PITTSBURGH, April 26 /PRNewswire-FirstCall/ -- CNX Gas Corporation
(NYSE:CXG) reported net income for the quarter ended March 31, 2006
of $45.9 million, or $0.30 per diluted share, compared with net
income of $26.5 million for the quarter ended March 31, 2005.
Production was 13.6 billion cubic feet (Bcf), or 151.5 million
cubic feet per day (MMcf/d), for the quarter ended March 31, 2006,
up 11% from the 12.3 Bcf, or 136.6 MMcf/d, for the quarter ended
March 31, 2005. Both the quarterly net income and production were
Company records. The March 31, 2006 quarter included (pre-tax)
proceeds from business interruption insurance of $3.0 million
related to an incident at an affiliated mine in the first half of
2005. (Logo: http://www.newscom.com/cgi-bin/prnh/20051213/CNXLOGO)
Nicholas J. DeIuliis, president and chief executive officer, said,
"I am very gratified to see such excellent results from our first
quarter as a public company. I feel that our employees have
coalesced as a team to bring the focus, the discipline, and the
results that were anticipated last year when CNX Gas was
established. For example, in the third quarter of 2005, CNX Gas
earned $26.1 million; in the fourth quarter, $32.6 million; and
now, $45.9 million. While we're clearly benefiting from higher
prices, we're also accelerating our drilling and production while
prudently managing our costs." TABLE 1 FINANCIAL AND OPERATIONAL
RESULTS - Quarter-To-Quarter Quarter Ended Quarter Ended March 31,
2006 March 31, 2005 Total Revenue and Other Income $148.2 $106.1
Net Income $45.9 $26.5 Earnings per Share - Diluted $0.30 $0.18*
Net Cash from Operating Activities $85.3 $36.5 EBITDA $83.5 $52.2
EBIT $74.6 $43.1 Total Period Production (Bcf) 13.6 12.3 Average
Daily Production (MMcf) 151.5 136.6 Capital Expenditures $40.2
$10.8 Financial results are in millions of dollars except per share
amounts. Production results are net of royalties. *Pro forma
earnings per share for the March 2005 quarter assumes the same
number of shares outstanding as the March 2006 quarter. The price
realized for the Company's gas production, including the effects of
hedging, was $7.81 per Mcf for the quarter ended March 31, 2006.
This was up 33% from the $5.88 per Mcf received for the quarter
ended March 31, 2005. Unit costs for Company production, exclusive
of royalties, were $2.73 per Mcf in the just-ended quarter, or 8%
higher than the $2.52 per Mcf for the quarter ended March 31, 2005.
As a result, (pre-tax) unit margins for Company production were
$5.08 in the March 31, 2006 quarter, up 51% from $3.36 in the March
31, 2005 quarter. Mr. DeIuliis commented on unit costs and margins,
saying, "I believe that our results help to dispel two common myths
in the industry: that unconventional gas is high cost gas and that
industry unit margins may not expand much because of inflationary
pressures on unit costs. With our unit costs at $2.73 for the March
2006 quarter, I fully expect CNX Gas to be among the industry low
cost producers." "When you recall that our calendar year 2005 total
unit costs were $2.72, the just-reported $2.73 per Mcf is a notable
achievement. When adjusting for unit production taxes, which vary
with prices, our March 2006 quarterly unit costs were actually
lower than our average for calendar year 2005. Perhaps more
striking is a comparison on a quarter-to-quarter basis. The
increase in unit costs on this comparison can be attributed to
higher production taxes caused by higher prices, and higher
administration costs which were a result of becoming a stand alone,
publicly traded company." TABLE 2 PRICE AND COST DATA PER NET MCF -
Quarter-To-Quarter Comparison Quarter Ended Quarter Ended March 31,
2006 March 31, 2005 Average Sales Price/Mcf $7.81 $5.88 Costs/Mcf -
Production Lifting $0.32 $0.29 Other Production Costs $0.16 $0.29
Administration $0.51 $0.32 DD&A $0.43 $0.53 Production Taxes
$0.26 $0.18 Costs/Mcf - Gathering Operating Costs $0.63 $0.59
Transportation $0.19 $0.09 DD&A $0.23 $0.23 Total Costs/Mcf
$2.73 $2.52 Includes amounts attributable to equity in affiliates.
Operations Update During the quarter ended March 31, 2006, CNX Gas
began production from 68 coalbed methane wells in Central
Appalachia and one in Northern Appalachia. These figures are
exclusive of gob wells. The Northern Appalachia 2006 drilling
program will begin in a few weeks as refurbished rigs begin to
arrive. In Tennessee, 1.25 net wells began production in the first
quarter. Production in the March 2006 quarter was also higher than
the March 2005 quarter because of increased recoveries of gob gas.
Also during the first quarter, CNX Gas employees worked another
quarter without having a lost time accident. The Company regrets to
report, however, that one of our contractors suffered a fatality.
Financial Update The Company ended the quarter with cash on hand of
$65.4 million, up sharply from the $20.1 million at December 31,
2005, despite having capital expenditures of $40.2 million in the
March 2006 quarter. CNX Gas has outstanding letters of credit of
$16.8 million, but otherwise has no drawn amounts on its $200
million credit facility. Mr. DeIuliis further commented, "Our
management team is focused on key return criteria such as return on
capital employed (ROCE). For the just-ended quarter, we achieved,
on an annualized basis, a 28.3% return on capital employed. We feel
this parameter is the best measure of the efficient deployment of
capital in the long term. It is our expectation to be an industry
leader in this parameter by continuing to work accident-free,
remaining a low-cost producer, and steadily increasing production."
Guidance The three-year guidance remains unchanged from the
previous quarter: TABLE 3 GUIDANCE: Three-Year 2006 2007 2008 Total
Period Production (Bcf) 55.7 64.9 76.2 Production Growth 15% 16%
17% Volumes Hedged (Bcf) 17.0 7.4 7.4 Average Hedge Price ($/Mcf)
7.42 7.67 7.20 Capital Expenditures ($MM) 190 222 233 "We remain
committed to our 2006-2008 guidance," commented Mr. DeIuliis.
"Clearly, we are off to a fine start with production in 2006.
Looking to the second quarter, I expect production to come in
slightly below the first quarter, allowing for normal summer
pipeline maintenance curtailments from a non-affiliated interstate
pipeline, a longwall move at Buchanan Mine, and the sealing of
another mine, VP-8." In late summer of 2006, CNX Gas is expecting
to see the completion of the Jewell Ridge lateral, which will
provide a second outlet to eastern markets for transporting growing
Central Appalachia production volumes and mitigate single-pipeline
curtailment impacts. CNX Gas will host a conference call today at
10:00 a.m. Eastern time to discuss the Company's first quarter
results. The teleconference can be heard "live" at the investor
relations portion of the Company web site: http://www.cnxgas.com/.
Description CNX GAS CORPORATION is an independent natural gas
exploration, development, production and gathering company
operating in the Appalachian Basin of the United States. Contact:
Dan Zajdel Director - Investor and Public Relations (412) 854-6719
http://www.cnxgas.com/ Definition: EBIT is defined as earnings
(excluding cumulative effect of accounting change) before deducting
net interest expense (interest expense less interest income) and
income taxes. EBITDA is defined as earnings (excluding cumulative
effect of accounting change) before deducting net interest expense
(interest expense less interest income), income taxes, and
depreciation, depletion and amortization. Although EBIT and EBITDA
are not measures of performance calculated in accordance with
generally accepted accounting principles, management believes that
it is useful to an investor in evaluating CNX Gas because it is
widely used to evaluate a company's operating performance before
debt expense and its cash flow. EBIT and EBITDA do not purport to
represent cash generated by operating activities and should not be
considered in isolation or as a substitute for measures of
performance in accordance with generally accepted accounting
principles. In addition, because all companies do not calculate
EBIT and EBITDA identically, the presentation here may not be
comparable to similarly titled measures of other companies.
Reconciliation of EBITDA and EBIT to the income statement is as
follows: CNX Gas EBIT & EBITDA Reconciliation (000) Omitted
Quarter Ended Quarter Ended March 31, 2006 March 31, 2005 Net
Income $45,876 $26,526 Add: Interest Expense 7 - Less: Interest
Income 370 - Add: Income Taxes 29,061 16,605 ------ ------ Earnings
Before Interest & Taxes (EBIT) $74,574 $43,131 Add:
Depreciation, Depletion, & Amortization 8,904 9,100 ------
------ EBITDA $83,478 $52,231 CNX Gas Capital Employed and Return
on Capital Employed (000) Omitted Capital employed is a measure of
net investment. When viewed from the perspective of how the capital
is used, it includes CNX Gas' property, plant, and equipment and
other assets less liabilities. Quarter Ended Quarter Ended Capital
Employed March 31, 2006 December 31, 2005 Total assets $946,656
$874,856 Less liabilities: Total current liabilities (79,872)
(86,158) Total long-term liabilities (119,613) (109,226) -------
------- Total Capital Employed $747,171 $679,472 Return on average
capital employed (ROCE) is a performance measure ratio. ROCE is
defined as net income plus after-tax interest expense, divided by
average capital employed. Below is a calculation of ROCE for the
March 2006 quarter. In order to annualize the result on a
compounded basis, a "1" is added to the quarterly ROCE, before it
is raised to the fourth power. Quarter Ended Return on Capital
Employed March 31,2006 Net Income $45,876 Financing costs
(after-tax): - Third-party debt - All other financing costs (4)
------- Total financing costs (4) ------- Earnings excluding
financing costs $45,880 Average capital employed $713,322 Return on
average capital employed 6.4% Return on average capital
employed-annualized 28.3% Management believes that ROCE is a useful
measure because it indicates the return on all capital, which
includes equity and debt, employed in the business. Management
believes that ROCE is an additional measure of efficiency when
considered in conjunction with return on equity which measures the
return on only the shareholders' equity component of total capital
employed. CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
STATEMENTS Various statements in this release, including those that
express a belief, expectation, or intention, as well as those that
are not statements of historical fact, are forward-looking
statements. The forward-looking statements may include projections
and estimates concerning the timing and success of specific
projects and our future production, revenues, income and capital
spending. When we use the words "believe," "intend," "expect,"
"may," "should," "anticipate," "could," "estimate," "plan,"
"predict," "project," 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 release speak only as of the
date of this release; 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: our business strategy; our financial position; our cash
flow and liquidity; declines in the prices we receive for our gas
affecting our operating results and cash flow; uncertainties in
estimating our gas reserves; replacing our gas reserves;
uncertainties in exploring for and producing gas; our inability to
obtain additional financing necessary in order to fund our
operations, capital expenditures and to meet our other obligations;
disruptions, capacity constraints in or other limitations on the
pipeline systems which deliver our gas; competition in the gas
industry; our inability to retain and attract key personnel; our
joint venture arrangements; the effects of government regulation
and permitting and other legal requirements; costs associated with
perfecting title for gas rights in some of our properties; our need
to use unproven technologies to extract coalbed methane in some
properties; our relationships and arrangements with CONSOL Energy
Inc.; and other factors discussed in our 2005 Form 10-K under "Risk
Factors," which is on file at the Securities and Exchange
Commission (SEC). These factors and others could cause actual
results to differ materially from the forward-looking statements
contained in this press release. CNX GAS CORPORATION AND
SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollars
in thousands, except per share data) For The Three Months Ended
March 31, 2006 2005 Revenue and Other Income: Outside Sales
$104,184 $70,125 Related Party Sales 1,630 1,698 Purchased Gas
Sales 35,768 31,719 Other Income 6,641 2,508 ------- ------- Total
Revenue and Other Income 148,223 106,050 Costs and Expenses:
Lifting Costs 7,679 5,704 Gathering and Compression Costs 11,861
8,729 Purchased Gas Costs 36,181 31,931 Other 1,829 3,342 Equity in
(Earnings) Loss of Affiliates (147) 351 General and Administrative
6,972 3,762 Depreciation, Depletion and Amortization 8,904 9,100
Interest Expense 7 - ------- ------- Total Costs and Expenses
73,286 62,919 ------- ------- Earnings Before Income Taxes 74,937
43,131 Income Taxes 29,061 16,605 ------- ------- Net Income
$45,876 $26,526 ======= ======= Earnings per share: Basic $0.30
$0.21 ======= ======= Diluted $0.30 $0.21 ======= ======= Weighted
Average Number of Common Shares Outstanding: Basic 150,833,334
122,896,667 =========== =========== Dilutive 150,931,545
122,988,359 =========== ===========
http://www.newscom.com/cgi-bin/prnh/20051213/CNXLOGO
http://photoarchive.ap.org/ DATASOURCE: CNX Gas Corporation
CONTACT: Dan Zajdel, Director - Investor and Public Relations of
CNX Gas Corporation, +1-412-854-6719, or Web site:
http://www.cnxgas.com/
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