News Release

Printer Friendly Version View printer-friendly version
<< Back
CNX Gas Reports Record Third Quarter Results; Net Income Doubles to a Record $67.4 million; Production Rises By 38% to a Record 19.7 Bcf; 2008 and 2009 Production Guidance Raised

PITTSBURGH, Oct. 22 /PRNewswire-FirstCall/ -- CNX Gas Corporation (NYSE: CXG), the leading E&P company in the Appalachian Basin, reported record net income for the quarter ended September 30, 2008 of $67.4 million, or $0.45 per diluted share. This is more than double the net income of $31.3 million, or $0.21 per diluted share, for the quarter ended September 30, 2007, and the highest quarterly net income in the company's history.

(Logo: http://www.newscom.com/cgi-bin/prnh/20051213/CNXLOGO )

Gas production net of royalty and line loss was also a record, at 19.7 billion cubic feet (Bcf), or 213.7 million cubic feet (MMcf) per day, for the quarter ended September 30, 2008. This was 38% higher than the 14.3 Bcf, or 156.0 MMcf per day, for the quarter ended September 30, 2007. It was also 5% higher than the 18.8 Bcf produced in the June 2008 quarter.

Nicholas J. DeIuliis, president and chief executive officer, said, "CNX Gas had an outstanding quarter, delivering record results that reflect the continuing growth of our CBM program, the strong early results of our shale program, and the benefits of our exploration program. Our net income and production in the third quarter were the highest in our three-year history and significantly higher than the year-earlier quarter. Also, our employees continued to work without a lost-time accident.

"In these times of economic uncertainty, CNX Gas is in a terrific position. We now anticipate, due to increased operating and capital efficiencies, of investing $515 million in our business in 2008. Our earlier capital expenditure guidance had been $552 million. Concurrently, we are raising 2008 production guidance, to 74 Bcf. In looking ahead to 2009, we estimate that we can now grow production by 15% to 85 Bcf. With current NYMEX pricing, and with nearly one-half of our production hedged at $9.74 per Mcf, we anticipate being able to fund this 2009 growth entirely through cash flow from operations. This combination may make us unique in the E&P industry."

At September 30, 2008, the company had cash on hand of $3.1 million, while $58.2 million was drawn on its credit facility. Capital expenditures for the quarter were $170.4 million and quarterly return on capital employed was 24%, on an annualized after-tax basis.


                                   TABLE 1
             FINANCIAL AND OPERATIONAL RESULTS - Period-To-Period

                              Quarter      Quarter   Nine Months  Nine Months
                               Ended        Ended        Ended        Ended
                             Sept. 30,    Sept. 30,    Sept. 30,    Sept. 30,
                                2008         2007         2008         2007
    Total Revenue and
     Other Income             $216.9       $110.7       $583.4       $359.7
    Net Income                 $67.4        $31.3       $181.6       $105.8
    Earnings per Share -
     Diluted                   $0.45        $0.21        $1.20        $0.70
    Net Cash from Operating
     Activities               $120.1        $70.5       $306.9       $211.1
    EBITDA                    $135.7        $64.8       $356.4       $208.8
    EBIT                      $117.9        $52.6       $306.1       $172.5
    Total Period
     Production (Bcf)           19.7         14.3         54.3         43.4
    Average Daily
     Production (MMcf)         213.7        156.0        198.2        159.0
    Capital Expenditures      $170.4        $73.2       $406.2       $265.1

Financial results are in millions of dollars except per share amounts. Production results are net of royalties.

The average price realized for the company's gas production was $9.73 per Mcf for the quarter ended September 30, 2008, or $2.86 higher than the $6.87 per Mcf received for the quarter ended September 30, 2007.

Unit costs for company production, exclusive of royalties, were $4.02 per Mcf in the just-ended quarter, or 16% higher than the $3.47 per Mcf for the quarter ended September 30, 2007. As a result, pre-tax unit margins for company production were $5.71 per Mcf in the September 30, 2008 quarter, an increase of 68% from $3.40 per Mcf in the September 30, 2007 quarter. The unit costs of $4.02 per Mcf were 3% lower than the unit costs of $4.15 per Mcf incurred in the quarter ended June 30, 2008.

Average unit lifting costs increased in the quarter ended September 30, 2008 as a result of several factors. Water disposal costs increased $0.10 per Mcf, as expected, due to additional volumes of water produced by CNX Gas wells in Mountaineer. Repairs and maintenance costs increased $0.09 per Mcf due to higher material expenses and higher contract labor expenses. Well closing costs increased $0.06 per Mcf in the 2008 period related to adjustments in the 2007 period related to well lives which resulted in a reduction to expense. Well service costs increased by $0.05 per Mcf due to additional work on existing wells in order to slow down expected rates of decline.

Administration costs were affected in the quarter ended September 30, 2008 by the reversal of $4.5 million of long-term incentive compensation that had previously been accrued. The reversal was based on the CNX Gas stock price on September 30, 2008 which was lower than at the end of the June 30, 2008 quarter.

Other non operating costs include interest expense of $0.12 per Mcf in the just-ended quarter, which is higher than the $0.04 per Mcf in the quarter ended September 30, 2007 due to an increased draw on the credit facility.


                                   TABLE 2
              PRICE AND COST DATA PER NET MCF - Period-To-Period

                              Quarter      Quarter    Nine Months  Nine Months
                               Ended        Ended        Ended        Ended
                             Sept. 30,    Sept. 30,    Sept. 30,    Sept. 30,
                                2008         2007         2008         2007

    Average Sales Price        $9.73        $6.87        $9.25        $7.23
    Costs - Production
      Lifting                  $0.77        $0.41        $0.64        $0.38
      Production Taxes         $0.29        $0.19        $0.28        $0.22
      DD&A                     $0.68        $0.55        $0.67        $0.52
    Total Production Costs     $1.74        $1.15        $1.59        $1.12

    Costs - Gathering
      Operating Costs          $1.05        $0.89        $0.96        $0.90
      Transportation           $0.15        $0.18        $0.13        $0.17
      DD&A                     $0.23        $0.28        $0.26        $0.30
    Total Gathering Costs      $1.43        $1.35        $1.35        $1.37
    Total Operating Costs      $3.17        $2.50        $2.94        $2.49

    Administration             $0.68        $0.89        $0.93        $0.90
    Other Non Operating*       $0.17        $0.08        $0.14        $0.14
    Total Costs                $4.02        $3.47        $4.01        $3.53

    Margin                     $5.71        $3.40        $5.24        $3.70

*Note: Other non operating costs include interest expense, exploration costs, corporate DD&A, and minority interest.

Operations Update

During the third quarter, CNX Gas employees worked another quarter without incurring a lost time incident. This raises the cumulative time worked by employees without a lost time incident to 3.3 million hours, with the last incident in June 1994.

CNX Gas continued to add to its acreage position in the quarter. Gross acres crossed the four million mark, and now stand at 4.1 million. On a net basis, CNX Gas controls 3.6 million acres. The bulk of the acres recently acquired were coalbed methane acres in Northern and Central Appalachia. The company's shale acreage position did not increase significantly from the June 2008 quarter.

Virginia CBM Operations achieved record production in the quarter. CNX Gas drilled 84 wells in its Virginia CBM Operations in the third quarter, excluding gob wells. For the first nine months 242 wells were drilled. Virginia Operations also continued its aggressive workover program to boost production from its existing wells, resulting in legacy frac production (from wells online prior to January 1, 2007) increasing by 0.5 Bcf in the September 2008 quarter, when compared to the year-earlier quarter. Additional gains came from bringing wells online more quickly after they had been drilled. CNX Gas expects to drill 300 wells in Virginia in 2008.

Mountaineer CBM Operations achieved record production in the quarter. CNX Gas drilled 33 wells during the quarter in this Northern Appalachia play. For the first nine months, 85 wells were drilled. During the quarter, Mountaineer CBM Operations brought online another satellite gas processing facility, in Marshall County, West Virginia. CNX Gas expects to drill 100 horizontal wells in Mountaineer in 2008.

Nittany CBM Operations achieved record production in the quarter. CNX Gas drilled 29 wells in the third quarter in this west-central Pennsylvania play and 75 wells in the first nine months. Results continue to exceed initial expectations. CNX Gas expects to drill 100 wells in Nittany in 2008.

In the Marcellus Shale during the third quarter, CNX Gas drilled its first and second horizontal wells in southwestern Pennsylvania. The first horizontal well cost $6 million and was stimulated with a five-stage slickwater frac. An open flow test was not conducted on this well. It came online October 2, and is producing 1.2 MMcf per day with 4,000 pounds of backpressure. The daily flow rate is expected to increase dramatically over the next few weeks as the backpressure is gradually eased. The nearby coalbed methane gathering system has the capacity to handle up to 2.5 MMcf per day from this horizontal well and is being expanded within the next two weeks to handle additional volumes.

The second horizontal well has been drilled and is currently awaiting fracing. Its cost, before fracing, has been $2.8 million. It will be fraced when the drilling of a third horizontal well is completed. The second and third wells will then be fraced concurrently.

Randy Albert, senior vice president-emerging business units noted, "CNX Gas drilled the lateral portion of its first and second horizontal Marcellus Shale wells without incurring any meaningful issues. I believe that this success is largely the result of the directional drilling experience we have with CBM drilling in Mountaineer.

"Also," Mr. Albert continued, "the vertical Marcellus Shale well that we turned online in July 2008 is currently producing 450 Mcf per day. We believe that the well has some sand issues, and could return to a daily production rate of 700-800 Mcf after cleaning."

CNX Gas will keep one horizontal rig and one vertical rig running in the Marcellus Shale for the remainder of the year.

In the Chattanooga Shale, CNX Gas drilled three horizontal wells in the quarter, bringing the yearly total to seven, and the project total to eight. No wells were connected during the September quarter, although the fifth well was connected last week. The first four wells are seeing current daily production rates of 230, 160, 100, and 230 Mcf per day, for a total of 720 Mcf per day. The daily rates for the better wells have been stable.

The latest well was drilled and completed for only $900,000. CNX Gas will be performing micro-seismic work in the fourth quarter in order to better understand the variances in individual well production.

Two conventional wells were also drilled in Tennessee in the September quarter.

CNX Gas has two rigs drilling in the Chattanooga Shale for the remainder of the year in the areas that have shown better initial results.

In the Huron Shale during the third quarter, CNX Gas drilled one additional horizontal well in eastern Kentucky. A total of two Huron wells have been drilled in 2008. The rig performing this drilling has returned to Tennessee to drill Chattanooga Shale wells for the remainder of the year. CNX Gas is building out gathering and compression in this area, with an expected in-service date of March 2009.

In the Illinois Basin, current plans are to emphasize exploring in the shallower conventional formations above the New Albany Shale until results are available from the shale consortium the company joined. CNX Gas is currently recompleting three shale wells to test shallow oil potential in both Kentucky and Indiana. Two offsets will be drilled to a shallow oil well that was drilled in the second quarter. Two new shallow wells will also be drilled. The Benoist and Tar Springs are the targeted zones.

Financial Update

The company ended the quarter with cash-on-hand of $3.1 million, down from the $23.1 million from June 30, 2008. Including acquisitions, capital expenditures were $170.4 million during the third quarter and $406.2 million through the first nine months.

These expenditures were funded mostly from internal operations. However, CNX Gas ended the quarter with $58.2 million drawn on its $200 million credit facility. CNX Gas also has outstanding letters of credit of $14.9 million. The credit facility is supported by a syndicate of twelve banks, with the lead banks being PNC Bank and Citibank. The facility provides to CNX Gas margin- free hedging capacity.

The counterparties to CNX Gas hedges are all members of the banking syndicate.

Guidance

The 2008 production guidance has been increased again, to 74 Bcf, which now represents a 27% growth in production from the 58.2 Bcf achieved in 2007. CNX Gas continues to see better-then-expected results in its development program and its shale exploration program. Production guidance for 2009 has also been raised, to 85 Bcf. CNX Gas maintains its strategic vision of producing 100 Bcf by 2010 and will continue to re-invest in its core business as long as we can earn a meaningful spread over our cost of capital.

    The capital expenditure guidance for 2008 has been reduced from $552
million to $515 million.



                                   TABLE 3
                            GUIDANCE - Three-Year

                                       2008            2009          2010
    Total Yearly Production (Bcf)        74              85           100
    Production Growth                   27%             15%           18%
    Volumes Hedged (Bcf)               43.4            41.9          22.8
    Average Hedge Price ($/Mcf)       $9.25           $9.74         $9.61
    Capital Expenditures ($MM)         $515             N/A           N/A

CNX Gas will host a conference call today at 10:00 a.m. Eastern Time to discuss the company's third quarter results. The teleconference can be heard "live" at the investor relations portion of the company web site: http://www.cnxgas.com.

     Contact:
     Dan Zajdel
     Vice President - Investor Relations
     (412) 200-6719
     danzajdel@cnxgas.com
     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 they are useful to an investor in evaluating CNX Gas because they are 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      Quarter   Nine Months  Nine Months
                                Ended        Ended        Ended        Ended
                              Sept. 30,    Sept. 30,    Sept. 30,    Sept. 30,
                                 2008         2007         2008         2007

    Net Income                 $67,415      $31,296     $181,591     $105,780
    Add:  Interest Expense       2,412        1,221        5,567        3,686
    Less:  Interest Income         116          629          358        3,363
    Add:  Income Taxes          48,160       20,701      119,287       66,387
    Earnings Before Interest
     & Taxes (EBIT)           $117,871      $52,589     $306,087     $172,490
    Add:  Depreciation,
     Depletion, &
     Amortization               17,803       12,248       50,340       36,325
    EBITDA                    $135,674      $64,837     $356,427     $208,815



                                   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.


    Capital Employed                                 As of          As of
                                                   Sept. 30,    December 31,
                                                     2008           2007

    Total assets                                  $1,854,897     $1,380,703
    Less liabilities:
      Total current liabilities (other than
       current portion of  indebtedness)            (143,821)       (56,865)
      Total long-term liabilities (other
       than indebtedness)                           (302,265)      (227,833)
    Total Capital Employed                        $1,408,811     $1,096,005

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. On the next page is a calculation of ROCE for the quarter ended September 30, 2008 and the nine months ended September 30, 2008. In order to annualize the results on a compounded basis, a "1" is added to the quarterly ROCE, before it is raised to the fourth power, while for the nine months' ROCE, a "1" is added before it is raised to the four-thirds power.


                                                     Quarter      Nine Months
                                                      Ended          Ended
                                                  September 30,  September 30,
    Return on Capital Employed                         2008           2008
    Net Income                                       $67,415       $181,591
    Financing costs (after-tax):                           -              -
      Third-party debt                                     -              -
      All other financing costs                       (1,416)        (3,360)
    Total financing costs                             (1,416)        (3,360)
    Earnings excluding financing costs               $68,831       $184,951
    Average capital employed                      $1,254,203     $1,252,408
    Return on average capital employed                   5.5%          14.8%
    Return on average capital employed-annualized       23.8%          20.1%

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 (as defined in Section 21E of the Securities Exchange Act of 1934). These statements involve risks and uncertainties that could cause actual results to differ materially from projected results. Accordingly, investors should not place undue reliance on forward-looking statements as a prediction of actual results. 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; the availability of personnel and equipment; increased costs; the effects of government regulation and permitting and other legal requirements; legal uncertainties regarding the ownership of the coalbed methane estate; 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; factors affecting CONSOL Energy's coal mining operations, such as changes in the coal market, the risk inherent in coal mining, and compliance with laws, and other factors discussed under "Risk Factors" in the 10-K for the year ended December 31, 2007. We are including this cautionary statement in this release 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.



                       CNX GAS CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (Unaudited)
                  (Dollars in thousands, except per share data)

                                   For the Three              For the Nine
                                    Months Ended              Months Ended
                                    September 30,             September 30,
                                  2008         2007         2008         2007
    Revenue and Other Income:
      Outside Sales            $188,612      $96,222     $494,624     $306,615
      Related Party Sales         2,587        2,379        8,035        6,980
      Royalty Interest Gas
       Sales                     22,902       10,175       61,921       36,841
      Purchased Gas Sales         1,674          821        6,860        3,297
      Other Income                1,172        1,134       11,929        6,005
        Total Revenue and
         Other Income           216,947      110,731      583,369      359,738
    Costs and Expenses:
      Lifting Costs              20,709        8,588       50,176       25,617
      Gathering and
       Compression Costs         23,642       15,283       59,034       46,593
      Royalty Interest Gas
       Costs                     21,055        8,543       59,057       31,736
      Purchased Gas Costs         1,664          495        6,607        2,987
      Other                         872         (437)       1,679        1,558
      General and
       Administrative            13,527       12,793       50,701       39,069
      Depreciation, Depletion
       and Amortization          17,803       12,248       50,340       36,325
      Interest Expense            2,412        1,221        5,567        3,686
        Total Costs and
         Expenses               101,684       58,734      283,161      187,571
    Earnings Before Income
     Taxes and Minority
     Interest                   115,263       51,997      300,208      172,167
    Minority Interest              (312)                     (670)
    Earnings Before
     Income Taxes               115,575       51,997      300,878      172,167
    Income Taxes                 48,160       20,701      119,287       66,387
    Net Income                  $67,415      $31,296     $181,591     $105,780
    Earnings Per Share:
      Basic                       $0.45        $0.21        $1.20        $0.70
      Dilutive                    $0.45        $0.21        $1.20        $0.70

    Weighted Average Number
     of Common Shares
     Outstanding:
      Basic                 150,939,418  150,895,233  150,956,753  150,877,067
      Dilutive              151,292,158  151,149,432  151,366,746  151,103,827

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



                               CNX Gas Corporation
                           CONSOLIDATED BALANCE SHEETS
                 (Dollars in thousands - except per share data)

                                                (Unaudited)
                                               September 30,      December 31,
                                                     2008              2007
    ASSETS
    Current Assets:
      Cash and Cash Equivalents                     $3,116           $32,048
      Accounts and Notes Receivable:
        Trade                                       64,356            38,680
        Related Parties                                830             1,022
        Other Receivables                            6,624             1,406
      Recoverable Income Taxes                                           972
      Derivatives                                   77,756            10,711
      Other                                          1,876             3,148
          Total Current Assets                     154,558            87,987

    Property, Plant and Equipment:
      Property, Plant and Equipment              1,943,084         1,509,060
        Less - Accumulated Depreciation,
         Depletion and Amortization                301,790           254,154
          Total Property, Plant and
           Equipment - Net                       1,641,294         1,254,906

    Other Assets:
      Investment in Affiliates                      25,005            28,284
      Derivatives                                   29,238
      Other                                          4,802             9,526
         Total Other Assets                         59,045            37,810
           TOTAL ASSETS                         $1,854,897        $1,380,703

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



                               CNX Gas Corporation
                           CONSOLIDATED BALANCE SHEETS
                 (Dollars in thousands - except per share data)

                                                (Unaudited)
                                               September 30,      December 31,
                                                     2008              2007
    LIABILITIES AND STOCKHOLDERS' EQUITY
    Current Liabilities:
      Accounts Payable                             $69,101           $30,263
      Accrued Royalties                             22,100            12,896
      Accrued Severance Taxes                        4,755             2,620
      Short-Term Notes Payable                      58,200
      Deferred Income Taxes                         28,203             1,269
      Accrued Income Taxes                           4,219
      Current Portion of Long-Term Debt              7,563             5,819
      Other Current Liabilities                     15,443             9,817
          Total Current Liabilities                209,584            62,684

    Long-Term Debt:
      Long-Term Debt                                16,430             5,799
      Capital Lease Obligations                     58,935            61,150
          Total Long-Term Debt                      75,365            66,949

    Deferred Credits and Other Liabilities:
      Derivatives                                                      1,092
      Deferred Income Taxes                        259,826           188,415
      Asset Retirement Obligations                   7,207             3,981
      Postretirement Benefits Other Than
       Pensions                                      2,896             2,700
      Other                                         33,642            30,965
          Total Deferred Credits and
           Other Liabilities                       303,571           227,153

    Minority Interest                               (1,306)              680
          Total Liabilities and Minority
           Interest                                587,214           357,466

    Stockholders' Equity:
      Common Stock, $.01 par value;
       200,000,000 Shares Authorized,
       150,971,636 Issued and Outstanding
       at September 30, 2008 and 150,915,198
       Issued and Outstanding at December 31,
       2007                                          1,510             1,509
      Capital in Excess of Par Value               788,782           785,575
      Retained Earnings                            411,473           229,962
      Other Comprehensive Loss                      65,918             6,191

          Total Stockholders' Equity             1,267,683         1,023,237

          TOTAL LIABILITIES AND
           STOCKHOLDERS' EQUITY                 $1,854,897        $1,380,703

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



                       CNX GAS CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                  (Dollars in Thousands - except per share data)

                                                    Accumulated
                              Capital in               Other        Total
                       Common  Excess of  Retained Comprehensive Stockholders'
                        Stock  Par Value  Earnings Income (Loss)    Equity

    Balance -
     December 31,
     2007              $1,509   $785,575  $229,962     $6,191     $1,023,237

    (Unaudited)

    Net Income                             181,591                   181,591
    Gas Cash Flow
     Hedge (Net
     of ($36,962) tax)                                 59,809         59,809
    Issuance of
     Common Stock           1                                              1
    Amortization
     of Prior
     Service Costs
     and Actuarial
     Losses (Net of
     $38 Tax)                                             (62)           (62)
    Comprehensive
     Income (Loss)          1              181,591     59,747        241,339
    Cumulative Effect
     of FAS 158
     Measurement
     Adoption (Net of
     $64 tax)                                  (80)       (20)          (100)
    Stock Options
     Exercised                       488                                 488
    Tax Benefit from
     Stock Based
     Compensation                    184                                 184
    Amortization of
     Stock Based
     Compensation
     Awards                        2,535                               2,535
    Balance -
     September 30,
     2008              $1,510   $788,782  $411,473    $65,918     $1,267,683

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



                      CNX GAS CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                             (Dollars in thousands)

                                                  For the Nine Months Ended
                                                        September 30,
                                                    2008              2007
    Operating Activities:
      Net Income                                 $181,591          $105,780
      Adjustments to Reconcile Net Income
       to Net Cash Provided by Operating
       Activities:
        Depreciation, Depletion and
         Amortization                               50,340            36,325
        Stock-based Compensation                     2,535             2,417
        Change in Minority Interest                 (1,670)
        Deferred Income Taxes                       59,908            52,121
        Equity in Earnings of Affiliates              (352)           (1,330)
        Changes in Operating Assets:
          Accounts Receivable                      (27,925)           15,758
          Related Party Receivable                     192             2,745
          Other Current Assets                         537             1,353
        Changes in Other Assets                      4,243             2,131
        Changes in Operating Liabilities:
          Accounts Payable                          12,823            (7,190)
          Related Party Liability                                        152
          Income Taxes                               6,006              (771)
          Other Current Liabilities                 16,877              (332)
        Changes in Other Liabilities                 1,580             3,170
        Other                                          234            (1,254)
            Net Cash Provided by
             Operating Activities                  306,919           211,075
    Investing Activities:
       Capital Expenditures                       (370,180)         (203,967)
       Acquisition of Knox Energy                  (36,000)
       Acquisition of Mineral Rights                                 (61,149)
       Investment in Equity Affiliates               1,081            (2,259)
       Proceeds From Sales of Assets                   450               187
            Net Cash Used in Investing
             Activities                           (404,649)         (267,188)
    Financing Activities:
       Capital Lease Payments                       (2,058)           (1,912)
       Proceeds from Variable Interest
        Equity Debt                                 11,984             9,000
       Proceeds from Short-Term
        Borrowings                                  58,200
       Exercise of Stock Options                       488               220
       Tax Benefit from Stock Based
        Compensation                                   184                35
            Net Cash Provided by
             Financing Activities                   68,798             7,343
    Net Decrease in Cash and Cash
     Equivalents                                   (28,932)          (48,770)
    Cash and Cash Equivalents at
     Beginning of Period                            32,048           107,173
            Cash and Cash Equivalents at
             End of Period                          $3,116           $58,403

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

SOURCE CNX Gas Corporation



Print Page Print Page | E-mail Page Email Page | RSS Feeds RSS Feeds | E-mail Alerts Email Alerts | Financial Tear Sheet Financial Tear Sheet