$94,617 $15,763 $4,084 $114,464   
Capital Expenditures$105,988 $2,310 $37 $108,335   

(A)    Included in Total Natural Gas, NGL and Oil Revenue are sales of $35,645 to Direct Energy Business Marketing LLC, which comprises over 10% of revenue from contracts with external customers for the period.
(B)    Includes equity in earnings of unconsolidated affiliates of $396 for Other.
(C)    Includes investments in unconsolidated equity affiliates of $15,685.
















30


 
Marcellus
Shale
 Utica Shale Coalbed Methane 
Other
Gas
 
Total
E&P
 Midstream Unallocated Intercompany Eliminations Consolidated 
Natural Gas, NGLs and Oil Revenue$179,142
 $50,042
 $35,621
 $246
 $265,051
 $
 $
 $
 $265,051
(A)
Purchased Gas Revenue
 
 
 29,192
 29,192
 
 
 
 29,192
  
Midstream Revenue
 
 
 
 
 74,261
 
 (55,736) 18,525
  
Gain on Commodity Derivative Instruments38,354
 12,628
 6,036
 156,895
 213,913
 
 
 
 213,913
 
Other Operating Income
 
 
 3,375
 3,375
 
 
 (59) 3,316
(B)
Total Revenue and Other Operating Income$217,496
 $62,670
 $41,657
 $189,708
 $511,531
 $74,261
 $
 $(55,795) $529,997
  
Earnings Before Income Tax$41,014
 $18,220
 $8,717
 $83,279
 $151,230
 $41,741
 $(109) $
 $192,862
 
Segment Assets        $7,087,782
 $2,178,073
 $16,668
 $3,735
 $9,286,258
(C)
Depreciation, Depletion and Amortization        $111,839
 $8,620
 $
 $
 $120,459
  
Capital Expenditures        $267,689
 $68,448
 $
 $
 $336,137
  

(A)Included in Total Natural Gas, NGLs and Oil Revenue are sales of $39,092 to Direct Energy Business Marketing LLC, which comprises over 10% of revenue from contracts with external customers for the period.
(B)Includes equity in earnings of unconsolidated affiliates of $673 for Total E&P.
(C)Includes investments in unconsolidated equity affiliates of $17,110 for Total E&P.

Industry segment results for the three months ended September 30, 2018:2019: 
ShaleCoalbed MethaneOtherConsolidated
Natural Gas, NGL and Oil Revenue$229,183 $35,621 $247 $265,051 (D)
Purchased Gas Revenue29,192 29,192   
Gain on Commodity Derivative Instruments50,982 6,036 156,895 213,913 
Other Revenue and Operating Income18,525 3,316 21,841 (E)
Total Revenue and Other Operating Income$298,690 $41,657 $189,650 $529,997   
Total Operating Expense$185,452 $32,940 $80,207 $298,599 
Earnings Before Income Tax$113,238 $8,717 $70,907 $192,862 
Segment Assets$6,911,677 $1,231,509 $1,143,072 $9,286,258 (F)
Depreciation, Depletion and Amortization$100,545 $17,400 $2,514 $120,459   
Capital Expenditures$332,640 $2,196 $1,301 $336,137   

(D)    Included in Total Natural Gas, NGL and Oil Revenue are sales of $39,092 to Direct Energy Business Marketing LLC, which comprises over 10% of revenue from contracts with external customers for the period.
(E)    Includes equity in earnings of unconsolidated affiliates of $673 for Other.
(F)    Includes investments in unconsolidated equity affiliates of $17,110.



Industry segment results for the nine months ended September 30, 2020: 
ShaleCoalbed MethaneOtherConsolidated
Natural Gas, NGL and Oil Revenue$528,913 $79,319 $1,251 $609,483 (A)
Purchased Gas Revenue78,324 78,324   
Gain (Loss) on Commodity Derivative Instruments266,488 33,210 (416,693)(116,995)(B)
Other Revenue and Operating Income47,286 13,177 60,463 (C)
Total Revenue and Other Operating Income$842,687 $112,529 $(323,941)$631,275   
Total Operating Expense$511,653 $94,113 $779,532 $1,385,298 
Earnings (Loss) Before Income Tax$331,034 $18,416 $(1,216,459)$(867,009)
Segment Assets$6,070,356 $1,125,312 $933,506 $8,129,174 (D)
Depreciation, Depletion and Amortization$295,648 $49,903 $11,623 $357,174   
Capital Expenditures$385,763 $6,796 $2,677 $395,236   

(A)    Included in Total Natural Gas, NGL and Oil Revenue are sales of $115,011 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 11 - Derivative Instruments for more information).
(C)    Includes equity in loss of unconsolidated affiliates of $1,025 for Other.
(D)    Includes investments in unconsolidated equity affiliates of 15,685.

















 Marcellus
Shale
 Utica Shale Coalbed Methane Other
Gas
 Total
E&P
 Midstream Unallocated Intercompany Eliminations Consolidated 
Natural Gas, NGLs and Oil Revenue$207,407
 $88,039
 $48,471
 $795
 $344,712
 $
 $
 $
 $344,712
(D)
Purchased Gas Revenue
 
 
 10,560
 10,560
 
 
 
 10,560
  
Midstream Revenue
 
 
 
 
 61,372
 
 (41,426) 19,946
  
Gain (Loss) on Commodity Derivative Instruments1,796
 (151) 605
 15,755
 18,005
 
 
 
 18,005
 
Other Operating Income
 
 
 3,969
 3,969
 
 
 (66) 3,903
(E)
Total Revenue and Other Operating Income$209,203
 $87,888
 $49,076
 $31,079
 $377,246
 $61,372
 $
 $(41,492) $397,126
  
Earnings (Loss) Before Income Tax$64,408
 $41,237
 $9,642
 $(60,856) $54,431
 $31,173
 $117,830
 $
 $203,434
 
Segment Assets        $6,256,132
 $1,883,134
 $82,696
 $(12,926) $8,209,036
(F)
Depreciation, Depletion and Amortization        $111,844
 $7,741
 $
 $
 $119,585
  
Capital Expenditures        $253,263
 $44,202
 $
 $
 $297,465
  
31

(D)Included in Total Natural Gas, NGLs and Oil Revenue are sales of $42,901 to NJR Energy Services Company, which comprises over 10% of revenue from contracts with external customers for the period.
(E)Includes equity in earnings of unconsolidated affiliates of $1,241 for Total E&P.
(F)Includes investments in unconsolidated equity affiliates of $19,488 for Total E&P.





28




Industry segment results for the nine months ended September 30, 2019:
ShaleCoalbed MethaneOtherConsolidated
Natural Gas, NGL and Oil Revenue$917,862 $125,094 $906 $1,043,862 (E)
Purchased Gas Revenue64,181 64,181   
Gain on Commodity Derivative Instruments23,501 2,819 213,798 240,118 
Other Revenue and Operating Income55,863 9,436 65,299 (F)
Total Revenue and Other Operating Income$997,226 $127,913 $288,321 $1,413,460   
Total Operating Expense$586,030 $98,694 $254,510 $939,234 
Earnings (Loss) Before Income Tax$411,196 $29,219 $(90,278)$350,137 
Segment Assets$6,911,677 $1,231,509 $1,143,072 $9,286,258 (G)
Depreciation, Depletion and Amortization$316,596 $51,669 $6,354 $374,619   
Capital Expenditures$951,427 $7,752 $5,323 $964,502   

 
Marcellus
Shale
 Utica Shale Coalbed Methane 
Other
Gas
 
Total
E&P
 Midstream Unallocated Intercompany Eliminations Consolidated 
Natural Gas, NGLs and Oil Revenue$709,656
 $208,206
 $125,094
 $906
 $1,043,862
 $
 $
 $
 $1,043,862
(A)
Purchased Gas Revenue
 
 
 64,181
 64,181
 
 
 
 64,181
  
Midstream Revenue
 
 
 
 
 225,280
 
 (169,417) 55,863
  
Gain on Commodity Derivative Instruments17,727
 5,774
 2,819
 213,798
 240,118
 
 
 
 240,118
 
Other Operating Income
 
 
 9,671
 9,671
 
 
 (235) 9,436
(B)
Total Revenue and Other Operating Income$727,383
 $213,980
 $127,913
 $288,556
 $1,357,832
 $225,280
 $
 $(169,652) $1,413,460
  
Earnings (Loss) Before Income Tax$178,326
 $68,165
 $29,219
 $(42,650) $233,060
 $118,739
 $(1,662) $
 $350,137
 
Segment Assets        $7,087,782
 $2,178,073
 $16,668
 $3,735
 $9,286,258
(C)
Depreciation, Depletion and Amortization        $349,620
 $24,999
 $
 $
 $374,619
  
Capital Expenditures        $716,164
 $248,338
 $
 $
 $964,502
  

(A)Included in Total Natural Gas, NGLs and Oil Revenue are sales of $155,337 to Direct Energy Business Marketing LLC and $114,440 to NJR Energy Services Company, each of which comprise(E)    Included in Total Natural Gas, NGL and Oil Revenue are sales of $155,337 to Direct Energy Business Marketing LLC and $114,440 to NJR Energy Services Company, each of which comprises over 10% of revenue from contracts with external customers for the period.
(B)Includes equity in earnings of unconsolidated affiliates of $1,703 for Total E&P.
(C)Includes investments in unconsolidated equity affiliates of $17,110 for Total E&P.

Industry segment results for the nine months ended September 30, 2018:period.
(F)    Includes equity in earnings of unconsolidated affiliates of $1,703 for Other.
(G)    Includes investments in unconsolidated equity affiliates of $17,110.

 Marcellus
Shale
 Utica Shale Coalbed Methane Other
Gas
 Total
E&P
 Midstream Unallocated Intercompany Eliminations Consolidated 
Natural Gas, NGLs and Oil Revenue$590,728
 $326,119
 $152,854
 $15,150
 $1,084,851
 $
 $
 $
 $1,084,851
(D)
Purchased Gas Revenue
 
 
 38,546
 38,546
 
 
 
 38,546
  
Midstream Revenue
 
 
 
 
 186,875
 
 (117,191) 69,684
  
Gain on Commodity Derivative Instruments1,411
 746
 330
 76,265
 78,752
 
 
 
 78,752
 
Other Operating Income
 
 
 23,355
 23,355
 
 
 (209) 23,146
(E)
Total Revenue and Other Operating Income$592,139
 $326,865
 $153,184
 $153,316
 $1,225,504
 $186,875
 $
 $(117,400) $1,294,979
  
Earnings (Loss) Before Income Tax$155,923
 $143,830
 $35,164
 $(138,551) $196,366
 $94,502
 $702,097
 $
 $992,965
 
Segment Assets        $6,256,132
 $1,883,134
 $82,696
 $(12,926) $8,209,036
(F)
Depreciation, Depletion and Amortization        $338,834
 $24,504
 $
 $
 $363,338
  
Capital Expenditures        $708,660
 $85,464
 $
 $
 $794,124
  

(D)Included in Total Natural Gas, NGLs and Oil Revenue are sales of $158,746 to NJR Energy Services Company, which comprises over 10% of revenue from contracts with external customers for the period.
(E)Includes equity in earnings of unconsolidated affiliates of $4,688 for Total E&P.
(F)Includes investments in unconsolidated equity affiliates of $19,488 for Total E&P.



29



Reconciliation of Segment Information to Consolidated Amounts:

Revenue and Other Operating Income
For the Three Months Ended September 30,For the Nine Months Ended September 30,
2020201920202019
Total Segment Revenue from Contracts with External Customers$230,443 $312,767 $735,093 $1,163,906 
(Loss) Gain on Commodity Derivative Instruments(168,834)213,913 (116,995)240,118 
Other Operating Income4,466 3,317 13,177 9,436 
Total Consolidated Revenue and Other Operating Income$66,075 $529,997 $631,275 $1,413,460 
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
2019 2018 2019 2018
Total Segment Revenue from Contracts with External Customers$312,768
 $375,218
 $1,163,906
 $1,193,081
Gain on Commodity Derivative Instruments213,913
 18,005
 240,118
 78,752
Other Operating Income3,316
 3,903
 9,436
 23,146
Total Consolidated Revenue and Other Operating Income$529,997
 $397,126
 $1,413,460
 $1,294,979


Earnings Before Income Tax:
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2019 2018 2019 2018
Segment Income Before Income Taxes for Reportable Business Segments:       
Total E&P$151,230
 $54,431
 $233,060
 $196,366
Midstream41,741
 31,173
 118,739
 94,502
Total Segment Income Before Income Taxes for Reportable Business Segments$192,971
 $85,604
 $351,799
 $290,868
Unallocated Expenses:       
Other (Expense) Income(3,109) (1,105) (1,578) 4,811
Gain on Certain Asset Sales3,000
 134,320
 7,530
 146,706
Gain on Previously Held Equity Interest
 
 
 623,663
Loss on Debt Extinguishment
 (15,385) (7,614) (54,433)
Impairment of Other Intangible Assets
 
 
 (18,650)
Earnings Before Income Tax$192,862
 $203,434
 $350,137
 $992,965


Total Assets:
September 30,
20202019
Segment Assets for Reportable Business Segments$7,195,668 $8,143,186 
Segment Assets for Other782,730 1,126,404 
Items Excluded from Segment Assets:
Cash and Cash Equivalents
150,132 5,484 
Recoverable Income Taxes
644 11,184 
Total Consolidated Assets$8,129,174 $9,286,258 
 September 30,
2019 2018
Segment Assets for Total Reportable Business Segments:   
E&P$7,087,782
 $6,256,132
Midstream2,178,073
 1,883,134
Intercompany Eliminations3,735
 (12,926)
Items Excluded from Segment Assets:   
Cash and Cash Equivalents

5,484
 42,672
Recoverable Income Taxes

11,184
 40,024
Total Consolidated Assets$9,286,258
 $8,209,036




3032




NOTE 18—15—STOCK REPURCHASE:
Since the October 30, 2017 inception of the current stock repurchase program, CNX's Board of Directors has approved in total a $750,000 stock repurchase program, which is not subject to an expiration date. The repurchases may be affected from time-to-time through open market purchases, privately negotiated transactions, Rule 10b5-1 plans, accelerated stock repurchases, block trades, derivative contracts or otherwise in compliance with Rule 10b-18. The timing of any repurchases will be based on a number of factors, including available liquidity, the Company's stock price, the Company's financial outlook, and alternative investment options. The stock repurchase program does not obligate the Company to repurchase any dollar amount or number of shares and the Board may modify, suspend, or discontinue its authorization of the program at any time. The Board of Directors will continue to evaluate the size of the stock repurchase program based on CNX's free cash flow position, leverage ratio, and capital plans. During the nine months ended September 30, 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. There were 0 shares repurchased and retired during the nine months ended September 30, 2020.

NOTE 19—16—RECENT ACCOUNTING PRONOUNCEMENTS:

In May 2019,August 2020, the FASB issued ASU 2019-052020-06 - FinancialAccounting for Convertible Instruments - Credit Losses (Topic 326), which provides optional targeted transition relief to entities adoptingand Contracts in an Entity's Own Equity. This ASU 2016-13. ASU 2016-13 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 will be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectabilitysimplifies an entity's accounting for convertible instruments by eliminating two of the reported amount. ASU 2019-05 providesthree models in ASC 470-20 that require separate accounting for embedded conversion features, simplifies the optionsettlement assessment that entities are required to irrevocably electperform 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 option for certain financial assets previously measuredof an entity's convertible debt at amortized cost basis. For those entities, the targeted transition relief will increase comparability of financial statement information by providing an option to align measurement methodologies for similar financial assets.instrument level, among other things. The amendments in this ASU will be applied using the modified-retrospective approach and,are effective for public entities are effective for fiscal years beginning after December 15, 2019 and2021, including interim periods within those annual periods.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.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. The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022. The Company is still evaluating the effect of adopting this guidance.

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


NOTE 17—SUBSEQUENT EVENT:

On October 8, 2020, CNX repurchased the remaining $363,348 of its outstanding 5.875% senior notes due in April 2022 at an average price equal to 100% of the principal amount.






3133



ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

General

DuringCNX continues to monitor the thirdcurrent 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 factors include: the impact of the COVID-19 pandemic and the related global economic downturn, the historically low natural gas prices and the historically low natural gas liquids prices that began with the crude oil price war between the Organization of Petroleum Exporting Countries ("OPEC")/Saudi Arabia and Russia in the first quarter of 2019, CNX sold 128.3 Bcfe of produced2020. The natural gas an increase of 7.8% from the 119.0 Bcfe sold in the year-earlier quarter, primarily due to an increase in Marcellus Shale volumes. The increase was offset, in part, by a decrease in Utica Shale volumes due to the sale of substantially all of CNX's Ohio Utica joint venture ("JV") assetsliquids prices have rebounded in the third quarterquarter. 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 2018. Total quarterly production costs increasedthe same period in previous years. The results presented in this Form 10-Q are not necessarily indicative of future operating results.

While CNX did not incur significant disruptions to $1.99 per Mcfe, compared to the year-earlier quarter of $1.97 per Mcfe, driven primarily by increases in transportation, gathering and compression, offset, in part, by reductions in depreciation, depletion and amortization and lease operating expense. Capital expenditures increased to $336 million in the third quarter of 2019, compared to $297 million of spend in the third quarter of 2018.
Marketing Update:
For the third quarter of 2019, CNX's average sales price for natural gas, natural gas liquids (NGLs), oil, and condensate was $2.51 per Mcfe. The average realized price for all liquids for the third quarter of 2019 was $14.26 per barrel.

CNX's weighted average differential from NYMEX in the third quarter of 2019 was negative $0.33 per MMBtu. CNX's average sales price for natural gas before hedging decreased 18.7% to $2.04 per Mcf compared with the average sales price of $2.51 per Mcf in the second quarter of 2019. This decrease resulted primarily from a lower Henry Hub price reflecting current general market conditions coupled with a wider differential. Including the impact of cash settlements from hedging, CNX's average sales price for natural gas was $0.08 per Mcf, or 3.1%, lower thanoperations during the three months ended June 30, 2019, and $0.23 per Mcf, or 8.4%, lower than the threenine months ended September 30, 2018.2020 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. These uncertainties include the volatility and severity of the virus, the duration of the outbreak, the availability of a vaccine, governmental or other actions taken to combat the virus (which could include limitations on our operations or the operations of our customers and vendors), and the effect that the COVID-19 pandemic will have on the demand for natural gas and natural gas liquids. The continued health of our employees, contractors and vendors, and our ability to meet staffing needs in our operations and certain critical functions is vital to our operations and cannot currently be predicted. Further, the continuing impacts of a potential worsening of global economic conditions and the continued disruptions to, and volatility in, the credit and financial markets as well as other unanticipated consequences remain unknown. In addition, CNX cannot predict the impact that COVID-19 will have on our customers, vendors and contractors; however, any material effect on these parties could adversely impact CNX. For instance, in the short term, CNX is starting to see a reduction in overall service and materials costs, due to oversupply of those services and costs, since industrial production has waned. However, if services providers to our industry are forced into bankruptcy or otherwise consolidate due to weakening economic conditions, demand could outpace supply in the long-term and cause these costs to increase. The situation surrounding COVID-19 remains fluid and unpredictable, and CNX is actively managing our response in collaboration with our contractors, customers, employees and vendors and assessing potential impacts to our financial position and operating results, as well as any adverse developments that could impact our business.

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

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



34


Recent Business Developments:

On September 28, 2020, we completed the acquisition of all of the outstanding common units of CNX updates 2019 production volumes to 530-540 Bcfe, comparedMidstream Partners LP ("CNXM") and CNXM became our indirect wholly-owned subsidiary (the “Merger”) (See Note 13 - Acquisitions and Dispositions in the Notes to the previous guidanceUnaudited Consolidated Financial Statements in Item 1 of 510-530 Bcfe.this Form 10-Q for additional information). In connection with the closing of the Merger, we issued 37.1 million shares of our common stock to acquire the 42.1 million common units of CNXM held by third-party CNXM investors at a fixed exchange ratio of 0.88 shares of CNX updates 2020 production volumescommon stock for each CNXM common unit, for total implied consideration of $384.6 million.

In conjunction with the Merger and to 535-565 Bcfe, comparedprovide a greater level of transparency that is more in-line with how Management views CNX's operations, CNX has updated its segment reporting to now include a Shale segment which is made up of what was formerly the Marcellus, Utica and Midstream Segments (See Note 14 - Segments in the Notes to the previous guidanceUnaudited Consolidated Financial Statements in Item 1 of 570-595 Bcfe. The updated 2020 guidance equates to an approximately 3% increase over 2019's updated midpoint.this Form 10-Q for additional information). CNX has recast its current and historical operating results into the new format.

Third quarter 2019 capital expenditure came in lower than expected, and the company is reducing its full-year 2019 capital guidance, while increasing production volumes. For 2020, the company is reducing its full-year capital guidance and production volumes, primarily due to plan changes and associated timing.Hedging Update:

For 2019 and 2020 combined, the company expects to spend approximately $80 million less capital than previously announced, resulting in 17.5 Bcfe less production in 2020, after accounting for 15 Bcfe of production accelerated from 2020 into 2019.

Total hedged natural gas production in the 20192020 fourth quarter is 115.7124.0(1) Bcf. The annual gas hedge position is shown in the table below:
  2019 2020
Volumes Hedged (Bcf), as of 10/9/19 405.2* 489.6
20202021
Volumes Hedged (Bcf), as of 10/8/20
448.8(1)(2)
459.1 
*1Net of purchased swaps.
2Includes actual settlements of 312.5356.2 Bcf.

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






3235




Results of Operations - Three Months EndedSeptember 30, 20192020 Compared with Three Months Ended September 30, 20182019

Net (Loss) Income Attributable to CNX Resources Shareholders

CNX reported a net loss attributable to CNX Resources shareholders of $205 million, or a loss per diluted share of $1.03, for the three months ended September 30, 2020, compared to net income attributable to CNX Resources shareholders of $116 million, or earnings per diluted share of $0.61, for the three months ended September 30, 2019, compared to net income attributable to CNX Resources shareholders of $125 million, or earnings per diluted share of $0.59,2019.
 For the Three Months Ended September 30,
(Dollars in thousands)20202019Variance
Net (Loss) Income$(188,793)$143,960 $(332,753)
Less: Net Income Attributable to Noncontrolling Interest15,905 28,422 (12,517)
Net (Loss) Income Attributable to CNX Resources Shareholders$(204,698)$115,538 $(320,236)

Included in the loss for the three months ended September 30, 2018.
 For the Three Months Ended September 30,
(Dollars in thousands)2019 2018 Variance
Net Income$143,960
 $146,756
 $(2,796)
Less: Net Income Attributable to Noncontrolling Interest28,422
 21,727
 6,695
Net Income Attributable to CNX Resources Shareholders$115,538
 $125,029
 $(9,491)

CNX consists2020 was an unrealized loss on commodity derivative instruments of two principal business divisions: Exploration and Production (E&P) and Midstream.

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

CNX's E&P Division had earnings before income tax of $151 million for the three months ended September 30, 2019, compared to earnings before income tax of $54 million for the three months ended September 30, 2018.$259 million. Included in the earnings for the three months ended September 30, 2019 and 2018 werewas an unrealized gainsgain on commodity derivative instruments of $157 millionmillion.

Selected Operating Revenue and $15 million, respectively.Other Cost Data

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

As a result of the Midstream Acquisition (See Note 5 - Acquisitions and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q), 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. Prior to the acquisition, CNX accounted for its interests in CNX Gathering and CNXM as an equity-method investment.

CNX's Midstream Division had earnings before income tax of $42 million for the three months ended September 30, 2019, compared to earnings before income tax of $31 million for the three months ended September 30, 2018.
E&P Division Summary
SalesThe following table presents sales volumes, revenue, costs, average sales priceprices (including the effects of settled derivative instruments),derivatives) and average unit costs for the E&P Division were as follows: production operations on a total Company basis:

 For the Three Months Ended September 30,
 2019 2018 Variance 
Percent
Change
Sales Volumes (Bcfe)128.3
 119.0
 9.3
 7.8 %
        
Average Sales Price (per Mcfe)$2.51
 $2.92
 $(0.41) (14.0)%
Lease Operating Expense (per Mcfe)0.11
 0.14
 (0.03) (21.4)%
Production, Ad Valorem, and Other Fees (per Mcfe)0.05
 0.06
 (0.01) (16.7)%
Transportation, Gathering and Compression (per Mcfe)0.97
 0.84
 0.13
 15.5 %
Depreciation, Depletion and Amortization (DD&A) (per Mcfe)0.86
 0.93
 (0.07) (7.5)%
Average Costs (per Mcfe)1.99
 1.97
 0.02
 1.0 %
Average Margin (per Mcfe)$0.52
 $0.95
 $(0.43) (45.3)%
For the Three Months Ended September 30,
20202019Variance
in MillionsPer Mcfein MillionsPer Mcfein MillionsPer Mcfe
Total Sales Volumes (Bcfe)*115.7128.3(12.6)
— 
Natural Gas, NGL and Oil Revenue$182 1.53$265 2.04 $(83)(0.51)
Gain on Commodity Derivative Instruments - Cash Settlement - Gas90 0.8357 0.47 33 0.36 
Total Revenue272 2.36322 2.51 (50)(0.15)
Lease Operating Expense10 0.0914 0.11 (4)(0.02)
Production, Ad Valorem, and Other Fees0.050.05 — — 
Transportation, Gathering and Compression69 0.5980 0.63 (11)(0.04)
Depreciation, Depletion and Amortization (DD&A)112 0.98120 0.93 (8)0.05 
Average Costs197 1.71 220 1.72 (23)(0.01)
Average Margin$75 0.65 $102 0.79 $(27)(0.14)




33



Natural gas, *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 revenue was $265 million forand natural gas, which is not indicative of the three months ended September 30, 2019,relationship of NGL, condensate, and natural gas prices.

The 12.6 Bcfe decrease in sales volumes when compared to $345 million for the three months ended September 30, 2018. The decreaseyear-earlier quarter was primarily due to the temporary shut-in of new turn-in-line wells in 2020 due to low natural gas prices and normal production declines for legacy wells.

Changes in 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 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 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 a lower production base in 2020. The lower production volumes was a result of temporary shut-ins due to lower natural gas prices.

36


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.

For the Three Months Ended September 30,
20202019Variance
in MillionsPer Mcfein MillionsPer Mcfein MillionsPer Mcfe
Total Company Sales Volumes (Bcfe)*115.7128.3(12.6)
Total Other Revenue and Operating Income$21 0.18 $22 0.17 $(1)0.01 
Depreciation, Depletion and Amortization0.02 — 0.00 0.02 
Exploration and Production Related Other Costs0.02 0.05 (4)(0.03)
Selling, General and Administrative Costs23 0.20 24 0.19 (1)0.01 
Other Operating Expense24 0.21 21 0.16 0.05 
Total Selected Operating Costs and Expenses51 0.45 51 0.40 — 0.05 
Other Expense0.02 0.02 (1)0.00 
Interest Expense38 0.33 38 0.30 — 0.03 
Total Selected Other Expense40 0.35 41 0.32 (1)0.03 
Total Selected Costs and Expenses$91 0.80 $92 0.72 $(1)0.08 
* 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, pricing offset, in-part bycondensate, and natural gas prices.

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 7.8% increase in totalunderstanding of the Company’s natural gas production and sales volumes.portfolio and information regarding settled commodity derivatives:

For the Three Months Ended September 30,
in thousands (unless noted)20202019VariancePercent Change
LIQUIDS
NGL:
Sales Volume (MMcfe)6,885 8,019 (1,134)(14.1)%
Sales Volume (Mbbls)1,147 1,337 (190)(14.2)%
Gross Price ($/Bbl)$13.14 $13.68 $(0.54)(3.9)%
Gross NGL Revenue$15,053 $18,305 $(3,252)(17.8)%
Oil/Condensate:
Sales Volume (MMcfe)624 77 547 710.4 %
Sales Volume (Mbbls)104 13 91 700.0 %
Gross Price ($/Bbl)$39.50 $73.12 $(33.62)(46.0)%
Gross Oil/Condensate Revenue$4,106 $931 $3,175 341.0 %
GAS
Sales Volume (MMcf)108,190 120,208 (12,018)(10.0)%
Sales Price ($/Mcf)$1.51 $2.04 $(0.53)(26.0)%
Gross Gas Revenue$163,054 $245,815 $(82,761)(33.7)%
Hedging Impact ($/Mcf)$0.83 $0.47 $0.36 76.6 %
Gain on Commodity Derivative Instruments - Cash Settlement$90,311 $57,041 $33,270 58.3 %


37


The decrease in average sales price per Mcfethe gross revenue was primarily the result of the $0.67$0.53 per Mcf decrease in general natural gas prices, when excluding the impact of hedging, in the markets in which CNX sells its natural gas. There was also a $0.16 per Mcfegas and the 12.6 Bcfe decrease in sales volumes. The decrease in the uplift from NGLs and condensate sales volumes. Both decreases weregross revenue was offset, in-part, by a $0.44 per Mcfthe increase in the realized gain on commodity derivative instruments related to the Company's hedging program duringprogram.

SEGMENT ANALYSIS for the current period.three months ended September 30, 2020 compared to the three months ended September 30, 2019:

Changes
For the Three Months EndedDifference to Three Months Ended
September 30, 2020September 30, 2019
(in millions)ShaleCBMOtherTotalShaleCBMOtherTotal
Natural Gas, NGL and Oil Revenue$156 $26 $— $182 $(73)$(10)$— $(83)
Gain (Loss) on Commodity Derivative Instruments80 11 (260)(169)29 (417)(383)
Purchased Gas Revenue— — 32 32 — — 
Other Revenue and Operating Income17 — 21 (2)— (1)
Total Revenue and Other Operating Income253 37 (224)66 (46)(5)(413)(464)
Lease Operating Expense(1)10 (3)— (1)(4)
Production, Ad Valorem, and Other Fees— — (1)— 
Transportation, Gathering and Compression60 10 (1)69 (10)— (1)(11)
Depreciation, Depletion and Amortization94 16 114 (7)(1)(6)
Exploration and Production Related Other Costs— — — — (4)(4)
Purchased Gas Costs— — 32 32 — — 
Selling, General and Administrative Costs— — 23 23 — — (1)(1)
Other Operating Expense— — 24 24 — — 
Total Operating Costs and Expenses166 31 83 280 (20)(2)(19)
Other Expense— — — — (1)(1)
Gain on Asset Sales and Abandonments, net— — (4)(4)— — (1)(1)
Interest Expense— — 38 38 — — — — 
Total Other Expense— — 36 36 — — (2)(2)
Total Costs and Expenses166 31 119 316 (20)(2)(21)
Earnings (Loss) Before Income Tax$87 $$(343)$(250)$(26)$(3)$(414)$(443)





















38


SHALE SEGMENT

The Shale segment had earnings before income tax of $87 million for the three months ended September 30, 2020 compared to earnings before income tax of $113 million for the three months ended September 30, 2019.
For the Three Months Ended September 30,
20202019VariancePercent Change
Shale Gas Sales Volumes (Bcf)95.2 106.0 (10.8)(10.2)%
NGL Sales Volumes (Bcfe)*6.9 8.0 (1.1)(13.8)%
Oil/Condensate Sales Volumes (Bcfe)*0.5 0.1 0.4 400.0 %
Total Shale Sales Volumes (Bcfe)*102.6 114.1 (11.5)(10.1)%
Average Sales Price - Gas (per Mcf)$1.44 $1.98 $(0.54)(27.3)%
Gain on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)$0.84 $0.48 $0.36 75.0 %
Average Sales Price - NGL (per Mcfe)*$2.18 $2.28 $(0.10)(4.4)%
Average Sales Price - Oil/Condensate (per Mcfe)*$6.27 $12.76 $(6.49)(50.9)%
Total Average Shale Sales Price (per Mcfe)$2.30 $2.46 $(0.16)(6.5)%
Average Shale Lease Operating Expenses (per Mcfe)0.07 0.09 (0.02)(22.2)%
Average Shale Production, Ad Valorem, and Other Fees (per Mcfe)0.04 0.04 — — %
Average Shale Transportation, Gathering and Compression Costs (per Mcfe)0.58 0.61 (0.03)(4.9)%
Average Shale Depreciation, Depletion and Amortization Costs (per Mcfe)0.93 0.89 0.04 4.5 %
   Total Average Shale Costs (per Mcfe)$1.62 $1.63 $(0.01)(0.6)%
   Average Margin for Shale (per Mcfe)$0.68 $0.83 $(0.15)(18.1)%
* 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, oil, condensate, and natural gas prices.

The Shale segment had natural gas, NGL and oil revenue of $156 million for the three months ended September 30, 2020 compared to $229 million for the three months ended September 30, 2019. The $73 million decrease was primarily due to a 27.3% decrease in the average costssale price for natural gas and a 4.4% decrease in the average sale price of NGLs, along with a 10.1% decrease in total Shale sales volumes. The decrease in total Shale sales volumes was primarily due to the temporary shut-in of new turn-in-line wells in 2020 due to low natural gas prices.

The decrease in the total average Shale sales price was primarily due to a $0.54 per Mcf decrease in the average sales price for natural gas and a $0.10 per Mcfe decrease in the average NGL sales price, offset in part by a $0.36 per Mcf increase in the realized gain on commodity derivative instruments resulting from the Company's hedging program. The notional amounts associated with these financial hedges represented approximately 89.3 Bcf of the Company's produced Shale gas sales volumes for the three months ended September 30, 2020 at an average gain of $0.89 per Mcf hedged. For the three months ended September 30, 2019, these financial hedges represented approximately 90.3 Bcf at an average gain of $0.56 per Mcf hedged.

Total operating costs and expenses for the Shale segment were primarily related$166 million for the three months ended September 30, 2020 compared to $186 million for the three months ended September 30, 2019. The decrease in total dollars and decrease in unit costs for the Shale segment were due to the following items:
Transportation, gathering,
Shale lease operating expenses were $7 million for the three months ended September 30, 2020 compared to $10 million for the three months ended September 30, 2019. The decrease in total dollars and compression expense increased onin unit costs was primarily due to a per unit basis primarilydecrease in water disposal costs in the current period due to an increase in CNXMthe reuse of produced water in well completions activity.

Shale transportation, gathering feesand compression costs were $60 million for the three months ended September 30, 2020 compared to $70 million for the three months ended September 30, 2019. The decreases in total dollars and unit costs were primarily related to an increase in our Marcellus productionlower processing costs and an increasea decrease in firm transportation expense primarily asdue to lower gas sales volumes.

Depreciation, depletion and amortization costs attributable to the Shale segment were $94 million for the three months ended September 30, 2020 compared to $101 million for the three months ended September 30, 2019. These amounts included

39


depletion on a resultunit of new contracts that give CNX the ability to moveproduction basis of $0.81 per Mcfe and sell natural gas outside of the Appalachian basin.$0.82 per Mcfe, respectively. The decrease in units of production from CNX'sdepreciation, depletion and amortization rate in the current period is the result of positive reserve revisions within our core SWPA development area and lower cost dry Utica volumes also contributedreserves added in our core SWPA development area from the 2019 development program partially offset by an increase in the units of production depreciation, depletion and amortization rate due to the increasenegative reserves revisions within our Ohio operations. The remaining depreciation, depletion and amortization costs were either recorded on a per unit basis.straight-line basis or related to asset retirement obligations.
Lease
Total Shale other revenue and operating expense decreased on a per unit basisincome relates to natural gas gathering services provided to third-parties. The Shale segment had other revenue and operating income of $17 million for the three months ended September 30, 2020 compared to $19 million for the three months ended September 30, 2019. The decrease in the period-to-period comparison was primarily due to a reduction in third-party volumes transported related to temporary production curtailments.

COALBED METHANE (CBM) SEGMENT

The CBM segment had earnings before income tax of $6 million for the numberthree months ended September 30, 2020 compared to earnings before income tax of employees$9 million for the three months ended September 30, 2019.

For the Three Months Ended September 30,
20202019VariancePercent Change
CBM Gas Sales Volumes (Bcf)13.0 14.1 (1.1)(7.8)%
Average Sales Price - Gas (per Mcf)$1.98 $2.52 $(0.54)(21.4)%
Gain on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)$0.81 $0.43 $0.38 88.4 %
Total Average CBM Sales Price (per Mcf)$2.79 $2.95 $(0.16)(5.4)%
Average CBM Lease Operating Expenses (per Mcf)0.28 0.28 — — %
Average CBM Production, Ad Valorem, and Other Fees (per Mcf)0.09 0.10 (0.01)(10.0)%
Average CBM Transportation, Gathering and Compression Costs (per Mcf)0.76 0.71 0.05 7.0 %
Average CBM Depreciation, Depletion and Amortization Costs (per Mcf)1.21 1.24 (0.03)(2.4)%
Total Average CBM Costs (per Mcf)$2.34 $2.33 $0.01 0.4 %
Average Margin for CBM (per Mcf)$0.45 $0.62 $(0.17)(27.4)%

The CBM segment had natural gas revenue of $26 million for the three months ended September 30, 2020 compared to $36 million for the three months ended September 30, 2019. The $10 million decrease was due to the 7.8% decrease in total CBM sales volumes and the associated costs21.4% decrease in the period-to-period comparison.average sales price for natural gas. 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 $0.54 per Mcf decrease in average gas sales price, offset in part by a $0.38 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 11.8 Bcf of the Company's produced CBM sales volumes for the three months ended September 30, 2020 at an average gain of $0.89 per Mcf hedged. For the three months ended September 30, 2019, these financial hedges represented approximately 11.3 Bcf at an average gain of $0.53 per Mcf hedged.

Total operating costs and expenses for the CBM segment were $31 million for the three months ended September 30, 2020 compared to $33 million for the three months ended September 30, 2019. The decrease in total dollars and increase in unit costs for the CBM segment was primarily due to the following:

CBM transportation, gathering and compression costs remained consistent at $10 million for both the three months ended September 30, 2020 and 2019. The increase in unit costs were primarily related to the 7.8% decrease in CBM sales volumes.

Depreciation, depletion and amortization expense decreasedcosts attributable to the CBM segment were $16 million for the three months ended September 30, 2020 compared to $17 million for the three months ended September 30, 2019. These amounts included depletion on a unit of production basis of $0.67 per unit basis primarilyMcfe and $0.70 per Mcfe, respectively. The decrease in the units of

40


production depreciation, depletion and amortization rate was due to positive reserve revisions. The remaining depreciation, depletion and amortization costs were either recorded on a reductionstraight-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 of exploration and production properties, as well as various other expenses that are managed outside the Shale and CBM segments such as selling, general and administrative (SG&A), interest expense and income taxes.

The Other segment had a loss before income tax of $343 million for the three months ended September 30, 2020 compared to earnings before income tax of $71 million for the three months ended September 30, 2019.

 For the Three Months Ended September 30,
 20202019VariancePercent Change
Other Gas Sales Volumes (Bcf)— 0.1 (0.1)(100.0)%
Oil/Condensate Sales Volumes (Bcfe)*0.1 — 0.1 100.0 %
* 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.

Gain or Loss on Commodity Derivative Instruments and Monetization

For the three months ended September 30, 2020, the Other Gas segment recognized an unrealized loss on commodity derivative instruments of $259 million and cash settlements paid of $1 million. For the three months ended September 30, 2019, the Other Gas segment recognized an unrealized gain on commodity derivative instruments of $157 million. The unrealized loss/gain on commodity derivative instruments represents changes in Marcellus rates asthe fair value of all of the Company's existing commodity hedges on a resultmark-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 $32 million for the three months ended September 30, 2020 compared to $29 million for the three months ended September 30, 2019. Purchased gas costs were $32 million for the three months ended September 30, 2020 compared to $28 million for the three months ended September 30, 2019. The period-to-period increase in purchased gas revenue was due to an increase in the Company's associated reserves.

The following table presents a breakout of net liquid and naturalpurchased gas sales informationvolumes, offset in part by a decrease in average sales price.

For the Three Months Ended September 30,
20202019VariancePercent Change
Purchased Gas Sales Volumes (in Bcf)20.7 13.6 7.1 52.2 %
Average Sales Price (per Mcf)$1.52 $2.14 $(0.62)(29.0)%
Average Cost (per Mcf)$1.53 $2.02 $(0.49)(24.3)%

Other Operating Income

For the Three Months Ended September 30,
(in millions)20202019VariancePercent Change
Gathering Income$$$50.0 %
Water Income— 100.0 %
Equity in Earnings of Affiliates— (1)(100.0)%
Total Other Operating Income$$$33.3 %

Gathering income represents revenue from the sale of excess firm transportation capacity to assistthird-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

41


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.

Exploration and Production Related Other Costs

For the Three Months Ended September 30,
(in millions)20202019VariancePercent Change
Seismic Activity$— $$(5)(100.0)%
Lease Expiration Costs— — %
Land Rentals— 100.0 %
Total Exploration and Production Related Other Costs$$$(4)(66.7)%

Seismic activity decreased in the understanding ofperiod-to-period comparison due to additional geophysical research in the Company’s natural gas production and sales portfolio.prior period.
  For the Three Months Ended September 30,
 in thousands (unless noted) 2019 2018 Variance Percent Change
LIQUIDS        
NGLs:        
Sales Volume (MMcfe) 8,019
 9,972
 (1,953) (19.6)%
Sales Volume (Mbbls) 1,337
 1,662
 (325) (19.6)%
Gross Price ($/Bbl) $13.68
 $28.08
 $(14.40) (51.3)%
Gross Revenue $18,305
 $46,663
 $(28,358) (60.8)%
         
Oil:        
Sales Volume (MMcfe) 9
 72
 (63) (87.5)%
Sales Volume (Mbbls) 2
 12
 (10) (83.3)%
Gross Price ($/Bbl) $56.64
 $63.00
 $(6.36) (10.1)%
Gross Revenue $92
 $759
 $(667) (87.9)%
         
Condensate:        
Sales Volume (MMcfe) 67
 351
 (284) (80.9)%
Sales Volume (Mbbls) 11
 58
 (47) (81.0)%
Gross Price ($/Bbl) $75.54
 $58.56
 $16.98
 29.0 %
Gross Revenue $839
 $3,426
 $(2,587) (75.5)%
         
GAS        
Sales Volume (MMcf) 120,208
 108,565
 11,643
 10.7 %
Sales Price ($/Mcf) $2.04
 $2.71
 $(0.67) (24.7)%
  Gross Revenue $245,815
 $293,864
 $(48,049) (16.4)%
         
Hedging Impact ($/Mcf) $0.47
 $0.03
 $0.44
 1,466.7 %
Gain on Commodity Derivative Instruments - Cash Settlement 57,041
 2,825
 54,216
 1,919.2 %









34



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

For the Three Months Ended September 30,For the Three Months Ended September 30,
(in millions)2019 2018 Variance 
Percent
Change
(in millions)20202019VariancePercent Change
SG&A       
Salaries and WagesSalaries and Wages$$10 $(2)(20.0)%
Long-Term Equity-Based Compensation (Non-Cash)Long-Term Equity-Based Compensation (Non-Cash)— — %
Short-Term Incentive Compensation$2
 $6
 $(4) (66.7)%Short-Term Incentive Compensation50.0 %
Long-Term Equity-Based Compensation (Non-Cash)2
 5
 (3) (60.0)%
Salaries and Wages10
 9
 1
 11.1 %
Other10
 12
 (2) (16.7)%Other10 10 — — %
Total SG&A$24
 $32
 $(8) (25.0)%Total SG&A$23 $24 $(1)(4.2)%

Short-term incentive compensation decreased $4 million due to lower projected payouts in the current period.

UnallocatedSalaries and Wages decreased $2 million due to an overall reduction in employees and employee related costs resulting from a reduction in staff at the end of 2019 period.

Other Operating Expense

Certain costs
For the Three Months Ended September 30,
(in millions)20202019VariancePercent Change
Unutilized Firm Transportation and Processing Fees$20 $15 $33.3 %
Idle Equipment and Service Charges— 100.0 %
Insurance Expense— — %
Other(4)(80.0)%
Total Other Operating Expense$24 $21 $14.3 %

Unutilized firm transportation and expenses, suchprocessing fees represent pipeline transportation capacity obtained to enable gas production to flow uninterrupted as other expense, gain on asset sales and abandonments related to non-core assets, loss on debt extinguishment and income taxes are unallocated expenses and therefore are excluded from the per unit costs abovevolumes increase, as well as segment reporting. Belowadditional processing capacity for NGLs. The increase of $5 million in the period-to-period comparison was primarily due to previously acquired capacity which was not utilized during the current period to transport the Company's flowing production or to process the Company’s wet natural gas production. The increase in unutilized capacity was primarily due to the temporary shut-in of new turn-in-line wells in 2020 due to low natural gas price. 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 Other Revenue and Operating Income above.
Idle Equipment and Service Charges primarily relate to the temporary idling of one 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

42


completions process. The increase of $2 million in the period-to-period comparison was primarily the result of CNX idling one of its drilling rigs in the third-quarter.
Other decreased $4 million in the period-to-period comparison primarily due to a summarywrite-off of these costs and expenses:obsolete inventory in the 2019 period.

Other Expense
For the Three Months Ended September 30,
(in millions)20202019VariancePercent Change
Other Income
Interest Income$$$100.0 %
Other— 100.0 %
Total Other Income$$$700.0 %
Other Expense
Professional Services$$$100.0 %
Merger Related Costs— 100.0 %
Bank Fees— — %
Total Other Expense$10 $$150.0 %
Total Other Expense$$$(1)(33.3)%
 For the Three Months Ended September 30,
 (in millions)2019 2018 Variance 
Percent
Change
Other Income       
Royalty Income$
 $2
 $(2) (100.0)%
Right of Way Sales
 1
 (1) (100.0)%
Interest Income1
 
 1
 100.0 %
Other
 1
 (1) (100.0)%
Total Other Income$1
 $4
 $(3) (75.0)%
        
Other Expense       
Professional Services$1
 $1
 $
  %
Bank Fees3
 3
 
  %
Other Corporate Expense
 1
 (1) (100.0)%
Total Other Expense$4
 $5
 $(1) (20.0)%
        
       Total Other Expense$3
 $1
 $2
 200.0 %


Gain on Asset Sales and Abandonments
A gain on asset salesOther income increased $7 million in the period-to-period comparison primarily due to the receipt of $3 milliona severance tax refund related to non-core assets was recognizeda prior period in the three months ended September 30, 2019 compared to a gain of $134 million in the three months ended September 30, 2018, primarily2020 as well as additional interest income related to the Ohio Utica JV asset sale. Seealternative minimum tax (“AMT”) credit refund CNX received (See Note 5 -4- Income Taxes in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information).
Merger-related costs consist of transaction costs directly attributable to the CNXM Merger (See Note 13- Acquisitions and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.information), including financial advisory, legal service and other professional fees, which were recorded to Other Expense in the Consolidated Statements of Income.

LossGain on Debt ExtinguishmentAsset Sales and Abandonments, net
Loss
A gain on debt extinguishmentasset sales of $15$4 million related to the sale of various non-core assets was recognized in the three months ended September 30, 2018 due2020 compared to the $200a gain of $3 million redemption of the 8.00% Senior notes due in April 2023 at an average price equal to 106.0% of the principal amount. No such transactions occurred in the current period.three months ended September 30, 2019.

Loss (Gain) Loss on Debt Extinguishment

A nominal loss on debt extinguishment was recognized in the three months ended September 30, 2020. See Note 119 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.


















3543


Interest Expense
For the Three Months Ended September 30,
(in millions)20202019VariancePercent Change
Total Interest Expense$38 $38 $— — %

Interest expense remained unchanged quarter over quarter. In 2020, the Company purchased $531 million of the outstanding 5.875% senior notes due in April 2022 during the nine months ended September 30, 2020 and had lower average borrowings under the CNX credit facility. These decreases were offset by the addition of $345 million of convertible senior notes due 2026 (the “Convertible Notes”) during the three months ended June 30, 2020 and by the addition of the $125 million Cardinal States Facility and $50 million CSG Holdings Facility during the three months ended March 31, 2020. Realized and unrealized losses on interest rate swap agreements also offset the decreases in interest expense mentioned above.

Income Taxes
 For the Three Months Ended September 30,
(in millions)20202019VariancePercent Change
Total Company (Loss) Earnings Before Income Tax$(250)$193 $(443)(229.5)%
Income Tax (Benefit) Expense$(61)$49 $(110)(224.5)%
Effective Income Tax Rate24.5  %25.4  %(0.9)%

The effective income tax rate was 24.5% for the three months ended September 30, 2020 compared to 25.4% for the three months ended September 30, 2019 compared to 27.9% for the three months ended September 30, 2018.2019. The effective rate for the three months ended September 30, 2020 and 2019 differs from the U.S. federal statutory rate of 21% primarily due to the impact of noncontrolling interest, equity compensation and state income taxes. The effective rate for the three months ended September 30, 2018 differs from the U.S. federalFederal statutory rate of 21% primarily due to the impact of noncontrolling interest, equity compensation and state income taxes.

See Note 64 - Income Taxes in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.

44
 For the Three Months Ended September 30,
(in millions)2019 2018 Variance 
Percent
Change
Total Company Earnings Before Income Tax$193
 $203
 $(10) (4.9)%
Income Tax Expense$49
 $57
 $(8) (14.0)%
Effective Income Tax Rate25.4% 27.9% (2.5)%  



36



Results of Operations - Nine Months Ended September 30, 2020 Compared with Nine Months Ended September 30, 2019
TOTAL E&P DIVISION ANALYSIS
Net (Loss) Income Attributable to CNX Resources Shareholders
CNX reported a net loss attributable to CNX Resources shareholders of $680 million, or a loss per diluted share of $3.56, for the threenine months ended September 30, 2020, compared to net income attributable to CNX Resources shareholders of $191 million, or earnings per diluted share of $1.01, for the nine months ended September 30, 2019.
 For the Nine Months Ended September 30,
(Dollars in thousands)20202019Variance
Net (Loss) Income$(624,502)$272,004 $(896,506)
Less: Net Income Attributable to Noncontrolling Interest55,031 81,325 (26,294)
Net (Loss) Income Attributable to CNX Resources Shareholders$(679,533)$190,679 $(870,212)

Included in the loss for the nine months ended September 30, 2020 was a $62 million non-cash impairment charge related to exploration and production properties, a $473 million non-cash impairment charge related to goodwill and an unrealized loss on commodity derivative instruments of $501 million. Included in the earnings for the nine months ended September 30, 2019 compared to the three months ended September 30, 2018:was an unrealized gain on commodity derivative instruments of $214 million.

Selected Operating Revenue and Other Cost Data

The E&P division had earnings before income taxfollowing table presents sales volumes, average sales prices (including the effects of $151 million for the three months ended September 30, 2019 compared to earnings before income tax of $54 million for the three months ended September 30, 2018. Variances by individual E&P segment are discussed below.settled derivatives and excluding hedge monetizations) and average costs on a total Company basis:

 For the Three Months Ended Difference to Three Months Ended
 September 30, 2019 September 30, 2018
 (in millions)Marcellus Utica CBM Other
Gas
 Total E&P Marcellus Utica CBM Other
Gas
 Total
E&P
Natural Gas, NGLs and Oil Revenue$179
 $50
 $36
 $
 $265
 $(28) $(38) $(12) $(2) $(80)
Gain on Commodity Derivative Instruments38 13
 6
 157
 214
 36
 13
 5
 142
 196
Purchased Gas Revenue
 
 
 29
 29
 
 
 
 18
 18
Other Operating Income
 
 
 4
 4
 
 
 
 1
 1
Total Revenue and Other Operating Income217
 63
 42
 190
 512
 8
 (25) (7) 159
 135
Lease Operating Expense6
 4
 4
 
 14
 (1) (1) (1) 1
 (2)
Production, Ad Valorem, and Other Fees3
 1
 2
 
 6
 
 (1) 
 
 (1)
Transportation, Gathering and Compression106
 8
 10
 
 124
 29
 (4) (1) 
 24
Depreciation, Depletion and Amortization61
 32
 17
 2
 112
 3
 4
 (4) (3) 
Exploration and Production Related Other Costs
 
 
 6
 6
 
 
 
 3
 3
Purchased Gas Costs
 
 
 27
 27
 
 
 
 16
 16
Other Operating Expense
 
 
 21
 21
 
 
 
 3
 3
Selling, General and Administrative Costs
 
 
 20
 20
 
 
 
 (7) (7)
Total Operating Costs and Expenses176
 45
 33
 76
 330
 31
 (2) (6) 13
 36
Interest Expense
 
 
 31
 31
 
 
 
 2
 2
Total E&P Division Costs176
 45
 33
 107
 361
 31
 (2) (6) 15
 38
Earnings Before Income Tax$41
 $18
 $9
 $83
 $151
 $(23) $(23) $(1) $144
 $97
For the Nine Months Ended September 30,
20202019Variance
in MillionsPer Mcfein MillionsPer Mcfein MillionsPer Mcfe
Total Sales Volumes (Bcfe)*364.6395.8(31.2)
Natural Gas, NGL and Oil Revenue$609 1.62 $1,044 2.63 $(435)(1.01)
Gain on Commodity Derivative Instruments - Cash Settlement - Gas **300 0.87 26 0.07 274 0.80 
Total Revenue909 2.49 1,070 2.70 (161)(0.21)
Lease Operating Expense31 0.08 53 0.13 (22)(0.05)
Production, Ad Valorem, and Other Fees17 0.04 20 0.05 (3)(0.01)
Transportation, Gathering and Compression212 0.58 244 0.62 (32)(0.04)
Depreciation, Depletion and Amortization (DD&A)350 0.97 373 0.94 (23)0.03 
Average Costs610 1.67 690 1.74 (80)(0.07)
Average Margin$299 0.82 $380 0.96 $(81)(0.14)



37



MARCELLUS SEGMENT
The Marcellus segment had earnings before income tax of $41 million for the three months ended September 30, 2019 compared to earnings before income tax of $64 million for the three months ended September 30, 2018.
 For the Three Months Ended September 30,
 2019 2018 Variance 
Percent
Change
Marcellus Gas Sales Volumes (Bcf)79.2
 61.9
 17.3
 27.9 %
NGLs Sales Volumes (Bcfe)*8.0
 8.4
 (0.4) (4.8)%
Condensate Sales Volumes (Bcfe)*0.1
 0.3
 (0.2) (66.7)%
Total Marcellus Sales Volumes (Bcfe)*87.3
 70.6
 16.7
 23.7 %
        
Average Sales Price - Gas (per Mcf)$2.02
 $2.66
 $(0.64) (24.1)%
Gain on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)$0.48
 $0.03
 $0.45
 1,500.0 %
Average Sales Price - NGLs (per Mcfe)*$2.28
 $4.80
 $(2.52) (52.5)%
Average Sales Price - Condensate (per Mcfe)*$14.09
 $9.66
 $4.43
 45.9 %
        
Total Average Marcellus Sales Price (per Mcfe)$2.49
 $2.96
 $(0.47) (15.9)%
Average Marcellus Lease Operating Expenses (per Mcfe)0.07
 0.10
 (0.03) (30.0)%
Average Marcellus Production, Ad Valorem, and Other Fees (per Mcfe)0.04
 0.05
 (0.01) (20.0)%
Average Marcellus Transportation, Gathering and Compression Costs (per Mcfe)1.22
 1.10
 0.12
 10.9 %
Average Marcellus Depreciation, Depletion and Amortization Costs (per Mcfe)0.69
 0.80
 (0.11) (13.8)%
   Total Average Marcellus Costs (per Mcfe)$2.02
 $2.05
 $(0.03) (1.5)%
   Average Margin for Marcellus (per Mcfe)$0.47
 $0.91
 $(0.44) (48.4)%
*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,NGL, condensate, and natural gas prices.
**Excluding $84 million gain from hedge monetization

The Marcellus segment had natural gas, NGLs and oil revenue of $179 million for31.2 Bcfe decrease in volumes in the three months ended September 30, 2019 compared to $207 million for the three months ended September 30, 2018. The $28 million decreaseperiod-to period comparison was primarily due to the 24.1%temporary shut-in of a portion of CNX's liquids-rich Shirley-Pennsboro production in May and June of 2020 in response to low NGL prices. Additionally, four new pads of dry gas turn-in-lines from April and May were temporarily shut-in May through September due to low natural gas prices. Normal production declines also contributed to the decrease in total volumes.

Changes in the average gas sales price andcosts per Mcfe were primarily related to the 52.5% decrease in the average NGL sales price, offset in part by the 23.7% increase in total Marcellus sales volumes. The increase in sales volumes was primarily due to additional wells being turned in-line throughout 2018 and the first nine months of 2019 as part of the Company's ongoing drilling and completions program.following items:

The decrease in the total average Marcellus sales price wasLease operating expense decreased on a per unit basis primarily due to a $0.64 per Mcf decrease in the average gas sales price and a $2.52 per Mcfe decreasewater disposal costs in the average NGL sales price, offsetperiod-to-period comparison as a result of increased reuse of produced water in part by a $0.45 per Mcf increasewell completions in the realized gain on commodity derivative instruments resulting from the Company's hedging program. The notional amounts associated with these financial hedges represented approximately 68.7 Bcf of the Company's produced Marcellus gas sales volumes for the three months ended September 30, 2019 at an average gain of $0.56 per Mcf. For the three months ended September 30, 2018, these financial hedges represented approximately 53.9 Bcf at an average gain of $0.03 per Mcf. There was a $0.25 per Mcfe decrease in the uplift from NGLs and condensate sales volumes when excluding the impact of hedging.

Total operating costs and expenses for the Marcellus segment were $176 million for the three months ended September 30, 2019 compared to $145 million for the three months ended September 30, 2018. The increase in total dollars and decrease in unit costs for the Marcellus segment were due to the following items:

current period.
Marcellus lease operatingTransportation, gathering, and compression expense was $6 million for the three months ended September 30, 2019 compareddecreased on a per unit basis primarily due to $7 million for the three months ended September 30, 2018. Thelower processing costs due to a drier production mix and a decrease in unitfirm transportation costs was driven by the decreased total dollars, along with the 23.7% increase in total Marcellusdue to lower gas sales volumes.

Marcellus production, ad valorem, and other fees were consistent at $3 million for the three months ended September 30, 2019 and September 30, 2018. The decrease in unit costs was driven by the 23.7% increase in total Marcellus sales volumes and the 24.1% decrease in the average gas sales price.

45


38



Marcellus transportation, gathering and compression costs were $106 million for the three months ended September 30, 2019 compared to $77 million for the three months ended September 30, 2018. The increase in total dollars was primarily related to the increase in production which resulted in an increase in both CNX Midstream fees as well as an increase in utilized firm transportation expense. The increase in firm transportation total dollars was also related to new contracts that give CNX the ability to move and sell natural gas outside of the Appalachian basin. The increase in unit costs was driven by the increased total dollars described above.
Depreciation, depletion and amortization costs attributable to the Marcellus segment were $61 million for the three months ended September 30, 2019 compared to $58 million for the three months ended September 30, 2018. These amounts included depletionexpense increased on a per unit of production basis of $0.68 per Mcfe and $0.79 per Mcfe, respectively. The decrease in units of production depreciation, depletion and amortization rate is theas a result of positive reserve revisions within our core development area. The remainingfixed depreciation depletion and amortization costs were either recorded on a straight-line basis or related to asset retirement obligations.CNX's gathering infrastructure being spread over a lower production base in 2020. The lower production volumes was a result of temporary shut-ins due to lower natural gas prices.

UTICA SEGMENT

The Utica segment hadfollowing 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 of $18 million foron a total company Mcfe equivalent and excluded from the three months ended September 30, 2019 compared to earnings before income tax of $41 million for the three months ended September 30, 2018.previous table.

 For the Three Months Ended September 30,
 2019 2018 Variance 
Percent
Change
Utica Gas Sales Volumes (Bcf)26.8
 31.9
 (5.1) (16.0)%
NGLs Sales Volumes (Bcfe)*
 1.6
 (1.6) (100.0)%
Condensate Sales Volumes (Bcfe)*
 0.1
 (0.1) (100.0)%
Total Utica Sales Volumes (Bcfe)*26.8
 33.6
 (6.8) (20.2)%
        
Average Sales Price - Gas (per Mcf)$1.86
 $2.53
 $(0.67) (26.5)%
Gain on Commodity Derivative Instruments - Cash Settlement- Gas (per Mcf)$0.47
 $
 $0.47
 100.0 %
Average Sales Price - NGLs (per Mcfe)*$
 $4.00
 $(4.00) (100.0)%
Average Sales Price - Condensate (per Mcfe)*$
 $10.01
 $(10.01) (100.0)%
        
Total Average Utica Sales Price (per Mcfe)$2.34
 $2.62
 $(0.28) (10.7)%
Average Utica Lease Operating Expenses (per Mcfe)0.15
 0.14
 0.01
 7.1 %
Average Utica Production, Ad Valorem, and Other Fees (per Mcfe)0.04
 0.07
 (0.03) (42.9)%
Average Utica Transportation, Gathering and Compression Costs (per Mcfe)0.29
 0.35
 (0.06) (17.1)%
Average Utica Depreciation, Depletion and Amortization Costs (per Mcfe)1.18
 0.83
 0.35
 42.2 %
   Total Average Utica Costs (per Mcfe)$1.66
 $1.39
 $0.27
 19.4 %
   Average Margin for Utica (per Mcfe)$0.68
 $1.23
 $(0.55) (44.7)%

For the Nine Months Ended September 30,
20202019Variance
in MillionsPer Mcfein MillionsPer Mcfein MillionsPer Mcfe
Total Company Sales Volumes (Bcfe)*364.6395.8(31.2)
Total Other Revenue and Operating Income$61 0.17 $65 0.16 $(4)0.01 
Depreciation, Depletion and Amortization0.02 0.01 0.01 
Exploration and Production Related Other Costs0.02 15 0.04 (6)(0.02)
Selling, General and Administrative Costs76 0.21 109 0.28 (33)(0.07)
Other Operating Expense71 0.19 61 0.15 10 0.04 
Total Selected Operating Costs and Expenses163 0.44 187 0.48 (24)(0.04)
Other Expense12 0.03 0.01 0.02 
Interest Expense133 0.36 114 0.29 19 0.07 
Total Selected Other Expense145 0.39 117 0.30 28 0.09 
Total Selected Costs and Expenses$308 0.83 $304 0.78 $0.05 
*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,NGL, condensate, and natural gas prices.

Average Realized Price Reconciliation

The Utica segment hadfollowing table presents a breakout of liquids and natural gas NGLssales information and oil revenue of $50 million for the three months ended September 30, 2019 comparedsettled derivative information to $88 million for the three months ended September 30, 2018. The $38 million decrease was primarily due to the 20.2% decrease in total Utica sales volumes, along with the 26.5% decreaseassist in the averageunderstanding of the Company’s natural gas production and sales price. The decrease in total Utica sales volumes was primarily due to the sale of substantially all of CNX's Ohio Utica JV assets in the third quarter of 2018 as well as normal production declines in the remaining dry Utica wells.portfolio and information regarding settled commodity derivatives:
For the Nine Months Ended September 30,
 in thousands (unless noted)20202019VariancePercent Change
LIQUIDS
NGL:
Sales Volume (MMcfe)19,927 22,556 (2,629)(11.7)%
Sales Volume (Mbbls)3,321 3,759 (438)(11.7)%
Gross Price ($/Bbl)$12.24 $19.20 $(6.96)(36.3)%
Gross Revenue$40,691 $72,095 $(31,404)(43.6)%
Oil/Condensate:
Sales Volume (MMcfe)1,236 690 546 79.1 %
Sales Volume (Mbbls)206 115 91 79.1 %
Gross Price ($/Bbl)$37.01 $45.16 $(8.15)(18.0)%
Gross Revenue$7,630 $5,193 $2,437 46.9 %
GAS
Sales Volume (MMcf)343,403 372,524 (29,121)(7.8)%
Sales Price ($/Mcf)$1.63 $2.59 $(0.96)(37.1)%
  Gross Revenue$561,162 $966,574 $(405,412)(41.9)%
Hedging Impact ($/Mcf)$0.87 $0.07 $0.80 1,142.9 %
Gain on Commodity Derivative Instruments - Cash Settlement*$299,730 $26,331 $273,399 1,038.3 %

46


* Excluding gains from hedge monetizations

The decrease in total average Utica sales pricegross revenue was primarily due to a $0.67the result of the $0.96 per Mcf decrease in general natural gas prices, when excluding the averageimpact of hedging, in the markets in which CNX sells its natural gas, the 31.2 Bcfe decrease in sales price,volumes, and the $6.96 per Bbl. decrease in NGL prices. These decreases were offset, in partin-part, by a $0.47 per Mcfthe increase in the realized gain on commodity derivative instruments. The notional amounts associated with these financial hedges represented approximately 21.6 Bcf ofinstruments related to the Company's produced Utica gas sales volumeshedging program.

SEGMENT ANALYSIS for the threenine months ended September 30, 2019 at an average gain of $0.58 per Mcf. For2020 compared to the threenine months ended September 30, 2018, these financial hedges represented approximately 23.1 Bcf at an average gain of $0.04 per Mcf. Additionally, there was a $0.08 per2019:
For the Nine Months EndedDifference to the Nine Months Ended
 September 30, 2020September 30, 2019
 (in millions)ShaleCBMOtherTotal E&PShaleCBMOtherTotal
E&P
Natural Gas, NGL and Oil Revenue$529 $79 $$609 $(389)$(46)$— $(435)
Gain (Loss) on Commodity Derivative Instruments266 33 (416)(117)242 30 (629)(357)
Purchased Gas Revenue— — 78 78 — — 14 14 
Other Revenue and Operating Income47 — 14 61 (9)— (4)
Total Revenue and Other Operating Income842 112 (323)631 (156)(16)(610)(782)
Lease Operating Expense19 11 31 (21)(2)(22)
Production, Ad Valorem, and Other Fees14 — 18 (1)(1)— (2)
Transportation, Gathering and Compression183 29 — 212 (32)— — (32)
Depreciation, Depletion and Amortization295 50 12 357 (22)(2)(18)
Impairment of Exploration and Production Properties
— — 62 62 — — 62 62 
Impairment of Goodwill— — 473 473 — — 473 473 
Exploration and Production Related Other Costs— — — — (6)(6)
Purchased Gas Costs— — 77 77 — — 15 15 
Other Operating Expense— — 71 71 — — 10 10 
Selling, General and Administrative Costs
— — 76 76 — — (33)(33)
Total Operating Costs and Expenses511 94 781 1,386 (76)(5)528 447 
Other Expense— — 12 12 — — 
Gain on Asset Sales and Abandonments, net— — (22)(22)— — (21)(21)
Gain on Debt Extinguishment— — (11)(11)— — (19)(19)
Interest Expense— — 133 133 — — 19 19 
Total Other Expenses— — 112 112 — — (12)(12)
Total Costs and Expenses511 94 893 1,498 $(76)$(5)$516 $435 
Earnings (Loss) Before Income Tax$331 $18 $(1,216)$(867)$(80)$(11)$(1,126)$(1,217)

















3947



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 JV assets in the third quarter of 2018, which consisted primarily of wet gas production.

Total operating costs and expenses for the Utica segment were $45 million for the three months ended September 30, 2019 compared to $47 million for the three months ended September 30, 2018. The decrease in total dollars and increase in unit costs for the Utica segment were due to the following items:

SHALE SEGMENT

Utica lease operating expense was $4 million for the three months ended September 30, 2019 compared to $5 million for the three months ended September 30, 2018. The decrease in total dollars was primarily due to a reduction in repairs and maintenance costs due to the sale of the Ohio JV assets in 2018, along with a reduction in the number of employees and the associated costs in the period-to-period comparison. The increase in unit costs was driven by the decrease in production volumes.

Utica transportation, gathering and compression costs were $8 million for the three months ended September 30, 2019 compared to $12 million for the three months ended September 30, 2018. The $4 million decrease in total dollars and $0.06 per Mcfe decrease in unit costs were both due to the overall decrease in Utica volumes as well as the shift to lower cost dry Utica production.

Depreciation, depletion and amortization costs attributable to the Utica segment were $32 million for the three months ended September 30, 2019 compared to $28 million for the three months ended September 30, 2018. These amounts included depletion on a unit of production basis of $1.17 per Mcfe and $0.83 per Mcfe, respectively. The increase in the units of production depreciation, depletion and amortization rate was due to negative reserve revisions, an increase in capital expenditures and a higher depreciation, depletion and amortization rate on deep dry Utica wells compared to the lower capital cost Utica 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.

COALBED METHANE (CBM) SEGMENT
The CBMShale segment had earnings before income tax of $9$331 million for the threenine months ended September 30, 20192020 compared to earnings before income tax of $10$411 million for the threenine months ended September 30, 2018.2019.
 For the Three Months Ended September 30,
 2019 2018 Variance 
Percent
Change
CBM Gas Sales Volumes (Bcf)14.1
 14.7
 (0.6) (4.1)%
        
Average Sales Price - Gas (per Mcf)$2.52
 $3.29
 $(0.77) (23.4)%
Gain on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)$0.43
 $0.04
 $0.39
 975.0 %
        
Total Average CBM Sales Price (per Mcf)$2.95
 $3.33
 $(0.38) (11.4)%
Average CBM Lease Operating Expenses (per Mcf)0.28
 0.32
 (0.04) (12.5)%
Average CBM Production, Ad Valorem, and Other Fees (per Mcf)0.10
 0.12
 (0.02) (16.7)%
Average CBM Transportation, Gathering and Compression Costs (per Mcf)0.71
 0.77
 (0.06) (7.8)%
Average CBM Depreciation, Depletion and Amortization Costs (per Mcf)1.24
 1.47
 (0.23) (15.6)%
   Total Average CBM Costs (per Mcf)$2.33
 $2.68
 $(0.35) (13.1)%
   Average Margin for CBM (per Mcf)$0.62
 $0.65
 $(0.03) (4.6)%

The CBM segment had natural gas revenue of $36 million for the three months ended September 30, 2019 compared to $48 million for the three months ended September 30, 2018. The $12 million decrease was primarily due to the 4.1% decrease in total CBM sales volumes and the 23.4% decrease in the average gas sales price. The decrease in CBM sales volumes was primarily due to normal well declines.

The total average CBM sales price decreased $0.38 per Mcf due to a $0.77 decrease in the average gas sales price, offset in part by a $0.39 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 11.3 Bcf of the Company's produced CBM sales volumes for the three months ended September 30, 2019 at an average gain of $0.53 per Mcf. For the three months ended September 30, 2018, these financial hedges represented approximately 11.7 Bcf at an average gain of $0.03 per Mcf.


40




Total operating costs and expenses for the CBM segment were $33 million for the three months ended September 30, 2019 compared to $39 million for the three months ended September 30, 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 $4 million for the three months ended September 30, 2019 compared to $5 million for the three months ended September 30, 2018. The $1 million decrease was primarily due to reductions in contractor services and a decrease in repairs and maintenance costs. The decrease in unit costs was also due to the decrease in total dollars.

CBM transportation, gathering and compression costs were $10 million for the three months ended September 30, 2019 compared to $11 million for the three months ended September 30, 2018. The $1 million decrease in total dollars as well as the $0.06 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 $17 million for the three months ended September 30, 2019 compared to $21 million for the three months ended September 30, 2018. These amounts included depletion on a unit of production basis of $0.68 per Mcfe and $0.70 per Mcfe, respectively. The remaining depreciation, depletion and amortization costs were either recorded on a straight-line basis or related to asset retirement obligations.

OTHER GAS SEGMENT

The Other Gas segment had earnings before income tax of $83 million for the three months ended September 30, 2019 compared to a loss before income tax of $61 million for the three months ended September 30, 2018.
 For the Three Months Ended September 30,
 2019 2018 Variance Percent
Change
Other Gas Sales Volumes (Bcf)0.1
 
 0.1
 100.0 %
Oil Sales Volumes (Bcfe)*
 0.1
 (0.1) (100.0)%
Total Other Sales Volumes (Bcfe)*0.1
 0.1
 
  %

 For the Nine Months Ended September 30,
 20202019VariancePercent
Change
Shale Gas Sales Volumes (Bcf)304.0 330.6 (26.6)(8.0)%
NGLs Sales Volumes (Bcfe)*19.9 22.6 (2.7)(11.9)%
Oil/Condensate Sales Volumes (Bcfe)*1.2 0.6 0.6 100.0 %
Total Shale Sales Volumes (Bcfe)*325.1 353.8 (28.7)(8.1)%
Average Sales Price - Gas (per Mcf)$1.58 $2.54 $(0.96)(37.8)%
Gain on Commodity Derivative Instruments - Cash Settlement- Gas (per Mcf)$0.88 $0.07 $0.81 1,157.1 %
Average Sales Price - NGLs (per Mcfe)*$2.04 $3.20 $(1.16)(36.3)%
Average Sales Price - Oil/Condensate (per Mcfe)*$5.98 $7.50 $(1.52)(20.3)%
Total Average Shale Sales Price (per Mcfe)$2.45 $2.66 $(0.21)(7.9)%
Average Shale Lease Operating Expenses (per Mcfe)0.06 0.11 (0.05)(45.5)%
Average Shale Production, Ad Valorem, and Other Fees (per Mcfe)0.04 0.05 (0.01)(20.0)%
Average Shale Transportation, Gathering and Compression Costs (per Mcfe)0.56 0.61 (0.05)(8.2)%
Average Shale Depreciation, Depletion and Amortization Costs (per Mcfe)0.92 0.89 0.03 3.4 %
   Total Average Shale Costs (per Mcfe)$1.58 $1.66 $(0.08)(4.8)%
   Average Margin for Shale (per Mcfe)$0.87 $1.00 $(0.13)(13.0)%
*Oil is 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, oil, condensate, and natural gas prices.

The Other GasShale segment includes activity not assignedhad natural gas, NGL and oil/condensate revenue of $529 million for the nine months ended September 30, 2020 compared to $918 million for the nine months ended September 30, 2019. The $389 million decrease was due primarily to a 37.8% decrease in the average sales price for natural gas, an 8.1% decrease in total Shale sales volumes, and a 36.3% decrease in the average sales price of NGLs.

The decrease in total Shale volumes was due to the Marcellus, Utica, or CBM segments. This segmenttemporary shut-in of a portion of CNX's liquids-rich Shirley-Pennsboro production in May and June of 2020 in response to low NGL prices. Additionally, four new pads of dry gas turn-in-lines from April and May were temporarily shut-in during May through September due to low natural gas prices. Normal production declines also includes purchasedcontributed to the decrease in total Shale volumes.

The decrease in total average Shale sales price was primarily due to a $0.96 per Mcf decrease in average gas activity, unrealizedsales price and a $1.16 per Mcfe decrease in the average NGL sales price. These decreases were offset in part by a $0.81 per Mcf increase in the realized gain on commodity derivative instruments. The notional amounts associated with these financial hedges represented approximately 296.6 Bcf of the Company's produced Shale gas sales volumes for the nine months ended September 30, 2020 at an average gain of $0.90 per Mcf hedged. For the nine months ended September 30, 2019, these financial hedges represented approximately 246.5 Bcf at an average gain of $0.10 per Mcf hedged.

Total operating costs and expenses for the Shale segment were $511 million for the nine months ended September 30, 2020 compared to $587 million for the nine months ended September 30, 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 $19 million for the nine months ended September 30, 2020 compared to $40 million for the nine months ended September 30, 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.

Shale transportation, gathering and compression costs were $183 million for the nine months ended September 30, 2020 compared to $215 million for the nine months ended September 30, 2019. The decreases in total dollars and unit costs

48


were primarily related to lower processing costs due to a drier production mix. Lower firm transportation costs from lower gas sales volumes contributed to the decrease in total dollars.

Depreciation, depletion and amortization costs attributable to the Shale segment were $295 million for the nine months ended September 30, 2020 compared to $317 million for the nine months ended September 30, 2019. These amounts included depletion on a unit of production basis of $0.81 per Mcfe and $0.82 per Mcfe, respectively. The decrease in the units of production depreciation, depletion and amortization rate in the current period is the result of positive reserve revisions within our core SWPA development area and lower cost reserves added in our core SWPA development area from the 2019 development program partially offset by an increase in the units of production depreciation, depletion and amortization rate due to negative reserves revisions within our Ohio operations. 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 $47 million for the nine months ended September 30, 2020 compared to $56 million for the nine months ended September 30, 2019. The decrease in the period-to-period comparison was primarily due to a reduction in third-party volumes transported related to temporary production curtailments.

COALBED METHANE (CBM) SEGMENT
The CBM segment had earnings before income tax of $18 million for the nine months ended September 30, 2020 compared to earnings before income tax of $29 million for the nine months ended September 30, 2019.
 For the Nine Months Ended September 30,
 20202019VariancePercent
Change
CBM Gas Sales Volumes (Bcf)39.3 41.7 (2.4)(5.8)%
Average Sales Price - Gas (per Mcf)$2.02 $3.00 $(0.98)(32.7)%
Gain on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)$0.84 $0.07 $0.77 1,100.0 %
Total Average CBM Sales Price (per Mcf)$2.86 $3.07 $(0.21)(6.8)%
Average CBM Lease Operating Expenses (per Mcf)0.29 0.30 (0.01)(3.3)%
Average CBM Production, Ad Valorem, and Other Fees (per Mcf)0.10 0.13 (0.03)(23.1)%
Average CBM Transportation, Gathering and Compression Costs (per Mcf)0.74 0.70 0.04 5.7 %
Average CBM Depreciation, Depletion and Amortization Costs (per Mcf)1.25 1.24 0.01 0.8 %
   Total Average CBM Costs (per Mcf)$2.38 $2.37 $0.01 0.4 %
   Average Margin for CBM (per Mcf)$0.48 $0.70 $(0.22)(31.4)%

The CBM segment had natural gas revenue of $79 million for the nine months ended September 30, 2020 compared to $125 million for the nine months ended September 30, 2019. The $46 million decrease was due to the 5.8% decrease in total CBM sales volumes and the 32.7% 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 $0.21 per Mcf due to a $0.98 per Mcf decrease in average gas sales price, offset in part by a $0.77 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 37.0 Bcf of the Company's produced CBM sales volumes for the nine months ended September 30, 2020 at an average gain of $0.90 per Mcf hedged. For the nine months ended September 30, 2019, these financial hedges represented approximately 29.6 Bcf at an average gain of $0.10 per Mcf hedged.

Total operating costs and expenses for the CBM segment were $94 million for the nine months ended September 30, 2020 compared to $99 million for the nine months ended September 30, 2019. The decrease in total dollars and increase in unit costs for the CBM segment were due to the following items:


49


CBM lease operating expense was $11 million for the nine months ended September 30, 2020 compared to $13 million for the nine months ended September 30, 2019. The decrease in total dollars was due to a decrease in water disposal costs as well as a decrease in 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 $50 million for the nine months ended September 30, 2020 compared to $52 million for the nine months ended September 30, 2019. These amounts included depletion on a 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 to reduced production, offset in part by negative reserve revisions. 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 settlement dates, exploration and production related other costs, impairments of exploration and production properties, as well as various other operational activity not assignedexpenses that are managed outside the Shale and CBM segments such as SG&A, interest expense and income taxes.

The Other Gas segment had a loss before income tax of $1,216 million for the nine months ended September 30, 2020 compared to a specific segment.loss before income tax of $90 million for the nine months ended September 30, 2019.

Other Gas sales volumes are primarily related to shallow oil
 For the Nine Months Ended September 30,
 20202019VariancePercent Change
Other Gas Sales Volumes (Bcf)0.1 0.3 (0.2)(66.7)%

Gain or Loss on Commodity Derivative Instruments and gas production. CNX sold substantially all of these assets on MarchMonetization

For the nine months ended September 30, 2018 (See Note 5 - Acquisitions and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information). There was nominal natural gas and oil revenue related to2020, the Other Gas segment for bothrecognized an unrealized loss on commodity derivative instruments of $501 million as well as cash settlements received of $85 million. For the threenine months ended September 30, 2019, and 2018. Total operating costs and expenses related to these other gas sales volumes were $2 million for the three months ended September 30, 2019 compared to $4 million for the three months ended September 30, 2018.

The Other Gas segment recognized an unrealized gain on commodity derivative instruments of $157$214 million for the three months ended September 30, 2019 compared to $15 million for the three months ended September 30, 2018.as well as cash settlements paid of $1 million. The unrealized gaingain/loss on commodity derivative instruments represents changes in the fair value of all of the Company's existing commodity hedges on a mark-to-market basis. Included in cash settlements for the nine months ended September 30, 2020 is $84 million related to natural gas hedges and financial basis hedges that were partially monetized or terminated prior to their settlement date. See Note 11 - Derivative Instruments in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information related to the cash settlements.

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 $29$78 million for the threenine months ended September 30, 20192020 compared to $11$64 million for the threenine months ended September 30, 2018.2019. Purchased gas costs were $27$77 million for the threenine months ended September 30, 20192020 compared to $11$62 million for the threenine months ended September 30, 2018.2019. The period-to-period increase in purchased gas revenue was due to thean increase in purchased gas sales volumes, offset in part by a decrease in the averageaverages sales price.
 For the Nine Months Ended September 30,
20202019VariancePercent Change
Purchased Gas Sales Volumes (in Bcf)48.2 26.9 21.3 79.2 %
Average Sales Price (per Mcf)$1.63 $2.39 $(0.76)(31.8)%
Average Cost (per Mcf)$1.59 $2.33 $(0.74)(31.8)%







4150



 For the Three Months Ended September 30,
 2019 2018 Variance Percent
Change
Purchased Gas Sales Volumes (in Bcf)13.6
 4.1
 9.5
 231.7 %
Average Sales Price (per Mcf)$2.14
 $2.55
 $(0.41) (16.1)%
Average Cost (per Mcf)$2.02
 $2.56
 $(0.54) (21.1)%

Other Operating Income

Other operating
For the Nine Months Ended September 30,
(in millions)20202019VariancePercent Change
Water Income$$$400.0 %
Gathering Income28.6 %
Equity in (Loss) Earnings of Affiliates(1)(2)(200.0)%
Other— 100.0 %
Total Other Operating Income$14 $$55.6 %

Water income wasincreased $4 million forin the three months ended September 30, 2019 compared to $3 million for the three months ended September 30, 2018. The $1 million increase was2020 period due to the following items:
 For the Three Months Ended September 30,
(in millions)2019 2018 Variance Percent
Change
Equity in Earnings of Affiliates$1
 $1
 $
 %
Gathering Income2
 2
 
 %
Other1
 
 1
 100.0%
Total Other Operating Income$4
 $3
 $1
 33.3%

Exploration and Production Related Other Costs

Exploration and production related other costs were $6 millionincreased revenue for the three months ended September 30, 2019 compared to $3 millionaccepting deliveries of produced water from third-parties for the three months ended September 30, 2018. The $3 million increase was due to the following items:
 For the Three Months Ended September 30,
(in millions)2019 2018 Variance 
Percent
Change
Seismic Activity$5
 $
 $5
 100.0 %
Lease Expiration Costs1
 1
 
  %
Land Rentals
 1
 (1) (100.0)%
Other
 1
 (1) (100.0)%
Total Exploration and Production Other Costs$6
 $3
 $3
 100.0 %

Seismic activity increasedreuse in the period-to-period comparison dueCompany's hydraulic fracturing and increased sales of freshwater to additional geophysical research inthird-parties for hydraulic fracturing.
Gathering income represents revenue from the current period relatedsale of excess firm transportation capacity to the Utica segment.

Other Operating Expense

Other operating expense was $21 million for the three months ended September 30, 2019 compared to $18 million for the three months ended September 30, 2018.third-parties. The $3 million increase was due to the following items:
 For the Three Months Ended September 30,
 2019 2018 Variance Percent
Change
Unutilized Firm Transportation and Processing Fees$15
 $11
 $4
 36.4 %
Insurance Expense1
 
 1
 100.0 %
Consulting and Professional Services
 1
 (1) (100.0)%
Litigation Expense
 2
 (2) (100.0)%
Other5
 4
 1
 25.0 %
Total Other Operating Expense$21
 $18
 $3
 16.7 %

Unutilized Firm Transportation and Processing Fees representCompany obtains firm 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 current period to transport the Company’s flowing production. The Company attemptsincrease. In order to minimize this unutilized firm transportation expense, by releasing (selling)CNX is able to release (sell) unutilized firm transportation capacity to other parties when possible and when beneficial. The


42



revenue received when this(Gathering income) from released capacity is released (sold) is includedhelps offsets the unutilized firm transportation and processing fees in Gathering Income in Total Other Operating Income above.

Selling, General and Administrative

total other operating expense.
SG&A costs represent direct charges for
Impairment of Exploration and Production Properties

During the management and operation of CNX's E&P division. SG&A costs were $20 million for the threenine months ended September 30, 2019 compared2020, CNX recognized certain indicators of impairments specific to $27 million forour Southwest Pennsylvania (SWPA) CBM asset group and determined that the three months ended September 30, 2018. Refer tocarrying value of that asset group was not recoverable. The fair value of the discussionasset 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 total company SG&A costs contained in the section "Net Income Attributable to CNX Resources Shareholders"fair value. As a result, an impairment of this Form 10-Q for a detailed cost explanation.

Interest Expense
Interest expense of $31$62 million was recognized and is included in Impairment of Exploration and Production Properties in the three months ended September 30, 2019 comparedConsolidated Statements of Income. The impairment was related to $29an economic decision to temporarily idle certain wells and the related processing facility during the first quarter.

Impairment of Goodwill

In connection with the CNX Midstream Acquisition that occurred in January 2018, CNX recorded $796 million of goodwill.

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

In connection with CNX's assessment of goodwill in the three months ended September 30, 2018. The $2 million increase was primarily duefirst quarter of 2020 in relation to additional borrowings on the CNX credit facility, offset, in part, bydeteriorating macroeconomic conditions, and the reduction in higher-cost long-term debt resulting from the $500 million purchase,decline in the 2018 period,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 outstanding 8.00% senior notes dueincome 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 April 2023, $200 millionImpairment of which was purchased duringGoodwill in the three months ended September 30, 2018.Consolidated Statement of Income. No such impairment occurred in the prior period. See Note 116 - Long-Term DebtGoodwill and Other Intangible Assets in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.


TOTAL MIDSTREAM DIVISION ANALYSIS for the three months ended September 30, 2019 compared to the three months ended September 30, 2018:

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

On January 3, 2018, CNX completed the Midstream Acquisition (See Note 5 - Acquisitions and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information). CNX Gathering holds all of the interests in CNX Midstream GP LLC, which holds the general partner interest and incentive distribution rights in CNXM. As a result of this transaction, 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.



 For the Three Months Ended September 30,
 (in millions)

2019 2018 Variance
Midstream Revenue - Related Party$56
 $41
 $15
Midstream Revenue - Third Party19
 20
 (1)
Total Revenue$75
 $61
 $14
      
Transportation, Gathering and Compression$12
 $10
 $2
Depreciation, Depletion and Amortization9
 8
 1
Selling, General, and Administrative Costs
4
 5
 (1)
Total Operating Costs and Expenses25
 23
 2
Interest Expense8
 7
 1
Total Midstream Division Costs33
 30
 3
Earnings Before Income Tax$42
 $31
 $11
51

Midstream Revenue

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


43



The table below summarizes volumes gathered by gas type:
 For the Three Months Ended September 30,
 2019 2018 Variance
Dry Gas (BBtu/d) (*)857
 702
 155
Wet Gas (BBtu/d) (*)685
 705
 (20)
Other (BBtu/d) (*)(**)273
 3
 270
Total Gathered Volumes1,815
 1,410
 405
(*) Classification as dry or wet is based upon the shipping destination of the related volumes. Because CNXM's customers have the option to ship a portion of their natural gas to destinations associated with either our wet system or our dry system, due to any number of factors, volumes may be classified as “wet” in one period and as “dry” in the comparative period.
(**) Includes condensate handling and third-party volumes under high-pressure short-haul agreements.

Transportation, Gathering and Compression 

Transportation, Gathering and Compression costs were $12 million for the three months ended September 30, 2019 compared to $10 million for the three months ended September 30, 2018, and are comprised of items directly related to the cost of gathering natural gas at the wellhead and transporting it to interstate pipelines or other local sales points. These costs include items such as electrically-powered compression, compressor rental, repairs and maintenance, supplies, treating and contract services.

Selling, General and Administrative Expense

SG&A expense is comprised of direct charges for the management and operation of CNXM assets. SG&A costs were $4 million for the three months ended September 30, 2019 compared to $5 million for the three months ended September 30, 2018. Refer to the discussion of total Company SG&A costs contained in the section "Net Income Attributable to CNX Resources Shareholders"of this Form 10-Q for a detailed cost explanation.

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

Interest Expense
Interest expense is comprised of interest on the outstanding balance under CNXM's senior notes due 2026 and its revolving credit facility. Interest expense was $8 million for the three months ended September 30, 2019 compared to $7 million for the three months ended September 30, 2018.



44


Results of Operations - Nine Months Ended September 30, 2019 Compared with Nine Months Ended September 30, 2018
Net Income Attributable to CNX Resources Shareholders
CNX reported net income attributable to CNX Resources shareholders of $191 million, or earnings per diluted share of $1.01, for the nine months ended September 30, 2019, compared to net income attributable to CNX Resources shareholders of $695 million, or earnings per diluted share of $3.18, for the nine months ended September 30, 2018.
 For the Nine Months Ended September 30,
(Dollars in thousands)2019 2018 Variance
Net Income$272,004
 $753,696
 $(481,692)
Less: Net Income Attributable to Noncontrolling Interest81,325
 59,090
 22,235
Net Income Attributable to CNX Resources Shareholders$190,679
 $694,606
 $(503,927)

CNX consists of two principal business divisions: Exploration and Production (E&P) and Midstream.Related Other Costs

The principal
 For the Nine Months Ended September 30,
(in millions)20202019VariancePercent Change
Seismic Activity$— $$(6)(100.0)%
Land Rentals— — %
Lease Expiration Costs— — %
Permitting Expense— 100.0 %
Other— (2)(100.0)%
Total Exploration and Production Related Other Costs$$15 $(6)(40.0)%

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

CNX's E&P Division had earnings before income tax of $233 million for the nine months ended September 30, 2019, compared to earnings before income tax of $196 million for the nine months ended September 30, 2018. Included in the earnings for the nine months ended September 30, 2019 and 2018 were unrealized gains on commodity derivative instruments of $214 million and $76 million, respectively.

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

As a result of the Midstream Acquisition (See Note 5 - Acquisitions and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q), 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 in the current period. Prior to the acquisition, CNX accounted for its interests in CNX Gathering and CNXM as an equity-method investment.

CNX's Midstream Division had earnings before income tax of $119 million for the nine months ended September 30, 2019, compared to earnings before income tax of $95 million for the period from January 3, 2018 through September 30, 2018.
E&P Division Summary
Sales volumes, average sales price (including the effects of settled derivative instruments), and average costs for the E&P Division were as follows: 
 For the Nine Months Ended September 30,
 2019 2018 Variance 
Percent
Change
Sales Volumes (Bcfe)395.8
 371.0
 24.8
 6.7 %
        
Average Sales Price (per Mcfe)$2.70
 $2.93
 $(0.23) (7.8)%
Lease Operating Expense (per Mcfe)0.13
 0.21
 (0.08) (38.1)%
Production, Ad Valorem, and Other Fees (per Mcfe)0.05
 0.07
 (0.02) (28.6)%
Transportation, Gathering and Compression (per Mcfe)0.96
 0.84
 0.12
 14.3 %
Depreciation, Depletion and Amortization (DD&A) (per Mcfe)0.87
 0.90
 (0.03) (3.3)%
Average Costs (per Mcfe)2.01
 2.02
 (0.01) (0.5)%
Average Margin (per Mcfe)$0.69
 $0.91
 $(0.22) (24.2)%


45


Excluding the effects of settled derivative instruments, natural gas, NGLs, and oil revenue was $1,044 million for the nine months ended September 30, 2019, compared to $1,085 million for the nine months ended September 30, 2018. The decrease was primarily due to a decrease in natural gas and NGL pricing, offset in-part by a 6.7% increase in total sales volumes.

The decrease in average sales price per Mcfe was the result of the $0.15 per Mcf decrease in general natural gas prices, when excluding the impact of hedging, in the markets in which CNX sells its natural gas. There was also a $0.13 per Mcfe decrease in the uplift from NGLs and condensate sales volumes. Both decreases were offset, in-part by the $0.06 per Mcf increase in the realized gain on commodity derivative instruments related to the Company's hedging program during the current 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 increaseadditional geophysical research in the reuse of produced water in well completions in the current 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.prior period.
Transportation, gathering, and compression expense increased on a per unit basis primarily due to an increase in CNXM gathering fees related to an increase in our Marcellus production and an increase in firm transportation expense, primarily as a result of new contracts that give CNX the ability to move and sell natural gas outside of the Appalachian basin. The decrease in production from CNX's lower cost dry Utica volumes as well as the third quarter 2018 sale of CNX's Ohio JV assets also contributed to the increase on a per unit basis.

The following table presents a breakout of net liquid and natural gas sales information to assist in the understanding of the Company’s natural gas production and sales portfolio.
  For the Nine Months Ended September 30,
 in thousands (unless noted) 2019 2018 Variance Percent Change
LIQUIDS        
NGLs:        
Sales Volume (MMcfe) 22,556
 29,445
 (6,889) (23.4)%
Sales Volume (Mbbls) 3,759
 4,908
 (1,149) (23.4)%
Gross Price ($/Bbl) $19.20
 $27.96
 $(8.76) (31.3)%
Gross Revenue $72,095
 $137,104
 $(65,009) (47.4)%
         
Oil:        
Sales Volume (MMcfe) 43
 236
 (193) (81.8)%
Sales Volume (Mbbls) 7
 39
 (32) (82.1)%
Gross Price ($/Bbl) $48.24
 $58.98
 $(10.74) (18.2)%
Gross Revenue $347
 $2,317
 $(1,970) (85.0)%
         
Condensate:        
Sales Volume (MMcfe) 647
 1,670
 (1,023) (61.3)%
Sales Volume (Mbbls) 108
 278
 (170) (61.2)%
Gross Price ($/Bbl) $44.94
 $53.64
 $(8.70) (16.2)%
Gross Revenue $4,846
 $14,925
 $(10,079) (67.5)%
         
GAS        
Sales Volume (MMcf) 372,524
 339,679
 32,845
 9.7 %
Sales Price ($/Mcf) $2.59
 $2.74
 $(0.15) (5.5)%
  Gross Revenue $966,574
 $930,505
 $36,069
 3.9 %
         
Hedging Impact ($/Mcf) $0.07
 $0.01
 $0.06
 600.0 %
Gain on Commodity Derivative Instruments - Cash Settlement 26,331
 2,518
 23,813
 945.7 %

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


For the Nine Months Ended September 30,
(in millions)20202019VariancePercent Change
Long-Term Equity-Based Compensation (Non-Cash)$12 $37 $(25)(67.6)%
Salaries and Wages23 31 (8)(25.8)%
Short-Term Incentive Compensation(2)(22.2)%
Other34 32 6.3 %
Total SG&A$76 $109 $(33)(30.3)%
46


 For the Nine Months Ended September 30,
 (in millions)2019 2018 Variance 
Percent
Change
SG&A       
Long-Term Equity-Based Compensation (Non-Cash)$37
 $16
 $21
 131.3 %
Salaries and Wages31
 30
 1
 3.3 %
Short-Term Incentive Compensation9
 17
 (8) (47.1)%
Other32
 36
 (4) (11.1)%
Total SG&A$109
 $99
 $10
 10.1 %

Long-term equity-based compensation increased $21decreased $25 million in the period-to-period comparison due to a change in control event that occurred in the Company incurring an additional $20 millionsecond quarter of long-term equity-based compensation (non-cash) expense during the nine months ended September 30, 2019. The additional expense was a result of2019 and resulted in the acceleration of vesting of certain restricted stock units and performance share units held by certain employees related to a change in control event (Seeemployees. See Note 2 - Earnings Per Share in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information). information.
Short-term incentive compensationSalaries and Wages decreased $8 million due to lower projected payoutsan overall reduction in the current period.

Unallocated Expense

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

Other Expense (Income)
 For the Nine Months Ended September 30,
 (in millions)2019 2018 Variance 
Percent
Change
Other Income       
Royalty Income$4
 $12
 $(8) (66.7)%
Right of Way Sales4
 5
 (1) (20.0)%
Interest Income2
 
 2
 100.0 %
Other
 5
 (5) (100.0)%
Total Other Income$10
 $22
 $(12) (54.5)%
        
Other Expense       
Professional Services$2
 $6
 $(4) (66.7)%
Bank Fees9
 8
 1
 12.5 %
Other Corporate Expense2
 3
 (1) (33.3)%
Total Other Expense$13
 $17
 $(4) (23.5)%
        
       Total Other Expense (Income)$3
 $(5) $8
 (160.0)%

Gain on Asset Sales and Abandonments
A gain on asset sales of $8 million related to non-core assets was recognized in the nine months ended September 30, 2019 compared to a gain of $147 million in the nine months ended September 30, 2018, primarily due to the sale of substantially all of CNX's Ohio Utica JV assets. See Note 5 - Acquisitions and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.

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






47


Gain on Previously Held Equity Interest

CNX recognized a gain on previously held equity interest of $624 million in the nine months ended September 30, 2018 due to the Midstream Acquisition in January 2018. No such transactions occurred in the current period. See Note 5 - Acquisitions and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.

Loss on Debt Extinguishment

Loss on debt extinguishment of $8 million was recognized in the nine months ended September 30, 2019 compared to a loss on debt extinguishment of $54 million in the nine months ended September 30, 2018. During the nine months ended September 30, 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 nine months end September 30, 2018 CNX purchased $391 million of its 5.875% Senior notes due in April 2022 at an average price equal to 103.8% of the principal amount and redeemed the $500 million 8.00% Senior notes due in April 2023 at an average price equal to 106.0% of the principal amount. See Note 11 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.

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.

In connection with the AEA with HG Energy (See Note 5 - Acquisition and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information) that occurred during the nine months ended September 30, 2018, CNX determined that the carrying value of the other intangible asset - customer relationships 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 current period.

Income Taxes

The effective income tax rate was 22.3% for the nine months ended September 30, 2019 compared to 24.1% for the nine months ended September 30, 2018. The effective rate for the nine months ended September 30, 2019 differs from the U.S. federal statutory rate of 21% primarily due to the impact of noncontrolling interest, equity compensation and state income taxes. The effective rate for the nine months ended September 30, 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”) carryback which resulted in the Company being able to utilize previously valued tax attributes at a tax rate differential of 14%, as well as non-controlling interest. The benefits were offset by increases for both state income taxes and state valuation allowances.

See Note 6 - Income Taxes in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.
 For the Nine Months Ended September 30,
(in millions)2019 2018 Variance 
Percent
Change
Total Company Earnings Before Income Tax$350
 $993
 $(643) (64.8)%
Income Tax Expense$78
 $239
 $(161) (67.4)%
Effective Income Tax Rate22.3% 24.1% (1.8)%  


48


TOTAL E&P DIVISION ANALYSIS for the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018:
The E&P division had earnings before income tax of $233 million for the nine months ended September 30, 2019 compared to earnings before income tax of $196 million for the nine months ended September 30, 2018. Variances by individual E&P segment are discussed below.
 For the Nine Months Ended Difference to Nine Months Ended
 September 30, 2019 September 30, 2018
 (in millions)Marcellus Utica CBM 
Other
Gas
 Total E&P Marcellus Utica CBM 
Other
Gas
 
Total
E&P
Natural Gas, NGLs and Oil Revenue$709
 $208
 $125
 $2
 $1,044
 $118
 $(118) $(28) $(13) $(41)
Gain on Commodity Derivative Instruments18
 6
 3
 213
 240
 17
 5
 3
 136
 161
Purchased Gas Revenue
 
 
 64
 64
 
 
 
 25
 25
Other Operating Income
 
 
 10
 10
 
 
 
 (12) (12)
Total Revenue and Other Operating Income727
 214
 128
 289
 1,358
 135
 (113) (25) 136
 133
Lease Operating Expense27
 13
 13
 
 53
 (7) (13) (4) (1) (25)
Production, Ad Valorem, and Other Fees11
 4
 5
 
 20
 (2) (1) 
 (1) (4)
Transportation, Gathering and Compression325
 24
 29
 
 378
 97
 (20) (8) (4) 65
Depreciation, Depletion and Amortization186
 105
 52
 7
 350
 25
 (3) (7) (4) 11
Exploration and Production Related Other Costs
 
 
 15
 15
 
 
 
 6
 6
Purchased Gas Costs
 
 
 62
 62
 
 
 
 25
 25
Other Operating Expense
 
 
 60
 60
 
 
 
 9
 9
Selling, General and Administrative Costs


 
 
 95
 95
 
 
 
 13
 13
Total Operating Costs and Expenses549
 146
 99
 239
 1,033
 113
 (37) (19) 43
 100
Interest Expense
 
 
 92
 92
 
 
 
 (4) (4)
Total E&P Division Costs549
 146
 99
 331
 1,125
 113
 (37) (19) 39
 96
Earnings (Loss) Before Income Tax$178
 $68
 $29
 $(42) $233
 $22
 $(76) $(6) $97
 $37



49


MARCELLUS SEGMENT
The Marcellus segment had earnings before income tax of $178 million for the nine months ended September 30, 2019 compared to earnings before income tax of $156 million for the nine months ended September 30, 2018.
 For the Nine Months Ended September 30,
 2019 2018 Variance 
Percent
Change
Marcellus Gas Sales Volumes (Bcf)245.3
 176.0
 69.3
 39.4 %
NGLs Sales Volumes (Bcfe)*22.5
 23.9
 (1.4) (5.9)%
Condensate Sales Volumes (Bcfe)*0.6
 1.3
 (0.7) (53.8)%
Total Marcellus Sales Volumes (Bcfe)*268.4
 201.2
 67.2
 33.4 %
        
Average Sales Price - Gas (per Mcf)$2.58
 $2.66
 $(0.08) (3.0)%
Gain on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)$0.07
 $0.01
 $0.06
 600.0 %
Average Sales Price - NGLs (per Mcfe)*$3.20
 $4.67
 $(1.47) (31.5)%
Average Sales Price - Condensate (per Mcfe)*$7.43
 $8.91
 $(1.48) (16.6)%
        
Total Average Marcellus Sales Price (per Mcfe)$2.71
 $2.94
 $(0.23) (7.8)%
Average Marcellus Lease Operating Expenses (per Mcfe)0.10
 0.17
 (0.07) (41.2)%
Average Marcellus Production, Ad Valorem, and Other Fees (per Mcfe)0.04
 0.06
 (0.02) (33.3)%
Average Marcellus Transportation, Gathering and Compression Costs (per Mcfe)1.21
 1.13
 0.08
 7.1 %
Average Marcellus Depreciation, Depletion and Amortization Costs (per Mcfe)0.70
 0.81
 (0.11) (13.6)%
   Total Average Marcellus Costs (per Mcfe)$2.05
 $2.17
 $(0.12) (5.5)%
   Average Margin for Marcellus (per Mcfe)$0.66
 $0.77
 $(0.11) (14.3)%
* 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, which is not indicative of the relationship of oil, NGLs, condensate, and natural gas prices.

The Marcellus segment had natural gas, NGLs and oil revenue of $709 million for the nine months ended September 30, 2019 compared to $591 million for the nine months ended September 30, 2018. The $118 million increase was due to a 33.4% increase in total Marcellus sales volumes. The increase in sales volumes was primarily due to additional wells being turned in-line throughout 2018 and the first nine months of 2019 as part of the Company's ongoing drilling and completions program.

The decrease in the total average Marcellus sales price was primarily due to an $0.08 per Mcf decrease in the average sales price for natural gas and a $1.47 per Mcfe decrease in the average NGL sales price, offset in part by a $0.06 per Mcf increase in the realized gain on commodity derivative instruments resulting from the Company's hedging program. The notional amounts associated with these financial hedges represented approximately 185.9 Bcf of the Company's produced Marcellus gas sales volumes for the nine months ended September 30, 2019 at an average gain of $0.10 per Mcf. For the nine months ended September 30, 2018, these financial hedges represented approximately 148.9 Bcf at an average gain of $0.01 per Mcf.

Total operating costs and expenses for the Marcellus segment were $549 million for the nine months ended September 30, 2019 compared to $436 million for the nine months ended September 30, 2018. The increase in total dollars and decrease in unit costs for the Marcellus segment were due to the following items:

Marcellus lease operating expenses were $27 million for the nine months ended September 30, 2019 compared to $34 million for the nine months ended September 30, 2018. The decrease in total dollars was primarily due to a decrease in water disposal costs in the current period due to an increase in the reuse of produced water in well completions activity, as well as a reduction in employee costs. The decrease in unit costs was driven by the decrease in total dollars, along with the 33.4% increase in total Marcellus sales volumes.

Marcellus production, ad valorem, and other fees were $11 million for the nine months ended September 30, 2019 compared to $13 million for the nine months ended September 30, 2018. The decrease in total dollars was primarily related to a decrease in CNX's severance tax liability due to the production mix by state and lower natural gas prices. The decrease in unit costs was driven by the decreased total dollars, along with the 33.4% increase in total Marcellus sales volumes.



50


Marcellus transportation, gathering and compression costs were $325 million for the nine months ended September 30, 2019 compared to $228 million for the nine months ended September 30, 2018. The increase in total dollars was primarily related to the increase in production which resulted in an increase in both CNX Midstream fees as well as an increase in utilized firm transportation expense. The increase in firm transportation total dollars was also related to new contracts, which began during the 2019 period, that give CNX the ability to move and sell natural gas outside of the Appalachian basin. These increases were offset by lower processing costs from a drier production mix. The increase in unit costs was driven by the increased total dollars described above.
Depreciation, depletion and amortization costs attributable to the Marcellus segment were $186 million for the nine months ended September 30, 2019 compared to $161 million for the nine months ended September 30, 2018. These amounts included depletion on a unit of production basis of $0.68 per Mcfe and $0.79 per Mcfe, respectively. The decrease in units of production depreciation, depletion and amortization rate is the result of positive reserve revisions within our core development area in the current period. The remaining depreciation, depletion and amortization costs were either recorded on a straight-line basis or related to asset retirement obligations.

UTICA SEGMENT

The Utica segment had earnings before income tax of $68 million for the nine months ended September 30, 2019 compared to earnings before income tax of $144 million for the nine months ended September 30, 2018.
 For the Nine Months Ended September 30,
 2019 2018 Variance 
Percent
Change
Utica Gas Sales Volumes (Bcf)85.4
 113.7
 (28.3) (24.9)%
NGLs Sales Volumes (Bcfe)*
 5.5
 (5.5) (100.0)%
Condensate Sales Volumes (Bcfe)*
 0.4
 (0.4) (100.0)%
Total Utica Sales Volumes (Bcfe)*85.4
 119.7
 (34.3) (28.7)%
        
Average Sales Price - Gas (per Mcf)$2.43
 $2.61
 $(0.18) (6.9)%
Gain on Commodity Derivative Instruments - Cash Settlement- Gas (per Mcf)$0.07
 $0.01
 $0.06
 600.0 %
Average Sales Price - NGLs (per Mcfe)*$
 $4.60
 $(4.60) (100.0)%
Average Sales Price - Condensate (per Mcfe)*$
 $9.03
 $(9.03) (100.0)%
        
Total Average Utica Sales Price (per Mcfe)$2.50
 $2.73
 $(0.23) (8.4)%
Average Utica Lease Operating Expenses (per Mcfe)0.15
 0.22
 (0.07) (31.8)%
Average Utica Production, Ad Valorem, and Other Fees (per Mcfe)0.04
 0.04
 
  %
Average Utica Transportation, Gathering and Compression Costs (per Mcfe)0.28
 0.37
 (0.09) (24.3)%
Average Utica Depreciation, Depletion and Amortization Costs (per Mcfe)1.23
 0.90
 0.33
 36.7 %
   Total Average Utica Costs (per Mcfe)$1.70
 $1.53
 $0.17
 11.1 %
   Average Margin for Utica (per Mcfe)$0.80
 $1.20
 $(0.40) (33.3)%

*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, which is not indicative of the relationship of oil, NGLs, condensate, and natural gas prices.

The Utica segment had natural gas, NGLs and oil revenue of $208 million for the nine months ended September 30, 2019 compared to $326 million for the nine months ended September 30, 2018. The $118 million decrease was due to the 28.7% decrease in total Utica sales volumes and a 6.9% decrease in the average sales price for natural gas. The decrease in total Utica sales volumes was primarily due to the sale of substantially all of CNX's Ohio Utica JV assets in the third quarter of 2018 as well as normal production declines in the remaining dry Utica wells.

The decrease in total average Utica sales price was primarily due to a $0.18 per Mcf decrease in average gas sales price. Additionally, there was a $0.11 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 Utica production. The decreases were partially offset by a $0.06 per Mcf increase in the realized gain on commodity derivative instruments. The notional amounts associated with these financial hedges represented approximately 60.6 Bcf of the


51


Company's produced Utica gas sales volumes for the nine months ended September 30, 2019 at an average gain of $0.10 per Mcf. For the nine months ended September 30, 2018, these financial hedges represented approximately 78.7 Bcf at an average gain of $0.01 per Mcf.

Total operating costs and expenses for the Utica segment were $146 million for the nine months ended September 30, 2019 compared to $183 million for the nine months ended September 30, 2018. The decrease in total dollars and increase in unit costs for the Utica segment were due to the following items:

Utica lease operating expense was $13 million for the nine months ended September 30, 2019 compared to $26 million for the nine months ended September 30, 2018. The decrease in total dollars was primarily due to a decrease in water disposal costs due to lower production volumes, an increase in reuse of produced water in well completions and a reduction in well operating costs due to the overall decrease in Utica volumes described above. The decrease in unit costs was driven by the decrease in total dollars.

Utica transportation, gathering and compression costs were $24 million for the nine months ended September 30, 2019 compared to $44 million for the nine months ended September 30, 2018. The $20 million decrease in total dollars and $0.09 per Mcfe decrease in unit costs were both due to the overall decrease in Utica volumes as well as the shift to lower cost dry Utica production.

Depreciation, depletion and amortization costs attributable to the Utica segment were $105 million for the nine months ended September 30, 2019 compared to $108 million for the nine months ended September 30, 2018. These amounts included depletion on a unit of production basis of $1.17 per Mcfe and $0.90 per Mcfe, respectively. The increase in the units of production depreciation, depletion and amortization rate was due to negative reserve revisions, an increase in capital expenditures and a higher depreciation, depletion and amortization rate on deep dry Utica wells compared to the lower capital cost Utica 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.

COALBED METHANE (CBM) SEGMENT
The CBM segment had earnings before income tax of $29 million for the nine months ended September 30, 2019 compared to earnings before income tax of $35 million for the nine months ended September 30, 2018.
 For the Nine Months Ended September 30,
 2019 2018 Variance 
Percent
Change
CBM Gas Sales Volumes (Bcf)41.7
 45.4
 (3.7) (8.1)%
        
Average Sales Price - Gas (per Mcf)$3.00
 $3.37
 $(0.37) (11.0)%
Gain on Commodity Derivative Instruments - Cash Settlement - Gas (per Mcf)$0.07
 $0.01
 $0.06
 600.0 %
        
Total Average CBM Sales Price (per Mcf)$3.07
 $3.37
 $(0.30) (8.9)%
Average CBM Lease Operating Expenses (per Mcf)0.30
 0.37
 (0.07) (18.9)%
Average CBM Production, Ad Valorem, and Other Fees (per Mcf)0.13
 0.12
 0.01
 8.3 %
Average CBM Transportation, Gathering and Compression Costs (per Mcf)0.70
 0.82
 (0.12) (14.6)%
Average CBM Depreciation, Depletion and Amortization Costs (per Mcf)1.24
 1.29
 (0.05) (3.9)%
   Total Average CBM Costs (per Mcf)$2.37
 $2.60
 $(0.23) (8.8)%
   Average Margin for CBM (per Mcf)$0.70
 $0.77
 $(0.07) (9.1)%

The CBM segment had natural gas revenue of $125 million for the nine months ended September 30, 2019 compared to $153 million for the nine months ended September 30, 2018. The $28 million decrease was due to the 8.1% decrease in total CBM sales volumes and the 11.0% 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 5 - Acquisitions and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information).



52


The total average CBM sales price decreased $0.30 per Mcf due to a $0.37 decrease in average gas sales price, offset in part by a $0.06 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 29.6 Bcf of the Company's produced CBM sales volumes for the nine months ended September 30, 2019 at an average gain of $0.10 per Mcf. For the nine months ended September 30, 2018, these financial hedges represented approximately 34.8 Bcf at an average gain of $0.01 per Mcf.

Total operating costs and expenses for the CBM segment were $99 million for the nine months ended September 30, 2019 compared to $118 million for the nine months ended September 30, 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 $13 million for the nine months ended September 30, 2019 compared to $17 million for the nine months ended September 30, 2018. The $4 million decrease was primarily due to reductions in contractor 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 $29 million for the nine months ended September 30, 2019 compared to $37 million for the nine months ended September 30, 2018. The $8 million decrease in total dollars as well as the $0.12 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 $52 million for the nine months ended September 30, 2019 compared to $59 million for the nine months ended September 30, 2018. These amounts included depletion on a unit of production basis of $0.68 per Mcfe and $0.70 per Mcfe, respectively. The remaining depreciation, depletion and amortization costs were either recorded on a straight-line basis or related to asset retirement obligations.

OTHER GAS SEGMENT

The Other Gas segment had a loss before income tax of $42 million for the nine months ended September 30, 2019 compared to a loss before income tax of $139 million for the nine months ended September 30, 2018.
 For the Nine Months Ended September 30,
 2019 2018 Variance Percent
Change
Other Gas Sales Volumes (Bcf)0.3
 4.6
 (4.3) (93.5)%
Oil Sales Volumes (Bcfe)*
 0.1
 (0.1) (100.0)%
Total Other Sales Volumes (Bcfe)*0.3
 4.7
 (4.4) (93.6)%

*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.

The Other Gas segment includes activity not assigned to the Marcellus, Utica, or CBM segments. This segment also includes purchased gas activity, unrealized gain on commodity derivative instruments, exploration and production related other costs and other operational activity not assigned to a specific segment.

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 5 - Acquisitions and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information). There was $2 million of natural gas and oil revenue related to the Other Gas segment for the nine months ended September 30, 2019 compared to $15 million for the nine months ended September 30, 2018. The decrease in natural gas and oil revenue was due to the asset sale. Total operating costs and expenses related to these other gas sales volumes were $5 million for the nine months ended September 30, 2019 compared to $17 million for the nine months ended September 30, 2018.

The Other Gas segment recognized an unrealized gain on commodity derivative instruments of $214 million as well as cash settlements paid of $1 million for the nine months ended September 30, 2019. For the nine months ended September 30, 2018, the Other Gas segment recognized an unrealized gain on commodity derivative instruments of $76 million as well as cash settlements received of $1 million. The unrealized gain on commodity derivative instruments represents changes in the fair value of all of the Company's existing commodity hedges on a mark-to-market basis.


53


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 $64 million for the nine months ended September 30, 2019 compared to $39 million for the nine months ended September 30, 2018. Purchased gas costs were $62 million for the nine months ended September 30, 2019 compared to $37 million for the nine months ended September 30, 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 averages sales price.
 For the Nine Months Ended September 30,
 2019 2018 Variance Percent
Change
Purchased Gas Sales Volumes (in Bcf)26.9
 12.9
 14.0
 108.5 %
Average Sales Price (per Mcf)$2.39
 $2.98
 $(0.59) (19.8)%
Average Cost (per Mcf)$2.33
 $2.89
 $(0.56) (19.4)%

Other Operating Income

Other operating income was $10 million for the nine months ended September 30, 2019 compared to $22 million for the nine months ended September 30, 2018. The $12 million decrease was due to the following items:
 For the Nine Months Ended September 30,
(in millions)2019 2018 Variance Percent
Change
Water Income$1
 $11
 $(10) (90.9)%
Equity in Earnings of Affiliates2
 4
 (2) (50.0)%
Gathering Income7
 7
 
  %
Total Other Operating Income$10
 $22
 $(12) (54.5)%

Water income decreased $10 million due to nominal sales of freshwater to third-parties for hydraulic fracturingstaff in the 2019 period compared to the 2018 period.

Exploration and Production Related Other Costs

Exploration and production related other costs were $15 million for the nine months ended September 30, 2019 compared to $9 million for the nine months ended September 30, 2018. The $6 million increase was due to the following items:
 For the Nine Months Ended September 30,
(in millions)2019 2018 Variance 
Percent
Change
Seismic Activity$6
 $
 $6
 100.0 %
Lease Expiration Costs5
 4
 1
 25.0 %
Land Rentals2
 3
 (1) (33.3)%
Other2
 2
 
  %
Total Exploration and Production Other Costs$15
 $9
 $6
 66.7 %

Seismic activity increased in the period-to-period comparison due to additional geophysical research in the current period related to the Utica segment.


54


Other Operating Expense

 For the Nine Months Ended September 30,
(in millions)20202019VariancePercent Change
Unutilized Firm Transportation and Processing Fees$54 $43 $11 25.6 %
Water Expense— — %
Insurance Expense— — %
Idle Equipment and Service Charges— — %
Severance Expense— (1)(100.0)%
Other— — %
Total Other Operating Expense$71 $61 $10 16.4 %
Other operating expense was $60 million for the nine months ended September 30, 2019 compared to $51 million for the nine months ended September 30, 2018. The $9 million increase was due to the following items:
 For the Nine Months Ended September 30,
 2019 2018 Variance Percent
Change
Unutilized Firm Transportation and Processing Fees$43
 $29
 $14
 48.3 %
Idle Equipment and Service Charges8
 5
 3
 60.0 %
Insurance Expense2
 2
 
  %
Severance Expense1
 1
 
  %
Litigation Expense
 3
 (3) (100.0)%
Water Expense1
 5
 (4) (80.0)%
Other5
 6
 (1) (16.7)%
Total Other Operating Expense$60
 $51
 $9
 17.6 %

Unutilized Firm Transportationfirm transportation and Processing Feesprocessing 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 of $11 million in the period-to-period comparison was primarily due to previously-acquiredpreviously acquired capacity which was not utilized during the current period to transport the Company's flowing production or to process the Company’s flowingwet natural gas production. The increase in unutilized capacity results in part from the temporary shut-in of a portion of CNX's liquids-rich Shirley-Pennsboro production in May and June of 2020 and due to the temporary shut-in of new

52


turn-in-line wells due to low natural gas prices. 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.
Idle Equipment
Gain on Asset Sales and Service Charges primarily relate to the temporary idlingAbandonments, net

A gain on asset sales 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 $3$22 million in the period-to-period comparison was primarily the result of the acceleration of five months of idle rig expense due to CNX terminating one of its drilling rig contacts early, as well as additional idle service expense related to the Shaw 1G Utica Shale well that occurredsale of various non-core assets was recognized in the first quarter of 2019.
Water Expense decreased $4 million due to the associated costs related to the sales of freshwater to third-parties for hydraulic fracturing in the 2018 period in Total Other Operating Income above. There were nominal sales in the 2019 period.

Selling, General and Administrative

SG&A costs represent direct charges for the management and operation of CNX's E&P division. SG&A costs were $95 million for the nine months ended September 30, 20192020 compared to $82a gain of $1 million forin the nine months ended September 30, 2018. Refer to the discussion2019.

Loss (Gain) on Debt Extinguishment

A gain on debt extinguishment of total company SG&A costs contained in the section "Net Income Attributable to CNX Resources Shareholders"of this Form 10-Q for a detailed cost explanation.

Interest Expense
Interest expense of $92$11 million was recognized in the nine months ended September 30, 20192020 compared to $96a loss on debt extinguishment of $8 million in the nine months ended September 30, 2018. The $4 million decrease was primarily due to 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 $391 million purchase of the outstanding 5.875% senior notes due in April 2022 during2019. During the nine months ended September 30, 2018. Additionally, the Company2020, CNX purchased $400$531 million of its outstanding 5.875% seniorSenior notes due in April 2022 duringat an average price equal to 97.5% of the nine months ended September 30, 2019. These decreases were partially offset by a completed private offering of $500 million of 7.25% senior notes due March 2027 duringprincipal amount. During the nine months ended September 30, 2019 as well as additional borrowings onCNX purchased $400 million of its 5.875% Senior notes due in April 2022 at an average price equal to 101.5% of the CNX credit facility.principal amount. See Note 119 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.


Other Expense
55

 For the Nine Months Ended September 30,
 (in millions)20202019VariancePercent Change
Other Income
Royalty Income$— $$(4)(100.0)%
Right of Way Sales(2)(50.0)%
Interest Income— — %
Other250.0 %
Total Other Income$11 $12 $(1)(8.3)%
Other Expense
Professional Services$$$200.0 %
Merger Related Costs— 100.0 %
Bank Fees— — %
Other Corporate Expense(1)(25.0)%
Total Other Expense$23 $15 $53.3 %
       Total Other Expense$12 $$(300.0)%

TOTAL MIDSTREAM DIVISION ANALYSIS forRoyalty 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 activity.
Other income increased $5 million in the period-to-period comparison primarily due to the receipt of a severance tax refund related to a prior period in the nine months ended September 30, 2019 compared2020 (See Note 4- Income Taxes in the Notes to the period January 3, 2018 through September 30, 2018:Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information).

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

On January 3, 2018, CNX completed the Midstream AcquisitionMerger (See Note 5 -13- Acquisitions and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information). CNX Gathering holds all, including financial advisory, legal service and other professional fees, which were recorded to Other Expense in the Consolidated Statements of Income.
Professional services increased $4 million in the interests in CNX Midstream GP LLC, which holds the general partner interest andperiod-to-period comparison primarily due to fees related to an agreement to eliminate CNXM's incentive distribution rights, or IDRs, in CNXM. As a resultJanuary of this transaction, CNX owns and controls 100% of CNX Gathering, making CNXM a single-sponsor master limited partnership and thus2020, prior to the Company began consolidating CNXM on January 3, 2018.Merger.






53


 (in millions)For the nine months ended September 30, 2019 For the period January 3, 2018 through September 30, 2018 Variance
Midstream Revenue - Related Party$169
 $117
 $52
Midstream Revenue - Third Party56
 70
 (14)
Total Revenue$225
 $187
 $38
      
Transportation, Gathering and Compression$36
 $36
 $
Depreciation, Depletion and Amortization25
 24
 1
Selling, General, and Administrative Costs
14
 17
 (3)
Total Operating Costs and Expenses75
 77
 (2)
Other Expense1
 
 1
Loss (Gain) on Asset Sales and Abandonments7
 (2) 9
Interest Expense23
 17
 6
Total Midstream Division Costs106
 92
 14
Earnings Before Income Tax$119
 $95
 $24
Interest Expense

For the Nine Months Ended September 30,
(in millions)20202019VariancePercent Change
Total Interest Expense$133 $114 $19 16.7 %
Midstream Revenue

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

The table below summarizes volumes gathered by gas type:
 For the nine months ended September 30, 2019 For the period January 3, 2018 through September 30, 2018 Variance
Dry Gas (BBtu/d) (*)862
 702
 160
Wet Gas (BBtu/d) (*)705
 690
 15
Other (BBtu/d) (*)(**)196
 12
 184
Total Gathered Volumes1,763
 1,404
 359
(*) Classification as dry or wet is based upon the shipping destination of the related volumes. Because CNXM's customers have the option to ship a portion of their natural gas to destinations associated with either our wet system or our dry system,$19 million increase was primarily due to any number of factors, volumes may be classified as “wet” in one periodrealized and as “dry” in the comparative period.
(**) Includes condensate handling and third-party volumes under high-pressure short-haul agreements.






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Transportation, Gathering and Compression 

Transportation, Gathering and Compression costs were $36 million for bothunrealized losses on interest rate swap agreements during the nine months ended September 30, 20192020. The addition of $345 million of convertible senior notes due 2026, the addition of the $125 million Cardinal States Facility and the $50 million CSG Holdings Facility all in the current period January 3, 2018 throughalso contributed to the increase. These increases were offset in part by the purchase of $531 million of the outstanding 5.875% senior notes due in April 2022 during the nine months ended September 30, 2018, and are comprised of items directly related2020, as well as lower borrowings on the CNX credit facility. See Note 9 - Long-Term Debt in the Notes to the costUnaudited Consolidated Financial Statements in Item 1 of gathering natural gas at the wellhead and transporting it to interstate pipelines or other local sales points. These costs include items such as electrically-powered compression, compressor rental, repairs and maintenance, supplies, treating and contract services.

this Form 10-Q for additional information.
Selling, General and Administrative Expense

Income Taxes
 For the Nine Months Ended September 30,
(in millions)20202019VariancePercent Change
Total Company (Loss) Earnings Before Income Tax$(867)$350 $(1,217)(347.7)%
Income Tax (Benefit) Expense$(243)$78 $(321)(411.5)%
Effective Income Tax Rate28.0 %22.3 %5.7 %
SG&A expense is comprised of direct charges for the management and operation of CNXM assets. SG&A costs were $14 million
The effective income tax rate was 28.0% for the nine months ended September 30, 20192020 compared to $17 million for the period January 3, 2018 through September 30, 2018. Refer to the discussion of total Company SG&A costs contained in the section "Net Income Attributable to CNX Resources Shareholders"of this Form 10-Q for a detailed cost explanation.

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

Loss (Gain) on Asset Sales and Abandonments

During the nine months ended September 30, 2019, CNXM abandoned the construction of a compressor station that was designed to support additional production within certain areas of what is referred to as their "Anchor Systems," incurring a loss of $7 million that is included in Gain on Asset Sales and Abandonments in the Consolidated Statements of Income. CNXM continues to evaluate projects as CNX's and third-party customer development plans change in order to optimize system design and to actively manage capital investments. During the period January 3, 2018 through September 30, 2018, CNXM sold property and equipment to an unrelated third-party for $6 million in cash proceeds resulting in a gain of $2 million.

Interest Expense
Interest expense is comprised of interest on the outstanding balance under CNXM's senior notes due 2026 and its revolving credit facility. Interest expense was $23 million22.3% for the nine months ended September 30, 2019 compared to $17 million2019. The effective rate for the period January 3, 2018 throughnine months ended September 30, 2018.2020 and 2019 differs from the U.S. Federal statutory rate of 21% primarily due to the impact of noncontrolling interest, equity compensation and state income taxes.


See Note 4 - Income Taxes in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.

5754




Liquidity and Capital Resources

CNX generally has satisfied its working capital requirements and funded its capital expenditures and debt service obligations with cash generated from operations and proceeds from borrowings. CNX currently believes that cash generated from operations, asset sales and the Company's borrowing capacity will be sufficient to meet the Company's working capital requirements, anticipated capital expenditures (other than major acquisitions), scheduled debt payments, anticipated dividend payments and to provide required letters of credit.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.
UncertaintyCNX continuously reviews its liquidity and capital resources. If market conditions were to change, for instance due to the significant decline in oil prices or uncertainty created by the financial markets brings additional potential risksCOVID-19 pandemic, and our revenue was reduced significantly or operating costs were to CNX. These risks include declinesincrease significantly, our cash flows and liquidity could be reduced.
As of September 30, 2020, CNX was in the Company's stock price, less availability and higher costs of additional credit, potential counterparty defaults, and commercial bank failures. Financial market disruptions may impact the Company's collection of trade receivables. As a result, CNX regularly monitors the creditworthinesscompliance with all of its customersdebt covenants. After considering the current and counterpartiespotential effect of the significant decline in oil prices, current and manages credit exposure through payment terms, credit limits, prepaymentsexpected future natural gas prices, and security.uncertainty created by the COVID-19 pandemic on its operations, CNX believes thatcurrently expects to remain in compliance with its current group of customers is financially sound and represents no abnormal business risk.debt covenants.

In order to manage the market risk exposure of volatile natural gas prices in the future, CNX enters into various physical natural gas supply transactions with both gas marketers and end users for terms varying in length. CNX has also entered into various natural gas swap and option transactions, which exist parallel to the underlying physical transactions. The fair value of these contracts was a net assetliability of $313$95 million at September 30, 20192020 and a net asset of $99$406 million at December 31, 2018.2019. The Company has not experienced any issues of non-performance by derivative counterparties.
CNX frequently evaluates potential acquisitions. CNX has funded acquisitions with cash generated from operations and a variety of other sources, depending on the size of the transaction, including debt and equity financing. There can be no assurance that additional capital resources, including debt and equity financing, will be available to CNX on terms which CNX finds acceptable, or at all.

Cash Flows (in millions)
 For the Nine Months Ended September 30,
 20202019Change
Cash Provided by Operating Activities$634 $866 $(232)
Cash Used in Investing Activities$(363)$(949)$586 
Cash (Used in) Provided by Financing Activities$(131)$71 $(202)
 For the Nine Months Ended September 30,
 2019 2018 Change
Cash Provided by Operating Activities$866
 $690
 $176
Cash Used in Investing Activities$(949) $(585) $(364)
Cash Provided by (Used in) Financing Activities$71
 $(572) $643

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

Net income decreased $482$897 million in the period-to-period comparison.
Adjustments to reconcile net income to cash provided by operating activities primarily consisted of a $181$473 million impairment of goodwill, a $62 million impairment of exploration and production properties, a $265 million change in deferred income taxes, a $624$729 million net change in derivative instruments, a $25 million decrease in gain on previously held equity interest,stock-based compensation expense, a $148$21 million decreaseincrease in gain on asset sales and abandonments, and a $138 million net change in commodity derivative instruments, a $21$18 million increase in stock-based compensation, a $19 million decrease in impairment of other intangible assets, and a $47 million decrease in the lossgain on debt extinguishment.

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

Capital expenditures increased $170decreased $569 million in the period-to-period comparison primarily due to increaseddecreased expenditures in the Utica and Marcellus Shale playssegment resulting from increaseddecreased drilling and completions activity as well as additional wateractivity. Gathering capital expenditures decreased due primarily to the installation of new water pipelines. CNXM's capital expenditures increased due to additional spend in order to support both CNX's and third-party customer development plans.substantial build out that was completed during 2019.
Proceeds from asset sales decreased $486increased $17 million primarilymainly due to the 2018 sale of substantially all of the Ohio Utica Joint Venture Assets in the wet gas Utica Shale areas of Belmont, Guernsey, Harrison,increased surface sales and Noble counties along with the 2018 sale of our shallow oil and gas and CBM assetsassignment sales in Pennsylvania and West Virginia. See Note 5 - Acquisitions

the nine months ended September 30, 2020.

5855



and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.
In January 2018, CNX completed the Midstream Acquisition for a net payment of $299 million. See Note 5 - Acquisitions and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.

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

During the nine months ended September 30, 2020, CNX paid $519 million to purchase $531 million of senior notes due in 2022 at 97.7% of the principal amount. During the nine months ended September 30, 2019, CNX paid $406 million to repurchasepurchase $400 million of the senior notes due in 2022 at 101.5% of the principal amount. During the nine months ended September 30, 2018, CNX paid $530 million to repurchase all of the remaining senior notes due in 2023 at 106.0% of the principal amount as well as $405 million to repurchase $391 million of the senior notes due in 2022 at 103.8% of the principal amount. See Note 119 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.
In the nine months ended September 30, 2020, there were $31 million of net proceeds from the CNXM credit facility compared to $162 million of net proceeds during the nine months ended September 30, 2019.
In the nine months ended September 30, 2020, there were $251 million of net payments on the CNX credit facility compared to $1 million of net proceeds during the nine months ended September 30, 2019.
During the nine months ended September 30, 2019,2020, CNX received proceedsclosed on $200 million aggregate principal amount of $500 million from the issuance ofits senior notes due in 2027. During2027 at a price of 103.5% for cash proceeds of $207 million. These new $200 million senior notes due in 2027 were offered as additional notes to the previously issued $500 million senior notes due in 2027 during the nine months ended September 30, 2018, CNX received proceeds of $394 million from the issuance of CNXM's senior notes due in 2026.2019. See Note 119 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.
In the nine months ended September 30, 2020, there were $164 million of net proceeds from the Cardinal States Gathering LLC and CSG Holdings II LLC non-revolving credit facilities. See Note 9 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.
During the nine months ended September 30, 2020, CNX received proceeds of $335 million from the issuance of the Convertible Notes. See Note 9 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.
During the nine months ended September 30, 2020, CNX paid $36 million for capped call transactions related to the issuance of the Convertible Notes. See Note 9 - Long-Term Debt in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional information.
In the nine months ended September 30, 2019, CNX repurchased $117 million of its common stock on the open market compared to $294 millionno purchases in the nine months ended September 30, 2018.2020.
In the nine months ended September 30, 2019, there was $1 million of net proceeds from the CNX credit facility and $439 million of proceeds in the 2018 period.
In the nine months ended September 30, 2019, there were $162 million of net proceeds from the CNXM credit facility compared to $106 million of net payments during the nine months ended September 30, 2018.
In the nine months ended September 30, 2019, there were $10 million in debtDebt issuance and financing fees comparedincreased $5 million primarily due to $20 million during the nine months ended September 30, 2018.fees associated with the borrowings on the Cardinal States Gathering LLC and CSG Holdings II LLC non-revolving credit facilities as well as the issuance of the Convertible Notes.
In the nine months ended September 30, 2019, there were $47 million in distributions to CNXM unitholders, compared to $41 million during the nine months ended September 30, 2018.


The following is a summary of the Company's significant contractual obligations at September 30, 20192020 (in thousands):
Payments due by Year
Less Than
1 Year
1-3 Years3-5 YearsMore Than
5 Years
Total
Payments due by Year
Less Than
1 Year
 1-3 Years 3-5 Years 
More Than
5 Years
 Total
Purchase Order Firm Commitments$7,670
 $2,185
 $485
 $
 $10,340
Purchase Order Firm Commitments$806 $1,131 $— $— $1,937 
Gas Firm Transportation and Processing244,865
 486,838
 412,475
 1,113,008
 2,257,186
Gas Firm Transportation and Processing241,980 427,931 369,444 930,189 1,969,544 
Long-Term Debt
 895,415
 859,200
 895,187
 2,649,802
Long-Term Debt22,488 411,411 798,992 1,384,511 2,617,402 
Interest on Long-Term Debt147,753
 297,695
 173,943
 129,626
 749,017
Interest on Long-Term Debt132,249 239,504 186,647 101,764 660,164 
Finance Lease Obligations7,203
 8,881
 519
 
 16,603
Finance Lease Obligations7,419 2,049 273 — 9,741 
Interest on Finance Lease Obligations933
 498
 94
 
 1,525
Interest on Finance Lease Obligations396 63 19 — 478 
Operating Lease Obligations65,061
 88,077
 7,574
 26,863
 187,575
Operating Lease Obligations52,032 35,436 7,369 23,375 118,212 
Interest on Operating Lease Obligations7,714
 7,400
 3,326
 5,171
 23,611
Interest on Operating Lease Obligations4,101 4,054 2,924 3,808 14,887 
Long-Term Liabilities—Employee Related (a)1,841
 3,934
 4,399
 25,344
 35,518
Long-Term Liabilities—Employee Related (a)1,860 3,999 4,633 31,274 41,766 
Other Long-Term Liabilities (b)207,067
 7,625
 8,325
 18,173
 241,190
Other Long-Term Liabilities (b)281,530 10,000 10,000 41,761 343,291 
Total Contractual Obligations (c)$690,107
 $1,798,548
 $1,470,340
 $2,213,372
 $6,172,367
Total Contractual Obligations (c)$744,861 $1,135,578 $1,380,301 $2,516,682 $5,777,422 
 _________________________
(a)Employee related long-term liabilities include salaried retirement contributions and work-related injuries and illnesses.
(b)Other long-term liabilities include royalties and other long-term liability costs.
(c)The significant obligation table does not include obligations to taxing authorities due to the uncertainty surrounding the ultimate settlement of amounts and timing of these obligations.

(a)Employee related long-term liabilities include salaried retirement contributions and work-related injuries and illnesses.
(b)Other long-term liabilities include royalties and other long-term liability costs.
(c)The table above does not include obligations to taxing authorities due to the uncertainty surrounding the ultimate settlement of amounts and timing of these obligations.


5956




Debt
At September 30, 2019,2020, CNX had total long-term debt of $2,650$2,617 million, including the current portion of long-term debt of $22 million and excluding unamortized debt issuance costs. This long-term debt consisted of:
An aggregate principal amount of $895$700 million of 5.875% Senior Notes7.25% senior notes due in April 2022March 2027 plus $1$7 million of unamortized bond premium. Interest on the notes is payable April 15 and October 15 of each year. Payment of the principal and interest on the notes is guaranteed by most of CNX's subsidiaries but does not include CNXM.
An aggregate principal amount of $613 million in outstanding borrowings under the CNX credit facility.
An aggregate principal amount of $500 million of 7.25% Senior Notes due in March 2027. Interest on the notes is payable March 14 and September 14 of each year. Payment of the principal and interest on the notes is guaranteed by most of CNX's subsidiaries but does not include CNXM.CNXM or CSG Holdings III LLC (or its subsidiaries).
An aggregate principal amount of $410 million in outstanding borrowings under the CNX Revolving Credit Facility.
An aggregate principal amount of $400 million of 6.50% Senior Notessenior notes due in March 2026 issued by CNXM, less $5$4 million of unamortized bond discount. Interest on the notes is payable March 15 and September 15 of each year. Payment of the principal and interest on the notes is guaranteed by certain of CNXM's subsidiaries. CNX is not a guarantor of these notes.
An aggregate principal amount of $246$363 million of 5.875% senior notes due in April 2022 plus a nominal unamortized bond premium. Interest on the notes is payable April 15 and October 15 of each year. Payment of the principal and interest on the notes is guaranteed by most of CNX's subsidiaries but does not include CNXM (or its subsidiaries or general partner) or CSG Holdings III LLC (or its subsidiaries).
An aggregate principal amount of $345 million of 2.25% senior notes due in May 2026, unless earlier redeemed, repurchased, or converted, less $112 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 (or its subsidiaries).
An aggregate principal amount of $343 million in outstanding borrowings under the CNXM revolver. CNX is not a guarantor of CNXM's revolving credit facility.

An aggregate principal amount of $119 million in outstanding borrowings under the Cardinal States Gathering Company Credit Facility, less $1 million of unamortized discount. Interest and a portion of the obligation are paid quarterly.
An aggregate principal amount of $47 million in outstanding borrowings under the CSG Holdings II LLC Credit 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 $5,222$4,270 million at September 30, 20192020 compared to $5,082$4,962 million at December 31, 2018.2019. See the Consolidated Statements of Stockholders' Equity in Item 1 of this Form 10-Q for additional details.
On September 28, 2020, the Merger of CNXM was completed (See Note 13 - Acquisitions and Dispositions in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q 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's Board of Directors determines whether dividends will be paid quarterly. CNX suspended its quarterly dividend in March 2016 to further reflect the Company's increased emphasis on growth. The determination to pay dividends in the future will depend upon, among other things, general business conditions, CNX's financial results, contractual and legal restrictions regarding the payment of dividends by CNX, planned investments by CNX, and such other factors as the Board of Directors deems relevant. The Company's Credit Facility limits CNX's ability to pay dividends in excess of an annual rate of $0.10 per share when the Company's net leverage ratio exceeds 3.00 to 1.00 and is subject to availability under the Credit Facility of at least 15% of the aggregate commitments. The net leverage ratio was 2.452.34 to 1.00 at September 30, 2019.2020. The Credit Facility does not permit dividend payments in the event of default. The indentures to the 5.875% Senior Notessenior notes due in April 2022 and the 7.25% Senior Notessenior notes due in March 2027 limit dividends to $0.50 per share annually unless several conditions are met. These conditions include no defaults, ability to incur additional debt and other payment limitations under the indentures. There were no defaults in the nine months ended September 30, 2019.2020.

On October 16, 2019 the Board of Directors of CNX Midstream GP LLC, the general partner of CNX Midstream Partners LP, announced the declaration of a cash distribution of $0.4001 per unit with respect to the third quarter of 2019. The distribution will be made on November 12, 2019 to unitholders of record as of the close of business on November 5, 2019. The distribution, which equates to an annual rate of $1.6004 per unit, represents an increase of 3.5% over the prior quarter, and an increase of 15% over the distribution paid with respect to the third quarter of 2018.
Off-Balance Sheet Transactions

CNX does not maintain off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that are reasonably likely to have a material current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources which are not disclosed in the Notes to the Unaudited Consolidated Financial Statements. CNX uses a combination of

57


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 September 30, 2019.2020. Management believes these items will expire without being funded. See Note 1310 - Commitments and Contingent Liabilities in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for additional details of the various financial guarantees that have been issued by CNX.


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Forward-Looking Statements

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

prices for natural gas and natural gas liquids are volatile and can fluctuate widely based upon a number of factors beyond our control including oversupply relative to the demand for our products, weather and the price and availability of alternative fuels;
our dependence on gathering, processing and transportation facilities and other midstream facilities owned by CNX Midstream Partners LP (NYSE: CNXM) (CNXM) and others;third-parties;
uncertainties in estimating our economically recoverable natural gas reserves, and inaccuracies in our estimates;
the high-risk nature of drilling, developing and developingoperating 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;
challenges associated with strategic determinations, including the allocation of capital and other resources to strategic opportunities;
the substantial capital expenditures required for our development and exploration projects, as well as CNXM’s midstream system development, require substantial capital expenditures;development;
the impact of potential, as well as any adopted, environmental regulations, including anythose relating to greenhouse gas emissions on our operating costs as well as on the market for natural gas and for our securities;emissions;
environmental regulations can increase costs and introduce uncertainty that could adversely impact the market for natural gas with potential short and long-term liabilities;
our operations are subject to operating risks that could increase our operating expenses and decrease our production levels which could adversely affect our results of operation and our operations are also subject to hazards and any losses or liabilities we suffer from hazards, which occur in our operations may not be fully covered by our insurance policies;
decreases in the availability of, or increases in the price of, required personnel, services, equipment, parts and raw materials in sufficient quantities or at reasonable costs to support our operations;
if natural gas prices decrease or drilling efforts are unsuccessful, we may be required to record write-downs of our proved natural gas properties;
the availability of storage capacity for refined products such as crude, and refinery inputs including condensate, c5+ and butane;
changes in assumptions impacting management’s estimates of future financial results as well as other assumptions such as movement in our stock price, weighted-average cost of capital, terminal growth rates and industry multiples, could cause goodwill and other intangible assets we hold to become impaired and result in material non-cash charges to earnings;
a loss of our competitive position because of the competitive nature of the natural gas industry, consolidation within the industry or overcapacity in the industry adversely affecting our ability to sell our products and midstream services, which could impair our profitability;services;
deterioration in the economic conditions in any of the industries in which our customers operate, a domestic or worldwide financial downturn, or negative credit market conditions;
the impact of outbreaks of communicable diseases such as COVID-19 on business activity, the Company’s operations and national and global economic conditions, generally;

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hedging activities may prevent us from benefiting from price increases and may expose us to other risks;
existing and future government laws, regulations and other legal requirements and judicial decisions that govern our business may increase our costs of doing business and may restrict our operations;
significant costs and liabilities may be incurred as a result of pipeline operations and related increase in the regulation of gas gathering pipelines;
our ability to find adequate water sources for our use in shale gas drilling and production operations, or our ability to dispose of, transport or recycle water used or removed in connection with our gas operations at a reasonable cost and within applicable environmental rules;


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failure to successfully estimate the rate of decline or existing reserves or to find or acquire economically recoverable natural gas reserves to replace our current natural gas reserves;
risks associated with our debt;current long-term debt obligations;
a decrease in our borrowing base, which could decrease for a variety of reasons including lower natural gas prices, declines in natural gas proved reserves, asset sales and lending requirements or regulations;
changes in federal or state income tax laws;
cyber-incidents could have a material adverse effect on our business, financial condition or results of operations;
construction of new gathering, compression, dehydration, treating or other midstream assets by CNXM may not result in revenue increases and may be subject to regulatory, environmental, political, legal and economic risks;
our success depends on key members of our management and our ability to attract and retain experienced technical and other professional personnel;
terrorist activities could materially and adversely affect our business and results of operations;
we may operate a portion of our business with one or more joint venture partners or in circumstances where we are not the operator, which may restrict our operational and corporate flexibility and we may not realize the benefits we expect to realize from a joint venture;
acquisitions and divestitures, we anticipate may not occur or produce anticipated benefits;
the outcomes of various legal proceedings, including those which are more fully described in our reports filed under the Exchange Act;
there is no guarantee that we will continue to repurchase shares of our common stock under our current or any future share repurchase program at levels undertaken previously or at all;
negative public perception regarding our industry could have an adverse effect on our operations;
CONSOL Energy may not be able to satisfy its indemnification obligations in the future and such indemnities may not be sufficient to hold us harmless from the full amount of liabilities for which CONSOL Energy will be allocated responsibility;
Risks associated with our Convertible Notes, including the separationpotential 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 CONSOL Energythe Convertible Notes could resultdelay or prevent a beneficial takeover of the Company;
the potential impact of the capped call transaction undertaken in substantialtandem with the Convertible Notes issuance, including counterparty risk;
the possibility that Company and CNXM may be the targets of securities class actions and derivative lawsuits;
the risk that cost savings, tax liability;benefits and any other synergies from the Merger may not be fully realized or may take longer to realize than expected;
the impact and outcome of pending and future litigation, including litigation, relating to the Merger; and
certain other factors discussedaddressed in this report.

Although forward-looking statements reflect our good faith beliefs at the time they are made, they involve known and unknown risks, uncertainties and other factors. For more information concerning factors that could cause actual results to differ materially from those conveyed in the Company's 2018forward-looking statements, including, among others, that our business plans may change as circumstances warrant, please refer to the “Risk Factors” and “Forward-Looking Statements” sections of our Annual Report on Form 10-K under “Risk Factors,” as updated by any subsequent Forms 10-Q, which are on file atfor the year ended December 31, 2019 filed with the Securities and Exchange Commission.Commission on February 10, 2020 and subsequent Quarterly Reports on Form 10-Q. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, unless required by law.


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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

CNX is exposed to market price risk in the normal course of selling natural gas.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 CNX's 20182019 Annual Report on Form 10-K.

At September 30, 20192020 our open gas derivative instruments were in a net liability position with a fair value of $95 million, and at December 31, 2018,2019 our open gas derivative instruments were in a net asset position with a fair value of $313 million and $99 million, respectively.$406 million. A sensitivity analysis has been performed to determine the incremental effect on future earnings related to open derivative instruments at September 30, 20192020 and December 31, 2018.2019. A hypothetical 10 percent increase in future natural gas prices would have decreased the fair value by $411$393 million and $427$383 million at September 30, 20192020 and December 31, 2018,2019, respectively. A hypothetical 10 percent decrease in future natural gas prices would have increased the fair value by $428$389 million and $453$402 million at September 30, 20192020 and December 31, 2018,2019, respectively.


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CNX's interest expense is sensitive to changes in the general level of interest rates in the United States. The Company uses derivative instruments to manage risk related to interest rates. At September 30, 20192020 and December 31, 2018,2019, CNX had $1,798$1,700 million and $1,703$1,797 million, respectively, aggregate principal amount of debt outstanding under fixed-rate instruments, including unamortized debt issuance costs of $10 million and $9 million, respectively. At September 30, 20192020 and December 31, 2018,2019, CNX had $859$910 million and $696$973 million, respectively, of debt outstanding under variable-rate instruments.instruments, including unamortized debt issuance costs of $7 million at September 30, 2020. CNX’s primary exposure to market risk for changes in interest rates relates to our Credit Facility, under which there were $613$410 million of borrowings at September 30, 20192020 and $612$661 million at December 31, 2018, and2019, CNXM's revolving credit facility, under which there were $246$343 million of borrowings at September 30, 20192020 and $84$312 million at December 31, 2018.2019, and the Cardinal States Gathering LLC and CSG Holdings II LLC Credit Agreements, under which there were $166 million of borrowings at September 30, 2020. A hypothetical 100 basis-point increase in the average rate for CNX's and CNXM's revolving credit facilitiesvariable-rate instruments would decrease pre-tax future earnings as of September 30, 20192020 and December 31, 20182019 by $9 million and $7$10 million, respectively, on an annualized basis.

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







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Natural Gas Hedging Volumes

As of October 9, 2019,8, 2020, our hedged volumes for the periods indicated are as follows:
 For the Three Months Ended 
 March 31,June 30,September 30,December 31,Total Year
2020 Fixed Price Volumes*
Hedged BcfN/AN/AN/A130.2 130.2 
Weighted Average Hedge Price per McfN/AN/AN/A$2.50 $2.50 
2021 Fixed Price Volumes
Hedged Bcf120.6 110.9 112.8 115.6 459.1**
Weighted Average Hedge Price per Mcf$2.56 $2.42 $2.42 $2.48 $2.47 
2022 Fixed Price Volumes
Hedged Bcf99.5 97.1 98.1 95.3 390.0 
Weighted Average Hedge Price per Mcf$2.37 $2.30 $2.30 $2.28 $2.32 
2023 Fixed Price Volumes
Hedged Bcf67.2 68.0 68.7 68.7 272.6 
Weighted Average Hedge Price per Mcf$2.26 $2.24 $2.24 $2.25 $2.24 
2024 Fixed Price Volumes
Hedged Bcf64.2 61.3 61.9 61.9 249.3 
Weighted Average Hedge Price per Mcf$2.34 $2.28 $2.28 $2.28 $2.30 
2025 Fixed Price Volumes
Hedged Bcf22.0 22.2 22.5 22.4 89.1 
Weighted Average Hedge Price per Mcf$2.10 $2.10 $2.10 $2.10 $2.10 
 For the Three Months Ended  
 March 31, June 30, September 30, December 31, Total Year
2019 Fixed Price Volumes         
Hedged BcfN/A N/A N/A 115.8
 115.8
Weighted Average Hedge Price per McfN/A N/A N/A $2.66
 $2.66
2020 Fixed Price Volumes         
Hedged Bcf121.3
 123.6
 126.4
 121.5
 489.6*
Weighted Average Hedge Price per Mcf$2.68
 $2.49
 $2.49
 $2.52
 $2.54
2021 Fixed Price Volumes         
Hedged Bcf104.5
 105.7
 106.9
 105.2
 422.3
Weighted Average Hedge Price per Mcf$2.40
 $2.40
 $2.40
 $2.39
 $2.40
2022 Fixed Price Volumes         
Hedged Bcf68.6
 69.3
 70.1
 70.1
 278.1
Weighted Average Hedge Price per Mcf$2.45
 $2.45
 $2.45
 $2.43
 $2.44
2023 Fixed Price Volumes         
Hedged Bcf35.7
 36.1
 36.4
 36.4
 144.6
Weighted Average Hedge Price per Mcf$2.28
 $2.28
 $2.28
 $2.28
 $2.28
2024 Fixed Price Volumes         
Hedged Bcf30.5
 30.6
 30.9
 30.9
 122.9
Weighted Average Hedge Price per Mcf$2.45
 $2.45
 $2.45
 $2.45
 $2.45
*Excludes purchased swaps. The Company's purchased swaps are as follows:

For the Three Months Ended
December 31, 2020
Hedged Bcf6.2
Weighted Average Fixed Price per Mcf$1.75 
**Quarterly volumes do not add to annual volumes inasmuch as a discrete condition in individual quarters, where basis hedge volumes exceed NYMEX hedge volumes, does not exist for the year taken as a whole.







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ITEM 4.CONTROLS AND PROCEDURES
ITEM 4.CONTROLS AND PROCEDURES

Disclosure controls and procedures. CNX, under the supervision and with the participation of its management, including CNX’s principal executive officer and principal financial officer, evaluated the effectiveness of the Company’s “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, CNX’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures are effective as of September 30, 20192020 to ensure that information required to be disclosed by CNX in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and includes controls and procedures designed to ensure that information required to be disclosed by CNX in such reports is accumulated and communicated to CNX’s management, including CNX’s principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.



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

PART II: OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS
ITEM 1.LEGAL PROCEEDINGS
The first and second paragraph of Note 13—10—Commitments and Contingent Liabilities in the Notes to the Unaudited Consolidated Financial Statements included in Item 1 of this Form 10-Q is incorporated herein by reference.

Environmental Proceedings

From time to time, CNX and federal, state, and local regulatory agencies that oversee CNX’s activities enter into agreements regarding notices of noncompliance. With respect to the subsurface pressure anomaly experienced at one of our Utica wells in January 2019, CNX and the Pennsylvania Department of Environmental Protection executed a consent order and agreement, which was immaterial to CNX’s financial statements.

ITEM 1A.     RISK FACTORS
CNX is also subject to certainadditional risks and hazards due to the nature of the business activities it conducts. For a discussion of these risks, see “Item 1A. Risk Factors” in CNX's 20182019 Annual Report on Form 10-K as filed with the SEC on February 7, 10, 2020 ("2019 ("2018 Form 10-K"). and in our Quarterly Reports on Form 10Q for the quarters ended March 31, 2020 and June 30, 2020. The risks described in the 2018 Form 10-K could materially and adversely affect CNX's business, financial condition, cash flows, and results of operations. There have been no material changes to the risks described in the 2018 Form 10-K. CNX may experience additional risks and uncertainties not currently known; or, as a result of developments occurring in the future, conditions that are currently deemed to be immaterial may also materially and adversely affect CNX's business, financial condition, cash flows, and results of operations.

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

The recent outbreak of the coronavirus pandemic (COVID-19) has affected, and may materially and adversely affect, our business, operating and financial results and liquidity. The severity, magnitude and duration of the current COVID-19 outbreak remains 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), lead to a disruption in our resource acquisition or permitting activities and cause disruption in our relationship with our customers. Additionally, the COVID-19 outbreak has significantly impacted economic activity and markets around the world, and COVID-19 or another similar outbreak could negatively impact our business in numerous ways, including, but not limited to, the following:

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

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

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

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

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 larger net losses (or lower net income) in our financial results because ASC 470-20 will require interest 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 diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are included in the denominator for purposes of calculating diluted earnings per share. We cannot be sure that the accounting standards in the future 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.





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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 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 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, including holders who had previously converted their Convertible Notes, 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.


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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.

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 $166 million as of September 30, 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 10 Commitments and Contingent Liabilities in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for information 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.


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ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The following table sets forth repurchasesThere were no issuer purchases of equity securities in the third quarter of fiscal year 2020. Under our commoncurrent stock during the three months ended September 30, 2019:
ISSUER PURCHASES OF EQUITY SECURITIES
 (a)(b)(c)(d)
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)
July 1, 2019-
July 31, 2019

$

$156,143
August 1, 2019-
August 31, 2019

$

$156,143
September 1, 2019-
September 30, 2019
1,000,000
$7.68
1,000,000
$148,466
Total1,000,000
   
(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 thewhich is not subject to an expiration date, CNX's Board of Directors on Octoberhas approved up to $750 million of repurchases. As of September 30, 20172020, approximately $148.5 million remained available under the stock repurchase program. The stock repurchase program does not obligate the Company to repurchase any dollar amount or number of shares and subsequently amended from time to time (Seethe Board may modify, suspend, or discontinue its authorization of the program at any time. See Note 1815 - Stock Repurchase in the Notes to the Unaudited Consolidated Financial Statements in Item 1 of this Form 10-Q for more information), which is not subjectinformation.

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



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ITEM 6.EXHIBITS
ITEM 6.EXHIBITS
10.1*2.1 
Change in Control Severance10.1 

10.2*10.2 

31.1*10.3 
31.1*
31.2*
32.1
32.2
101.INS
XBRL Instance Document - the instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document.
101.SCH*
XBRL Taxonomy Extension Schema Document.
101.CAL*
XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF*
XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB*
XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*
XBRL Taxonomy Extension Presentation Linkbase Document.
* Filed herewith

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


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

Dated: October 29, 20192020
 
CNX RESOURCES CORPORATION
CNX RESOURCES CORPORATION
By: 
By: 
/s/S/  NICHOLAS J. DEIULIIS    
Nicholas J. DeIuliis
Director, Chief Executive Officer and President

(Duly Authorized Officer and Principal Executive Officer)
By: 
/S/    DONALD W. RUSH    
Donald W. Rush
Chief Financial Officer and Executive Vice President

(Duly Authorized Officer and Principal Financial Officer)
By: 
/S/    JASON L. MUMFORDALAN K. SHEPARD 
Jason L. MumfordAlan K. Shepard
Chief Accounting Officer and Vice President

(Duly Authorized Officer and Principal Accounting Officer)
By:
/S/    JASON L. MUMFORD
Jason L. Mumford
Vice President and Controller


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