CONSOL Coal Resources 10-Q 2020 Q3 Quarterly report

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, 2020

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to                     

Commission file number: 001-14901

CONSOL Coal Resources LP 

(Exact name of registrant as specified in its charter)

Delaware	47-3445032
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1000 CONSOL Energy Drive, Suite 100

Canonsburg, PA 15317-6506

(724) 416-8300

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Units representing limited partner interests	CCR	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.

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   ☒

CONSOL Coal Resources LP had 27,690,251 common units and a 1.7% general partner interest outstanding at October 28, 2020.

TABLE OF CONTENTS

		Page
	Part I. Financial Information
Item 1.	Financial Statements	4
	Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019	4
	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2020 and 2019	5
	Consolidated Balance Sheets at September 30, 2020 and December 31, 2019	6
	Consolidated Statement of Partners’ Capital for the three and nine months ended September 30, 2020 and 2019	7
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019	8
	Notes to the Consolidated Financial Statements	9
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	20
Item 4.	Controls and Procedures	34
	Part II. Other Information
Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 4.	Mine Safety Disclosures	37
Item 5.	Other Information	37
Item 6.	Exhibits	39
	Signatures	40

2

Significant Relationships and Other Terms Referenced in this Quarterly Report

• “CONSOL Coal Resources LP,” the “Partnership,” “we,” “our,” “us” and similar terms refer to CONSOL Coal Resources LP, a Delaware limited partnership, and its subsidiaries, with common units listed for trading on the New York Stock Exchange under the ticker “CCR”;

• “Affiliated Company Credit Agreement” refers to an agreement entered into on November 28, 2017 among the Partnership and certain of its subsidiaries (collectively, the “Credit Parties”), CONSOL Energy, as lender and administrative agent, and PNC Bank, National Association, as collateral agent (“PNC”), as amended by Amendment No. 1 to Affiliated Company Credit Agreement, dated March 28, 2019 and Amendment No. 2 to Affiliated Company Credit Agreement, dated June 5, 2020. The Affiliated Company Credit Agreement provides for a revolving credit facility in an aggregate principal amount of up to $275 million to be provided by CONSOL Energy, as lender;

• “common units” refer to the limited partner interests in CONSOL Coal Resources LP. The holders of common units are entitled to participate in partnership distributions and are entitled to exercise the rights or privileges of limited partners under the Partnership Agreement. The common units are listed on the New York Stock Exchange under the symbol “CCR”;

• “CONSOL Energy” and our “sponsor” refer to CONSOL Energy Inc., a Delaware corporation and the parent of our general partner, and its subsidiaries other than our general partner, us and our subsidiaries;

• “CONSOL Operating” refers to CONSOL Operating LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of the Partnership;

• “CONSOL Thermal Holdings” refers to CONSOL Thermal Holdings LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of CONSOL Operating; CONSOL Thermal Holdings owns a 25% undivided interest in the assets, liabilities, revenues and expenses comprising the Pennsylvania Mining Complex;

• “CPCC” refers to CONSOL Pennsylvania Coal Company LLC, a Delaware limited liability company and a wholly owned subsidiary of CONSOL Energy;

• “general partner” refers to CONSOL Coal Resources GP LLC, a Delaware limited liability company and our general partner;

• “Omnibus Agreement” refers to the Omnibus Agreement dated July 7, 2015, as replaced by the First Amended and Restated Omnibus Agreement dated as of September 30, 2016, and as amended by the First Amendment to the First Amended and Restated Omnibus Agreement, dated November 28, 2017;

• “Partnership Agreement” refers to the Third Amended and Restated Partnership Agreement dated as of November 28, 2017;

• “Pennsylvania Mining Complex” refers to the Bailey, Enlow Fork, and Harvey coal mines, coal reserves and related assets and operations, located primarily in southwestern Pennsylvania. The Pennsylvania Mining Complex is owned 75% by our sponsor and its subsidiaries and 25% by CONSOL Thermal Holdings;

• “SEC” refers to the United States Securities and Exchange Commission; and

• “subordinated units” refer to limited partner interests in CONSOL Coal Resources LP having the rights and obligations specified with respect to subordinated units in the Partnership Agreement. On August 16, 2019, all 11,611,067 subordinated units, which were owned entirely by CONSOL Energy Inc., were converted into common units on a one-for-one basis. As of the date of this Quarterly Report on Form 10-Q, there are no outstanding subordinated units.

3

PART I: FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

CONSOL COAL RESOURCES LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except unit data)

(unaudited)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2020			2019		2020			2019
Coal Revenue	$	46,016		$	75,385	$	135,386		$	246,166
Freight Revenue		3,227			900		4,785			3,529
Other Income		71			1,096		10,338			3,440
Total Revenue and Other Income		49,314			77,381		150,509			253,135
Operating and Other Costs 1		33,912			53,998		106,976			164,542
Depreciation, Depletion and Amortization		12,305			11,086		35,753			33,639
Freight Expense		3,227			900		4,785			3,529
Selling, General and Administrative Expenses 2		2,879			2,840		9,285			10,353
Interest Expense, Net 3		2,520			1,587		6,929			4,495
Total Costs		54,843			70,411		163,728			216,558
Net (Loss) Income	$	(5,529	)	$	6,970	$	(13,219	)	$	36,577
Less: General Partner Interest in Net (Loss) Income		(93	)		118		(222	)		617
Limited Partner Interest in Net (Loss) Income	$	(5,436	)	$	6,852	$	(12,997	)	$	35,960
Net (Loss) Income per Limited Partner Unit - Basic	$	(0.20	)	$	0.25	$	(0.47	)	$	1.30
Net (Loss) Income per Limited Partner Unit - Diluted	$	(0.20	)	$	0.25	$	(0.47	)	$	1.30
Limited Partner Units Outstanding - Basic		27,690,251			27,632,770		27,681,867			27,618,396
Limited Partner Units Outstanding - Diluted		27,690,251			27,667,477		27,681,867			27,654,684
Cash Distributions Declared per Unit 4	$	0		$	0.5125	$	0		$	1.5375

¹ Related Party expenses of $1,006 and $838 for the three months ended and $2,715 and $2,368 for the nine months ended September 30, 2020 and September 30, 2019, respectively.

² Related Party expenses of $1,770 and $1,902 for the three months ended and $6,427 and $6,932 for the nine months ended September 30, 2020 and September 30, 2019, respectively.

3 Related Party expenses of $2,336 and $1,587 for the three months ended and $6,397 and $4,495 for the nine months ended September 30, 2020 and September 30, 2019, respectively.

⁴ Represents the cash distributions declared related to the period presented.

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

4

CONSOL COAL RESOURCES LP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Net (Loss) Income	$	(5,529	)	$	6,970		$	(13,219	)	$	36,577
Recognized Net Actuarial Gain (Loss)		39			(5	)		116			(11	)
Other Comprehensive Income (Loss)		39			(5	)		116			(11	)
Comprehensive (Loss) Income	$	(5,490	)	$	6,965		$	(13,103	)	$	36,566

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

5

CONSOL COAL RESOURCES LP

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

	(unaudited)
	September 30,		December 31,
	2020		2019
ASSETS
Current Assets:
Cash	$	625	$	543
Trade Receivables, net		24,887		32,769
Other Receivables, net		962		1,572
Inventories		13,178		12,653
Prepaid Expenses		4,086		5,746
Total Current Assets		43,738		53,283
Property, Plant and Equipment:
Property, Plant and Equipment		1,017,483		984,898
Less—Accumulated Depreciation, Depletion and Amortization		606,311		571,238
Total Property, Plant and Equipment—Net		411,172		413,660
Other Assets:
Right of Use Asset—Operating Leases		12,170		15,695
Other Assets		2,637		13,456
Total Other Assets		14,807		29,151
TOTAL ASSETS	$	469,717	$	496,094
LIABILITIES AND PARTNERS’ CAPITAL
Current Liabilities:
Accounts Payable	$	15,796	$	22,805
Accounts Payable—Related Party		8,035		1,419
Current Portion of Long-Term Debt		9,251		5,252
Other Accrued Liabilities		41,456		39,455
Total Current Liabilities		74,538		68,931
Long-Term Debt:
Affiliated Company Credit Agreement—Related Party		174,685		180,925
Finance Lease Obligations		5,198		1,645
Total Long-Term Debt		179,883		182,570
Other Liabilities:
Pneumoconiosis Benefits		6,754		6,028
Workers’ Compensation		3,998		3,611
Asset Retirement Obligations		11,315		10,801
Operating Lease Liability		8,178		11,507
Other		887		785
Total Other Liabilities		31,132		32,732
TOTAL LIABILITIES		285,553		284,233
Partners’ Capital:
Common Units (27,690,251 Units Outstanding at September 30, 2020; 27,632,824 Units Outstanding at December 31, 2019)		162,023		189,367
General Partner Interest		11,446		11,915
Accumulated Other Comprehensive Income		10,695		10,579
Total Partners’ Capital		184,164		211,861
TOTAL LIABILITIES AND PARTNERS’ CAPITAL	$	469,717	$	496,094

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

6

CONSOL COAL RESOURCES LP

CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL

(Dollars in thousands)

	Limited Partners								Accumulated Other Comprehensive
	Common			Subordinated		General Partner			Income		Total
Balance at December 31, 2019	$	189,367		$	0	$	11,915		$	10,579	$	211,861
(unaudited)
Net Income		161			0		3			0		164
Unitholder Distributions		(14,191	)		0		(243	)		0		(14,434	)
Unit-Based Compensation		159			0		0			0		159
Units Withheld for Taxes		(217	)		0		0			0		(217	)
Adoption of ASU 2016-013		(247	)		0		(4	)		0		(251	)
Actuarially Determined Long-Term Liability Adjustments		0			0		0			39		39
Balance at March 31, 2020	$	175,032		$	0	$	11,671		$	10,618	$	197,321
Net Loss		(7,722	)		0		(132	)		0		(7,854	)
Unit-Based Compensation		74			0		0			0		74
Actuarially Determined Long-Term Liability Adjustments		0			0		0			38		38
Balance at June 30, 2020	$	167,384		$	0	$	11,539		$	10,656	$	189,579
Net Loss		(5,436	)		0		(93	)		0		(5,529	)
Unit-Based Compensation		75			0		0			0		75
Actuarially Determined Long-Term Liability Adjustments		0			0		0			39		39
Balance at September 30, 2020	$	162,023		$	0	$	11,446		$	10,695	$	184,164

	Limited Partners									Accumulated Other Comprehensive Income
	Common			Subordinated			General Partner			(Loss)			Total
Balance at December 31, 2018	$	212,122		$	(11,421	)	$	12,119		$	11,920		$	224,740
(unaudited)
Net Income		8,676			6,287			257			0			15,220
Unitholder Distributions		(8,211	)		(5,951	)		(243	)		0			(14,405	)
Unit-Based Compensation		397			0			0			0			397
Units Withheld for Taxes		(880	)		0			0			0			(880	)
Actuarially Determined Long-Term Liability Adjustments		0			0			0			(3	)		(3	)
Balance at March 31, 2019	$	212,104		$	(11,085	)	$	12,133		$	11,917		$	225,069
Net Income		8,201			5,944			242			0			14,387
Unitholder Distributions		(8,211	)		(5,950	)		(243	)		0			(14,404	)
Unit-Based Compensation		341			0			0			0			341
Actuarially Determined Long-Term Liability Adjustments		0			0			0			(3	)		(3	)
Balance at June 30, 2019	$	212,435		$	(11,091	)	$	12,132		$	11,914		$	225,390
Net Income		6,852			0			118			0			6,970
Unitholder Distributions		(8,211	)		(5,951	)		(243	)		0			(14,405	)
Conversion of Subordinated Units to Common Units1		(17,042	)		17,042			0			0			0
Unit-Based Compensation		344			0			0			0			344
Actuarially Determined Long-Term Liability Adjustments		0			0			0			(5	)		(5	)
Balance at September 30, 2019	$	194,378		$	0		$	12,007		$	11,909		$	218,294

¹All subordinated units were converted to common units on a one-for-one basis on August 16, 2019. For purposes of calculating net income per common and subordinated unit, the conversion of the subordinated units is deemed to have occurred on July 1, 2019. See Note 3 - Net (Loss) Income Per Limited Partner and General Partner Interest.

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

7

CONSOL COAL RESOURCES LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

(unaudited)

	Nine Months Ended
	September 30,
	2020			2019
Cash Flows from Operating Activities:
Net (Loss) Income	$	(13,219	)	$	36,577
Adjustments to Reconcile Net (Loss) Income to Net Cash Provided by Operating Activities:
Depreciation, Depletion and Amortization		35,753			33,639
(Gain) Loss on Sale of Assets		(59	)		5
Unit-Based Compensation		308			1,082
Changes in Operating Assets:
Trade and Other Receivables		8,245			(4,353	)
Inventories		(525	)		(273	)
Prepaid Expenses		1,660			(1,998	)
Changes in Other Assets		528			1,610
Changes in Operating Liabilities:
Accounts Payable		(6,344	)		(2,041	)
Accounts Payable—Related Party		6,616			(949	)
Other Operating Liabilities		(61	)		3,645
Changes in Other Liabilities		1,228			561
Net Cash Provided by Operating Activities		34,130			67,505
Cash Flows from Investing Activities:
Capital Expenditures		(13,172	)		(29,354	)
Proceeds from Sales of Assets		85			4
Net Cash Used in Investing Activities		(13,087	)		(29,350	)
Cash Flows from Financing Activities:
Proceeds from Finance Lease Obligations		4,073			0
Payments on Finance Lease Obligations		(4,143	)		(2,853	)
Net (Payments on) Proceeds From Related Party Long-Term Notes		(6,240	)		18,400
Payments for Unitholder Distributions		(14,434	)		(43,214	)
Units Withheld for Taxes		(217	)		(880	)
Net Cash Used in Financing Activities		(20,961	)		(28,547	)
Net Increase in Cash		82			9,608
Cash at Beginning of Period		543			1,003
Cash at End of Period	$	625		$	10,611
Non-Cash Investing and Financing Activities:
Finance Lease	$	4,334		$	0
Other Equipment Financing	$	3,281		$	959

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

8

CONSOL COAL RESOURCES LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(Dollars in thousands, except per unit amounts)

NOTE 1—BASIS OF PRESENTATION:

The accompanying unaudited Consolidated Financial Statements were prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.

For the three and nine months ended September 30, 2020 and 2019, the unaudited Consolidated Financial Statements include the accounts of CONSOL Operating and CONSOL Thermal Holdings, wholly owned and controlled subsidiaries.

The Partnership is a master limited partnership formed on March 16, 2015 to manage and further develop all of our sponsor's active coal operations in Pennsylvania. As of September 30, 2020, the Partnership's assets are comprised of a 25% undivided interest in, and operational control over, the Pennsylvania Mining Complex. The Partnership's common units trade on the New York Stock Exchange under the ticker symbol “CCR.”

Recent Accounting Pronouncements:

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04 Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this Update provide optional guidance for a limited period of time to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The Update also provides optional expedients and exceptions for applying generally accepted accounting principles (“GAAP”) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2022. An entity may elect to apply the amendments for contract modifications by Topic or Industry Subtopic as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. Once elected for a Topic or an Industry Subtopic, the amendments in this Update must be applied prospectively for all eligible contract modifications for that Topic or Industry Subtopic. Management has elected to apply this Update subsequent to March 12, 2020. Management does not expect this Update to have a material impact on the Partnership's financial statements.

In August 2018, the FASB issued ASU 2018-14 - Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20) to improve the effectiveness of disclosures in the notes to the financial statements by facilitating clear communication of the information required by GAAP. The amendments modify the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. These changes will be effective for fiscal years ending after December 15, 2020, including interim periods within those fiscal years. Management does not expect this Update to have a material impact on the Partnership's financial statements.

9

NOTE 2—REVENUE:

The following table disaggregates our revenue from contracts with customers for the three and nine months ended September 30, 2020 and September 30, 2019:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Coal Revenue	$	46,016	$	75,385	$	135,386	$	246,166
Freight Revenue		3,227		900		4,785		3,529
Total Revenue from Contracts with Customers	$	49,243	$	76,285	$	140,171	$	249,695

Coal Revenue

Coal revenue is generally recognized when title passes to the customer and the price is fixed and determinable. Generally, title passes when coal is loaded at the central preparation facility and, on occasion, at terminal locations or other customer destinations. Our coal contract revenue per ton is fixed and determinable and adjusted for nominal quality adjustments. Some coal contracts also contain positive electric power price-related adjustments, which represent market-driven price adjustments, wherein there is no additional value exchanged, in addition to a fixed base price per ton. The Partnership's coal contracts generally do not allow for retroactive adjustments to pricing after title to the coal has passed.  Our coal supply contracts and other sales and operating revenue contracts vary in length from short-term to long-term contracts and do not typically have significant financing components.

The estimated transaction price from each of our contracts is based on the total amount of consideration to which we expect to be entitled under the contract. Included in the transaction price for certain coal supply contracts is the impact of variable consideration, including quality price adjustments, handling services, per-ton price fluctuations based on certain coal sales price indices and anticipated payments in lieu of shipments. The estimated transaction price for each contract is allocated to our performance obligations based on relative standalone selling prices determined at contract inception. We have determined that each ton of coal represents a separate and distinct performance obligation. Some of our contracts span multiple years and have annual pricing modification provisions, based upon market-driven or inflationary adjustments, where no additional value is exchanged. Management believes that the invoice price is the most appropriate rate at which to recognize revenue.

While we do, from time to time, experience costs of obtaining coal customer contracts with amortization periods greater than one year, those costs are generally immaterial to our net income. As of and for the three and nine months ended September 30, 2020 and September 30, 2019, we do not have any capitalized costs to obtain customer contracts on our balance sheet nor have we recognized any amortization of previously existing capitalized costs of obtaining customer contracts. Further, the Partnership has not recognized any coal revenue in the current period from performance obligations satisfied (or partially satisfied) in previous periods.

Freight Revenue

Some of our coal contracts require that we sell our coal at locations other than our central preparation plant. The cost to transport our coal to the ultimate sales point is passed through to our customers and we recognize the freight revenue equal to the transportation cost when title of the coal passes to the customer.

Contract Balances

Contract assets are recorded separately from trade receivables in the Partnership's unaudited Consolidated Balance Sheets and are reclassified to trade receivables as title passes to the customer and the Partnership's right to consideration becomes unconditional. Payments for coal shipments are typically due within two to four weeks of the invoice date. The Partnership typically does not have material contract assets that are stated separately from trade receivables as the Partnership's performance obligations are satisfied as control of the goods or services passes to the customer, thereby granting the Partnership an unconditional right to receive consideration. Contract liabilities relate to consideration received in advance of the satisfaction of the Partnership's performance obligations. Contract liabilities are recognized as revenue at the point in time when control of the good passes to the customer, or over time when services are provided.

10

NOTE 3—NET (LOSS) INCOME PER LIMITED PARTNER AND GENERAL PARTNER INTEREST:

The Partnership allocates net income among our general partner and limited partners using the two-class method in accordance with applicable authoritative accounting guidance. Under the two-class method, we allocate our net income to our limited partners and our general partner in accordance with the terms of our Partnership Agreement. We also allocate any earnings in excess of distributions to our limited partners and our general partner in accordance with the terms of our Partnership Agreement. We allocate any distributions in excess of earnings for the period to our general partner and our limited partners based on their respective proportionate ownership interests in us, after taking into account distributions to be paid with respect to the incentive distribution rights, as set forth in the Partnership Agreement.

Diluted net income per limited partner unit reflects the potential dilution that could occur if securities or agreements to issue common units, such as awards under the long-term incentive plan, were exercised, settled or converted into common units. When it is determined that potential common units resulting from an award subject to performance or market conditions should be included in the diluted net income per limited partner unit calculation, the impact is reflected by applying the treasury stock method.

On August 16, 2019, all 11,611,067 subordinated units were converted into common units on a 1-for-one basis. For purposes of calculating net income per common and subordinated unit, the conversion of the subordinated units is deemed to have occurred on July 1, 2019. The conversion did not impact the amount of the cash distribution paid or the total number of the Partnership’s outstanding units representing limited partner interests. Upon payment of the cash distribution for the second quarter of 2019, the financial requirements for the conversion of all subordinated units were satisfied.

The following table illustrates the Partnership’s calculation of net (loss) income per unit for common and subordinated partner units:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2020			2019		2020			2019
Net (Loss) Income	$	(5,529	)	$	6,970	$	(13,219	)	$	36,577
Less: General Partner Interest in Net (Loss) Income		(93	)		118		(222	)		617
Net (Loss) Income Allocable to Limited Partner Units	$	(5,436	)	$	6,852	$	(12,997	)	$	35,960
Limited Partner Interest in Net (Loss) Income - Common Units	$	(5,436	)	$	6,852	$	(12,997	)	$	23,729
Limited Partner Interest in Net Income - Subordinated Units		0			0		0			12,231
Limited Partner Interest in Net (Loss) Income - Basic & Diluted	$	(5,436	)	$	6,852	$	(12,997	)	$	35,960
Weighted Average Limited Partner Units Outstanding - Basic		27,690,251			27,632,770		27,681,867			27,618,396
Weighted Average Limited Partner Units Outstanding - Diluted		27,690,251			27,667,477		27,681,867			27,654,684
Net (Loss) Income Per Limited Partner Unit - Basic
Common Units	$	(0.20	)	$	0.25	$	(0.47	)	$	1.30
Subordinated Units	$	0		$	0	$	0		$	1.05
Net (Loss) Income Per Limited Partner Unit - Basic	$	(0.20	)	$	0.25	$	(0.47	)	$	1.30
Net (Loss) Income Per Limited Partner Unit - Diluted
Common Units	$	(0.20	)	$	0.25	$	(0.47	)	$	1.30
Subordinated Units	$	0		$	0	$	0		$	1.05
Net (Loss) Income Per Limited Partner Unit - Diluted	$	(0.20	)	$	0.25	$	(0.47	)	$	1.30

There were 33,705 and 37,669 phantom units excluded from the computation of the diluted earnings per unit, because their effect would be anti-dilutive for the three and nine months ended September 30, 2020, respectively.  There were 0 phantom units excluded from the computation of the diluted earnings per unit, because their effect would be anti-dilutive for the three and nine months ended September 30, 2019.

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NOTE 4—CREDIT LOSSES:

Effective January 1, 2020, the Partnership adopted ASU 2016-013, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments using a modified retrospective approach. This ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade and other receivables. The amendment requires entities to consider forward-looking information to estimate expected credit losses, resulting in earlier recognition of losses for receivables that are current or not yet due, which were not considered under previous accounting guidance. The Partnership recorded a cumulative-effect adjustment to decrease retained earnings in the amount of $251 for expected credit losses on financial assets at the adoption date.

The following table illustrates the impact of ASC 326.

	January 1, 2020
	As Reported Under ASC 326		Pre-ASC 326 Adoption		Impact of ASC 326 Adoption
Trade Receivables	$	763	$	525	$	238
Other Receivables		32		19		13
Allowance for Credit Losses on Receivables	$	795	$	544	$	251

The Partnership is exposed to credit losses primarily through sales of products and services. The Partnership's expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade and other accounts receivables. Due to the short-term nature of such receivables, the estimate of the amount of accounts receivable that may not be collected is based on an aging of the accounts receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Partnership's monitoring activities include timely account reconciliations, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions.

Balances are written off when determined to be uncollectible. The Partnership considered the current and expected future economic and market conditions surrounding the novel coronavirus (“COVID-19”) pandemic and determined that the estimate of credit losses was not significantly impacted.

Management estimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for changes to the assessment of anticipated payment, changes in economic conditions, current industry trends in the markets the Partnership serves, and changes in the financial health of the Partnership's counterparties.

The following table provides a roll-forward of the allowance for credit losses by portfolio segment that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected.

	Trade Receivables		Other Receivables
Beginning Balance, January 1, 2020	$	525	$	19
Adoption of ASU 2016-13, cumulative-effect adjustment to retained earnings		238		13
Provision for expected credit losses		135		(23	)
Ending Balance, September 30, 2020	$	898	$	9

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NOTE 5—INVENTORIES:

	September 30,		December 31,
	2020		2019
Coal	$	1,628	$	621
Supplies		11,550		12,032
Total Inventories	$	13,178	$	12,653

Inventories are stated at the lower of cost or net realizable value. The cost of coal inventories is determined by the first-in, first-out (FIFO) method. Coal inventory costs include labor, supplies, equipment costs, operating overhead, depreciation, depletion and amortization, and other related costs. The cost of supplies inventory is determined by the average cost method and includes operating and maintenance supplies to be used in our coal operations.

NOTE 6—PROPERTY, PLANT AND EQUIPMENT:

	September 30,		December 31,
	2020		2019
Coal and Other Plant and Equipment	$	695,504	$	666,560
Coal Properties and Surface Lands		126,669		126,294
Airshafts		109,965		106,750
Mine Development		81,538		81,538
Advance Mining Royalties		3,807		3,756
Total Property, Plant and Equipment		1,017,483		984,898
Less: Accumulated Depreciation, Depletion and Amortization		606,311		571,238
Total Property, Plant and Equipment, Net	$	411,172	$	413,660

Coal reserves are controlled either through fee ownership or by lease. The duration of the leases varies; however, the lease terms generally are extended automatically to the exhaustion of economically recoverable coal reserves, as long as active mining continues. Coal interests held by lease provide the same rights as fee ownership for mineral extraction and are legally considered real property interests.

As of September 30, 2020 and December 31, 2019, property, plant and equipment includes gross assets under finance lease of $20,891 and $12,596, respectively. Accumulated amortization for finance leases was $11,895 and $7,351 at September 30, 2020 and December 31, 2019, respectively. Amortization expense for assets under finance leases approximated $1,537 and $966 for the three months ended September 30, 2020 and September 30, 2019 and $4,143 and $2,899 for the nine months ended September 30, 2020 and September 30, 2019, respectively, and is included in Depreciation, Depletion and Amortization in the accompanying unaudited Consolidated Statements of Operations.

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NOTE 7—OTHER ACCRUED LIABILITIES:

	September 30,		December 31,
	2020		2019
Subsidence Liability	$	22,479	$	22,661
Accrued Payroll and Benefits		3,580		4,460
Accrued Interest (Related Party)		3,195		2,541
Accrued Equipment Obligations		2,524		0
Other		2,152		2,304
Current Portion of Long-Term Liabilities:
Operating Lease Liability		4,877		4,753
Workers’ Compensation		1,452		1,423
Asset Retirement Obligations		830		954
Pneumoconiosis Benefits		219		201
Long-Term Disability		148		158
Total Other Accrued Liabilities	$	41,456	$	39,455

NOTE 8—LONG-TERM DEBT:

	September 30,		December 31,
	2020		2019
Affiliated Company Credit Agreement (5.00% interest rate at September 30, 2020 and 4.00% interest rate at December 31, 2019)	$	174,685	$	180,925
Other Asset-Backed Financing Maturing in December 2020, 4.41% and 5.96% Weighted Average Interest Rate at September 30, 2020 and December 31, 2019, respectively		4,723		1,443
		179,408		182,368
Less: Amounts Due in One Year*		4,723		1,443
Long-Term Debt	$	174,685	$	180,925

* Excludes current portion of Finance Lease Obligations of $4,528 and at $3,809 at September 30, 2020 and December 31, 2019, respectively.

Affiliated Company Credit Agreement

On November 28, 2017, the Partnership and the other Credit Parties entered into the Affiliated Company Credit Agreement by and among the Credit Parties, CONSOL Energy, as lender and administrative agent, and PNC. On June 5, 2020, the Partnership amended the Affiliated Company Credit Agreement to provide eight quarters of financial covenant relaxation, effected a 50 basis points increase in the rate at which borrowings under the Affiliated Company Credit Agreement bear interest, and added additional conditions to be met for the covenants relating to general investments, investments in unrestricted subsidiaries, and distributions to equity holders of the Partnership. The Affiliated Company Credit Agreement has a maturity date of December 28, 2024. The Affiliated Company Credit Agreement provides for a revolving credit facility in an aggregate principal amount of up to $275,000 to be provided by CONSOL Energy, as lender. In connection with the Partnership’s entry into the Affiliated Company Credit Agreement, the Partnership made an initial draw of $200,583, the net proceeds of which were used to repay the amounts outstanding under the Partnership's prior credit facility. Additional drawings under the Affiliated Company Credit Agreement are available for general partnership purposes. The obligations under the Affiliated Company Credit Agreement are guaranteed by the Partnership’s subsidiaries and secured by substantially all of the assets of the Partnership and its subsidiaries pursuant to the security agreement and various mortgages.

Interest on outstanding obligations under our Affiliated Company Credit Agreement accrues at a fixed rate ranging from 4.25% to 5.25%, depending on the total net leverage ratio. The unused portion of our Affiliated Company Credit Agreement is subject to a commitment fee of 0.50% per annum. The Partnership had available capacity under the Affiliated Company Credit Agreement of $100,315 and $94,075 as of September 30, 2020 and December 31, 2019, respectively.

        The Affiliated Company Credit Agreement contains certain covenants and conditions that, among other things, limit the Partnership’s ability to: (i) incur or guarantee additional debt; (ii) make cash distributions; provided that we will be able to make cash distributions of available cash to partners so long as the Partnership's first lien gross leverage ratio shall not be greater than 2.00 to 1.00, the fixed charge coverage ratio shall be not less than 1.00 to 1.00, and no event of default is continuing or would result therefrom; (iii) incur certain liens or permit them to exist; (iv) make particular investments and loans; provided that we will be able to increase our ownership percentage of our undivided interest in the Pennsylvania Mining Complex and make investments in the Pennsylvania Mining Complex in accordance with our ratable ownership; (v) enter into certain types of transactions with affiliates; (vi) merge or consolidate with another company; and (vii) transfer, sell or otherwise dispose of assets. The Partnership is also subject to covenants that require the Partnership to maintain certain financial ratios, each of which will be calculated on a consolidated basis for the Partnership and its restricted subsidiaries at the end of each fiscal quarter.  The amendment revised the financial covenants in the Affiliated Company Credit Agreement, so that for the fiscal quarters ending June 30, 2020 through March 31, 2021, the maximum first lien gross leverage ratio shall be 3.75 to 1.00 and the maximum total net leverage ratio shall be 4.00 to 1.00; for the fiscal quarters ending June 30, 2021 through September 30, 2021, the maximum first lien gross leverage ratio shall be 3.50 to 1.00 and the maximum total net leverage ratio shall be 3.75 to 1.00; for the fiscal quarters ending December 31, 2021 through March 31, 2022, the maximum first lien gross leverage ratio shall be 3.00 to 1.00 and the maximum total net leverage ratio shall be 3.50 to 1.00; and for the fiscal quarters ending on or after June 30, 2022, the maximum first lien gross leverage ratio shall be 2.75 to 1.00 and the maximum total net leverage ratio shall be 3.25 to 1.00. At September 30, 2020, the Partnership was in compliance with its financial covenants with a first lien gross leverage ratio of 3.41 to 1.00 and a total net leverage ratio of 3.40 to 1.00. The Partnership is continuing to actively monitor the effects of the ongoing COVID-19 pandemic on its liquidity.

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Other Asset-Backed Financing

As of September 30, 2020 and December 31, 2019, the Partnership was a borrower under an asset-backed financing arrangement related to certain equipment. The equipment, which had an approximate value of $4,723 and $1,443, respectively, fully collateralizes the loan.

NOTE 9—COMPONENTS OF COAL WORKERS’ PNEUMOCONIOSIS (CWP) AND WORKERS’ COMPENSATION NET PERIODIC BENEFIT COSTS:

The Partnership is obligated to CONSOL Energy for medical and disability benefits to certain CPCC employees and their dependents resulting from occurrences of coal workers’ pneumoconiosis disease and is also obligated to CONSOL Energy to compensate certain individuals who are entitled benefits under workers’ compensation laws.

	CWP								Workers’ Compensation
	Three Months Ended				Nine Months Ended				Three Months Ended						Nine Months Ended
	September 30,				September 30,				September 30,						September 30,
	2020		2019		2020		2019		2020			2019			2020			2019
Service Cost	$	254	$	200	$	762	$	600	$	386		$	349		$	1,157		$	1,046
Interest Cost		45		49		135		146		31			41			95			124
Amortization of Actuarial Loss (Gain)		41		6		122		19		(8	)		(12	)		(25	)		(37	)
State Administrative Fees and Insurance Bond Premiums		0		0		0		0		43			53			135			149
Net Periodic Benefit Cost	$	340	$	255	$	1,019	$	765	$	452		$	431		$	1,362		$	1,282

NOTE 10—FAIR VALUE OF FINANCIAL INSTRUMENTS:

The Partnership 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 LIBOR-based discount rates), while unobservable inputs reflect the Partnership’s own assumptions of what market participants would use.

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

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

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

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Level Three - Unobservable inputs significant to the fair value measurement supported by little or no market activity. The significant unobservable inputs used in the fair value measurement of the Partnership’s third party guarantees are the credit risk of the third party and the third party surety bond markets.

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

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

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

	September 30, 2020				December 31, 2019
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
Affiliated Company Credit Agreement—Related Party	$	174,685	$	157,217	$	180,925	$	180,925

The Partnership’s debt obligations are valued through reference to the applicable underlying benchmark rate and, as a result, constitute Level 2 fair value measurements.

NOTE 11—COMMITMENTS AND CONTINGENT LIABILITIES:

         The Partnership is 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 its business. We accrue the estimated loss for these lawsuits and claims when the loss is probable and can be estimated. Our 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 the Partnership. 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 the Partnership; however, such amounts cannot be reasonably estimated.

At September 30, 2020, the Partnership was contractually obligated to CONSOL Energy for financial guarantees and letters of credit to certain third parties which were issued by CONSOL Energy on behalf of the Partnership. The maximum potential total of future payments that we could be required to make under these instruments is $103,563. The instruments are comprised of $691 of letters of credit expiring within the next year, $94,357 of environmental surety bonds expiring within the next three years, and $8,515 of employee-related and other surety bonds expiring within the next three years. Employee-related financial guarantees have primarily been provided to support various state workers’ compensation and federal black lung self-insurance programs. Environmental financial guarantees have primarily been provided to support various performance bonds related to reclamation and other environmental issues. Other guarantees have been extended to support insurance policies, legal matters, full and timely payments of mining equipment leases, and various other items necessary in the normal course of business. 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 financial guarantees and letters of credit are recorded as liabilities on the financial statements. The Partnership’s management believes that these guarantees will expire without being funded, and therefore the commitments will not have a material adverse effect on the financial condition of the Partnership.

NOTE 12—RECEIVABLES FINANCING AGREEMENT

On November 30, 2017, (i) CONSOL Marine Terminals LLC, as an originator of receivables, (ii) CPCC, as an originator of receivables and as initial servicer of the receivables for itself and the other originators (collectively, the “Originators”), each a wholly owned subsidiary of CONSOL Energy, and (iii) CONSOL Funding LLC (the “SPV”), as buyer, entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”). Concurrently, (i) CONSOL Thermal Holdings, as sub-originator, and (ii) CPCC, as buyer and as initial servicer of the receivables for itself and CONSOL Thermal Holdings, entered into a Sub-Originator Agreement (the “Sub-Originator PSA”). In addition, on that date, the SPV entered into a Receivables Financing Agreement (the “Receivables Financing Agreement”) by and among (i) the SPV, as borrower, (ii) CPCC, as initial servicer, (iii) PNC, as administrative agent, LC Bank and lender, and (iv) the additional persons from time to time party thereto as lenders. Together, the Purchase and Sale Agreement, the Sub-Originator PSA and the Receivables Financing Agreement establish the primary terms and conditions of an accounts receivable securitization program (the “Securitization”). In March 2020, the Securitization was amended, among other things, to extend the scheduled termination date to March 27, 2023.

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Pursuant to the Securitization, (i) CONSOL Thermal Holdings will sell current and future trade receivables to CPCC and (ii) the Originators will sell and/or contribute current and future trade receivables (including receivables sold to CPCC by CONSOL Thermal Holdings) to the SPV and the SPV will, in turn, pledge its interests in the receivables to PNC, which will either make loans or issue letters of credit on behalf of the SPV. The maximum amount of advances and letters of credit outstanding under the Securitization may not exceed $100,000. Loans under the Securitization will accrue interest at a reserve-adjusted LIBOR market index rate equal to the one-month Eurodollar rate. Loans and letters of credit under the Securitization also will accrue a program fee and participation fee, respectively, ranging from 2.00% to 2.50% per annum, depending on the total net leverage ratio of CONSOL Energy. In addition, the SPV paid certain structuring fees to PNC Capital Markets LLC and will pay other customary fees to the lenders, including a fee on unused commitments. The SPV’s assets and credit are not available to satisfy the debts and obligations owed to the creditors of CONSOL Energy, CONSOL Thermal Holdings or any of the Originators. CONSOL Thermal Holdings, the Originators and CPCC as servicer are independently liable for their own customary representations, warranties, covenants and indemnities. In addition, CONSOL Energy has guaranteed the performance of the obligations of CONSOL Thermal Holdings, the Originators and CPCC as servicer, and will guarantee the obligations of any additional originators or successor servicer that may become party to the Securitization. However, neither CONSOL Energy nor its affiliates will guarantee collectability of receivables or the creditworthiness of obligors thereunder.

The Securitization contains various customary representations and warranties, covenants and default provisions which provide for the termination and acceleration of the commitments and loans under the Securitization in circumstances including, but not limited to, failure to make payments when due, breach of representation, warranty or covenant, certain insolvency events or failure to maintain the security interest in the trade receivables, and defaults under other material indebtedness.

As of September 30, 2020 and December 31, 2019, respectively, the Partnership, through CONSOL Thermal Holdings, had sold $25,785 and $33,294 of trade receivables to CPCC. The Partnership has not derecognized the receivables due to its continued involvement in the collections efforts.

NOTE 13—RELATED PARTY:

Omnibus Agreement

The Partnership is a party to the Omnibus Agreement, dated September 30, 2016, as amended on November 28, 2017, with our sponsor and certain of its subsidiaries. Under the Omnibus Agreement, we are obligated to make certain payments to, and reimburse, CONSOL Energy for the provision of certain services in connection with our operations.

Charges for services from CONSOL Energy under the Omnibus Agreement include the following:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2020		2019		2020		2019
Operating and Other Costs	$	1,006	$	838	$	2,715	$	2,368
Selling, General and Administrative Expenses		1,770		1,902		6,427		6,932
Total Services from CONSOL Energy	$	2,776	$	2,740	$	9,142	$	9,300

At September 30, 2020 and December 31, 2019, the Partnership had a net payable to CONSOL Energy in the amount of $8,035 and $1,419, respectively. This payable includes reimbursements for business expenses, executive fees, stock-based compensation and other items under the Omnibus Agreement.

Affiliated Company Credit Agreement

As described in Note 8, the Partnership is also a party to the Affiliated Company Credit Agreement with CONSOL Energy.

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For the three and nine months ended September 30, 2020, $2,428 and $6,705 of interest was incurred under the Affiliated Company Credit Agreement, respectively, of which $92 and $308 was capitalized and included in Property, Plant and Equipment in the unaudited Consolidated Balance Sheets, respectively.  For the three and nine months ended September 30, 2019, $2,003 and $5,770 of interest was incurred under the Affiliated Company Credit Agreement, respectively, of which $416 and $1,275 was capitalized and included in Property, Plant and Equipment in the unaudited Consolidated Balance Sheets, respectively. Interest is calculated based upon a fixed rate, determined quarterly, depending on the total net leverage ratio. For the three and nine months ended September 30, 2020, the average interest rate was 4.88% and 4.39%, respectively, and for the three and nine months ended September 30, 2019 the average interest rate was 3.88%. and 3.79%, respectively. See Note 8 - Long-Term Debt for more information.

Repurchase Program

In May 2019, CONSOL Energy's Board of Directors approved an expansion of the stock, unit and debt repurchase program. The program previously allowed CONSOL Energy to use up to $25 million of the program to purchase the Partnership's outstanding common units in the open market.  CONSOL Energy's Board of Directors approved changing the termination date of the program from June 30, 2020 to June 30, 2022. Also, in accordance with CONSOL Energy’s credit facility covenants, the total amount that can be used for repurchases of the Partnership's outstanding common units was raised to $50 million. NaN common units were repurchased during the three and nine months ended September 30, 2020. During the three and nine months ended September 30, 2019, 19,413 and 26,297 common units were repurchased at an average price of $12.88 and  $14.05 per unit, respectively .

Conversion of Subordinated Units

In August 2019, upon payment of the cash distribution with respect to the quarter ended June 30, 2019, the financial requirements for the conversion of all the Partnership's subordinated units were satisfied. As a result, all 11,611,067 subordinated units, owned entirely by CONSOL Energy Inc., were converted into common units on a one-for-one basis. The conversion did not impact the amount of the cash distribution paid or the total number of the Partnership’s outstanding units representing limited partner interests.

Proposed Merger with CONSOL Energy

          Please see Note 15 – Subsequent Events.

NOTE 14—LONG-TERM INCENTIVE PLAN:

  Under the CONSOL Coal Resources LP 2015 Long-Term Incentive Plan (the “LTIP”), our general partner may issue long-term equity-based awards to directors, officers and employees of our general partner or its affiliates, or to any consultants, affiliates of our general partner or other individuals who perform services for us. These awards are intended to compensate the recipients thereof based on the performance of our common units and their continued service during the vesting period, as well as to align their long-term interests with those of our unitholders. We are responsible for the cost of awards granted under the LTIP and all determinations with respect to awards to be made under the LTIP will be made by the board of directors of our general partner or any committee thereof that may be established for such purpose or by any delegate of the board of directors or such committee, subject to applicable law, which we refer to as the plan administrator.

The LTIP limits the number of units that may be delivered pursuant to vested awards to 2,300,000 common units, subject to proportionate adjustment in the event of unit splits and similar events. Common units subject to awards that are canceled, forfeited, withheld to satisfy exercise prices or tax withholding obligations or otherwise terminated without delivery of the common units will be available for delivery pursuant to other awards. The Partnership recognizes forfeitures as they occur.

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The general partner has granted equity-based phantom units that vest over a period of a recipient’s continued service with the Partnership. The phantom units will be paid in common units or an amount of cash equal to the fair market value of a unit based on the vesting date. The awards may accelerate upon a change in control of the Partnership. Compensation expense is recognized on a straight-line basis over the requisite service period, which is generally the vesting term. The Partnership recognized compensation expense of $75 and $344 for the three months ended and $308 and $1,082 for the nine months ended September 30, 2020 and September 30, 2019, respectively, which is included in Selling, General and Administrative Expense in the unaudited Consolidated Statements of Operations. As of September 30, 2020, there is $110 of unearned compensation that will vest over a weighted average period of 0.37 years. There were 0 phantom units that vested during the three months ended September 30, 2020 and $1 during the three months ended September 30, 2019. The total fair value of phantom units vested during the nine months ended September 30, 2020 and September 30, 2019 was $820 and $2,906, respectively. The following represents the nonvested phantom units and their corresponding weighted average grant date fair value:

	Number of Units			Weighted Average Grant Date Fair Value per Unit
Nonvested at December 31, 2019		78,345		$	18.62
Granted		33,705		$	8.90
Vested		(78,173	)	$	18.62
Forfeited		(172	)	$	18.95
Nonvested at September 30, 2020		33,705		$	8.90

NOTE 15—SUBSEQUENT EVENTS:

On October 22, 2020, the Partnership, our general partner, our sponsor and a wholly owned subsidiary of our sponsor (“Merger Sub”) entered into a definitive merger agreement (the “Merger Agreement”) pursuant to which Merger Sub will merge with and into the Partnership, with the Partnership surviving as an indirect, wholly owned subsidiary of our sponsor (the “Merger”). Under the terms of the Merger Agreement, at the effective time of the Merger, (i) each outstanding common unit other than common units owned by our sponsor and its subsidiaries will be converted into the right to receive, subject to adjustment as described in the Merger Agreement, 0.73 shares of common stock of our sponsor (the “Merger Consideration”); and (ii) each of the outstanding phantom units and any other awards relating to a common unit issued under a Partnership equity incentive plan, whether vested or not vested, will become fully vested and will be automatically converted into the right to receive, with respect to each common unit subject thereto, the Merger Consideration (plus any accrued but unpaid amounts in relation to distribution equivalent rights). Except for the Partnership’s incentive distribution rights, which will be automatically canceled immediately prior to the effective time of the Merger for no consideration, the common units owned by our sponsor and its subsidiaries immediately prior to the effective time of the Merger will remain outstanding as limited partner interests in the surviving entity.

In aggregate, our sponsor will issue approximately 8.0 million of its shares of common stock as Merger Consideration, representing approximately 22.2% of the total CONSOL Energy shares that will be outstanding on a pro forma basis after completion of the proposed transaction.

The transaction terms were negotiated, reviewed and approved by the conflicts committee of the board of directors of our general partner and the board of directors of our general partner. Our conflicts committee is composed of the independent members of the board of directors of our general partner. Our sponsor’s board of directors also approved the Merger Agreement and the transactions contemplated thereby, including the merger and the issuance of CONSOL Energy common stock as the merger consideration, and has resolved to submit the approval of the issuance of the CONSOL Energy common stock in connection with the proposed transactions to a vote of the holders of CONSOL Energy common stock.

Subject to customary approvals and conditions, the transaction is expected to close in the first quarter of 2021. The transaction is subject to majority approval by holders of at least a majority of our common units, approval by the holders of at least a majority of the votes cast by our sponsor’s stockholders and the effectiveness of a registration statement related to the issuance of the new CONSOL Energy shares to our common unitholders. Pursuant to a support agreement entered into in connection with the transaction, our sponsor has agreed to vote all of our common units that it owns in favor of the proposed transaction. Our sponsor currently owns approximately 60.7% of our outstanding common units.

In connection with the closing of the transaction, our common units will cease to be publicly traded and the incentive distribution rights in the Partnership will be eliminated.

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

Unless otherwise indicated, the following discussion and analysis of the financial condition and results of operations of our Partnership reflect a 25% undivided interest in the assets, liabilities and results of operations of the Pennsylvania Mining Complex. As used in the following discussion and analysis of the financial condition and results of operations of our Partnership, the terms “we,” “our,” “us,” or like terms refer to the Partnership with respect to its 25% undivided interest in the Pennsylvania Mining Complex’s combined assets, liabilities, revenues and costs. All amounts discussed in this section are in thousands, except for per unit or per ton amounts, unless otherwise indicated.

Merger

As previously disclosed, on October 22, 2020, the Partnership, our general partner, our sponsor and a wholly owned subsidiary of our sponsor and its wholly-owned subsidiary (“Merger Sub”)  entered into a definitive merger agreement (the “Merger Agreement”) pursuant to which Merger Sub will merge with and into the Partnership, with the Partnership surviving as an indirect, wholly owned subsidiary of our sponsor (the “Merger”).  Under the terms of the Merger Agreement, at the effective time of the Merger, (i) each outstanding common unit other than common units owned by our sponsor and its subsidiaries will be converted into the right to receive, subject to adjustment as described in the Merger Agreement, 0.73 shares of common stock of our sponsor (the “Merger Consideration”); and (ii) each of the outstanding phantom units and any other awards relating to a common unit issued under a Partnership equity incentive plan, whether vested or not vested, will become fully vested and will be automatically converted into the right to receive, with respect to each common unit subject thereto, the Merger Consideration (plus any accrued but unpaid amounts in relation to distribution equivalent rights). Except for the Partnership’s incentive distribution rights, which will be automatically canceled immediately prior to the effective time of the Merger for no consideration, the common units owned by our sponsor and its subsidiaries immediately prior to the effective time of the Merger will remain outstanding as limited partner interests in the surviving entity.

In aggregate, our sponsor will issue approximately 8.0 million of its shares of common stock as Merger Consideration, representing approximately 22.2% of the total CONSOL Energy shares that will be outstanding on a pro forma basis.

Subject to customary approvals and conditions, the transaction is expected to close in the first quarter of 2021. The transaction is subject to majority approval by our common unitholders, approval by our sponsor’s stockholders and the effectiveness of a registration statement related to the issuance of the new CONSOL Energy shares to our common unitholders. Pursuant to a support agreement entered into in connection with the transaction, our sponsor has agreed to vote all of our common units it owns in favor of the transaction. Our sponsor currently owns approximately 60.7% of our outstanding common units.

In connection with the closing of the transaction, our common units will cease to be publicly traded and the incentive distribution rights in the Partnership will be eliminated.

COVID-19 Update

The Partnership is monitoring the impact of the COVID-19 pandemic and has taken, and will continue to take, steps to mitigate the potential risks and impact on the Partnership. The health and safety of our sponsor's employees is paramount. In response to two of our sponsor's employees testing positive for COVID-19, our sponsor temporarily curtailed production at the Bailey Mine for two weeks at the end of March 2020. To date, several employees have tested positive for COVID-19. However, our sponsor has not experienced a localized outbreak, which we believe is attributable, in part, to the health and safety procedures put in place by our sponsor. This has also allowed our sponsor to continue operating without production curtailment due to positive employee cases. Our sponsor continues to monitor the health and safety of its employees closely in order to limit potential risks to its employees, contractors, family members, and the community.

We are considered a critical infrastructure company by the U.S. Department of Homeland Security. As a result, we were exempt from Pennsylvania Governor Tom Wolf's executive order, issued in March 2020, closing all businesses that are not life sustaining until Pennsylvania's phased reopening which began in the second quarter of 2020. The coal demand decline that began in the first quarter hit its lowest point in May 2020, and has improved through the third quarter of 2020. In response to the decline in demand for our coal, our sponsor idled four of the five longwalls for periods of time beginning in the second quarter of 2020. As demand improved, our sponsor restarted longwalls and ultimately ran four of the five longwalls for the majority of the third quarter of 2020. This decline in coal demand has negatively impacted our operational, sales, and financial performance year-to-date and we expect that this negative impact will continue as the pandemic continues.

While some of the government-imposed shutdowns of nonessential business in the United States and abroad have been phased out, there is a possibility that such shutdowns may be reinstated if COVID-19 experiences a resurgence. We expect that depressed domestic and international demand for our coal will continue for so long as there are widespread, government-imposed shutdowns of business activity. Depressed demand for our coal may also result from a general recession or reduction in overall business activity caused by COVID-19. Additionally, some of our customers have already attempted, and may in the future attempt, to invoke force majeure or similar provisions in the contracts they have in place with us in order to avoid taking possession of, and paying us for, our coal that they are contractually obligated to purchase. Sustained decrease in demand for our coal and the failure of our customers to purchase coal from us that they are obligated to purchase pursuant to existing contracts would have a material adverse effect on our results of operations and financial condition. The extent to which COVID-19 may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, including new information concerning the severity of the outbreak and the effectiveness of actions globally to contain or mitigate its effects. We expect this will continue to negatively impact our results of operations, cash flows and financial condition. The Partnership will continue to take the appropriate steps to mitigate the impacts of COVID-19 on the Partnership's operations, liquidity and financial condition.

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Overview

        We are a master limited partnership formed in 2015 to manage and further develop all of our sponsor's active coal operations in Pennsylvania. Our primary strategy for growing our business is to increase operating efficiencies to maximize realizations and make acquisitions that increase our distributable cash flow. At September 30, 2020, the Partnership’s assets include a 25% undivided interest in, and operational control over, CONSOL Energy’s Pennsylvania Mining Complex, which consists of three underground mines and related infrastructure that produce high-Btu coal that is sold primarily to electric utilities in the eastern United States. We believe that our ability to efficiently produce and deliver large volumes of high-quality coal at competitive prices, the strategic location of our mines, and the industry experience of our management team position us as a leading producer of high-Btu thermal coal in the Northern Appalachian Basin and the eastern United States.

How We Evaluate Our Operations

Our management team uses a variety of financial and operating metrics to analyze our performance. These metrics are significant factors in assessing our operating results and profitability. The metrics include: (i) coal production, sales volumes and average revenue per ton sold; (ii) cost of coal sold, a non-GAAP financial measure; (iii) cash cost of coal sold, a non-GAAP financial measure; (iv) average margin per ton sold, an operating ratio derived from non-GAAP financial measures; (v) average cash margin per ton sold, an operating ratio derived from non-GAAP financial measures; (vi) adjusted EBITDA, a non-GAAP financial measure; and (vii) distributable cash flow, a non-GAAP financial measure.

Cost of coal sold, cash cost of coal sold, average margin per ton sold, average cash margin per ton sold, adjusted EBITDA and distributable cash flow normalize the volatility contained within comparable GAAP measures by adjusting certain non-operating or non-cash transactions. Each of these non-GAAP metrics are used as supplemental financial measures by management and by external users of our financial statements, such as investors, industry analysts, lenders and ratings agencies, to assess:

• our operating performance as compared to the operating performance of other companies in the coal industry, without regard to financing methods, historical cost basis or capital structure;

• the ability of our assets to generate sufficient cash flow to make distributions to our partners;

• our ability to incur and service debt and fund capital expenditures;

• the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities; and

• the attractiveness of capital projects and acquisitions and the overall rates of return on alternative investment opportunities.

These non-GAAP financial measures should not be considered an alternative to total costs, total coal revenue, net income, operating cash flow, or any other measure of financial performance or liquidity presented in accordance with GAAP. These measures exclude some, but not all, items that affect measures presented in accordance with GAAP and these measures and the way we calculate them may vary from those of other companies. As a result, the items presented below may not be comparable to similarly titled measures of other companies.

Reconciliation of Non-GAAP Financial Measures

We evaluate our cost of coal sold and cash cost of coal sold on an aggregate basis. We define cost of coal sold as operating and other production costs related to produced tons sold, along with changes in coal inventory, both in volumes and carrying values. The cost of coal sold includes items such as direct operating costs, royalty and production taxes, direct administration, and depreciation, depletion and amortization costs on production assets. Our costs exclude any indirect costs such as selling, general and administrative costs, freight expenses, interest expenses, depreciation, depletion and amortization costs on non-production assets and other costs not directly attributable to the production of coal. The GAAP measure most directly comparable to cost of coal sold and cash cost of coal sold is total costs. The cash cost of coal sold includes cost of coal sold less depreciation, depletion and amortization cost on production assets.

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The following table presents a reconciliation of cost of coal sold and cash cost of coal sold to total costs, the most directly comparable GAAP financial measure, on a historical basis for each of the periods indicated.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Total Costs	$	54,843		$	70,411		$	163,728		$	216,558
Freight Expense		(3,227	)		(900	)		(4,785	)		(3,529	)
Selling, General and Administrative Expenses		(2,879	)		(2,840	)		(9,285	)		(10,353	)
Interest Expense, Net		(2,520	)		(1,587	)		(6,929	)		(4,495	)
Other Costs (Non-Production)		(1,403	)		(983	)		(11,726	)		(4,154	)
Depreciation, Depletion and Amortization (Non-Production)		(897	)		(519	)		(5,541	)		(1,605	)
Cost of Coal Sold	$	43,917		$	63,582		$	125,462		$	192,422
Depreciation, Depletion and Amortization (Production)		(11,408	)		(10,567	)		(30,212	)		(32,034	)
Cash Cost of Coal Sold	$	32,509		$	53,015		$	95,250		$	160,388

We define average margin per ton sold as average revenue per ton sold, net of average cost of coal sold per ton. We define average cash margin per ton sold as average revenue per ton sold, net of average cash cost of coal sold per ton. The GAAP measure most directly comparable to average margin per ton sold and average cash margin per ton sold is total coal revenue. 

The following table presents a reconciliation of each of average margin per ton sold and average cash margin per ton sold to total coal revenue, the most directly comparable GAAP financial measure, on a historical basis, for each of the periods indicated.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Total Coal Revenue	$	46,016		$	75,385		$	135,386		$	246,166
Operating and Other Costs		33,912			53,998			106,976			164,542
Less: Other Costs (Non-Production)		(1,403	)		(983	)		(11,726	)		(4,154	)
Cash Cost of Coal Sold		32,509			53,015			95,250			160,388
Add: Depreciation, Depletion and Amortization		12,305			11,086			35,753			33,639
Less: Depreciation, Depletion and Amortization (Non-Production)		(897	)		(519	)		(5,541	)		(1,605	)
Cost of Coal Sold	$	43,917		$	63,582		$	125,462		$	192,422
Total Tons Sold		1,135			1,618			3,197			5,145
Average Revenue per Ton Sold	$	40.55		$	46.59		$	42.35		$	47.84
Average Cash Cost of Coal Sold per Ton		28.64			32.78			29.88			31.16
Add: Depreciation, Depletion and Amortization Costs per Ton Sold		10.06			6.51			9.37			6.23
Average Cost of Coal Sold per Ton	$	38.70		$	39.29		$	39.25		$	37.39
Average Margin per Ton Sold		1.85			7.30			3.10			10.45
Add: Total Depreciation, Depletion and Amortization Costs per Ton Sold		10.06			6.51			9.37			6.23
Average Cash Margin per Ton Sold	$	11.91		$	13.81		$	12.47		$	16.68

We define adjusted EBITDA as (i) net income (loss) before net interest expense, depreciation, depletion and amortization, as adjusted for (ii) certain non-cash items, such as long-term incentive awards including phantom units under the CONSOL Coal Resources LP 2015 Long-Term Incentive Plan (“Unit-Based Compensation”). The GAAP measure most directly comparable to adjusted EBITDA is net income.

We define distributable cash flow as (i) net income before net interest expense, depreciation, depletion and amortization, as adjusted for (ii) certain non-cash items, such as Unit-Based Compensation, less net cash interest paid and estimated maintenance capital expenditures, which is defined as those forecasted average capital expenditures required to maintain, over the long-term, the operating capacity of our capital assets. These estimated capital expenditures do not reflect the actual cash capital incurred in the period presented. Distributable cash flow will not reflect changes in working capital balances. The GAAP measures most directly comparable to distributable cash flow are net income and net cash provided by operating activities.

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The following table presents a reconciliation of adjusted EBITDA to net (loss) income, the most directly comparable GAAP financial measure, on a historical basis for each of the periods indicated. The table also presents a reconciliation of distributable cash flow to net (loss) income and operating cash flows, the most directly comparable GAAP financial measures, on a historical basis for each of the periods indicated.

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Net (Loss) Income	$	(5,529	)	$	6,970		$	(13,219	)	$	36,577
Plus:
Interest Expense, Net		2,520			1,587			6,929			4,495
Depreciation, Depletion and Amortization		12,305			11,086			35,753			33,639
Unit-Based Compensation		75			344			308			1,082
Adjusted EBITDA	$	9,371		$	19,987		$	29,771		$	75,793
Less:
Cash Interest		2,255			1,832			6,579			5,522
Estimated Maintenance Capital Expenditures		8,692			8,937			25,987			26,946
Distributable Cash Flow	$	(1,576	)	$	9,218		$	(2,795	)	$	43,325
Net Cash Provided by Operating Activities	$	10,814		$	20,427		$	34,130		$	67,505
Plus:
Interest Expense, Net		2,520			1,587			6,929			4,495
Other, Including Working Capital		(3,963	)		(2,027	)		(11,288	)		3,793
Adjusted EBITDA	$	9,371		$	19,987		$	29,771		$	75,793
Less:
Cash Interest		2,255			1,832			6,579			5,522
Estimated Maintenance Capital Expenditures		8,692			8,937			25,987			26,946
Distributable Cash Flow	$	(1,576	)	$	9,218		$	(2,795	)	$	43,325

23

Results of Operations

Three Months Ended September 30, 2020 Compared with the Three Months Ended September 30, 2019

Total net loss was ($5,529) for the three months ended September 30, 2020 compared to net income of $6,970 for the three months ended September 30, 2019. Our results of operations for each of these periods are presented in the table below. Variances are discussed following the table.

	For the Three Months Ended
	September 30,
	2020			2019		Variance
Revenue:
Coal Revenue	$	46,016		$	75,385	$	(29,369	)
Freight Revenue		3,227			900		2,327
Other Income		71			1,096		(1,025	)
Total Revenue and Other Income		49,314			77,381		(28,067	)
Cost of Coal Sold:
Operating Costs		32,509			53,015		(20,506	)
Depreciation, Depletion and Amortization		11,408			10,567		841
Total Cost of Coal Sold		43,917			63,582		(19,665	)
Other Costs:
Other Costs		1,403			983		420
Depreciation, Depletion and Amortization		897			519		378
Total Other Costs		2,300			1,502		798
Freight Expense		3,227			900		2,327
Selling, General and Administrative Expenses		2,879			2,840		39
Interest Expense, Net		2,520			1,587		933
Total Costs		54,843			70,411		(15,568	)
Net (Loss) Income	$	(5,529	)	$	6,970	$	(12,499	)
Adjusted EBITDA	$	9,371		$	19,987	$	(10,616	)
Distributable Cash Flow	$	(1,576	)	$	9,218	$	(10,794	)

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Coal Production

The table below presents total tons produced from the Pennsylvania Mining Complex on our 25% undivided interest for the periods indicated:

	Three Months Ended September 30,
Mine	2020		2019		Variance
Bailey		453		695		(242	)
Enlow Fork		359		597		(238	)
Harvey		323		331		(8	)
Total		1,135		1,623		(488	)

Coal production was 1,135 tons for the three months ended September 30, 2020 compared to 1,623 tons for the three months ended September 30, 2019. Coal production decreased 488 tons primarily due to a reduced operating schedule in light of the decline in global demand due to the COVID-19 pandemic. For the majority of the third quarter of 2020, we ran four of the five longwalls at the Pennsylvania Mining Complex.

Coal Operations

Coal revenue and cost components on a per-unit basis for the three months ended September 30, 2020 and 2019 are detailed in the table below. Our operations also include various costs such as selling, general and administrative, freight and other costs not included in our unit cost analysis because these costs are not directly associated with coal production.

	Three Months Ended September 30,
	2020		2019		Variance
Total Tons Sold		1,135		1,618		(483	)
Average Revenue per Ton Sold	$	40.55	$	46.59	$	(6.04	)
Average Cash Cost of Coal Sold per Ton (1)	$	28.64	$	32.78	$	(4.14	)
Depreciation, Depletion and Amortization per Ton Sold (Non-Cash Cost)		10.06		6.51		3.55
Average Cost of Coal Sold per Ton	$	38.70	$	39.29	$	(0.59	)
Average Margin per Ton Sold (1)	$	1.85	$	7.30	$	(5.45	)
Add: Depreciation, Depletion and Amortization Costs per Ton Sold		10.06		6.51		3.55
Average Cash Margin per Ton Sold (1)	$	11.91	$	13.81	$	(1.90	)

(1) Average cash cost of coal sold per ton, average margin per ton sold and average cash margin per ton sold are each an operating ratio derived from non-GAAP measures. See “How We Evaluate Our Operations – Reconciliation of Non-GAAP Financial Measures” for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures.

Revenue and Other Income

Coal revenue was $46,016 for the three months ended September 30, 2020 compared to $75,385 for the three months ended September 30, 2019. Total tons sold decreased in the period-to-period comparison as a result of lingering effects of the unprecedented contraction in United States and global economic activity due to the COVID-19 pandemic. Additionally, lower natural gas prices as compared to the prior year quarter have contributed to electric generation trending toward gas, rather than coal, as a fuel source.

Freight revenue is the amount billed to customers for transportation costs incurred. This revenue is based on the weight of coal shipped, negotiated freight rates and method of transportation, primarily rail, used by the customers for which we contractually provide transportation services. Freight revenue is completely offset in freight expense. Freight revenue and freight expense were both $3,227 for the three months ended September 30, 2020 compared to $900 for the three months ended September 30, 2019. The $2,327 increase was due to increased shipments to customers where we were contractually obligated to provide transportation services.

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Other income is comprised of income generated by the Partnership relating to non-coal producing activities. Other income was $71 for the three months ended September 30, 2020 compared to $1,096 for the three months ended September 30, 2019. The $1,025 decrease was primarily due to sales of externally purchased coal to blend and resell and customer contract buyouts in the three months ended September 30, 2019, none of which occurred during the three months ended September 30, 2020.

Cost of Coal Sold

Cost of coal sold is comprised of operating costs related to produced tons sold, along with changes in both volumes and carrying values of coal inventory. The cost of coal sold includes items such as direct operating costs, royalties and production taxes, direct administration expenses, and depreciation, depletion, and amortization costs on production assets. Total cost of coal sold was $43,917 for the three months ended September 30, 2020, or $19,665 lower than the $63,582 for the three months ended September 30, 2019. Average cost of coal sold per ton was $38.70 per ton for the three months ended September 30, 2020, compared to $39.29 per ton for the three months ended September 30, 2019. The decrease in the total cost of coal sold was primarily driven by the reduction in production volume and reduced operating days, as the Partnership sought to match production with demand and limit discretionary spending.

Total Other Costs

Total other costs are comprised of various costs that are not allocated to each individual mine and therefore are not included in unit costs, such as idle mine costs, coal reserve holding costs and purchased coal costs. Total other costs remained materially consistent in the period-to-period comparison.

Selling, General, and Administrative Expense

Selling, general, and administrative expenses remained materially consistent in the period-to-period comparison.

Interest Expense

Interest expense, which primarily relates to obligations under our Affiliated Company Credit Agreement, remained materially consistent in the period-to-period comparison.

Adjusted EBITDA

Adjusted EBITDA was $9,371 for the three months ended September 30, 2020 compared to $19,987 for the three months ended September 30, 2019. The $10,616 decrease was primarily a result of a $8,863 reduction in coal revenue, net of a decrease in operating costs, and a decrease in non-production related income, as discussed above.

Distributable Cash Flow

Distributable cash flow was ($1,576) for the three months ended September 30, 2020 compared to $9,218 for the three months ended September 30, 2019. The $10,794 decrease was primarily attributable to a $10,616 decrease in Adjusted EBITDA, as discussed above.

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Nine Months Ended September 30, 2020 Compared with the Nine Months Ended September 30, 2019

Total net loss was ($13,219) for the nine months ended September 30, 2020 compared to net income of $36,577 for the nine months ended September 30, 2019. Our results of operations for each of these periods are presented in the table below. Variances are discussed following the table.

	For the Nine Months Ended
	September 30,
	2020			2019		Variance
Revenue:
Coal Revenue	$	135,386		$	246,166	$	(110,780	)
Freight Revenue		4,785			3,529		1,256
Other Income		10,338			3,440		6,898
Total Revenue and Other Income		150,509			253,135		(102,626	)
Cost of Coal Sold:
Operating Costs		95,250			160,388		(65,138	)
Depreciation, Depletion and Amortization		30,212			32,034		(1,822	)
Total Cost of Coal Sold		125,462			192,422		(66,960	)
Other Costs:
Other Costs		11,726			4,154		7,572
Depreciation, Depletion and Amortization		5,541			1,605		3,936
Total Other Costs		17,267			5,759		11,508
Freight Expense		4,785			3,529		1,256
Selling, General and Administrative Expenses		9,285			10,353		(1,068	)
Interest Expense, Net		6,929			4,495		2,434
Total Costs		163,728			216,558		(52,830	)
Net (Loss) Income	$	(13,219	)	$	36,577	$	(49,796	)
Adjusted EBITDA	$	29,771		$	75,793	$	(46,022	)
Distributable Cash Flow	$	(2,795	)	$	43,325	$	(46,120	)

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Coal Production

The table below presents total tons produced from the Pennsylvania Mining Complex on our 25% undivided interest for the periods indicated:

	Nine Months Ended September 30,
Mine	2020		2019		Variance
Bailey		1,405		2,239		(834	)
Enlow Fork		1,014		1,919		(905	)
Harvey		805		983		(178	)
Total		3,224		5,141		(1,917	)

Coal production was 3,224 tons for the nine months ended September 30, 2020 compared to 5,141 tons for the nine months ended September 30, 2019. Coal production decreased 1,917 tons primarily due to the temporary idling of longwalls at the Bailey and Enlow Fork mines. This was mainly in response to weakened customer demand as a result of a warmer-than-normal winter, followed by a decline in global demand due to the COVID-19 pandemic and, in response, the widespread government-imposed shutdowns, which have significantly reduced electricity consumption and, therefore, demand for the Partnership's coal.

Coal Operations

Coal revenue and cost components on a per-unit basis for the nine months ended September 30, 2020 and 2019 are detailed in the table below. Our operations also include various costs such as selling, general and administrative, freight and other costs not included in our unit cost analysis because these costs are not directly associated with coal production.

	Nine Months Ended September 30,
	2020		2019		Variance
Total Tons Sold		3,197		5,145		(1,948	)
Average Revenue per Ton Sold	$	42.35	$	47.84	$	(5.49	)
Average Cash Cost of Coal Sold per Ton (1)	$	29.88	$	31.16	$	(1.28	)
Depreciation, Depletion and Amortization per Ton Sold (Non-Cash Cost)		9.37		6.23		3.14
Average Cost of Coal Sold per Ton	$	39.25	$	37.39	$	1.86
Average Margin per Ton Sold (1)	$	3.10	$	10.45	$	(7.35	)
Add: Depreciation, Depletion and Amortization Costs per Ton Sold		9.37		6.23		3.14
Average Cash Margin per Ton Sold (1)	$	12.47	$	16.68	$	(4.21	)

(1) Average cash cost of coal sold per ton, average margin per ton sold and average cash margin per ton sold are each an operating ratio derived from non-GAAP measures. See “How We Evaluate Our Operations – Reconciliation of Non-GAAP Financial Measures” for a reconciliation of non-GAAP measures to the most directly comparable GAAP measures.

Revenue and Other Income

Coal revenue was $135,386 for the nine months ended September 30, 2020 compared to $246,166 for the nine months ended September 30, 2019. Total tons sold decreased in the period-to-period comparison in response to weakened customer demand due to a warmer-than-normal winter followed by the COVID-19 pandemic, each of which have reduced electricity consumption and, therefore, demand for the Partnership's coal. Additionally, lower natural gas prices as compared to the prior year quarter have contributed to electric generation trending toward gas, rather than coal, as a fuel source. The decrease in customer demand and the overall decline in electric power markets also resulted in lower pricing received on our sales contracts.

Freight revenue is the amount billed to customers for transportation costs incurred. This revenue is based on the weight of coal shipped, negotiated freight rates and method of transportation, primarily rail, used by the customers for which we contractually provide transportation services. Freight revenue is completely offset in freight expense. Freight revenue and freight expense were both $4,785 for the nine months ended September 30, 2020 compared to $3,529 for the nine months ended September 30, 2019. The $1,256 increase was due to increased shipments to customers where we were contractually obligated to provide transportation services.

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Other income is comprised of income generated by the Partnership relating to non-coal producing activities. Other income was $10,338 for the nine months ended September 30, 2020 compared to $3,440 for the nine months ended September 30, 2019. The $6,898 increase was primarily the result of additional customer contract buyouts in the nine months ended September 30, 2020, offset, in part, by a decrease in sales of externally purchased coal to blend and resell. These partial contract buyouts involved negotiations to reduce the coal quantities several customers were previously committed to purchase under the contracts in exchange for payment of certain fees to us, and do not impact forward contract terms.

Cost of Coal Sold

Cost of coal sold is comprised of operating costs related to produced tons sold, along with changes in both volumes and carrying values of coal inventory. The cost of coal sold includes items such as direct operating costs, royalties and production taxes, direct administration expenses, and depreciation, depletion, and amortization costs on production assets. Total cost of coal sold was $125,462 for the nine months ended September 30, 2020, or $66,960 lower than the $192,422 for the nine months ended September 30, 2019. Average cost of coal sold per ton was $39.25 per ton for the nine months ended September 30, 2020, compared to $37.39 per ton for the nine months ended September 30, 2019. The decrease in the total cost of coal sold was primarily driven by decreased production activity during the nine months ended September 30, 2020 in response to weakened market demand. On a per-unit basis, the decreased production resulted in an overall increase in the average cost of coal sold per ton.

Total Other Costs

Total other costs are comprised of various costs that are not allocated to each individual mine and therefore are not included in unit costs. Total other costs increased $11,508 for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The increase was primarily attributable to costs related to the temporary idling of the Bailey and Enlow Fork mines due to the COVID-19 pandemic and, in response, the widespread government-imposed shutdowns, which have significantly reduced electricity consumption and power prices and, therefore, demand for the Partnership's coal.

Selling, General, and Administrative Expense

Selling, general, and administrative expenses decreased $1,068 for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 primarily due to several initiatives launched by management to reduce costs, including compensation reductions, curtailment of discretionary expenses, and headcount management.

Interest Expense

Interest expense, which primarily relates to obligations under our Affiliated Company Credit Agreement, increased $2,434 due to less interest capitalized and an increase in interest incurred due to an increase in the average interest rate in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.

Adjusted EBITDA

Adjusted EBITDA was $29,771 for the nine months ended September 30, 2020 compared to $75,793 for the nine months ended September 30, 2019. The $46,022 decrease was primarily a result of a $45,642 reduction in coal revenue, net of a decrease in operating costs, and an increase in non-production related costs, partially offset by higher non-production related income, as discussed above.

Distributable Cash Flow

Distributable cash flow was $(2,795) for the nine months ended September 30, 2020 compared to $43,325 for the nine months ended September 30, 2019. The $46,120 decrease was primarily attributable to a $46,022 decrease in Adjusted EBITDA, as discussed above.

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Capital Resources and Liquidity

Liquidity and Financing Arrangements

Our ongoing potential sources of liquidity include cash generated from operations, borrowings under our Affiliated Company Credit Agreement, and, if necessary, the ability to issue additional equity or debt securities (either directly or indirectly). We believe that cash generated from these sources should be sufficient to meet our short-term working capital requirements and our long-term capital expenditure requirements.

The coal demand decline that began in the first quarter of 2020 hit its lowest point in May 2020, and has improved through the third quarter of 2020. In response to the decline in demand for our coal, our sponsor idled four of the five longwalls for periods of time beginning in the second quarter of 2020. As demand improved, our sponsor restarted longwalls and ultimately ran four of the five longwalls for the majority of the third quarter of 2020. This decline in coal demand has negatively impacted our operational, sales and financial performance year-to-date and we expect that this negative impact will continue as the pandemic continues. 

While some of the government-imposed shutdowns of nonessential business in the United States and abroad have been phased out, there is a possibility that such shutdowns may be reinstated if COVID-19 experiences a resurgence. We expect that depressed demand for our coal will continue for so long as there is a widespread, government-imposed shutdown of business activity. Depressed demand for our coal may also result from a general recession or reduction in overall business activity caused by COVID-19. Additionally, some of our customers have already attempted, and may in the future attempt, to invoke force majeure or similar provisions in the contracts they have in place with us in order to avoid taking possession of and paying us for our coal that they are contractually obligated to purchase. Sustained decrease in demand for our coal and the failure of our customers to purchase coal from us that they are obligated to purchase pursuant to existing contracts would have a material adverse effect on our results of operations and financial condition. The extent to which COVID-19 may adversely impact our business depends on future developments, which are highly uncertain and unpredictable, including new information concerning the severity of the outbreak and the effectiveness of actions globally to contain or mitigate its effects. We expect this matter to negatively impact our results of operations, cash flows and financial condition. Due to the current level of uncertainty over the economic and operational impacts of COVID-19, the Partnership will continue to take the appropriate steps to mitigate the impact of COVID-19 on the Partnership’s operations, liquidity and financial condition.

Cost containment and capital expenditure reductions remains the focus as volume opportunities remain limited in the near term. 

We believe that the recent credit amendment to our affiliate loan facility with CONSOL Energy, as discussed below, allows us to maintain access to our primary source of liquidity.  From an operational standpoint, our contracted position has partially insulated us from the ongoing volatility in the spot market and management has embarked on several cost control measures to partially offset the decline in revenue. We have been experiencing some delays in collections of trade receivables since the second half of 2019. The COVID-related decline in demand has impacted some of our customers, resulting in continued delays in collections. This trend improved slightly during the third quarter of 2020, although global demand for coal remained challenging. However, if these delays continue or increase, we may have less cash flow from operations. 

We started a capital construction project on the coarse refuse disposal area in 2017, which is expected to continue through 2021. We have taken steps to reduce other capital expenditures and explore alternative sources of capital, including closing on the refinancing of a shield rebuild using a finance lease transaction in the first quarter of 2020.

Uncertainty in the financial markets brings additional potential risks to the Partnership. These risks include the ability to raise capital in the equity markets due to declines in the Partnership's unit price, less availability and higher costs of additional credit, potential counterparty defaults, and commercial bank failures. Financial market disruptions may impact the Partnership's collection of trade receivables. As a result, the Partnership regularly monitors the creditworthiness of its customers and counterparties and manages credit exposure through payment terms, credit limits, prepayments and security.

      Over the past year, the insurance markets have been increasingly challenging, particularly for coal companies.  We have experienced rising premiums, reduced coverage and fewer providers willing to underwrite policies and surety bonds.  Terms have generally become more unfavorable, including the amount of collateral required to secure surety bonds.  Further cost burdens on our ability to maintain adequate insurance and bond coverage may adversely impact our operations, financial position and liquidity. 

Our Partnership Agreement requires that we distribute all of our available cash, if any, to our unitholders. In determining our available cash, in accordance with our Partnership Agreement, our general partner determines the amount of cash reserves needed to properly conduct our business in subsequent quarters. As a result, we expect to rely primarily upon financing under the Affiliated Company Credit Agreement and the issuance of debt and equity securities to fund our acquisitions and expansion capital expenditures, if any. Due to the ongoing uncertainty in the commodity markets, driven by the COVID-19 pandemic-related demand decline, on April 23, 2020, the Board of Directors of our general partner made the decision to temporarily suspend the quarterly distribution to all of our unitholders and on October 29, 2020, the Board of Directors decided to uphold this suspension. While the Partnership did generate cash flow from operations during the nine months ended September 30, 2020, the ongoing decline in Adjusted EBITDA has impaired our leverage ratio, and the cushion against the financial covenants contained in our credit facilities has been reduced. Accordingly, we will focus on deleveraging our balance sheet by conserving cash, boosting liquidity and reducing our outstanding debt.

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On July 25, 2019, the Board of Directors of our general partner announced that upon payment of the cash distribution with respect to the quarter ended June 30, 2019, the financial requirements for the conversion of all subordinated units had been satisfied. As a result, on August 16, 2019, all 11,611,067 subordinated units, which were owned entirely by CONSOL Energy Inc., were converted into common units on a one-for-one basis. The conversion did not impact the amount of the cash distribution paid or the total number of the Partnership's outstanding units representing limited partner interests.

The Partnership is continuing to actively monitor the effects of the ongoing COVID-19 pandemic on its liquidity and capital resources. As disclosed previously and above, we took several steps during the first three quarters of 2020 to reinforce our liquidity.  From a shipment perspective, the decrease in demand for our coal in 2020 as a result of the COVID-19 pandemic hit its lowest point to date in May and has since shown some modest improvement. However, continued reduced demand for our coal could materially and adversely affect our liquidity in future quarters. Our Affiliated Company Credit Agreement and Securitization Facility (collectively, the “Credit Facilities”) contain certain financial covenants. Although the June 2020 amendment loosens these covenants, events resulting from the effects of COVID-19 may nevertheless negatively impact our liquidity and, as a result, our ability to comply with these covenants, which could lead us to seek an additional amendment or waivers from our lenders, limit access to or require accelerated repayment of amounts borrowed under the Credit Facilities, or require us to pursue alternative financing. We have no assurance that any such alternative financing, if required, could be obtained at terms acceptable to us, or at all, as a result of the effects of COVID-19 on capital markets at such time.

Affiliated Company Credit Agreement

On November 28, 2017, the Partnership and the other Credit Parties entered into the Affiliated Company Credit Agreement by and among the Credit Parties, CONSOL Energy, as lender and administrative agent, and PNC, as collateral agent. On June 5, 2020, the Partnership amended the Affiliated Company Credit Agreement to provide eight quarters of financial covenant relaxation, effected a 50 basis points increase in the rate at which borrowings under the Affiliated Company Credit Agreement bear interest, and added additional conditions to be met for the covenants relating to general investments, investments in unrestricted subsidiaries, and distributions to equity holders of the Partnership. The Affiliated Company Credit Agreement has a maturity date of December 28, 2024. The Affiliated Company Credit Agreement provides for a revolving credit facility in an aggregate principal amount of up to $275,000 to be provided by CONSOL Energy, as lender. In connection with the Partnership’s entry into the Affiliated Company Credit Agreement, the Partnership made an initial draw of $200,583, the net proceeds of which were used to repay the amounts outstanding under the Partnership's prior credit facility. Additional drawings under the Affiliated Company Credit Agreement are available for general partnership purposes. The obligations under the Affiliated Company Credit Agreement are guaranteed by the Partnership’s subsidiaries and secured by substantially all of the assets of the Partnership and its subsidiaries pursuant to the security agreement and various mortgages.

Interest on outstanding obligations under our Affiliated Company Credit Agreement accrues at a fixed rate ranging from 4.25% to 5.25%, depending on the total net leverage ratio. The unused portion of our Affiliated Company Credit Agreement is subject to a commitment fee of 0.50% per annum.

As of September 30, 2020, the Partnership had $174,685 of borrowings outstanding under the Affiliated Company Credit Agreement, leaving $100,315 of unused capacity. Interest on outstanding borrowings under the Affiliated Company Credit Agreement at September 30, 2020 was accrued at a rate of 5.00%.

The Affiliated Company Credit Agreement contains certain covenants and conditions that, among other things, limit the Partnership’s ability to: (i) incur or guarantee additional debt; (ii) make cash distributions; provided that we will be able to make cash distributions of available cash to partners so long as the Partnership's first lien gross leverage ratio shall not be greater than 2.00 to 1.00, the fixed charge coverage ratio shall be not less than 1.00 to 1.00, and no event of default is continuing or would result therefrom; (iii) incur certain liens or permit them to exist; (iv) make particular investments and loans; provided that we will be able to increase our ownership percentage of our undivided interest in the Pennsylvania Mining Complex and make investments in the Pennsylvania Mining Complex in accordance with our ratable ownership; (v) enter into certain types of transactions with affiliates; (vi) merge or consolidate with another company; and (vii) transfer, sell or otherwise dispose of assets. The Partnership is also subject to covenants that require the Partnership to maintain certain financial ratios, each of which will be calculated on a consolidated basis for the Partnership and its restricted subsidiaries at the end of each fiscal quarter.  The amendment revised the financial covenants in the Affiliated Company Credit Agreement, so that for the fiscal quarters ending June 30, 2020 through March 31, 2021, the maximum first lien gross leverage ratio shall be 3.75 to 1.00 and the maximum total net leverage ratio shall be 4.00 to 1.00; for the fiscal quarters ending June 30, 2021 through September 30, 2021, the maximum first lien gross leverage ratio shall be 3.50 to 1.00 and the maximum total net leverage ratio shall be 3.75 to 1.00; for the fiscal quarters ending December 31, 2021 through March 31, 2022, the maximum first lien gross leverage ratio shall be 3.00 to 1.00 and the maximum total net leverage ratio shall be 3.50 to 1.00; and for the fiscal quarters ending on or after June 30, 2022, the maximum first lien gross leverage ratio shall be 2.75 to 1.00 and the maximum total net leverage ratio shall be 3.25 to 1.00. At September 30, 2020, the Partnership was in compliance with its financial covenants with a first lien gross leverage ratio at 3.41 to 1.00 and a total net leverage ratio at 3.40 to 1.00. 

Receivables Financing Agreement

On November 30, 2017, (i) CONSOL Marine Terminals LLC, as an originator of receivables, (ii) CPCC, as an originator of receivables and as initial servicer of the receivables for itself and the other originators (collectively, the “Originators”), each a wholly owned subsidiary of CONSOL Energy, and (iii) CONSOL Funding LLC (the “SPV”), as buyer, entered into a Purchase and Sale Agreement (the “Purchase and Sale Agreement”). Concurrently, (i) CONSOL Thermal Holdings, as sub-originator, and (ii) CPCC, as buyer and as initial servicer of the receivables for itself and CONSOL Thermal Holdings, entered into a Sub-Originator Agreement (the “Sub-Originator PSA”). In addition, on that date, the SPV entered into a Receivables Financing Agreement (the “Receivables Financing Agreement”) by and among (i) the SPV, as borrower, (ii) CPCC, as initial servicer, (iii) PNC, as administrative agent, LC Bank and lender, and (iv) the additional persons from time to time party thereto as lenders. Together, the Purchase and Sale Agreement, the Sub-Originator PSA and the Receivables Financing Agreement establish the primary terms and conditions of an accounts receivable securitization program (the “Securitization”). In March 2020, the Securitization was amended, among other things, to extend the scheduled termination date to March 27, 2023.

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Pursuant to the Securitization, (i) CONSOL Thermal Holdings will sell current and future trade receivables to CPCC and (ii) the Originators will sell and/or contribute current and future trade receivables (including receivables sold to CPCC by CONSOL Thermal Holdings) to the SPV and the SPV will, in turn, pledge its interests in the receivables to PNC, which will either make loans or issue letters of credit on behalf of the SPV. The maximum amount of advances and letters of credit outstanding under the Securitization may not exceed $100,000.

Loans under the Securitization will accrue interest at a reserve-adjusted LIBOR market index rate equal to the one-month Eurodollar rate. Loans and letters of credit under the Securitization also will accrue a program fee and a letter of credit participation fee, respectively, ranging from 2.00% to 2.50% per annum, depending on the total net leverage ratio of CONSOL Energy. In addition, the SPV paid certain structuring fees to PNC Capital Markets LLC and will pay other customary fees to the lenders, including a fee on unused commitments equal to 0.60% per annum.

The SPV’s assets and credit are not available to satisfy the debts and obligations owed to the creditors of CONSOL Energy, CONSOL Thermal Holdings or any of the Originators. CONSOL Thermal Holdings, the Originators and CPCC as servicer are independently liable for their own customary representations, warranties, covenants and indemnities. In addition, CONSOL Energy has guaranteed the performance of the obligations of CONSOL Thermal Holdings, the Originators and CPCC as servicer, and will guarantee the obligations of any additional originators or successor servicer that may become party to the Securitization. However, neither CONSOL Energy nor its affiliates will guarantee collectability of receivables or the creditworthiness of obligors thereunder.

The agreements comprising the Securitization contain various customary representations and warranties, covenants and default provisions which provide for the termination and acceleration of the commitments and loans under the Securitization in certain circumstances including, but not limited to, failure to make payments when due, breach of representation, warranty or covenant, certain insolvency events or failure to maintain the security interest in the trade receivables, and defaults under other material indebtedness.

As of September 30, 2020, the Partnership, through CONSOL Thermal Holdings, sold $25,785 of trade receivables to CPCC. The Partnership has not derecognized the receivables due to its continued involvement in the collections efforts.

Cash Flows

	Nine Months Ended September 30,
	2020			2019			Variance
Cash flows provided by operating activities	$	34,130		$	67,505		$	(33,375	)
Cash used in investing activities	$	(13,087	)	$	(29,350	)	$	16,263
Cash used in financing activities	$	(20,961	)	$	(28,547	)	$	7,586

Nine Months Ended September 30, 2020 Compared with the Nine Months Ended September 30, 2019:

Cash provided by operating activities decreased $33,375 in the period-to-period comparison, primarily due to a decrease in net income, partially offset by other working capital changes that occurred throughout both periods.

Cash used in investing activities decreased $16,263 in the period-to-period comparison. Capital expenditures decreased primarily as a result of cost control measures put into place in response to the COVID-19 pandemic and the overall decline in coal markets.

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	Nine Months Ended September 30,
	2020		2019		Variance
Building and Infrastructure	$	6,357	$	12,091	$	(5,734	)
Equipment Purchases and Rebuilds		3,296		8,689		(5,393	)
Refuse Storage Area		3,081		6,346		(3,265	)
Other		438		2,228		(1,790	)
Total Capital Expenditures	$	13,172	$	29,354	$	(16,182	)

Cash flows used in financing activities decreased $7,586 in the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. The decrease was primarily due to the temporary suspension of the quarterly distribution payment to all unitholders, as discussed above, which resulted in a $28,780 decrease to cash used in financing activities.  In addition, the decrease was due to $4,073 of proceeds received in the nine months ended September 30, 2020 related to a finance leasing arrangement, partially offset by higher discretionary payments made under the Affiliated Company Credit Agreement. Net payments made under the Affiliated Company Credit Agreement increased $24,640 in the period-to-period comparison.

Off-Balance Sheet Arrangements

We do not maintain off-balance sheet transactions, arrangements, obligations or other relationships with unconsolidated entities or others that have or are reasonably likely to have a material current or future effect on our 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 in this Form 10-Q.

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 and outcomes to differ materially from results expressed in or implied by our forward-looking statements. 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,” “continue,” “intend,” “expect,” “may,” “should,” “anticipate,” “could,” “estimate,” “plan,” “predict,” “project,” “will,” or their negatives, or other similar expressions, the statements which include those words are usually forward-looking statements. When we describe strategy that involves risks or uncertainties, we are making forward-looking statements. The forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the date of this Quarterly Report on Form 10-Q; we disclaim any obligation to update these statements unless required by securities law, and we caution you not to rely on them unduly. We have based these forward-looking statements on our current expectations and assumptions about future events. While our management considers these expectations and assumptions to be reasonable, they are inherently subject to significant business, economic, competitive, regulatory and other risks, contingencies and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks, contingencies and uncertainties relate to, among other matters, the following:

• the pending merger is subject to conditions, including certain conditions that may not be satisfied or completed on a timely basis, if at all;

• the number of shares of CONSOL Energy common stock that our unitholders may receive in the pending merger between CONSOL Energy and us is based on a fixed exchange ratio and will not be adjusted in the event of any change in the price of either shares of CONSOL Energy common stock or our common units;

• our unitholders will have a reduced ownership after the pending merger and will not have contractual rights to receive distributions or dividends;

• we will incur substantial transaction-related costs in connection with the pending merger, and if the merger does not close, we will not benefit from these expenses;

• we and CONSOL Energy may be targets of securities class action and derivative lawsuits, which could result in substantial costs and may delay or prevent the completion of the pending merger;

• directors and executive officers of our general partner have certain interests in the pending merger that are different from those of our unitholders generally;

• the shares of CONSOL Energy common stock to be received by our unitholders as a result of the merger have different rights than our common units and may be affected by factors different from those affecting the common units of the Partnership;

• the effects the COVID-19 pandemic has on our business and results of operations and the global economy;

• changes in coal prices or the costs of mining or transporting coal;

• uncertainty in estimating economically recoverable coal reserves and replacement of reserves;

• our ability to develop our existing coal reserves, acquire additional reserves and successfully execute our mining plans;

• defects in title or loss of any leasehold interests with respect to our properties;

• changes in general economic conditions, both domestically and globally;

• competitive conditions within the coal industry;

• changes in the consumption patterns of coal-fired power plants and steelmakers and other factors affecting the demand for coal by coal-fired power plants and steelmakers;

• the availability and price of coal to the consumer compared to the price of alternative and competing fuels;

• competition from the same and alternative energy sources;

• energy efficiency and technology trends;

• our ability to successfully implement our business plan;

• the price and availability of debt and equity financing;

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• operating hazards and other risks incidental to coal mining;

• major equipment failures and difficulties in obtaining equipment, parts and raw materials;

• availability, reliability and costs of transporting coal;

• adverse or abnormal geologic conditions, which may be unforeseen;

• natural disasters, weather-related delays, casualty losses and other matters beyond our control;

• operating in a single geographic area;

• our reliance on a few major customers;

• labor availability, relations and other workforce factors;

• defaults by CONSOL Energy under our operating agreement, employee services agreement and Affiliated Company Credit Agreement;

• restrictions in our Affiliated Company Credit Agreement that may adversely affect our business;

• changes in our tax status;

• delays in the receipt of, failure to receive or revocation of necessary governmental permits;

• the effect of existing and future laws and government regulations, including the enforcement and interpretation of environmental laws thereof;

• the effect of new or expanded greenhouse gas regulations;

• coal users switching to other fuels in order to comply with various environmental standards related to coal combustion emissions;

• the impact of potential, as well as many adopted, regulations to address climate change, including any relating to greenhouse gas emissions on our operating costs as well as on the market for coal;

• the effects of litigation;

• adverse effect of cybersecurity threats;

• failure to maintain effective internal controls over financial reporting;

• recent action and the possibility of future action on trade by U.S. and foreign governments;

• conflicts of interest that may cause our general partner or CONSOL Energy to favor their own interest to our detriment;

• the requirement that we distribute all of our available cash; and

• other factors discussed in our 2019 Annual Report on Form 10-K under “Risk Factors,” as updated by any subsequent Quarterly Reports on Forms 10-Q, which are on file at the SEC.

ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the management of the Partnership’s general partner, including the Chief Executive Officer and the Chief Financial Officer of the general partner, an evaluation of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), was conducted as of the end of the period covered by this report. Based upon this evaluation, the Chief Executive Officer and Chief Financial Officer of the Partnership’s general partner have concluded that the Partnership’s disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events.

PART II: OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

Refer to paragraph one within Part 1, Item 1. Financial Statements, “Note 11. Commitments and Contingent Liabilities,” which is incorporated herein by reference.

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ITEM 1A.    RISK FACTORS

In addition to the other information set forth in this quarterly report, including the risk factor below, you should carefully consider the factors discussed in “Part I - Item 1A. Risk Factors” of our 2019 Form 10-K, as updated by any subsequent Form 10-Qs. These described risks are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Risks Relating to the Merger of us and CONSOL Energy

The number of shares of CONSOL Energy common stock that our unitholders may receive in the pending Merger between CONSOL Energy and us is based on a fixed exchange ratio and will not be adjusted in the event of any change in the price of either shares of CONSOL Energy common stock or our common units.

On October 22, 2020, the Partnership, our general partner, our sponsor and a wholly owned subsidiary of our sponsor (“Merger Sub”)  entered into a definitive merger agreement (the “Merger Agreement”) pursuant to which Merger Sub will merge with and into the Partnership, with the Partnership surviving as an indirect, wholly owned subsidiary of our sponsor.  The market value of the merger consideration that our unitholders will receive in the Merger will depend on the trading price of CONSOL Energy common stock. The exchange ratio set forth in the Merger Agreement that specifies the number of shares of CONSOL Energy common stock that our unitholders will receive as Merger Consideration is fixed at 0.73. This means that there is no mechanism contained in the Merger Agreement that would adjust the number of shares of CONSOL Energy common stock that our unitholders will receive as the Merger Consideration based on any decreases or increases in the trading price of CONSOL Energy common stock. Stock price changes may result from a variety of factors (many of which are beyond CONSOL Energy’s or our control), including:

• changes in CONSOL Energy’s and our business, operations and prospects or market assessments thereof;

• interest rates, general market, industry and economic conditions and other factors generally affecting the price of CONSOL Energy common stock; and

• federal, state and local legislation, governmental regulation and legal developments in the businesses and industry in which CONSOL Energy and we operate.

If the price of CONSOL Energy common stock at the closing of the Merger is less than the price of CONSOL Energy common stock on the date on which the Merger Agreement was signed, then the market value of the Merger Consideration received by our unitholders will be less than contemplated at the time the Merger Agreement was signed.

The market price of CONSOL Energy common stock after the merger may be affected by factors different from those affecting the common units of the Partnership currently.

Upon completion of the merger, holders of the Partnership’s common units will become holders of CONSOL Energy common stock. CONSOL Energy’s business differs in important respects from that of the Partnership, and, accordingly, the results of operations of the combined company and the market price of CONSOL Energy common stock after the completion of the merger may be affected by factors different from those currently affecting the independent results of operations of each of CONSOL Energy and the Partnership.

The Merger is subject to conditions, including certain conditions that may not be satisfied or completed on a timely basis, if at all. Failure to complete the Merger could have a material and adverse effect on us and, even if completed, the Merger may not achieve some or all of the anticipated benefits.

Completion of the Merger is subject to certain customary conditions, including, among others: (i) approval of the issuance of the Merger Consideration by a majority of votes cast at a special meeting of holders of shares of CONSOL Energy common stock; (ii) the receipt of the written consent by our sponsor covering all of our common units beneficially owned by it, approving the Merger, adoption of the Merger Agreement and any other matters necessary for consummation of the Merger and the other transactions contemplated in the Merger Agreement; (iii) there being no law or injunction prohibiting consummation of the transactions contemplated under the Merger Agreement; (iv) the effectiveness of a registration statement on Form S-4 relating to the shares of CONSOL Energy common stock to be issued as Merger Consideration; (v) approval for listing on the New York Stock Exchange of the shares of CONSOL Energy Common Stock to be issued as Merger Consideration; (vi) subject to specified materiality standards, the accuracy of certain representations and warranties of each party; and (vii) compliance by each party in all material respects with its covenants.  These and other conditions to the closing of the Merger may not be fulfilled in a timely manner or at all, and, accordingly, the Merger may be delayed or may not be completed.

If the Merger is not completed, our ongoing businesses or the price of our common units may be adversely affected and, without realizing any of the benefits of having completed the Merger, we will be subject to a number of risks, including the following:

• we will be required to pay our costs relating to the Merger, such as legal, accounting and financial advisory expenses, whether or not the Merger is completed;

• time and resources committed by the management of our general partner to matters relating to the Merger could otherwise have been devoted to pursuing other beneficial opportunities; and

• the market price of our common units could decline to the extent that the current market price reflects a market assumption that the Merger will be completed.

In addition, even if completed there can be no assurance that the Merger will deliver the benefits anticipated by us.

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We are subject to provisions under the Merger Agreement that, in specified circumstances, could require us to be responsible for CONSOL Energy's expenses.

The Merger Agreement provides for certain termination rights for both CEIX and CCR. The Merger Agreement provides that upon termination of the Merger Agreement under certain circumstances, we will be obligated to reimburse CONSOL Energy for its expenses in an amount not to exceed $3.5 million. The Merger Agreement also provides that upon termination of the Merger Agreement under certain circumstances, CONSOL Energy will be obligated to reimburse us for our expenses in an amount not to exceed $3.5 million.

 Financial projections relating to the combined company after the Merger may not be achieved.

In connection with the proposed Merger, CONSOL Energy prepared and considered, among other things, internal financial forecasts for CONSOL Energy and us. These financial projections include assumptions regarding future operating cash flows, expenditures, and income of CONSOL Energy and us, and speak only as of the date made and will not be updated. These financial projections were not provided with a view to public disclosure, are subject to significant economic, competitive, industry, regulatory and other uncertainties and may not be achieved in full, at all, or within projected timeframes. In addition, the failure of our businesses to achieve projected results, including projected cash flows, could have a material adverse effect on the price of shares of CONSOL Energy common stock and CONSOL Energy’s financial position.

We and CONSOL Energy may be targets of securities class action and derivative lawsuits, which could result in substantial costs and may delay or prevent the completion of the Merger.

Securities class action lawsuits and derivative lawsuits are often brought against companies that have entered into merger agreements in an effort to enjoin the relevant merger or seek monetary relief. If CONSOL Energy or we are subject to such lawsuits related to the Merger Agreement or the Merger, even if the lawsuits are without merit, defending against these claims can result in substantial costs and divert management time and resources. We and CONSOL Energy cannot predict the outcome of these lawsuits, or others, nor can either company predict the amount of time and expense that will be required to resolve such litigation. An unfavorable resolution of any such litigation surrounding the Merger could delay or prevent its consummation. In addition, the costs of defending the litigation, even if resolved in our or CONSOL Energy’s favor, could be substantial and such litigation could distract us and CONSOL Energy from pursuing the consummation of the Merger and other potentially beneficial business opportunities.

We and CONSOL Energy will incur substantial transaction-related costs in connection with the Merger, including fees paid to legal, financial and accounting advisors, filing fees and printing costs. If the Merger does not close, the companies will not benefit from these expenses. In addition, we and CONSOL Energy may not achieve the net benefits from the Merger in the near term.

We and CONSOL Energy expect to incur a number of non-recurring transaction-related costs associated with completing the Merger. These fees and costs will be substantial. Non-recurring transaction costs include, but are not limited to, fees paid to legal, financial and accounting advisors, filing fees and printing costs. Many of the expenses that will be incurred are, by their nature, difficult to estimate accurately at the present time.  If the Merger does not close, neither us nor CONSOL Energy will benefit from these expenses.

CONSOL Energy may not pay any cash dividends at all to its shareholders. CONSOL Energy’s ability to declare and pay cash dividends to its stockholders, if any, in the future will depend on various factors, many of which are beyond its control.

While our Partnership Agreement requires that, within 45 days after the end of each quarter, we distribute all of our available cash to unitholders of record, CONSOL Energy is not required to declare dividends of its available cash to its common stockholders. The declaration and payment of dividends by CONSOL Energy is subject to the discretion of CONSOL Energy’s board of directors, and no assurance can be given that CONSOL Energy will pay dividends in the future. The determination to pay dividends in the future will depend upon, among other things, general business conditions, CONSOL Energy’s financial results, contractual and legal restrictions regarding the payment of dividends by CONSOL Energy, planned investments by CONSOL Energy and such other factors as its board of directors deems relevant. Additionally, CONSOL Energy’s senior secured credit facilities limit CONSOL Energy’s ability to pay dividends up to $25 million annually, which increases to $50 million annually when the CONSOL Energy's total net leverage ratio is less than 1.50 to 1.00 and subject to an aggregate amount up to a cumulative credit calculation set forth in the facilities.

Our unitholders will have a reduced ownership after the Merger.

CONSOL Energy will issue approximately 8.0 million shares of CONSOL Energy common stock to Partnership common unitholders in the Merger. As a result of these issuances, current holders of CONSOL Energy common stock and Partnership common unitholders are expected to hold approximately 77.8% and 22.2%, respectively, of the outstanding shares of CONSOL Energy common stock immediately following completion of the Merger.

When the Merger occurs, the CONSOL Energy common stock that each of our unitholders receive in exchange for our common units will represent a smaller percentage ownership of the combined company than our unitholders’ collective percentage ownership of us.

The shares of CONSOL Energy common stock to be received by our unitholders as a result of the Merger have different rights than our common units.

Following completion of the Merger, our unitholders will own CONSOL Energy common stock. There are important differences between the rights of our unitholders and the rights of the holders of CONSOL Energy common stock. Ownership interests in a limited partnership are different than ownership interests in a corporation. Following the Merger, the rights as a stockholder of CONSOL Energy, a Delaware corporation, will be governed by the organizational documents of CONSOL Energy and the Delaware General Corporation Law, rather than the terms of the Partnership Agreement and the Delaware Revised Uniform Limited Partnership Act applicable to the holders of our common units.

Directors and executive officers of our general partner have certain interests that are different from those of our unitholders generally.

The directors and executive officers of our general partner are parties to agreements or participants in other arrangements that give them interests in the Merger that may be different from, or in addition to, the interests of our unitholders. In addition, certain of the directors and executive officers of our general partner are also directors or executive officers of CONSOL Energy. These and other different interests will be described in the joint proxy statement/prospectus that we and CONSOL Energy intend to file with the SEC when it becomes available.

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Our Partnership Agreement restricts the remedies available to holders of our common units for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty.

Our Partnership Agreement contains provisions that restrict the remedies available to unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty under state fiduciary duty law. In light of potential conflicts of interest between CONSOL Energy and our general partner, on the one hand, and us and the Partnership common unitholders, on the other hand, the board of directors of our general partner submitted the Merger and related matters to the board’s conflicts committee (the “Conflicts Committee”) for, among other things, review, evaluation, negotiation and possible approval of a majority of its members.  Under our Partnership Agreement:

• any determination by our general partner must be made in good faith, and our general partner, our Conflicts Committee and the board of directors of our general partner are entitled to a presumption that they acted in good faith; and

• in any proceeding brought by or on behalf of any limited partner or the Partnership, the person bringing or prosecuting such proceeding will have the burden of overcoming such presumption.

The Conflicts Committee reviewed, negotiated and evaluated the Merger Agreement, the Merger and related matters on behalf of our unitholders and us. Among other things, the Conflicts Committee (i) determined that the Merger Agreement and the transactions contemplated thereby, including the Merger, is in the best interests of the common unitholders, (ii) recommended that the board of directors of our general partner resolve to direct that the Merger Agreement be submitted to a vote of the limited partners of the Partnership and (iii) authorized such limited partners to act by written consent pursuant to the terms of the Partnership Agreement.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 4.    MINE SAFETY DISCLOSURES

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95 to this Quarterly Report on Form 10-Q.

ITEM 5. OTHER INFORMATION

Approval of Change in Control Severance Agreement 

The Partnership is a party to an omnibus agreement with our sponsor under which the Partnership reimburses our sponsor on a monthly basis for compensation-related expenses (including salary, bonus, incentive compensation and other amounts) attributable to the portion of an executive’s compensation that is allocable to the general partner. As a result of our 25% undivided interest in the Pennsylvania Mining Complex, we reimburse our sponsor for approximately 25% of the total compensation-related expenses (including salary, bonus, incentive compensation and other amounts) incurred by our sponsor and attributable to our executive officers’ compensation.

On November 4, 2020, our sponsor and Mitesh Thakkar, our sponsor’s Chief Financial Officer, entered into a new Change in Control Severance Agreement (the “New CIC Agreement”). The New CIC Agreement supersedes and replaces in its entirety that certain Change in Control Severance Agreement entered into by and between our sponsor and Mr. Thakkar on January 3, 2020, as previously disclosed in the Partnership’s Form 8-K filed with the United States Securities and Exchange Commission on January 3, 2020 (the “Original CIC Agreement”). 

The New CIC Agreement provides that Mr. Thakkar will receive a base salary in accordance with our sponsor’s normal payroll practices, that he will be eligible to receive an annual cash bonus in accordance with any of our sponsor’s applicable bonus plans or programs, that he will be able to participate in any long-term incentive compensation plan maintained by our sponsor and that he will be entitled to participate in all employee benefit and fringe benefit plans made available by our sponsor to its executives and key management. The New CIC Agreement further provides for both (i) non-change in control and (ii) change in control cash severance exclusively upon a termination of employment absent “cause,” subject to the following requirements.  In the case of a change-in-control scenario, the New CIC Agreement is “double trigger” and Mr. Thakkar is only entitled to cash severance if, following, or in connection with, a change-in-control, his employment is terminated by our sponsor absent “cause” or if he resigns due to constructive or good reason termination within ninety days prior to the change-in-control or within two years following the change-in-control. Under the New CIC Agreement, Mr. Thakkar is entitled to receive:

•  his base salary through the date of termination and any annual bonus awarded in accordance with our sponsor’s bonus program but not yet paid in both a change-in-control and non-change-in-control termination absent “cause”; 

• payment of any amounts earned, accrued or owing but not yet paid to Mr. Thakkar as of the date of termination, payable in a lump sum, and any benefits accrued or earned in accordance with the terms of any applicable benefit plans and programs of our sponsor or any of its affiliates in a non-change-in-control termination absent “cause”;

• a lump sum payment equal to 1x multiple of his base salary in a non-change-in-control or involuntary termination of employment absent “cause”;

• a prorated payment of the executive’s annual incentive compensation for the year in which the termination occurs in both a change in control and non-change in control termination absent “cause”;

• accelerated vesting of any outstanding long-term incentive compensation upon the second trigger related to a change in control termination event; provided that any outstanding performance-based awards will be settled at the greater of target or actual performance (if ascertainable at the change in control) and prorated for service to the date of the change in control;

• continued healthcare for 18-months for both a change-in-control and a non-change-in-control termination absent “cause;” and

• outplacement assistance in the form of a cash payment equal to $25,000 in a change in control termination only.

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The terms of the New CIC Agreement are materially consistent with the terms of the Original CIC Agreement except that the New CIC Agreement also provides for the following payments in a change-in-control termination absent “cause”:

• A lump sum cash payment equal to a 2x multiple of his base salary plus a 2x multiple of his annual incentive pay in an involuntary termination of employment or constructive (or good reason) termination (the multiple for each of the base salary payment and the annual incentive pay payment under the Original CIC Agreement was 1.5x);

• a cash lump sum payment equal to the total amount he would have received under our sponsor’s 401(k) plan assuming he continued employment for a period of 18-months; and

• payment of any amounts earned, accrued or owing but not yet paid to Mr. Thakkar as of the date of termination, payable in a lump sum, and any benefits accrued or earned in accordance with the terms of any applicable benefit plans and programs of our sponsor or any of its affiliates.

The New CIC Agreement also provides that in the event Mr. Thakkar’s employment is terminated for Cause, he shall only be entitled to receive: (i) his base salary through the date of termination, (ii) payment for all accrued but unused vacation through the date of termination and (iii) reimbursement for certain reimbursable expenses.

The New CIC Agreement also contains confidentiality, non-competition and non-solicitation obligations for Mr. Thakkar pursuant to which he has agreed not to compete with our sponsor or any of its affiliates for two years, or to solicit customers or employees for one year following a termination of employment.

No payments or benefits are provided under the New CIC Agreement unless Mr. Thakkar executes, and does not revoke, a written release of any and all claims (other than entitlements under the terms of the New CIC Agreement or which may not be released under applicable law.)

Approval of Changes in Timing of Payout under CONSOL Energy Inc. 2020 Short-Term Incentive Compensation (“STIC”)

On November 3, 2020, the Compensation Committee (the “Committee”) and the Board of Directors (the “Board”) of our sponsor authorized an amendment to the 2020 short-term incentive arrangement (“STIC”) Terms and Conditions, previously approved by the Committee and Board on February 4, 2020.

The 2020 STIC Terms and Conditions previously provided that all earned amounts would be paid in the first quarter of 2021 on or before March 15, 2021 after the Committee evaluates our sponsor’s performance against pre-established performance metrics for the 2020 performance year and then determines the extent to which applicable performance goals have been met.

The amendment to the 2020 STIC Terms and Conditions delegates authority to the Chief Executive Officer of our sponsor (“CONSOL Energy CEO”) to provide for a different payment schedule for individuals participating in the STIC (other than himself).  Under the terms of the amendment, the CONSOL Energy CEO may (but is not obligated) to advance payment of a portion of the annual 2020 STIC payout due each named executive officer (other than the CONSOL Energy CEO), in an amount not to exceed fifty percent (50%) of our sponsor’s target performance for the 2020 year.  Any advance payment may be made at any time on or before December 31, 2020.  Any remaining portion of amounts earned under the 2020 STIC will be paid on or before March 15, 2021, the regularly scheduled payment date. 

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ITEM 6.    EXHIBITS

Exhibits	Description	Method of Filing
2.1	Agreement and Plan of Merger, dated as of October 22, 2020, by and among CONSOL Energy Inc., Transformer LP Holdings Inc., Transformer Merger Sub LLC, CONSOL Coal Resources LP and CONSOL Coal Resources GP LLC.	Filed as Exhibit 2.1 to Form 8-K (#001-37456) filed on October 23, 2020
10.1	Support Agreement, dated as of October 22, 2020, by and among CONSOL energy Inc. and CONSOL Coal Resources LP.	Filed as Exhibit 10.1 to Form 8-K (#001-37456) filed on October 23, 2020
31.1	Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes-Oxley Act of 2002	Filed herewith
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Filed herewith
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	Filed herewith
95	Mine Safety and Health Administration Safety Data.	Filed herewith
101	Interactive Data File (Form 10-Q for the quarterly period ended September 30, 2020, furnished in Inline XBRL).	Filed herewith
104	Cover Page Interactive Data File (formatted as Inline XBRL)	Contained in Exhibit 101

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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: November 5, 2020

CONSOL Coal Resources LP
By:	CONSOL Coal Resources GP LLC, its general partner
By:	/s/ JAMES A. BROCK
	James A. Brock
	Chief Executive Officer, Chairman of the Board and Director (Principal Executive Officer)
By:	CONSOL Coal Resources GP LLC, its general partner
By:	/s/ MITESHKUMAR B. THAKKAR
	Miteshkumar B. Thakkar
	Chief Financial Officer (Principal Financial Officer)
By:	CONSOL Coal Resources GP LLC, its general partner
By:	/s/ JOHN M. ROTHKA
	John M. Rothka
	Chief Accounting Officer (Principal Accounting Officer)

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