CNX Resources (CNX) 10-Q 4 May 10 2010 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010	Apr. 16, 2010
Document Type	10-Q
Amendment Flag	false
Document Period End Date	2010-03-31
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1
Trading Symbol	CNX
Entity Registrant Name	CONSOL Energy Inc
Entity Central Index Key	0001070412
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		225,710,460

CONSOLIDATED STATEMENTS OF INCO

CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Thousands, except Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Sales-Outside	$1,169,514	$1,150,244
Sales-Purchased Gas	3,016	1,465
Sales-Gas Royalty Interests	14,339	12,632
Freight-Outside	31,200	30,916
Other Income	21,991	23,494
Total Revenue and Other Income	1,240,060	1,218,751
Cost of Goods Sold and Other Operating Charges (exclusive of depreciation, depletion and amortization shown below)	766,862	667,622
Purchased Gas Costs	2,308	1,530
Acquisition and Financing Fees	46,563
Gas Royalty Interests Costs	12,197	10,591
Freight Expense	31,200	30,916
Selling, General and Administrative Expenses	30,130	30,816
Depreciation, Depletion and Amortization	119,186	106,219
Interest Expense	8,145	8,512
Taxes Other Than Income	81,301	77,839
Total Costs	1,097,892	934,045
Earnings Before Income Taxes	142,168	284,706
Income Taxes	34,286	79,735
Net Income	107,882	204,971
Less: Net Income Attributable to Noncontrolling Interest	(7,613)	(9,152)
Net Income Attributable to CONSOL Energy Inc. Shareholders	$100,269	$195,819
Earnings Per Share:
Basic	0.55	1.08
Dilutive	0.54	1.08
Weighted Average Number of Common Shares Outstanding:
Basic	181,726,480	180,576,479
Dilutive	184,348,982	182,150,090
Dividends Paid Per Share	0.1	0.1

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands	Mar. 31, 2010	Dec. 31, 2009
Current Assets:
Cash and Cash Equivalents	$1,879,007	$65,607
Accounts and Notes Receivable:
Trade	473,356	317,460
Other Receivables	13,141	15,983
Accounts Receivable-Securitized	50,000	50,000
Inventories	327,443	307,597
Deferred Income Taxes	63,900	73,383
Prepaid Expenses	185,901	161,006
Total Current Assets	2,992,748	991,036
Property, Plant and Equipment:
Property, Plant and Equipment	10,744,244	10,681,955
Less-Accumulated Depreciation, Depletion and Amortization	4,535,190	4,557,665
Total Property, Plant and Equipment-Net	6,209,054	6,124,290
Other Assets:
Deferred Income Taxes	408,361	425,297
Investment in Affiliates	87,856	83,533
Other	176,545	151,245
Total Other Assets	672,762	660,075
TOTAL ASSETS	9,874,564	7,775,401
Current Liabilities:
Accounts Payable	305,310	269,560
Short-Term Notes Payable	566,150	472,850
Borrowings Under Securitization Facility	50,000	50,000
Current Portion of Long-Term Debt	45,690	45,394
Accrued Income Taxes	42,082	27,944
Other Accrued Liabilities	609,525	612,838
Total Current Liabilities	1,618,757	1,478,586
Long-Term Debt:
Long-Term Debt	362,248	363,729
Capital Lease Obligations	58,340	59,179
Total Long-Term Debt	420,588	422,908
Deferred Credits and Other Liabilities:
Postretirement Benefits Other Than Pensions	2,684,827	2,679,346
Pneumoconiosis Benefits	186,310	184,965
Mine Closing	388,597	397,320
Gas Well Closing	81,180	85,992
Workers' Compensation	154,613	152,486
Salary Retirement	176,953	189,697
Reclamation	46,063	27,105
Other	129,772	132,517
Total Deferred Credits and Other Liabilities	3,848,315	3,849,428
TOTAL LIABILITIES	5,887,660	5,750,922
Stockholders' Equity:
Common Stock, $.01 Par Value; 500,000,000 Shares Authorized, 227,289,426 Issued and 225,664,677 Outstanding at March 31, 2010; 183,014,426 Issued and 181,086,267 Outstanding at December 31, 2009	2,273	1,830
Capital in Excess of Par Value	2,874,894	1,033,616
Preferred Stock, 15,000,000 authorized, None issued and outstanding
Retained Earnings	1,525,007	1,456,898
Accumulated Other Comprehensive Loss	(609,537)	(640,504)
Common Stock in Treasury, at Cost-1,624,749 Shares at March 31, 2010 and 1,928,159 Shares at December 31, 2009	(58,055)	(66,292)
Total CONSOL Energy Inc. Stockholders' Equity	3,734,582	1,785,548
Noncontrolling Interest	252,322	238,931
TOTAL EQUITY	3,986,904	2,024,479
TOTAL LIABILITIES AND EQUITY	$9,874,564	$7,775,401

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)
	Mar. 31, 2010	Dec. 31, 2009
Common Stock, Par Value	0.01	0.01
Common Stock, Shares Authorized	500,000,000	500,000,000
Common Stock, Issued	227,289,426	225,664,677
Common Stock, Outstanding	183,014,426	181,086,267
Preferred Stock, authorized	15,000,000	15,000,000
Preferred Stock, issued	0	0
Preferred Stock, outstanding	0	0
Common Stock in Treasury, Shares	1,624,749	1,928,159

CONSOLIDATED STATEMENTS OF STOC

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)
In Thousands	Common Stock	Capital in Excess of Par Value	Retained Earnings (Deficit)	Accumulated Other Comprehensive Income (Loss)	Common Stock in Treasury	Total CONSOL Energy Inc. Stockholders' Equity	Non- Controlling Interest	Total
Beginning Balance at Dec. 31, 2009	$1,830	$1,033,616	$1,456,898	($640,504)	($66,292)	$1,785,548	$238,931	$2,024,479
Net Income			100,269			100,269	7,613	107,882
Treasury Rate Lock (Net of $12 Tax)				(23)		(23)		(23)
Gas Cash Flow Hedge (Net of $20,218 Tax)				26,199		26,199	5,252	31,451
Actuarially Determined Long-Term Liability Adjustments (Net of $2,987 Tax)				4,791		4,791	2	4,793
Comprehensive Income (Loss)			100,269	30,967		131,236	12,867	144,103
Issuance of Treasury Stock			(14,044)		8,237	(5,807)		(5,807)
Issuance of CONSOL Energy Stock	443	1,828,419				1,828,862		1,828,862
Issuance of CNX Gas Stock							139	139
Tax Benefit From Stock-Based Compensation		2,962				2,962		2,962
Amortization of Stock-Based Compensation Awards		8,626				8,626	1,323	9,949
Stock-Based Compensation Awards to CNX Gas Employees		1,271				1,271	(1,059)	212
Net Change in Crown Drilling Noncontrolling Interest							121	121
Dividends ($0.10 per share)			(18,116)			(18,116)		(18,116)
Ending Balance at Mar. 31, 2010	$2,273	$2,874,894	$1,525,007	($609,537)	($58,055)	$3,734,582	$252,322	$3,986,904

1_CONSOLIDATED STATEMENTS OF ST

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) (USD $)
In Thousands, except Per Share data	3 Months Ended Mar. 31, 2010
Treasury Rate Lock, Tax	$12
Gas Cash Flow Hedge, Tax	20,218
Actuarially Determined Long-Term Liability Adjustments, Tax	$2,987
Dividends, per share	0.1

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Cash Flows from Operating Activities:
Net Income	$107,882	$204,971
Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities:
Depreciation, Depletion and Amortization	119,186	106,219
Stock-Based Compensation	9,949	9,906
Loss (Gain) on Sale of Assets	1,439	(1,871)
Amortization of Mineral Leases	2,190	1,671
Deferred Income Taxes	3,225	16,452
Equity in Earnings of Affiliates	(3,873)	(3,361)
Changes in Operating Assets:
Accounts and Notes Receivable	(152,796)	(30,459)
Inventories	(22,501)	(49,866)
Prepaid Expenses	782	2,320
Changes in Other Assets	8,788	5,327
Changes in Operating Liabilities:
Accounts Payable	45,225	(43,690)
Other Operating Liabilities	24,092	26,250
Changes in Other Liabilities	14,527	2,938
Other	15,995	2,973
Net Cash Provided by Operating Activities	174,110	249,780
Cash Flows from Investing Activities:
Capital Expenditures	(265,344)	(299,560)
Proceeds from Sale of Assets	152	43,827
Net Investment in Equity Affiliates	(450)	720
Net Cash Used in Investing Activities	(265,642)	(255,013)
Cash Flows from Financing Activities:
Proceeds from (Payments on) Short-Term Debt	93,300	(37,300)
Payments on Miscellaneous Borrowings	(3,487)	(6,425)
Tax Benefit from Stock-Based Compensation	3,138	140
Dividends Paid	(18,116)	(18,060)
Proceeds from Issuance of Common Stock	1,828,862
Issuance of Treasury Stock	1,235	121
Noncontrolling Interest Member Distribution		(200)
Net Cash Provided By (Used In) Financing Activities	1,904,932	(61,724)
Net Increase (Decrease) in Cash and Cash Equivalents	1,813,400	(66,957)
Cash and Cash Equivalents at Beginning of Period	65,607	138,512
Cash and Cash Equivalents at End of Period	$1,879,007	$71,555

BASIS OF PRESENTATION:

BASIS OF PRESENTATION:
	3 Months Ended Mar. 31, 2010
BASIS OF PRESENTATION:	NOTE 1BASIS OF PRESENTATION: The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March31, 2010 are not necessarily indicative of the results that may be expected for future periods. The balance sheet at December31, 2009 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 December31, 2009 included in CONSOL Energys Form 10-K. As required by the Transfers and Servicing Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification, effective January1, 2010, CONSOL Energy modified the reporting of the Accounts Receivable securitization facility transactions in the Consolidated Financial Statements. The modification includes reporting the pledge of collateral as Accounts Receivable Securitized and the borrowings are now classified as debt in Borrowings under Securitization Facility. Additionally, similar reclassifications of prior period data have been made to conform to the three months ended March31, 2010 classifications required by the Transfers and Servicing Topic of the FASB Accounting Standards Codification. On March31, 2010, CONSOL Energy issued 44,275,000 shares of common stock, which generated net proceeds of $1,828,862 to fund, in part, the acquisition of the Appalachian oil and gas exploration and production business of Dominion Resources, Inc. (Dominion Acquisition). The acquisition transaction closed on April30, 2010. For additional details see Note 17Subsequent Events for additional details. Basic earnings per share are computed by dividing net income by the weighted average shares outstanding during the reporting period. Dilutive earnings per share are computed similarly to basic earnings per share except that the weighted average shares outstanding are increased to include additional shares from the effect of potential dilutive common shares outstanding during the period. The number of additional shares is calculated by assuming that restricted stock units and performance share units were converted, and outstanding stock options were exercised and that the proceeds from such activity were used to acquire shares of common stock at the average market price during the reporting period. The table below sets forth the outstanding options, unvested restricted stock units, and unvested performance stock units that have been excluded from the computation of the diluted earnings per share because t

ACQUISITIONS AND DISPOSITIONS:

ACQUISITIONS AND DISPOSITIONS:
	3 Months Ended Mar. 31, 2010
ACQUISITIONS AND DISPOSITIONS:	NOTE 2ACQUISITIONS AND DISPOSITIONS: In March 2010, CONSOL Energy completed the sale of Jones Fork Mining Complex as part of a litigation settlement with Kentucky Fuel Corporation. No cash proceeds were received and $11,585 of litigation settlement expense was recorded in Cost of Goods Sold and Other Operating Charges. The loss recorded was net of $8,700 related to the fair value of estimated amounts to be collected related to an override royalty on future mineable and merchantable coal extracted and sold from the property.

COMPONENTS OF PENSION AND OTHER

COMPONENTS OF PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS NET PERIODIC BENEFIT COSTS:
	3 Months Ended Mar. 31, 2010
COMPONENTS OF PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS NET PERIODIC BENEFIT COSTS:	NOTE 3COMPONENTS OF PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS NET PERIODIC BENEFIT COSTS: Components of net periodic costs for the three months ended March31 are as follows: Pension Benefits Other Benefits Three Months Ended March31, Three Months Ended March31, 2010 2009 2010 2009 Service cost $ 3,477 $ 2,867 $ 3,732 $ 3,378 Interest cost 9,228 8,659 40,492 39,735 Expected return on plan assets (9,318 ) (9,070 ) Amortization of prior service (credits) (184 ) (277 ) (11,603 ) (11,604 ) Recognized net actuarial loss 7,865 5,440 17,398 14,970 Net periodic benefit cost $ 11,068 $ 7,619 $ 50,019 $ 46,479 For the three months ended March31, 2010, $15,928 in contributions were paid to the pension trust and various pension benefits from operating cash flows. Currently, depending on asset values and asset returns held in the trust, we expect to contribute $63,600 to our pension trust in 2010. CONSOL Energy does not expect to contribute to the other postemployment benefit plan in 2010. We intend to pay benefit claims as they become due. For the three months ended March31, 2010, $36,019 of other post-employment benefits have been paid.

COMPONENTS OF COAL WORKERS' PNE

COMPONENTS OF COAL WORKERS' PNEUMOCONIOSIS (CWP) AND WORKERS' COMPENSATION NET PERIODIC BENEFIT COSTS:
	3 Months Ended Mar. 31, 2010
COMPONENTS OF COAL WORKERS' PNEUMOCONIOSIS (CWP) AND WORKERS' COMPENSATION NET PERIODIC BENEFIT COSTS:	NOTE 4COMPONENTS OF COAL WORKERS PNEUMOCONIOSIS (CWP) AND WORKERS COMPENSATION NET PERIODIC BENEFIT COSTS: Components of net periodic costs for the three months ended March31 are as follows: CWP WorkersCompensation ThreeMonthsEnded March 31, Three Months Ended March 31, 2010 2009 2010 2009 Service cost $ 1,946 $ 1,769 $ 6,754 $ 7,099 Interest cost 2,747 3,014 2,289 2,191 Amortization of actuarial gain (4,981 ) (5,080 ) (768 ) (1,050 ) State administrative fees and insurance bond premiums 2,419 1,759 Legal and administrative costs 750 675 784 850 Net periodic cost $ 462 $ 378 $ 11,478 $ 10,849 CONSOL Energy does not expect to contribute to the CWP plan in 2010. We intend to pay benefit claims as they become due. For the three months ended March31, 2010, $3,412 of CWP benefit claims have been paid. CONSOL Energy does not expect to contribute to the workers compensation plan in 2010. We intend to pay benefit claims as they become due. For the three months ended March31, 2010, $9,896 of workers compensation benefits, state administrative fees and surety bond premiums have been paid.

INCOME TAXES:

INCOME TAXES:
	3 Months Ended Mar. 31, 2010
INCOME TAXES:	NOTE 5INCOME TAXES: The following is a reconciliation, stated in dollars and as a percentage of pretax income, of the U.S. statutory federal income tax rate to CONSOL Energys effective tax rate: For the Three Months Ended March 31, 2010 2009 Amount Percent Amount Percent Statutory U.S. federal income tax rate $ 49,759 35.0 % $ 99,647 35.0 % Excess tax depletion (15,169 ) (10.7 ) (27,816 ) (9.8 ) Effect of Domestic Production Activities Deduction (2,502 ) (1.8 ) (4,328 ) (1.5 ) Net effect of state income taxes 5,616 4.0 10,904 3.8 Other (3,418 ) (2.4 ) 1,328 0.5 Income Tax Expense / Effective Rate $ 34,286 24.1 % $ 79,735 28.0 % The effective rate for the three months ended March31, 2010 and 2009 was calculated using the annual effective rate projection on recurring earnings and includes tax liabilities related to certain discrete transactions, such as the Canadian tax settlement described below. CONSOL Energy was advised by the Canadian Revenue Agency and variance provinces that its appeal of tax deficiencies paid as a result of the Agencys audit of the Canadian tax returns filed for years 1997 through 2003 had been successfully resolved. As a result of the audit settlement, the Company reflected $3,450 as a discrete reduction to income tax expense in the three months ended March31, 2010. Accordingly, a discrete federal income tax expense of $1,457 was also recognized related to this transaction. The total amounts of unrecognized tax benefits at March31, 2010 and 2009 were $56,916 and $60,691, respectively. If these unrecognized tax benefits were recognized, approximately $15,502 and $14,657, respectively, would affect CONSOL Energys effective tax rate. There were no additions to the liability for unrecognized tax benefits during the three months ended March31, 2010 and 2009. CONSOL Energy and its subsidiaries file income tax returns in the U.S. federal, various states and Canadian tax jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2005. CONSOL Energy recognizes interest accrued related to unrecognized tax benefits in its interest expense. As of March31, 2010 and 2009, the Company reported an accrued interest liability relating to uncertain tax positions of $9,129 and $9,724, respectively. The accrued interest liability includes $791 and $627 of interest expense that is reflected in the Companys Consolidated Statements of Income for the three months ended March31, 2010 and 2009, respectively. CONSOL Energy recognizes penalties accrued related to unrecognized tax benefits in its income tax expense. As of March31, 2010 and 2009, CONSOL Energy had no accrued liability for tax penalties.

INVENTORIES:

INVENTORIES:
	3 Months Ended Mar. 31, 2010
INVENTORIES:	NOTE 6INVENTORIES: Inventory components consist of the following: March31, 2010 December31, 2009 Coal $ 193,419 $ 173,719 Merchandise for resale 43,076 44,842 Supplies 90,948 89,036 Total Inventories $ 327,443 $ 307,597 Merchandise for resale is valued using the last-in, first-out (LIFO) cost method. The excess of replacement cost of merchandise for resale inventories over carrying LIFO value was $15,808 and $13,696 at March31, 2010 and December31, 2009, respectively.

ACCOUNTS RECEIVABLE SECURITIZAT

ACCOUNTS RECEIVABLE SECURITIZATION:
	3 Months Ended Mar. 31, 2010
ACCOUNTS RECEIVABLE SECURITIZATION:	NOTE 7ACCOUNTS RECEIVABLE SECURITIZATION: CONSOL Energy and certain of our U.S. subsidiaries are party to a trade accounts receivable facility with financial institutions for the sale on a continuous basis of eligible trade accounts receivable. The facility allows CONSOL Energy to receive, on a revolving basis, up to $165,000. The facility also allows for the issuance of letters of credit against the $165,000 capacity. At March31, 2010, there were no letters of credit outstanding against the facility. CNX Funding Corporation, a wholly owned, special purpose, bankruptcy-remote subsidiary, buys and sells eligible trade receivables generated by certain subsidiaries of CONSOL Energy. Under the receivables facility, CONSOL Energy and certain subsidiaries, irrevocably and without recourse, sell all of their eligible trade accounts receivable to CNX Funding Corporation, who in turn sells these receivables to financial institutions and their affiliates, while maintaining a subordinated interest in a portion of the pool of trade receivables. This retained interest, which is included in Accounts and Notes Receivable Trade in the Consolidated Balance Sheets, is recorded at fair value. Due to a short average collection cycle for such receivables, our collection experience history and the composition of the designated pool of trade accounts receivable that are part of this program, the fair value of our retained interest approximates the total amount of the designated pool of accounts receivable. CONSOL Energy will continue to service the sold trade receivables for the financial institutions for a fee based upon market rates for similar services. Effective January1, 2010, CONSOL Energy modified the reporting of the Accounts Receivable securitization facility transactions in the Consolidated Financial Statements. The modification includes reporting the pledge of collateral as Accounts ReceivableSecuritized and the borrowings are now classified as debt in Borrowings under Securitization Facility. Additionally, similar reclassifications of prior period data have been made to conform to the three months ended March31, 2010 classifications required by the Transfers and Servicing Topic of the FASB Accounting Standards Codification. The cost of funds under this facility is based upon commercial paper rates, plus a charge for administrative services paid to the financial institutions. Costs associated with the receivables facility totaled $452 and $935 for three months ended March31, 2010 and 2009, respectively. These costs have been recorded as financing fees which are included in Cost of Goods Sold and Other Operating Charges in the Consolidated Statements of Income. No servicing asset or liability has been recorded. The receivables facility expires in April 2012 with the underlying liquidity agreement renewing annually each April. At March31, 2010 and December31, 2009, eligible accounts receivable totaled $165,000 and $151,000, with a subordinated retained interest of approximated $115,000 and $101,000, respectively. Accounts ReceivableSecuritized and Borrowings under Securitization Facility of $50,000 were recorded on the Consolidated Balan

PROPERTY, PLANT AND EQUIPMENT:

PROPERTY, PLANT AND EQUIPMENT:
	3 Months Ended Mar. 31, 2010
PROPERTY, PLANT AND EQUIPMENT:	NOTE 8PROPERTY, PLANT AND EQUIPMENT: The components of property, plant and equipment are as follows: March31, 2010 December31, 2009 Coal other plant and equipment $ 4,857,502 $ 4,874,880 Gas properties and related development 1,704,818 1,649,476 Coal properties and surface lands 1,276,241 1,284,795 Gas gathering equipment 819,660 804,212 Airshafts 621,476 622,068 Mine development 589,390 573,037 Leased coal lands 503,477 504,475 Coal advance mining royalties 369,128 366,312 Gas advance royalties 2,552 2,700 Total property, plant and equipment 10,744,244 10,681,955 Less Accumulated depreciation, depletion and amortization 4,535,190 4,557,665 Total Net Property, Plant and Equipment $ 6,209,054 $ 6,124,290

SHORT-TERM NOTES PAYABLE:

SHORT-TERM NOTES PAYABLE:
	3 Months Ended Mar. 31, 2010
SHORT-TERM NOTES PAYABLE:	NOTE 9SHORT-TERM NOTES PAYABLE: CONSOL Energy has a five-year $1,000,000 senior secured credit facility, which extends through June 2012. The facility is secured by substantially all of the assets of CONSOL Energy and certain of its subsidiaries and collateral is shared equally and ratably with the holders of CONSOL Energy Inc. 7.875% bonds maturing in 2012. Fees and interest rate spreads are based on a ratio of financial covenant debt to twelve-month trailing earnings before interest, taxes, depreciation, depletion and amortization (EBITDA), measured quarterly. The facility includes a minimum interest coverage ratio covenant of no less than 4.50 to 1.00, measured quarterly. The interest coverage ratio was 22.68 to 1.00 at March31, 2010. The facility also includes a maximum leverage ratio covenant of not more than 3.25 to 1.00, measured quarterly. The leverage ratio was less than zero at March31, 2010. Affirmative and negative covenants in the facility limit our ability to dispose of assets, make investments, purchase or redeem CONSOL Energy common stock, pay dividends and merge with another corporation. At March31, 2010, the $1,000,000 facility had $517,000 of borrowings outstanding and $262,323 of letters of credit outstanding, leaving $220,677 of capacity available for borrowings and the issuance of letters of credit. The facility bore a weighted average interest rate of 0.87% as of March31, 2010. CONSOL Energy amended the facility in March 2010 to allow for the Dominion Acquisition. The amendment also allowed CONSOL Energy to issue $1,500,000 of 8% senior unsecured notes due in 2017 and $1,250,000 of 8.25% senior unsecured notes due in 2020 to finance a portion of the Dominion Acquisition. See Note 17Subsequent Events for further information. CNX Gas has a five-year $200,000 unsecured credit agreement which extends through October 2010. The agreement contains a negative pledge provision, whereby CNX Gas assets cannot be used to secure other obligations. Fees and interest rate spreads are based on the percentage of facility utilization, measured quarterly. Covenants in the facility limit CNX Gas ability to dispose of assets, make investments, purchase or redeem CNX Gas stock, pay dividends and merge with another corporation. The facility includes a maximum leverage ratio covenant of not more than 3.00 to 1.00, measured quarterly. The leverage ratio was 0.35 to 1.00 at March31, 2010. The facility also includes a minimum interest coverage ratio covenant of no less than 3.00 to 1.00, measured quarterly. This ratio was 67.05 to 1.00 at March31, 2010. At March31, 2010, the CNX Gas credit agreement had $49,150 of borrowings outstanding and $14,913 of letters of credit outstanding, leaving $135,937 of capacity available for borrowings and the issuance of letters of credit. The facility bore a weighted average interest rate of 1.41% as of March31, 2010.

COMMITMENTS AND CONTINGENCIES:

COMMITMENTS AND CONTINGENCIES:
	3 Months Ended Mar. 31, 2010
COMMITMENTS AND CONTINGENCIES:	NOTE 10COMMITMENTS AND CONTINGENCIES: CONSOL Energy and its subsidiaries are subject to various lawsuits and claims with respect to such matters as personal injury, wrongful death, damage to property, exposure to hazardous substances, governmental regulations including environmental remediation, employment and contract disputes and other claims and actions arising out of the normal course of business. Our current estimates related to these pending claims, individually and in the aggregate, are immaterial to the financial position, results of operations or cash flows of CONSOL Energy. However, it is reasonably possible that the ultimate liabilities in the future with respect to these lawsuits and claims may be material to the financial position, results of operations or cash flows of CONSOL Energy. In 2008, the Pennsylvania Department of Conservation and Natural Resources (Commonwealth) filed a six-count Complaint in the Court of Common Pleas of Allegheny County, Pennsylvania, claiming that the Companys underground longwall mining activities caused cracks and seepage damage to the Ryerson Park Dam, thereby eliminating the Ryerson Park Lake. The Commonwealth claimed that the Company is liable for dam reconstruction costs, lake restoration costs and natural resources damages totaling $58,000. The Court stayed the proceedings in the state court, holding that the Commonwealth should pursue administrative agency review of the claim. Furthermore, the Court found that the Commonwealth could not recover natural resources damages under applicable law. The Commonwealth then filed a subsidence-damage claim with the Pennsylvania Department of Environmental Protection (DEP) and DEP reviewed the issue of whether the dam was damaged by subsidence. On February16, 2010, DEP issued its interim report, concluding that the alleged damage was subsidence related. The Commonwealth and the Company now move into the next phase of the DEP proceeding, which is the damage phase, in which DEP will determine what amount and in what form the compensatory relief should be provided. Following completion of the next procedural phase before the DEP, either party can appeal the result to the Pennsylvania Environmental Hearing Board (PEHB), which will consider the case de novo, meaning without regard to the DEPs decision, as to any finding of causation of damage and/or the amount of damages. Thereafter, either party may appeal the decision of the PEHB to the Pennsylvania Commonwealth Court, and then, as may be allowed, to the Pennsylvania Supreme Court. As to the underlying claim, the Company believes it is not responsible for the damage to the dam and that numerous grounds exist upon which to attack the propriety of the claims. The Company intends to vigorously defend the case. However, it is reasonably possible that if damages were awarded to the Commonwealth, the result may be material to the financial position, results of operations, or cash flows of CONSOL Energy. One of our subsidiaries, Fairmont Supply Company (Fairmont), which distributes industrial supplies, currently is named as a defendant in approximately 22,500 asbestos claims in state courts in Pennsylva

DERIVATIVE INSTRUMENTS:

DERIVATIVE INSTRUMENTS:
	3 Months Ended Mar. 31, 2010
DERIVATIVE INSTRUMENTS:	NOTE 11DERIVATIVE INSTRUMENTS: CONSOL Energy enters into financial derivative instruments to manage our exposure to commodity price volatility. We measure each derivative instrument at fair value and record it on the balance sheet as either an asset or liability. Changes in the fair value of the derivatives are recorded currently in earnings unless special hedge accounting criteria are met. For derivatives designated as fair value hedges, the changes in fair value of both the derivative instrument and the hedged item are recorded in earnings. For derivatives designated as cash flow hedges, the effective portions of changes in fair value of the derivative are reported in Other Comprehensive Income or Loss (OCI) and reclassified into earnings in the same period or periods which the forecasted transaction affects earnings. The ineffective portions of hedges are recognized in earnings in the current year. CONSOL Energy currently utilizes only cash flow hedges that are considered highly effective. CONSOL Energy formally assesses both at inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in the fair values or the cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a highly effective hedge, CONSOL Energy will discontinue hedge accounting prospectively. CONSOL Energy is exposed to credit risk in the event of nonperformance by counterparties. The creditworthiness of counterparties is subject to continuing review. All of the counterparties to CONSOL Energys natural gas derivative instruments also participate in CONSOL Energys revolving credit facility. The Company has not experienced any issues of non-performance by derivative counterparties. CONSOL Energy has entered into forward and option contracts on various commodities to manage the price risk associated with the forecasted revenues from those commodities. The objective of these hedges is to reduce the variability of the cash flows associated with the forecasted revenues from the underlying commodities. As of March31, 2010, the total notional amount of the Companys outstanding natural gas forward contracts was 73.1 billion cubic feet. These forward contracts are forecasted to settle through December31, 2012 and meet the criteria for cash flow hedge accounting. During the next year, $75,816 of unrealized gain is expected to be reclassified from Other Comprehensive Income into earnings. No gains or losses have been reclassified into earnings as a result of the discontinuance of cash flow hedges. As of March31, 2010, CONSOL Energy did not have any outstanding coal sales options. For the quarter ended March31, 2009, CONSOL Energy recognized in Other Income on the Consolidated Statement of Income, a gain of $2,135 for the coal sales options which were not designated as hedging instruments. The fair value of CONSOL Energys derivative instruments at March31, 2010 is as follows: Derivatives As of March31, 2010 BalanceSheet Location Fair Value Derivative designated as hedging instruments Natural Gas Pr

OTHER COMPREHENSIVE LOSS:

OTHER COMPREHENSIVE LOSS:
	3 Months Ended Mar. 31, 2010
OTHER COMPREHENSIVE LOSS:	NOTE 12OTHER COMPREHENSIVE LOSS: Total comprehensive income (loss), net of tax, for the three months ended March31, 2010 was as follows: Treasury Rate Lock Change in Fair Value ofCashFlow Hedges Adjustments forActuarially Determined Liabilities Adjustments for Non- controlling Interest Accumulated Other Comprehensive Loss Balance at December31, 2009 $ 180 $ 71,378 $ (699,434 ) $ (12,628 ) $ (640,504 ) Net increase in value of cash flow hedges 74,850 (12,500 ) 62,350 Reclassification of cash flow hedges from other comprehensive income to earnings (43,399 ) 7,248 (36,151 ) Current period change (23 ) 4,793 (2 ) 4,768 Balance at March31, 2010 $ 157 $ 102,829 $ (694,641 ) $ (17,882 ) $ (609,537 )

FAIR VALUES OF FINANCIAL INSTRU

FAIR VALUES OF FINANCIAL INSTRUMENTS:
	3 Months Ended Mar. 31, 2010
FAIR VALUES OF FINANCIAL INSTRUMENTS:	NOTE 13FAIR VALUES OF FINANCIAL INSTRUMENTS: The financial instruments measured at fair value on a recurring basis are summarized below: Fair Value Measurements at March31, 2010 Description QuotedPricesin ActiveMarkets forIdentical Liabilities (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Gas Cash Flow Hedges $ $ 169,011 $ The following methods and assumptions were used to estimate the fair value for which the fair value option was not elected: Cash and cash equivalents: The carrying amount reported in the balance sheets for cash and cash equivalents approximates its fair value due to the short-term maturity of these instruments. Short-term notes payable: The carrying amount reported in the balance sheets for short-term notes payable approximates its fair value due to the short-term maturity of these instruments. Long-term debt: The fair values of long-term debt are estimated using discounted cash flow analyses, based on current market rates for instruments with similar cash flows. The carrying amounts and fair values of financial instruments for which the fair value option was not elected are as follows: March31, 2010 December31, 2009 Carrying Amount FairValue Carrying Amount FairValue Cash and cash equivalents $ 1,879,007 $ 1,879,007 $ 65,607 $ 65,607 Short-term notes payable $ (566,150 ) $ (566,150 ) $ (472,850 ) $ (472,850 ) Borrowings Under Securitization Facility $ (50,000 ) $ (50,000 ) $ (50,000 ) $ (50,000 ) Long-term debt $ (401,318 ) $ (419,069 ) $ (402,753 ) $ (420,056 )

SEGMENT INFORMATION:

SEGMENT INFORMATION:
	3 Months Ended Mar. 31, 2010
SEGMENT INFORMATION:	NOTE 14SEGMENT INFORMATION: CONSOL Energy has two principal business units: Coal and Gas. The principal activities of the Coal unit are mining, preparation and marketing of steam coal, sold primarily to power generators, and metallurgical coal, sold to metal and coke producers. The Coal unit includes five reportable segments. These reportable segments are Northern Appalachian, Central Appalachian, Low Volatile Metallurgical, High Volatile Metallurgical and Other Coal. Each of these reportable segments includes a number of operating segments (mines or type of coal sold). For the three months ended March31, 2010, the Northern Appalachian aggregated segment includes the following mines: Blacksville #2, Robinson Run, McElroy, Loveridge, Bailey, Enlow Fork and Shoemaker. For the three months ended March31, 2010, the Central Appalachian aggregated segment includes the following mines or type of coal: Jones Fork Contractors, the Miller Creek Complex and Buchanan steam sales. For the three months ended March31, 2010, the Low Volatile Metallurgical aggregated segment includes the Buchanan mine. For the three months ended March31, 2010, the High Volatile Metallurgical aggregated segment includes: Bailey, Enlow Fork and Emery coal sales. The Other Coal segment includes our purchased coal activities, idled mine cost, coal segment business units not meeting aggregation criteria, as well as various other activities assigned to the coal segment but not allocated to each individual mine. The principal activity of the Gas unit is to produce pipeline quality methane gas for sale primarily to gas wholesalers. CONSOL Energys All Other segment includes terminal services, river and dock services, industrial supply services and other business activities, including rentals of buildings and flight operations. Intersegment sales have been recorded at amounts approximating market. Operating profit for each segment is based on sales less identifiable operating and non-operating expenses. Certain reclassifications of 2009 segment information have been made to conform to the 2010 presentation, which include changes in segment classification of mines or type of coal sold from mines between the Central Appalachian segment, the Low Volatile Metallurgical segment and the Other Coal segment. Industry segment results for three months ended March31, 2010 are: Northern Appalachian Central Appalachian Low Volatile Metallurgical High Volatile Metallurgical Other Coal Total Coal Gas All Other Corporate, Adjustments Eliminations Consolidated Salesoutside $ 609,397 $ 67,309 $ 126,457 $ 57,367 $ 63,080 $ 923,610 $ 173,147 $ 72,757 $ $ 1,169,514 SalesPurchased Gas 3,016 3,016 SalesGas Royalty Interests 14,339 14,339 Freightoutside 31,200 31,200 31,200 Intersegment transfers 866 43,604 (44,470 ) Tot

GUARANTOR SUBSIDIARIES FINANCIA

GUARANTOR SUBSIDIARIES FINANCIAL INFORMATION:
	3 Months Ended Mar. 31, 2010
GUARANTOR SUBSIDIARIES FINANCIAL INFORMATION:	NOTE 15GUARANTOR SUBSIDIARIES FINANCIAL INFORMATION: The payment obligations under the $250,000, 7.875%per annum notes due March1, 2012 issued by CONSOL Energy are jointly and severally, and also fully and unconditionally guaranteed by several subsidiaries of CONSOL Energy. In accordance with positions established by the Securities and Exchange Commission (SEC), the following financial information sets forth separate financial information with respect to the parent, CNX Gas, an 83.3% owned guarantor subsidiary, the remaining guarantor subsidiaries and the non-guarantor subsidiaries. CNX Gas is presented in a separate column in accordance with SEC Regulation S-X Rule 3-10. CNX Gas Corporation is a reporting company under Section12(b) of the Securities Exchange Act of 1933, and as such, CNX Gas Corporation files its own financial statements with the Securities and Exchange Commission and those financial statements, when filed, are publicly available on Edgar. The principal elimination entries include investments in subsidiaries and certain intercompany balances and transactions. CONSOL Energy, the parent, and a guarantor subsidiary manage several assets and liabilities of all other 100% owned subsidiaries. These include, for example, deferred tax assets, cash and other post-employment liabilities. These assets and liabilities are reflected as parent company or guarantor company amounts for purposes of this presentation. Income Statement for the three months ended March31, 2010: Parent Issuer CNX Gas Guarantor Other Subsidiary Guarantors Non- Guarantors Elimination Consolidated SalesOutside $ $ 174,013 $ 946,077 $ 50,456 $ (1,032 ) $ 1,169,514 SalesPurchased Gas 3,016 3,016 SalesGas Royalty Interests 14,339 14,339 FreightOutside 31,200 31,200 Other Income (including equity earnings) . 193,898 896 8,035 6,308 (187,146 ) 21,991 Total Revenue and Other Income 193,898 192,264 985,312 56,764 (188,178 ) 1,240,060 Cost of Goods Sold and Other Operating Charges 19,608 41,979 636,152 3,407 65,716 766,862 Purchased Gas Costs 2,308 2,308 Acquisition and Financing Fees 46,563 46,563 Gas Royalty Interests Costs 12,214 (17 ) 12,197 Related Party Activity (1,983 ) (1,982 ) 44,517 (40,552 ) Freight Expense 31,200 31,200 Selling, General and Administrative Expense 23,575 28,095 287 (21,827 ) 30,130 Depreciation, Depletion and Amortization 3,404 32,092 83,011 679 119,186 Interest Expense 3,750 1,915 2,566 5 (91 ) 8,145 Taxes Other Than Income 2,539 4,781 73,214 767 81,301 Total Costs 73,8

RECENT ACCOUNTING PRONOUNCEMENT

RECENT ACCOUNTING PRONOUNCEMENTS:
	3 Months Ended Mar. 31, 2010
RECENT ACCOUNTING PRONOUNCEMENTS:	NOTE 16RECENT ACCOUNTING PRONOUNCEMENTS: In January 2010, the Financial Accounting Standards Board issued an update to the Fair Value Measurement and Disclosure Topic of the FASB Accounting Standards Codification which is intended to provide additional application guidance and enhance disclosures regarding fair value measurements. This update also provides amendments that require new disclosures regarding transfers between levels of fair value measurements. This guidance did not have an impact on CONSOL Energy. In June 2009, the FASB issued authoritative guidance on the consolidation of variable interest entities, which is effective for CONSOL beginning July1, 2010. The new guidance requires revised evaluations of whether entities represent variable interest entities, ongoing assessments of control over such entities, and additional disclosures for variable interests. We believe adoption of this new guidance will not have a material impact on CONSOLs financial statements.

SUBSEQUENT EVENTS:

SUBSEQUENT EVENTS:
	3 Months Ended Mar. 31, 2010
SUBSEQUENT EVENTS:	NOTE 17SUBSEQUENT EVENTS: On April1, 2010, CONSOL Energy closed the offering of $1,500,000 of 8.00% senior notes which mature on April1, 2017 and $1,250,000 of 8.25% senior notes which mature on April1, 2020. Interest on the notes will be payable semi-annually on April1 and October1 of each year, commencing on October1, 2010. The notes are guaranteed by substantially all of our existing and future wholly owned domestic subsidiaries. Net proceeds received related to the issuance of the senior notes were $2,698,273. The proceeds from this offering will be used to finance, in part, the Dominion Acquisition. On April23, 2010, CONSOL Energy amended the accounts receivable securitization facility to allow the Company to receive, on a revolving basis, up to $200,000. Previously, the facility provided up to $165,000 of short-term funding or letters of credit. The trade accounts receivable facility supports sales, on a continuous basis to financial institutions, of eligible trade accounts receivable. The facility was expanded to meet the future cash needs of the Company. On April28, 2010, CONSOL Energy commenced a tender offer to acquire all of the shares of CNX Gas common stock that it does not currently own at a cash price of $38.25 per share. CONSOL Energy currently owns approximately 83.3% of the approximately 151million shares of CNX Gas common stock outstanding. CONSOL Energys offer is subject to a number of conditions, including the condition, which cannot be waived, that there is tendered into the offer at least a majority of the outstanding CNX Gas shares not currently held by CONSOL Energy. Following the purchase by CONSOL Energy of shares of CNX Gas in the offer, CONSOL Energy intends to merge CNX Gas into a wholly owned subsidiary of CONSOL Energy, with CNX Gas surviving the merger as a wholly owned subsidiary of CONSOL Energy. As a result of the merger, each outstanding CNX Gas share will be converted into the right to receive $38.25. CONSOL Energy anticipates financing the acquisition of CNX Gas shares by means of internally generated funds, borrowings under its credit facilities and/or proceeds from its recently closed offering of common stock. Previously, on March21, 2010, CONSOL Energy announced that it had entered into an agreement with T. Rowe Price Associates, Inc., on behalf of its investment advisory clients owning approximately 9.5million shares of CNX Gas common stock, or approximately 37% of the shares of CNX Gas that CONSOL Energy does not currently own. Under the agreement, CONSOL Energy agreed, subject to certain conditions, to commence this tender offer and T. Rowe Price agreed to tender these shares of CNX Gas common stock subject to the rights of certain clients with respect to those shares which are discretionary account shares. On April30, 2010, CONSOL Energy completed the Dominion Acquisition for a cash payment of $3,475,000 which will be principally allocated to oil and gas properties, wells and well related equipment. The acquisition includes approximately 1 Tcfe of net proved reserves and 1.45million acres of oil and gas rights within the Appalachian Basin. Included in the acreage holdings are approxi