Earnings call: CONSOL Energy reported a net income of $58 million

CONSOL Energy Inc (NYSE:CNX). (NYSE: CEIX) demonstrated resilience in the second quarter of 2024, delivering strong financial and operational performance. The temporary closure of the Port of Baltimore export channel, following the collapse of the Francis Scott Key Bridge, did not significantly hinder the company's momentum. CONSOL Energy (NYSE:CEIX) successfully navigated these challenges, securing alternative port capacity and managing production costs to achieve robust cash margins per ton sold.

The company reported a net income of $58 million and an adjusted EBITDA of $125 million for the quarter, alongside generating $59 million of free cash flow. Sales volumes reached approximately 5.8 million tons of Pennsylvania Mining Complex (PMC) product, with 2.9 million tons in the export market. CONSOL Energy has also increased its average coal revenue per ton sold range and adjusted its PMC sales volume guidance for 2024.

Key Takeaways

• CONSOL Energy reported a strong Q2 with $58 million in net income and $125 million in adjusted EBITDA.
• The company sold around 5.8 million tons of PMC product, with 2.9 million tons exported.
• Despite the Port of Baltimore closure, alternative port capacity was secured.
• CONSOL Energy increased its average coal revenue per ton sold range to $63.50 to $66.50.
• The PMC sales volume guidance range for 2024 has been adjusted to 24.5 million to 26 million tons.
• $55 million was spent on capital expenditures, and the company received delayed equipment.
• CONSOL Energy remains focused on safe operations, managing spending, and securing long-term contracts.

Company Outlook

• CONSOL Energy is optimistic about future industrial demand and aims to create value for shareholders.
• The company has increased its contracted book, completing fixed-price multiyear contracts.
• Capital expenditure guidance range has been increased due to easing supply chain bottlenecks.

Bearish Highlights

• The temporary closure of the Port of Baltimore impacted Q2 results.
• CONSOL Energy is working on an insurance claim for business interruption recovery.

Bullish Highlights

• Increased electric demand from factories, data centers, and electrification could extend the life of coal-fired power plants.
• The company participated in capacity auctions, indicating a potential extension of coal plant operations.
• CONSOL Energy's contracted business is robust, with 14.5 million tons contracted for 2025.

Misses

• Low pet coke prices and high vessel freight rates have paused export contracts.
• The company is working through a temporary setback due to the Port of Baltimore closure.

Q&A Highlights

• CONSOL Energy plans to contract more domestically at an average price of around $60 per ton.
• The contracted business has a sensitivity of $0.14 per dollar change in API2.
• The Itmann asset is expected to increase production with additional staffing and equipment in Q3.

CONSOL Energy's earnings call underscored its strong performance in Q2 2024, with a focus on maintaining a robust financial position, managing operational costs, and capitalizing on market opportunities. The company's ability to swiftly adapt to the unforeseen closure of the Port of Baltimore export channel reflects its operational agility and commitment to shareholder value. With increased guidance on coal revenue and sales volume, along with a solid contracted business portfolio, CONSOL Energy appears well-positioned to navigate the evolving energy market landscape.

InvestingPro Insights

CONSOL Energy Inc. (NYSE: CEIX) has shown a notable ability to adapt and thrive despite recent challenges. The company's strategic maneuvers are reflected in its financial metrics and management actions, which offer a deeper insight into its market position and future prospects.

InvestingPro Data indicates a strong financial footing with a market capitalization of $2.71 billion and an attractive price-to-earnings (P/E) ratio of 5.37 based on the last twelve months as of Q1 2024. This low P/E ratio could suggest that the stock is undervalued relative to its earnings. Additionally, the company's gross profit margin stands at a healthy 39.66%, showing its ability to maintain profitability in its operations.

An InvestingPro Tip highlights that CONSOL Energy's management has been aggressively buying back shares, signaling confidence in the company's value and future performance. Another tip to consider is that CONSOL Energy holds more cash than debt on its balance sheet, providing financial stability and flexibility for future investments or to weather economic downturns.

For readers interested in a deeper dive, there are 10 additional InvestingPro Tips available at https://www.investing.com/pro/CEIX, which can provide further guidance on the company's financial health and investment potential.

The recent share price volatility, with a one-week total return of -8.71%, may concern some investors, yet the company's strong return over the last five years and predictions of profitability this year, as noted in an InvestingPro Tip, could indicate an opportunity for those with a long-term investment horizon. With a fair value estimate of $114.25, according to InvestingPro, investors might find the current price level an attractive entry point.

CONSOL Energy's ability to generate solid earnings, maintain a strong balance sheet, and secure long-term contracts, as reported in the article, aligns with the insights provided by InvestingPro, painting a picture of a company that is well-equipped to continue its upward trajectory in the energy sector.

Full transcript - Consol Energy Inc (CEIX) Q2 2024:

Operator: Good morning, ladies and gentlemen. And welcome to the CONSOL Energy CIEX Second Quarter 2024 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Thursday, August 8th, 2024. I would now like to turn the conference over to Nathan Tucker. Please go ahead.

Nathan Tucker: Good morning everyone and thank you for joining us. Welcome to CONSOL Energy’s second quarter 2024 earnings conference call. Any forward-looking statements or comments we make about future events are subject to risk, certain of which we have outlined in our press release and in our SEC filing, and are considered forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. We do not undertake any obligations of updating any forward-looking statements for future events or otherwise. We will also be discussing certain non-GAAP financial measures, which are defined and reconciled to comparable GAAP financial measures, in our 2024 second quarter press release, furnished to the SEC on Form 8-K, which is also posted on our website. Additionally, we filed our 10-Q for the quarter ended June 30th, 2024, with the SEC this morning. You can find additional information regarding the company on our website, www.consolenergy.com, which also includes a supplemental slide deck that was posted this morning. On the call with me today are Jimmy Brock, our Chief Executive Officer; Mitesh Thakkar, our President and Chief Financial Officer; and Bob Braithwaite, our Senior Vice President of Marketing and Sales. In his prepared remarks, Jimmy will highlight our second quarter achievements and discussion our operations and response to the Francis Scott Key Bridge collapse. Mitesh will then provide a market update, financial performance recap, and 2024 outlook. In his closing comments, Jimmy will lay out our key priorities for the remainder of this year. There will be a Q&A session following our prepared remarks in which Bob will also participate. With that, let me turn it over to Jimmy.

Jimmy Brock: Thank you, Nate. Good morning everyone. During the second quarter, CONSOL Energy posted a strong financial and operational performance. Despite the nearly two-month closure of the Port of Baltimore export channel due to the Francis Scott Key Bridge collapse. In the quarter, while successfully securing alternative port capacity and prudently managing our production cost, we achieved strong PMC cash margins per ton sold despite the additional transportation cost of moving to an alternative port. Let me be clear, the temporary closure of the Port of Baltimore was a Black Swan event, which created unprecedented challenges. Nonetheless, this demonstrated the agility of the CONSOL team and our railroad partner, Norfolk Southern (NYSE:NSC), as we quickly pivoted to identify an alternate route to partially mitigate the impact on our ability to serve our export customers. As a result of our agility, we were able to sell approximately 5.8 million tons of our PMC product during the second quarter, including 2.9 million tons into the export market. We also generated approximately $59 million of free cash flow in the quarter, which is a testament to the resiliency of our business model and strong relationships with our logistics partners and customers. On the operations front, beginning with our safety performance. Our Bailey preparation plant, Itmann preparation plant, and the CONSOL Marine Terminal all had zero employee recordable incidents during the second quarter of 2024. Our coal operations finished the quarter with a total recordable incident rate, well below the national average for underground coal mines. Coal production at the Pennsylvania Mining Complex came in at 5.6 million tons in Q2 24 compared to 6.3 million tons in the prior year period. Although production was lower due to us throttling back our operations to align with our reduced export capacity caused by the temporary closure of the Port of Baltimore, our performance was respectable. -- considering that we produced only 11% fewer tons than in the prior year quarter, by almost immediately securing incremental capacity at an alternative Port in Virginia. As such, we shipped over 1.1 million tons to this port during the quarter. During Q2 2024, we successfully managed our reduced production schedule, maximized our stockpile capacity, and rerouted vessels and trains to continue to fulfill our sales obligations. Our quick action, and the continued demand for our product, resulted in nearly every customer deferring shipments to later in the year rather than canceling shipments despite us having limited export capacity for approximately two-thirds of the quarter. Our PMC average cash cost of coal sold per ton for Q2 2024 was $39.82 compared to $36.33 in Q2 2023, mainly due to reduced fixed cost leverage caused by the reduction in tonnage. Looking ahead to the back half of 2024, we expect normal production levels and we have only one longwall move remaining at the PMC for the balance of the year. Moving on to the Itmann Complex. During the second quarter, of 2024, sales from the complex, including third-party tons were 164,000 tons compared to 193,000 tons in Q1 2024. This impairment was due to fewer purchased coal tons being shipped due in part to the FSK bridge collapse and the continued impact of equipment delivery delays with a major supplier. However, on a positive note, we successfully achieved near-full staffing levels to allow us to operate all three super sections as we ramp up. We have continued our mains development, which will set this mine up for long-term success. Looking forward to the remainder of the year, as equipment is received, employees are trained, and retreat mining begins, we expect to see efficiency gains and production improvements. Additionally, there has been some recent pullback in met coal demand, which could serve to help us on the supply chain and employee turnover side as well. Although the ramp-up has been longer than expected at the Itmann Edman, we remain excited about this low-vol product and are eager to produce at full run rate capacity once all the delayed section equipment is received. Moving on to the CONSOL Marine Terminal. Despite losing nearly two months of export capability through the Port of Baltimore, we achieved a CMT throughput volume of 2.3 million tons during Q2 2024 and which represents approximately 43% of our Q2 2023 throughput volume. When adjusting for the amount of time the CMT was fully opened in the quarter, we essentially kept pace with the shipping levels of Q2 2023, which was our highest throughput quarter ever at CMT. During the temporary closure of the Port of Baltimore, the CMT team accelerated its planned summer shutdown maintenance, which had originally been scheduled to occur early in the third quarter. This acceleration gave us the ability to load and ship vessels during the normal shutdown period, while the mines and railroads performed their maintenance work. As a result, we were able to reduce additional inventory at the port in early July. For Q2 2024, terminal revenues came in at $12 million and CMT operating cash costs were $6.1 million. Accordingly, CMT adjusted EBITDA finished at $5.2 million compared to $23.9 million in the prior year period. With that, let me turn the call over to Mitesh to provide the marketing and financial updates.

Mitesh Thakkar: Thank you, Jimmy and good morning everyone. Let me start with an update on the marketing front and our contracting progress. During 2Q 2024, we sold 5.8 million tons of PMC coal at an average coal revenue per ton sold of $66.83 compared to 6.4 million tons at $81.27 in the year ago period. During the quarter, we incurred incremental transportation costs of approximately $10 per ton on those tons that were redirected to the alternative port in Virginia. This incremental shipping cost impaired our average core revenue by approximately $2 per ton sold. Remarkably, we sold only 9% fewer tons than in the prior year period, demonstrating our team's diligence, agility and strong relationships. On the international front, as previously mentioned, we were restricted in our ability to export during 2Q 2024 until late May. By securing incremental export capacity at an alternative port, we were able to take advantage of strong Indian industrial demand ahead of its monsoon season, which began in early June. Additionally, during the quarter, we successfully moved tons into the industrial and crossover metallurgical markets, specifically in Egypt, Brazil, and China. Furthermore, as India exits its monsoon season during the third quarter, we expect demand to pick back up due to lower retail inventories and construction activities resuming. This quarter highlighted the importance of having a healthy sales mix of domestic and international contracts as well as our flexibility to quickly pay better. Looking ahead internationally, we expect India to remain a major customer of our high CV thermal coal, specifically for use in industrial application as it continues its aggressive infrastructure buildout. In our recently announced budget, India's finance minister highlighted that infrastructure spending remains a priority for the country in order to meet Prime Minister Modi's target of making India a developed nation by 2047. Infrastructure spending accounts for one of India's highest budget expenditures second only to defense spending. Since 2022, India has nearly doubled its allocated spending towards infrastructure buildout. We expect this trend to continue and create a steady upward demand co, particularly for our high heat content product. Simultaneously, India is also going through a consolidation phase in its cement industry where smaller regional producers are being rolled into larger global players who have demonstrated an ability to take a longer term view and enter into long-term contracts with companies such as CONSOL. While the industry remains very regional and fragmented, it continues to grow at a healthy pace to support the country's aspirations. In the domestic market, due to the recent heat wave experienced across much of the country, we have seen increased coal burn and decreased coal stockpiles at domestic power plants, specifically in the markets we serve. According to EBA, net coal burned increased by approximately 32% in June when compared to May 2024, which resulted in reduction in stockpiles. During the month of July, we saw increased PJM West power prices, which were up approximately 50% compared to June. We believe this will lead to a further increase in coal burn and reduction in power plant stockpiles even as low natural gas prices continue to weigh on the fuel mix. Additionally, this heat wave led to an increase in scheduled trains with many of our domestic customers. Looking forward domestically, along with the recent heat wave, that are long-term indicators for potential growth and demand. In late July, the latest PJM 2025-2026 capacity auction settled at just under $270 per megawatt day, an increase of more than 800% compared to prices just one year ago. This appears to be a clear message that the supply/demand balance is tightening, a sharp increase of electric demand to meet the requirements of factories, data centers and broader electrification needs, risk straining our electric grids and underscores the need for maintaining our existing coal fleet. These capacity auctions provide a critical revenue source for power plants in the region and lease payments aim to ensure that generators are ready to solve the grid whenever the PJM RTO needs them. As such, a significant increase of pricing in the most recent auction is a clear investment signal and could very well extend the life of coal-fired power plants in the PJM. Furthermore, as discussed in the past, we remain convinced that the expected increased energy consumption due to the buildout of artificial intelligence, electric vehicles, data centers and other technological advances will expand the reliance on electricity as a source of energy. Our buildup of the transmission lines and distribution grids will be needed in order to handle this increased demand, which will require large amounts of capital and long lead-times and could face opposition from affected communities. These factors could slow renewables growth and the development of data centers to prolong the use of fossil fuels and extend the energy transition overall. CONSOL will continue to support its domestic customers and everyday Americans through its ability to provide an economic, reliable, and dispatchable source of energy even as it expands its reach to play a significant role in global infrastructure buildout. Moving on to the contracting front. The tailwinds I just mentioned have helped us increase our contracted book since we last reported. At the PMC, we are near fully contracted in 2024 based on the midpoint of our production guidance, and we have 14.5 million tons contracted for 2025. Consistent with the anticipated increase in domestic demand, we recently completed a fixed-price multiyear contract for 4 million tons with the domestic utility to be delivered through 2028, which followed another long-term contract that we previously announced in 1Q 2024. Now, let me provide a quick update on our financial results before moving on to our 2024 guidance and outlook. This morning, we reported a strong second quarter 2024 financial performance despite the operational headwinds previously discussed. We generated net income of $58 million or $1.96 per diluted share and adjusted EBITDA of $125 million. Furthermore, we spent $55 million in CapEx as we continue to invest in our assets and received some previously delayed equipment at the PMC. Accordingly, we generated $59 million of free cash flow compared to our 124 free cash flow of $41 million despite the reduced tonnage. Finally, we deployed $130 million through a 10b5-1 plan towards share buybacks and reduced outstanding debt by $3 million. At the beginning of 2024, we expected the second quarter to be our strongest quarter of the year due to a seasonally strong shipment schedule and the absence of longwall moves. However, the temporary closure of the Port of Portmore significantly impacted our second quarter financial results. As such, we are working on a business interruption recovery claim with our insurance providers. Now, let me provide a quick update on our outlook for 2024. On the pricing front, given our strong performance in 2Q 2024, despite the increased transportation costs, we are increasing the bottom end of our average coal revenue per ton sold range by $1 to an updated range of $63.50 to $66.50. Additionally, we are moving up the bottom end of our PMC sales volume guidance range by 0.5 million tons to an updated range of 24.5 million to 26 million tons, reflecting our expectations of strong operational performance and the slightly earlier-than-expected resumption of exports out of Baltimore. For our Itmann Mining complex, we are maintaining our sales volume guidance range of 700,000 to 900,000 tons and remain optimistic about our ability to achieve a full ramp-up by the end of this year given our recent success on the staffing front, but still subject to expected equipment deliveries staying on schedule. Lastly, the capital expenditures front, based on the easing of supply chain bottlenecks and equipment delivery backlogs, we are increasing our CapEx guidance range by $10 million to a range of $165 million to $190 million from the previous range of $155 million to $180 million. With that, let me turn it back to Jimmy.

Jimmy Brock: Thank you, Mitesh. Let me now provide an update on our capital allocation strategy. Through a 10b5-1 plan put into place in Q1 2024, we deployed $13 million of our free cash flow to repurchase shares of our outstanding common stock in the second quarter. Year-to-date, through the end of Q2 2024, we have spent $71 million return on free cash flow to our shareholders in the form of share buybacks. Since restarting our share repurchase program in late 2022, we've retired 6.1 million shares or approximately 18% of our public float through June 30th, 2024. Due to the uncertainty surrounding the Francis Scott Key bridge collapse and the timing of free cash flow generation in the quarter, which was heavily weighted toward the back half of June, we repurchased fewer shares than we have in recent quarters. As we move through the second half of 2024, we remain focused on returning value to our shareholders. As you know, we have consistently disclosed that our vision since 2022 has been to maximize cash flow generation, while maintaining a strong balance sheet and liquidity, returning capital to shareholders, and when prudent, allocating capital towards growth and diversification opportunities. During Q2, we slowed our return of capital efforts as we navigated uncertainties around the temporary closure and shipment restrictions at the Port of Baltimore. Our vision has not changed as we look towards the rest of the year. For the remainder of 2024, we will be focused on a few key areas that we believe are crucial for our company. First, we will continue to focus on running our operations safely and consistently. We have plans in place to mitigate as most of the financial impact of the Port of Baltimore incident as possible. This includes the insurance recovery claim that Mitesh highlighted previously and additional production where possible. Second, we are focusing our efforts on managing our spending levels and constantly identifying ways to mitigate the impact of inflationary pressures. Third, we are prioritizing post-summer contracting as we leverage our high-quality product to layer in multiple long-term fixed-price contracts. Domestically, we have already layered in such contracts and will continue to look for similar opportunities. The recent PJM auction results provide another indication of improving long-term demand in the domestic market. Internationally, we anticipate strong industrial demand, specifically in India, post monsoon season as we look to continue filling out more of our book in 2025 and beyond. Finally, we remain focused on creating long-term value for our shareholders. Our balance sheet is extremely strong, and we built additional flexibility during the second quarter despite navigating reduced export capacity. We are dedicated to prioritizing the highest rate of return and the most advantageous use of our capital. Let me finish by acknowledging again the hard work of our employees. This quarter, we truly showcased our best asset, our people. Across the organization, we effectively work together to mitigate the effects of the Port of Baltimore incident as much as possible. The team successfully optimized our sales book and secured additional export capacity, produced to the market, manage cost and accelerated some maintenance work to ensure we were ready to throttle up when the channel reopened. I am very grateful for our team members' dedication and extremely pleased with how this unprecedented quarter was managed. With that, I will hand the call back over to Nate.

Nathan Tucker: Thank you, Jimmy. We will now move to the Q&A session of our call. At this time, I'd like to ask our operator to please provide the instructions to our callers.

Operator: Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Your first question comes from Nathan Martin of Benchmark Company. Please go ahead.

Nathan Martin: Thanks, operator. Good morning everyone and congrats on the results, especially given the unfortunate events in Baltimore.

Jimmy Brock: Thank you, Nate.

Nathan Martin: Maybe I'll start on the pricing side. For the second quarter in a row, price per ton actually above full year guidance despite what I think, Mitesh, you said was about a $2 per ton impact due to the alternative transportation you guys had to utilize. Can we talk about the drivers there? Is part of it just a lower shipment denominator in the second quarter? Or is this mix related? It would be great to get some more details.

Bob Braithwaite: Yes, a lot of that was mix related, Nate. Right now, if you look at our entire portfolio, the average cost -- our average price of our domestic tons exceeds our export tons, and we focused on shipping as much domestic tons dooring the bridge outage we can, which ultimately boosted our price in the second quarter.

Nathan Martin: Was any of that crossover met as well, did that benefit, Bob?

Bob Braithwaite: Yes. It was. We focused on shipping as much as we could in the domestic market -- I'm sorry, the cross-seller metallurgical market as well. China was certainly a big taker of that product in the second quarter. We actually moved over 800,000 tons of China year-to-date, and it looks like we're going to be well north of 1 million by the time it's all said and done.

Nathan Martin: Okay, great. And then maybe related, I know you guys increased the low end of your full year price for tonne guidance, but even so that would imply second half realizations kind of take a step down. So, what's driving that assumption? Maybe curious what API2 kind of price assumptions you're including there as well?

Bob Braithwaite: Well, as you know, we reported this morning, we're near fully contracted. We have close to 25 million tons put to bed for this year. As we contracted out for the second half, we were able to increase our lower end of the guidance really two reasons. One, the channel opened, I'd say, a week or two ahead of schedule, which certainly helped us. And then secondly, the balance of the open tons that we did sell were higher than we anticipated as they moved into the crossover market. As I mentioned, China continues to be a big taker of those. We -- our midpoint of our pricing guidance is based on $110 API2 price. So, as you know, today, we're closer to 120. And the sensitivity there is about $0.09 across the entire portfolio. So, if we have around 120 for the back half of the year, that would imply an additional near-dollar uplift from the midpoint of the pricing guidance.

Nathan Martin: Okay. So, we could maybe see a little bit of an uplift if things kind of stay where they are. Okay, got it. Maybe shifting over to your update on the contracting side. You only added about 1 million tons, I think, in 2025 at 14.5 million tons now. I look back in 2030 and in 2022 for that matter, you guys added roughly 3 million tons between the first and second quarter. So, -- and we're sitting materially higher from total commitments as well. So, just curious kind of what's changed there? Are you guys a little bit behind where you want to be? I think Jimmy mentioned that you're kind of prioritizing contracting post summer? Or is this maybe just due to heavier export mix? Just would be great to get your thoughts there, too.

Bob Braithwaite: No, I'd say a couple of things, Nate. Number one, we are in the middle of some negotiations domestically. So, I'd say stay tuned there. I think we'll put some more volume to bed before the next earnings call domestically. And then on the export side, we're being patient. We certainly had opportunities to contract further out. But right now, pet coke prices are, I would say, near the floor and then you have freight rates -- vessel freight rates that are near all-time highs. So, when you look at that in these negotiations that we've been, we didn't think that this price was reasonable. So, we decided to kind of take a pause there. The demand is certainly still there. And I think back half of the year, we'll be successful in concluding some more volume to the export market. But then I'll also say this -- as Mitesh mentioned, this PJM auction is really opening up a lot of eyes, and I think there's going to be more demand domestically as well, which should boost prices. So, we always sell to the best market, and we're going to continue to do that. We have an idea in the back of our head where we're willing to contract today. And as we just mentioned, too, on the call, we did a four-year deal. And the average price in that four-year deal across the term was close to $60 and that's kind of where our goalposts are right now. And as we see -- as we move forward, we're going to expect to continue to contract near that level.

Jimmy Brock: And Nate also remember that there is inherent lumpiness in our contracting in general. And with us becoming more export-oriented than typical. I think that also impairs our ability to do long-term contracting. Although as Bob mentioned up, a lot of domestic opportunities are opening up that could counterbalance that.

Nathan Martin: Okay. Appreciate those thoughts, guys. And then maybe just one last one, sticking with 2025, that 14.5 million tons. Bob, could you kind of give us the usual breakdown of what buckets those go into? And then maybe the approximate price or contracted at?

Bob Braithwaite: Yes. So, it's about $2.5 million linked to power. $6.9 million is domestic and fixed, balance is export. And all the -- I should say, all the 300,000 tons are -- have ceilings and floors and are index-linked. 300,000 tons of that would be fixed. Our current sensitivity right now, to give you an idea, is about $0.14 per every dollar change in API2 based on a 26 million tonne production rate. I will tell you that we're forecasting 10-so, $100 API2 price in that number. As you know, it's higher today. And at $100 API2 price, we're looking at low 60s across the 14.5 million tons.

Nathan Martin: Okay, great. Very helpful guys. I appreciate the time and best of luck in the second half.

Mitesh Thakkar: Thanks, Nate.

Jimmy Brock: Thanks Nate.

Operator: [Operator Instructions] Your next question comes from Lucas Pipes of B. Riley Securities. Please go ahead.

Lucas Pipes: Thank you very much, operator. Good morning, everyone. Way to manage that challenge in Q2. I wanted to ask about 2025. Bob, did you mention kind of where that average price of the contracted business, 14.5 million tons with that $100 per metric ton API2 assumption?

Bob Braithwaite: Low 60s, Lucas.

Lucas Pipes: Low 60s. And then the sensitivity you mentioned, $0.14 based on 26 million tons. Just to clarify there, is that making an assumption on additional export sales? Obviously, like on -- I would assume on higher export sales sensitivity could be higher. So, I just wanted to make sure it's clear.

Bob Braithwaite: Yes. So, to be clear, the volume that we currently have under contract, every dollar movement will be $0.14 based on 26 million. So, if we were to add to that, if we were to add to the, I would say, index-linked book, that certainly would change the sensitivity.

Lucas Pipes: Got it. So, it's a 5-plus million tons of exports today. And based on those tons, the sensitive is $0.14.

Bob Braithwaite: That is correct.

Lucas Pipes: Very helpful. Thank you for that clarification. I wanted to switch to capital returns. And Jimmy, Mitesh, understandably, in the second quarter, you were a bit reluctant on the buyback side. But now with -- you have managing the situation so well, strong cash flow outlook for the second half. How do you think about kind of the minimum allocation of available free cash flow to buybacks? Should we anticipate kind of a catch-up in the second half of this year? Thank you very much.

Jimmy Brock: Yes. Well, Lucas, as I said in my prepared remarks, our vision hasn't really changed. We remain -- we want to maximize cash flow generation. We want to maintain a strong balance sheet and liquidity, and then we want to return capital back to our shareholders. And when prudent, we always look at it, allocating capital toward compelling growth or diversification opportunities that we have. Now, in the second half of this year in 2024, we'll be looking at several capital and market opportunities, including refinancing those Medco bonds at Baltimore, exercising the according features to upside our revolver, and renewing the securitization facility that could impact our ability to buy back shares in the market. But our vision and goal has not changed one bit on that. We still want to return capital to our shareholders and we want to return at the highest rate of return.

Lucas Pipes: That's helpful. Thank you for that color. Very helpful. In terms of Itmann and the more challenging met coal price environment, could you speak a little bit to where that asset sits on the cost curve today? And any guidance how that might change with the continued productivity improvements? Thank you very much.

Jimmy Brock: Yes. Well, obviously, we could -- we want to increase the production at Itmann. It still Lucas, one on a positive, like I said in the remarks, we have been able to hire some people that get the workforce up fully staffed, we believe we can run five of those sections, which is definitely going to happen on the production side. And we were restricted a little bit there, too, during Q2 with our -- the bridge outage because of our third-party tons that we're bringing in and running through the plant. But we still need the equipment there to where we can get. And we're very hopeful we just had a meeting with our suppliers. We're very hopeful to get those two miners as they have promised here in the third quarter. And if we do, we think we're going to see improved production, just like I said in the remarks, we'll begin the pillar inspection, and I think it's going to be a lot -- it's really hard to hold those guys accountable down there and drive them when we really don't have the equipment. They've got a lot of breakdowns because of these delays we have. And I think we'll be able to wrap and give you better cost guidance once we get some steady production, and we know what we're doing there. But I'll say this, it is improving.

Lucas Pipes: I appreciate the color. To you and the team, continued best of luck.

Jimmy Brock: Thanks Lucas.

Mitesh Thakkar: Thank you, Lucas.

Operator: There are no further questions at this time. That concludes our question-and-answer session. I'd like to turn the conference back to Nathan Tucker for closing remarks.

Nathan Tucker: Thank you. On behalf of the CONSOL team, I'd like to thank you for joining us this morning and for your support of CONSOL Energy. We hope to answer your questions, and we look forward to speaking with you on our next call. Thanks.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

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